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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, 2007 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report For the transition period from to |
11, Euljiro 2-Ga, Jung-gu, Seoul, Korea
Telephone No.:82-2-6100-2114
Facsimile No.:82-2-6100-7948
(Name, telephone, email and/or facsimile number and address of company contact person)
Title of each class | Name of each exchange on which registered | |
American Depositary Shares, each representing one-ninth of one shares of Common Stock | New York Stock Exchange | |
Common Stock, par value | New York Stock Exchange, Inc.* |
* | Not for trading, but only in connection with the registration of the American Depositary Shares. |
DURING THE PAST FIVE YEARS)
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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 downlink packet access, or HSDPA, technology, high-speed uplink packet access, or HSUPA, technology and wireless broadband internet, or WiBro, technology; | |
• | our plans to spend approximately Won 1.75 trillion for capital expenditures in 2008 for a range of projects, including investments in our backbone networks (and expansion of our WiBro network in particular), investments to improve our WCDMA network-based products and services, investments in our wireless Internet-related and convergence businesses and funding for mid-to long-term research and development projects, as well as other initiatives, primarily related to our ongoing businesses and in the ordinary course; | |
• | our efforts to make significant investments to build, develop and broaden our businesses, including developing and providing wireless data, multimedia, mobile commerce and Internet services; | |
• | our ability to comply with governmental rules and regulations, including the regulations of the KCC, related to telecommunications providers, rules related to our status as a “market-dominating business entity” under the Korean Monopoly Regulation and Fair Trade Act, or the Fair Trade Act, and the effectiveness of steps we have taken to comply with such regulations; | |
• | our ability to manage effectively our bandwidth and to implement timely and efficiently new bandwidth-efficient technologies; | |
• | our expectations and estimates related to interconnection fees; tariffs charged by our competitors; regulatory fees; operating costs and expenditures; working capital requirements; principal repayment obligations with respect to long-term borrowings, bonds and obligations under capital leases; and research and development expenditures and other financial estimates; | |
• | the success of our various joint ventures and investments in other telecommunications service providers; | |
• | our ability to successfully manage our recent acquisition of an additional 38.6% stake in hanarotelecom inc., a fixed-line telecommunications operator and broadband Internet service provider; 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 1.A. | Directors and Senior Management |
Item 1.B. | Advisers |
Item 1.C. | Auditor |
Item 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Item 3. | KEY INFORMATION |
Item 3.A. | Selected Financial Data |
As of or for the Year Ended December 31, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | |||||||||||||||||||
(In billions of Won and millions of dollars, except per share and percentage data) | ||||||||||||||||||||||||
INCOME STATEMENT DATA | ||||||||||||||||||||||||
Korean GAAP: | ||||||||||||||||||||||||
Total Operating Revenue(1) | 10,272 | .1 | 10,570 | .6 | 10,721 | .8 | 11,028 | .0 | 12,018 | .2 | US$ | 12,842 | .7 | |||||||||||
Cellular Service(1) | 10,091 | .8 | 10,297 | .6 | 10,361 | .9 | 10,515 | .6 | 11,237 | .2 | 12,008 | .1 | ||||||||||||
Other(2) | 180 | .3 | 273 | .0 | 359 | .9 | 512 | .4 | 781 | .0 | 834 | .6 | ||||||||||||
Operating Expenses | 7,167 | .0 | 8,130 | .9 | 8,051 | .2 | 8,406 | .9 | 10,207 | .8 | 10,908 | .0 | ||||||||||||
Operating Income | 3,105 | .1 | 2,439 | .7 | 2,670 | .6 | 2,621 | .1 | 1,810 | .4 | 1,934 | .6 | ||||||||||||
Income before Income Taxes and Minority Interest | 2,754 | .3 | 2,123 | .2 | 2,561 | .6 | 2,021 | .6 | 1,985 | .3 | 2,121 | .5 | ||||||||||||
Net Income(3) | 1,965 | .3 | 1,493 | .4 | 1,868 | .3 | 1,449 | .6 | 1,562 | .3 | 1,669 | .4 | ||||||||||||
Net Income per Share of Common Stock(4) | 26,187 | 20,261 | 25,443 | 19,801 | 22,696 | 24 | .25 | |||||||||||||||||
Diluted Net Income per Share of Common Stock(4) | 26,187 | 20,092 | 25,036 | 19,523 | 22,375 | 23 | .91 | |||||||||||||||||
Dividends Declared per Share of Common Stock | 5,500 | 10,300 | 9,000 | 8,000 | 9,400 | 10 | .04 | |||||||||||||||||
Weighted Average Number of Shares | 75,078,219 | 73,614,296 | 73,614,296 | 73,305,026 | 72,650,909 | 72,650,909 |
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As of or for the Year Ended December 31, | |||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | ||||||||||||||||||||
(In billions of Won and millions of dollars, except per share and percentage data) | |||||||||||||||||||||||||
U.S. GAAP: | |||||||||||||||||||||||||
Total Operating Revenue | 10,225 | .1 | 10,534 | .6 | 10,701 | .4 | 10,541 | .8 | 11,212 | .4 | US$ | 11,981 | .6 | ||||||||||||
Operating Expenses | 7,044 | .5 | 8,137 | .6 | 7,847 | .7 | 7,720 | .0 | 9,144 | .3 | 9,771 | .6 | |||||||||||||
Operating Income | 3,180 | .6 | 2,397 | .0 | 2,853 | .7 | 2,821 | .8 | 2,068 | .1 | 2,210 | .0 | |||||||||||||
Net Income | 2,062 | .7 | 1,553 | .1 | 2,027 | .6 | 1,880 | .5 | 1,506 | .1 | 1,609 | .4 | |||||||||||||
Net Income per Share of Common Stock(4) | 27,475 | 21,097 | 27,543 | 25,653 | 20,731 | 22 | .15 | ||||||||||||||||||
Diluted Net Income per Share of Common Stock(4) | 27,475 | 20,918 | 27,089 | 25,236 | 20,390 | 21 | .79 | ||||||||||||||||||
BALANCE SHEET DATA | |||||||||||||||||||||||||
Korean GAAP: | |||||||||||||||||||||||||
Working Capital (Deficiency)(5) | (461 | .4 | ) | 1,323 | .8 | 1,735 | .2 | 1,455 | .5 | 1,796 | .2 | US$ | 1,919 | .4 | |||||||||||
Property and Equipment, Net | 4,641 | .5 | 4,703 | .9 | 4,663 | .4 | 4,507 | .3 | 4,969 | .4 | 5,310 | .3 | |||||||||||||
Total Assets | 13,818 | .2 | 14,283 | .4 | 14,704 | .8 | 16,240 | .0 | 19,048 | .9 | 20,355 | .8 | |||||||||||||
Non-current Liabilities(6) | 3,193 | .5 | 4,010 | .7 | 3,513 | .9 | 3,548 | .5 | 4,344 | .4 | 4,642 | .5 | |||||||||||||
Capital Stock | 44 | .6 | 44 | .6 | 44 | .6 | 44 | .6 | 44 | .6 | 47 | .7 | |||||||||||||
Total Shareholders’ Equity | 6,093 | .8 | 7,205 | .7 | 8,327 | .5 | 9,483 | .1 | 11,687 | .6 | 12,489 | .5 | |||||||||||||
U.S. GAAP: | |||||||||||||||||||||||||
Working Capital (Deficiency) | (445 | .5 | ) | 1,311 | .3 | 1,587 | .2 | 1,286 | .2 | 1,751 | .1 | 1,871 | .2 | ||||||||||||
Total Assets | 15,586 | .2 | 15,576 | .8 | 16,351 | .2 | 17,929 | .5 | 20,214 | .9 | 21,601 | .7 | |||||||||||||
Total Shareholders’ Equity | 7,014 | .7 | 8,237 | .0 | 9,472 | .4 | 10,738 | .5 | 12,699 | .11 | 13,570 | .3 | |||||||||||||
OTHER FINANCIAL DATA | |||||||||||||||||||||||||
Korean GAAP: | |||||||||||||||||||||||||
EBITDA(3)(7) | 4,705 | .6 | 4,087 | .7 | 4,429 | .5 | 3,879 | .1 | 4,357 | .7 | US$ | 4,656 | .6 | ||||||||||||
Capital Expenditures(8) | 1,647 | .6 | 1,631 | .9 | 1,416 | .6 | 1,498 | .1 | 1,816 | .0 | 1,940 | .5 | |||||||||||||
R&D Expenses(9) | 300 | .7 | 336 | .1 | 321 | .1 | 279 | .0 | 293 | .1 | 313 | .2 | |||||||||||||
Internal R&D | 235 | .8 | 267 | .1 | 252 | .0 | 212 | .0 | 218 | .7 | 233 | .7 | |||||||||||||
External R&D | 64 | .9 | 69 | .0 | 69 | .1 | 67 | .0 | 74 | .4 | 79 | .5 | |||||||||||||
Depreciation and Amortization | 1,646 | .3 | 1,752 | .5 | 1,675 | .5 | 1,698 | .4 | 2,000 | .7 | 2,138 | .0 | |||||||||||||
Cash Flow from Operating Activities | 3,329 | .4 | 2,527 | .9 | 3,407 | .1 | 3,589 | .8 | 3,710 | .7 | 3,965 | .3 | |||||||||||||
Cash Flow from Investing Activities | (1,415 | .1 | ) | (1,470 | .3) | (1,938 | .2) | (2,535 | .2) | (2,399 | .0) | (2,563 | .6) | ||||||||||||
Cash Flow from Financing Activities | (2,261 | .0 | ) | (968 | .6) | (1,429 | .0) | (952 | .4) | (856 | .0) | (914 | .7) | ||||||||||||
Margins (% of total sales): | |||||||||||||||||||||||||
EBITDA Margin(7) | 45 | .8 | % | 38 | .7% | 41 | .4% | 35 | .2% | 36 | .6% | 36 | .6% | ||||||||||||
Operating Margin | 30 | .2 | 23 | .1 | 24 | .9 | 23 | .8 | 15 | .1 | 15 | .1 | |||||||||||||
Net Margin | 19 | .1 | 14 | .1 | 17 | .5 | 13 | .2 | 13 | .0 | 13 | .0 |
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As of or for the Year Ended December 31, | |||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | ||||||||||||||||||||
(In billions of Won and millions of dollars, except per share and percentage data) | |||||||||||||||||||||||||
U.S. GAAP: | |||||||||||||||||||||||||
EBITDA(7) | 4,679 | .1 | 3,970 | .4 | 4,412 | .2 | 4,529 | .6 | 3,961 | .7 | 4,233 | .5 | |||||||||||||
Capital Expenditures(8) | 1,668 | .0 | 1,656 | .9 | 1,429 | .3 | 1,538 | .0 | 1,854 | .0 | 1,981 | .2 | |||||||||||||
Cash Flow from Operating Activities | 3,144 | .3 | 3,237 | .9 | 3,296 | .8 | 3,614 | .8 | 3,284 | .8 | 3,510 | .2 | |||||||||||||
Cash Flow from Investing Activities | (1,285 | .5 | ) | (1,634 | .1) | (1,816 | .5) | (2,560 | .6) | (2,435 | .7) | (2,602 | .8) | ||||||||||||
Cash Flow from Financing Activities | (2,205 | .5 | ) | (1,514 | .8) | (1,439 | .3) | (940 | .6) | (631 | .3) | (674 | .6) |
As of or for the Year Ended December 31, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | |||||||||||||||||||
SELECTED OPERATING DATA | ||||||||||||||||||||||||
Population of Korea (millions)(10) | 47 | .9 | 48 | .2 | 48 | .3 | 48 | .3 | 48 | .5 | 48 | .5 | ||||||||||||
Our Wireless Penetration(11) | 38 | .2% | 39 | .0% | 40 | .4% | 42 | .0% | 45 | .3% | 45 | .3% | ||||||||||||
Number of Employees(12) | 6,286 | 7,353 | 6,646 | 7,676 | 9,485 | 9,485 | ||||||||||||||||||
Total Sales per Employee (millions) | 1,634 | .1 | 1,437 | .6 | 1,613 | .3 | 1,436 | .7 | 1,267 | .1 | US$ | 1,354 | .0 | |||||||||||
Wireless Subscribers(13) | 18,313,135 | 18,783,338 | 19,530,117 | 20,271,133 | 21,968,169 | 21,968,169 | ||||||||||||||||||
Average Monthly Outgoing Voice Minutes per Subscriber(14) | 197 | 194 | 197 | 201 | 201 | 201 | ||||||||||||||||||
Average Monthly Revenue per Subscriber(15) | 39,739 | 39,689 | 40,205 | 40,220 | 40,154 | US$ | 42 | .91 | ||||||||||||||||
Average Monthly Churn Rate(16) | 1 | .2% | 1 | .7% | 1 | .8% | 2 | .0% | 2 | .6% | 2 | .6% | ||||||||||||
Digital Cell Sites | 8,310 | 9,458 | 10,142 | 12,515 | 16,099 | 16,099 |
* | The conversion into Dollars was made at the rate of Won 935.8 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 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 1,017.1 billion for 2003, Won 849.4 billion for 2004, Won 898.6 billion for 2005, Won 1,033.4 billion for 2006 and Won 1,062.2 billion for 2007 of interconnection revenue. Following our sale of a 60% equity interest in SK Teletech to Pantech & Curitel in July 2005, our equity interest in the company was reduced to 29.1% (which subsequently became a 22.7% interest in Pantech following the merger of SK Teletech into Pantech in December 2005) and SK Teletech ceased to be our consolidated subsidiary. Following the exclusion of SK Teletech from consolidation, we did not derive revenues from digital handset sales until the inclusion of HELIO LLC, as our consolidated subsidiary, as of November 1, 2007. See “Item 4.B. Business Overview — Interconnection”. | |
(2) | For more information about our other revenue, see “Item 5. Operating and Financial Review and Prospects” and “Item 4.B. Business Overview”. | |
(3) | As of January 1, 2007, we adopted Statements of Korean Accounting Standards, or SKAS, No. 25. Pursuant to adoption of SKAS No. 25, net income is allocated to equity holders of the parent and minority interest. In addition, when a subsidiary is purchased during the fiscal year, the subsidiary’s statement of income is included in consolidation as though it had been acquired at the beginning of the fiscal year, and pre-acquisition earnings are presented as a separate deduction within the consolidated statements of income. The consolidated statements of income for the years ended December 31, 2005 and 2006 appearing in our consolidated financial statements included elsewhere in this report have been reclassified in accordance with SKAS No. 25. | |
(4) | Income per share of common stock is calculated by dividing net income attributable to majority interest by the weighted average number of shares outstanding during the period. Diluted net income per share 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 issuance of convertible bonds in 2004, 2005, 2006 and 2007. | |
(5) | Working capital means current assets minus current liabilities. | |
(6) | Our monetary assets and liabilities denominated in foreign currencies are valued at the exchange rate of Won 1,198 to US$1.00 as of December 31, 2003, Won 1,044 to US$1.00 as of December 31, 2004, Won 1,013 to US$1.00 as of December 31, 2005, Won 930 to US$1.00 as of December 31, 2006 and Won 938 to US$1.00 as of December 31, 2007, the rates of exchange permitted under Korean GAAP as of those dates. See note 2(w) of the notes to our consolidated financial statements. | |
(7) | 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 intense business, capital expenditures and level of debt and interest expenses may have a significant |
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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. | ||
(8) | Consists of investments in property, plant and equipment. Under U.S. GAAP, interest costs incurred during the period required to complete an asset or ready an asset for its intended use are capitalized based on the interest rates a company pays on its outstanding borrowings. Under Korean GAAP, such interest costs are expensed as incurred. | |
(9) | Includes donations to Korean research institutes and educational organizations. See “Item 5.C. Research and Development”. | |
(10) | Population estimates based on historical data published by the National Statistical Office of Korea. | |
(11) | Wireless penetration is determined by dividing our subscribers by total estimated population, as of the end of the period. | |
(12) | Includes regular employees and temporary employees. See “Item 6.D. Employees”. | |
(13) | 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. | |
(14) | The average monthly outgoing voice minutes per subscriber is derived by dividing the total minutes of outgoing voice usage for the period by the monthly weighted average number of subscribers for the period, then dividing that number by the number of months in the period. The monthly weighted average number of subscribers is derived by dividing (i) the sum of the average number of subscribers for each month in the period, calculated as the average of the number of subscribers on the first and last days of the relevant month, by (ii) the number of months in the period. | |
(15) | The average monthly revenue per subscriber excludes interconnection revenue and is derived by dividing the sum of total initial subscription fees, monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services, value-added service fees and other miscellaneous revenues for the period by the monthly weighted average number of subscribers for the period, then dividing that number by the number of months in the period. Including interconnection revenue, average monthly revenue per subscriber was Won 44,546 for 2003, Won 43,542 for 2004, Won 44,167 for 2005, Won 44,599 for 2006 and Won 44,416 for 2007. | |
(16) | The average monthly churn rate for a period is the number calculated by dividing the sum of voluntary and involuntary deactivations during the period by the simple average of the number of subscribers at the beginning and end of the period, then dividing that number by the number of months in the period. Churn includes subscribers who upgrade to CDMA lxRTT or CDMA 1xEV/ DO-capable handsets by terminating their service and opening a new subscriber account. |
As of or for the Year Ended December 31, | ||||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007(1) | |||||||||||||||||||||||||
(In billions of Won and millions of dollars) | ||||||||||||||||||||||||||||||
Net Income | 2,062 | .7 | 1,553 | .1 | 2,027 | .6 | 1,880 | .5 | 1,506 | .1 | US $ | 1,609 | .4 | |||||||||||||||||
LESS: Interest income | (93 | .9 | ) | (86 | .7 | ) | (62 | .6 | ) | (86 | .8 | ) | (99 | .0 | ) | (105 | .8 | ) | ||||||||||||
ADD: Interest expense | 387 | .1 | 291 | .0 | 226 | .8 | 241 | .7 | 204 | .0 | 218 | .0 | ||||||||||||||||||
Taxes | 811 | .5 | 611 | .1 | 667 | .1 | 686 | .8 | 576 | .9 | 616 | .5 | ||||||||||||||||||
Depreciation and Amortization | 1,511 | .7 | 1,601 | .9 | 1,553 | .3 | 1,807 | .4 | 1,773 | .7 | 1,895 | .4 | ||||||||||||||||||
EBITDA | 4,679 | .1 | 3,970 | .4 | 4,412 | .2 | 4,529 | .6 | 3,961 | .7 | US $ | 4,233 | .5 | |||||||||||||||||
(1) | The conversion into Dollars was made at the rate of Won 935.8 to US$1.00. See note 2(a) of the notes to our consolidated financial statements. |
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As of or for the Year Ended December 31, | ||||||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007(1) | |||||||||||||||||||||||||
(In billions of Won and millions of dollars) | ||||||||||||||||||||||||||||||
Net Income | 1,965 | .3 | 1,493 | .4 | 1,868 | .3 | 1,449 | .6 | 1,562 | .3 | US $ | 1,669 | .4 | |||||||||||||||||
LESS: Interest income | (86 | .5 | ) | (80 | .5 | ) | (61 | .1 | ) | (80 | .0 | ) | (93 | .9 | )(2) | (100 | .4 | )(2) | ||||||||||||
ADD: Interest expense | 391 | .5 | 303 | .4 | 253 | .5 | 239 | .1 | 235 | .3 | (2) | 251 | .5 | (2) | ||||||||||||||||
Taxes | 789 | .0 | 629 | .8 | 693 | .3 | 572 | .0 | 686 | .2 | (2) | 733 | .3 | (2) | ||||||||||||||||
Depreciation and Amortization | 1,646 | .3 | 1,741 | .6 | 1,675 | .5 | 1,698 | .4 | 1,967 | .8 | (2) | 2,102 | .8 | (2) | ||||||||||||||||
EBITDA | 4,705 | .6 | 4,087 | .7 | 4,429 | .5 | 3,879 | .1 | 4,357 | .7 | US $ | 4,656 | .6 | |||||||||||||||||
(1) | The conversion into Dollars was made at the rate of Won 935.8 to US$1.00. See note 2(a) of the notes to our consolidated financial statements. | |
(2) | In accordance with our adoption of SKAS No. 25 in 2007, when a subsidiary is purchased during the fiscal year, the subsidiary’s statement of income is included in consolidation as though it had been acquired at the beginning of the fiscal year, and pre-acquisition earnings are presented as a separate deduction within the consolidated statements of income. For purposes of reconciling net income under Korean GAAP with EBITDA, the interest income, interest expense, taxes and depreciation and amortization amounts for 2007 shown in the table above exclude, with respect to subsidiaries newly consolidated in 2007, the income earned and expense incurred by such subsidiaries prior to the date of consolidation. As a result, the interest income, interest expense, taxes and depreciation and amortization amounts for 2007 that appear in the table above differ from those set forth in our consolidated statements of income and consolidated statements of cash flows for the year ended December 31, 2007. |
At End of Year Ended December 31, | ||||||||||||||||
Period | Average Rate(1) | High | Low | |||||||||||||
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 | ||||||||||||
2006 | 930 | 951 | 1,003 | 914 | ||||||||||||
2007 | 936 | 928 | 950 | 903 |
Past Six Months | ||||||||
High | Low | |||||||
(Won per US$1.00) | ||||||||
December 2007 | 943 | 919 | ||||||
January 2008 | 953 | 935 | ||||||
February 2008 | 948 | 937 | ||||||
March 2008 | 1,021 | 947 | ||||||
April 2008 | 1,005 | 974 | ||||||
May 2008 | 1,047 | 1,004 | ||||||
June 2008 (through June 27, 2008) | 1,044 | 1,016 |
(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). |
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Item 3.B. | Capitalization and Indebtedness |
Item 3.C. | Reasons for the Offer and Use of Proceeds |
Item 3.D. | Risk Factors |
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• | a slowdown in consumer spending and the overall economy; | |
• | adverse changes or volatility in foreign currency reserve levels, commodity prices, exchange rates, interest rates or stock markets; | |
• | 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 bases from Korea to China); | |
• | the economic impact of any pending or future free trade agreements, including the Free Trade Agreement recently negotiated with the United States; | |
• | social and labor unrest; | |
• | substantial decreases in the market prices of Korean real estate; | |
• | a decrease in tax revenues and a substantial increase in the Government’s expenditures for unemployment compensation and other social programs that, together, would lead to an increased government budget deficit; | |
• | financial problems or lack of progress in restructuring 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 Korean conglomerates; | |
• | geo-political uncertainty and risk of further attacks by terrorist groups around the world; | |
• | the recurrence of severe acute respiratory syndrome or an outbreak of 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. |
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• | an increase in the amount of Won required by us to make interest and principal payments on our foreign currency-denominated debt, which accounted for approximately 37.9% of our total consolidated long-term debt, including current portion, as of December 31, 2007; 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. |
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• | revoke our business license; | |
• | suspend all or part of our business; or | |
• | if the suspension of business is deemed to result in significant inconvenience to our customers or to be detrimental to the public interest, impose a one-time administrative penalty of up to 3% of the average of our annual revenue for the preceding three fiscal years. |
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• | 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. |
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Item 4. | INFORMATION ON THE COMPANY |
Item 4.A. | History and Development of the Company |
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As of or for the Year Ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(In thousands, except for per population amounts) | ||||||||||||||||||||
Population of Korea(1) | 47,849 | 48,082 | 48,294 | 48,297 | 48,456 | |||||||||||||||
Wireless Subscribers(2) | 33,592 | 36,586 | 38,342 | 40,197 | 43,498 | |||||||||||||||
Wireless Subscribers per 100 Population | 70 | .2 | 76 | .1 | 79 | .4 | 83 | .2 | 89 | .8 | ||||||||||
Telephone Lines in Service(2) | 22,877 | 22,871 | 22,920 | 23,119 | 23,130 | |||||||||||||||
Telephone Lines per 100 Population | 47 | .8 | 47 | .6 | 47 | .5 | 47 | .9 | 47 | .7 |
(1) | Source: National Statistical Office of Korea | |
(2) | Source: MIC |
As of December 31, | |||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||
Number of Wireless Internet Enabled Handsets | 31,431 | 35,017 | 37,202 | 38,894 | 41,598 | ||||||||||||||||||||
Total Number of Wireless Subscribers | 33,592 | 36,586 | 38,342 | 40,197 | 43,498 | ||||||||||||||||||||
Penetration of Wireless Internet Enabled Handsets | 93 | .6 | % | 95 | .7 | % | 97 | .0 | % | 96 | .8 | % | 95 | .6 | % |
As of December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
Number of Internet Users(1) | 29,220 | 31,580 | 33,010 | 34,120 | 34,820 | |||||||||||||||
Number of Broadband Subscribers(2) | 11,172 | 11,921 | 12,191 | 14,043 | 14,709 |
(1) | Source: KRNIC. | |
(2) | Source: MIC. Includes subscribers accessing Internet service using digital subscriber line, or xDSL, connections; cable modem connections; local area network, or LAN, connections; and satellite connections. |
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Item 4.B. | Business Overview |
• | Cellular voice services. We provide wireless voice transmission services to our subscribers through our backbone cellular networks and also offer wireless global roaming services though service agreements with various foreign wireless telecommunications service providers. (Accordingly, while “cellular voice services” principally refer to our core wireless voice transmission services, they also comprise our wireless voice and data global roaming services.) | |
• | Wireless data services. We also provide wireless data transmission services, including wireless Internet access services, which allow subscribers to access a wide range of online digital contents and services, as well as to send and receive text and multimedia messages, using their mobile phones. | |
• | Digital convergence and new businesses. We have pioneered new services that reflect the growing convergence within the telecommunications sector, as well as between the telecommunications sector and other industries, including satellite digital media broadcasting, or satellite DMB, service, which enables satellite broadcasting to mobile devices and “Telematics” service, which makes use of global positioning system, or GPS, technology. In addition, in March 2008, we completed the acquisition of an additional 38.6% stake in hanarotelecom, which is the second-largest fixed-line operator in Korea. For more information about our acquisition of an additional equity interest in hanarotelecom, see “— Our Services — Digital Convergence and New Business” below. |
• | 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 advanced wireless technologies. We believe we have the most extensive and advanced wireless telecommunications network in Korea and we are committed to ensuring that our delivery platforms keep pace with the latest technological advancements. In March 2007, we completed the nationwide build-out of our HSDPA-capable WCDMA network and are currently expanding the coverage area of our WiBro service. In June 2007, we began HSUPA upgrades to our WCDMA network, which we expect to complete by the end of 2009. We plan to continue upgrading and expanding our backbone network infrastructure in line with new developments in wireless telecommunications technology. We believe that ensuring the quality and technical sophistication of our wireless networks will, among other things, allow us |
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to provide our subscribers with top-quality service, enable us to more quickly introduce the latest wireless telecommunications products and services and allow us to efficiently implement new wireless technologies as market opportunities arise. |
• | Offer a broad range of new and innovative wireless data contents and services. We plan to improve the service quality and expand the range of our wireless data contents and services, principally through our integrated wireless and fixed-line Internet portal, NATE, with a view to increasing revenues from these services to complement our core cellular revenues. In particular, we believe demand for wireless access to entertainment-related digital contents and services, wireless access to community and social networking platforms and wireless access to financial-related contents and services, or “m-commerce” services, will continue to grow. We continue to actively seek partnerships with, as well as strategic investments in, digital media content providers, financial services providers and wireless application developers to improve the breadth and quality of the wireless data contents and services we offer to our subscribers. | |
• | Leverage our extensive network infrastructure, technical know-how and leading market position to exploit opportunities that arise from an increasingly convergent era in telecommunications and to pioneer new businesses. We believe that increasing convergence among communications technologies, as well as between the telecommunications sector and other industries, creates growth opportunities for incumbent telecommunications service providers, like us, whose existing infrastructure, know-how and extensive subscriber base provide us with a competitive advantage. We further believe that digital convergence will support demand for increasingly integrated products and services. In March 2008 we completed the acquisition of an additional 38.6% equity stake in hanarotelecom, Korea’s second-largest fixed-line operator. We hope to benefit from a range of synergies from this acquisition, including by offering our customers bundled fixed-line and wireless services and by creating greater convergence opportunities across various media platforms. We also plan to continue to improve our existing convergence services, such as Telematics and the satellite DMB service operated by our subsidiary, TU Media. | |
• | Continue global expansion by seeking opportunities in overseas markets. We continue to seek opportunities to expand into various overseas markets. In light of the high saturation of the Korean wireless market, we believe that strategic expansion into overseas markets offers important opportunities for future growth. We plan to leverage our homegrown technical expertise and operational know-how to gain entry into foreign markets — particularly those with less matureand/or rapidly growing wireless telecommunications sectors. To this end, we have made selective majority and minority investments in mobile telecommunications companies operating in key foreign markets and formed strategic alliances with many leading international telecommunications service providers. We have also actively participated in regional and international cooperative organizations to reinforce our global competencies and keep pace with advancements in overseas telecommunications markets. In addition, we believe that our continued expansion into international markets will better position us to ensure that our network technologies and wireless applications remain compatible with emerging global standards. We believe this will provide us with a competitive advantage as the wireless telecommunications paradigm moves toward increasingly interconnected regional networks responsive to growing consumer demands for seamless universal access to wireless products and services. |
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• | Wireless Entertainment and Community Services:We offer our subscribers a wide range of wireless entertainment-related contents and services, primarily through content-specific portal sites that we operate, including: |
Ø | MelOn, a music portal that provides wireless access to a wide range of digital music contents. To aggregate and manage our digital music contents offerings, we also operate an integrated wireless and fixed-line MelOn website, which subscribers can access using wireless devices, such as their mobile phones and MP3 players, as well as fixed-line devices, such as personal computers. As of December 31, 2007, we had approximately 9.8 million subscribers to our MelOn service; | |
Ø | Gaming Services,we offer subscribers various mobile gaming options through our NATE portal. For example, we offer a variety of multi-player, interactive mobile games, as well as anime-based mobile games. In addition, we also offer 3D mobile games that subscribers can download to mobile phones and other wireless devices equipped with a mobile gaming-specific chip; | |
Ø | Cizle, a movie portal, which provides subscribers access to a broad range of movie-related contents. As with our MelOn service, we operate an integrated wireless and fixed-line Cizle website, which subscribers can access using both wireless and fixed-line devices. Subscribers can also purchase movie tickets, learn theater schedules and purchasevideo-on-demand contents through our Cizle portal; and | |
Ø | Mobile Cyworld, a wireless web community portal site, which is a mobile version of the Cyworld community site operated by our subsidiary SK Communications. For a more detailed description of the fixed-line Cyworld portal, see “— Other Products and Services — Other Portal Services — Community Portal Service”. |
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• | Wireless Financial Services: We also offer our subscribers a range of wireless finance-related contents and m-commerce services. Our wireless financial businesses include: |
Ø | Moneta, a financial portal that allows subscribers to use their mobile phones to access an array of financial contents and services relating to securities trading, insurance, real estate and personal asset management; | |
Ø | Moneta Transportation, a mobile payment technology that allows subscribers to use their mobile phones to pay for public transportation fares in lieu of cash payment or pre-paid transportation cards. Moneta Transportation requires a WCDMA-capable handset with a built-in universal subscriber identity module, or USIM, card; | |
Ø | M-Banking, a banking portal, which provides access to certain electronic banking services operated by participating commercial banks, and, accordingly, enables subscribers to perform certain banking transactions, such as account inquiries, wire transfers and credit card payments, through their mobile phones; | |
Ø | 11thStreet, an online shopping mall that links wired and wireless shopping services; and | |
Ø | Gifticon, a service that allows users to pay for and give gifts using their mobile phone. Payments are settled wirelessly and recipients are notified of their gifts by instant messaging or via our NATE data service. |
• | Wireless News and Search Services: We offer our subscribers a range of wireless news and search services, including access to domestic and international news content, dictionary resources and real-time weather information. Subscribers can also search for and purchase books, DVDs, CDs and lottery tickets, as well as download discount coupons for use at offline stores. |
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• | Fixed-line NATE portal service. Our subsidiary, SK Communications, offers a fixed-line portal service under our “NATE” brand name and at the websitewww.NATE.com. NATE.com includes information and content formerly offered under our Netsgo brand as well as the content and services formerly available on Lycos Korea, which our subsidiary, SK Communications Co., Ltd., acquired in 2002. NATE.com offers a wide variety of content and services, including an Internet search engine, as well as access to freee-mail accounts. SK Communications also operates NATE-ON, an instant messaging service available to NATE users. NATE-ON allows users to chat online using a variety of wireless, as well as wired, devices, such as mobile phones, personal digital assistants and portable computers. | |
• | Community Portal Service. “Cyworld”, also operated by SK Communications, is one of the most popular online community portal services in Korea. Cyworld is a social networking site that encompasses an ever-expanding virtual forum where subscribers can meet to exchange information and ideas and share multimedia contents, including through the publication of personal homepages and blog sites. As of December 31, 2007, our Cyworld portal service had approximately 22 million subscribers. We have also sought to expand our global reach by launching Cyworld service in overseas markets, including the United States, Japan, China and Taiwan. While retaining many aspects of the original Korean version that make Cyworld unique among social networking sites, we have redesigned foreign versions of Cyworld to make it more appealing to local audiences. We plan to continue expanding our “Global Cyworld” community, including to other countries in Asia. |
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As of or for the Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(In billions of Won) | ||||||||||||
Initial Subscription Fees | 232 | .3 | 252 | .4 | 392 | .4 | ||||||
Monthly Fees | 3,365 | .1 | 3,629 | .5 | 3,949 | .8 | ||||||
Usage Charges(1) | 5,538 | .8 | 5,565 | .9 | 5,763 | .0 | ||||||
Interconnection Revenue | 898 | .6 | 1,033 | .4 | 1,062 | .2 | ||||||
Revenue from Sales of Digital Handsets(2) | 294 | .6 | — | 51 | .7 | |||||||
Other Cellular Revenue(3) | 32 | .5 | 34 | .4 | 18 | .1 | ||||||
Total | 10,361 | .9 | 10,515 | .6 | 11,237 | .2 | ||||||
Additional Facility Deposits | 3 | .4 | 9 | .0 | 2 | .4 | ||||||
Refunded Facility Deposits | 11 | .0 | 11 | .7 | 17 | .1 | ||||||
Facility Deposits at Period End | 23 | .8 | 21 | .1 | 6 | .4 |
(1) | Usage charges principally include revenues from monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services, value-added-service fees, as well as international charges and interest on overdue subscriber accounts (net of telephone tax). | |
(2) | Until its sale to Pantech & Curitel in July 2005, our revenue from handset sales consisted of sales by our former subsidiary, SK Teletech. With the inclusion of HELIO as a consolidated subsidiary as of November 2007, revenue from handset sales currently consists of sales by HELIO. | |
(3) | Other cellular revenue includes revenue from the sale and licensing of Internet platform solutions. |
• | Data Plans, which target subscribers with high usage patterns for wireless data transmission and wireless Internet services. We offer four Data Plans that provide unlimited wireless data services for monthly fees ranging from Won 3,500 to Won 25,000. Our Data Plans include “NATE only” plans, as well as “NATE + June” plans. We also offer a Data Plan that allows subscribers to use up to Won 100,000 of wireless Internet services each month for a fixed monthly fee of Won 10,000. | |
• | Videoconferencing Plans, for subscribers to our 3G services, which we provide primarily using our WCDMA network. The basic monthly fee for our Videoconferencing Plans ranges between Won 10,000 and Won 30,000. |
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• | our expansion and technical enhancement of our digital networks, including with high-speed data capabilities; | |
• | increasing consumer awareness of the benefits of wireless telecommunications; | |
• | an effective marketing strategy; | |
• | our focus on customer service; | |
• | the introduction of new, value-added services, such as voicemail services, call-forwarding, Caller ID, three-way calling and wireless Internet services provided by NATE; and | |
• | our acquisition of Shinsegi in January 2002. |
As of or for the Year Ended December 31, | |||||||||||||||
2005 | 2006 | 2007 | |||||||||||||
Subscribers | 19,530,117 | 20,271,133 | 21,968,169 | ||||||||||||
Subscribers Growth Rate | 4 | .0 | % | 3 | .8 | % | 8 | .4 | % | ||||||
Activations | 5,057,176 | 5,573,799 | 8,344,784 | ||||||||||||
Deactivations | 4,310,397 | 4,832,783 | 6,647,748 | ||||||||||||
Average Monthly Churn Rate(1) | 1 | .8 | % | 2 | .0 | % | 2 | .6 | % |
(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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Rate per Minute | ||||||||||||
Applicable Year | SK Telecom | KTF | LGT | |||||||||
2004 | 31 | .81 | 47 | .66 | 58 | .55 | ||||||
2005 | 31 | .19 | 46 | .70 | 54 | .98 | ||||||
2006 | 33 | .13 | 40 | .06 | 47 | .01 | ||||||
2007 | 32 | .78 | 39 | .60 | 45 | .13 |
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• | Cell sites, which are physical locations equipped with transmitters, receivers and other equipment that communicate by radio signals with wireless handsets within range of the cell (typically a 3 to 40 kilometer radius); | |
• | Switching stations, which switch voice and data transmissions to their proper destinations, which may be, for instance, a mobile phone of one of our subscribers (for which transmissions would originate and terminate on our wireless networks), a mobile phone of a KTF or LGT subscriber (for which transmissions would be routed to KTF’s or LGT’s wireless networks, as applicable), a fixed-line telephone number (for which calls would be routed to the public switched telephone network of a fixed-line network operator), an international number (for which calls would be routed to the network of a long distance service provider) or an Internet site (for which transmissions may be routed through our NATE portal); and | |
• | Transmission lines, which link cell sites to switching stations and switching stations with other switching stations. |
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• | POSCO. We currently own a 2.9% interest in the outstanding capital stock of POSCO, with a book value as of December 31, 2007 of Won 1,426.8 billion. POSCO is the largest fully integrated steel producer in Korea, and one of the largest steel producers in the world. | |
• | hanarotelecom.We currently own a 43.4% interest in hanarotelecom with a book value, following our acquisition of a 38.6% equity stake in the company in March 2008, of Won 1,206.3 billion as of March 31, |
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2008. hanarotelecom currently provides fixed-line telephone and broadband-based Internet services and “Hana TV”, avideo-on-demand service and plans to roll out real-time IP TV services in the future. |
• | LG Powercomm. We currently own a 5.0% interest in LG Powercomm (formerly Powercomm Corporation), with a book value as of December 31, 2007 of Won 89.4 billion. Powercomm is an operator of fixed-line networks that provides wholesale fixed-line network services, such as leased lines, to telecommunications, Internet and cable television service providers in Korea. | |
• | SK C&C. We currently own a 30.0% equity interest in SK C&C, with a book value as of December 31, 2007 of Won 1,037.6 billion. SK C&C is an information technologies services provider. We are party to several service contracts with SK C&C related to development and maintenance of our information technologies systems. See “Item 7.B. Related Party Transactions”. We intend to dispose of our entire equity interest in SK C&C in the initial public offering of SK C&C’s common shares on the Korea Exchange, expected to be completed in July 2008. We can provide no assurance, however, that the initial public offering will be consummated on a timely basis or at all. |
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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. |
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• | Restriction on debt guarantee among affiliates. Any affiliate within the SK Group may not guarantee the debts of another domestic affiliate, except for certain guarantees prescribed in the Fair Trade Act, such as those relating to the debts of a company acquired for purposes of industrial rationalization, bid deposits for overseas construction work or technology development funds. | |
• | Restriction on cross-investment. A member company of the SK Group may not acquire or hold shares in an affiliate belonging to the SK Group that owns shares in the member company. | |
• | Public notice of board resolution on large-scale transactions with specially related persons. If a member of the SK Group engages in a transaction with a specially related person in the amount of 10% or more of the member’s capital or for Won 10 billion or more, the transaction must be approved by a resolution of the member’s board of directors and the member must publicly disclose the transaction. | |
• | Restrictions on equity investments in other domestic companies. Under the Fair Trade Act, a company that is a member of a large business group as designated by the FTC is generally required to limit its total investments in other domestic companies to 40% of its non-consolidated net assets. Depending on the time frame in which such a company acquired shares in excess of the 40% ceiling, the FTC may issue corrective orders requiring, for example, the disposition of the shares held in excess of the 40% ceiling or imposing limitations on the voting rights for such sharesand/or monetary sanctions. We were subject to such restrictions on equity investments in other domestic companies until July 3, 2007, when the company formerly known as SK Corporation underwent a corporate reorganization, pursuant to which SK Corporation spun off substantially all of its operating business divisions into a newly established corporation named SK Energy Co., Ltd. and the surviving company, renamed SK Holdings Co., Ltd., became a holding company under the Fair Trade Act. As a holding company under the Fair Trade Act, SK Holdings and its subsidiaries (including us), as well as any subsidiaries of SK Holdings’ subsidiaries(“sub-subsidiaries”), are exempted from the Fair Trade Act’s restrictions on equity investments in other domestic companies. However, SK Group member companies that are not subsidiaries (orsub-subsidiaries) of SK Holdings remain subject to such restrictions on equity investments in other domestic companies. | |
• | Restrictions on investments by subsidiaries andsub-subsidiaries of holding companies. The Fair Trade Act prohibits subsidiaries orsub-subsidiaries of holding companies from investing in, or holding shares of common stock of, domestic affiliates that belong to the same large business group, unless such domestic affiliates are their own subsidiaries (orsub-subsidiaries). Therefore, we and other subsidiaries (or |
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sub-subsidiaries) of SK Holdings may not invest in any domestic affiliate that is also a member company of the SK Group, except in the case where we invest in our own subsidiary (or sub-subsidiary) or another subsidiary (or sub-subsidiary) of SK Holdings invests in its own subsidiary (or sub-subsidiary). |
• | a telecommunications service provider could provide subsidies to subscribers who had maintained their subscription with the same telecommunications service provider for at least 18 months,providedthat no separate subsidy was provided to the same subscriber for two years thereafter; or | |
• | a telecommunications service provider that had provided a particular telecommunications service for less than six years could provide subsidies to subscribers of such service. |
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• | revoke our business license; | |
• | suspend all or part of our business; or | |
• | if the suspension of business is deemed to result in significant inconvenience to our customers or to be detrimental to the public interest, impose a one-time administrative penalty of up to 3% of the average of our annual revenue for the preceding three fiscal years. |
• | the acquisition by an entity (and its related parties) of 15% or more of the equity of a network services provider; | |
• | a change in the largest shareholder of a network services provider; | |
• | agreements by a network service provider or its shareholders with foreign governments or parties regarding important business matters of such network services provider, such as the appointment of officers and directors and transfer of businesses; and | |
• | a change in the shareholder that actually controls a network services provider. |
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Item 4.C. | Organizational Structure |
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Item 4.D. | Property, Plants And Equipment |
Location | Primary Use | Approximate Area 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 | 639,791 | |||||
Busan | Regional Headquarters | 363,272 | ||||
Others | 245,811 | |||||
Daegu | Regional Headquarters | 153,578 | ||||
Others | 317,440 | |||||
Cholla and Jeju Provinces | Regional Headquarters | 265,595 | ||||
Others | 359,784 | |||||
Choongchung Province | Regional Headquarters | 565,421 | ||||
Others | 481,978 |
Item 4A. | UNRESOLVED STAFF COMMENTS |
Item 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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Item 5.A. | Operating Results |
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Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Outgoing voice minutes (in thousands)(1) | 45,243,761 | 47,980,107 | 51,295,166 | |||||||||
Average monthly outgoing voice minutes per subscriber(2) | 197 | 201 | 201 | |||||||||
Average monthly revenue per subscriber, excluding interconnection revenue(3) | 40,205 | 40,220 | 40,154 | |||||||||
Average monthly revenue per subscriber, including interconnection revenue(4) | 44,167 | 44,599 | 44,416 |
(1) | Does not include minutes of incoming calls or minutes of use relating to the use of SMS, MMS and other wireless data services. | |
(2) | The average monthly outgoing voice minutes per subscriber is derived by dividing the total minutes of outgoing voice usage for the period by the monthly weighted average number of subscribers for the period, then dividing that number by the number of months in the period. The monthly weighted average number of subscribers is derived by dividing (i) the sum of the average number of subscribers for each month in the period, calculated as the average of the number of subscribers on the first and last days of the relevant month, by (ii) the number of months in the period. | |
(3) | The average monthly revenue per subscriber, excluding interconnection revenue, is derived by dividing the sum of total initial subscription fees, monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services, value-added service fees and other miscellaneous revenues for the period by the monthly weighted average number of subscribers for the period, then dividing that number by the number of months in the period. | |
(4) | The average monthly revenue per subscriber, including interconnection revenue, is derived by dividing the sum of total initial subscription fees, monthly plan-based fees, usage charges for outgoing voice and wireless data transmissions, charges for purchases of digital contents, value-added service fees, other miscellaneous revenues and interconnection revenue for the period by the monthly weighted average number of subscribers for the period, then dividing that number by the number of months in the period. |
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For the Year Ended December 31, | ||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | ||||||||||||||||||||||||||||
(In billions of Won, except percentage data) | ||||||||||||||||||||||||||||||
Operating Revenue | 10,721 | .8 | 100 | .00 | % | 11,028 | .0 | 100 | .0 | % | 12,018 | .2 | 100 | .00 | % | |||||||||||||||
Operating Expenses | 8,051 | .2 | 75 | .09 | 8,406 | .9 | 76 | .23 | 10,207 | .8 | 84 | .94 | ||||||||||||||||||
Operating Income | 2,670 | .6 | 24 | .91 | 2,621 | .1 | 23 | .77 | 1,810 | .4 | 15 | .06 | ||||||||||||||||||
Other Income | 392 | .6 | 3 | .66 | 284 | .9 | 2 | .58 | 867 | .2 | 7 | .22 | ||||||||||||||||||
Other Expenses | 501 | .6 | 4 | .68 | 884 | .4 | 8 | .02 | 692 | .4 | 5 | .76 | ||||||||||||||||||
Income Before Income Taxes and Minority Interest | 2,561 | .6 | 23 | .89 | 2,021 | .6 | 18 | .33 | 1,985 | .3 | 16 | .52 | ||||||||||||||||||
Income Taxes | 693 | .3 | 6 | .47 | 572 | .0 | 5 | .19 | 686 | .2 | 5 | .71 | ||||||||||||||||||
Preacquisition Net Loss of Subsidiaries | — | — | — | — | 263 | .1 | 2 | .2 | ||||||||||||||||||||||
Net Income Attributable to: | ||||||||||||||||||||||||||||||
Majority Interest | 1,873 | .0 | 17 | .47 | 1,451 | .5 | 13 | .16 | 1,648 | .9 | 13 | .72 | ||||||||||||||||||
Minority Interests | (4 | .7 | ) | (0 | .04 | ) | (1 | .9 | ) | (0 | .02 | ) | (86 | .6 | ) | (0 | .72 | ) | ||||||||||||
Net Income | 1,868 | .3 | 17 | .43 | % | 1,449 | .6 | 13 | .14 | 1,562 | .3 | 13 | .00 | |||||||||||||||||
Depreciation and Amortization(1) | 1,546 | .3 | 14 | .42 | % | 1,553 | .6 | 14 | .09 | % | 1,851 | .8 | 15 | .41 | % |
(1) | Excludes the depreciation and amortization allocated to internal research and development costs and manufacturing costs of Won 126.9 billion, Won 144.8 billion and Won 148.9 billion for the years ended December 31, 2005, 2006 and 2007, respectively. |
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Year Ended December 31, | ||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | ||||||||||||||||||||||||||||
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) | 9,168 | .7 | 85 | .5 | % | 9,482 | .2 | 86 | .0 | % | 10,123 | .3 | 84 | .2 | % | |||||||||||||||
Interconnection | 898 | .6 | 8 | .4 | 1,033 | .4 | 9 | .4 | 1,062 | .2 | 8 | .8 | ||||||||||||||||||
Digital Handset Sales(2) | 294 | .6 | 2 | .7 | — | 0 | .0 | 51 | .7 | 0 | .5 | |||||||||||||||||||
Total Cellular Revenue | 10,361 | .9 | 96 | .6 | 10,515 | .6 | 95 | .4 | 11,237 | .2 | 93 | .5 | ||||||||||||||||||
Other Revenue: | ||||||||||||||||||||||||||||||
International Calling Service(3) | 138 | .7 | 1 | .3 | 176 | .4 | 1 | .6 | 211 | .8 | 1 | .8 | ||||||||||||||||||
Portal Service(4) | 126 | .9 | 1 | .2 | 165 | .6 | 1 | .5 | 178 | .7 | 1 | .5 | ||||||||||||||||||
Miscellaneous(5) | 94 | .3 | 0 | .9 | 170 | .4 | 1 | .5 | 390 | .5 | 3 | .2 | ||||||||||||||||||
Total Other Revenue | 359 | .9 | 3 | .4 | 512 | .4 | 4 | .6 | 781 | .0 | 6 | .5 | ||||||||||||||||||
Total Operating Revenue | 10,721 | .8 | 100 | .0 | % | 11,028 | .0 | 100 | .0 | % | 12,018 | .2 | 100 | .0 | % | |||||||||||||||
Total Operating Revenue Growth | 1 | .4 | % | 2 | .9 | % | 9 | .0 | % |
(1) | Wireless services revenue includes initial subscription fees, monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services, value-added-service fees and other miscellaneous cellular revenues, including international interconnection charges, interest on overdue subscriber accounts (net of telephone tax) and revenue from the sale and licensing of Internet platform solutions. | |
(2) | 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. Following the exclusion of SK Teletech from consolidation, we did not derive revenues from digital handset sales until the inclusion of HELIO as our consolidated subsidiary, as of November 1, 2007. | |
(3) | Provided by SK Telink Co. See “Item 4.B. Business Overview — Our Services — Other Products and Services — International Calling Services”. | |
(4) | Portal service revenue attributable to our subsidiaries (including SK Communications, Paxnet Co., Ltd., which operates a financial portal site, andU-Land Company Limited, the Hong Kong-incorporated holding company through which we hold our interest in ViaTech). | |
(5) | Miscellaneous revenue attributable to our subsidiaries (including neotam.com, an online outlet shopping mall; Morning365.com, an online bookstore; cherrya.com, an online cosmetics store; and TU Media). |
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Item 5.B. | Liquidity and Capital Resources |
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Year Ended December 31, | Change | ||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2005 to 2006 | 2006 to 2007 | |||||||||||||||||||||||||||||
(In billions of Won, except percentages) | |||||||||||||||||||||||||||||||||
Net Cash Flow from Operating Activities | 3,407 | .1 | 3,589 | .8 | 3,710 | .7 | 182 | .7 | 5 | .4% | 120 | .9 | 3 | .4% | |||||||||||||||||||
Net Cash Used in Investing Activities | (1,938 | .2 | ) | (2,535 | .1 | ) | (2,399 | .0 | ) | (596 | .9 | ) | (30 | .8) | 136 | .1 | 5 | .4 | |||||||||||||||
Net Cash Used in Financing Activities | (1,429 | .0 | ) | (952 | .4 | ) | (856 | .0 | ) | 476 | .6 | 33 | .4 | 96 | .4 | 10 | .1 | ||||||||||||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents Held in Foreign Currencies | (3 | .0 | ) | (9 | .3 | ) | 2 | .8 | (6 | .3 | ) | 210 | .0 | 12 | .1 | 130 | .1 | ||||||||||||||||
Net Cash Flow due to Changes in Consolidated Subsidiaries | (29 | .1 | ) | 14 | .6 | 154 | .2 | 43 | .7 | 150 | .1 | 139 | .6 | 956 | .2 | ||||||||||||||||||
Preacquisition Cash Flows of Subsidiaries(1) | — | — | (263 | .1 | ) | — | N/A | (263 | .1 | ) | N/A | * | |||||||||||||||||||||
Net Increase in Cash and Cash Equivalents due to Merger(2) | — | — | 50 | .4 | — | N/A | 50 | .4 | N/A | ** | |||||||||||||||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 7 | .8 | 107 | .6 | 400 | .0 | 99 | .8 | 1,279 | .5 | 292 | .4 | 271 | .7 | |||||||||||||||||||
Cash and Cash Equivalents at Beginning of Period | 370 | .6 | 378 | .4 | 486 | .0 | 7 | .8 | 2 | .1 | 107 | .6 | 28 | .4 | |||||||||||||||||||
Cash and Cash Equivalents at End of Period | 378 | .4 | 486 | .0 | 886 | .0 | 107 | .6 | 28 | .4% | 400 | .0 | 82 | .3% | |||||||||||||||||||
* | Pre-acquisition cash flows of subsidiaries was Won (263.1) billion in 2007 compared to none in 2006. | |
** | Net increase in cash and cash equivalents due to merger was Won 50.4 billion in 2007 compared to none in 2006. | |
(1) | In 2007, we adopted SKAS No. 25. Pursuant to SKAS No. 25, when a subsidiary is acquired during the year, such subsidiary’s statement of income is included in consolidation as if it had been acquired at the beginning of the year, and pre-acquisition earnings (losses) are presented as deduction (addition) at the bottom of the consolidated statements of income. In addition, in connection with our adoption of SKAS No. 25, we have also begun to present pre-acquisition cash flows of subsidiaries as a separate deduction (addition) at the bottom of our consolidated statements of cash flows. | |
(2) | Net increase in cash and cash equivalents due to merger for the year ended December 31, 2007 relates to the merger of Empas into SK Communications in November 2007. |
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Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(In billions of Won) | ||||||||||||
CDMA Networks(1) | 376 | 280 | 198 | |||||||||
WCDMA Network | 575 | 781 | 1,044 | |||||||||
WiBro(2) | — | 53 | 154 | |||||||||
Others(3) | 466 | 384 | 420 | |||||||||
Total(4) | 1,417 | 1,498 | 1,816 | |||||||||
(1) | Includes our basic CDMA, CDMA 1xRTT and CMDA EV-DO networks. | |
(2) | We commenced WiBro service in May 2006. | |
(3) | Includes investments in infrastructure consisting of equipment necessary for the provision of data services and marketing. | |
(4) | Also, see note 7 of the notes to our consolidated financial statements. |
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Year Ending December 31, | Total | |||
(In billions of Won) | ||||
2008 | 526.4 | |||
2009 | 630.9 | |||
2010 | 435.2 | |||
After 2010 | 1,654.8 |
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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 | 2,920 | .1 | 523 | .3 | 835 | .9 | 585 | .6 | 975 | .3 | ||||||||||
Interest | 797 | .3 | 109 | .2 | 162 | .7 | 117 | .8 | 407 | .6 | ||||||||||
Long-term borrowings | ||||||||||||||||||||
Principal | 324 | .3 | 0 | .9 | 229 | .5 | 0 | .1 | 93 | .8 | ||||||||||
Interest | 61 | .2 | 19 | .2 | 28 | .1 | 9 | .3 | 4 | .6 | ||||||||||
Capital lease obligations | 2 | .9 | 2 | .2 | 0 | .7 | — | — | ||||||||||||
Operating leases | 28 | .8 | 7 | .7 | 11 | .6 | 3 | .8 | 5 | .7 | ||||||||||
Purchase obligations | — | — | — | — | — | |||||||||||||||
Facility deposits | 14 | .0 | 7 | .6 | — | — | 6 | .4 | ||||||||||||
Derivatives | 123 | .4 | 12 | .6 | 23 | .1 | 85 | .2 | 2 | .5 | ||||||||||
Other long-term payables(2) | ||||||||||||||||||||
Principal | 560 | .0 | 110 | .0 | 280 | .0 | 170 | .0 | — | |||||||||||
Interest | 68 | .4 | 25 | .5 | 35 | .1 | 7 | .8 | — | |||||||||||
Total contractual cash obligations(3) | 4,900 | .4 | 818 | .2 | 1,606 | .7 | 979 | .6 | 1,495 | .9 | ||||||||||
(1) | We are contractually obligated to make severance payments to eligible employees we have employed for more than one year, upon termination of their employment, regardless of whether such termination is voluntary or involuntary. Accruals for severance indemnities are recorded based on the amount we would be required to pay in the event the employment of all our employees were to terminate at the balance date. However, we have not yet estimated cash flows for future periods. Accordingly, payments due in connection with severance indemnities have been excluded from this table. | |
(2) | Related to acquisition of IMT-2000 license. See note 2(k) and note 8 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 SKT Vietnam under a business cooperation contract with Saigon Post & Telecommunication Service Corporation. See “Item 4.B. Business Overview — Global Business — Overseas Operations” and “— Critical Accounting Policies, Estimates And Judgments — Off-Balance Sheet Arrangements”. |
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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 |
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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. | |
• | 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. |
• | Pursuant to adoption of SKAS No. 21, “Preparation and Presentation of Financial Statements”, certain amounts classified as capital adjustments through 2006 are classified as accumulated other comprehensive income (loss) — such amounts include unrealized gain/loss onavailable-for-sale securities, equity in capital adjustments of affiliates and gain/loss on valuation of derivative instruments. In addition, certain amounts classified as investment assets through 2006 are classified as other non-current assets — such amounts include long-term loans, guarantee deposits, long-term deposits and others. The consolidated balance sheets as of December 31, 2005 and 2006, which appear in the consolidated financial statements included elsewhere in this report, have been reclassified in accordance with SKAS No. 21. | |
• | Pursuant to adoption of SKAS No. 25, “Consolidated Financial Statements”, net income is allocated to equity holders of the parent and minority interest. In addition, when a subsidiary is purchased during the year, such subsidiary’s statement of income is included in consolidation as though it had been acquired as of January 1 of the relevant year, and preacquisition earnings are presented as deduction at the bottom of the consolidated statements of income. The accompanying consolidated statements of income for the years ended December 31, 2005 and 2006, which appear in the consolidated financial statements included elsewhere in this report, have been reclassified in accordance with SKAS No. 25. In addition, in connection with our adoption of SKAS No. 25, we also began to present pre-acquisition cash flows of subsidiaries as a separate deduction (addition) at the bottom of our consolidated statements of cash flows. |
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Item 5.C. | Research and Development |
As of and for the Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(In billions of Won) | ||||||||||||
Internal R&D Expenses | 252 | .0 | 212 | .0 | 218 | .7 | ||||||
External R&D Expenses | 69 | .1 | 67 | .0 | 74 | .4 | ||||||
Total R&D Expenses | 321 | .1 | 279 | .0 | 293 | .1 | ||||||
• | Theaccess technology R&D center, which has pioneered the development of 3G and 3.5G technologies. This center is developing next-generation technologies, including with a view toward leading global standardization of mobile telecommunications technologies. Current projects include the development of multimedia handsets and location-based services, as well as development of network technologies, including with respect to WiBro, personal area network, ubiquitous sensor and broadband convergence |
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networks, The access technology R&D center is also spearheading our joint development of TD-SCDMA technology with the Chinese government. |
• | Theservice technology R&D center, which focuses on improving the quality and operation of our core networks; building a flexible service infrastructure that will support the introduction of new products and services and enable easy maintenance; and developing new services based on customer needs. Specifically, this center has been developing an array of value-added services, including COLORing services and developing new wireless data and convergent products and services. | |
• | Thetechnology innovation center, which is responsible for developing and maintaining our overall management and information technology infrastructure, including billing and subscriber information security systems. The information technology R&D center is also currently upgrading our customer relationship management system. |
Item 5.D. | Trend Information |
Item 5.E. | Off-Balance Sheet Arrangements |
Item 5.F. | Tabular Disclosure of Contractual Obligations |
Item 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Item 6.A. | Directors and Senior Management |
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Other Principal | ||||||||||||
Date of | Director | Expiration | Directorships | |||||||||
Name | Birth | Since | of Term | Position | and Positions | Business Experience | ||||||
Shin Bae Kim | Oct. 15, 1954 | 2002 | 2011 | President, Chief Executive Officer, Chief Officer & Representative Director | Chairman, Korea Association of RFID/USN | Senior Vice President and Head of Strategic Planning Group (SK Telecom); Director, KORMS | ||||||
Sung Min Ha | Mar. 24, 1957 | 2004 | 2010 | Head of Mobile Network Operations Business | Head of Strategic Planning Group, SK Telecom; Director, SK Telink; Auditor, SK C&C; Chairman and Representative Director, SKT Vietnam; Auditor, SK Teletech |
Other Principal | ||||||||||||
Date of | Director | Expiration | Directorships | |||||||||
Name | Birth | Since | of Term | Position | and Positions | Business Experience | ||||||
Young Ho Park* | Jul. 31, 1947 | 2008 | 2011 | President & Chief Executive Officer of SK Holdings | President, Executive Vice President, Corporate Management Office, SK Corporation, Senior Vice President, Marketing Support Division, SK Corporation | |||||||
Hyun Chin Lim | Apr. 26, 1949 | 2006 | 2009 | Independent Non-executive Director | Dean, College of Social Science, Seoul National University | President, Korea Sociological Association; Dean, Faculty of Liberal Education, Seoul National University; President, Korean Association of NGO Studies | ||||||
Dal Sup Shim | Jun. 27, 1950 | 2007 | 2010 | Independent Non-executive Director | Research Fellow, Institute for Global Economics | Auditor, Korea Credit Guarantee Fund; Financial Attaché, Korean Embassy in the United States; Audit Officer, Korea Customs Service; Tax & Customs Office, Ministry of Strategy and Finance (formerly Ministry of Finance and Economy) |
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Other Principal | ||||||||||||
Date of | Director | Expiration | Directorships | |||||||||
Name | Birth | Since | of Term | Position | and Positions | Business Experience | ||||||
Rak Young Uhm | Jun. 23, 1948 | 2008 | 2011 | Independent Non-executive Director | Visiting Professor Graduate School of Public Administration, Seoul National University | Independent Non-executive Director, Tong Yang Insurance Co., Ltd., Non-Standing Director KOTRA; President, Korea Development Bank | ||||||
Jay Young Chung | Oct. 15, 1944 | 2008 | 2011 | Independent Non-executive Director | Professor, Graduate School of Business Administration, Sung Kyun Kwan University | Chief, Asia-Pacific Economic Association; Vice President, Sung Kyun Kwan University; Independent Non-executive Director, POSCO | ||||||
Jae Ho Cho | Jan. 18, 1955 | 2008 | 2011 | Independent Non-executive Director | Professor of Finance, College of Business Administration, Seoul National University | Director, Kyung Hee Foundation; Visiting Professor, Graduate School of Economics, University of Tokyo, Advisory Committee Member, Samsung Securities |
* | Mr. Young Ho Park is a non-standing director but not an independent director. |
Item 6.B. | Compensation |
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Item 6.C. | Board Practices |
• | examine the agenda for the general meeting of shareholders; | |
• | examine financial statements and other reports to be submitted by the board of directors to the general meeting of shareholders; | |
• | review the administration by the board of directors of our affairs; and | |
• | examine the operations and asset status of us and our subsidiaries. |
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NYSE Corporate Governance Standards | Our Corporate Governance Practice | |
Director Independence | ||
Listed companies must have a majority of independent directors. | Of the eight members of our board of directors, five are independent directors. | |
Executive Session | ||
Listed companies must hold meetings solely attended by non-management directors to more effectively check and balance management directors. | Our Audit Committee, which is comprised solely of three independent directors, holds meetings whenever there are matters related to management directors, and such meetings are generally held once every month. | |
Nomination/Corporate Governance Committee | ||
Listed companies must have a nomination/corporate governance committee composed entirely of independent directors. | Although we do not have a separate nomination/ corporate governance committee, we maintain an Independent Director Recommendation Committee composed of independent directors and management directors. | |
Audit Committee | ||
Listed companies must have an audit committee that satisfies the requirements ofRule 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 association, 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. |
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NYSE Corporate Governance Standards | Our Corporate Governance Practice | |
Corporate Governance Guidelines | ||
Listed companies must adopt and disclose corporate governance guidelines. | Although we do not maintain separate corporate governance guidelines, we are in compliance with the Korean Commercial Code in connection with such matters, including the governance of the board of directors. | |
Code of Business Conduct and Ethics | ||
Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees and promptly disclose any waivers of the code for directors or executive officers. | We have adopted a Code of Business Conduct and Ethics for all of our directors, officers and employees, and such code is also available on our website atwww.sktelecom.com. |
Item 6.D. | Employees |
Regular | Temporary | |||||||||||
Employees | Employees | Total | ||||||||||
December 31, 2005 | 5,727 | 919 | 6,646 | |||||||||
December 31, 2006 | 6,178 | 1,498 | 7,676 | |||||||||
December 31, 2007 | 7,524 | 1,961 | 9,485 |
Marketing | Production | Research | Support | New Business | Total | |||||||||||||||||||
Regular Employees | 2,105 | 2,842 | 470 | 1,225 | 882 | 7,524 | ||||||||||||||||||
Temporary Employees | 888 | 662 | 24 | 279 | 108 | 1,961 | ||||||||||||||||||
Total | 2,993 | 3,504 | 494 | 1,504 | 990 | 9,485 | ||||||||||||||||||
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Item 6.E. | Share Ownership |
Percentage | ||||||||||||||
Number of | of Total | Special | ||||||||||||
Shares | Shares | Voting | ||||||||||||
Name | Position | Owned | Outstanding | Rights | Options | |||||||||
Standing Directors: | ||||||||||||||
Shin Bae Kim | President, Chief Executive Officer and Representative Director | 1,270 | 0 | None | None | |||||||||
Sung Min Ha | Head of Mobile Network Operations Business | 738 | 0 | None | None | |||||||||
Non-Standing Directors: | ||||||||||||||
Hyun Chin Lim | Independent Non-executive Director | 0 | 0 | None | None | |||||||||
Dal Sup Shim | Independent Non-executive Director | 0 | 0 | None | None | |||||||||
Rak Young Uhm | Independent Non-executive Director | 0 | 0 | None | None | |||||||||
Jay Young Chung | Independent Non-executive Director | 0 | 0 | None | None | |||||||||
Jae Ho Cho | Independent Non-executive Director | 0 | 0 | None | None |
Item 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
Item 7.A. | Major Shareholders |
Percentage | Percentage | |||||||||||||
Number of | Total Shares | Total Shares | ||||||||||||
Shareholder/Category | Shares | Issued | Outstanding | |||||||||||
Domestic Shareholders | ||||||||||||||
SK Group(1) | 18,748,452 | 23 | .09 | % | 25 | .83 | % | |||||||
POSCO | 2,341,569 | 2 | .88 | 3 | .23 | |||||||||
Employees(2) | 311,259 | 0 | .38 | 0 | .43 | |||||||||
Treasury shares(2)(3) | 8,609,034 | 10 | .60 | N/A | ||||||||||
Officers and Directors | 2,758 | 0 | * | 0 | * | |||||||||
Other Domestic Shareholders | 14,012,339 | 17 | .27 | 19 | .30 | |||||||||
Foreign Shareholders | 37,168,300 | 45 | .78 | 51 | .21 | |||||||||
Total Issued Shares | 81,193,711 | 100 | .00 | % | 100 | .00 | % | |||||||
* | Less than 0.00%. | |
(1) | The SK Group’s ownership interest consists of the following as of December 31, 2007: |
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Percentage | Percentage | |||||||||||||
Number of | Total Shares | Total Shares | ||||||||||||
SK Group Member(a) | Shares | Issued | Outstanding | |||||||||||
SK Holdings(b) | 17,663,127 | 21 | .75 | % | 24 | .33 | % | |||||||
SK Networks(b) | 1,085,325 | 1 | .34 | 1 | .50 | |||||||||
18,748,452 | 23 | .09 | % | 25 | .83 | % | ||||||||
(a) | The SK Group is a group of affiliated entities. As of December 31, 2007, the ownership interests among the SK Group included, among others: |
• | SK Holdings owned: 21.75% of SK Telecom, 31.18% of SK Energy, 40.47% of SK Networks, 42.50% of SKC and 72.13% of SK Shipping Co., Ltd. | |
• | SK Networks owned 1.34% of SK Telecom, 17.71% of SK Shipping, 0.02% of SK Engineering & Construction Co., Ltd., and 22.71% of SK Securities Co., Ltd. | |
• | SK Chemicals owned 58.03% of SK Engineering and Construction. | |
• | SKC owned 10.06% of SK Shipping and 12.41% of SK Securities. | |
• | SK C&C owned 25.42% of SK Holdings. | |
• | We owned 30.00% of SK C&C. |
(b) | On February 25, 2008, SK Holdings purchased 1,085,325 of our common shares from SK Networks, increasing SK Holdings’ equity interest in us to 23.09% and decreasing SK Network’s equity interest in us to zero. |
(2) | Represents shares owned by our employee stock ownership association. See “Item 6.D. Employees”. In January 2008, we sold an additional 208,326 of our treasury shares to our employee stock ownership association, increasing the number of shares held by the employee stock ownership association to 519,585 and reducing the number of shares held by us in treasury to 8,400,708. | |
(3) | Treasury shares do not have any voting rights; includes 1,277,164 treasury shares that were deposited with Korea Securities Depository to be reserved and used to satisfy the conversion rights of the holders of US$229.2 million in zero coupon convertible notes that were sold in May 2004. |
As of December 31, | |||||||||||||||
Shareholder | 2005 | 2006 | 2007 | ||||||||||||
(As a percentage of | |||||||||||||||
total issued shares)(1) | |||||||||||||||
SK Group | 22 | .79 | % | 23 | .09 | % | 23 | .09 | % | ||||||
SK Holdings(2) | 21 | .47 | 21 | .75 | 21 | .75 | |||||||||
SK Networks(2) | 1 | .32 | 1 | .34 | 1 | .34 | |||||||||
POSCO(3) | 3 | .64 | 2 | .88 | 2 | .88 |
(1) | Includes 8,662,415, 8,526,252 and 8,609,034 shares held in treasury as of December 31, 2005, 2006 and 2007, respectively. | |
(2) | On February 25, 2008, SK Holdings purchased 1,085,325 of our common shares from SK Networks, increasing SK Holdings’ equity interest in us to 23.09% and decreasing SK Network’s equity interest in us to zero. | |
(3) | POSCO acquired these shares in connection with our acquisition of a 27.7% equity interest in Shinsegi. |
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• | revoke our business license; | |
• | suspend all or part of our business; or | |
• | if the suspension of business is deemed to result in significant inconvenience to our customers or to be detrimental to the public interest, impose a one-time administrative penalty of up to 3% of the average of our annual revenue for the preceding three fiscal years. |
Item 7.B. | Related Party Transactions |
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Item 7.C. | Interests of Experts and Counsel |
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Item 8. | FINANCIAL INFORMATION |
Item 8.A. | Consolidated Statements and Other Financial Information |
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Number of | ||||||||||||
Shares | ||||||||||||
Total Amount of | Entitled to | |||||||||||
Year Ended December 31, | Dividend per Share | Dividends | Dividend | |||||||||
(In Won) | (In billions of Won) | |||||||||||
2003 | 5,500 | 404.9 | 73,614,308 | |||||||||
2004 | 10,300 | 758.2 | 73,614,296 | |||||||||
2005 | 9,000 | 662.5 | 73,614,296 | |||||||||
2006 | 8,000 | 582.4 | 72,667,459 | |||||||||
2007 | 9,400 | 682.4 | 72,584,677 |
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Item 8.B. | Significant Changes |
Item 9. | THE OFFER AND LISTING |
Item 9.A. | Offering and Listing Details |
Item 9.B. | Plan of Distribution |
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Item 9.C. | Markets |
Average Daily | ||||||||||||||||
Trading Volume | ||||||||||||||||
(Number of | ||||||||||||||||
Calendar Year | High(1) | Low(1) | Close | Shares) | ||||||||||||
(Won per share) | ||||||||||||||||
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 | 235,000 | 177,000 | 222,500 | 190,565 | ||||||||||||
First Quarter | 203,500 | 177,000 | 192,500 | 177,491 | ||||||||||||
Second Quarter | 235,000 | 190,000 | 204,000 | 216,607 | ||||||||||||
Third Quarter | 204,500 | 181,000 | 201,500 | 204,167 | ||||||||||||
Fourth Quarter | 233,000 | 195,000 | 222,500 | 163,534 | ||||||||||||
2007 | 274,000 | 188,500 | 249,000 | 244,792 | ||||||||||||
First Quarter | 223,000 | 190,500 | 191,500 | 204,343 | ||||||||||||
Second Quarter | 215,000 | 188,500 | 213,000 | 223,604 | ||||||||||||
Third Quarter | 221,000 | 192,000 | 210,000 | 206,051 | ||||||||||||
Fourth Quarter | 274,000 | 204,500 | 249,000 | 343,354 |
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Average Daily | ||||||||||||||||
Trading Volume | ||||||||||||||||
(Number of | ||||||||||||||||
Calendar Year | High(1) | Low(1) | Close | Shares) | ||||||||||||
(Won per share) | ||||||||||||||||
2008 (through June 27) | 232,000 | 178,500 | 191,000 | 295,204 | ||||||||||||
First Quarter | 232,000 | 178,500 | 186,500 | 328,984 | ||||||||||||
January | 232,000 | 202,000 | 213,000 | 313,864 | ||||||||||||
February | 208,000 | 189,000 | 192,500 | 416,408 | ||||||||||||
March | 189,000 | 178,500 | 186,500 | 269,289 | ||||||||||||
Second Quarter (through June 27) | 212,000 | 180,000 | 191,000 | 266,310 | ||||||||||||
April | 203,000 | 182,000 | 203,000 | 335,664 | ||||||||||||
May | 212,000 | 201,500 | 203,500 | 206,251 | ||||||||||||
June (through June 27) | 201,500 | 180,000 | 191,000 | 242,817 |
(1) | Both high and low prices are based on the daily closing prices for the period. |
Prices(1) | ||||||||||||||||
Average Daily | ||||||||||||||||
Trading Volume | ||||||||||||||||
(Number of | ||||||||||||||||
Calendar Year | High(1) | Low(1) | Close | Shares) | ||||||||||||
(US$ per ADS) | (Number of ADSs) | |||||||||||||||
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 | 27 | .70 | 20 | .62 | 26 | .48 | 866,527 | |||||||||
First Quarter | 24 | .56 | 20 | .62 | 23 | .59 | 952,819 | |||||||||
Second Quarter | 27 | .70 | 22 | .54 | 23 | .42 | 1,045,503 | |||||||||
Third Quarter | 24 | .16 | 21 | .14 | 23 | .63 | 789,033 | |||||||||
Fourth Quarter | 27 | .42 | 22 | .89 | 26 | .48 | 680,124 |
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Prices(1) | ||||||||||||||||
Average Daily | ||||||||||||||||
Trading Volume | ||||||||||||||||
(Number of | ||||||||||||||||
Calendar Year | High(1) | Low(1) | Close | Shares) | ||||||||||||
(US$ per ADS) | (Number of ADSs) | |||||||||||||||
2007 | 33 | .33 | 22 | .46 | 29 | .84 | 1,379,370 | |||||||||
First Quarter | 26 | .41 | 22 | .46 | 23 | .42 | 1,046,780 | |||||||||
Second Quarter | 28 | .02 | 23 | .41 | 27 | .35 | 1,498,295 | |||||||||
Third Quarter | 30 | .30 | 26 | .15 | 29 | .70 | 1,498,032 | |||||||||
Fourth Quarter | 33 | .33 | 29 | .00 | 29 | .84 | 1,462,495 | |||||||||
2008 (through June 26) | 27 | .96 | 19 | .90 | 20 | .86 | 1,556,413 | |||||||||
First Quarter | 27 | .96 | 19 | .90 | 21 | .61 | 1,992,134 | |||||||||
January | 27 | .96 | 23 | .63 | 24 | .84 | 2,163,864 | |||||||||
February | 24 | .50 | 22 | .40 | 22 | .40 | 2,097,431 | |||||||||
March | 22 | .17 | 19 | .90 | 21 | .61 | 1,697,047 | |||||||||
Second Quarter (through June 26) | 23 | .47 | 20 | .72 | 20 | .86 | 1,127,499 | |||||||||
April | 22 | .60 | 21 | .47 | 22 | .57 | 1,327,796 | |||||||||
May | 23 | .47 | 22 | .13 | 22 | .72 | 1,074,084 | |||||||||
June (through June 26) | 22 | .24 | 20 | .72 | 20 | .86 | 923,479 |
(1) | Both high and low prices are based on the daily closing prices for the period. |
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Period Average | ||||||||||||||||||||||||
Dividend | Price | |||||||||||||||||||||||
Yield(1) | Earnings | |||||||||||||||||||||||
Year | Opening | High | Low | Closing | (%) | Ratio(2) | ||||||||||||||||||
1980 | 100 | .00 | 119 | .36 | 100 | .00 | 106 | .87 | 20 | .9 | 2 | .6 | ||||||||||||
1981 | 97 | .95 | 165 | .95 | 93 | .14 | 131 | .37 | 13 | .2 | 3 | .1 | ||||||||||||
1982 | 123 | .60 | 134 | .49 | 106 | .00 | 127 | .31 | 10 | .5 | 3 | .4 | ||||||||||||
1983 | 122 | .52 | 134 | .46 | 115 | .59 | 121 | .21 | 6 | .9 | 3 | .8 | ||||||||||||
1984 | 116 | .73 | 142 | .46 | 114 | .37 | 142 | .46 | 5 | .1 | 4 | .5 | ||||||||||||
1985 | 139 | .53 | 163 | .37 | 131 | .40 | 163 | .37 | 5 | .3 | 5 | .2 | ||||||||||||
1986 | 161 | .40 | 279 | .67 | 153 | .85 | 272 | .61 | 4 | .3 | 7 | .6 | ||||||||||||
1987 | 264 | .82 | 525 | .11 | 264 | .82 | 525 | .11 | 2 | .6 | 10 | .9 | ||||||||||||
1988 | 532 | .04 | 922 | .56 | 527 | .89 | 907 | .20 | 2 | .4 | 11 | .2 | ||||||||||||
1989 | 919 | .61 | 1,007 | .77 | 844 | .75 | 909 | .72 | 2 | .0 | 13 | .9 | ||||||||||||
1990 | 908 | .59 | 928 | .77 | 566 | .27 | 696 | .11 | 2 | .2 | 12 | .8 | ||||||||||||
1991 | 679 | .75 | 763 | .10 | 586 | .51 | 610 | .92 | 2 | .6 | 11 | .2 | ||||||||||||
1992 | 624 | .23 | 691 | .48 | 459 | .07 | 678 | .44 | 2 | .2 | 10 | .9 | ||||||||||||
1993 | 697 | .41 | 874 | .10 | 605 | .93 | 866 | .18 | 1 | .6 | 12 | .7 | ||||||||||||
1994 | 879 | .32 | 1,138 | .75 | 860 | .47 | 1,027 | .37 | 1 | .2 | 16 | .2 | ||||||||||||
1995 | 1,013 | .57 | 1,016 | .77 | 847 | .09 | 882 | .94 | 1 | .2 | 16 | .4 | ||||||||||||
1996 | 888 | .85 | 986 | .84 | 651 | .22 | 651 | .22 | 1 | .3 | 17 | .8 | ||||||||||||
1997 | 653 | .79 | 792 | .29 | 350 | .68 | 376 | .31 | 1 | .5 | 17 | .0 | ||||||||||||
1998 | 385 | .49 | 579 | .86 | 280 | .00 | 562 | .46 | 1 | .9 | 10 | .8 | ||||||||||||
1999 | 587 | .57 | 1,028 | .07 | 498 | .42 | 1,028 | .07 | 1 | .1 | 13 | .5 | ||||||||||||
2000 | 1,059 | .04 | 1,059 | .04 | 500 | .60 | 504 | .62 | 2 | .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 | 1,389 | .27 | 1,464 | .70 | 1,192 | .09 | 1,434 | .46 | 1 | .7 | 11 | .4 | ||||||||||||
2007 | 1,435 | .26 | 2,064 | .85 | 1,355 | .79 | 1,897 | .13 | 1 | .4 | 16 | .8 | ||||||||||||
2008 (through June 26) | 1,853 | .45 | 1,888 | .88 | 1,574 | .44 | 1,717 | .66 | 1 | .6 | 14 | .7 |
(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. |
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(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 that did not submit annual reports to the KRX, and companies which received disqualified opinion from external auditors. |
Previous Day’s Closing Price | Rounded Down to | |||
Less than 5,000 | 5 | |||
5,000 to less than 10,000 | 10 | |||
10,000 to less than 50,000 | 50 | |||
50,000 to less than 100,000 | 100 | |||
100,000 to less than 500,000 | 500 | |||
500,000 or more | 1,000 |
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Market Capitalization on the | ||||||||||||||||||||||||
Last Day of Each Period | Average Trading Volume & Value | |||||||||||||||||||||||
Number of | | |||||||||||||||||||||||
Listed | (Millions | (Thousands of | Thousands of | (Millions | (Thousands of | |||||||||||||||||||
Year | Companies | of Won) | Dollars)(1) | Shares | of 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 | 731 | 704,587,508 | 757,620,976 | 279,096 | 3,435,180 | 3,693,742 | ||||||||||||||||||
2007 | 745 | 951,900,447 | 1,017,205,009 | 363,741 | 5,539,653 | 5,919,698 | ||||||||||||||||||
2008 (through June 26) | 756 | 872,201,691 | 837,608,462 | 302,433 | 5,258,073 | 5,049,528 |
(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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Item 9.D. | Selling Shareholders |
Item 9.E. | Dilution |
Item 9.F. | Expenses of the Issue |
Item 10. | ADDITIONAL INFORMATION |
Item 10.A. | Share Capital |
Item 10.B. | Memorandum and Articles of 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; | |
• | tourism |
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• | electronic financial services business; | |
• | film business (production, import, distribution and screening); 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 1.5% or more of our outstanding shares and preferred shares for at least six months; or | |
• | at the request of our audit committee. |
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• | amending our articles of association; | |
• | 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; |
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• | 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. |
• | the information contained in our notice to the ADR depositary including an English translation, or, if requested by us, a summary of the information provided by us; |
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• | a statement that the ADR holders as of the close of business on a specified record date will be entitled to instruct the ADR depositary as to how to exercise their voting rights for the number of shares of deposited shares of common stock, subject to the provisions of applicable Korean law and our articles of association, 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. |
• | 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; |
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• | a fee of up to US$5.00 per 100 ADSs, or portion thereof, for execution and delivery of ADSs and the surrender of ADRs under the deposit agreement; and | |
• | 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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Item 10.C. | Material Contracts |
Item 10.D. | Exchange Controls |
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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 MOSF may temporarily suspend performance under any or all foreign exchange transactions, in whole or in part, to which the Foreign Exchange Transaction Laws apply (including suspension of payment and receipt of foreign exchange) or impose an obligation to deposit, safe-keep or | |
• | sell any means of payment to The Bank of Korea or certain other governmental agencies or financial institutions; and | |
• | if the Government concludes that the international balance of payments and international financial markets are experiencing or are likely to experience significant disruption or that the movement of capital between Korea and other countries are likely to adversely affect the Won, exchange rate or other macroeconomic policies, the MOSF may take action to require any person who intends to effect or effects a capital | |
• | transaction to deposit all or a portion of the means of payment acquired in such transactions with The Bank of Korea or certain other governmental agencies or financial institutions. |
• | Under 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 10.B. Memorandum and Articles of Association — Description of American Depositary Shares”. Therefore, a holder of ADRs who surrenders ADRs and withdraws shares may not be permitted subsequently to deposit those shares and obtain ADRs. | |
• | In addition, we are also required to notify the MOSF upon receipt of full proceeds from the offering of ADSs. No additional Korean governmental approval is necessary for the offering and issuance of ADSs. |
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• | odd-lot trading of shares; |
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• | acquisition of shares by a foreign company as a result of a merger; | |
• | acquisition or disposal of shares in connection with a tender offer; | |
• | acquisition of shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company (“Converted Shares”); | |
• | acquisition of shares through exercise of rights under securities issued outside of Korea; | |
• | acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends; | |
• | over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded; | |
• | acquisition of shares by direct investment under the Foreign Investment Promotion Law; | |
• | acquisition and disposal of shares on an overseas stock exchange market, if such shares are simultaneously listed on the KRX Stock Market or KRX KOSDAQ Market and such overseas stock exchange; and | |
• | arm’s length transactions between foreigners in the event all such foreigners belong to an investment group managed by the same person. |
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Item 10.E. | Taxation |
• | 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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• | 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 10.F. | Dividends and Paying Agents |
Item 10.G. | Statements by Experts |
Item 10.H. | Documents on Display |
Item 10.I. | Subsidiary Information |
Item 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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Maturities | ||||||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||||||||
(In billions of Won, except for percentage data) | ||||||||||||||||||||||||||||||||||||||
Local currency: | ||||||||||||||||||||||||||||||||||||||
Fixed rate | 541 | .8 | 360 | .6 | 203 | .5 | 192 | .8 | — | 575 | .7 | 1,874 | .4 | 1,822 | .9 | |||||||||||||||||||||||
Average weighted rate(1) | 5 | .62 | % | 5 | .30 | % | 4 | .15 | % | 3 | .12 | % | 0 | .00 | % | 4 | .86 | % | ||||||||||||||||||||
Variable rate | 3 | .7 | 0 | .3 | 200 | .1 | — | — | — | 204 | .1 | 204 | .1 | |||||||||||||||||||||||||
Average weighted rate(1) | 6 | .70 | % | 3 | .72 | % | 5 | .82 | % | 0 | .00 | % | 0 | .00 | % | 0 | .00 | % | ||||||||||||||||||||
Sub-total | 545 | .5 | 360 | .9 | 403 | .6 | 192 | .8 | — | 575 | .7 | 2,078 | .5 | 2,027 | .0 | |||||||||||||||||||||||
Foreign currency: | ||||||||||||||||||||||||||||||||||||||
Fixed rate | 1 | .6 | 265 | .2 | 28 | .3 | 279 | .7 | — | 368 | .4 | 943 | .2 | 981 | .2 | |||||||||||||||||||||||
Average weighted rate(1) | 3 | .18 | % | 0 | .00 | % | 9 | .97 | % | 4 | .28 | % | 0 | .00 | % | 6 | .75 | % | ||||||||||||||||||||
Variable rate | 0 | .9 | — | — | — | 103 | .7 | 93 | .8 | 198 | .4 | 198 | .4 | |||||||||||||||||||||||||
Average weighted rate(1) | 6 | .86 | % | 0 | .00 | % | 0 | .00 | % | 0 | .00 | % | 1 | .45 | % | 4 | .94 | % | ||||||||||||||||||||
Sub-total | 2 | .5 | 265 | .2 | 28 | .3 | 279 | .7 | 103 | .7 | 462 | .2 | 1,141 | .6 | 1,179 | .6 | ||||||||||||||||||||||
Total | 548 | .0 | 626 | .1 | 431 | .9 | 472 | .5 | 103 | .7 | 1,037 | .9 | 3,220 | .1 | 3,206 | .6 | ||||||||||||||||||||||
(1) | Weighted average rates of the portfolio at the period end. |
Item 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
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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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Item 16. | RESERVED |
Item 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
Item 16B. | CODE OF ETHICS |
Item 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Years Ended December 31, | ||||||||
2006 | 2007 | |||||||
(In millions of Won) | ||||||||
Audit | 1,220 | .5 | 1,401 | .3 | ||||
Audit Related | 81 | .1 | 61 | .3 | ||||
Tax | 277 | .0 | 70 | .8 | ||||
All Other Fees | — | — | ||||||
Total | 1,578 | .6 | 1,533 | .4 |
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Item 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
Item 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
Maximum Number | ||||||||||||||||
Total Number of | of Shares That | |||||||||||||||
Shares Purchased | May yet Be | |||||||||||||||
as Part of Publicly | Purchased Under | |||||||||||||||
Total Number of | Average Price Paid per | Announced Plans | the Plans or | |||||||||||||
Period 2007 | Shares Purchased | Share | or Program | Program | ||||||||||||
January | — | — | — | — | ||||||||||||
February | — | — | — | — | ||||||||||||
March | — | — | — | — | ||||||||||||
April | — | — | — | — | ||||||||||||
May | — | — | — | — | ||||||||||||
June | — | — | — | — | ||||||||||||
July | — | — | — | — | ||||||||||||
August | — | — | — | — | ||||||||||||
September | — | — | — | — | ||||||||||||
October | — | — | — | — | ||||||||||||
November | 248,600 | 242,621 | — | — | ||||||||||||
December | 222,400 | 261,673 | — | — | ||||||||||||
Total | 471,000 | 251,617 | — | — |
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Item 17. | FINANCIAL STATEMENTS |
Item 18. | FINANCIAL STATEMENTS |
Index of Financial Statements | F-1 | |||
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements | F-2 | |||
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting | F-3 | |||
Consolidated balance sheets as of December 31, 2005, 2006 and 2007 | F-4 | |||
Consolidated statements of income for the years ended December 31, 2005, 2006 and 2007 | F-6 | |||
Consolidated statements of stockholders’ equity for the years ended December 31, 2005, 2006 and 2007 | F-7 | |||
Consolidated statements of cash flows for the years ended December 31, 2005, 2006 and 2007 | F-9 | |||
Notes to consolidated financial statements for the years ended December 31, 2005, 2006 and 2007 | F-11 |
Item 19. | EXHIBITS |
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 | ||
8 | .1 | List of Subsidiaries of SK Telecom Co., Ltd. | ||
12 | .1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
12 | .2 | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
13 | .1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
13 | .2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
15 | .1 | Framework Act on Telecommunications, as amended (English translation) | ||
15 | .2 | Enforcement Decree of the Framework Act on Telecommunications, as amended (English translation) | ||
15 | .3 | Telecommunications Business Act, as amended (English translation) | ||
15 | .4 | Enforcement Decree of the Telecommunications Business Act (English translation) | ||
15 | .5 | Amendment to the Government Organization Act | ||
99 | .1 | Consent of Deloitte Anjin LLC |
* | Filed previously as exhibits to ourForm 20-F filed on June 30, 2006. |
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(Registrant)
/s/ Shin Bae Kim |
Title: | President, Chief Executive Officer & Representative Director |
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F-2 | ||||
F-3 | ||||
F-4 | ||||
F-6 | ||||
F-7 | ||||
F-9 | ||||
F-11 |
F-1
Table of Contents
ON CONSOLIDATED FINANCIAL STATEMENTS
F-2
Table of Contents
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
F-3
Table of Contents
2005 | 2006 | 2007 | 2007 | |||||||||||||
In millions of Korean won | In thousands | |||||||||||||||
of U.S. dollars | ||||||||||||||||
(Note 2 a) | ||||||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash and cash equivalents (Notes 2, 13 and 30) | 378,426 | 485,972 | 885,847 | $ | 946,620 | |||||||||||
Short-term financial instruments (Notes 22 and 23) | 106,592 | 98,085 | 148,103 | 158,264 | ||||||||||||
Trading securities (Notes 2 and 4) | 777,472 | 665,312 | 635,434 | 679,028 | ||||||||||||
Current portion of long-term investment securities (Notes 2 and 4) | 1 | 335 | 101,209 | 108,152 | ||||||||||||
Accounts receivable — trade, net of allowance for doubtful accounts of | 1,684,119 | 1,800,606 | 1,774,935 | 1,896,703 | ||||||||||||
Short-term loans, net of allowance for doubtful accounts of | 65,539 | 69,745 | 84,570 | 90,372 | ||||||||||||
Accounts receivable — other, net of allowance for doubtful accounts of | 1,369,691 | 1,305,284 | 948,322 | 1,013,381 | ||||||||||||
Inventories, net (Notes 2, 3 and 24) | 7,784 | 19,778 | 47,052 | 50,280 | ||||||||||||
Prepaid expenses | 104,124 | 116,727 | 108,552 | 115,999 | ||||||||||||
Current deferred income tax assets (Notes 2 and 18) | 66,117 | 49,940 | 36,383 | 38,879 | ||||||||||||
Currency swap (Notes 2 and 28) | — | 16,660 | — | — | ||||||||||||
Accrued income and other | 38,715 | 35,518 | 42,665 | 45,592 | ||||||||||||
Total Current Assets | 4,598,580 | 4,663,962 | 4,813,072 | 5,143,270 | ||||||||||||
NON-CURRENT ASSETS: | ||||||||||||||||
Property and equipment, net (Notes 2, 7, 12, 23, 24 and 25) | 4,663,369 | 4,507,335 | 4,969,354 | 5,310,274 | ||||||||||||
Intangible assets, net (Notes 2, 8, 12 and 29) | 3,452,889 | 3,518,411 | 3,433,962 | 3,669,547 | ||||||||||||
Long-term investment securities (Notes 2 and 4) | 1,220,208 | 2,475,418 | 5,058,519 | 5,405,556 | ||||||||||||
Equity securities accounted for using the equity method (Notes 2 and 5) | 471,879 | 750,921 | 350,966 | 375,044 | ||||||||||||
Long-term bank deposits (Note 22) | 1,479 | 10,445 | 15,535 | 16,601 | ||||||||||||
Long-term loans, net of allowance for doubtful accounts of | 18,430 | 18,569 | 84,906 | 90,731 | ||||||||||||
Guarantee deposits (Notes 13 and 25) | 168,559 | 139,619 | 148,987 | 159,208 | ||||||||||||
Long-term currency swap (Notes 2 and 28) | — | — | 13,057 | 13,953 | ||||||||||||
Long-term interest rate swap (Notes 2 and 28) | — | — | 3,170 | 3,387 | ||||||||||||
Non-current deferred income tax assets (Notes 2 and 18) | 1,495 | 2,655 | 7,286 | 7,786 | ||||||||||||
Other | 107,884 | 152,633 | 150,121 | 160,419 | ||||||||||||
Total Non-current Assets | 10,106,192 | 11,576,006 | 14,235,863 | 15,212,506 | ||||||||||||
TOTAL ASSETS | 14,704,772 | 16,239,968 | 19,048,935 | $ | 20,355,776 | |||||||||||
F-4
Table of Contents
2005 | 2006 | 2007 | 2007 | |||||||||||||
In millions of Korean won | In thousands | |||||||||||||||
of U.S. dollars | ||||||||||||||||
(Note 2 a) | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts payable (Notes 13 and 25) | 1,047,779 | 1,221,704 | 1,252,734 | $ | 1,338,677 | |||||||||||
Short-term borrowings (Notes 22 and 23) | 972 | 58,344 | 24,616 | 26,305 | ||||||||||||
Income taxes payable | 370,822 | 336,536 | 319,108 | 341,000 | ||||||||||||
Accrued expenses (Notes 2 and 27) | 364,830 | 375,063 | 436,008 | 465,920 | ||||||||||||
Dividend payable (Note 21) | 298 | 268 | 308 | 329 | ||||||||||||
Withholdings | 216,622 | 339,144 | 226,407 | 241,940 | ||||||||||||
Current portion of long-term debt, net (Notes 9, 10 and 12) | 809,573 | 797,042 | 634,990 | 678,553 | ||||||||||||
Current portion of subscription deposits (Note 11) | 14,875 | 17,576 | 7,564 | 8,083 | ||||||||||||
Current deferred income tax liabilities (Notes 2 and 18) | 44 | — | 4 | 4 | ||||||||||||
Currency swap (Notes 2 and 28) | — | — | 12,646 | 13,514 | ||||||||||||
Advanced receipts and other | 37,558 | 62,739 | 102,489 | 109,520 | ||||||||||||
Total Current Liabilities | 2,863,373 | 3,208,416 | 3,016,874 | 3,223,845 | ||||||||||||
NON-CURRENT LIABILITIES: | ||||||||||||||||
Bonds payable, net (Notes 2, 9 and 23) | 2,314,208 | 1,995,323 | 2,348,661 | 2,509,789 | ||||||||||||
Long-term borrowings (Notes 10 and 23) | 155 | 293,026 | 323,421 | 345,609 | ||||||||||||
Subscription deposits (Note 11) | 23,770 | 21,140 | 6,425 | 6,866 | ||||||||||||
Long-term payables — other, net of present value discount of | 591,587 | 517,539 | 422,114 | 451,073 | ||||||||||||
Obligations under capital leases (Notes 2, 12 and 23) | 10,204 | 1,860 | 712 | 761 | ||||||||||||
Accrued severance indemnities, net (Note 2) | 71,284 | 22,284 | 44,322 | 47,363 | ||||||||||||
Non-current deferred income tax liabilities (Notes 2 and 18) | 401,156 | 532,639 | 1,044,758 | 1,116,433 | ||||||||||||
Long-term currency swap (Notes 2 and 28) | 73,450 | 112,970 | 110,911 | 118,520 | ||||||||||||
Long-term interest rate swap (Notes 2 and 28) | — | 454 | — | — | ||||||||||||
Guarantee deposits received and other (Notes 25 and 27) | 28,045 | 51,229 | 43,104 | 46,061 | ||||||||||||
Total Non-Current Liabilities | 3,513,859 | 3,548,464 | 4,344,428 | 4,642,475 | ||||||||||||
Total Liabilities | 6,377,232 | 6,756,880 | 7,361,302 | 7,866,320 | ||||||||||||
COMMITMENTS AND CONTINGENCIES (Note 23) | ||||||||||||||||
STOCKHOLDERS’ EQUITY : | ||||||||||||||||
Capital stock — | 44,639 | 44,639 | 44,639 | 47,701 | ||||||||||||
Issued and outstanding — 220,000,000 shares authorized; 73,614,296 shares, 72,667,459 shares and 72,584,677 shares at December 31, 2005, 2006 and 2007, respectively (Notes 1 and 14) | ||||||||||||||||
Capital surplus (Notes 2, 14 and 18) | 2,954,840 | 2,950,327 | 2,924,960 | 3,125,625 | ||||||||||||
Capital adjustments: | ||||||||||||||||
Treasury stock (Note 16) | (2,047,105 | ) | (2,014,927 | ) | (2,041,483 | ) | (2,181,538 | ) | ||||||||
Loss on disposal of treasury stock (Notes 16 and 18) | — | (7,887 | ) | (94 | ) | (100 | ) | |||||||||
Stock options (Notes 2, 17 and 26) | 3,480 | 3,246 | — | — | ||||||||||||
Accumulated other comprehensive income (loss) (Note 19): | ||||||||||||||||
Unrealized gain (loss) on valuation of long-term investment securities, net (Notes 2, 4 and 18) | (42,093 | ) | 429,228 | 1,624,613 | 1,736,069 | |||||||||||
Equity in other comprehensive income of affiliates, net (Notes 2, 5 and 18) | 61,368 | 107,324 | 1,727 | 1,845 | ||||||||||||
Loss on valuation of currency swap, net (Notes 2, 18 and 28) | (14,177 | ) | (16,487 | ) | (11,816 | ) | (12,627 | ) | ||||||||
Gain (loss) on valuation of interest rate swap, net (Notes 2, 18 and 28) | — | (329 | ) | 2,298 | 2,456 | |||||||||||
Foreign-based operations’ translation adjustment (Notes 2 and 18) | (9,988 | ) | (29,726 | ) | (25,564 | ) | (27,318 | ) | ||||||||
Retained earnings (Note 15) | 7,267,649 | 7,847,434 | 8,914,970 | 9,526,576 | ||||||||||||
Minority interest in equity of consolidated subsidiaries (Note 2) | 108,927 | 170,246 | 253,383 | 270,767 | ||||||||||||
Total Stockholders’ Equity | 8,327,540 | 9,483,088 | 11,687,633 | 12,489,456 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 14,704,772 | 16,239,968 | 19,048,935 | $ | 20,355,776 | |||||||||||
F-5
Table of Contents
2005 | 2006 | 2007 | 2007 | |||||||||||||
In millions of Korean won, except for | In thousands of | |||||||||||||||
Income per share | U.S. dollars, | |||||||||||||||
except for | ||||||||||||||||
income per share | ||||||||||||||||
(Note 2 a) | ||||||||||||||||
OPERATING REVENUE (Notes 2, 25 and 31) | 10,721,820 | 11,027,977 | 12,018,163 | $ | 12,842,662 | |||||||||||
OPERATING EXPENSES (Notes 2 and 25) | ||||||||||||||||
Labor cost | (464,764 | ) | (491,839 | ) | (593,792 | ) | (634,529 | ) | ||||||||
Commissions paid | (2,859,638 | ) | (3,293,197 | ) | (4,224,510 | ) | (4,514,330 | ) | ||||||||
Depreciation and amortization (Notes 7 and 8) | (1,546,285 | ) | (1,553,635 | ) | (1,851,832 | ) | (1,978,876 | ) | ||||||||
Network interconnection (Note 31) | (989,417 | ) | (1,014,913 | ) | (1,078,714 | ) | (1,152,719 | ) | ||||||||
Leased line | (407,043 | ) | (412,902 | ) | (410,408 | ) | (438,564 | ) | ||||||||
Advertising | (279,390 | ) | (307,190 | ) | (392,031 | ) | (418,926 | ) | ||||||||
Research and development (Note 2) | (252,046 | ) | (211,961 | ) | (218,653 | ) | (233,654 | ) | ||||||||
Rent | (190,134 | ) | (206,708 | ) | (240,742 | ) | (257,258 | ) | ||||||||
Frequency usage | (156,098 | ) | (158,958 | ) | (166,395 | ) | (177,810 | ) | ||||||||
Repair | (131,719 | ) | (150,848 | ) | (171,262 | ) | (183,011 | ) | ||||||||
Provision for bad debts | (112,792 | ) | (61,457 | ) | (71,439 | ) | (76,340 | ) | ||||||||
Cost of goods sold | (240,746 | ) | (121,381 | ) | (311,678 | ) | (333,060 | ) | ||||||||
Other | (421,132 | ) | (421,856 | ) | (476,295 | ) | (508,971 | ) | ||||||||
Sub-total | (8,051,204 | ) | (8,406,845 | ) | (10,207,751 | ) | (10,908,048 | ) | ||||||||
OPERATING INCOME | 2,670,616 | 2,621,132 | 1,810,412 | 1,934,614 | ||||||||||||
OTHER INCOME: | ||||||||||||||||
Interest income (Note 4) | 61,143 | 79,969 | 98,301 | 105,045 | ||||||||||||
Dividends | 26,515 | 20,351 | 21,119 | 22,568 | ||||||||||||
Commissions (Note 25) | 32,738 | 33,226 | 32,196 | 34,405 | ||||||||||||
Equity in earnings of affiliates (Notes 2 and 5) | 20,949 | 45,787 | 247,382 | 264,353 | ||||||||||||
Foreign exchange and translation gains (Note 2) | 4,167 | 4,412 | 12,091 | 12,920 | ||||||||||||
Reversal of allowance for doubtful accounts | 450 | 789 | 614 | 656 | ||||||||||||
Gain on valuation of trading securities (Notes 2 and 4) | 1 | — | 128 | 137 | ||||||||||||
Gain on disposal of investment assets (Note 5) | 24,613 | 27,490 | 3,721 | 3,976 | ||||||||||||
Gain on disposal of consolidated subsidiaries (Note 5) | 178,689 | 1,556 | — | — | ||||||||||||
Gain on disposal of property, equipment and intangible assets | 4,693 | 4,507 | 9,776 | 10,447 | ||||||||||||
Gain on transactions and valuation of currency swap (Notes 2 and 28) | 2,578 | 16,660 | 10,799 | 11,540 | ||||||||||||
Gain on conversion of convertible bonds (Note 4) | — | — | 373,140 | 398,739 | ||||||||||||
Gain on redemption of bonds payable | — | — | 6,160 | 6,583 | ||||||||||||
Other | 36,016 | 50,111 | 51,818 | 55,373 | ||||||||||||
Sub-total | 392,552 | 284,858 | 867,245 | 926,742 | ||||||||||||
OTHER EXPENSES: | ||||||||||||||||
Interest and discounts (Note 2) | (253,472 | ) | (239,138 | ) | (241,863 | ) | (258,456 | ) | ||||||||
Donations | (76,185 | ) | (103,348 | ) | (72,849 | ) | (77,847 | ) | ||||||||
Equity in losses of affiliates (Notes 2 and 5) | (71,825 | ) | (211,464 | ) | (175,474 | ) | (187,512 | ) | ||||||||
Foreign exchange and translation losses (Note 2) | (4,178 | ) | (4,139 | ) | (12,966 | ) | (13,856 | ) | ||||||||
Loss on valuation of trading securities (Notes 2 and 4) | (16 | ) | — | (1,203 | ) | (1,286 | ) | |||||||||
Loss on disposal of investment assets (Note 5) | (4,017 | ) | (6,096 | ) | (1,190 | ) | (1,272 | ) | ||||||||
Loss on disposal of property, equipment and intangible assets | (6,523 | ) | (17,148 | ) | (30,730 | ) | (32,838 | ) | ||||||||
Loss on impairment of investment assets (Notes 2 and 4) | (3,422 | ) | (27,696 | ) | (15,526 | ) | (16,591 | ) | ||||||||
Impairment loss on assets (Note 2) | (260 | ) | (7,030 | ) | (3,484 | ) | (3,723 | ) | ||||||||
Loss on transactions and valuation of currency swap (Notes 2 and 28) | — | (9,258 | ) | (33,876 | ) | (36,200 | ) | |||||||||
Special severance indemnities (Note 2) | — | (144,021 | ) | — | — | |||||||||||
External research and development costs (Note 2) | (69,140 | ) | (67,021 | ) | (74,388 | ) | (79,491 | ) | ||||||||
Other | (12,564 | ) | (48,053 | ) | (28,816 | ) | (30,792 | ) | ||||||||
Sub-total | (501,602 | ) | (884,412 | ) | (692,365 | ) | (739,864 | ) | ||||||||
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST | 2,561,566 | 2,021,578 | 1,985,292 | 2,121,492 | ||||||||||||
INCOME TAXES (Notes 2 and 18) | (693,259 | ) | (572,026 | ) | (686,161 | ) | (733,235 | ) | ||||||||
PREACQUISITION NET LOSS OF SUBSIDIARIES (Note 3) | — | — | 263,134 | 281,186 | ||||||||||||
NET INCOME | 1,868,307 | 1,449,552 | 1,562,265 | $ | 1,669,443 | |||||||||||
ATTRIBUTABLE TO: | ||||||||||||||||
Majority interests (Note 20) | 1,872,978 | 1,451,491 | 1,648,876 | $ | 1,761,996 | |||||||||||
Minority interests | (4,671 | ) | (1,939 | ) | (86,611 | ) | (92,553 | ) | ||||||||
1,868,307 | 1,449,552 | 1,562,265 | $ | 1,669,443 | ||||||||||||
NET INCOME PER SHARE OF MAJORITY INTERESTS (Notes 2 and 20) (In Korean won and U.S. dollars) | 25,443 | 19,801 | 22,696 | $ | 24.25 | |||||||||||
DILUTED NET INCOME PER SHARE OF MAJORITY INTERESTS (Notes 2 and 20) (In Korean won and U.S. dollars) | 25,036 | 19,523 | 22,375 | $ | 23.91 | |||||||||||
F-6
Table of Contents
Accumulated | ||||||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||||||
Common | Capital | Capital | Comprehensive | Retained | Minority | Stockholders’ | ||||||||||||||||||||||
Stock | Surplus | Adjustments | Income | Earnings | Interest | Equity | ||||||||||||||||||||||
(In millions of Korean won) | ||||||||||||||||||||||||||||
Balance, January 1, 2005 | 44,639 | 2,968,301 | (2,042,272 | ) | (16,020 | ) | 6,152,898 | 98,198 | 7,205,744 | |||||||||||||||||||
Cash dividends paid (Note 21) | — | — | — | — | (684,613 | ) | — | (684,613 | ) | |||||||||||||||||||
Interim cash dividends paid (Note 21) | — | — | — | — | (73,614 | ) | — | (73,614 | ) | |||||||||||||||||||
Net income | — | — | — | — | 1,872,978 | (4,671 | ) | 1,868,307 | ||||||||||||||||||||
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 2, 14 and 17) | — | 1,533 | (1,533 | ) | — | — | — | — | ||||||||||||||||||||
Equity in capital surplus and other comprehensive income of affiliates (Notes 2, 5, 14 and 19) | — | 3,508 | — | (73,008 | ) | — | — | (69,500 | ) | |||||||||||||||||||
Stock compensation plans (Notes 2 and 17) | — | — | 180 | — | — | — | 180 | |||||||||||||||||||||
Unrealized gain on valuation of long-term investment securities (Notes 2, 4 and 19) | — | — | — | 50,882 | — | — | 50,882 | |||||||||||||||||||||
Gain on valuation of currency swap (Notes 2, 19 and 28) | — | — | — | 35,276 | — | — | 35,276 | |||||||||||||||||||||
Foreign-based operations’ translation adjustment (Notes 2 and 19) | — | — | — | (2,020 | ) | — | — | (2,020 | ) | |||||||||||||||||||
Increase in minority interest in equity of consolidated subsidiaries | — | — | — | — | — | 15,400 | 15,400 | |||||||||||||||||||||
Balance, December 31, 2005 | 44,639 | 2,954,840 | (2,043,625 | ) | (4,890 | ) | 7,267,649 | 108,927 | 8,327,540 | |||||||||||||||||||
Cash dividends paid (Note 21) | — | — | — | — | (588,914 | ) | — | (588,914 | ) | |||||||||||||||||||
Interim cash dividends paid (Note 21) | — | — | — | — | (73,714 | ) | — | (73,714 | ) | |||||||||||||||||||
Net income | — | — | — | — | 1,451,491 | (1,939 | ) | 1,449,552 | ||||||||||||||||||||
Conversion of convertible bonds (Notes 9 and 14) | — | (3,733 | ) | — | — | — | — | (3,733 | ) | |||||||||||||||||||
Transfer of stock option from capital adjustments to capital surplus (Notes 2, 14 and 17) | — | 234 | (234 | ) | — | — | — | — | ||||||||||||||||||||
Equity in capital surplus of affiliates (Notes 2, 5 and 14) | — | (1,014 | ) | — | — | — | — | (1,014 | ) | |||||||||||||||||||
Treasury stock (Note 16) | — | — | 32,178 | — | — | — | 32,178 | |||||||||||||||||||||
Loss on disposal of treasury stock (Notes 16 and 18) | — | — | (7,887 | ) | — | — | — | (7,887 | ) | |||||||||||||||||||
Unrealized gain on valuation of long-term investment securities, net (Notes 2, 4 and 19) | — | — | — | 471,321 | — | — | 471,321 | |||||||||||||||||||||
Equity in other comprehensive income changes of affiliates, net (Notes 2, 5 and 19) | — | — | — | 45,956 | — | — | 45,956 | |||||||||||||||||||||
Foreign-based operations’ translation adjustment (Notes 2 and 19) | — | — | — | (19,737 | ) | — | — | (19,737 | ) | |||||||||||||||||||
Gain (loss) on valuation of currency swap, net (Notes 2, 19 and 28) | — | — | — | (2,311 | ) | — | — | (2,311 | ) | |||||||||||||||||||
Loss on valuation of interest swap, net (Notes 2, 19 and 28) | — | — | — | (329 | ) | — | — | (329 | ) | |||||||||||||||||||
Acquisition and retirement of treasury stock (Note 16) | — | — | — | — | (209,078 | ) | — | (209,078 | ) | |||||||||||||||||||
Increase in minority interest in equity of consolidated subsidiaries | — | — | — | — | — | 63,258 | 63,258 | |||||||||||||||||||||
Balance, December 31, 2006 | 44,639 | 2,950,327 | (2,019,568 | ) | 490,010 | 7,847,434 | 170,246 | 9,483,088 | ||||||||||||||||||||
F-7
Table of Contents
Accumulated | ||||||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||||||
Common | Capital | Capital | Comprehensive | Retained | Minority | Stockholders’ | ||||||||||||||||||||||
Stock | Surplus | Adjustments | Income | Earnings | Interest | Equity | ||||||||||||||||||||||
(In millions of Korean won) | ||||||||||||||||||||||||||||
Balance, January 1, 2007 | 44,639 | 2,950,327 | (2,019,568 | ) | 490,010 | 7,847,434 | 170,246 | 9,483,088 | ||||||||||||||||||||
Cash dividends paid (Note 21) | — | — | — | — | (508,672 | ) | — | (508,672 | ) | |||||||||||||||||||
Interim cash dividends paid (Note 21) | — | — | — | — | (72,668 | ) | — | (72,668 | ) | |||||||||||||||||||
Net income | — | — | — | — | 1,648,876 | (86,611 | ) | 1,562,265 | ||||||||||||||||||||
Conversion of convertible bonds (Notes 9 and 14) | — | (11,116 | ) | — | — | — | — | (11,116 | ) | |||||||||||||||||||
Transfer of stock option from capital adjustments to capital surplus (Notes 2, 14 and 17) | — | 3,246 | (3,246 | ) | — | — | — | — | ||||||||||||||||||||
Difference between the acquisition cost and the net book value incurred from the capital transactions between companies under common control (Note 14) | — | (9,696 | ) | — | — | — | — | (9,696 | ) | |||||||||||||||||||
Equity in capital surplus and other comprehensive income of affiliates (Notes 2, 5 and 14) | — | (7,801 | ) | — | — | — | — | (7,801 | ) | |||||||||||||||||||
Treasury stock (Note 16) | — | — | (26,556 | ) | — | — | — | (26,556 | ) | |||||||||||||||||||
Loss on disposal of treasury stock (Notes 16 and 18) | — | — | 7,793 | — | — | — | 7,793 | |||||||||||||||||||||
Unrealized gain on valuation of long-term investment securities (Notes 2, 4 and 19) | — | — | — | 1,195,385 | — | — | 1,195,385 | |||||||||||||||||||||
Equity in other comprehensive income changes of affiliates, net (Notes 2, 5 and 19) | — | — | — | (105,597 | ) | — | — | (105,597 | ) | |||||||||||||||||||
Foreign-based operations’ translation adjustment (Notes 2 and 19) | — | — | — | 4,162 | — | — | 4,162 | |||||||||||||||||||||
Gain on valuation of currency swap (Notes 2, 19 and 28) | — | — | — | 4,671 | — | — | 4,671 | |||||||||||||||||||||
Gain on valuation of interest rate swap (Notes 2, 19 and 28) | — | — | — | 2,627 | — | — | 2,627 | |||||||||||||||||||||
Increase in minority interest in equity of consolidated subsidiaries | — | — | — | — | — | 169,748 | 169,748 | |||||||||||||||||||||
Balance, December 31, 2007 | 44,639 | 2,924,960 | (2,041,577 | ) | 1,591,258 | 8,914,970 | 253,383 | 11,687,633 | ||||||||||||||||||||
(In thousands of U.S. dollars) (Note 2 a) | ||||||||||||||||||||||||||||
Balance, January 1, 2007 | $ | 47,701 | $ | 3,152,732 | $ | (2,158,119 | ) | $ | 523,627 | $ | 8,385,803 | $ | 181,926 | $ | 10,133,670 | |||||||||||||
Cash dividends paid (Note 21) | — | — | — | — | (543,569 | ) | — | (543,569 | ) | |||||||||||||||||||
Interim cash dividends paid (Note 21) | — | — | — | — | (77,654 | ) | — | (77,654 | ) | |||||||||||||||||||
Net income | — | — | — | — | 1,761,996 | (92,553 | ) | 1,669,443 | ||||||||||||||||||||
Conversion of convertible bonds (Notes 9 and 14) | — | (11,879 | ) | — | — | — | — | (11,879 | ) | |||||||||||||||||||
Transfer of stock option from capital adjustments to capital surplus (Notes 2, 14 and 17) | — | 3,469 | (3,469 | ) | — | — | — | — | ||||||||||||||||||||
Difference between the acquisition cost and the net book value incurred from the capital transactions between companies under common control (Note 14) | — | (10,361 | ) | — | — | — | — | (10,361 | ) | |||||||||||||||||||
Equity in capital surplus and other comprehensive income of affiliates (notes 2, 5 and 14) | — | (8,336 | ) | — | — | — | — | (8,336 | ) | |||||||||||||||||||
Treasury stock (Note 16) | — | — | (28,378 | ) | — | — | — | (28,378 | ) | |||||||||||||||||||
Loss on disposal of treasury stock (Notes 16 and 18) | — | — | 8,328 | — | — | — | 8,328 | |||||||||||||||||||||
Unrealized gain on valuation of long-term investment securities (Notes 2, 4 and 19) | — | — | — | 1,277,393 | — | — | 1,277,393 | |||||||||||||||||||||
Equity in other comprehensive income changes of affiliates, net (Notes 2, 5 and 19) | — | — | — | (112,841 | ) | — | — | (112,841 | ) | |||||||||||||||||||
Foreign-based operations’ translation adjustment (Notes 2 and 19) | — | — | — | 4,448 | — | — | 4,448 | |||||||||||||||||||||
Gain on valuation of currency swap (Notes 2, 19 and 28) | — | — | — | 4,991 | — | — | 4,991 | |||||||||||||||||||||
Gain on valuation of interest rate swap (Notes 2, 19 and 28) | — | — | — | 2,807 | — | — | 2,807 | |||||||||||||||||||||
Increase in minority interest in equity of consolidated subsidiaries | — | — | — | — | — | 181,394 | 181,394 | |||||||||||||||||||||
Balance, December 31, 2007 | $ | 47,701 | $ | 3,125,625 | $ | (2,181,638 | ) | $ | 1,700,425 | $ | 9,526,576 | $ | 270,767 | $ | 12,489,456 | |||||||||||||
F-8
Table of Contents
2005 | 2006 | 2007 | 2007 | |||||||||||||
In millions of Korean won | In thousands | |||||||||||||||
of U.S. dollars | ||||||||||||||||
(Note 2 a) | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net income | 1,868,307 | 1,449,552 | 1,562,265 | $ | 1,669,443 | |||||||||||
Expenses not involving cash payments: | ||||||||||||||||
Provision for severance indemnities | 47,073 | 47,370 | 44,233 | 47,268 | ||||||||||||
Depreciation and amortization | 1,675,528 | 1,698,364 | 2,000,701 | 2,137,958 | ||||||||||||
Provision for bad debts | 115,731 | 86,321 | 80,876 | 86,424 | ||||||||||||
Foreign currency translation loss | 981 | 1,106 | 9,411 | 10,057 | ||||||||||||
Loss on valuation of trading securities | 16 | — | 1,203 | 1,286 | ||||||||||||
Equity in losses of affiliates | 71,825 | 211,464 | 175,474 | 187,512 | ||||||||||||
Loss on impairment of investment assets | 3,422 | 27,696 | 15,526 | 16,591 | ||||||||||||
Loss on disposal of investment assets | 4,017 | 6,096 | 1,190 | 1,272 | ||||||||||||
Loss on disposal of property, equipment and intangible assets | 6,523 | 17,148 | 30,730 | 32,838 | ||||||||||||
Impairment loss on assets | 260 | 7,030 | 3,484 | 3,723 | ||||||||||||
Loss on transaction and valuation of currency swap | — | 9,258 | 33,876 | 36,200 | ||||||||||||
Amortization of discounts on bonds and other | 51,846 | 51,077 | 49,345 | 52,730 | ||||||||||||
Sub-total | 1,977,222 | 2,162,930 | 2,446,049 | 2,613,859 | ||||||||||||
Income not involving cash receipts: | ||||||||||||||||
Reversal of allowance for doubtful accounts | (450 | ) | (789 | ) | (614 | ) | (656 | ) | ||||||||
Foreign currency translation gain | (658 | ) | (924 | ) | (5,373 | ) | (5,742 | ) | ||||||||
Gain on valuation of trading securities | (1 | ) | — | (128 | ) | (137 | ) | |||||||||
Gain on disposal of investment assets | (24,613 | ) | (27,490 | ) | (3,721 | ) | (3,976 | ) | ||||||||
Equity in earnings of affiliates | (20,949 | ) | (45,787 | ) | (247,382 | ) | (264,353 | ) | ||||||||
Gain on disposal of consolidated subsidiaries | (178,689 | ) | (1,556 | ) | — | — | ||||||||||
Gain on disposal of property, equipment and intangible assets | (4,693 | ) | (4,507 | ) | (9,776 | ) | (10,447 | ) | ||||||||
Gain on transactions and valuation of currency swap | (2,545 | ) | (16,660 | ) | (10,799 | ) | (11,540 | ) | ||||||||
Gain on conversion of convertible bond | — | — | (373,140 | ) | (398,739 | ) | ||||||||||
Gain on redemption of bonds payable | — | — | (6,160 | ) | (6,583 | ) | ||||||||||
Gain on disposal of other non-current assets and other | (765 | ) | (3,075 | ) | (13,623 | ) | (14,557 | ) | ||||||||
Sub-total | (233,363 | ) | (100,788 | ) | (670,716 | ) | (716,730 | ) | ||||||||
Changes in assets and liabilities related to operating activities: | ||||||||||||||||
Accounts receivable — trade | (210,957 | ) | (161,914 | ) | 2,738 | 2,926 | ||||||||||
Accounts receivable — other | 22,284 | 57,253 | 372,778 | 398,352 | ||||||||||||
Inventories | 8,297 | (9,145 | ) | (20,049 | ) | (21,424 | ) | |||||||||
Prepaid expenses | 9,016 | 61,148 | 76,293 | 81,527 | ||||||||||||
Accrued income and other | (24,938 | ) | 5,865 | (16,225 | ) | (17,338 | ) | |||||||||
Accounts payable | (34,441 | ) | 161,611 | (17,587 | ) | (18,794 | ) | |||||||||
Income taxes payable | 88,477 | (44,637 | ) | (21,791 | ) | (23,286 | ) | |||||||||
Accrued expenses | (12,944 | ) | 37,985 | (4,101 | ) | (4,382 | ) | |||||||||
Withholdings | 19,717 | 123,003 | (111,918 | ) | (119,596 | ) | ||||||||||
Current portion of subscription deposits | 1,495 | 885 | (8,220 | ) | (8,784 | ) | ||||||||||
Advance receipts and other | (22,221 | ) | 21,585 | 25,585 | 27,340 | |||||||||||
Deferred income taxes | 7,640 | (76,423 | ) | 121,681 | 130,029 | |||||||||||
Dividends received from affiliates | 785 | 1,318 | 2,184 | 2,334 | ||||||||||||
Severance indemnity payments | (24,365 | ) | (262,948 | ) | (13,732 | ) | (14,674 | ) | ||||||||
Deposits for group severance indemnities and other deposits | (32,869 | ) | 162,545 | (14,530 | ) | (15,527 | ) | |||||||||
Sub-total | (205,024 | ) | 78,131 | 373,106 | 398,703 | |||||||||||
Net Cash Provided by Operating Activities | 3,407,142 | 3,589,825 | 3,710,704 | 3,965,275 | ||||||||||||
(Continued) |
F-9
Table of Contents
2005 | 2006 | 2007 | 2007 | |||||||||||||
In millions of Korean won | In thousands | |||||||||||||||
of U.S. dollars | ||||||||||||||||
(Note 2 a) | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES : | ||||||||||||||||
Decrease (increase) in short-term financial instruments | (75,261 | ) | 4,470 | (6,974 | ) | $ | (7,452 | ) | ||||||||
Decrease in long-term financial instruments | 2 | 2 | 2,118 | 2,263 | ||||||||||||
Decrease (increase) in trading securities | (122,710 | ) | 80,060 | 28,696 | 30,664 | |||||||||||
Decrease in current portion of long-term investment securities | 53,608 | — | 156 | 167 | ||||||||||||
Collection of short-term loans | 60,530 | 96,892 | 119,608 | 127,814 | ||||||||||||
Collection of long-term loans | 57 | 654 | 3,652 | 3,903 | ||||||||||||
Proceeds from disposal of long-term investment securities | 40,889 | 305,953 | 76,879 | 82,153 | ||||||||||||
Proceeds from disposal of equity securities accounted for using the equity method | 7,539 | 80,014 | 20,258 | 21,648 | ||||||||||||
Proceeds from disposal of consolidated subsidiary | 290,966 | 39,062 | — | — | ||||||||||||
Decrease in guarantee deposits | 142,131 | 71,164 | 32,594 | 34,830 | ||||||||||||
Decrease in other non-current assets | 36,110 | 19,940 | 30,444 | 32,533 | ||||||||||||
Proceeds from disposal of property and equipment | 34,179 | 14,353 | 31,290 | 33,437 | ||||||||||||
Proceeds from disposal of intangible assets | 107 | 1,630 | 6,739 | 7,201 | ||||||||||||
Cash inflows from transaction of currency swap | — | — | 8,473 | 9,054 | ||||||||||||
Increase in short-term loans | (59,008 | ) | (92,753 | ) | (104,674 | ) | (111,855 | ) | ||||||||
Increase in long-term loans | (5,766 | ) | (12,623 | ) | (100,006 | ) | (106,867 | ) | ||||||||
Increase in long-term financial instruments | (1,140 | ) | (10,091 | ) | (652 | ) | (697 | ) | ||||||||
Acquisition of long-term investment securities | (319,061 | ) | (1,127,396 | ) | (417,528 | ) | (446,172 | ) | ||||||||
Acquisition of equity securities accounted for using the equity method | (231,793 | ) | (244,333 | ) | (76,629 | ) | (81,886 | ) | ||||||||
Increase in guarantee deposits | (75,295 | ) | (30,290 | ) | (31,056 | ) | (33,187 | ) | ||||||||
Increase in other non-current assets | (86,803 | ) | (132,349 | ) | (78,853 | ) | (84,263 | ) | ||||||||
Acquisition of property and equipment | (1,416,622 | ) | (1,498,142 | ) | (1,815,966 | ) | (1,940,549 | ) | ||||||||
Acquisition of intangible assets | (199,494 | ) | (73,964 | ) | (115,102 | ) | (122,999 | ) | ||||||||
Acquisition of minority interest | (11,352 | ) | (27,406 | ) | (12,514 | ) | (13,372 | ) | ||||||||
Net Cash Used in Investing Activities | (1,938,187 | ) | (2,535,153 | ) | (2,399,047 | ) | (2,563,632 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Increase in short-term borrowings | — | 51,230 | 35,946 | 38,412 | ||||||||||||
Issuance of bonds payable | 193,683 | 384,990 | 761,117 | 813,333 | ||||||||||||
Proceeds from long-term borrowings | — | 294,800 | 28,271 | 30,211 | ||||||||||||
Repayment of short-term borrowings | (376,929 | ) | — | (86,561 | ) | (92,499 | ) | |||||||||
Repayment of current portion of long-term debt | (500,033 | ) | (815,287 | ) | (907,176 | ) | (969,412 | ) | ||||||||
Repayment of bonds payable | — | (1,230 | ) | (61,306 | ) | (65,512 | ) | |||||||||
Payment of dividends | (758,192 | ) | (662,815 | ) | (581,309 | ) | (621,189 | ) | ||||||||
Decrease in facility deposits | (7,670 | ) | (2,630 | ) | (14,714 | ) | (15,723 | ) | ||||||||
Cash outflows from transaction of currency swap | — | — | (8,936 | ) | (9,549 | ) | ||||||||||
Acquisition and retirement of treasury stock | — | (209,078 | ) | (118,512 | ) | (126,642 | ) | |||||||||
Disposal of treasury stock | — | — | 45,133 | 48,229 | ||||||||||||
Increase in minority interest in equity of consolidated subsidiaries | 21,243 | 19,050 | 62,564 | 66,856 | ||||||||||||
Other | (1,140 | ) | (11,407 | ) | (10,624 | ) | (11,355 | ) | ||||||||
Net Cash Used in Financing Activities | (1,429,038 | ) | (952,377 | ) | (856,107 | ) | (914,840 | ) | ||||||||
THE EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS HELD IN FOREIGN CURRENCIES (Note 2) | (3,036 | ) | (9,317 | ) | 2,783 | 2,974 | ||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DUE TO CHANGES IN CONSOLIDATED SUBSIDIARIES | (29,085 | ) | 14,568 | 154,227 | 164,808 | |||||||||||
PREACQUISITION CASH FLOWS OF SUBSIDIARIES | — | — | (263,133 | ) | (281,186 | ) | ||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS DUE TO MERGER | — | — | 50,448 | 53,909 | ||||||||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 7,796 | 107,546 | 399,875 | 427,308 | ||||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR | 370,630 | 378,426 | 485,972 | 519,312 | ||||||||||||
CASH AND CASH EQUIVALENTS AT END OF THE YEAR | 378,426 | 485,972 | 885,847 | $ | 946,620 | |||||||||||
F-10
Table of Contents
1. | GENERAL |
Percentage of | ||||||||
Number of | Total Shares | |||||||
Shares | Issued (%) | |||||||
SK Group | 18,748,452 | 23.09 | ||||||
POSCO | 2,341,569 | 2.88 | ||||||
Institutional investors and other minority stockholders | 51,494,656 | 63.43 | ||||||
Treasury stock | 8,609,034 | 10.60 | ||||||
81,193,711 | 100.00 | |||||||
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
a. | Basis of Presentation |
F-11
Table of Contents
b. | Principles of Consolidation |
Year of | Ownership Percentage (%) | |||||||||||||||
Subsidiary | Establishment | Primary Business | 2005 | 2006 | 2007 | |||||||||||
SK Capital Co., Ltd. | 1995 | Finance | 100 | .00 | — | — | ||||||||||
SK Telink Co., Ltd. | 1998 | Telecommunication services | 90 | .77 | 90 | .77 | 90 | .77 | ||||||||
SK Communications Co., Ltd. | 1999 | Internet website services | 92 | .37 | 87 | .08 | 65 | .71 | ||||||||
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 | — | |||||||||
Global Credit & information Corp. | 1998 | Credit and collection services | 50 | .00 | 50 | .00 | 50 | .00 | ||||||||
PAXNet Co., Ltd. | 1999 | Internet website services | 67 | .10 | 59 | .74 | 59 | .74 | ||||||||
Loen Entertainment, Inc. (formerly Seoul Records, Inc.) | 1982 | Release of music disc | 60 | .00 | 60 | .00 | 60 | .00 | ||||||||
IHQ, Inc. | 1962 | Business related entertainment | 21 | .60 | 34 | .08 | 37 | .09 | ||||||||
TU Media Corp. | 2003 | Satellite broadcasting services | 29 | .58 | 29 | .58 | 32 | .70 | ||||||||
AirCross Co., Ltd. | 2000 | Advertising agency | 38 | .10 | 38 | .10 | 100 | .00 | ||||||||
Ntreev Soft Co., Ltd. | 2003 | Game software | 51 | .00 | 51 | .00 | 66 | .70 | ||||||||
Commerce Planet Co., Ltd.(formerly Philio Co., Ltd.) | 1997 | Cosmetic wholesale | — | — | 100 | .00 | ||||||||||
The First Music Investment Fund ofSK-PVC | 2005 | Investment association | 99 | .00 | 99 | .00 | 99 | .00 | ||||||||
The Second Music Investment Fund of SK-PVC | 2005 | Investment association | 99 | .00 | 99 | .00 | 99 | .00 | ||||||||
SK-KTB Music Investment Fund | 2005 | Investment association | 99 | .00 | 99 | .00 | 99 | .00 | ||||||||
IMM Cinema Fund | 2005 | Investment association | 48 | .39 | 60 | .84 | 72 | .24 | ||||||||
Michigan Global Cinema Fund | 2006 | Investment association | — | 36 | .36 | 45 | .45 | |||||||||
SK i-media Co., Ltd. | 2006 | Game software | — | 60 | .00 | 60 | .00 | |||||||||
YTN Media, Inc | 2000 | Broadcasting services | — | 51 | .42 | 51 | .42 | |||||||||
Konan Technology | 1999 | Multimedia contents | — | 7 | .51 | 29 | .49 | |||||||||
SK Telecom China Co., Ltd. | 2002 | Telecommunication services | 100 | .00 | 100 | .00 | 100 | .00 | ||||||||
ULand Company Ltd. | 2004 | Telecommunication services | 100 | .00 | 100 | .00 | 100 | .00 | ||||||||
SKT Vietnam PTE Ltd. (formerly SLD Telecom PTE Ltd.) | 2000 | Telecommunication services | 55 | .10 | 73 | .32 | 73 | .32 | ||||||||
SK Telecom USA Holdings, Inc. | 2005 | Telecommunication services | 100 | .00 | 100 | .00 | 100 | .00 | ||||||||
Helio, Inc. & Helio, LLC | 2005 | Mobile handset services | 50 | .00 | 48 | .08 | 64 | .86 | ||||||||
SK Telecom International Inc. | 1995 | Internet website services | 100 | .00 | 100 | .00 | 100 | .00 | ||||||||
SK Cyberpass, Inc. | 2001 | International telephone call services | 70 | .54 | 70 | .54 | 70 | .54 |
F-12
Table of Contents
c. | Use of Estimates |
d. | Cash Equivalents |
e. | Allowance for Doubtful Accounts |
F-13
Table of Contents
2005 | 2006 | 2007 | ||||||||||
Beginning balance | 71,090 | 133,499 | 106,737 | |||||||||
Write-offs | (49,181 | ) | (90,780 | ) | (90,475 | ) | ||||||
Net | 21,909 | 42,719 | 16,262 | |||||||||
Provision for doubtful accounts receivable-trade | 112,792 | 61,457 | 71,439 | |||||||||
Increase (decrease) due to the changes in consolidated subsidiaries | (1,202 | ) | 2,561 | 5,850 | ||||||||
End of year | 133,499 | 106,737 | 93,551 | |||||||||
f. | Inventories |
Assets | Methods | |
E-commerce inventories | Moving average method | |
Replacement units for wireless telecommunication facilities and supplies for sales promotion | Moving average method | |
Wireless device | FIFO | |
Books and CDs | FIFO |
g. | Securities (excluding securities accounted for using the equity method of accounting) |
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Table of Contents
h. | Equity Securities Accounted for Using the Equity Method of Accounting |
i. | Troubled Debt Restructuring |
j. | Property and Equipment |
F-15
Table of Contents
Useful Lives | ||||||
Assets | Depreciation Method | (Years) | ||||
Buildings and structures | Declining balance method (straight-line method) | 15 ~50 | ||||
Machinery | Declining balance method | 3 ~9 | ||||
Other | Declining balance method | 3 ~5 |
k. | Intangible Assets |
l. | Government Subsidy |
m. | Impairment Losses |
n. | Convertible Bonds and Bonds with Stock Purchase Warrants |
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Table of Contents
o. | Discounts on Bonds |
p. | Valuation of Long-term Payables |
q. | 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. | |
• | Present obligations arising from past events or transactions, for which i) a disbursement of economic resources to fulfill such obligations is not probable or ii) a disbursement of economic resources is probable, but the related amount cannot be reasonably estimated. |
r. | Accrued Severance Indemnities |
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2005 | 2006 | 2007 | ||||||||||
Beginning net balance | 80,984 | 71,284 | 22,284 | |||||||||
Provision | 47,073 | 47,370 | 44,233 | |||||||||
Payments to employees | (24,365 | ) | (262,948 | ) | (13,732 | ) | ||||||
Net increase due to the changes in consolidated subsidiaries | 594 | 4,010 | 6,291 | |||||||||
Changes in deposits for severance indemnities | (33,002 | ) | 162,568 | (14,754 | ) | |||||||
Ending net balance | 71,284 | 22,284 | 44,322 | |||||||||
Ending balance : | ||||||||||||
Accrued severance indemnities | 267,855 | 51,243 | 90,286 | |||||||||
Deposits with insurance companies | (191,354 | ) | (28,868 | ) | (45,878 | ) | ||||||
National Pension Fund | (5,217 | ) | (91 | ) | (86 | ) | ||||||
Net balance | 71,284 | 22,284 | 44,322 | |||||||||
s. | Accounting for Employee Stock Option Compensation Plan |
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Table of Contents
t. | Accounting for Leases |
• | The lease transfers ownership of the asset to the lessee by the end of the lease term; | |
• | The lessee has the option to purchase the asset at a bargain price and it is certain that the option will be exercised; | |
• | The lease term is for the major part (75% or more) of the economic life of the asset even if title is not transferred; | |
• | At the date of lease commencement, the present value of the minimum lease payments amounts to at least substantially all (90% or more) of the fair value of the leased asset; or | |
• | The leased assets are of such a specialized nature that only the lessee can use them without major modifications. |
u. | Research and Development Costs |
v. | Foreign-based Operations’ Translation Adjustment |
w. | Accounting for Foreign Currency Transactions and Translation |
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Table of Contents
x. | Derivative Instruments |
y. | Revenue Recognition |
z. | Income Taxes |
aa. | Net Income Per Share |
ab. | Handset Subsidies to Long-term Mobile Subscribers |
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ac. | 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’ new issuance of their common stocks 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 adjustment (accumulated other comprehensive income) 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 (accumulated other comprehensive income), 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 |
• | Pursuant to adoption of SKAS No. 21, “Preparation and Presentation of Financial Statements”, certain amounts classified as capital adjustments through 2006 are classified as accumulated other comprehensive income (loss); such amounts include unrealized gain/loss on available-for-sale securities, equity in capital adjustments of affiliates and gain/loss on valuation of derivative instruments. In addition, certain amounts |
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classified as investment assets through 2006 are classified as other non-current assets; such amounts include long-term loans, guarantee deposits, long-term deposits and others. The accompanying consolidated balance sheets as of December 31, 2005 and 2006, which are comparatively presented, were reclassified in accordance with SKAS No. 21. |
• | Pursuant to adoption of SKAS No. 25, “Consolidated Financial Statements”, net income is allocated to majority interest and minority interest. In addition, when a subsidiary is purchased during the year, statement of income of the subsidiary is included in the consolidation as though it had been acquired at the beginning of the year, and pre-acquisition earnings are presented as deduction at the bottom of the consolidated statements of income. The accompanying consolidated statements of income for the years ended December 31, 2005 and 2006, which are comparatively presented, were reclassified in accordance with SKAS No. 25. In addition, in connection with the Company’s adoption of SKAS No. 25, the Company also begun to present pre-acquisition cash flows of subsidiaries as a separate deduction (addition) at the bottom of the Company’s consolidated statements of cash flows. | |
• | There is no significant change due to the adoption of SKAS No. 11, No. 22 and No. 23. |
3. | INVENTORIES |
2005 | 2006 | 2007 | ||||||||||
Merchandise | 863 | 1,167 | 42,787 | |||||||||
Finished goods | 766 | 2,282 | 4,054 | |||||||||
Semi-finished goods | — | 41 | 706 | |||||||||
Raw materials | 493 | 313 | 165 | |||||||||
Supplies | 6,301 | 16,782 | 3,733 | |||||||||
Total | 8,423 | 20,585 | 51,445 | |||||||||
Less allowance for valuation loss | (639 | ) | (807 | ) | (4,393 | ) | ||||||
Net | 7,784 | 19,778 | 47,052 | |||||||||
4. | INVESTMENT SECURITIES |
a. | Trading Securities |
Acquisition | ||||||||||||||||||||
Cost at | Fair Value at | |||||||||||||||||||
December 31, | December 31, | Carrying Amount | ||||||||||||||||||
2007 | 2007 | 2005 | 2006 | 2007 | ||||||||||||||||
(Note a) | ||||||||||||||||||||
Stocks | — | — | 12 | 12 | — | |||||||||||||||
Beneficiary certificates | 636,509 | 635,434 | 777,460 | 665,300 | 635,434 | |||||||||||||||
Total | 636,509 | 635,434 | 777,472 | 665,312 | 635,434 | |||||||||||||||
(note a) | The difference between the fair value and the acquisition cost of trading securities amounting to |
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b. | Long-term Investment Securities |
2005 | 2006 | 2007 | ||||||||||
Available-for-sale equity securities | 923,821 | 1,011,971 | 4,689,905 | |||||||||
Available-for-sale debt securities | 296,273 | 1,463,636 | 469,729 | |||||||||
Held-to-maturity securities | 115 | 146 | 94 | |||||||||
Total | 1,220,209 | 2,475,753 | 5,159,728 | |||||||||
Less current portion | (1 | ) | (335 | ) | (101,209 | ) | ||||||
Long-term portion | 1,220,208 | 2,475,418 | 5,058,519 | |||||||||
b-(1). | Available-for-sale Equity Securities |
December 31, 2007 | Carrying Amount | |||||||||||||||||||||||||||
Ownership | ||||||||||||||||||||||||||||
Number of | Percentage | Acquisition | Fair | |||||||||||||||||||||||||
Shares | (%) | Cost | Value | 2005 | 2006 | 2007 | ||||||||||||||||||||||
(Investments in listed companies) | ||||||||||||||||||||||||||||
Digital Chosunilbo Co., Ltd. | 2,890,630 | 7 | .8 | 5,781 | 8,629 | 5,796 | 5,897 | 8,629 | ||||||||||||||||||||
hanarotelecom incorporated | 11,045,000 | 4 | .8 | 121,677 | 116,525 | 56,440 | 88,581 | 116,525 | ||||||||||||||||||||
KRTnet Corporation | 234,150 | 4 | .4 | 1,171 | 2,470 | 2,646 | 2,517 | 2,470 | ||||||||||||||||||||
POSCO | 2,481,310 | 2 | .8 | 332,662 | 1,426,753 | 501,225 | 766,725 | 1,426,753 | ||||||||||||||||||||
DAEA TI Co., Ltd. (Formerly Comas Interactive Co., Ltd.) | 99,120 | 0 | .2 | 1,695 | 228 | 83 | 83 | 228 | ||||||||||||||||||||
eXtended Computing Environment Co., Ltd. (note a) | 133,333 | 3 | .3 | 10 | 905 | 10 | 876 | 905 | ||||||||||||||||||||
nTels Co., Ltd. (note b) | 205,200 | 8 | .2 | 34 | 1,525 | 34 | 34 | 1,525 | ||||||||||||||||||||
Qualcomm Inc. | 55,805 | 0 | .1 | 2,756 | 2,060 | — | — | 2,060 | ||||||||||||||||||||
China Unicom Ltd. (note c) | 899,745,075 | 6 | .6 | 1,333,009 | 1,936,840 | — | — | 1,936,840 | ||||||||||||||||||||
ZeroOne Interactive Co., Ltd. | 2,472,999 | 7 | .2 | 4,500 | 2,770 | — | 3,845 | 2,770 | ||||||||||||||||||||
T-Entertainment Co., Ltd. | 1,026,695 | 6 | .2 | 2,500 | 1,817 | — | — | 1,817 | ||||||||||||||||||||
HB Entertainment Co., Ltd. | — | — | — | — | 2,408 | 1,137 | — | |||||||||||||||||||||
sub-total | 1,805,795 | 3,500,522 | 568,642 | 869,695 | 3,500,522 | |||||||||||||||||||||||
(Investments in non-listed companies) | ||||||||||||||||||||||||||||
LG Powercomm Co., Ltd. (Formerly Powercomm Co., Ltd.) (note d) | 7,500,000 | 5 | .0 | 240,243 | 89,422 | 77,130 | 80,370 | 89,422 | ||||||||||||||||||||
SK C&C Co., Ltd. (note e) | 6,000,000 | 30 | .0 | 501,652 | 1,037,604 | — | — | 1,037,604 | ||||||||||||||||||||
Japan MBCO (note f) | 54,000 | 7 | .3 | 27,332 | — | 27,332 | — | — | ||||||||||||||||||||
Eonex Technologies Inc. (note g) | 144,000 | 12 | .3 | 3,600 | (note g | ) | 4,593 | 4,593 | 4,593 | |||||||||||||||||||
The Korea Economic Daily | 2,585,069 | 13 | .8 | 13,964 | (note��g | ) | 13,964 | 13,964 | 13,964 | |||||||||||||||||||
Cheongsol | 4,328 | 7 | .7 | 5,000 | (note g | ) | — | 5,000 | 5,000 | |||||||||||||||||||
Other (note h) | 132,244 | (note g | ) | 32,168 | 34,333 | 20,611 | ||||||||||||||||||||||
sub-total | 924,035 | 155,187 | 138,260 | 1,171,194 | ||||||||||||||||||||||||
(Investments in funds) | ||||||||||||||||||||||||||||
Korea IT Fund (note i) | — | 190,000 | — | — | ||||||||||||||||||||||||
Others (note j) | 18,313 | 9,992 | 4,016 | 18,189 | ||||||||||||||||||||||||
sub-total | 18,313 | 199,992 | 4,016 | 18,189 | ||||||||||||||||||||||||
Total | 2,748,143 | 923,821 | 1,011,971 | 4,689,905 | ||||||||||||||||||||||||
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Table of Contents
(note a) | The common stocks of eXtended Computing Environment Co., Ltd. were newly listed on the Korea Securities Dealers Automated Quotation in the Korea Stock Exchange during the year ended December 31, 2006. | |||
(note b) | The common stocks of nTels Co., Ltd. were newly listed on the Korea Securities Dealers Automated Quotation in the Korea Stock Exchange during the year ended December 31, 2007. | |||
(note c) | In accordance with the resolution of the Company’s board of directors of August 20, 2007, convertible bonds of China Unicom Ltd. were converted into common stocks and reclassified to available-for-sale equity securities from available-for-sale debt securities. | |||
(note d) | The Company recorded its investments in common stock of LG Powercomm Co., Ltd. at its fair value, which was estimated by assistance of an outside professional valuation company using the present value technique. The unrealized loss on valuation of investments amounting to | |||
(note e) | The investment in common stock of SK C&C Co., Ltd. was reclassified to available-for-sale securities from equity securities accounted for using the equity method during the fourth quarter of 2007, as SK C&C Co., Ltd. became the ultimate parent company of the Company. The Company recorded its investments in common stock of SK C&C Co., Ltd. at its fair value, which was estimated by assistance of an outside professional valuation company using the present value technique. The unrealized gain on valuation of investments totaling | |||
(note f) | Due to the impairment of the Company’s investments in common stock of Japan MBCO, the Company recorded impairment loss on such investments of | |||
(note g) | As a reasonable estimate of fair value could not be made, the investment is stated at acquisition cost. The investment in common stock of Eonex Technologies Inc. was reclassified to available-for-sale securities from equity securities accounted for using the equity method during the year ended December 31, 2003, as the Company’s ownership in such investees decreased to less than 20% and the Company no longer exercises 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. Meanwhile, during the year ended December 31, 2007, the investment in common stock of Pantech Co., Ltd. was reclassified to available-for-sale equity securities from equity securities accounted for using the equity method as the Company no longer exercise significant influence over the investee as a result of Pantech’s 20 to 1 stock consolidation which resulted in decrease in the Company’s ownership to 0.5% from 22.7%. And, the carrying amount of the investment as of December 31, 2007 is nil. | |||
(note h) | Due to the impairment of the Company’s investments in common stock of TeleMerc.com, Fibernett Co., Ltd. and others in 2005, Astro Nest Inc., D&D Media Inc. and others in 2006 and Skycross Korea Co., Ltd., GOMID Co., Ltd. and others in 2007, the Company recorded impairment losses of | |||
(note i) | The investment in Korea IT Fund was reclassified to equity securities accounted for using the equity method for the year ended December 31, 2006 as the Company has the ability to exercise significant influence on the investee. | |||
(note j) | Due to the impairment of their investments in cinema projects, the Company recorded impairment losses of |
F-24
Table of Contents
Acquisition | ||||||||||||||||||
Cost | ||||||||||||||||||
at December 31, | Carrying Amount | |||||||||||||||||
Maturity | 2007 | 2005 | 2006 | 2007 | ||||||||||||||
Public bonds | (note a) | 51,558 | 1,599 | 51,313 | 51,353 | |||||||||||||
Currency stabilization bonds | (note b) | 49,948 | 294,674 | 49,894 | 49,713 | |||||||||||||
Closed beneficiary certificates | Oct. 20, 2009 | 4,750 | — | — | 4,788 | |||||||||||||
Bond-type beneficiary certificates | (note c) | 351,385 | — | 5,072 | 360,641 | |||||||||||||
Convertible bonds of Real Telecom Co., Ltd. (note d) | Mar. 29, 2007 | 10,656 | — | — | — | |||||||||||||
Convertible bonds of China Unicom Ltd. (note e) | Jul. 5, 2009 | — | — | 1,276,703 | — | |||||||||||||
Convertible bonds of Eonex Technologies, Inc. (note f) | Oct. 11, 2008 | 1,000 | — | 1,000 | 1,000 | |||||||||||||
Convertible bonds of Empas Corp. (note g) | Oct. 18, 2009 | — | — | 78,670 | — | |||||||||||||
Others | 2,234 | — | 984 | 2,234 | ||||||||||||||
Total | 471,531 | 296,273 | 1,463,636 | 469,729 | ||||||||||||||
Less current portion of available-for-sale debt securities | (101,789 | ) | — | (256 | ) | (101,209 | ) | |||||||||||
Long-term available-for-sale debt securities | 369,742 | 296,273 | 1,463,380 | 368,520 | ||||||||||||||
(note a) | The maturities of public bonds as of December 31, 2007 are within 1 year for | |||
(note b) | The maturities of currency stabilization bonds as of December 31, 2007 are within 1 year. | |||
(note c) | The maturities of bond-type beneficiary certificates as of December 31, 2007 are within 1 year for | |||
(note d) | The convertible bonds of Real Telecom Co., Ltd. with a principal amount of | |||
(note e) | In accordance with the resolution of the Company’s board of directors of August 20, 2007, convertible bonds of China Unicom Ltd. were converted into its common stocks and reclassified to available-for-sale equity securities from available-for-sale debt securities. As a result of such conversion, the Company recorded gain on conversion of convertible bonds of | |||
(note f) | On October 11, 2006, the Company purchased convertible bonds of Eonex Technologies, Inc. at principal amount of | |||
(note g) | SK Communications Co., Ltd., a subsidiary of SK Telecom purchased convertible bonds of Empas Corp. on October 19, 2006. On November 1, 2007, SK Communications Co., Ltd. merged Empas Corp., and the convertible bonds of Empas Corp. were totally retired. |
F-25
Table of Contents
Acquisition Cost | ||||||||||||||||||||
at December 31, | Carrying Amount | |||||||||||||||||||
Maturity | 2007 | 2005 | 2006 | 2007 | ||||||||||||||||
Public bonds | (note a | ) | 94 | 115 | 146 | 94 | ||||||||||||||
Less current portion of held-to-maturity securities | (1 | ) | (79 | ) | — | |||||||||||||||
Long-term held-to-maturity securities | 114 | 67 | 94 | |||||||||||||||||
(note a) | The maturities of public bonds as of December 31, 2007 are within 5 years for |
For the Year Ended December 31, 2005 | ||||||||||||||||||||
Minority Interest | ||||||||||||||||||||
Transferred | in Equity of | |||||||||||||||||||
Beginning | Increase/ | to Realized | Consolidated | Ending | ||||||||||||||||
Balance | (Decrease) | Gain (Loss) | Subsidiaries | Balance | ||||||||||||||||
Digital Chosunilbo Co., Ltd. | (3,758 | ) | 3,772 | — | — | 14 | ||||||||||||||
hanarotelecom incorporated | (50,657 | ) | (14,580 | ) | — | — | (65,237 | ) | ||||||||||||
KRTnet Corporation | 1,007 | 468 | — | — | 1,475 | |||||||||||||||
POSCO | 131,343 | 37,220 | — | — | 168,563 | |||||||||||||||
Comas Interactive Co., Ltd. (Formerly INNOTG Co., Ltd.) | (1,543 | ) | (68 | ) | — | — | (1,611 | ) | ||||||||||||
HB Entertainment Co., Ltd. | — | 150 | — | (94 | ) | 56 | ||||||||||||||
SK Securities Co., Ltd. | (3,133 | ) | 3,610 | (477 | ) | — | — | |||||||||||||
SINJISOFT Corporation | 460 | — | (460 | ) | — | — | ||||||||||||||
Cowon Systems, Inc. | — | 585 | (585 | ) | — | — | ||||||||||||||
LG Powercomm Co., Ltd. (Formerly Powercomm Co., Ltd.) | (168,678 | ) | 5,565 | — | — | (163,113 | ) | |||||||||||||
Eonex Technologies Inc. | 2,011 | — | — | — | 2,011 | |||||||||||||||
WiderThan Co., Ltd. | (27 | ) | 27 | — | — | — | ||||||||||||||
Currency stabilization bonds | — | (217 | ) | — | — | (217 | ) | |||||||||||||
Sub-total | (92,975 | ) | 36,532 | (1,522 | ) | (94 | ) | (58,059 | ) | |||||||||||
Less tax effect (note a) | 25,568 | (10,046 | ) | 418 | 26 | 15,966 | ||||||||||||||
Total | (67,407 | ) | 26,486 | (1,104 | ) | (68 | ) | (42,093 | ) | |||||||||||
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Table of Contents
For the Year Ended December 31, 2006 | ||||||||||||||||||||
Minority Interest | ||||||||||||||||||||
Transferred | in Equity of | |||||||||||||||||||
Beginning | Increase/ | to Realized | Consolidated | Ending | ||||||||||||||||
Balance | (Decrease) | Gain (Loss) | Subsidiaries | Balance | ||||||||||||||||
Digital Chosunilbo Co., Ltd. | 14 | 102 | — | — | 116 | |||||||||||||||
hanarotelecom incorporated | (65,237 | ) | 32,141 | — | — | (33,096 | ) | |||||||||||||
KRTnet Corporation | 1,475 | (129 | ) | — | — | 1,346 | ||||||||||||||
POSCO | 168,563 | 265,500 | — | — | 434,063 | |||||||||||||||
Comas Interactive Co., Ltd. (Formerly INNOTG Co., Ltd.) | (1,611 | ) | — | — | — | (1,611 | ) | |||||||||||||
eXtended Computing Environment Co., Ltd. | — | 866 | — | — | 866 | |||||||||||||||
ZeroOne Interactive Co.,Ltd. | — | (655 | ) | — | 71 | (584 | ) | |||||||||||||
HB Entertainment Co., Ltd. | 56 | (1,272 | ) | — | 795 | (421 | ) | |||||||||||||
LG Powercomm Co., Ltd. | ||||||||||||||||||||
(Formerly Powercomm Co., Ltd.) | (163,113 | ) | 3,240 | — | — | (159,873 | ) | |||||||||||||
Eonex Technologies Inc. | 2,011 | — | — | — | 2,011 | |||||||||||||||
Public bonds | — | (4 | ) | — | — | (4 | ) | |||||||||||||
Currency stabilization bonds | (217 | ) | 906 | (677 | ) | — | 12 | |||||||||||||
Convertible bonds of China Unicom Ltd. | — | 319,648 | — | — | 319,648 | |||||||||||||||
Convertible bonds of Empas Corp. | — | 33,820 | — | (4,218 | ) | 29,602 | ||||||||||||||
Sub-total | (58,059 | ) | 654,163 | (677 | ) | (3,352 | ) | 592,075 | ||||||||||||
Less tax effect (note a) | 15,966 | (179,894 | ) | 186 | 895 | (162,847 | ) | |||||||||||||
Total | (42,093 | ) | 474,269 | (491 | ) | (2,457 | ) | 429,228 | ||||||||||||
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For the Year Ended December 31, 2007 | ||||||||||||||||||||
Minority Interest | ||||||||||||||||||||
Transferred | in Equity of | |||||||||||||||||||
Beginning | Increase/ | to Realized | Consolidated | Ending | ||||||||||||||||
Balance | (Decrease) | Gain (Loss) | Subsidiaries | Balance | ||||||||||||||||
Digital Chosunilbo Co., Ltd. | 116 | 2,731 | — | — | 2,847 | |||||||||||||||
hanarotelecom incorporated | (33,096 | ) | 27,944 | — | — | (5,152 | ) | |||||||||||||
KRTnet Corporation | 1,346 | (46 | ) | — | — | 1,300 | ||||||||||||||
POSCO | 434,063 | 660,028 | — | — | 1,094,091 | |||||||||||||||
DAEA TI Co., Ltd. (Formerly Comas Interactive Co., Ltd.) | (1,611 | ) | 145 | — | — | (1,466 | ) | |||||||||||||
eXtended Computing Environment Co., Ltd. | 866 | 29 | — | — | 895 | |||||||||||||||
nTels Co., Ltd. | — | 1,490 | — | — | 1,490 | |||||||||||||||
Qualcomm Inc. Ltd. | — | (696 | ) | — | — | (696 | ) | |||||||||||||
China Unicom Ltd. | — | 599,012 | — | — | 599,012 | |||||||||||||||
ZeroOne Interactive Co., Ltd. | (584 | ) | (1,147 | ) | — | 189 | (1,542 | ) | ||||||||||||
T-Entertainment Co., Ltd. | — | (682 | ) | — | 74 | (608 | ) | |||||||||||||
HB Entertainment Co., Ltd. | (421 | ) | 421 | — | — | — | ||||||||||||||
LG Powercomm Co., Ltd. (Formerly Powercomm Co., Ltd.) | (159,873 | ) | 9,053 | — | — | (150,820 | ) | |||||||||||||
SK C&C Co., Ltd. | — | 691,248 | — | — | 691,248 | |||||||||||||||
Eonex Technologies Inc. | 2,011 | — | — | — | 2,011 | |||||||||||||||
Public bonds | (4 | ) | (201 | ) | — | — | (205 | ) | ||||||||||||
Currency stabilization bonds | 12 | (247 | ) | — | — | (235 | ) | |||||||||||||
Convertible bonds of China Unicom Ltd. | 319,648 | 208,095 | (527,743 | ) | — | — | ||||||||||||||
Convertible bonds of Empas Corp. | 29,602 | — | (29,602 | ) | 137 | 137 | ||||||||||||||
Beneficiary certificates | — | 9,256 | — | 46 | 9,302 | |||||||||||||||
Sub-total | 592,075 | 2,206,433 | (557,345 | ) | 446 | 2,241,609 | ||||||||||||||
Less tax effect (note a) | (162,847 | ) | (607,406 | ) | 153,270 | (13 | ) | (616,996 | ) | |||||||||||
Total | 429,228 | 1,599,027 | (404,075 | ) | 433 | 1,624,613 | ||||||||||||||
(note a) | Represents adjustments to reflect the tax effect of temporary differences directly charged or credited to unrealized gains (losses) on valuation of long-term investment securities, which are other comprehensive income (loss) items, in accordance with SKAS No. 16 “Income Taxes”, which is effective January 1, 2005. |
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5. | EQUITY SECURITIES ACCOUNTED FOR USING THE EQUITY METHOD |
December 31, 2007 | Carrying Amount | |||||||||||||||||||||||||||
Ownership | ||||||||||||||||||||||||||||
Number | Percentage | Acquisition | Net asset | |||||||||||||||||||||||||
of Shares | (%) | Cost | Value | 2005 | 2006 | 2007 | ||||||||||||||||||||||
Pantech Co., Ltd. (Formerly SK Teletech Co., Ltd.) | — | — | — | — | (note a) | 55,732 | — | — | ||||||||||||||||||||
SK C&C Co., Ltd. | — | — | — | — | (note b) | 168,244 | 268,278 | — | ||||||||||||||||||||
STIC Ventures Co., Ltd. | — | — | — | — | (note c) | 8,379 | 8,611 | — | ||||||||||||||||||||
TU Media Corp. | — | — | — | — | (note d) | 32,343 | 7,214 | — | ||||||||||||||||||||
AirCross Co., Ltd. | — | — | — | — | (note e) | 966 | 1,477 | — | ||||||||||||||||||||
Harex Info Tech, Inc. | 225,000 | 21.2 | 3,375 | 417 | 2,530 | 1,805 | 1,118 | |||||||||||||||||||||
SK Mobile | — | 42.5 | 10,322 | 3,273 | (note f) | — | 4,666 | 3,273 | ||||||||||||||||||||
Skytel Co., Ltd. | 1,756,400 | 26.4 | 2,159 | 7,743 | 4,786 | 5,823 | 7,743 | |||||||||||||||||||||
SK China Company Ltd. | 28,160 | 20.7 | 3,195 | 1,222 | 485 | — | 137 | |||||||||||||||||||||
Helio, LLC & Helio, Inc. | — | — | — | — | (note g) | 102,272 | 80,130 | — | ||||||||||||||||||||
SK USA, Inc. | 49 | 49.0 | 3,184 | 3,141 | 3,279 | 3,016 | 3,141 | |||||||||||||||||||||
Korea IT Fund | 190 | 14.3 | 190,000 | 210,568 | (note h) | — | 193,061 | 210,568 | ||||||||||||||||||||
Michigan Global Cinema Fund | — | — | — | (note i) | 4,000 | 3,773 | — | |||||||||||||||||||||
3rd Fund of Isu Entertainment | 31.3 | 3,000 | 2,028 | 2,500 | 2,419 | 2,028 | ||||||||||||||||||||||
Centurion IT Investment Association | 53.2 | 1,930 | 2,463 | (note j) | — | — | 2,463 | |||||||||||||||||||||
CDMA Mobile Phone Center | 50.0 | 147,627 | 66,001 | 40,810 | 84,689 | 66,001 | ||||||||||||||||||||||
Empas Corp. | — | — | — | — | (note k) | — | 36,474 | — | ||||||||||||||||||||
SK i-media Co., Ltd. | — | — | — | — | (note l) | — | 11,312 | — | ||||||||||||||||||||
Cyworld Japan Co., Ltd. | 1,250,000 | 100.0 | 10,584 | 1,943 | (note m) | 726 | 4,362 | 4,091 | ||||||||||||||||||||
Cyworld Incorporated | 9,500,000 | 100.0 | 9,071 | — | (note m) | 524 | 3,592 | 2,672 | ||||||||||||||||||||
SK Telecom China Holding Co., Ltd | — | 100.0 | 19,070 | 19,070 | (note m) | — | — | 19,070 | ||||||||||||||||||||
Ntreev Soft Co., Ltd. | — | — | — | — | (note l) | — | 4,800 | — | ||||||||||||||||||||
Konan Technology | — | — | — | — | (note l) | — | 4,037 | — | ||||||||||||||||||||
SK Cyberpass, Inc. | — | — | — | — | (note l) | 1,949 | 1,780 | — | ||||||||||||||||||||
Cyworld Europe GmbH | — | 50.2 | 4,208 | 1,321 | (note m) | — | 512 | — | ||||||||||||||||||||
Cyworld China (Holdings) Ltd. | 9,000,100 | 100.0 | 8,467 | — | (note m) | — | 12 | — | ||||||||||||||||||||
WiderThan Co., Ltd. | — | — | — | — | 11,503 | — | — | |||||||||||||||||||||
IHQ, Inc. | — | — | — | — | 14,755 | — | — | |||||||||||||||||||||
SKT-HP Ventures, LLC. | — | — | — | — | 5,290 | — | — | |||||||||||||||||||||
Etoos Group Inc. | — | — | — | — | 2,586 | — | — | |||||||||||||||||||||
Other investment in affiliates | — | — | 35,601 | — | 8,220 | 19,090 | 28,661 | |||||||||||||||||||||
Total | 451,793 | 471,879 | 750,921 | 350,966 | ||||||||||||||||||||||||
(note a) | 60% equity interests in SK Teletech Co., Ltd. were sold to Curitel Communications, Inc. and the Company recorded a gain of |
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(note b) | For the year ended December 31, 2007, the Company’s shares of SK C&C Co., Ltd. were increased to 6,000,000 shares from 300,000 shares as a result of SK C&C Co., Ltd.’s 20 to 1 stock split. In addition, the investment in common stock of SK C&C Co., Ltd. was reclassified to available-for-sale equity securities, as SK C&C Co., Ltd. became the ultimate parent company of the Company by increasing its ownership interest in SK Holdings Co., Ltd., a split-off company from SK Corporation Co., Ltd. to 25.42% as of December 31, 2007. | |
(note c) | For the year ended December 31, 2007, the Company disposed all of its 1,600,000 shares of STIC Ventures Co., Ltd. | |
(note d) | TU Media Corp. was newly included in consolidation effective April 1, 2007 as the Company’s ownership interest increased to 32.7% and is the largest stockholder of TU Media Corp. | |
(note e) | For the year ended December 31, 2007, the Company acquired additional 975,000 shares of AirCross Co., Ltd. from WiderThan Co., Ltd. and others, which increased the Company’s ownership interest from 38.1% to 100.0%, accordingly AirCross Co., Ltd. was newly included in consolidation from this year. | |
(note f) | On March 31, 2006, the Company acquired 42.5% interests of common stock of SK Mobile from Pantech Co., Ltd. and others. | |
(note g) | In the first quarter of 2005, the Company incorporated SK Telecom USA Holdings, Inc. with an initial investment of US$83 million in order to invest and manage Helio, LLC, a joint venture company in the United States of America, which was established in order to provide wireless telecommunication service in the United States of America. Through December 31, 2007, the Company additionally invested in Helio, LLC and the Company’s ownership interest increased to 64.9%. As a result, Helio, LLC became subsidiary and included in consolidation effective November 1, 2007. | |
(note h) | The investment in Korea IT Fund was reclassified to equity securities accounted for using the equity method for the year ended December 31, 2006 as the Company has ability to exercise significant influence on the investee. In accordance with the Agreement of Korea IT Fund, the Company has voting rights of 14.3%, while the Company invested 63.3% of total capital contribution and has profit sharing rights of 63.3%. | |
(note i) | As TU Media Corp. became a subsidiary of the Company during the year ended December 31, 2007, TU Media Corp.’s ownership interest in Michigan Global Cinema Fund added to the Company’s ownership interest in Michigan Global Fund for the calculation of controlling ownership interest. As a result, Michigan Global Cinema Fund was newly included in consolidation effective April 1, 2007. | |
(note j) | Centurion IT Investment Association was deconsolidated as it was dissolved on February 2008; instead, it was accounted for using the equity method for the year ended December 31, 2007. | |
(note k) | Empas Corp. was merged into SK Communications Co., Ltd. during the year ended December 31, 2007. | |
(note l) | Through the year ended December 31, 2006, these investees were excluded from consolidation and accounted for using the equity method even though the Company’s ownership interest is over majority because their total assets at the beginning of the fiscal year were less than | |
(note m) | Even though the Company’s ownership interest is over majority, these investees are excluded from the consolidation and accounted for using the equity method as their total assets at the beginning of the fiscal year were less than |
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For the Year Ended December 31, 2005 | ||||||||||||||||||||||||||||||||
Equity in Capital | ||||||||||||||||||||||||||||||||
Equity in | Surplus and Other | Other | ||||||||||||||||||||||||||||||
Beginning | Earnings | Comprehensive | Dividend | Increase | Ending | |||||||||||||||||||||||||||
Balance | Acquisition | (Losses) | Income | 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 & Helio, Inc. | (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 | |||||||||||||||||||||||
Other investment in affiliates | 11,867 | 12,432 | — | — | — | (7,106 | ) | 17,193 | ||||||||||||||||||||||||
304,028 | 231,793 | (50,876 | ) | (50,526 | ) | (784 | ) | 38,244 | 471,879 | |||||||||||||||||||||||
(note a) | 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) | 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 their unissued shares to third parties directly. | |
(note d) | 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. | |
(note f) | The increase in investments in equity securities of Helio LLC and Helio, Inc. 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, Inc. 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) | For the year ended December 31, 2005, SLD received a cash distribution of |
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(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, 2006 | ||||||||||||||||||||||||||||
Equity in | ||||||||||||||||||||||||||||
Capital Surplus | ||||||||||||||||||||||||||||
Equity in | and Other | Other | ||||||||||||||||||||||||||
Beginning | Earnings | Comprehensive | Dividend | Increase | Ending | |||||||||||||||||||||||
Balance | Acquisition | (Losses) | Income | Received | (Decrease) | Balance | ||||||||||||||||||||||
Pantech Co., Ltd. (note a) | 55,732 | — | (55,902 | ) | 170 | — | — | — | ||||||||||||||||||||
SK C&C Co., Ltd. (note b) | 168,244 | — | 37,825 | 63,199 | (990 | ) | — | 268,278 | ||||||||||||||||||||
STIC Ventures Co., Ltd. | 8,379 | — | 845 | (613 | ) | — | — | 8,611 | ||||||||||||||||||||
TU Media Corp. | 32,343 | — | (25,129 | ) | — | — | — | 7,214 | ||||||||||||||||||||
AirCross Co., Ltd. | 966 | — | 511 | — | — | — | 1,477 | |||||||||||||||||||||
WiderThan Co., Ltd. (note c) | 11,503 | — | — | — | — | (11,503 | ) | — | ||||||||||||||||||||
IHQ, Inc. | 14,755 | — | (1,346 | ) | 84 | — | (13,493 | ) | — | |||||||||||||||||||
Harex Info Tech, Inc. | 2,530 | — | (725 | ) | — | — | — | 1,805 | ||||||||||||||||||||
SK Mobile | — | 10,322 | (5,520 | ) | (136 | ) | — | — | 4,666 | |||||||||||||||||||
Skytel Co., Ltd. (note b) | 4,786 | — | 1,970 | (605 | ) | (328 | ) | — | 5,823 | |||||||||||||||||||
SK China Company Ltd. | 485 | — | (380 | ) | (105 | ) | — | — | — | |||||||||||||||||||
Helio, LLC & Helio, Inc. (note d) | 102,272 | 76,933 | (88,309 | ) | — | — | (10,766 | ) | 80,130 | |||||||||||||||||||
SK USA, Inc. | 3,279 | — | 7 | (270 | ) | — | — | 3,016 | ||||||||||||||||||||
Korea IT Fund (note e) | — | — | 2,339 | 722 | — | 190,000 | 193,061 | |||||||||||||||||||||
Michigan Global Cinema Fund | 4,000 | — | (227 | ) | — | — | — | 3,773 | ||||||||||||||||||||
3rd Fund of Isu Entertainment | 2,500 | — | (81 | ) | — | — | — | 2,419 | ||||||||||||||||||||
SKT-HP Ventures, LLC (note f) | 5,290 | — | — | — | — | (5,290 | ) | — | ||||||||||||||||||||
CDMA Mobile Phone Center (note g) | 40,810 | 76,039 | (21,474 | ) | — | — | (10,686 | ) | 84,689 | |||||||||||||||||||
Empas Corp. | — | 37,092 | (1,369 | ) | 751 | — | — | 36,474 | ||||||||||||||||||||
SK i-media Co., Ltd. | — | 12,000 | (636 | ) | (52 | ) | — | — | 11,312 | |||||||||||||||||||
Cyworld Japan Co., Ltd. | 726 | 6,118 | (2,549 | ) | 67 | — | — | 4,362 | ||||||||||||||||||||
Etoos Group Inc. (note h) | 2,586 | — | (259 | ) | — | — | (2,327 | ) | — | |||||||||||||||||||
Cyworld Incorporated | 524 | 8,547 | (5,358 | ) | (121 | ) | — | — | 3,592 | |||||||||||||||||||
Other investments in affiliates | 10,169 | 17,282 | 90 | (640 | ) | — | 3,318 | 30,219 | ||||||||||||||||||||
471,879 | 244,333 | (165,677 | ) | 62,451 | (1,318 | ) | 139,253 | 750,921 | ||||||||||||||||||||
(note a) | Pantech Co., Ltd. suffered a significant loss due to deterioration of its liquidity during the fourth quarter of 2006, which resulted in the Company’s investments in Pantech Co., Ltd. to be reduced to zero. Equity in losses of affiliates that exceeded the carrying amount was | |
(note b) | The Company received dividends from SK C&C Co., Ltd. and Skytel Co., Ltd. and the corresponding amount was deducted from its equity method securities. | |
(note c) | The Company sold all of investments in equity securities of WiderThan Co., Ltd. for the year ended December 31, 2006 and recognized gains on disposal of investment in equity securities of | |
(note d) | Other decrease in investments in equity securities of Helio, Inc. represents losses from disposal of investments in equity securities of Helio, Inc. amounting to | |
(note e) | Other increase in investments in Korea IT Fund is the carrying amount transferred from available-for-sale equity securities. | |
(note f) | Investment was fully liquidated due to dissolution of SKT-HP Ventures, LLC for the year ended December 31, 2006. | |
(note g) | For the year ended December 31, 2006, SLD received a cash distribution of | |
(note h) | For the year ended December 31, 2006, Etoos Group Inc. was merged into SK Communications Co., Ltd., the Company’s subsidiary. |
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For the Year Ended December 31, 2007 | ||||||||||||||||||||||||||||
Equity in | ||||||||||||||||||||||||||||
Capital Surplus | ||||||||||||||||||||||||||||
Equity in | and Other | Other | ||||||||||||||||||||||||||
Beginning | Earnings | Comprehensive | Dividend | Increase | Ending | |||||||||||||||||||||||
Balance | Acquisition | (Losses) | Income | Received | (Decrease) | Balance | ||||||||||||||||||||||
SK C&C Co., Ltd. (notes a and d) | 268,278 | — | 230,252 | 4,381 | (1,260 | ) | (501,651 | ) | — | |||||||||||||||||||
STIC Ventures Co., Ltd. | 8,611 | — | — | (238 | ) | — | (8,373 | ) | — | |||||||||||||||||||
TU Media Corp. (note b) | 7,214 | — | (5,879 | ) | — | — | (1,335 | ) | — | |||||||||||||||||||
AirCross Co., Ltd. (note c) | 1,477 | — | (95 | ) | — | — | (1,382 | ) | — | |||||||||||||||||||
Harex Info Tech, Inc. | 1,805 | — | (687 | ) | — | — | — | 1,118 | ||||||||||||||||||||
SK Mobile | 4,666 | — | (1,678 | ) | 285 | — | — | 3,273 | ||||||||||||||||||||
Skytel Co., Ltd. (note d) | 5,823 | — | 2,562 | 12 | (654 | ) | — | 7,743 | ||||||||||||||||||||
SK China Company Ltd. | — | — | 54 | 83 | — | — | 137 | |||||||||||||||||||||
Helio, Inc. & Helio, LLC (note e) | 80,130 | 18,527 | (116,725 | ) | (38 | ) | — | 18,106 | — | |||||||||||||||||||
SK USA, Inc. | 3,016 | — | 96 | 29 | — | — | 3,141 | |||||||||||||||||||||
Korea IT Fund | 193,061 | — | 14,383 | 3,124 | — | — | 210,568 | |||||||||||||||||||||
Michigan Global Cinema Fund (note f) | 3,773 | — | — | — | — | (3,773 | ) | — | ||||||||||||||||||||
3rd Fund of Isu Entertainment (note g) | 2,419 | — | (891 | ) | — | — | 500 | 2,028 | ||||||||||||||||||||
Centurion IT Investment Association | — | — | 35 | 777 | — | 1,651 | 2,463 | |||||||||||||||||||||
CDMA Mobile Phone Center (note h) | 84,689 | 12,094 | (20,651 | ) | — | — | (10,131 | ) | 66,001 | |||||||||||||||||||
Empas Corp. (note i) | 36,474 | — | (6,397 | ) | 24 | — | (30,101 | ) | — | |||||||||||||||||||
SK i-media Co., Ltd. (note j) | 11,312 | — | — | — | — | (11,312 | ) | — | ||||||||||||||||||||
Cyworld Japan Co., Ltd. | 4,362 | — | (391 | ) | 120 | — | — | 4,091 | ||||||||||||||||||||
Cyworld Incorporated (note k) | 3,592 | — | (4,052 | ) | — | — | — | 2,672 | ||||||||||||||||||||
SK Telecom China Holding Co., Ltd. | — | 19,070 | — | — | — | — | 19,070 | |||||||||||||||||||||
Ntreev Soft Co., Ltd. (note j) | 4,800 | — | — | — | — | (4,800 | ) | — | ||||||||||||||||||||
Konan Technology (note l) | 4,037 | — | (109 | ) | 8 | — | (3,936 | ) | — | |||||||||||||||||||
SK Cyberpass, Inc. (note j) | 1,780 | — | — | — | — | (1,780 | ) | — | ||||||||||||||||||||
Cyworld Europe GmbH (note m) | 512 | 3,696 | (4,208 | ) | ��� | — | — | — | ||||||||||||||||||||
Cyworld China (Holdings) Ltd. (note m) | — | 8,467 | (8,467 | ) | — | — | — | — | ||||||||||||||||||||
Other investment in affiliates (note m) | 19,090 | 14,775 | (5,244 | ) | 176 | (268 | ) | 132 | 28,661 | |||||||||||||||||||
750,921 | 76,629 | 71,908 | 8,744 | (2,182 | ) | (558,185 | ) | 350,966 | ||||||||||||||||||||
(note a) | The investment in SK C&C Co., Ltd. was reclassified to available-for-sale security during the fourth quarter of 2007 as it became the ultimate parent company of the Company. | |
(note b) | TU Media Corp. was included in the consolidation of accompanying consolidated financial statements effective April 1, 2007, as the Company acquired additional equity of TU Media Corp. in February 2007. | |
(note c) | AirCross Co., Ltd. was included in the consolidation of accompanying consolidated financial statements effective April 1, 2007, as the Company acquired additional equity of AirCross Co., Ltd. in March 2007. | |
(note d) | The Company received dividends from SK C&C Co., Ltd. and Skytel Co., Ltd.; the corresponding amount was deducted from its equity method securities. | |
(note e) | Helio, Inc. & Helio LLC was included in the consolidation of accompanying consolidated financial statements effective November 2007, as the Company acquired additional equity of Helio, LLC during the fourth quarter of 2007. | |
(note f) | As TU Media Corp. who had certain ownership interest of Michigan Global Cinema Fund became a subsidiary of the Company in February 2007, the Company became the largest stockholder owning more than 30% of total outstanding common stock of Michigan Global Cinema Fund and included Michigan Global Cinema Fund in the consolidation of accompanying consolidated financial statements effective April 1, 2007. | |
(note g) | Other increase in investments in equity securities of 3rd Fund of Isu Entertainment resulted from additional investment by TU Media Corp. | |
(note h) | For the year ended December 31, 2007, SKT Vietnam PTE Ltd. (formerly SLD Telecom PTE Ltd.) received a cash distribution of | |
(note i) | Other decrease in investments in equity securities of Empas Corp. resulted from the merger between Empas Corp. and SK Communications Co., Ltd. | |
(note j) | SK i-media Co., Ltd., Ntreev Soft Co., Ltd. and SK Cyberpass, Inc. were newly included in the consolidation of the accompanying financial statements as their total assets at the beginning of 2007 increased to more than | |
(note k) | Equity in losses of affiliates amounting to |
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(note l) | Konan Technology which was a subsidiary of Empas Corp. was included in the consolidation of accompanying consolidated financial statements as SK Communications Co., Ltd. merged with Empas Corp. for the year ended December 31, 2007. | |
(note m) | As carrying amounts of equity securities accounted for using the equity method of Cyworld Europe GmbH, Cyworld China (Holdings) Ltd. and Cyworld Vietnam became nil, the equity method accounting was discontinued. Unrecognized losses because of the discontinuance of the equity method were |
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 | |||||||||||
For the Year Ended December 31, 2006 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | In(De)crease | Amortization | Balance | |||||||||||||
Pantech Co., Ltd. | 793 | — | (793 | ) | — | |||||||||||
SK C&C Co., Ltd. | 4,870 | — | (406 | ) | 4,464 | |||||||||||
TU Media Corp. | 993 | — | (209 | ) | 784 | |||||||||||
IHQ, Inc. | 6,267 | (5,533 | ) | (734 | ) | — | ||||||||||
Harex Info Tech, Inc. | 1,402 | — | (351 | ) | 1,051 | |||||||||||
SK Mobile | — | 3,192 | (3,192 | ) | — | |||||||||||
Helio, Inc. | — | 38 | — | 38 | ||||||||||||
Empas Corp. | — | 24,159 | (1,208 | ) | 22,951 | |||||||||||
Etoos Group Inc. | 1,581 | (1,553 | ) | (28 | ) | — | ||||||||||
Other investments in affiliates | — | 12,531 | (1,086 | ) | 11,445 | |||||||||||
Total | 15,906 | 32,834 | (8,007 | ) | 40,733 | |||||||||||
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For the Year Ended December 31, 2007 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | In(de)crease | Amortization | Balance | |||||||||||||
SK C&C Co., Ltd. | 4,464 | (4,160 | ) | (304 | ) | — | ||||||||||
TU Media Corp. | 784 | (732 | ) | (52 | ) | — | ||||||||||
IHQ, Inc. | — | — | — | — | ||||||||||||
Harex Info Tech, Inc. | 1,051 | — | (350 | ) | 701 | |||||||||||
SK Mobile | — | — | — | — | ||||||||||||
Helio, Inc. | 38 | — | (38 | ) | — | |||||||||||
Empas Corp. | 22,951 | (18,924 | ) | (4,027 | ) | — | ||||||||||
Etoos Group Inc. | — | — | — | — | ||||||||||||
Ntreev Soft Co., Ltd. | 1,785 | (1,785 | ) | — | — | |||||||||||
Konan Technology | 3,859 | (3,859 | ) | — | — | |||||||||||
Other investments in affiliates | 5,801 | 2,899 | (1,770 | ) | 6,930 | |||||||||||
Total | 40,733 | (26,561 | ) | (6,541 | ) | 7,631 | ||||||||||
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 | |||||||||||
For the Year Ended December 31, 2006 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Decrease | Balance | |||||||||||||
Pantech Co., Ltd. | — | 271 | (271 | ) | — | |||||||||||
SK China Company Ltd. | 1,086 | — | — | 1,086 | ||||||||||||
Cyworld Japan Co., Ltd. | 2,526 | 681 | (570 | ) | 2,637 | |||||||||||
Cyworld Incorporated | — | 1,888 | (94 | ) | 1,794 | |||||||||||
Other investments in affiliates | — | 892 | (104 | ) | 788 | |||||||||||
Total | 3,612 | 3,732 | (1,039 | ) | 6,305 | |||||||||||
For the Year Ended December 31, 2007 | ||||||||||||||||
Beginning | Ending | |||||||||||||||
Balance | Increase | Decrease | Balance | |||||||||||||
SK China Company Ltd. | 1,086 | — | — | 1,086 | ||||||||||||
Cyworld Japan Co., Ltd. | 2,637 | — | (2,227 | ) | 410 | |||||||||||
Cyworld Incorporated | 1,794 | — | (378 | ) | 1,416 | |||||||||||
Other investments in affiliates | 788 | 2,552 | (385 | ) | 2,955 | |||||||||||
Total | 6,305 | 2,552 | (2,990 | ) | 5,867 | |||||||||||
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Table of Contents
Net | ||||||||||||||||
Total | Total | Income | ||||||||||||||
Assets | Liabilities | Revenue | (Loss) | |||||||||||||
Harex Info Tech, Inc. | 3,544 | 1,573 | 5,626 | (1,589 | ) | |||||||||||
SK Mobile | 8,777 | 1,077 | 2,367 | (3,949 | ) | |||||||||||
Skytel Co., Ltd. | 32,934 | 3,610 | 26,309 | 9,703 | ||||||||||||
SK China Company Ltd. | 7,601 | 1,697 | — | 307 | ||||||||||||
SK USA, Inc. | 7,454 | 1,045 | 7,712 | 196 | ||||||||||||
Korea IT Fund | 332,476 | — | 33,644 | 22,710 | ||||||||||||
3rd Fund of Isu Entertainment | 5,408 | — | 234 | (2,332 | ) | |||||||||||
Centurion IT Investment Association | 4,630 | 1 | 107 | 93 | ||||||||||||
CDMA Mobile Phone Center | 346,789 | 214,786 | 55,023 | (41,303 | ) | |||||||||||
Cyworld Japan Co., Ltd. | 2,177 | 234 | 114 | (3,741 | ) | |||||||||||
Cyworld Incorporated | 3,365 | 6,571 | 55 | (6,534 | ) | |||||||||||
SK Telecom (China) Holding Co., Ltd. | 19,070 | — | — | — | ||||||||||||
Cyworld Europe GmbH | 2,712 | 81 | 127 | (5,125 | ) | |||||||||||
Cyworld China (Holdings) Ltd. | 8,608 | 9,287 | 420 | (8,912 | ) |
6. | LOANS TO EMPLOYEES |
2005 | 2006 | 2007 | ||||||||||
Loans to employees’ stock ownership association | 14,586 | 7,526 | 34,817 | |||||||||
Loans to employees for housing and other | 4,799 | 4,580 | 15,231 | |||||||||
19,385 | 12,106 | 50,048 | ||||||||||
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Table of Contents
7. | PROPERTY AND EQUIPMENT |
Useful | ||||||||||||||
Lives | ||||||||||||||
(Years) | 2005 | 2006 | 2007 | |||||||||||
Land | 466,562 | 473,109 | 454,916 | |||||||||||
Buildings and structures | 15-50 | 1,484,360 | 1,502,755 | 1,510,199 | ||||||||||
Machinery | 3-9 | 10,510,486 | 11,380,257 | 12,909,629 | ||||||||||
Other | 3-5 | 846,813 | 1,004,196 | 1,028,442 | ||||||||||
Construction in progress | 264,309 | 132,831 | 308,955 | |||||||||||
Total | 13,572,530 | 14,493,148 | 16,212,141 | |||||||||||
Less accumulated depreciation | (8,909,161 | ) | (9,985,813 | ) | (11,242,431 | ) | ||||||||
Government subsidy | — | — | (356 | ) | ||||||||||
Property and equipment, net | 4,663,369 | 4,507,335 | 4,969,354 | |||||||||||
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 | ||||||||||||||||
Other | 289,811 | 768,328 | (3,991 | ) | (657,560 | ) | (94,807 | ) | 301,781 | |||||||||||||||
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 | |||||||||||||||
For the Year Ended December 31, 2006 | ||||||||||||||||||||||||
Beginning | Ending | |||||||||||||||||||||||
Balance | Acquisition | Disposal | Transfer | Depreciation | Balance | |||||||||||||||||||
Land | 466,562 | 115 | (645 | ) | 7,077 | — | 473,109 | |||||||||||||||||
Buildings and structures | 1,151,094 | 4,664 | (849 | ) | 14,262 | (55,947 | ) | 1,113,224 | ||||||||||||||||
Machinery | 2,479,623 | 65,819 | (8,571 | ) | 1,014,646 | (1,152,632 | ) | 2,398,885 | ||||||||||||||||
Other | 301,781 | 839,284 | (17,308 | ) | (636,866 | ) | (97,605 | ) | 389,286 | |||||||||||||||
Construction in progress | 264,309 | 588,260 | — | (719,738 | ) | — | 132,831 | |||||||||||||||||
Total | 4,663,369 | 1,498,142 | (27,373 | ) | (320,619 | ) | (1,306,184 | ) | 4,507,335 | |||||||||||||||
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Table of Contents
For the Year Ended December 31, 2007 | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Beginning | Increase | Ending | ||||||||||||||||||||||||||
Balance | (Decrease) | Acquisition | Disposal | Transfer | Depreciation | Balance | ||||||||||||||||||||||
Land | 473,109 | — | 471 | (20,362 | ) | 1,698 | — | 454,916 | ||||||||||||||||||||
Buildings and structures | 1,113,224 | 5 | 4,998 | (3,488 | ) | 7,779 | (56,438 | ) | 1,066,080 | |||||||||||||||||||
Machinery | 2,398,885 | 282,925 | 106,524 | (8,420 | ) | 1,333,354 | (1,312,840 | ) | 2,800,428 | |||||||||||||||||||
Other | 389,286 | 19,008 | 1,034,181 | (14,273 | ) | (964,200 | ) | (125,027 | ) | 338,975 | ||||||||||||||||||
Construction in progress | 132,831 | 5,941 | 669,793 | (893 | ) | (498,717 | ) | — | 308,955 | |||||||||||||||||||
Total | 4,507,335 | 307,879 | 1,815,967 | (47,436 | ) | (120,086 | ) | (1,494,305 | ) | 4,969,354 | ||||||||||||||||||
8. | INTANGIBLE ASSETS |
December 31, 2007 | Carrying Amounts | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Acquisition Cost | Amortization | Impairment | 2005 | 2006 | 2007 | |||||||||||||||||||
Goodwill | 2,521,640 | (837,233 | ) | (50 | ) | 1,868,932 | 1,775,695 | 1,684,357 | ||||||||||||||||
Frequency use rights | 1,385,120 | (424,818 | ) | — | 1,184,292 | 1,076,833 | 960,302 | |||||||||||||||||
Software development costs | 243,345 | (222,940 | ) | (568 | ) | 65,991 | 45,653 | 19,837 | ||||||||||||||||
Other | 1,377,334 | (606,181 | ) | (1,687 | ) | 333,674 | 620,230 | 769,466 | ||||||||||||||||
5,527,439 | (2,091,172 | ) | (2,305 | ) | 3,452,889 | 3,518,411 | 3,433,962 | |||||||||||||||||
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 | |||||||||||||||||||
For the Year Ended December 31, 2006 | ||||||||||||||||||||||||||||
Beginning | Ending | |||||||||||||||||||||||||||
Balance | Acquisition | Disposal | Transfer | Amortization | Impairment | Balance | ||||||||||||||||||||||
Goodwill | 1,868,932 | 1,672 | — | 44,947 | (139,806 | ) | (50 | ) | 1,775,695 | |||||||||||||||||||
Frequency use rights | 1,184,292 | 687 | — | — | (108,146 | ) | — | 1,076,833 | ||||||||||||||||||||
Software development costs | 65,991 | 1,946 | — | 9,340 | (31,624 | ) | — | 45,653 | ||||||||||||||||||||
Other | 333,674 | 69,659 | (1,250 | ) | 330,866 | (112,604 | ) | (115 | ) | 620,230 | ||||||||||||||||||
3,452,889 | 73,964 | (1,250 | ) | 385,153 | (392,180 | ) | (165 | ) | 3,518,411 | |||||||||||||||||||
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Table of Contents
For the Year Ended December 31, 2007 | ||||||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||
Beginning | Increase | Ending | ||||||||||||||||||||||||||||||||||
Balance | (Decrease) | Acquisition | Disposal | Transfer | Amortization | Impairment | Balance | |||||||||||||||||||||||||||||
Goodwill | 1,775,695 | 59,460 | 958 | (124 | ) | 6,092 | (157,724 | ) | (— | ) | 1,684,357 | |||||||||||||||||||||||||
Frequency use rights | 1,076,833 | — | — | — | — | (116,531 | ) | — | 960,302 | |||||||||||||||||||||||||||
Software development costs | 45,653 | 1,881 | 3,294 | (5,673 | ) | 1,679 | (26,930 | ) | (67 | ) | 19,837 | |||||||||||||||||||||||||
Other | 620,230 | 119,135 | 110,850 | (5,750 | ) | 130,358 | (205,211 | ) | (146 | ) | 769,466 | |||||||||||||||||||||||||
Total | 3,518,411 | 180,476 | 115,102 | (11,547 | ) | 138,129 | (506,396 | ) | (213 | ) | 3,433,962 | |||||||||||||||||||||||||
Amount | Description | Residual Useful Lives | ||||||
Goodwill | 1,563,560 | Goodwill related to merger of Shinsegi Telecomm, Inc. | 12 years and 3 months | |||||
² | 37,770 | Goodwill related to merger of Empas Corp. | 4 years and 10 months | |||||
IMT license | 868,465 | Frequency use rights relating to W-CDMA service | (note a) | |||||
WiBro license | 85,823 | WiBro service | (note b) | |||||
DMB license | 6,013 | DMB service | 8 years and 6 months |
(note a) | With its application for a license to provide IMT services, the Company has a commitment to pay | |
(note b) | The Company purchased the WiBro license from MIC on March 30, 2005. The license period is seven years from the purchase date. Amortization of the WiBro license commenced when the Company started its commercial WiBro services on June 30, 2006 using the straight line method over the remaining useful life. |
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Table of Contents
9. | BONDS PAYABLE |
Annual | ||||||||||||||||||
Maturity | Interest | |||||||||||||||||
Year | Rate (%) | 2005 | 2006 | 2007 | ||||||||||||||
Domestic general bonds | 2006 | 5.0-6.0 | 800,000 | — | — | |||||||||||||
² | 2007 | 5.0-6.0 | 700,000 | 700,000 | — | |||||||||||||
² | 2008 | 5.0 | 300,000 | 300,000 | 300,000 | |||||||||||||
² | 2009 | 5.0 | 300,000 | 300,000 | 300,000 | |||||||||||||
² | 2010 | 4.0 | 200,000 | 200,000 | 200,000 | |||||||||||||
² | 2011 | 3.0 | 200,000 | 200,000 | 200,000 | |||||||||||||
² (note a) | 2012 | 3 month Euro Yen | — | — | 104,166 | |||||||||||||
Libor+0.55 | ||||||||||||||||||
² | 2013 | 4.0 | — | 200,000 | 200,000 | |||||||||||||
² | 2014 | 5.0 | — | — | 200,000 | |||||||||||||
² | 2016 | 5.0 | — | 200,000 | 200,000 | |||||||||||||
Unsecured private bonds (note c) | 2008 | 6.07-6.14 | — | — | 30,000 | |||||||||||||
² (notes b and c) | 2009 | 6.51-7.48 | — | — | 34,584 | |||||||||||||
² (note c) | 2009 | 6.45 | — | — | 30,000 | |||||||||||||
² (note c) | 2010 | 6.50-7.07 | — | — | 36,250 | |||||||||||||
Unsecured public bonds (note c) | 2008 | 5.50 | — | — | 50,000 | |||||||||||||
² (note c) | 2010 | 6.30-6.81 | — | — | 110,000 | |||||||||||||
Dollar denominated bonds (US$300,000) | 2011 | 4.25 | 303,900 | 278,880 | 281,460 | |||||||||||||
Dollar denominated bonds (US$400,000) | 2027 | 6.63 | — | — | 375,280 | |||||||||||||
Private bonds (¥125,000) | 2007 | 4.65 | — | 684 | — | |||||||||||||
Convertible bonds (SK Telecom) (note d) | 2009 | — | 385,885 | 356,356 | 268,415 | |||||||||||||
Convertible bonds (IHQ, Inc.) | 2008 | — | — | 18,356 | — | |||||||||||||
Convertible bonds (YTN Media, Inc.) | 2007 | 1.0 | — | 1,000 | — | |||||||||||||
Bond with stock purchase warrant | ||||||||||||||||||
(SK Communications Co., Ltd.) | 2007 | 4.65 | — | 684 | — | |||||||||||||
Sub total | 3,189,785 | 2,755,960 | 2,920,155 | |||||||||||||||
Less discounts on bonds | (40,016 | ) | (39,422 | ) | (46,557 | ) | ||||||||||||
Less conversion right adjustments | (65,218 | ) | (46,079 | ) | (19,665 | ) | ||||||||||||
Less warrant right adjustments | — | (23 | ) | — | ||||||||||||||
Add long-term accrued interest | 24,808 | 23,854 | 17,256 | |||||||||||||||
Net | 3,109,359 | 2,694,290 | 2,871,189 | |||||||||||||||
Less portion due within one year | (795,151 | ) | (698,967 | ) | (522,528 | ) | ||||||||||||
Long-term portion | 2,314,208 | 1,995,323 | 2,348,661 | |||||||||||||||
(note a) | As of December 31, 2007, the3-months Euro Yen LIBOR rate is 0.895%. | |
(note b) | These bonds are scheduled to repay in 3 years with a two-year grace period. | |
(note c) | These bonds are unsecured private bonds of TU Media Corp. which was newly included in consolidation of accompanying consolidated financial statements for the year ended December 31, 2007. | |
(note d) | The principal amount of these convertible bonds denominated in U.S. dollar as of December 31, 2005, 2006 and 2007 are US$329,450,000, US$304,240,000 and US$229,160,000, respectively. |
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Table of Contents
F-41
Table of Contents
10. | LONG-TERM BORROWINGS |
Final | Annual Interest | |||||||||||||||
Lender | Maturity Year | Rate (%) | 2005 | 2006 | 2007 | |||||||||||
(Note a) | ||||||||||||||||
Shinhan Bank (note b) | 2010 | 91 days CD yield + 0.25 | — | 200,000 | 200,000 | |||||||||||
² | 2011 | 3.58 | — | — | 762 | |||||||||||
Small Business Corporation | 2009 | 5.25 | — | — | 156 | |||||||||||
Calyon Bank | 2013 | 6M Libor + 0.29 | US$ | — | US$ | 50,000 | US$ | 50,000 | ||||||||
DBS Bank | ² | ² | — | US$ | 25,000 | US$ | 25,000 | |||||||||
SMBC | ² | ² | — | US$ | 25,000 | US$ | 25,000 | |||||||||
Earthlink, Inc. | 2010 | 10 | — | — | US$ | 30,000 | ||||||||||
Industrial Bank of Korea | 2008 | 3.50 ~ 3.90 | ¥ | 14,802 | ¥ | 8,880 | ¥ | — | ||||||||
² | 2009 | 3.11 | ¥ | 12,800 | ¥ | 9,100 | — | |||||||||
² | 2010 | 3.47 ~ 3.97 | — | — | 641 | |||||||||||
Resona Bank | 2010 | 1.85 | ¥ | — | ¥ | — | ¥ | 98,573 | ||||||||
Total | — | 200,000 | 201,559 | |||||||||||||
US$ | — | US$ | 100,000 | US$ | 130,000 | |||||||||||
¥ | 27,602 | ¥ | 17,980 | ¥ | 98,573 | |||||||||||
Equivalent in Korean won | 237 | 293,101 | 324,346 | |||||||||||||
Less portion due within one year | (82 | ) | (75 | ) | (925 | ) | ||||||||||
Long-term portion | 155 | 293,026 | 323,421 | |||||||||||||
(note a) | At December 31, 2007, the91-day CD yield and the 6M LIBOR rate are 5.82% and 4.65%, respectively. | |||
(note b) | This long-term borrowings is classified as long-term borrowing as the borrowing is to be rolled-over exceeding 1 year from December 31, 2007 in accordance with the loan agreement. |
Long-Term Borrowing | ||||||||||||||||
Long-Term | in Foreign Currencies | |||||||||||||||
Borrowing in | Foreign | Korean Won | ||||||||||||||
Year Ending December 31, | Korean Won | Currencies | Equivalent | Total | ||||||||||||
2008 | 508 | ¥ | 50,067 | 417 | 925 | |||||||||||
2009 | 541 | ¥ | 33,258 | 278 | 819 | |||||||||||
¥ | 15,248 | |||||||||||||||
2010 | 200,382 | US$ | 30,000 | 28,273 | 228,655 | |||||||||||
2011 | 127 | — | — | 127 | ||||||||||||
2012 and thereafter | — | US$ | 100,000 | 93,820 | 93,820 | |||||||||||
Total | ¥ | 98,573 | ||||||||||||||
201,558 | US$ | 130,000 | 122,788 | 324,346 | ||||||||||||
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Table of Contents
11. | SUBSCRIPTION DEPOSITS |
Deposit per | ||||||||||||||||
Service Type | Subscriber | 2005 | 2006 | 2007 | ||||||||||||
Cellular | 200,000 | 23,770 | 21,140 | 6,425 |
12. | LEASES |
Annual Lease | ||||||||||||
Year Ending December 31, | Payments | Interest | Principal | |||||||||
2008 | 2,306 | 89 | 2,217 | |||||||||
2009 | 425 | 36 | 389 | |||||||||
2010 | 333 | 10 | 323 | |||||||||
Total | 3,064 | 135 | 2,929 | |||||||||
Less portion due within one year | (2,217 | ) | ||||||||||
Finance lease liabilities | 712 | |||||||||||
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Table of Contents
Minimum Lease | ||||
Year Ending December 31, | Payments | |||
2008 | 7,704 | |||
2009 | 6,723 | |||
2010 | 4,833 | |||
2011 | 1,922 | |||
2012 and thereafter | 7,545 | |||
Total | 28,727 | |||
13. | ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES |
Foreign Currencies | Korean Won Equivalent | |||||||||||||||||||||||
2005 | 2006 | 2007 | 2005 | 2006 | 2007 | |||||||||||||||||||
Cash and cash equivalents | US$ | 11,826 | US$ | 1,330 | US$ | 357,413 | 11,980 | 1,236 | 335,325 | |||||||||||||||
² | EUR | 3 | EUR | 2 | EUR | 117 | 3 | 2 | 162 | |||||||||||||||
² | VND | 902,819 | — | — | 58 | — | — | |||||||||||||||||
² | SG | $30 | — | — | 18 | — | — | |||||||||||||||||
US$ | 31,334 | US$ | 30,849 | US$ | 26,818 | 31,741 | 28,677 | 25,161 | ||||||||||||||||
Accounts receivable — trade | — | ¥ | 800 | ¥ | 41,307 | — | 6 | 344 | ||||||||||||||||
² | EUR | 248 | EUR | 248 | EUR | 248 | 298 | 303 | 343 | |||||||||||||||
² | — | — | CNY | 5,620 | — | — | 722 | |||||||||||||||||
Short-term loans | — | — | US$ | 2,419 | — | — | 2,270 | |||||||||||||||||
Accounts receivable — other | US$ | 3,364 | US$ | 1,657 | US$ | 965 | 3,408 | 1,541 | 905 | |||||||||||||||
² | VND | 6,173,479 | — | — | 394 | — | — | |||||||||||||||||
Guarantee deposits | — | US$ | 17 | US$ | 12 | — | 16 | 11 | ||||||||||||||||
² | ¥ | 16,156 | ¥ | 21,536 | ¥ | 16,912 | 139 | 168 | 141 | |||||||||||||||
Total assets | 48,039 | 31,949 | 365,384 | |||||||||||||||||||||
F-44
Table of Contents
Foreign Currencies | Korean Won Equivalent | |||||||||||||||||||||||
2005 | 2006 | 2007 | 2005 | 2006 | 2007 | |||||||||||||||||||
Accounts payable — trade | US$ | 28,360 | — | US$ | 27,904 | 28,728 | — | 26,179 | ||||||||||||||||
² | — | — | ¥ | 1,251 | — | — | 10 | |||||||||||||||||
Accounts payable — other | US$ | 15,737 | US$ | 36,373 | US$ | 22,596 | 15,942 | 33,812 | 21,199 | |||||||||||||||
² | ¥ | 8,498 | ¥ | 19,956 | ¥ | 16,954 | 73 | 156 | 141 | |||||||||||||||
² | HK$ | 254 | HK$ | 190 | HK$ | 248 | 33 | 23 | 30 | |||||||||||||||
² | — | CNY | 2 | CNY | 2 | — | — | — | ||||||||||||||||
² | GBP | 453 | GBP | 48 | GBP | 931 | 791 | 88 | 1,745 | |||||||||||||||
² | SG$ | 22 | SG$ | 6 | SG$ | 27 | 13 | 4 | 18 | |||||||||||||||
² | EUR | 504 | EUR | 813 | EUR | 588 | 604 | 993 | 812 | |||||||||||||||
² | CHF | 19 | CHF | 250 | CHF | 250 | 15 | 190 | 208 | |||||||||||||||
² | CA$ | 2 | CA$ | 2 | CA$ | — | 2 | 1 | — | |||||||||||||||
² | VND | 11,823,640 | — | — | 755 | — | — | |||||||||||||||||
² | — | FRF | 11 | FRF | 11 | — | 2 | 2 | ||||||||||||||||
Total liabilities | 46,956 | 35,269 | 50,344 | |||||||||||||||||||||
14. | CAPITAL STOCK AND CAPITAL SURPLUS |
2005 | 2006 | 2007 | ||||||||||
Authorized shares | 220,000,000 | 220,000,000 | 220,000,000 | |||||||||
Issued shares | 82,276,711 | 81,193,711 | 81,193,711 | |||||||||
Outstanding shares, net of treasury stock | 73,614,296 | 72,667,459 | 72,584,677 |
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Number of | Capital | |||||||||||
Shares Issued | Common Stock | Surplus | ||||||||||
At January 1, 2005 | 82,276,711 | 44,639 | 2,968,301 | |||||||||
Deferred tax effect of temporary difference related to conversion rights (note a) | — | — | (18,502 | ) | ||||||||
Transfer of stock option from capital adjustment (note b) | — | — | 1,533 | |||||||||
Equity in capital surplus changes of affiliates | — | — | 3,508 | |||||||||
At December 31, 2005 | 82,276,711 | 44,639 | 2,954,840 | |||||||||
Retirement of treasury stock (note c) | (1,083,000 | ) | — | — | ||||||||
Conversion of convertible bonds (note d) | — | — | (3,733 | ) | ||||||||
Transfer of stock options from capital adjustment (note e) | — | — | 234 | |||||||||
Equity in capital surplus changes of affiliates | — | — | (1,014 | ) | ||||||||
At December 31, 2006 | 81,193,711 | 44,639 | 2,950,327 | |||||||||
Conversion of convertible bonds (note f) | (11,116 | ) | ||||||||||
Transfer of stock options from capital adjustment (note g) | 3,246 | |||||||||||
Difference between the acquisition cost and the net book value incurred from the capital transaction between companies under common control (note h) | (9,696 | ) | ||||||||||
Equity in capital surplus changes of affiliates | (7,801 | ) | ||||||||||
At December 31, 2007 | 81,193,711 | 44,639 | 2,924,960 | |||||||||
(note a) | 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. | |||
(note b) | For the year ended December 31, 2005, the exercisable period for the stock options representing 17,800 shares, of which recognized compensation costs was | |||
(note c) | The Company retired 491,000 shares and 592,000 shares of treasury stock on August 17, 2006 and September 29, 2006, respectively, and reduced retained earnings before appropriation in accordance with Korean Commercial Code. | |||
(note d) | For the year ended December 31, 2006, the convertible bonds with principal amount of US$25,210,000 were converted into 136,163 shares of the Company’s common stock. Such conversion was settled by the Company by using its treasury stocks (see Note 16). Related to this conversion transaction, the capital surplus amount decreased by | |||
(note e) | For the year ended December 31, 2006, the exercisable period for the stock options representing 43,390 shares, of which recognized compensation costs were | |||
(note f) | For the year ended December 31, 2007, the convertible bonds with principal amount of US$38,820,000 were converted into 216,347 shares of the Company’s common stock. Such conversion was settled by the Company by using its treasury stocks (see note 16). Related to this conversion transaction, the capital surplus amount decreased by | |||
(note g) | For the year ended December 31, 2007, the exercisable period for the stock options representing 65,730 shares, for which the Company recognized compensation costs of | |||
(note h) | During the year ended December 31, 2007, SK Telecom acquired Ntreev Soft Co., Ltd.’s common stock from iHQ, Inc. a subsidiary of the Company. The difference between the acquisition cost and purchased net book value of Ntreev Soft Co., Ltd. amounting to |
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15. | RETAINED EARNINGS |
2005 | 2006 | 2007 | ||||||||||
Appropriated | 5,470,701 | 6,679,235 | 7,335,037 | |||||||||
Unappropriated | 1,796,948 | 1,168,199 | 1,579,933 | |||||||||
7,267,649 | 7,847,434 | 8,914,970 | ||||||||||
2005 | 2006 | 2007 | ||||||||||
Legal reserve | 22,320 | 22,320 | 22,320 | |||||||||
Reserve for improvement of financial structure | 33,000 | 33,000 | 33,000 | |||||||||
Reserve for loss on disposal of treasury stock | 477,182 | 477,182 | 255,984 | |||||||||
Reserve for research and manpower development | 822,061 | 880,595 | 872,595 | |||||||||
Reserve for business expansion | 4,116,138 | 5,266,138 | 6,151,138 | |||||||||
5,470,701 | 6,679,235 | 7,335,037 | ||||||||||
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 |
16. | TREASURY STOCK |
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17. | STOCK OPTIONS |
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Total | Recognized | Compensation | Stock Option in | |||||||||||||||||||||||||||||
Compensation | Compensation Cost | Cost to be | Capital Adjustment | |||||||||||||||||||||||||||||
Grant Date | Cost | 2005 | 2006 | 2007 | Recognized | 2005 | 2006 | 2007 | ||||||||||||||||||||||||
March 17, 2000 (note a) | 1,533 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
March 16, 2001 (note b) | 234 | — | — | — | — | 234 | — | — | ||||||||||||||||||||||||
March 8, 2002 (note c) | 3,246 | 180 | — | — | — | 3,246 | 3,246 | — | ||||||||||||||||||||||||
5,013 | 180 | — | — | — | 3,480 | 3,246 | — | |||||||||||||||||||||||||
(note a) | For 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 | |||
(note b) | For the year ended December 31, 2006, the exercisable period for stock options representing 43,820 shares, for which the Company had recognized compensation cost of | |||
(note c) | For the year ended December 31, 2007, the exercisable period for stock options representing 65,730 shares, for which the Company had recognized compensation cost of |
2005 | ||||
Pro forma net income (in millions of Korean won) | 1,872,680 | |||
Pro forma net income per common shares | 25,439 |
18. | INCOME TAXES |
2005 | 2006 | 2007 | ||||||||||
Currently | 685,541 | 615,959 | 564,480 | |||||||||
Changes in net deferred tax liabilities | 7,718 | (43,933 | ) | 121,681 | ||||||||
Income tax expenses | 693,259 | 572,026 | 686,161 | |||||||||
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2005 | 2006 | 2007 | |||||||||||||
Income taxes at statutory income tax rate of 25% in 2005, 2006 and 2007 | 640,391 | 505,394 | 496,323 | ||||||||||||
Resident surtax payable | 64,039 | 50,539 | 49,632 | ||||||||||||
Tax credit for investments, technology and human resource development and others | (100,160 | ) | (110,785 | ) | (112,235 | ) | |||||||||
Special surtax for agriculture and fishery industries and other | 18,838 | 20,183 | 18,370 | ||||||||||||
Goodwill amortization not deductible for tax purpose | 37,023 | 38,447 | 35,382 | ||||||||||||
Undistributed earnings (unrecognized deficit) of subsidiaries | 4,846 | 1,496 | 5,326 | ||||||||||||
Other permanent differences | 11,332 | 24,717 | 9,181 | ||||||||||||
Increase (decrease) in valuation allowance | 16,950 | 42,035 | 184,182 | ||||||||||||
Recorded income taxes | 693,259 | 572,026 | 686,161 | ||||||||||||
Effective tax rate | 27 | .06 | % | 28 | .30 | % | 34 | .56 | % | ||||||
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2005 | 2006 | 2007 | ||||||||||
Current : | ||||||||||||
Allowance for doubtful accounts | 39,334 | 21,701 | 17,289 | |||||||||
Write-off of doubtful accounts | 9,239 | — | — | |||||||||
Accrued interest income | (1,229 | ) | (1,605 | ) | (2,073 | ) | ||||||
Net operating loss carryforwards | 17 | 1,121 | 5,406 | |||||||||
Tax credit carryforwards | 89 | 19 | — | |||||||||
Other | 18,623 | 28,704 | 15,756 | |||||||||
Net deferred tax assets — current | 66,073 | 49,940 | 36,378 | |||||||||
Non-Current : | ||||||||||||
Depreciation | (47,472 | ) | (51,437 | ) | (42,671 | ) | ||||||
Loss on impairment of investment securities | 32,959 | 33,269 | 41,105 | |||||||||
Equity in losses (gains) of affiliates, net | (10,244 | ) | 3,968 | (52,313 | ) | |||||||
Unrecognized deficit (undistributed earnings) of subsidiaries | 13,732 | 34,005 | 86,497 | |||||||||
Tax free reserve for research and manpower development | (211,208 | ) | (211,215 | ) | (151,259 | ) | ||||||
Tax free reserve for loss on disposal of treasury stock | (130,372 | ) | (70,395 | ) | (70,396 | ) | ||||||
Loss on valuation of foreign currency swap | 3,642 | 6,188 | 6,188 | |||||||||
Loss on valuation of interest swap | — | 125 | (871 | ) | ||||||||
Loss on valuation of derivatives (accumulated other comprehensive income) | 5,377 | 6,668 | 6,668 | |||||||||
Gain on conversion of convertible bond | — | — | (102,613 | ) | ||||||||
Consideration for conversion right | (18,502 | ) | (17,086 | ) | (12,870 | ) | ||||||
Equity in capital adjustments of affiliates | (21,967 | ) | (34,077 | ) | 7,879 | |||||||
Unrealized loss(gain) on valuation of long-term investment securities (accumulated other comprehensive income) | 15,966 | (163,992 | ) | (617,020 | ) | |||||||
Net operating loss carryforwards | 24,108 | 66,319 | 183,053 | |||||||||
Tax credit carryforwards | — | 48 | 35,399 | |||||||||
Other | (875 | ) | 8,801 | 28,864 | ||||||||
Total deferred tax liabilities | (344,856 | ) | (388,811 | ) | (654,360 | ) | ||||||
Valuation allowance for: | ||||||||||||
Depreciation | (6,022 | ) | 183 | 236 | ||||||||
Net operating loss carryforwards | (23,523 | ) | (60,142 | ) | (182,726 | ) | ||||||
Equity in losses of affiliates and unrecognized deficit of subsidiaries | (17,631 | ) | (73,082 | ) | (161,081 | ) | ||||||
Other | (7,629 | ) | (8,132 | ) | (39,541 | ) | ||||||
Net deferred tax liabilities — non-current | (399,661 | ) | (529,984 | ) | (1,037,472 | ) | ||||||
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Net Operating Loss | Tax Credit | |||||||
Year Ending December 31, | Carryforwards | Carryforwards | ||||||
2008 | 7,584 | — | ||||||
2009 | — | 20 | ||||||
2010 | 568 | 4 | ||||||
2011 | — | — | ||||||
2012 | 622 | — | ||||||
Total | 8,774 | 24 | ||||||
2005 | 2006 | 2007 | ||||||||||
Consideration for conversion right | (18,502 | ) | (17,086 | ) | (12,870 | ) | ||||||
Loss on disposal of treasury stock | — | (38,341 | ) | (36,339 | ) | |||||||
Stock option | — | — | (99 | ) | ||||||||
Unrealized loss (gain) on valuation of long-term investment securities, net | 15,966 | (162,847 | ) | (616,996 | ) | |||||||
Equity in other comprehensive income of affiliates, net | (24,119 | ) | (41,403 | ) | (716 | ) | ||||||
Loss on valuation of currency swap | 5,377 | 6,668 | 6,668 | |||||||||
Loss (gain) on valuation of interest rate swap | — | 125 | (871 | ) | ||||||||
Foreign-based operations’ translation adjustment | 2 | (22 | ) | (32 | ) | |||||||
Retained Earnings | — | — | 30 | |||||||||
Total | (21,276 | ) | (252,906 | ) | (661,225 | ) | ||||||
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19. | COMPREHENSIVE INCOME |
2005 | 2006 | 2007 | ||||||||||||||||||||||
Profit and | Profit and | Profit and | ||||||||||||||||||||||
Loss Effect | Tax Effect | Loss Effect | Tax Effect | Loss Effect | Tax Effect | |||||||||||||||||||
Net income | 1,868,307 | 1,449,552 | 1,562,265 | |||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||
Unrealized gain on valuation of long-term investment securities, net | 50,882 | (179,973 | ) | 471,321 | (178,814 | ) | 1,195,385 | (454,149 | ) | |||||||||||||||
Equity in other comprehensive income change of affiliates, net | (73,008 | ) | (17,284 | ) | 45,956 | (17,282 | ) | (105,597 | ) | 40,687 | ||||||||||||||
Foreign-based operations translation adjustment | (2,020 | ) | 2 | (19,737 | ) | (24 | ) | 4,162 | (10 | ) | ||||||||||||||
Gain (loss) on valuation of currency swap, net | 35,276 | 1,291 | (2,311 | ) | 1,291 | 4,671 | — | |||||||||||||||||
Gain (loss) on valuation of interest rate swap, net | — | 125 | (329 | ) | 125 | 2,627 | (996 | ) | ||||||||||||||||
Sub-total | 11,130 | (195,839 | ) | 494,900 | (194,704 | ) | 1,101,248 | (414,468 | ) | |||||||||||||||
Comprehensive income | 1,879,437 | 1,944,452 | 2,663,513 | |||||||||||||||||||||
Attributable to: | ||||||||||||||||||||||||
Majority interests | 1,884,108 | 1,946,391 | 2,750,124 | |||||||||||||||||||||
Minority interests | (4,671 | ) | (1,939 | ) | (86,611 | ) | ||||||||||||||||||
1,879,437 | 1,944,452 | 2,663,513 | ||||||||||||||||||||||
20. | NET INCOME PER SHARE |
2005 | 2006 | 2007 | ||||||||||
Net income attributable to the majority interests | 1,872,978 | 1,451,491 | 1,648,876 | |||||||||
Weighted average number of common shares outstanding | 73,614,296 | 73,305,026 | 72,650,909 | |||||||||
Net income per share | 25,443 | 19,801 | 22,696 | |||||||||
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Weighted | Weighted | |||||||||||||||
Number of | Number of | Number | ||||||||||||||
Date | Shares | Days | of Shares | |||||||||||||
For 2005 : | ||||||||||||||||
At January 1, 2005 | — | 82,276,711 | 365/365 | 82,276,711 | ||||||||||||
Treasury stock, at the beginning of the year | — | (8,662,415 | ) | 365/365 | (8,662,415 | ) | ||||||||||
Total | 73,614,296 | 73,614,296 | ||||||||||||||
For 2006 : | ||||||||||||||||
At January 1, 2006 | — | 82,276,711 | 365/365 | 82,276,711 | ||||||||||||
Treasury stock, at the beginning of the year | — | (8,662,415 | ) | 365/365 | (8,662,415 | ) | ||||||||||
Retirement of treasury stock | (note a | ) | (1,083,000 | ) | — | (373,546 | ) | |||||||||
Conversion of convertible bonds | (note b | ) | 136,163 | — | 64,276 | |||||||||||
Total | 72,667,459 | 73,305,026 | ||||||||||||||
For 2007 : | ||||||||||||||||
At January 1, 2007 | — | 81,193,711 | 365/365 | 81,193,711 | ||||||||||||
Treasury stock, at the beginning of the year | — | (8,526,252 | ) | 365/365 | (8,526,252 | ) | ||||||||||
Acquisition of treasury stock | (note c | ) | (471,000 | ) | 28/365 | (36,337 | ) | |||||||||
Conversion of convertible bonds | (note d | ) | 216,347 | 29/365 | 16,962 | |||||||||||
Disposal of treasury stock | 171,871 | 6/365 | 2,825 | |||||||||||||
Total | 72,584,677 | 72,650,909 | ||||||||||||||
(note a) | The Company retired treasury stocks which were acquired on two different dates during the year ended December 31, 2006, and weighted number of shares was calculated considering each transaction date. | |
(note b) | Treasury stocks were used to settle the conversion of the convertible bonds on several different dates during the year ended December 31, 2006, and weighted number of shares was calculated considering each transaction date. | |
(note c) | The Company acquired treasury stocks on many different dates during the year ended December 31, 2007, and weighted number of shares was calculated considering each transaction date. | |
(note d) | Treasury stocks were used to settle the conversion of the convertible bonds on several different dates during the year ended December 31, 2007, and weighted number of shares was calculated considering each transaction date. |
2005 | 2006 | 2007 | ||||||||||
Adjusted net income attributable to the majority interest | 1,886,033 | 1,464,768 | 1,661,678 | |||||||||
Adjusted weighted average number of common shares outstanding | 75,332,996 | 75,025,926 | 74,263,655 | |||||||||
Diluted net income per share | 25,036 | 19,523 | 22,375 | |||||||||
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Average Weighted | Per-share | |||||||||||
Net Income | Number of Shares | Amount | ||||||||||
(In millions of | (In Korean won) | |||||||||||
Korean won) | ||||||||||||
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 | |||||||||
For 2006 | ||||||||||||
Basic net income per share | 1,451,491 | 73,305,026 | 19,801 | |||||||||
Effect of stock option (note a) | — | — | ||||||||||
Effect of convertible bonds (note b) | 13,277 | 1,720,900 | ||||||||||
Diluted net income per share | 1,464,768 | 75,025,926 | 19,523 | |||||||||
For 2007 | ||||||||||||
Basic net income per share | 1,648,876 | 72,650,909 | 22,696 | |||||||||
Effect of stock option (note a) | — | — | ||||||||||
Effect of convertible bonds (note b) | 12,802 | 1,612,746 | ||||||||||
Diluted net income per share | 1,661,678 | 74,263,655 | 22,375 | |||||||||
(note a) | For the years ended December 31, 2005, 2006 and 2007, the outstanding stock options did not have a dilutive effect because the exercise price exceeded the average market price of common stock for the years ended December 31, 2005, 2006 and 2007, respectively. | |
(note b) | The effect of convertible bonds is increase in net income related to interest expenses that would not have incurred, and increase in the weighted average number of common shares outstanding related to common shares that would have been issued, assuming that the conversion of convertible bonds were made at the beginning of the period. |
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21. | DIVIDEND DISCLOSURE |
Fiscal | Number of Shares | Dividend | ||||||||||||||||
Year | Dividend Type | Outstanding | Face Value | Ratio | Dividends | |||||||||||||
2005 | Cash dividends (interim) | 73,614,296 | 500 | 200 | % | 73,614 | ||||||||||||
Cash dividends (year-end) | 73,614,296 | 500 | 1,600 | % | 588,914 | |||||||||||||
Total | 662,528 | |||||||||||||||||
2006 | Cash dividends (interim) | 73,713,657 | 500 | 200 | % | 73,714 | ||||||||||||
Cash dividends (year-end) | 72,667,459 | 500 | 1,400 | % | 508,672 | |||||||||||||
Total | 582,386 | |||||||||||||||||
2007 | Cash dividends (interim) | 72,667,459 | 500 | 200 | % | 72,668 | ||||||||||||
Cash dividends (year-end) | 72,584,677 | 500 | 1,680 | % | 609,711 | |||||||||||||
Total | 682,379 | |||||||||||||||||
2005 | 2006 | 2007 | |||||||||||||
Dividends | 662,528 | 582,386 | 682,379 | ||||||||||||
Net income attributable to the majority interest | 1,872,978 | 1,451,491 | 1,648,876 | ||||||||||||
Dividends payout ratio | 35 | .37 | % | 40 | .12 | % | 41 | .38 | % | ||||||
2005 | 2006 | 2007 | |||||||||||||
Dividend per share | 9,000 | 8,000 | 9,400 | ||||||||||||
Stock price at the year-end | 181,000 | 222,500 | 249,000 | ||||||||||||
Dividends yield ratio | 4 | .97 | % | 3 | .60 | % | 3 | .78 | % | ||||||
22. | RESTRICTED DEPOSITS |
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23. | COMMITMENTS AND CONTINGENCIES |
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24. | INSURANCE |
Asset | Risk | Book Value | Coverage | |||||||||
Inventories and | US$ 59,115 | |||||||||||
property and equipment | Fire and comprehensive liability | |||||||||||
25. | TRANSACTIONS WITH AFFILIATED COMPANIES |
Description | 2005 | 2006 | 2007 | |||||||||
Transactions | ||||||||||||
SK Corporation : | ||||||||||||
Purchases of property and equipment | 1,302 | 2,158 | — | |||||||||
Commissions paid and other expense | 48,266 | 40,694 | — | |||||||||
Commission income and other income | 9,243 | 13,877 | 829 | |||||||||
SK Energy Co., Ltd.: | ||||||||||||
Commissions paid and other expense | — | — | 30,281 | |||||||||
Commission income and other income | — | — | 17,250 | |||||||||
SK Engineering & Construction Co., Ltd. : | ||||||||||||
Purchases of property and equipment | 257,823 | 235,872 | 307,702 | |||||||||
Commissions paid and other expense | 6,593 | 7,086 | 16,147 | |||||||||
Commission income and other income | 2,580 | 2,385 | 2,908 | |||||||||
SK Networks Co., Ltd. : | ||||||||||||
Purchases of property and equipment | 10,020 | 9,249 | 39,415 | |||||||||
Commissions paid, leased line and other expense | 432,967 | 490,437 | 710,228 | |||||||||
Sales of handsets and other income | 279,197 | 11,897 | 15,754 |
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Description | 2005 | 2006 | 2007 | |||||||||
SK Telesys Co., Ltd. : | ||||||||||||
Purchases of property and equipment | 294,829 | 231,233 | 264,150 | |||||||||
Commissions paid and other expenses | 7,410 | 6,567 | 13,027 | |||||||||
Commission income and other income | 575 | 2,170 | 2,687 | |||||||||
SKC : | ||||||||||||
Purchases of property and equipment | 219,767 | — | — | |||||||||
Commissions paid and other expenses | 13,316 | 21 | 21 | |||||||||
Commission income and other income | 32 | 1,155 | 1,135 | |||||||||
Innoace Co., Ltd. : | ||||||||||||
Purchases of property and equipment | 13,652 | 23,986 | 23,694 | |||||||||
Commissions paid and other expenses | 2,109 | 7,447 | 9,839 | |||||||||
Commission income and other income | 218 | 218 | 242 | |||||||||
SK C&C Co., Ltd. : | ||||||||||||
Purchases of property and equipment | 249,633 | 215,820 | 205,677 | |||||||||
Commissions paid and other expenses | 322,856 | 287,647 | 251,401 | |||||||||
Commission income and other income | 7,853 | 8,795 | 9,470 | |||||||||
TU Media Corp. (note a) : | ||||||||||||
Purchases of property and equipment | — | 573 | — | |||||||||
Commissions paid and other expenses | 1,950 | 1,798 | — | |||||||||
Commission income and other income | 22,381 | 57,866 | — | |||||||||
AirCross Co., Ltd. (note a) : | ||||||||||||
Purchases of property and equipment | — | — | — | |||||||||
Commissions paid and other expenses | 13,062 | 19,494 | — | |||||||||
Commission income and other income | 165 | 616 | — | |||||||||
Pantech Co., Ltd. : | ||||||||||||
Purchases of property and equipment | — | — | — | |||||||||
Commissions paid and other expenses | 737 | 400 | — | |||||||||
Commission income and other income | — | 16,605 | — | |||||||||
Helio, Inc. & Helio, LLC (note a) : | ||||||||||||
Commissions paid and other expenses | 876 | 1,087 | — | |||||||||
Commission income and other income | 11,914 | 18,243 | — | |||||||||
Balances | ||||||||||||
SK Engineering & Construction Co., Ltd. : | ||||||||||||
Accounts receivable — trade and other | 97 | 258 | 310 | |||||||||
Accounts payable | 21,326 | 1,635 | 8,870 | |||||||||
Guarantee deposits received | 942 | 942 | 1,135 | |||||||||
SK Networks Co., Ltd. : | ||||||||||||
Accounts receivable — trade and other | 1,787 | 780 | 2,182 | |||||||||
Guarantee deposits | 113 | 113 | 113 | |||||||||
Accounts payable | 22,237 | 71,160 | 71,311 | |||||||||
Guarantee deposits received | 2,700 | 3,123 | 3,432 | |||||||||
SK Corporation : | ||||||||||||
Accounts receivable — trade and other | 1,643 | 5,058 | 775 | |||||||||
Guarantee deposits | 37,703 | 291 | — | |||||||||
Accounts payable | 6,914 | 7,999 | — | |||||||||
Guarantee deposits received | 6,174 | 6,465 | — |
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Description | 2005 | 2006 | 2007 | |||||||||
SK Energy Co., Ltd. | ||||||||||||
Accounts receivable — trade and other | — | — | 2,959 | |||||||||
Guarantee deposits | — | — | 134 | |||||||||
Accounts payable | — | — | 4,404 | |||||||||
Guarantee deposits received | — | — | 248 | |||||||||
SK Telesys Co., Ltd. : | ||||||||||||
Accounts receivable — trade and other | 3 | 34 | 31 | |||||||||
Accounts payable | 65,819 | 51,663 | 30,205 | |||||||||
SKC : | ||||||||||||
Accounts receivable — trade and other | — | 121 | 71 | |||||||||
Guarantee deposits | — | — | — | |||||||||
Accounts payable | — | — | — | |||||||||
Innoace Co., Ltd. : | ||||||||||||
Accounts receivable — trade and other | — | — | 26 | |||||||||
Accounts payable | 6,100 | 13,574 | 7,223 | |||||||||
Guarantee deposits received | 2,138 | 2,291 | 2,291 | |||||||||
SK C&C Co., Ltd. : | ||||||||||||
Accounts receivable — trade and other | 91 | — | 411 | |||||||||
Accounts payable | 174,884 | 88,056 | 135,297 | |||||||||
Guarantee deposits received | 346 | 346 | 346 | |||||||||
TU Media Corp. (note a) : | ||||||||||||
Accounts payable | 5,299 | 886 | — | |||||||||
Guarantee deposits received | 3,016 | 3,016 | — | |||||||||
AirCross Co., Ltd. (note a) : | ||||||||||||
Accounts receivable — trade and other | 3,497 | — | — | |||||||||
Accounts payable | 3,866 | 3,513 | — | |||||||||
Guarantee deposits received | 226 | 226 | — | |||||||||
Pantech Co., Ltd. : | ||||||||||||
Accounts payable | — | 440 | — |
(note a) | These companies were included in the consolidation from the year ended December 31, 2007, accordingly transactions and balances with the Company are eliminated. |
26. | COMPENSATION FOR THE KEY MANAGEMENT |
For the Year Ended December 31, 2007 | ||||||||||||
Severance | ||||||||||||
Payee | Payroll | Indemnities | Total | |||||||||
12 registered directors (including outside directors) | 4,786 | 722 | 5,508 | |||||||||
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27. | PROVISION FOR POINT PROGRAM |
2005 | 2006 | 2007 | ||||||||||
Beginning balance | 61,596 | 52,172 | 52,593 | |||||||||
Present value discount (note a) | (7,415 | ) | — | — | ||||||||
Increase (provision) | 7,265 | 10,757 | 15,137 | |||||||||
Decrease (used and reversal) | (9,274 | ) | (10,336 | ) | (40,062 | ) | ||||||
Ending Balance | 52,172 | 52,593 | 27,668 | |||||||||
(note a) | Effective January 1, 2005, pursuant to adoption of SKAS No. 17, provision for point program was recorded at present value, which had been recorded at nominal value through 2004. |
Estimated Amount | ||||||||
to be Paid | ||||||||
Expected Usage for the Year Ended December 31, | in Nominal Value | Present Value | ||||||
(Note b) | (Note b) | |||||||
2008 | 12,203 | 11,432 | ||||||
2009 | 8,117 | 7,125 | ||||||
2010 | 5,443 | 4,476 | ||||||
2011 | 3,676 | 2,831 | ||||||
2012 | 2,500 | 1,804 | ||||||
Ending balance | 31,939 | 27,668 | ||||||
(note b) | The above expected year of the usage and the present value of the estimated amount to be paid are estimated based on historical usage experience. |
28. | DERIVATIVE INSTRUMENTS |
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Fair Value | ||||||||||||||||||||||||||
Designated | Designated | |||||||||||||||||||||||||
Hedged | Duration of | as Cash | as Fair | Not | ||||||||||||||||||||||
Type | Hedged Item | Amount | Contract | Flow Hedge | Value Hedge | Designated | Total | |||||||||||||||||||
Non-current assets: | ||||||||||||||||||||||||||
Fixed-to-fixed cross currency swap | U.S. dollar denominated bonds | US$ | 400,000 | ~ | Jul. 20, 2007 Jul. 20, 2017 | — | — | 7,316 | 7,316 | |||||||||||||||||
Floating-to-fixed cross currency interest rate swap | Japanese yen denominated bonds | JPY | 12,500,000 | ~ | Nov. 13, 2007 Nov. 13, 2012 | 5,741 | — | — | 5,741 | |||||||||||||||||
Floating-to-fixed interest rate swap | Long-term floating rate discounted bill | 200,000 | ~ | Jun. 29, 2006 Jun. 29, 2010 | 3,170 | — | — | 3,170 | ||||||||||||||||||
Total assets | 8,911 | — | 7,316 | 16,227 | ||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||
Fixed-to-fixed cross currency swap | U.S. dollar denominated China Unicom equity securities | HK$ | 10,940,900 | ~ | Sep. 11, 2007 Sep. 16, 2008 | — | 12,646 | — | 12,646 | |||||||||||||||||
Non-current liabilities: | ||||||||||||||||||||||||||
Fixed-to-fixed cross currency swap | U.S. dollar denominated bonds | US$ | 300,000 | ~ | Mar. 23, 2004 Apr. 1, 2011 | 85,239 | — | — | 85,239 | |||||||||||||||||
Fixed-to-fixed cross currency swap | U.S. dollar denominated convertible bond | US$ | 100,000 | ~ | May 27, 2004 May 27, 2009 | — | — | 23,125 | 23,125 | |||||||||||||||||
Floating-to-fixed cross currency interest rate swap | U.S. dollar denominated long-term borrowings | US$ | 100,000 | ~ | Oct. 10, 2006 Oct. 10, 2013 | 2,547 | — | — | 2,547 | |||||||||||||||||
87,786 | — | 23,125 | 110,911 | |||||||||||||||||||||||
Total liabilities | 87,786 | 12,646 | 23,125 | 123,557 | ||||||||||||||||||||||
29. | MERGERS AND ACQUISITIONS |
a. | Acquisition of Loen Entertainment, Inc.(formerly Seoul Record, Inc.) |
In Millions of | ||||
Description | Korean Won | |||
Fair value of net assets acquired | 23,796 | |||
Goodwill | 4,078 | |||
Acquisition cost | 27,874 | |||
b. | Merger with Etoos Group, Inc. |
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In Millions of | ||||
Description | Korean Won | |||
Fair value of acquired assets | 10,196 | |||
Fair value of assumed liabilities | (9,851 | ) | ||
Fair value of net assets | 345 | |||
Consideration for merger | ||||
Fair value of delivered stock | 11,586 | |||
Incidental cost | 1 | |||
Total | 11,587 | |||
Goodwill | 11,242 | |||
c. | Merger with SM The Data Co., Ltd. |
d. | Acquisition of Egloos Business from OnNet Co., Ltd and Etoos M Business from Netus |
In Millions of | ||||
Accounts | Korean Won | |||
Fair value of net assets acquired | 29 | |||
Goodwill | 1,642 | |||
Acquisition cost | 1,671 | |||
e. | Merger with Empas, Inc. |
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In Millions of | ||||
Description | Korean Won | |||
Fair value of acquired assets | 101,613 | |||
Fair value of assumed liabilities | (56,872 | ) | ||
Convertible bond issued by the acquirer | 44,850 | |||
Deferred tax asset on temporary differences | 3,991 | |||
Fair value of net assets | 93,582 | |||
Consideration for merger | ||||
Fair value of stock issued | 57,703 | |||
Carrying amount of equity method securities purchased prior to merger | 30,101 | |||
Convertible bond issued by the acquirer prior to merger | 44,850 | |||
Total | 132,654 | |||
Goodwill | 39,072 | |||
30. | CONSOLIDATED STATEMENTS OF CASH FLOWS |
2005 | 2006 | 2007 | ||||||||||
Conversion of convertible bonds | — | 29,528 | 45,470 | |||||||||
Retirement of treasury stocks | — | 209,077 | — | |||||||||
Write-offs of accounts receivable | 49,181 | 90,780 | 90,475 | |||||||||
Transfer from advanced payments to construction in progress | — | — | 12,714 | |||||||||
Increase in assets due to merger | — | 10,196 | 101,613 | |||||||||
Increase in liabilities due to merger | — | 9,851 | 56,872 | |||||||||
Increase(Decrease) in assets due to the change in consolidated subsidiaries | (597,143 | ) | 93,581 | 541,809 | ||||||||
Increase(Decrease) in liabilities due to the change in consolidated subsidiaries | (554,888 | ) | 33,904 | 489,288 |
2005 | 2006 | 2007 | ||||||||||
Cash and cash equivalents | 378,426 | 485,972 | 885,988 | |||||||||
Government subsidy | — | — | (141 | ) | ||||||||
378,426 | 485,972 | 885,847 | ||||||||||
31. | NETWORK INTERCONNECTION CHARGES |
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32. | SUBSEQUENT EVENT |
a. | Acquiring Stock of hanarotelecom incorporated |
b. | Resolution of Capital Increase of TU Media Corp. |
c. | Incorporation of SK Marketing & Company (tentative name) |
d. | Resolution of disposal on the investment in equity securities of SK C&C |
e. | Plan of disposal on the investment in equity securities of HELIO |
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33. | RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
a. | Deferred Income Taxes |
b. | Deferred Charges |
c. | Leases |
d. | Marketable Securities and Investments Securities |
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e. | Impairment of Investment Securities and Recoveries |
f. | Comprehensive Income |
g. | Business Combinations and Intangible Assets |
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h. | Determination of Acquisition Cost of Equity Interest in Subsidiary |
i. | Additional Equity Investment in Subsidiaries |
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j. | Capitalization of Foreign Exchange Losses (Gains) and Interest Expenses |
k. | Nonrefundable Activation Fees |
l. | Employee Stock Option Compensation Plan |
m. | Loans Receivable for Stock Issued to Employee |
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n. | Convertible Bonds Payable |
o. | Currency and Interest Rate Swap |
p. | Foreign Currency Translation |
q. | Sale of Stock by Equity Method Investee |
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r. | Subscription Payable |
s. | Equity Instrument to be Received in Conjunction with Providing Services |
t. | Consolidation of Variable Interest Entities |
u. | Remeasurement of Stock Option |
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v. | Convertible Notes Receivable |
w. | Presentation of Minority Interest as a Component of Shareholders’ Equity |
x. | Scope of Consolidations |
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Total | Total | Net | ||||||||||||||
Assets | Liabilities | Revenue | Income (Loss) | |||||||||||||
IHQ, Inc. | 69,216 | 12,860 | 41,395 | 3,330 | ||||||||||||
TU Media Corp. | 350,042 | 344,537 | 113,310 | (78,500 | ) | |||||||||||
YTN Media, Inc. | 30,808 | 12,297 | 26,161 | (111 | ) | |||||||||||
IMM Cinema Fund | 19,928 | 7 | 1,866 | (4,459 | ) | |||||||||||
Michigan Global Cinema Fund | 9,742 | — | 1,070 | (634 | ) |
y. | Handset Subsidies to Long-time Mobile Subscribers |
z. | Classification of SK C&C Co., Ltd. |
2005 | 2006 | 2007 | ||||||||||
Current assets | 470,428 | 400,994 | 663,791 | |||||||||
Non-Current assets | 1,074,552 | 1,505,237 | 3,052,281 | |||||||||
Total | 1,544,980 | 1,906,231 | 3,716,072 | |||||||||
Current liabilities | 489,191 | 542,917 | 810,141 | |||||||||
Non-Current liabilities | 511,209 | 483,934 | 904,821 | |||||||||
Stockholders’ equity | 544,580 | 879,380 | 2,001,110 | |||||||||
Total | 1,544,980 | 1,906,231 | 3,716,072 | |||||||||
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2005 | 2006 | 2007 | ||||||||||
Operating revenue | 1,002,667 | 1,107,910 | 1,160,946 | |||||||||
Operating expenses | (908,485 | ) | (994,556 | ) | (1,081,361 | ) | ||||||
Operating income | 94,182 | 113,354 | 79,585 | |||||||||
Other income (expenses), net | (11,587 | ) | 8,929 | 1,381,694 | ||||||||
Provision for income taxes | (20,902 | ) | (34,959 | ) | (405,709 | ) | ||||||
Net income | 61,693 | 87,324 | 1,055,570 | |||||||||
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Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Net income based on Korean GAAP | 1,868,307 | 1,449,552 | 1,562,265 | |||||||||
Adjustments : | ||||||||||||
Net income attributed to Minority interests | 4,671 | 1,939 | 86,611 | |||||||||
Deferred income tax adjustments due to difference in accounting principles | 30,857 | — | — | |||||||||
Deferred charges | (2,037 | ) | 2,037 | — | ||||||||
Capital leases | (695 | ) | (847 | ) | — | |||||||
Intangible assets | (16,046 | ) | (260 | ) | (4,180 | ) | ||||||
Reversal of amortization of goodwill | 137,389 | 128,327 | 145,772 | |||||||||
Capitalization of foreign exchange losses and interest expenses related to tangible assets | 3,231 | 9,266 | 954 | |||||||||
Capitalization of interest expenses related to purchases of intangible assets | 5,272 | 5,272 | 5,272 | |||||||||
Nonrefundable activation fees | (34, 681 | ) | (16,139 | ) | (50,325 | ) | ||||||
Loss on impairment of investment securities | 3,065 | (421 | ) | (2,238 | ) | |||||||
Loss on valuation of currency and interest rate swap | 29,898 | (4,056 | ) | 8,295 | ||||||||
Convertible bonds payable | 14,044 | 48,118 | (19,340 | ) | ||||||||
Foreign currency translation | (2,458 | ) | — | — | ||||||||
Sales of stock by the equity method investee | (8,637 | ) | 7,440 | (6,392 | ) | |||||||
Consolidation of variable interest entity | 38 | (38 | ) | — | ||||||||
Stock option compensation plan | 49 | (144 | ) | — | ||||||||
Convertible notes receivable | — | 365,751 | (412,383 | ) | ||||||||
Reclassification of SK C&C investment | — | — | 83,785 | |||||||||
Tax effect of the reconciling items | (4,717 | ) | (115,268 | ) | 109,368 | |||||||
FIN 48 effect | — | — | (1,320 | ) | ||||||||
Net income based on U.S. GAAP | 2,027,550 | 1,880,529 | 1,506,144 | |||||||||
Weighted average number of common shares outstanding | 73,614,296 | 73,305,026 | 72,650,909 | |||||||||
Earnings per share based on U.S. GAAP: | ||||||||||||
Basic earnings per share | 27, 543 | 25,653 | 20,731 | |||||||||
Diluted earnings per share | 27,089 | 25,236 | 20,390 | |||||||||
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December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Shareholders’ equity based on Korean GAAP | 8,327,540 | 9,483,088 | 11,687,633 | |||||||||
Adjustments: | ||||||||||||
Deferred charges | (2,037 | ) | — | — | ||||||||
Capital leases | 847 | — | — | |||||||||
Intangible assets | 993,547 | 993,802 | 1,096,547 | |||||||||
Reversal of amortization of goodwill | 547,681 | 676,008 | 821,780 | |||||||||
Capitalization of foreign exchange losses and interest expenses related to tangible assets | 47,522 | 56,788 | 57,742 | |||||||||
Capitalization of interest expenses related to purchase of intangible assets | (58,388 | ) | (53,116 | ) | (47,844 | ) | ||||||
Nonrefundable activation fees | (309,903 | ) | (326,042 | ) | (376,367 | ) | ||||||
Loans issued to employees’ stock ownership association | (14,586 | ) | (7,526 | ) | (34,816 | ) | ||||||
Convertible bonds payable | (52,220 | ) | (1,347 | ) | (12,642 | ) | ||||||
Investment securities without readily determinable fair value | — | — | (21,015 | ) | ||||||||
Consolidation of variable interest entity | 228 | 1,396 | 932 | |||||||||
Reclassification of SK C&C investment | — | — | (433,213 | ) | ||||||||
Minority interest in equity of consolidated affiliates | (108,927 | ) | (170,246 | ) | (253,383 | ) | ||||||
Tax effect of the reconciling items | 101,130 | 85,674 | 226,877 | |||||||||
FIN 48 effect | — | — | (13,173 | ) | ||||||||
Shareholders’ equity based on U.S. GAAP | 9,472,434 | 10,738,479 | 12,699,058 | |||||||||
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Balance, beginning of the year | 8,236,997 | 9,472,434 | 10,738,479 | |||||||||
Net income for the year | 2,027,550 | 1,880,529 | 1,506,144 | |||||||||
Accumulated effect of FIN 48 adoption through 2006 | — | — | (11,853 | ) | ||||||||
Dividends | (758,227 | ) | (662,628 | ) | (581,340 | ) | ||||||
Unrealized gains on valuation of securities, net of tax | 23,042 | 206,457 | 937,006 | |||||||||
Equity in capital surplus, retained earnings and other comprehensive income of affiliates (note a) | (63,370 | ) | 38,651 | 158,760 | ||||||||
Conversion of convertible bonds payable | — | 23,624 | 2,010 | |||||||||
Treasury stock transactions | — | (209,078 | ) | (26,556 | ) | |||||||
Foreign-based operations’ translation adjustments | (1,792 | ) | (18,570 | ) | 3,698 | |||||||
Stock compensation plan | 274 | — | — | |||||||||
Decrease(Increase) in loans receivable for stock issued to employees’ investor association | 7,960 | 7,060 | (27,290 | ) | ||||||||
Balance, end of the year | 9,472,434 | 10,738,479 | 12,699,058 | |||||||||
(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 ofavailable-for-sale securities, foreign-based operations’ translation adjustments in affiliates and stock transactions by affiliates. |
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December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Current assets : | ||||||||||||
As reported | 4,598,580 | 4,663,962 | 4,813,072 | |||||||||
U.S. GAAP adjustments : | ||||||||||||
— loans receivable for stock issued to employees investor association | (3,249 | ) | (2,208 | ) | (1,522 | ) | ||||||
— tax effect of the reconciling items | 31,381 | 39,241 | 46,979 | |||||||||
— consolidation of variable interest entity | (4,889 | ) | (8,809 | ) | (16,077 | ) | ||||||
— scope of consolidation | — | (40,189 | ) | (150,617 | ) | |||||||
Current assets based on U.S. GAAP | 4,621,823 | 4,651,997 | 4,691,835 | |||||||||
Non-current assets : | ||||||||||||
As reported | 10,106,192 | 11,576,006 | 14,235,863 | |||||||||
U.S. GAAP adjustments : | ||||||||||||
— loans receivable for stock issued to employees’ investor association | (11,337 | ) | (5,318 | ) | (33,294 | ) | ||||||
— intangible assets | 988,763 | 989,595 | 1,140,555 | |||||||||
— reverse of amortization of goodwill | 547,681 | 677,371 | 828,960 | |||||||||
— nonrefundable activation fees | 8,571 | 8,108 | 6,167 | |||||||||
— capital lease | 847 | (576 | ) | (576 | ) | |||||||
— capitalization of foreign exchange losses and interest expense related to tangible assets | 47,522 | 56,788 | 57,742 | |||||||||
— capitalization of interest expenses related to purchase of intangible assets | (58,388 | ) | (53,116 | ) | (47,844 | ) | ||||||
— deferred charges | 7,933 | 7,812 | 8,577 | |||||||||
— subscription payable | 40,014 | — | — | |||||||||
— equity instrument to be received in conjunction with providing services | (2,055 | ) | — | — | ||||||||
— consolidation of variable interest entity | 53,626 | 54,731 | 54,890 | |||||||||
— convertible bonds payable | — | (1,133 | ) | 281 | ||||||||
— Investment securities without readily determinable fair value | — | — | (21,015 | ) | ||||||||
— Reclassification of SK C&C investment | — | — | (433,213 | ) | ||||||||
— scope of consolidation | — | (32,735 | ) | (275,780 | ) | |||||||
— Tax effect of the reconciling items | 1,375 | |||||||||||
— FIN 48 effect | — | — | 374 | |||||||||
Non-current assets based on U.S. GAAP | 11,729,369 | 13,277,533 | 15,523,062 | |||||||||
Total assets based on U.S. GAAP | 16,351,192 | 17,929,530 | 20,214,897 | |||||||||
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December, 31 | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Current liabilities : | ||||||||||||
As reported | 2,863,373 | 3,208,416 | 3,016,874 | |||||||||
U.S. GAAP adjustments : | ||||||||||||
— nonrefundable activation fees | 114,111 | 142,697 | 170,761 | |||||||||
— subscription payable | 40,014 | — | — | |||||||||
— equity instrument to be received in conjunction with providing services | (525 | ) | — | — | ||||||||
— consolidation of variable interest entity | 17,671 | 32,078 | 38,773 | |||||||||
— scope of consolidation | — | (17,389 | ) | (285,677 | ) | |||||||
Current liabilities based on U.S. GAAP | 3,034,644 | 3,365,802 | 2,940,731 | |||||||||
Non-current liabilities : | ||||||||||||
As reported | 3,513,859 | 3,548,464 | 4,344,428 | |||||||||
U.S. GAAP adjustments : | ||||||||||||
— deferred charges | 9,970 | 7,812 | 8,577 | |||||||||
— nonrefundable activation fees | 204,363 | 191,453 | 211,773 | |||||||||
— tax effect of the reconciling items | (74,532 | ) | (51,216 | ) | (183,709 | ) | ||||||
— convertible bonds payable | 52,220 | 214 | 12,923 | |||||||||
— equity instrument to be received in conjunction with providing services | (1,530 | ) | — | — | ||||||||
— consolidation of variable interest entity | 631 | 227 | 296 | |||||||||
— scope of consolidation | — | (19,563 | ) | (73,015 | ) | |||||||
— FIN 48 effect | — | — | 13,950 | |||||||||
Non-current liabilities based on U.S. GAAP | 3,704,981 | 3,677,391 | 4,335,223 | |||||||||
Total liabilities based on U.S. GAAP | 6,739,625 | 7,043,193 | 7,275,954 | |||||||||
Minority interests : | ||||||||||||
As reported | 108,927 | 170,246 | 253,383 | |||||||||
U.S. GAAP adjustments : | ||||||||||||
— consolidation of variable interest entity | 30,206 | 12,221 | (1,188 | ) | ||||||||
— reversal of amortization of goodwill | — | 1,363 | 7,180 | |||||||||
— intangible assets | — | — | 47,604 | |||||||||
— scope of consolidation | — | (35,972 | ) | (67,094 | ) | |||||||
Total minority interests based on U.S. GAAP | 139,133 | 147,858 | 239,885 | |||||||||
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2005 | 2006 | 2007 | ||||||||||
Cash flows from operating activities based on Korean GAAP | 3,407,142 | 3,589,825 | 3,710,704 | |||||||||
Adjustments : | ||||||||||||
Trading security cash flows | (122,710 | ) | 80,061 | 28,696 | ||||||||
Consolidation of variable interest entity | 12,444 | (48,721 | ) | 35,777 | ||||||||
Scope of consolidation | — | (6,384 | ) | 11,363 | ||||||||
Pre-acquisition cash flows of subsidiaries | — | — | (501,788 | ) | ||||||||
Cash flows from operating activities based on U.S. GAAP | 3,296,876 | 3,614,781 | 3,284,752 | |||||||||
Cash flows from investing activities based on Korean GAAP | (1,938,187 | ) | (2,535,153 | ) | (2,399,047 | ) | ||||||
Adjustments : | ||||||||||||
Trading security cash flows | 122,710 | (80,061 | ) | (28,696 | ) | |||||||
Consolidation of variable interest entity | (1,004 | ) | 37,611 | (39,389 | ) | |||||||
Scope of consolidation | — | 17,035 | 15,559 | |||||||||
Pre-acquisition cash flows of subsidiaries | — | — | 15,880 | |||||||||
Cash flows from investing activities based on U.S. GAAP | (1,816,481 | ) | (2,560,568 | ) | (2,435,693 | ) | ||||||
Cash flows from financing activities based on Korean GAAP | (1,429,038 | ) | (952,377 | ) | (856,107 | ) | ||||||
Adjustments : | ||||||||||||
Consolidation of variable interest entity | (10,243 | ) | 17,716 | 5,016 | ||||||||
Scope of consolidation | — | (5,946 | ) | (2,475 | ) | |||||||
Pre-acquisition cash flows of subsidiaries | — | — | 222,161 | |||||||||
Cash flows from financing activities based on U.S. GAAP | (1,439,281 | ) | (940,607 | ) | (631,405 | ) | ||||||
The effect of exchange rate changes on cash and cash equivalents held in foreign currencies based on Korean GAAP | (3,036 | ) | (9,317 | ) | 2,783 | |||||||
Adjustments : | ||||||||||||
Consolidation of variable interest entity | — | (5,302 | ) | 37 | ||||||||
Pre-acquisition cash flows of subsidiaries | — | — | (1,657 | ) | ||||||||
The effect of exchange rate changes on cash and cash equivalents held in foreign currencies based on U.S. GAAP | (3,036 | ) | (14,619 | ) | 1,163 | |||||||
Net increase (decrease) in cash and cash equivalents due to changes in consolidated subsidiaries based on Korean GAAP | (29,085 | ) | 14,568 | 154,227 |
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2005 | 2006 | 2007 | ||||||||||
Adjustments : | ||||||||||||
Scope of consolidation | — | (14,246 | ) | (81,218 | ) | |||||||
Pre-acquisition cash flows of subsidiaries | — | — | 2,271 | |||||||||
Net increase (decrease) in cash and cash equivalents due to changes in consolidated subsidiaries based on U.S. GAAP | (29,085 | ) | 322 | 75,280 | ||||||||
Pre-acquisition cash flows of subsidiaries based on Korean GAAP | — | — | (263,133 | ) | ||||||||
Adjustments: | ||||||||||||
Pre-acquisition cash flows of subsidiaries | — | — | 263,133 | |||||||||
Pre-acquisition cash flows of subsidiaries based U.S. GAAP | — | — | — | |||||||||
Increases in cash and cash equivalents due to merger based on Korea GAAP | — | — | 50,448 | |||||||||
Adjustments | — | — | — | |||||||||
Increase in cash and cash equivalents due to merger based on U.S. GAAP | — | — | 50,448 | |||||||||
Cash and cash equivalents at beginning of the year based on Korean GAAP | 370,630 | 378,426 | 485,972 | |||||||||
Adjustments : | ||||||||||||
Consolidation of variable interest entity | — | 1,197 | 2,501 | |||||||||
Scope of consolidation | — | — | (9,541 | ) | ||||||||
Cash and cash equivalents at beginning of the year based on U.S. GAAP | 370,630 | 379,623 | 478,932 | |||||||||
Cash and cash equivalents at end of the year based on Korean GAAP | 378,426 | 485,972 | 885,847 | |||||||||
Adjustments : | ||||||||||||
Consolidation of variable interest entity | 1,197 | 2,501 | 3,942 | |||||||||
Scope of consolidation | — | (9,541 | ) | (66,312 | ) | |||||||
Cash and cash equivalents at end of the year based on U.S. GAAP | 379,623 | 478,932 | 823,477 | |||||||||
34. | ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP |
a. | Income Taxes |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Currently payable | 685,541 | 615,959 | 564,480 | |||||||||
Deferred | (18,422 | ) | 70,871 | 12,456 | ||||||||
667,119 | 686,830 | 576,936 | ||||||||||
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Year Ended December 31, | |||||||||||||||
2005 | 2006 | 2007 | |||||||||||||
Income taxes at statutory income tax rate of 25% in 2005, 2006 and 2007 | 670,776 | 641,840 | 507,200 | ||||||||||||
Resident surtax payable | 67,078 | 64,184 | 50,720 | ||||||||||||
Tax credit for investments, technology, human resource development and others | (100,160 | ) | (110,785 | ) | (112,235 | ) | |||||||||
Special surtax for agriculture and fishery industries and other | 18,850 | 20,183 | 18,370 | ||||||||||||
Undistributed earnings of subsidiaries | 4,846 | 1,777 | 5,326 | ||||||||||||
Other permanent differences | 19,637 | 27,602 | 10,670 | ||||||||||||
Change in valuation allowance | (13,908 | ) | 42,029 | 96,885 | |||||||||||
Recorded income taxes | 667,119 | 686,830 | 576,936 | ||||||||||||
Effective tax rate | 24 | .86 | % | 26 | .75 | % | 28 | .44 | % | ||||||
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December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Current : | ||||||||||||
Allowance for doubtful accounts | 39,334 | 21,251 | 16,391 | |||||||||
Write-off of doubtful accounts | 9,239 | — | — | |||||||||
Accrued interest income | (1,229 | ) | (1,544 | ) | (1,971 | ) | ||||||
Net operating loss carryforwards | 17 | 1,121 | 2,081 | |||||||||
Tax credit carryforwards | 89 | 19 | — | |||||||||
Accrued expenses and other | 50,004 | 68,264 | 66,857 | |||||||||
97,454 | 89,111 | 83,358 | ||||||||||
Non-current : | ||||||||||||
Depreciation | (58,745 | ) | (64,915 | ) | (56,359 | ) | ||||||
Loss on impairment of investment securities | 32,959 | 33,018 | 46,818 | |||||||||
Equity in losses (earnings) of affiliates | (7,471 | ) | (28,232 | ) | (121,855 | ) | ||||||
Undistributed deficit of subsidiaries | 13,732 | (17,179 | ) | (23,464 | ) | |||||||
Tax free reserve for technology development | (211,208 | ) | (211,215 | ) | (151,259 | ) | ||||||
Tax free reserve for loss on disposal of treasury stock | (130,372 | ) | (70,396 | ) | (70,396 | ) | ||||||
Unrealized gain (loss) on valuation of long-term investment securities (accumulated other comprehensive income) | 15,996 | (163,992 | ) | (523,761 | ) | |||||||
Tax credit carryforwards | — | 24 | 24 | |||||||||
Net operating loss carryforwards | 24,108 | 6,178 | 327 | |||||||||
Deferred charges and other | (4,129 | ) | 37,147 | 34,617 | ||||||||
(325,130 | ) | (479,562 | ) | (865,308 | ) | |||||||
Total deferred tax liabilities | (227,676 | ) | (390,451 | ) | (781,950 | ) | ||||||
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Amount | ||||
Balance at January 1, 2007 | 9,565 | |||
Gross increases for tax position of prior years | 501 | |||
Gross decreases for tax position of prior years | (15 | ) | ||
Gross decreases for tax position of current year | (62 | ) | ||
Balance at December 31, 2007 | 9,989 | |||
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b. | Information under U.S. GAAP with respect to Investments under SFAS No. 115 |
Gross | Gross | |||||||||||||||||||
Cost | Unrealized | Unrealized | Impairment | Fair | ||||||||||||||||
(Amortized Cost) | Gains | Losses | Losses | Value | ||||||||||||||||
At December 31, 2005 : | ||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||
Equity securities | 465,244 | 173,960 | (9,768 | ) | (60,838 | ) | 568,598 | |||||||||||||
Debt securities | 307,375 | — | (217 | ) | (10,885 | ) | 296,273 | |||||||||||||
Held-to-maturity Securities | 115 | — | — | — | 115 | |||||||||||||||
772,734 | 173,960 | (9,985 | ) | (71,723 | ) | 864,986 | ||||||||||||||
At December 31, 2006 : | ||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||
Equity securities | 469,754 | 462,521 | — | (62,614 | ) | 869,661 | ||||||||||||||
Debt securities | 1,083,914 | 33,903 | (46,107 | ) | (10,656 | ) | 1,061,054 | |||||||||||||
Held-to-maturity Securities | 134 | — | — | — | 134 | |||||||||||||||
1,553,802 | 496,424 | (46,107 | ) | (73,270 | ) | 1,930,849 | ||||||||||||||
At December 31, 2007 : | ||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||
Equity securities | 1,805,795 | 1,758,674 | (683 | ) | (63,264 | ) | 3,500,522 | |||||||||||||
Debt securities | 470,280 | 9,293 | (439 | ) | (10,656 | ) | 468,478 | |||||||||||||
Held-to-maturity Securities | 94 | — | — | — | 94 | |||||||||||||||
2,276,169 | 1,767,967 | (1,122 | ) | (73,920 | ) | 3,969,094 | ||||||||||||||
c. | Fair Value of Financial Instruments |
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2005 | 2006 | 2007 | ||||||||||||||||||||||
Carrying | Fair | Carrying | Fair | Carrying | Fair | |||||||||||||||||||
Amount | Value | Amount | Value | Amount | Value | |||||||||||||||||||
(Note a) | (Note a) | (Note a) | ||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||
Cash and cash equivalents and short-term financial instruments | 486,215 | 486,215 | 576,017 | 576,017 | 956,441 | 956,441 | ||||||||||||||||||
Trading securities | 777,472 | 777,472 | 665,312 | 665,312 | 635,434 | 635,434 | ||||||||||||||||||
Accounts receivable (trade and other) | 3,038,936 | 3,038,936 | 3,065,481 | 3,065,481 | 2,642,195 | 2,642,195 | ||||||||||||||||||
Short-term loans | 62,290 | 62,290 | 60,440 | 60,440 | 74,603 | 74,603 | ||||||||||||||||||
Investment securities: | ||||||||||||||||||||||||
Listed equity and debts | 864,986 | 864,986 | 1,930,849 | 1,930,849 | 3,969,094 | 3,969,094 | ||||||||||||||||||
Non - listed equity | 353,168 | N/A | 141,138 | N/A | 127,718 | N/A | ||||||||||||||||||
Long-term bank deposits | 1,479 | 1,479 | 10,430 | 10,430 | 15,512 | 15,512 | ||||||||||||||||||
Long-term loans | 7,093 | 5,320 | 13,250 | 9,938 | 45,524 | 34,143 | ||||||||||||||||||
5,591,639 | 6,462,917 | 8,466,521 | ||||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||
Accounts payable | 1,094,855 | 1,094,855 | 1,224,536 | 1,224,536 | 1,241,935 | 1,241,935 | ||||||||||||||||||
Short-term borrowings | 4,614 | 4,614 | 63,612 | 63,612 | 11,737 | 11,737 | ||||||||||||||||||
Bonds payable, long-term borrowings, convertible bonds, long-term payables — other and obligation under capital leases, including current portion | 3,763,135 | 3,825,813 | 3,595,880 | 3,667,748 | 3,460,939 | 3,508,681 | ||||||||||||||||||
4,862,604 | 4,884,028 | 4,714,611 | ||||||||||||||||||||||
(note a) | These carrying amounts represent the amounts determined under U.S. GAAP. |
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d. | Comprehensive Income |
2005 | 2006 | 2007 | ||||||||||
Net income | 2,027,550 | 1,880,529 | 1,506,414 | |||||||||
Other comprehensive income : | ||||||||||||
Available-for-sale securities | ||||||||||||
Unrealized gain on investment securities | 34,915 | 284,359 | 1,914,596 | |||||||||
Less impact of realized losses(gains) | (3,065 | ) | 446 | (557,346 | ) | |||||||
Tax effect | (8,808 | ) | (78,348 | ) | (420,244 | ) | ||||||
Net change from available-for-sale securities | 23,042 | 206,457 | 937,006 | |||||||||
Foreign-based operations’ translation adjustments | (1,792 | ) | (18,570 | ) | 3,698 | |||||||
Total other comprehensive income | 21,250 | 187,887 | 940,704 | |||||||||
Comprehensive income | 2,048,800 | 2,068,416 | 2,447,118 | |||||||||
e. | Goodwill and other intangible assets |
2005 | 2006 | 2007 | ||||||||||
Beginning of period | 3,408,989 | 3,418,212 | 3,419,114 | |||||||||
Goodwill increase due to acquisition and subsidiary change during the period | 9,223 | 13,426 | 180,145 | |||||||||
Goodwill impairment losses | — | (12,524 | ) | — | ||||||||
Goodwill disposed of during the period | — | — | (124 | ) | ||||||||
Ending of period | 3,418,212 | 3,419,114 | 3,599,135 | |||||||||
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December 31, 2005 | December 31, 2006 | December 31, 2007 | ||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Gross | Gross | Amortization | Gross | Amortization | ||||||||||||||||||||
Carrying | Accumulated | Carrying | and | Carrying | and | |||||||||||||||||||
Amount | Amortization | Amount | Impairment | Amount | Impairment | |||||||||||||||||||
Amortized intangible assets : | ||||||||||||||||||||||||
IMT license (13 years) | 1,188,547 | (188,193 | ) | 1,188,547 | (278,521 | ) | 1,188,547 | (368,849 | ) | |||||||||||||||
Customer lists (4 years) | 99,783 | (99,783 | ) | 99,783 | (99,783 | ) | 106,783 | (99,783 | ) | |||||||||||||||
Software purchased (5 years) | 496,373 | (215,529 | ) | 883,004 | (310,184 | ) | 1,083,552 | (478,849 | ) | |||||||||||||||
Software development cost (5 years) | 230,439 | (164,448 | ) | 242,164 | (196,510 | ) | 240,629 | (223,508 | ) | |||||||||||||||
Other (2 to 20 years) | 309,353 | (75,528 | ) | 308,747 | (98,035 | ) | 455,910 | (134,349 | ) | |||||||||||||||
Total | 2,324,495 | (743,481 | ) | 2,722,245 | (983,033 | ) | 3,075,421 | (1,305,338 | ) | |||||||||||||||
f. | Condensed Consolidated Income Statements under U.S. GAAP |
2005 | 2006 | 2007 | ||||||||||
Operating revenue: | ||||||||||||
Wireless services | 9,148,363 | 9,025,209 | 9,531,488 | |||||||||
Interconnection | 898,621 | 1,033,390 | 1,062,195 | |||||||||
Digital handset sales | 294,557 | — | 51,714 | |||||||||
Other | 359,911 | 483,203 | 566,989 | |||||||||
Total operating revenue | 10,701,452 | 10,541,802 | 11,212,386 | |||||||||
Total operating expenses | (7,847,705 | ) | (7,720,028 | ) | (9,144,306 | ) | ||||||
Operating income | 2,853,747 | 2,821,774 | 2,068,080 | |||||||||
Other income (expenses), net | (125,898 | ) | (135,726 | ) | (197,428 | ) | ||||||
Income before income taxes and appropriate item below | 2,727,849 | 2,686,048 | 1,870,652 | |||||||||
Provision for income taxes | (665,209 | ) | (673,330 | ) | (483,963 | ) | ||||||
Minority interests in losses of consolidated subsidiaries | 11,109 | 21,752 | 54,281 | |||||||||
Equity in earnings of unconsolidated businesses | (46,199 | ) | (153,941 | ) | 65,174 | |||||||
Net income | 2,027,550 | 1,880,529 | 1,506,144 | |||||||||
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g. | Segment |
h. | Supplemental Information relating to Cash Flows |
2005 | 2006 | 2007 | ||||||||||
Cash paid for interest (net of amounts capitalized) | 203,259 | 226,442 | 169,311 | |||||||||
Cash paid for income taxes | 588,296 | 660,188 | 591,672 |
i. | Accrued Severance Indemnities |
Year Ending December 31, | ||||
2008 | 3,353 | |||
2009 | 653 | |||
2010 | 1,483 | |||
2011 | 1,026 | |||
2012 | 3,963 | |||
2013 ~ 2017 | 28,907 | |||
Total | 39,385 | |||
j. | New Accounting Pronouncements |
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