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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE13a-16 OR15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF December 2019
COMMISSION FILE NUMBER333-04906
SK Telecom Co., Ltd.
(Translation of registrant’s name into English)
Euljiro65(Euljiro2-ga), Jung-gu
Seoul100-999, Korea
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover ofForm 20-F orForm 40-F.)
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting theForm 6-K in paper as permitted byRegulation S-T Rule 101(b)(1): ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of aForm 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting theForm 6-K in paper as permitted byRegulation S-T Rule 101(b)(7): ☐
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of aForm 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of aForm 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant toRule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ☐ No ☒
If “Yes” is marked, indicate below the file number assigned to the Registrant in connection withRule 12g3-2(b):82-
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QUARTERLY BUSINESS REPORT
(From January 1, 2019 to September 30, 2019)
THIS IS A SUMMARY OF THE QUARTERLY BUSINESS REPORT ORIGINALLY PREPARED IN KOREAN WHICH IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION.
IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS.
ALL REFERENCES TO THE “COMPANY” SHALL MEAN SK TELECOM CO., LTD. AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS CONSOLIDATED SUBSIDIARIES. REFERENCES TO “SK TELECOM” SHALL MEAN SK TELECOM CO., LTD., BUT SHALL NOT INCLUDE ITS CONSOLIDATED SUBSIDIARIES.
UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED FOR USE IN KOREA(“K-IFRS”) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.
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I. | COMPANY OVERVIEW |
1. Company Overview
The Company’s quarterly business report for the nine months ended September 30, 2019 includes the following consolidated subsidiaries:
Name | Date of | Principal Business | Total Assets as of Dec. 31, 2018 (millions of Won) | Material | ||||||
SK Telink Co., Ltd. | Apr. 9, 1998 | Telecommunication services and satellite broadcasting services | 493,972 | Material | ||||||
SK M&Service Co., Ltd. | Feb. 10, 2000 | Online information services | 97,924 | Material | ||||||
SK Communications Co., Ltd. | Sept. 19, 1996 | Internet portal and other Internet information services | 79,646 | Material | ||||||
SK Broadband Co., Ltd. | Sept. 5, 1997 | Fixed-line telecommunication services, multimedia and IPTV services | 4,266,458 | Material | ||||||
Home & Service Co., Ltd. | June 5, 2017 | Information and telecommunication network maintenance | 87,159 | Material | ||||||
SK stoa Co., Ltd. | Dec. 1, 2017 | Data broadcasting and commercial retail platform services | 41,305 | |||||||
K-net Culture and Contents Venture Fund | Nov. 24, 2008 | Investment partnership | 147,691 | Material | ||||||
PS&Marketing Co., Ltd. | Apr. 3, 2009 | Sale of telecommunication devices | 432,699 | Material | ||||||
Service Ace Co., Ltd. | Jul. 1, 2010 | Customer center management services | 76,770 | Material | ||||||
Service Top Co., Ltd. | Jul. 1, 2010 | Customer center management services | 74,452 | |||||||
SK ons Co., Ltd. (formerly known as Network O&S Co., Ltd.) | Jul. 1, 2010 | Network maintenance services | 81,773 | Material | ||||||
SK Planet Co., Ltd. | Oct. 1, 2011 | Telecommunication and platform services | 753,630 | Material | ||||||
Dreamus Company (formerly known as Iriver Ltd.) | Jul. 12, 2000 | Audio device manufacturing | 200,063 | Material | ||||||
Iriver Enterprise Ltd. | Jan. 14, 2014 | Management of Chinese subsidiary | 37,835 | |||||||
Iriver China Co., Ltd. | Jun. 24, 2004 | Electronic device manufacturing | 2,907 | |||||||
DongGuan Iriver Electronics Co., Ltd. | Jul. 6, 2006 | Electronic device manufacturing | 117 | |||||||
groovers Japan Co., Ltd. | Feb. 25, 2015 | Contents and information distribution | 1,086 | |||||||
Life Design Company Inc. | June 25, 2008 | Japanese merchandise business | 7,670 | |||||||
SK Telecom China Holdings Co., Ltd. | Jul. 12, 2007 | Investment (holding company) | 47,879 | |||||||
SK Global Healthcare Business Group, Ltd. | Sept. 14, 2012 | Investment (SPC) | 25,610 | |||||||
SK Planet Japan, K. K. | Mar. 14, 2012 | Digital contents sourcing services | 21,072 | |||||||
SK Planet Global Holdings Pte. Ltd. | Aug. 10, 2012 | Investment (holding company) | 329 | |||||||
SKT Americas, Inc. | Dec. 29, 1995 | Information collection and management consulting services | 31,392 | |||||||
SKP America LLC | Jan. 27, 2012 | Digital contents sourcing services | 383,697 | Material |
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Name | Date of | Principal Business | Total Assets as of Dec. 31, 2018 (millions of Won) | Material | ||||||
YTK Investment Ltd. | Jul. 1, 2010 | Investment | 3,307 | |||||||
Atlas Investment | Jun. 24, 2011 | Investment | 87,447 | Material | ||||||
SK Telecom Innovation Fund, L.P. | Jan. 15, 2016 | Investment | 47,879 | |||||||
SK Telecom China Fund I L.P. | Sept. 14, 2011 | Investment | 19,896 | |||||||
Onestore Co., Ltd. | Mar. 1, 2016 | Contents distribution | 116,716 | Material | ||||||
SK telecom Japan Inc. | Mar. 1, 2018 | Information collection and management consulting services | 10,066 | |||||||
id Quantique Ltd. | Oct. 29, 2001 | QRNG technology development | 38,303 | |||||||
Eleven Street Co., Ltd. | Sept. 1, 2018 | E-commerce and Internet-related services | 1,045,946 | Material | ||||||
SK TELINK VIETNAM Co., Ltd. | Aug. 30, 2018 | Sale of telecommunication devices | 1,092 | |||||||
Quantum Innovation Fund I | Dec. 3, 2018 | Investment | 8,000 | |||||||
Life & Security Holdings Co., Ltd. | Mar. 21, 2014 | Holding company | 3,078,431 | Material | ||||||
ADT CAPS Co., Ltd. | Jan. 22, 1971 | Unmanned security services | 696,797 | Material | ||||||
CAPSTEC Co., Ltd. | Jan. 1, 2005 | Manned security services | 30,401 | |||||||
ADT SECURITY Co., Ltd. | Nov. 28, 2001 | Sales and trade of anti-theft devices and surveillance devices | 9,981 | |||||||
SK Infosec Co., Ltd. | Jun. 26, 2000 | Information security services | 183,896 | Material | ||||||
Id Quantique LLC | Jul. 27, 2018 | Quantum information and communications services | 1,177 | |||||||
FSK L&S Co., Ltd. | Oct. 20, 2016 | Logistics consulting services | 31,054 | |||||||
FSK L&S (Shanghai) Co., Ltd. | Jul. 29, 2010 | International cargo transportation agent | 19,744 | |||||||
SK Telecom TMT Investment Corp. | Jan. 4, 2019 | Investment | — | |||||||
Incross Co., Ltd. | Aug. 13, 2007 | Advertising agency services | 128,239 | |||||||
Infra Communications Co., Ltd. | Aug. 1, 2017 | Operation of mobile services | 1,229 | |||||||
SK telecom CS T1 Co., Ltd. | Jul. 12, 2019 | Services | 10 | |||||||
Happy Hanool Co., Ltd. | Aug. 8, 2019 | Services | 800 | |||||||
SKinfosec Information Technology (wuxi) Co., Ltd. | Aug. 21, 2019 | System software development and supply services | 1,008 | |||||||
Mindknock Co., Ltd. | Jan. 31, 2018 | Computer programming services | 487 |
* | Material Subsidiary means a subsidiary with total assets of Won 75 billion or more as of the end of the latest fiscal year. |
ø | Total assets as of December 31, 2018 are not provided for subsidiaries established during the reporting period. |
ø | S.M. Life Design Company Japan Inc. changed its name to Life Design Company Inc. |
ø | On March 28, 2019, Iriver Ltd. changed its name to Dreamus Company at its general meeting of shareholders. |
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Changes in subsidiaries during the nine months ended September 30, 2019are set forth below.
Change | Name | Remarks | ||
Additions | SK Telecom TMT Investment Corp. | Newly established by the Company | ||
FSK L&S Co., Ltd. | Control acquired by the Company | |||
FSK L&S (Shanghai) Co., Ltd. | Subsidiary of FSK L&S Co., Ltd. | |||
Incross Co., Ltd. | Newly acquired by the Company | |||
Infra Communications Co., Ltd. | Subsidiary of Incross Co., Ltd. | |||
Mindknock Co., Ltd. | Control acquired by Incross Co., Ltd. | |||
SK telecom CS T1 Co., Ltd. | Newly established by the Company | |||
Happy Hanool Co., Ltd. | Newly established by the Company | |||
SKinfosec Information Technology (wuxi) Co., Ltd. | Newly established by SK Infosec Co., Ltd. | |||
Exclusions | groovers Inc. | Merged into Dreamus Company (formerly known as Iriver Ltd.) | ||
Shopkick Management Company, Inc. | Disposed by the Company | |||
Shopkick, Inc. | Disposed by the Company | |||
Iriver Inc. | Disposed by the Company |
A. | Corporate Legal Business Name: SK Telecom Co., Ltd. |
B. | Date of Incorporation: March 29, 1984 |
C. | Location of Headquarters |
(1) | Address: 65 Euljiro, Jung-gu, Seoul, Korea |
(2) | Phone:+82-2-6100-2114 |
(3) | Website: http://www.sktelecom.com |
D. | Major Businesses |
(1) | Wireless business |
The Company provides wireless telecommunications services, characterized by its competitive strengths in handheld devices, affordable pricing, network coverage and an extensive contents library. The Company continues to maintain its reputation as the unparalleled premium network operator in the 2G, 3G and LTE markets on the basis of its technological leadership and network management technology. In addition, with the world’s first commercialization of 5G technology on April 3, 2019, the Company continues to maintain its position as the top network operator in the 5G era and strives to provide differentiated services to its customers. In particular, in order to expedite its customers’ realization of the benefits of 5G services, the Company is pursuing efficient coverage expansion in terms of services, key commercial districts, “Summer” andbusiness-to-business (“B2B”).
In order to strengthen its sales channels, the Company has been offering a variety of fixed-line and wireless telecommunication convergence products through its subsidiary, PS&Marketing Co., Ltd. (“PS&Marketing”). PS&Marketing provides differentiated service to customers through the establishment of new sales channels and product development. Through its subsidiaries Service Ace Co., Ltd. and Service Top Co., Ltd., the Company operates customer service centers in Seoul and provides telemarketing services. Additionally, SK ons Co., Ltd. (“SK ons”), the Company’s subsidiary responsible for the operation of the Company’s 2G to 4G networks, as well as its 5G network, provides customers with quality network services and provides the Company with technologicalknow-how in network operations.
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The Company plans to increase its profitability by strengthening its retention policy, which is the fundamental basis of competitiveness for telecommunication companies in this data-intensive era. The Company will lead the information and communication technology (“ICT”) trend by providing products through which customers can have a distinctive experience and by providing innovative services to transition to service-based competition.
In addition to the mobile network operator (“MNO”) business, the Company is building next-generation growth businesses in Internet of Things (“IoT”) solutions, artificial intelligence (“AI”) and mobility. In July 2016, the Company deployed the world’s firstlow-cost Low Power Wide Area Network designed to support IoT devices based on LoRa technology. In September 2016, the Company launched NUGU, the first intelligent virtual assistant service launched in Korea with Korean language capabilities based on advanced voice recognition technologies. The Company plans to further utilize its big data analysis capabilities to achieve growth in new business areas such as AI.
(2) | Fixed-line business |
SK Broadband Co., Ltd. (“SK Broadband”) is engaged in providing telecommunications, broadcasting and new media services and various other services that are permitted to be carried out by SK Broadband under relevant regulations, as well as business activities that are directly or indirectly related to providing those services. In 1999, SK Broadband launched its high-speed Internet service in Seoul, Busan, Incheon and Ulsan and currently provides such services nationwide. SK Broadband also commercialized itsTV-Portal service in July 2006 and its IPTV service in January 2009 upon receipt of permit in September 2008. In April 2019, SK Broadband decided to launch an integratedover-the-top (“OTT”) platform “wavve,” combining its OTT service “oksusu” with POOQ, an OTT service alliance of Korea’s three terrestrial broadcasters. SK Broadband is focusing on strengthening the competitiveness of the combined OTT service through an increased investment in content and thereby developing it into a key service in the 5G era.
(3) | Commerce business |
The Company is a leading player in the Koreane-commerce industry with 11st, ane-commerce platform service that connects various sellers and purchasers through its online and mobile platforms. In addition, the Company continues to expand itse-commerce businesses by providing differentiated shopping-related services covering shopping information, product search and purchases, relying on the strength of the Company’s core principles of innovation supported by its advanced technological capabilities, includingAI-based commerce search technology and customized recommendations based on big data analysis. The Company seeks to continue evolving as a commerce portal by strengthening its high-margin product categories, such as fashion and beauty.
(4) | Other businesses |
In the field of security business, the Company has completed its converged security business portfolio ranging from physical security to information security, including through the acquisitions of ADT CAPS Co., Ltd. (“ADT CAPS”) and SK Infosec Co., Ltd. (“SK Infosec”). Due to a growing number of single-person households and increasing awareness for crime prevention, the security industry has been growing steadily in recent years. New markets for physical security have also been developing as a result of integrating cutting-edge ICT, such as big data, IoT and AI, andbio-recognition technologies. The domestic market size of the physical security industry expanded from Won 3.6 trillion in 2012 to Won 5.5 trillion in 2017 (average annual growth rate of 8.7%), and is expected to grow to Won 7.9 trillion (average annual growth rate of 7.5%) in 2022. The Company plans to expand its security business into one of its major business areas by leveraging such industry growth and synergies with its otherICT-based businesses.
In the online-to-offline (“O2O”) area, the Company is a leading player and continues to expand its market power with OK Cashbag, Korea’s largest loyalty mileage program, SyrupWallet, which offers smart shopping services utilizing its network of business partners and information technology such as big data, and other related services such as Gifticon and 11Pay. The Company focuses on the mobile platform to connect variouson- and offline commerce service platforms that provide various benefits and information at the right place and the right time to give consumers a pleasant and convenient shopping experience and retailers an integrated marketing solution to reach their target audience. The Company intends to continue its efforts to secure the market leading position in these markets.
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In the location-based services business area, the Company provides real time traffic information and various local information through itsT-Map Navigation service. In the digital contents business area, the Company provides high-quality digital contents in its leading mobile contents marketplace, Onestore.
The Company is also engaged in display advertising and search engine-based advertising and provides contents and other services. Display advertising provides exposure to the advertiser’s brand in the form of flash media, images or videos. Search engine-based advertising provides exposure through the search results of specific keywords entered in the NATE search engine, and is utilized mostly by small andmedium-sized advertisers. The Company also derives revenue by providing contents and other services.
See “II.1. Business Overview” for more information.
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E. | Credit Ratings |
(1) | Corporate bonds and other long-term securities |
Credit rating date | Subject of rating | Credit rating | Credit rating entity | Rating classification | ||||
October 26, 2015 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
October 26, 2015 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
October 26, 2015 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
February 19, 2016 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
February 19, 2016 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
February 19, 2016 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
April 27, 2016 | Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
May 11, 2016 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
May 12, 2016 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
May 19, 2016 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
May 20, 2016 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
May 20, 2016 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
April 12, 2017 | Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
April 12, 2017 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
April 12, 2017 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
April 12, 2017 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
April 12, 2017 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
April 12, 2017 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
October 30, 2017 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
October 30, 2017 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
October 30, 2017 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
February 5, 2018 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
February 5, 2018 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
February 6, 2018 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
April 10, 2018 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
April 11, 2018 | Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
April 16, 2018 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
May 29, 2018 | Hybrid securities | AA+ (Stable) | Korea Ratings | Current rating | ||||
August 31, 2018 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
August 31, 2018 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
August 31, 2018 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
February 20, 2019 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
February 20, 2019 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
February 20, 2019 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
May 31, 2019 | Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
June 4, 2019 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
June 18, 2019 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
July 15, 2019 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
July 15, 2019 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
July 15, 2019 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
October 4, 2019 | Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
October 7, 2019 | Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
October 8, 2019 | Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating |
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* | Rating definition: “AAA” - The certainty of principal and interest payment is at the highest level with extremely low investment risk and is stable such that it will not be influenced by reasonably foreseeable changes in external factors. |
* | Rating definition: “AA” - The certainty of principal and interest payment is extremely high with very low investment risk, but has slightly inferior factors compared to “AAA” rating. |
(2) | Commercial paper (“CP”) and short-term bonds |
Credit rating date | Subject of rating | Credit rating | Credit rating entity | Rating classification | ||||
October 26, 2015 | CP | A1 | Korea Ratings | Regular rating | ||||
October 26, 2015 | CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 26, 2015 | CP | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
January 19, 2016 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
January 19, 2016 | Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
January 19, 2016 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
April 27, 2016 | CP | A1 | Korea Ratings | Current rating | ||||
April 27, 2016 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
May 11, 2016 | CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
May 11, 2016 | Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
May 12, 2016 | CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
May 12, 2016 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
October 26, 2016 | CP | A1 | Korea Ratings | Regular rating | ||||
October 26, 2016 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
October 26, 2016 | CP | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
October 26, 2016 | Short-term bond | A1 | Korea Ratings | Regular rating | ||||
November 3, 2016 | CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
November 3, 2016 | Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
April 12, 2017 | CP | A1 | Korea Ratings | Current rating | ||||
April 12, 2017 | CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
April 12, 2017 | CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
April 12, 2017 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
April 12, 2017 | Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
April 12, 2017 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
October 30, 2017 | CP | A1 | Korea Ratings | Regular rating | ||||
October 30, 2017 | CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 30, 2017 | CP | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
October 30, 2017 | Short-term bond | A1 | Korea Ratings | Regular rating | ||||
October 30, 2017 | Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 30, 2017 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
April 10, 2018 | CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
April 10, 2018 | Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
April 11, 2018 | CP | A1 | Korea Ratings | Current rating | ||||
April 11, 2018 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
April 16, 2018 | CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
April 16, 2018 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
August 31, 2018 | CP | A1 | Korea Ratings | Regular rating | ||||
August 31, 2018 | CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
August 31, 2018 | CP | A1 | NICE Investors Service Co., Ltd. | Regular rating |
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Credit rating date | Subject of rating | Credit rating | Credit rating entity | Rating classification | ||||
August 31, 2018 | Short-term bond | A1 | Korea Ratings | Regular rating | ||||
August 31, 2018 | Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
August 31, 2018 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
May 31, 2019 | CP | A1 | Korea Ratings | Current rating | ||||
May 31, 2019 | Short-term bond | A1 | Korea Ratings | Current rating | ||||
June 4, 2019 | CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 4, 2019 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 18, 2019 | CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 18, 2019 | Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
October 4, 2019 | CP | A1 | Korea Ratings | Regular rating | ||||
October 4, 2019 | Short-term bond | A1 | Korea Ratings | Regular rating | ||||
October 7, 2019 | CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 7, 2019 | Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 8, 2019 | CP | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
October 8, 2019 | Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular rating |
* | Rating definition: “A1” - Timely repayment capability is at the highest level with extremely low investment risk and is stable such that it will not be influenced by reasonably foreseeable changes in external factors. |
(3) | International credit ratings |
Date of credit rating | Subject of rating | Credit rating of | Credit rating agency | Rating type | ||||
October 27, 2015 | Bonds denominated in foreign currency | A- (Stable) | Fitch Ratings | Regular rating | ||||
November 3, 2015 | Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Regular rating | ||||
November 4, 2015 | Bonds denominated in foreign currency | A3 (Stable) | Moody’s Investors Service | Regular rating | ||||
March 30, 2016 | Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Regular rating | ||||
July 20, 2016 | Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Regular rating | ||||
October 24, 2016 | Bonds denominated in foreign currency | A- (Stable) | Fitch Ratings | Regular rating | ||||
October 23, 2017 | Bonds denominated in foreign currency | A- (Stable) | Fitch Ratings | Regular rating | ||||
April 8, 2018 | Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Current rating | ||||
April 9, 2018 | Bonds denominated in foreign currency | A3 (Stable) | Moody’s Investors Service | Current rating | ||||
May 8, 2018 | Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Regular rating | ||||
May 10, 2018 | Bonds denominated in foreign currency | A3 (Negative) | Moody’s Investors Service | Regular rating | ||||
October 15, 2018 | Bonds denominated in foreign currency | A- (Negative) | Fitch Ratings | Regular rating | ||||
March 6, 2019 | Bonds denominated in foreign currency | A- (Negative) | S&P Global Ratings | Regular rating | ||||
May 30, 2019 | Bonds denominated in foreign currency | A3 (Negative) | Moody’s Investors Service | Regular rating | ||||
October 14, 2019 | Bonds denominated in foreign currency | A- (Negative) | Fitch Ratings | Regular rating |
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(4) | Listing (registration or designation) of Company’s shares and special listing status |
Listing (registration or designation) of stock | Date of listing (registration or designation) | Special listing | Special listing and applicable | |||
KOSPI Market of Korea Exchange | November 7, 1989 | Not applicable | Not applicable |
2. Company History
June 2015: Comprehensive exchange of shares of SK Broadband
April 2016: Thespin-off and merger of the location-based services business and the mobile phone verification services business of SK Planet Co., Ltd. (“SK Planet”)
December 2017: Comprehensive exchange of shares of SK Telink Co., Ltd. (“SK Telink”)
December 2018: Comprehensive exchange of shares of SK Infosec
A. | Location of Headquarters |
• | 22 Dohwa-dong,Mapo-gu, Seoul (July 11, 1988) |
• | 16-49Hangang-ro3-ga,Yongsan-gu, Seoul (November 19, 1991) |
• | 267Namdaemun-ro5-ga, Jung-gu, Seoul (June 14, 1995) |
• | 99 Seorin-dong,Jongro-gu, Seoul (December 20, 1999) |
• | 65 Euljiro, Jung-gu, Seoul (December 13, 2004) |
B. | Significant Changes in Management |
At the 30th General Meeting of Shareholders held on March 21, 2014, Jae Hoon Lee was elected as an independent director and Jae Hyeon Ahn was elected as an independent director and member of the audit committee of the Company’s board of directors (the “Board of Directors”). At the 31st General Meeting of Shareholders held on March 20, 2015, Dong Hyun Jang was elected as an inside director. At the 32nd General Meeting of Shareholders held on March 18, 2016, Dae Sik Cho wasre-elected as an inside director and Dae Shick Oh wasre-elected as an independent director and member of the audit committee of the Board of Directors. At the 33rd General Meeting of Shareholders held on March 24, 2017, Jung Ho Park was elected as an inside director and Dae Sik Cho was elected as anon-executive director. Jae Hoon Lee and Jae Hyeon Ahn werere-elected as independent directors and members of the audit committee and Jung Ho Ahn was elected as an independent director. At the 34th General Meeting of Shareholders held on March 21, 2018, Young Sang Ryu was elected as an inside director and Youngmin Yoon was elected as an independent director and member of the audit committee of the Board of Directors. At the 35th General Meeting of Shareholders held on March 26, 2019, Seok-Dong Kim was elected as an independent director and member of the audit committee of the Board of Directors.
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C. | Change in Company Name |
On March 23, 2012, SK hynix Inc. (“SK Hynix”), which became a subsidiary in February 2012, changed its name to SK hynix Inc. from Hynix Semiconductor Inc. in accordance with a resolution at its general meeting of shareholders.
On January 2, 2017, SK M&Service Co., Ltd. (“SK M&Service”), one of the Company’s subsidiaries, changed its name to SK M&Service Co., Ltd. from M&Service Co., Ltd. in accordance with a resolution at its general meeting of shareholders on December 26, 2016.
On October 23, 2018, Life & Security Holdings Co., Ltd. (“Life & Security Holdings”), one of the Company’s subsidiaries, changed its name to Life & Security Holdings Co., Ltd., from Siren Holdings Korea Co., Ltd., in accordance with a resolution at its extraordinary meeting of shareholders.
On March 28, 2019, Iriver Ltd., one of the Company’s subsidiaries, changed its name to Dreamus Company in accordance with a resolution at its general meeting of shareholders.
D. | Mergers, Acquisitions and Restructuring |
(1) Acquisition of shares of PS&Marketing
On February 20, 2014, the Board of Directors resolved to invest an additional Won 100 billion (20 million common shares) into PS&Marketing, an affiliated company, in order to increase itsmid- to long-term competitiveness in distribution. The date of investment was April 2, 2014, and the cumulative investment amount totaled Won 330 billion.
(2) Disposition of shares of iHQ Inc.
On March 10, 2014, the Company disposed of 3,790,000 shares (its 9.4% equity share) of iHQ Inc. to rebalance its investment portfolio.
(3) Acquisition of shares of NSOK Co., Ltd. (“NSOK”) (formerly, Neosnetworks Co., Ltd.)
In order to acquire a new growth engine, the Company acquired a controlling stake in NSOK, a building security company, with the purchase of 31,310 shares (a 66.7% equity interest) of NSOK on April 2, 2014. The Company acquired an additional 50,377 shares in NSOK in April 2015 through a rights offering, resulting in an increase of its ownership to 83.9%.
(4) Acquisition of shares of Iriver
On August 13, 2014, the Company purchased 10,241,722 shares (a 39.3% equity interest) of Iriver Ltd. (“Iriver”) from Vogo-Rio Investment Holdings Co., Ltd. andKGF-Rio Limited in order to foster application development and smartphone accessories as part of the Company’s growth engines. The Company holds a 48.9% equity interest of Iriver by acquiring additional shares in its rights offering. The Company does not hold a majority of the voting rights of Iriver but the Company has concluded that it has effective control, as it holds significantly more voting rights than any other shareholder or any organized group of shareholders.
(5) Acquisition of shares of Shopkick, Inc. (“Shopkick”)
On October 10, 2014, SK Planet America LLC (“SKP America”), a subsidiary of the Company, acquired (through its 95.2%-owned subsidiary Shopkick Management Company, Inc. (“SMC”)) a 100.0% ownership interest in Shopkick, a developer of a shopping app for mobile devices that provides benefits to customers for visiting stores, in order to penetrate the mobile commerce market in the United States. In the first half of 2016, SKP America acquired all remaining shares of SMC.
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(6) Disposition of ShenzenE-Eye shares
In 2014, the Company entered into an agreement to dispose of its equity interest in ShenzenE-eye in order to focus its business portfolio on high-growth business areas in the Chinese ICT market. The sale was completed on March 23, 2015.
(7) Disposition of a portion of KEB Hana Card shares
On April 3, 2015, the Company sold 27,725,264 shares (10.4% out of the 25.4% equity interest the Company held prior to the sale) of KEB Hana Card Co., Ltd. to Hana Financial Group in cash. With the proceeds of such sale (Won 180 billion), the Company acquired equity interests in Hana Financial Group on April 17, 2015 through participation in a rights offering by Hana Financial Group. The Company plans to maintain its strategic alliance and pursue opportunities to create synergies with, Hana Financial Group.
(8) Comprehensive share exchange of SK Broadband
On March 20, 2015, the Board of Directors resolved to approve a share exchange transaction through which the Company acquired all of the shares of SK Broadband that it did not otherwise own in exchange for its treasury shares such that SK Broadband became a wholly-owned subsidiary of the Company.
• | Share exchange ratio: Shareholders of one common share of SK Broadband were allotted 0.0168936 common shares of SK Telecom |
• | Shares exchanged: 2,471,883 registered common shares of SK Telecom |
• | Date of share exchange agreement: March 23, 2015 |
• | Record date: April 6, 2015 |
• | Announcement date for the proceeding of the share exchange as a small-scale share swap: April 6, 2015 |
• | Meeting of the Board of Directors for approval of the share exchange: May 6, 2015 |
• | Date of the share exchange: June 9, 2015 |
(9) Establishment of Entrix Co., Ltd. (“Entrix”)
In July 2015, SK Planet spun off its cloud streaming division and established Entrix. The Company exchanged 1,300,000 shares of SK Planet for 1,300,000 shares of Entrix at the time of thespin-off and later acquired an additional 2,857,000 shares by participating in the recapitalization.
(10) Additional capital raise by NanoEnTek Inc.
In 2015, the Company acquired 1,090,155 shares through the additional capital raise by NanoEnTek Inc.
(11) Reclassification of Packet One Networks’ accounts
In 2015, the Company reclassified its investments in Packet One from investments in associates and joint ventures to assets classified as held for sale as the Company no longer had significant control over Packet One. The difference between the book value and the fair value of Won 37.4 billion at the time of reclassification was recognized as impairment loss.
(12) Acquisition of shares of SK Communications Co., Ltd. (“SK Communications”)
On October 1, 2015, the Company became the largest shareholder of SK Communications with a 64.54% equity interest through dividends in kind from SK Planet of 26,523,815 shares and the purchase of 1,506,130 sharesover-the-counter.
(13) Acquisition of shares of CJ HelloVision Co., Ltd. (“CJ HelloVision”)
On November 2, 2015, the Board of Directors resolved to approve the acquisition of CJ HelloVision’s shares from CJ O Shopping Co., Ltd. (“CJ O Shopping”) and on the same day, entered into a share purchase agreement with CJ O Shopping. In addition, on November 2, 2015, SK Broadband’s board of directors resolved to approve the merger of SK Broadband with CJ HelloVision and on the same day, entered into a merger agreement with CJ HelloVision and the closing of the merger was conditioned upon receipt of regulatory approval from relevant authorities. On July 25, 2016, the Company notified CJ O Shopping of the termination of the share purchase agreement and SK Broadband notified CJ HelloVision of the termination of the merger agreement, as the Korea Fair Trade Commission on July 18, 2016 denied approval of the proposed merger, which was a closing condition to the consummation of the merger.
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(14) Tender offer of shares of CJ HelloVision
From November 2, 2015 to November 23, 2015, the Company purchased 6,671,933 shares of CJ HelloVision in a tender offer for up to 10,000,000 shares, paying Won 12,000 per share. Through this tender offer, the Company acquired an 8.61% equity interest in CJ HelloVision.
(15) Establishment of SK TechX Co., Ltd. and Onestore
In March 2016, SK Planet spun off its platform business and T Store business and established SK TechX Co., Ltd. (“SK TechX”) and Onestore. The Company exchanged 12,323,905 shares of SK Planet for 6,323,905 shares of SK TechX and 6,000,000 shares of Onestore at the time of thespin-off. The Company later acquired an additional 4,409,600 shares of Onestore at a purchase price of Won 22 billion by participating in thefollow-on rights offering. The Company did not participate in the subsequentfollow-on rights offering and as of September 30, 2019, the Company had a 65.5% interest in Onestore.
(16)Spin-off and merger of SK Planet’s location-based services business and mobile phone verification services business
Through the merger of SK Planet’s location-based services business and mobile phone verification services business into SK Telecom, the Company seeks to provide a solid base for continued growth, especially in the next generation platform business, and SK Planet plans to further concentrate its resources on its commerce business. Thespin-off and merger was effective as of April 5, 2016 and was registered as of April 7, 2016. SK Planet is a wholly-owned subsidiary of the Company, and as the Company did not issue any new shares in connection with the merger, there was no change in the share ownership of the Company.
(17) Establishment ofHana-SK Fintech Corporation
In order to provide an everyday finance platform, the Company entered into a joint venture agreement with Hana Financial Group, in accordance with the resolution of the Board of Directors on July 28, 2016. Combining the Company’s leading mobile technology and big data analysis capabilities with Hana Financial Group’s financial service,Hana-SK Fintech Corporation plans to provide innovative mobile financial services such as mobile asset management, easy payment and overseas wire transfer services. SK Telecom holds a 49% equity stake in the joint venture, and Hana Financial Group holds the remaining 51%. Service of the everyday finance platform Finnq officially launched in the third quarter of 2017.
(18) Capital contribution of shares of NSOK for new shares of SK Telink
On October 25, 2016, the Company made a capital contribution of all shares of NSOK owned by the Company to SK Telink in exchange for 219,967 newly issued shares of SK Telink, which resulted in an increase of the Company’s equity interest in SK Telink to 85.86%.
(19) Acquisition of shares of SM Mobile Communications
In October 2016, the Company transferred the media platform businesses Hotzil and 5Ducks to SM Mobile Communications in exchange for 1,200,000 shares of SM Mobile Communications. As a result, the Company owned a 46.2% equity interest in SM Mobile Communications as of September 30, 2019.
(20) Exchange of shares of SK Communications
On November 24, 2016, the Board of Directors resolved to approve the payment of cash consideration in lieu of the issuance of shares of the Company in a comprehensive exchange of shares of SK Communications. The amount of cash consideration was based on a share exchange ratio of one common share of the Company to 0.0125970 common share of SK Communications. In February 2017, SK Communications became a wholly-owned subsidiary of the Company.
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(21) Acquisition of shares of Iriver
The Company acquired 4,699,248 shares of Iriver at a purchase price of Won 5,320 in connection with a capital contribution. The Company’s equity interest in Iriver following the acquisition is 45.9%. See “Report on Important Business Matters (Decision on Capital Increase)” filed on July 17, 2017 by Iriver for more information.
(22) Acquisition of newly issued shares of SK China Company Limited (“SK China”)
On July 28, 2017, the Company acquired newly issued shares of SK China to find investment opportunities in ICT and other promising areas of growth in China. In exchange for newly issued shares of SK China, the Company contributed its full equity interest in each of SKY Property Management Limited (“SKY”) and SK Industrial Development China Co., Ltd. (“SK IDC”) as well as cash, equal to the following amounts: 1) SKY stock: USD 276,443,440.64, 2) SK IDC stock: USD 108,072,007.67 and 3) Cash: USD 100,000,000.00. As a result of the acquisition, the Company holds 10,928,921 shares and a 27.27% of equity interest in SK China. See “Report on Decision on Acquisition of SK China Shares” filed by the Company on July 28, 2017 for more information about this transaction.
(23) Exchange of shares of SK Telink
On September 28, 2017, the Company disclosed a resolution approving the payment of cash consideration in lieu of the issuance of shares of SK Telecom in an exchange of shares of SK Telink. The amount of cash consideration was based on a share exchange ratio of 1:1.0687714. The exchange was completed on December 14, 2017, upon which exchange SK Telink became a wholly-owned subsidiary of the Company.
(24) Acquisition of shares of FSK L&S Co., Ltd.
On February 6, 2016, the Company acquired 2,415,750 shares of FSK L&S Co., Ltd. at a purchase price of Won 17.8 billion from SK Holdings Co., Ltd. (“SK Holdings”) to utilize its logistics sharing infrastructure with its counterparties and pursue new business opportunities. As a result of the acquisition, the Company had a 60% equity interest in FSK L&S Co., Ltd.
(25) Acquisition of shares of id Quantique SA
In order to increase the value of the Company by enhancing its position as the top MNO through utilizing quantum cryptography and by generating returns from its global business, the Company acquired an additional 41,157,506 shares of id Quantique SA on April 30, 2018. As a result, the Company owns a total of 58.1% of the issued and outstanding shares (44,157,506 shares), and has acquired control, of id Quantique SA.
(26) Acquisition of shares of Siren Holdings Korea Co., Ltd.
The Company acquired shares of Siren Holdings Korea Co., Ltd. (“SHK”), which wholly owns ADT CAPS, in order to strengthen its security business and expand its residential customer base. See “Report on Decision on Acquisition of Shares of Siren Holdings Korea Co., Ltd.” filed on May 8, 2018 for more information.
* | Siren Investments Korea Co., Ltd. merged with and into SHK with SHK as the surviving entity, following which CAPSTEC Co., Ltd. and ADT Security Co., Ltd., which were subsidiaries of ADT CAPS, became subsidiaries of SHK. |
* | SHK changed its name to Life & Security Holdings Co., Ltd. in accordance with a resolution at its extraordinary meeting of shareholders on October 23, 2018. |
(27) Capital increase of Iriver
On July 26, 2018, the board of directors of Iriver, a subsidiary of the Company, resolved to approve a capital increase of Won 70,000 million through third-party allotment and subsequently issued 7,990,867 common shares. The Company participated in the capital increase and paid Won 65,000 million to subscribe 7,420,091 common shares of Iriver on August 10, 2018, resulting in an increase of the Company’s ownership interest from 45.9% to 53.7%.
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(28) Exchange of shares of SK Infosec
On October 26, 2018, the Company announced the decision of the Board of Directors to approve the comprehensive exchange of shares of SK Infosec for shares of the Company. The share exchange ratio was one common share of the Company to 0.0997678 common share of SK Infosec. The share exchange was completed on December 27, 2018, upon which SK Infosec became a wholly-owned subsidiary of the Company.
(29) Acquisition of shares of SK stoa Co., Ltd. (“SK Stoa”)
On April 25, 2019, the Board of Directors resolved to acquire the 100% equity interest in SK Stoa owned by SK Broadband, a subsidiary of the Company, in order to expand itsT-commerce business and maximize synergies with other ICT businesses of the Company. The Company will acquire 3,631,355 shares of SK Stoa, representing the number of outstanding shares upon the completion of acontribution-in-kind by SK Broadband approved by its board of directors on April 24, 2019. The transaction is subject to governmental approvals as a closing condition, and the particulars of the transaction may change due to approval procedures and applicable laws.
(30) Acquisition of shares of Tbroad Nowon Broadcasting Co., Ltd. (“Tbroad Nowon”)
On April 26, 2019, the Board of Directors resolved to acquire shares of Tbroad Nowon to enhance the Company’s competitiveness in the media business pursuant to a share purchase agreement with Tbroad Nowon’s largest shareholder, Tbroad Co., Ltd. (“Tbroad”). The Company will acquire a 55.00% equity interest, or 627,000 shares, of Tbroad Nowon at a purchase price of Won 10.4 billion. The expected date of acquisition has changed from November 7, 2019 to February 28, 2020 due to the extended review and approval process of relevant authorities. The transaction is subject to governmental approvals as a closing condition, and the particulars of the transaction may change due to approval procedures and applicable laws. The transaction may also be terminated by written consent by the parties or for cause pursuant to the terms of the share purchase agreement. See the report on “Decision on Acquisition of Tbroad Nowon” filed by the Company on April 26, 2019 for more information.
(31) Disposal of shares of SMC and Shopkick
On June 11, 2019, SKP America, a subsidiary of the Company, disposed of its 100% equity interest in SMC and SMC’s wholly-owned subsidiary Shopkick.
(32) Acquisition of shares of Incross Co., Ltd. (“Incross”)
On June 28, 2019, the Company acquired 2,786,455 shares of Incross in order to strengthen its digital advertising business. The Company’s equity interest in Incross following the acquisition is 34.6%. See the report on “Decision on Acquisition of Shares of Incross” filed by the Company on April 11, 2019, as amended on June 3, 2019 for more information.
(33) Capital increase of Content Alliance Platform Inc. (“Content Alliance Platform”)
The Company participated in a capital increase by Content Alliance Platform in the amount of Won 90 billion through third-party allotment in order to provide innovative media services and contents to customers and to enhance its competitiveness as a differentiated mobile OTT platform. See the report on “Participation in Capital Increase by Content Alliance Platform” filed by the Company on April 5, 2019, as amended on June 28, 2019.
(34) Acquisition of newly-issued shares of Kakao Corp. (“Kakao”)
In order to pursue a strategic alliance with Kakao, the Company acquired newly-issued common shares of Kakao in the aggregate amount of approximately Won 300 billion through third-party allotment. Kakao acquired treasury shares of the Company. See the report on “Results of Disposal of Treasury Shares” filed by the Company on November 5, 2019 for more information.
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[SK Broadband]
(1) Share Exchange
On March 20, 2015, the board of directors of SK Broadband resolved to approve the comprehensive exchange of shares of SK Broadband for shares of the Company. The share exchange was approved at the extraordinary meeting of shareholders held on May 6, 2015. Subsequent to the share exchange, the Company became the parent company of SK Broadband with 100% ownership and remained a listed corporation on the KRX KOSPI Market, and SK Broadband became a wholly-owned subsidiary of the Company and was delisted from the KRX KOSDAQ Market. There was no change in the share ownership interest of the Company’s existing shareholders or the Company’s management in connection with the Share Exchange.
(2) Merger among Subsidiaries and Affiliates
On July 29, 2015, the board of directors of SK Broadband approved the acquisition of SK Planet’s Hoppin business through aspin-off and subsequent merger transaction pursuant to Article530-2 of the Korean Commercial Code, with both SK Broadband and SK Planet remaining as existing companies. Thespin-off and subsequent merger were effective as of September 1, 2015, and on the same day, SK Broadband issued 2,501,125 new common shares resulting from the merger, allotting 0.0349186 common shares of SK Broadband per one common share of SK Planet to SK Telecom, SK Planet’s sole shareholder.
(3) Merger with CJ HelloVision
On November 2, 2015, SK Broadband’s board of directors resolved to approve the merger of SK Broadband with CJ HelloVision such that CJ HelloVision would be the surviving entity and SK Broadband would be thenon-surviving entity. The largest shareholder of the merged entity would be SK Telecom with an equity interest of 78.35%. On February 26, 2016, the entry into the merger agreement was resolved as proposed by SK Broadband’s shareholders.
On July 25, 2016, SK Broadband notified CJ HelloVision of the termination of the merger agreement, as the Korea Fair Trade Commission on July 18, 2016 denied approval of the proposed merger, which was a closing condition to the consummation of the merger. On July 27, 2016, SK Broadband’s board of directors resolved to terminate the merger agreement as proposed. Subsequently, the merger agreement is no longer effective and all procedures related to the merger, including the issuance of new shares, were terminated.
(4) Establishment of a subsidiary
On May 23, 2017, SK Broadband’s board of directors resolved to approve the establishment of a subsidiary. On June 5, 2017, SK Broadband established Home & Service Co., Ltd. (“Home & Service”), a subsidiary responsible for the management of customer service operations, in order to enhance SK Broadband’s competitiveness by strengthening its customer service and strategically developing its home Value Delivery channel and to create quality jobs. Home & Service was incorporated by SK Broadband under the Korean Commercial Code. The subsidiary was capitalized at Won 46 billion (9,200,000 shares with par value of Won 5,000 per share), and SK Broadband holds a 100% equity interest. The Korea Fair Trade Commission approved the subsidiary’s incorporation as an SK affiliate on July 1, 2017, from which arises a duty to report to the Fair Trade Commission.
(5)Spin-off
On August 16, 2017, SK Broadband’s board of directors resolved to approve thespin-off of itsT-commerce subsidiary to enhance the competitiveness and managerial efficiency of itsT-commerce business (data broadcasting and commercial retail platform service through TV home shopping channels) through aspin-off and subsequent establishment of a subsidiary pursuant to Article530-2 and530-12 of the Korean Commercial Code, with both companies from the simple verticalspin-off remaining as existing companies. Thespin-off was effective as of December 1, 2017, and the subsidiary was capitalized at Won 15 billion (3,000,000 shares with par value of Won 5,000 per share), with SK Broadband holding a 100% equity interest. The Korea Fair Trade Commission approved the subsidiary’s incorporation as an SK affiliate on January 1, 2018, from which arises a duty to report to the Fair Trade Commission.
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(6) Transfer of business
On April 5, 2019, SK Broadband’s board of directors resolved to approve an agreement for the transfer of its OTT service, oksusu, to Content Alliance Platform (POOQ), a joint venture among KBS, MBC and SBS, in an effort to lead the Korean market and expand globally as a Korean OTT service operator by combining the capabilities of telecommunications and broadcasting companies. The transaction was completed on September 18, 2019.
(7) Transfer of subsidiary shares
On April 24, 2019, SK Broadband’s board of directors approved the transfer of its 100% equity interest (3,631,355 shares) in SK Stoa, a subsidiary of SK Broadband, to SK Telecom in order to further expand the Company’sT-commerce business and enhance synergies with other ICT businesses of the Company. The number of shares to be transferred refers to the number of shares that would be outstanding upon the completion of anin-kind contribution by SK Broadband of studio and broadcasting equipment to SK Stoa in exchange for newly-issued shares of SK Stoa. The transaction is subject to governmental approvals as a closing condition, and the particulars of the transaction may change due to approval procedures and applicable laws.
(8) Merger with Tbroad, Tbroad Dongdaemun Broadcasting Co., Ltd. (“Tbroad Dongdaemun”) and Korea Digital Cable Media Center (“KDMC”)
On April 26, 2019, in order to enhance SK Broadband’s competitiveness as a comprehensive media business and pursue synergies, its board of directors resolved to enter into a merger agreement pursuant to which Tbroad, Tbroad Dongdaemun and KDMC will merge with and into SK Broadband, with SK Broadband as the surviving entity. SK Telecom will remain the largest shareholder of the surviving company. The transaction is subject to governmental approvals as a closing condition, and the particulars of the transaction may change due to approval procedures and applicable laws. See the report on “Decision on SK Broadband’s Merger with Tbroad, Tbroad Dongdaemun and KDMC” filed by the Company on April 26, 2019 for more information.
[SK Planet]
On May 29, 2015, the board of directors of SK Planet resolved to spin off its cloud streaming division on July 1, 2015 in order to strengthen its business capabilities and expand overseas. Thespin-off ratio was 0.9821740 for the surviving company to 0.0178260 for the newly-established company, and the capital reduction ratio was 1.7825968%.
On July 29, 2015, the board of directors of SK Planet resolved to spin off its Hoppin business, which was merged into SK Broadband on September 1, 2015, in order to unify capabilities within the business and maximize synergies to improve its competitive power in the Korean and international mobile media market. SK Planet issued 2,501,125 new common shares in connection with this transaction, and the merger ratio between SK Planet and SK Broadband was 0.0349186:1.
On December 29, 2015, the board of directors of SK Planet resolved to merge Commerce Planet Co., Ltd., its wholly-owned subsidiary, into SK Planet to generate synergies by uniting capabilities to promote its commerce business. The merger was effective as of February 1, 2016, and SK Planet did not issue any new shares in connection with the merger.
Effective as of March 1, 2016, SK Planet spun off its platform business and T Store business in order to enhance the competitiveness of each business for future growth.
Effective as of April 5, 2016, SK Planet spun off its location-based services business and mobile phone verification services business and merged them into the Company in order to further concentrate its resources on its commerce business.
On May 29, 2017, the board of directors of SK Planet resolved to transfer the operations and assets related to its BENEPIA business for Won 7.5 billion to SK M&Service as of July 1, 2017.
On July 17, 2017, the board of directors of SK Planet resolved to(1) spin-off SK Planet’s advertising agency business as a newly established company, SM Contents & Communications, in order to strengthen the competitiveness of the business for future growth, whichspin-off was effective as of October 1, 2017 and (2) sell 100% of its shares of SM Contents & Communications to SM Culture & Contents Co., Ltd. to further concentrate business capabilities and efficiently allocate management resources. The closing date of the sale transaction was October 24, 2017.
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On June 19, 2018, the board of directors of SK Planet resolved to spin off its 11st business (including Scinic, Gifticon and 11Pay) into a newly established company, effective as of September 1, 2018, in order to enhance the level of specialization and competitiveness of its businesses by strengthening their core competencies and obtain further growth potential of the businesses. See the “Report on Decision onSpin-off of SK Planet’s 11st Business” filed on June 19, 2018 for more information.
On June 19, 2018, the board of directors of SK Planet resolved to merge SK TechX with and into SK Planet, effective as of September 1, 2018, with a merger ratio between SK Planet and SK TechX of 1:3.0504171, in order to enhance management efficiency and create synergies. See the “Report on Decision on Merger of SK TechX into SK Planet” filed on June 19, 2018 for more information.
[SK Telink]
(1) Acquisition of shares of NSOK
In accordance with the resolution of its board of directors on September 22, 2016, SK Telink received a capital contribution of 408,435 shares (an 83.9% equity interest) of NSOK owned by SK Telecom. On October 25, 2016, SK Telink acquired the remaining 78,200 outstanding shares (a 16.1% equity interest) of NSOK, pursuant to which NSOK became a wholly-owned subsidiary of SK Telink.
In accordance with the resolution of its board of directors on April 12, 2017, SK Telink acquired 525,824 additional shares of NSOK pursuant to a rights offering for an aggregate amount of Won 40.0 billion (or Won 76,071 per share), resulting in SK Telink’s ownership of 1,012,459 shares (a 100% equity interest) of NSOK.
(2) Comprehensive exchange of shares
On September 28, 2017, SK Telink’s board of directors approved a comprehensive exchange of shares with SK Telecom, pursuant to which SK Telecom would acquire SK Telink’s remaining outstanding shares for cash consideration in lieu of issuance of shares of SK Telecom. The share exchange agreement was subsequently approved at the extraordinary general meeting of shareholders held on November 9, 2017.
Following the exchange, there were no changes to SK Telecom’s share ownership interest level or to management structure, and SK Telecom and SK Telink will remain as corporate entities. SK Telink became a wholly-owned subsidiary of SK Telecom and remains as an unlisted corporation, while SK Telecom remains as a listed corporation.
(3) Disposal of NSOK shares
Pursuant to the resolution of its board of directors on October 8, 2018, SK Telink entered into an agreement to sell 1,012,459 shares of NSOK (representing a 100.00% equity interest) to Life & Security Holdings. The date of sale was October 10, 2018, and the sale consideration amount was Won 100 billion. See “Report on Disposal of Shares of Related Party” filed on October 8, 2018 by SK Telink for more information about this transaction.
[NSOK]
(1) Acquisition of the unmanned electronic security business of Joeun Safe Co., Ltd.
On March 31, 2015, NSOK acquired the unmanned electronic security business of Joeun Safe to expand its unmanned security business. The acquisition cost, which had been reported on January 5, 2015 as Won 19.4 billion, was subject to adjustment depending on the customer transfer rate. The final acquisition cost was determined to be Won 16.9 billion.
(2) Merger into ADT CAPS
NSOK decided to merge itself into ADT CAPS to create synergies and achieve management efficiency through the combination of assets, technology and management resources. The effective date of the merger was December 1, 2018, and the merger ratio was 1:0. See “Report on Decision to Merge NSOK” filed on October 10, 2018 for more information about this transaction.
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[SK Communications]
(1) Disposition of the Cyworld service
Pursuant to the resolution of its board of directors on March 6, 2014, SK Communications sold its Cyworld service and certain related assets to Cyworld Co., Ltd. for Won 2.8 billion on April 8, 2014.
(2) Change in the largest shareholder
On September 24, 2015, SK Telecom and SK Planet entered into a share transfer agreement to transfer all of the shares of SK Communications held by SK Planet to SK Telecom. The agreement became effective on October 1, 2015, making SK Telecom the largest shareholder of SK Communications.
(3) Comprehensive share exchange
Pursuant to the resolution of its board of directors on November 24, 2016, SK Communications entered into a comprehensive share exchange agreement with SK Telecom on November 25, 2016. Upon the consummation of the share exchange on February 7, 2017, SK Communications became a wholly-owned subsidiary of SK Telecom.
[PS&Marketing]
On February 20, 2014, the board of directors of PS&Marketing resolved to acquire the retail distribution business, including related assets, liabilities, contracts and human capital of the information technology and mobile wing of SK Networks. On the same day, the board of directors of PS&Marketing also resolved to acquire retail stores, including their assets and liabilities, of LCNC Co., Ltd (“LCNC”). The acquisitions were completed on April 30, 2014 at a purchase price of Won 124.5 billion for the assets acquired from SK Networks and a purchase price of Won 10 billion for the assets acquired from LCNC.
[Dreamus Company]
(1) Merger with Iriver CS Co., Ltd. (“Iriver CS”)
Pursuant to the resolution of its board of directors on November 18, 2014, Dreamus Company merged Iriver CS, a subsidiary of the Company, with and into itself on January 31, 2015, with the purpose of enhancing competitiveness through management rationalization and maximization of synergy. The merger was completed based on a merger ratio of 1:0 with no capital increase. The merger and merger registration were completed on January 31, 2015 and February 2, 2015, respectively. Since this merger qualified as a small-scale merger, the approval of the merger by a resolution of the board of directors substituted for the approval by a general meeting of shareholders.
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(2) Acquisition of shares of S.M. Life Design Company Japan Inc.
Pursuant to the resolution of its board of directors on July 17, 2017, Dreamus Company approved a contract to acquire a total of 1,000,000 shares of S.M. Life Design Company Japan Inc. (a 100% equity interest) from S.M. Entertainment Japan Co., Ltd. with the purposes of entering foreign markets and maximizing business synergy. Dreamus Company acquired control of S.M. Life Design Company Japan Inc. upon its completion of payment for the shares on September 1, 2017.
(3) Merger of S.M. Mobile Communications JAPAN Inc.
Pursuant to the resolution of its board of directors on July 17, 2017, Dreamus Company decided to merge with S.M. Mobile Communications JAPAN Inc., a contents and information distribution company, with the purpose of reinforcing its contents based device business and enhancing managerial efficiency. As of October 1, 2017, Dreamus Company merged S.M. Mobile Communications JAPAN Inc. into it with a merger ratio of 1:1.6041745, based on which Dreamus Company issued 4,170,852 new common shares.
(4) Acquisition of important assets (Supply and distribution rights for music and digital contents)
On February 28, 2018, Dreamus Company entered into an agreement with S.M. Entertainment Co., Ltd. to acquire supply and distribution rights for music and digital contents of S.M. Entertainment Co., Ltd., JYP Entertainment Corporation and Big Hit Entertainment. Through this arrangement, the Company plans to increase sales by entering the music and sound recording industries and to create synergies through strategic alliances.
(5) Merger between subsidiaries
In order to achieve management efficiency and maximize organizational operation synergies, groovers Japan Co., Ltd. and SM Mobile Communications Japan Inc., each of which is a Japanese subsidiary of Dreamus Company, completed their merger with groovers Japan Co., Ltd. as the surviving entity, effective as of July 1, 2018.
(6) Investment in groovers Inc. (“Groovers”)
On July 26, 2018, the board of directors of Dreamus Company resolved to make an equity investment of Won 11,000 million (2,200,000 common shares) in Groovers for the purposes of providing operating funds to improve its financial structure and pursue new businesses. Payment was completed on July 27, 2018, and the Company’s ownership interest after such equity investment is 100%.
(7) Transfer of Music Mate business between Groovers and SK TechX
On August 31, 2018, pursuant to the resolutions of its board of directors and the extraordinary meeting of shareholders, each of which was held on June 28, 2018, Groovers acquired all properties, assets and rights related to the Music Mate streaming service from SK TechX for Won 3,570 million.
(8) Merger of Groovers
Pursuant to the resolution of its board of directors on December 26, 2018, Dreamus Company merged Groovers, a provider of music, contents and other services, with and into itself on March 1, 2019, in order to seek synergies by integrating management resources and enhance management efficiency. The merger was completed based on a merger ratio of 1:0 with no capital increase. The merger and merger registration were completed on March 1, 2019 and March 5, 2019, respectively. Since this merger qualified as a small-scale merger, the approval of the merger by a resolution of the board of directors substituted for the approval by a general meeting of shareholders.
(9) Disposal of shares of Iriver Inc.
Pursuant to the resolution of its board of directors on July 18, 2019, Dreamus Company disposed of all of its shares in Iriver Inc., effective as of September 1, 2019, with the goal of achieving sustainable growth of its device business by improving its financial structure and profitability and maintaining its business expertise and continuity of operations.
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[SK M&Service]
(1) Acquisition of SK Planet’s BENEPIA business
Pursuant to the resolutions of its board of directors and its extraordinary shareholders meeting held on May 29, 2017, SK M&Service decided to acquire SK Planet’s BENEPIA business (including agency service for the Flexible Benefit Plan and related tangible and intangible assets, goodwill, systems, etc.) for Won 7.5 billion on July 1, 2017.
[Life & Security Holdings]
(1)Spin-off and merger of certain businesses of ADT CAPS
On May 18, 2018, in order to seek a more efficient corporate structure through reorganization, Life & Security Holdings spun off ADT CAPS’ holding company business (i.e., the business of controlling its subsidiaries CAPSTEC Co. Ltd. and ADT SECURITY Co., Ltd. through the ownership of shares of these subsidiaries) from ADT CAPS and merged it with and into Life & Security Holdings, with Life & Security Holdings and ADT CAPS surviving these transactions.
[ADT CAPS]
(1) Merger of NSOK
On October 8, 2018, ADT CAPS merged NSOK, which operated an unmanned security business, with and into itself to seek new sources of growth, taking into account the growth potential of the physical security market.
[Eleven Street]
(1) Establishment of Eleven Street Co., Ltd. (“Eleven Street”)
On July 31, 2018, the board of directors of SK Planet resolved to spin off its 11st business division (including Scinic, Gifticon and 11Pay) into a newly established company, Eleven Street, effective as of September 1, 2018. In thespin-off, newly issued shares of thespun-off company were allocated in proportion to the equity interest of the shareholders as of the date of such allocation, at a ratio of 0.14344419 newly issued share for 1 share of SK Planet (8,383,931 common shares).
(2) Capital increase of Eleven Street
Pursuant to the resolution of the board of directors on September 7, 2018, Eleven Street issued new shares through a third-party allotment in order to increase its capital, allocating all such new shares to Nile Holdings Co., Ltd. The payment date was September 28, 2018. After the capital increase, SK Telecom holds a 80.26% interest in Eleven Street. See “Report on Decision on Capital Increase of Eleven Street Co., Ltd.” filed by the Company on September 7, 2018 for more information.
(3) Acquisition of shares of Hello Nature Co., Ltd. (“Hello Nature”)
On October 10, 2018, Eleven Street acquired 281,908 shares of Hello Nature, a fresh food delivery service provider, from SK Planet for Won 29.9 billion. As a result of this acquisition, Eleven Street owns a 49.90% interest in Hello Nature.
(4) Acquisition of shares of KOREACENTER Co., Ltd. (“KOREACENTER”)
Pursuant to the resolution of the board of directors on December 26, 2018, Eleven Street acquired 578,521 shares owned by the shareholders of KOREACENTER (Gi Rok Kim and three other individuals) and 578,521 newly issued shares of KOREACENTER, for a total consideration of Won 27.5 billion, in order to form a strategic alliance and promote its commerce services and global business.
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(5) Share repurchase
Pursuant to the resolution at its general shareholders’ meeting held on March 26, 2019 approving a share repurchase and the resolution of its board of directors held on April 26, 2019 approving the terms of such repurchase, Eleven Street repurchased 158,429 units of its own shares from SK Planet for Won 42.5 billion and 203 units of its own shares from certain other shareholders (Young-hoon Jeon and four others) for Won 50 million, effective as of August 30, 2019, in order to enhance the value of its shares. As a result of this repurchase, Eleven Street owns 1.55% of its total shares issued as treasury shares.
[SK Infosec]
(1) Merger of Bizen Co., Ltd. (“Bizen”)
Pursuant to a resolution of its board of directors on November 28, 2014, SK Infosec decided to merge Bizen with and into itself, with SK Infosec as the surviving entity, effective as of January 20, 2015, in order to strengthen its competitiveness through the creation of business synergies. The merger was completed based on a merger ratio of 1:0.0797984.
(2) Comprehensive exchange of shares
On October 25, 2018, the board of directors of SK Infosec resolved to enter into a share exchange agreement with SK Telecom pursuant to which the shareholders of record of SK Infosec would be allotted 0.00997678 treasury share of SK Telecom in exchange for one common share of SK Infosec on December 27, 2018, after which SK Infosec would become a wholly-owned subsidiary of SK Telecom. The share exchange agreement was executed on November 26, 2018 and the comprehensive share exchange was completed on December 27, 2018.
3. Total Number of Shares
A. | Total Number of Shares |
(As of September 30, 2019) | (Unit: in shares) | |||||||||||||||
Classification | Share type | Remarks | ||||||||||||||
Common shares | Preferred shares | Total | ||||||||||||||
I. Total number of authorized shares | 220,000,000 | — | 220,000,000 | — | ||||||||||||
II. Total number of shares issued to date | 89,278,946 | — | 89,278,946 | — | ||||||||||||
III. Total number of shares retired to date | 8,533,235 | — | 8,533,235 | — | ||||||||||||
a. reduction of capital | — | — | — | — | ||||||||||||
b. retirement with profit | 8,533,235 | — | 8,533,235 | — | ||||||||||||
c. redemption of redeemable shares | — | — | — | — | ||||||||||||
d. others | — | — | — | — | ||||||||||||
IV. Total number of shares(II-III) | 80,745,711 | — | 80,745,711 | — | ||||||||||||
V. Number of treasury shares | 8,875,883 | — | 8,875,883 | — | ||||||||||||
VI. Number of shares outstanding(IV-V) | 71,869,828 | — | 71,869,828 | — |
* | On November 5, 2019, the Company sold 1,266,620 treasury shares to Kakao pursuant to Article 342 of the Korean Commercial Code in order to strengthen collaboration with Kakao through a strategic alliance. As of November 14, 2019, the Company holds 7,609,263 treasury shares (9.42% of total shares issued). See the report on “Results of Disposal of Treasury Shares” filed by the Company on November 5, 2019 for more information. |
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B. | Treasury Shares |
(1) | Acquisitions and dispositions of treasury shares |
(As of September 30, 2019) | (Unit: in shares) |
Acquisition methods | Type of shares | At the beginning of period | Changes | At the end of period | ||||||||||||||||||||||
Acquired (+) | Disposed (-) | Retired (-) | ||||||||||||||||||||||||
Acquisition pursuant to the Financial Investment Services and Capital Markets Act of Korea (“FSCMA”) | Direct acquisition | Direct acquisition from market | Common shares | 8,875,883 | — | — | 8,875,883 | — | ||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Direct over- the-counter | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Tender offer | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Sub-total | Common shares | 8,875,883 | — | — | 8,875,883 | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Acquisition through trust and other agreements | Held by trustee | Common shares | — | — | — | — | — | |||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Held in actual stock | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Sub-total | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Other acquisition | Common shares | — | — | — | — | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||||||
Total | Common shares | 8,875,883 | — | — | 8,875,883 | — | ||||||||||||||||||||
Preferred shares | — | — | — | — | — |
* | On November 5, 2019, the Company sold 1,266,620 treasury shares to Kakao pursuant to Article 342 of the Korean Commercial Code in order to strengthen collaboration with Kakao through a strategic alliance. As of November 14, 2019, the Company holds 7,609,263 treasury shares (9.42% of total shares issued). See the report on “Results of Disposal of Treasury Shares” filed by the Company on November 5, 2019 for more information. |
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4. Status of Voting Rights
(As of September 30, 2019) | (Unit: in shares) |
Classification | Number of shares | Remarks | ||||||||
Total shares (A) | Common share | 80,745,711 | — | |||||||
Preferred share | — | — | ||||||||
Number of shares without voting rights (B) | Common share | 8,875,883 | | Treasury shares | | |||||
Preferred share | — | — | ||||||||
Shares without voting rights pursuant to the Company’s articles of incorporation (the “Articles of Incorporation”) (C) | Common share | — | — | |||||||
Preferred share | — | — | ||||||||
Shares with restricted voting rights pursuant to Korean law (D) | Common share | — | — | |||||||
Preferred share | — | — | ||||||||
Shares with reestablished voting rights (E) | Common share | — | — | |||||||
Preferred share | — | — | ||||||||
The number of shares with exercisable voting right s (F = A - B - C - | Common share | 71,869,828 | — | |||||||
Preferred share | — | — |
5. Dividends and Others
A. | Dividends |
(1) | Distribution of cash dividends was approved during the 32nd General Meeting of Shareholders held on March 18, 2016. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
(2) | Distribution of interim dividends of Won 1,000 was approved during the 393rd Board of Directors’ Meeting on July 28, 2016. |
(3) | Distribution of cash dividends was approved during the 33rd General Meeting of Shareholders held on March 24, 2017. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
(4) | Distribution of interim dividends of Won 1,000 was approved during the 404th Board of Directors’ Meeting on July 28, 2017. |
(5) | Distribution of cash dividends was approved during the 34th General Meeting of Shareholders held on March 21, 2018. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
(6) | Distribution of interim dividends of Won 1,000 was approved during the 416th Board of Directors’ Meeting on July 26, 2018. |
(7) | Distribution of cash dividends was approved during the 35th General Meeting of Shareholders held on March 26, 2019. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
(8) | Distribution of interim dividends of Won 1,000 was approved during the 426th Board of Directors’ Meeting on July 25, 2019. |
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B. | Dividends for the Last Three Fiscal Years |
(Unit: in millions of Won, except per share data and percentages) | ||||||||||||||||
Classification | As of and for the nine months ended September 30, 2019 | As of and for the year ended December 31, 2018 | As of and for the year ended December 31, 2017 | |||||||||||||
Par value per share (Won) |
| 500 | 500 | 500 | ||||||||||||
(Consolidated) Net income |
| 907,112 | 3,127,887 | 2,599,829 | ||||||||||||
Net income per share (Won) |
| 11,234 | 44,066 | 36,582 | ||||||||||||
Total cash dividend |
| 71,870 | 717,438 | 706,091 | ||||||||||||
Total stock dividends |
| — | — | — | ||||||||||||
(Consolidated) Percentage of cash dividend to available income (%) |
| 7.9 | 22.9 | 27.2 | ||||||||||||
Cash dividend yield ratio (%) | — | 0.4 | 3.7 | 3.6 | ||||||||||||
— | — | — | — | |||||||||||||
Stock dividend yield ratio (%) | — | — | — | — | ||||||||||||
— | — | — | — | |||||||||||||
Cash dividend per share (Won) | — | 1,000 | 10,000 | 10,000 | ||||||||||||
— | — | — | — | |||||||||||||
Stock dividend per share (share) | — | — | — | — | ||||||||||||
— | — | — | — |
* | Net income per share means basic net income per share. The cash dividend per share amounts include the respective interim cash dividend per share amounts. |
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II. | BUSINESS |
1. Business Overview
Each company in the consolidated entity is a separate legal entity providing independent services and products. The business is primarily separated into (1) the wireless business consisting of cellular voice, wireless data and wireless Internet services, (2) the fixed-line business consisting of fixed-line telephone, high speed Internet, data and network lease services, among others, (3) commerce business, and (4) other businesses consisting of security services, platform services and Internet portal services, among others.
Set forth below is a summary business description of material consolidated subsidiaries.
Classification | Company name | Description of business | ||
Wireless | SK Telecom Co., Ltd. | Wireless voice and data telecommunications services via digital wireless networks | ||
PS&Marketing Co., Ltd. | Sale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels | |||
SK ons Co., Ltd. | Maintenance of switching stations | |||
Service Ace Co., Ltd | Management and operation of customer centers | |||
Fixed-line | SK Broadband Co., Ltd. | High-speed Internet, TV, telephone, commercial data and other fixed-line services and management of the transmission system for online digital contents Various media-related services, such as channel management, includingvideo-on-demand (“VOD”), and mobile IPTV services | ||
SK Telink Co., Ltd. | International wireless direct-dial “00700” services, voice services using Internet protocol and Mobile Virtual Network Operator (“MVNO”) business | |||
Home & Service Co., Ltd. | System maintenance of high-speed Internet, IPTV and fixed-line services | |||
Commerce | Eleven Street Co., Ltd. | E-commerce and Internet-related businesses | ||
Other business | SK Planet Co., Ltd. | Information telecommunications business and development and supply of software | ||
ADT CAPS Co., Ltd. | Unmanned machine-based security and manned security services | |||
SK Infosec Co., Ltd. | Comprehensive information protection services and integrated computer system consulting and implementation services | |||
Onestore Co., Ltd. | Operate app store | |||
SK Communications Co., Ltd. | Integrated portal services through NATE and instant messaging services throughNATE-ON | |||
Dreamus Company (formerly known as Iriver Ltd.) | Audio and video device manufacturing | |||
SK M&Service Co., Ltd. | System software development, distribution and technical support services and other online information services | |||
Life & Security Holdings Co., Ltd. | Holding company | |||
K-net Culture and Contents Venture Fund | Start-up investment support | |||
SKP America LLC | Sourcing and provision of digital contents | |||
Atlas Investment | Investments |
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[Wireless Business]
A. | Industry Characteristics |
The telecommunications services market can be categorized into telecommunications services (such as fixed-line, wireless, leased line and value-added services) and broadcasting and telecommunications convergence services. Pursuant to the Telecommunications Business Act, the telecommunications services market can be further classified into basic telecommunications (fixed-line and wireless telecommunications), special category telecommunications (resale of telecommunications equipment, facilities and services) and value-added telecommunications (Internet connection and management, media contents and others). The size of the domestic telecommunications services market is determined based on various factors specific to Korea, including size of population that uses telecommunication services and telecommunications expenditures per capita. While it is possible for Korean telecommunication service providers to provide services abroad through acquisitions or otherwise, foreign telecommunication services markets have their own characteristics depending, among others, on the regulatory environment and demand for telecommunication services.
The Korean mobile communication market is considered to have reached its maturation stage with more than a 100% penetration rate. However, the Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology and the development of highly advancedLTE-A, LTE and 3G smartphones which enable the provision of convergence services for multimedia contents, mobile commerce, telematics, new media and other related services. In addition, through the commercialization of LTE network in July 2011 andLTE-A network in June 2013, B2B businesses, such as the corporate “connected workforce” business which can directly contribute to an enhancement in productivity, are expected to grow rapidly.
In the first half of 2014, widebandLTE-A service was commercialized and on December 29, 2014,tri-bandLTE-A service with a maximum speed of 300 Mbps was also commercialized. Since June 2017, through the commercialization of 5band CA technology, which is considered the final stage of LTE development, the Company has provided 4.5G service at the speed of 700Mbps to 900Mbps. Since early 2018, the Company was the first to start providing LTE services with a speed of up to 1 Gbps. Such achievements were the building blocks towards the Company’s LTE penetration exceeding 80% as of December 31, 2018.
The Company began its first 5G transmission in December 2018, signaling the beginning of the 5G era. Following the initial operation of“5G-AI Machine Vision” for its first 5G customer, the Company launched the world’s first 5G subscription services in April 2019. The Company has 1.54 million 5G customers as of September 30, 2019, and expects to reach 2 million 5G customers by the end of 2019. The Company has determined that 5G services would draw the highest level of interest from, and have the greatest impact on, customer experiences relating to media, augmented reality (“AR”) / virtual reality (“VR”) and games, and is launching services related to these areas. In the future, the Company will aim to lead the 5G era with differentiated content in various areas such as sports and entertainment.
B. | Growth Potential |
(Unit: in 1,000 persons)
Classification | As of September 30, | As of December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||||
Number of subscribers | SK Telecom | 28,142 | 27,382 | 26,753 | ||||||||||
Others (KT, LGU+) | 31,135 | 29,989 | 28,375 | |||||||||||
MVNO | 7,956 | 7,989 | 7,523 | |||||||||||
Total | 67,233 | 65,360 | 62,651 |
* | Source: Wireless subscriber data from the Ministry of Science and ICT (“MSIT”) as of September 30, 2019. |
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C. | Domestic and Overseas Market Conditions |
The Korean mobile communication market includes the entire population of Korea with mobile communication service needs, and almost every Korean is considered a potential user. Sales revenue related to data services has been growing due to the increasing popularity of smartphones and high-speed wireless networks. There is also a growing importance to the B2B segment, which creates added value by selling and developing various solutions. The telecommunications industry is a regulated industry requiring license and approval from the MSIT.
In the wireless business, industry players compete on the basis of the following three main competitive elements:
(i) | brand competitiveness, which refers to the overall sense of recognition and loyalty experienced by customers with respect to services and values provided by a company, including the images created by a company’s comprehensive activities and communications on top of the actual services rendered; |
(ii) | product and service competitiveness, which refers to the fundamental criteria for wireless telecommunications services, including voice quality, service coverage, broad ranges of rate plans, diversified mobile Internet services, price and quality of devices and customer service quality, as well as the ability to develop new services that meet customer needs in a market environment defined by convergence; and |
(iii) | sales competitiveness, which refers to novel and diversified marketing methods and the strength of the distribution network. |
Set forth below is the historical market share of the Company.
(Unit: in percentages)
Classification | As of September 30, | As of December 31, | ||||||||||||||
2019 | 2018 | 2017 | 2016 | |||||||||||||
Mobile communication services | 46.5 | 47.3 | 48.2 | 49.1 |
* | Source: Wireless subscriber data from the MSIT as of September 30, 2019. |
D. | Business Overview and Competitive Strengths |
The Company is seeking to transform itself from a telecommunications service provider into a comprehensive ICT service provider. It has continued to innovate the scope of its services and achieved strong growth in subscribers amid fierce competition and rate cuts.
As a result of positive customer responses to a series of customer value innovation programs that the Company pursued in 2018, such asno-contract plans, safe roaming and the T Plan, as well as its position as the top player in the 5G services market in terms of number of subscribers, the Company achieved a net increase of approximately 9,000 wireless subscribers in the third quarter of 2019. The churn rate remained relatively stable at a record low of 1.0% (excluding MVNO subscribers). In the third quarter of 2019, the Company recorded revenue of Won 4,561.2 billion and an operating profit of Won 302.1 billion on a consolidated basis, and revenue of Won 2,911.5 billion and an operating profit of Won 252.8 billion on a separate basis.
In the telecommunications technology domain, following the launch of commercial LTE services in July 2011, the Company became the first telecommunications service provider in the world to launch commercial widebandLTE-A services in June 2014. The Company launchedtri-bandLTE-A services in December 2014 and 5band 4.5G services in June 2017. In the first quarter of 2018, the Company commenced providing LTE services of up to 1 Gbps by utilizing five-band carrier aggregation technology and 4T4R technology. By launching various high quality services utilizing theLTE-A and wideband LTE networks such as group video conference call services and full high definition mobile IPTV streaming services, the Company has innovated its customers’ data usage experience. In June 2018, the Company secured frequency bandwidths that are optimal for the commercialization of 5G services at a reasonable bid price. In the fourth quarter of 2018, the Company began to build its 5G networks, focusing on Seoul and other metropolitan areas. The Company began its first 5G transmission in December 2018 and is focusing on establishing 5G networks with enhanced stability and security through the application of quantum cryptography communication and AI networks. In April 2019, the Company launched the world’s first 5G subscription services and is leading the 5G era by providing differentiated content in areas including media, AR/VR and games.
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SK Telink, a consolidated subsidiary of the Company, expanded its operations to the MVNO business based on its technical expertise andknow-how obtained in its international telecommunications business and launched its MVNO service, ‘SK 7Mobile,’ which is offered at reasonable rates and provides excellent quality. SK Telink is increasing its efforts to developlow-cost distribution channels and create niche markets through targeted marketing towards customers including foreign workers, middle-aged adults and students. An MVNO leases the networks of an MNO and provides wireless telecommunication services under its own brand and fee structure, without owning telecommunication networks or frequencies.
SK ons, a subsidiary of the Company responsible for the operation of the Company’s base stations and related transmission and power facilities, offers quality fixed-line and wireless network services to customers, including mobile office products to business customers. Network quality is a core competitive factor for not only the traditional consumer market but also for the expanding B2B market, and its importance will only increase in the 5G network era.
PS&Marketing, a subsidiary of the Company, provides a sales platform for products of the Company and SK Broadband including fixed-line and wireless telecommunication products that address customers’ needs for various convergence products. PS&Marketing provides differentiated service to clients through the establishment of new sales channels and product development.
[Fixed-line Business]
A. | Industry Characteristics |
The Korean fixed-line services industry is marked by a high level of market concentration, as the government is highly selective in granting telecommunications business licenses. The competitive landscape of the fixed-line and wireless services markets is dominated by its three leading operators, the Company (including SK Broadband), KT and LG U+. Growing competition within the industry has promoted rapid technological evolution, including the convergence of fixed-line and wireless services, as well as broadcasting and telecommunications. In general, the fixed-line and wireless services markets have been characterized by relatively high profitability, cash flows and financial stability.
The high-speed Internet segment operates in a highly mature market. While the number of new subscribers has been decreasing, the segment has shown growth in specialized markets such asone-person households and SOHO (Small Office Home Office), as well as continued growth centered around the premium Giga-Internet services. In the case of IPTV services, the conversion rate to digital television in the overall paid broadcasting market has been increasing, and the proportion of IPTV subscribers among high-speed Internet users has been expanding. Although the total number of new subscribers in the segment has been decreasing, the segment is experiencing rapid growth in the consumption of paid contents due to changes in customer viewing patterns and the diversification of contents, and the platform business such as media advertising also continues to expand. In order to satisfy the diversifying needs of customers and the trend of combining or fusing services, industry players are providing differentiated contents and incorporating AI and big data technologies, resulting in increased competition in the industry. Such competition will present new growth opportunities in the home platform area in connection with the fourth industrial revolution in the future. For business customers, the Company is introducing new technologies and strengthening its competitiveness to secure a stable source of revenue, while expanding its efforts to secure competitiveness in new growth areas such as platform and solution businesses.
B. | Growth Potential |
(Unit: in 1,000 persons)
Classification | As of September 30, | As of December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||||
Fixed-line Subscribers | High-speed Internet | 21,764 | 21,286 | 20,989 | ||||||||||
Fixed-line telephone | 13,783 | 14,334 | 15,039 | |||||||||||
IPTV (real-time) | 15,391 | 14,717 | 13,314 |
* | Source: MSIT website. |
* | The number of IPTV subscribers is based on the relevant report released by the MSIT on May 9, 2019 and the number of subscribers as of September 30, 2019 was calculated based on the average number of subscribers in the last six months of 2018. |
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C. | Cyclical Nature and Seasonality |
High-speed Internet, fixed-line telephone and IPTV services are mature markets that are comparatively less sensitive to cyclical economic changes as such services have become more of a necessity and the market has matured. The telecommunications services market overall is not expected to be particularly affected by economic downturns due to the low income elasticity of demand for telecommunication services.
D. | Domestic and Overseas Market Conditions |
Set forth below is the historical market share of the Company.
(Unit: in percentages)
Classification | As of September 30, | As of December 31, | ||||||||||
2019 | 2018 | 2017 | ||||||||||
High-speed Internet (including resales) | 26.1 | 25.4 | 24.9 | |||||||||
Fixed-line telephone (including Voice over Internet Protocol (“VoIP”) | 16.7 | 16.8 | 16.9 | |||||||||
IPTV | 30.2 | 30.3 | 30.6 |
* | Source: MSIT website. |
* | With respect to Internet telephone, the market share was calculated based on market shares among the Company, KT and LG U+ and is based on the number of IP phone subscribers. |
* | The market share of IPTV subscribers is based on the relevant report released by the MSIT on May 9, 2019 and the market share as of September 30, 2019 was calculated based on the average number of subscribers in the last six months of 2018. |
In each of its principal business areas, SK Broadband principally competes on the basis of price, service quality and speed. In the IPTV business, the ability to offer complex services and differentiated contents are becoming increasingly important. General telecommunications businesses operate in a licensed industry with a high barrier of entry, which is dominated by SK Broadband, KT and LG U+.
E. | Business Overview and Competitive Strengths |
For the third quarter of 2019, SK Broadband recorded Won 863.8 billion in revenue, Won 36.6 billion in operating profit and Won 35.0 billion in profit for the period on a consolidated basis (including discontinued operations). The overall increase in revenue was primarily driven by a record-high quarterly revenue from paid contents of its IPTV services. The number of subscribers to each of its high-speed Internet, residential fixed-line telephones, VoIP services and IPTV services was 5.57 million, 2.15 million, 1.61 million and 5.08 million, respectively (resulting in the total number of telephone subscribers being 3.76 million subscribers).
In the case of high-speed Internet, quarterly revenue increased marginally compared to the previous quarter as a result of increases in new subscribers and Giga Internet subscribers, whereas the average revenue per user decreased compared to the previous quarter due to certain promotional events. In the case of Giga Internet, SK Broadband has continued to increase the proportion of subscribers of premium services to approximately 37%, thereby continuing to enhance the composition of its customers. SK Broadband will continue its efforts to improve customer value through promoting the growth of the Giga Internet subscriber base and expand the marketing capabilities of distribution channels through innovations in the distribution structure.
SK Broadband’s IPTV service business continued its steady growth, with revenue from paid contents in the third quarter of 2019 increasing by approximately 18% compared to the third quarter of 2018, thereby achieving its highest quarterly revenue to date. SK Broadband has laid the foundation for its transformation into a lifestyle platform with the launch of new forms of products and services, such as B tv PICK and Bt Beer, and has strived to increase customer loyalty by holding various customer appreciation events under the theme of “Five Million Summers” to celebrate reaching 5 million B tv subscribers. In the future, SK Broadband will seek to grow into a customer-oriented business by continuing to provide differentiated customer value through offerings and product recommendations that are tailored to various customer needs.
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In the case of its corporate business, revenue in the third quarter of 2019 decreased compared to the previous quarter as a result ofone-off events during the previous quarter such as the entry into large-customer contracts andone-time sales from internet data centers, but such decrease in revenue was offset by increased sales in exclusive fixed-line services. The corporate business will improve its competitiveness with enhanced services based on the development of new technologies andcontinue the growth of its core and growth businesses by promoting entry into new markets. In addition, the corporate business will continue its expansion in the ICT sector, such as CDN and converged security, in order to secure a foundation for itsmid- to long-term growth.
SK Telink, a provider of international telecommunications service, has been able to establish itself as a market leader as a result of its affordable pricing, proactive marketing and the quality of its services. It launched a mobile phone-based international calling service under the brand name “00700” in 1998, creating a new niche market within the long-distance telephony market that was otherwise dominated by existing service providers. In 2003, SK Telink was designated a common carrier for international calling services, which allowed the Company to expand its international calling services to fixed-line international calling services. In 2005, SK Telink obtained a license to operate VoIP services and local calling value-added services to develop into a versatile fixed-line telecommunications service provider. SK Telink plans to strategically target the convergence of wireless and fixed-line telecommunications and strengthen its existing business as a comprehensive ICT service provider, including international satellite calling services (Internet, wireless and fixed-line calling services on ships, aircraft and in polar regions), and video conference call services while aiming to satisfy the diverse needs of customers by providing quality solutions at reasonable prices.
[Commerce Business]
A. | Industry Characteristics |
Electronic commerce, ore-commerce, refers to transactions of goods and services that are processed electronically by information processing systems, such as personal computers, and can be classified into “online order” and “online order brokerage” businesses. The mail order brokerage business refers to the act of intermediating a transaction between a seller and a buyer by an online shopping mall, and the online order business refers to direct sales of goods and services by an online shopping mall. Online shopping malls can be categorized, based on the range of products that they handle, into special malls that handle products limited to specific categories and general malls that handle products across multiple categories. The Koreane-commerce market started to grow in the early 2000s with the spread of the Internet, and it is now going through a second period of growth in the form of mobile commerce as a result of the removal of time and space constraints on shopping following the proliferation of smartphones beginning in 2010, the simplification and improved convenience of payment services, the expansion of fast delivery, the combination of offline and online shopping experiences (omni-channel and O2O services) and advancements in personalization and recommendation services based on AI. 11st, which is an online order brokerage business, is known as an “open market business” within thee-commerce market. As a result of leading the trend of mobile commerce and pursuing innovative customer experience since the early stages of its business, 11st has grown into a major player in thee-commerce market.
B. | Growth Potential |
As of December 31, 2018, the size of the Koreane-commerce market was Won 112 trillion, accounting for approximately 25% of the total online and offline distribution market and demonstrating rapid growth at an annual average growth rate of over 20% for the past three years. In addition, mobile transactions accounted for 62% of the totale-commerce transaction value in 2018, after surpassing 50% for the first time in 2016. Considering the current acceleration in the shift of products traditionally sold offline, such as food products, food delivery services, apparels and household products, to the mobilee-commerce platform, mobilee-commerce is expected to continue its growth in the future.
Year | 2016 | 2017 | 2018 | |||
E-commerce transaction value | Won 66 trillion | Won 94 trillion | Won 114 trillion | |||
Annual growth rate | 21.6% | 43.6% | 20.7% |
* | Source: Statistics Korea, “Online Shopping Trends.” |
C. | Cyclical Nature and Seasonality |
While the commerce industry is inherently affected by fluctuations in the economy to a certain extent, their effect on thee-commerce market has been limited due to its ongoing rapid growth.
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D. | Domestic and Overseas Market Conditions |
The mobile-centered online commerce market is expected to grow steadily due to the further growth potential of the Internet shopping population, the development of online business models by offline commerce operators and the continued rapid growth of mobile commerce. New business models continue to emerge and proliferate as diverse lifestyle services that go beyond commodities expand into new markets in the area of commerce.
E. | Business Overview and Competitive Strengths |
Focusing on the 11st Marketplace, the Company plans to continue expanding the commerce ecosystem of 11st, and ultimately enhance its corporate value by providing diverse and innovative shopping experiences based on technology and strengthening customer benefits using synergies with other ICT businesses of the Company. In particular, the Company is focusing on increasing not only revenue and transaction value but also profitability of 11st, as evidenced by recording profits for two consecutive quarters in 2019. 11st has become a leader in the Koreane-commerce market through steady growth since its launch in 2008, despite its late entry into the online commerce market that was dominated by two players, Gmarket and Auction. Furthermore, 11st has established itself as a market leader and top player in the Korean mobile commerce market, following its successful entry into and rapid growth in this market.
[Other Businesses]
A. | Industry Characteristics |
(1) | Security business |
The security systems service business provides security services to governments, companies and individuals with the purpose of protecting tangible and intangible assets and human resources. Depending on the risk prevention method used, the security business can be classified into machine-based security, security system integration (“SI”) and manned security. Machine-based security operates by receiving information that is detected and transmitted by various sensors and cameras installed at the target facilities through control facility equipment and taking prompt and appropriate action, such as dispatching an agent or contacting the police or the fire department, if an abnormality is detected. Security SI is a service that integrates installation, operation, maintenance and repair of various equipment and systems by analyzing the appropriate security system for customer facilities, such as buildings, factories and schools. Manned security services deploy security personnel to areas subject to security, who performon-site security services such as patrols and access control of buildings and facilities. The Company’s primary business in the security industry is its unmanned security service, and its business areas consist of the following:
Classification | Product | |
Machine-based security | CAPS service (unmanned security service), access control, view guard (CCTV), attendance management, drinking water management | |
Security SI and maintenance and repair | Access control (entry and parking), CCTV (recording, camera, monitor, network equipment), other security systems | |
Integrated security services (machine-based security + manned security) | Machine-based security services, manned security services (security, cleaning, concierge, etc.) |
(2) | Platform business |
As the number of smartphones distributed in Korea exceeds 40 million, the growth in various mobile devices has spurred the rise of service providers with a strong platform business as leaders in the ICT market. It is becoming increasingly important to enhance competitiveness by building a big data-based platform to handle the increase in both the quantity and quality of data transmission.
A platform business acts as an intermediary by promoting interactions among various customer groups, thereby generating new values. It is important for a platform business to continually attract subscribers and users and to create an ecosystem with certainlock-in effects. A platform can exist in various forms, including as a technological standard (e.g., iOS, Android OS), a subscriber-based service platform (e.g., Facebook, Twitter) or a marketplace (e.g., Amazon, Onestore). Platform businesses are evolving and expanding globally.
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A platform business has strong growth potential due to its connectivity with related services and ease of global expansion. Apple became a world-leading smartphone producer based on its innovative design and the competitive strength of its App Store platform. Google has created a new ecosystem of long-tail advertising by attracting millions of third parties to its advertising platform, as well as showing strong growth in mobile markets with its competitive platform based on Android OS. It is becoming increasingly important to enhance competitiveness through a database that can register and analyze purchase patterns of customers across all areas and a platform with large data capacity with which to utilize this database and provide differentiated services to customers.
B. | Growth Potential |
(1) | Security business |
Due to a growing number of single-person households and an increasing awareness of the need for security systems as a result of an increase in crime levels, the security industry has steadily grown in recent years. New markets are being formed in the physical security industry as a result of integrating cutting-edge ICT, such as big data, IoT and AI, andbio-recognition technologies. The domestic market size of the physical security industry expanded from Won 3.6 trillion in 2012 to Won 5.5 trillion in 2017 (representing an average annual growth rate of 8.7%), and is expected to grow to Won 7.9 trillion in 2022 (representing an average annual growth rate of 7.5%).
(2) | Platform business |
The scope and value generated by the platform business, including application and content marketplaces andN-screen services, continue to increase as smartphones and tablet computers become more popular and the bandwidth and speed of network infrastructure improve. As the wireless network has evolved to LTE, business opportunities for the platform business exist, including multimedia streaming,N-screen service based on cloud technology and high-definition location-based services. Since the platform business realizes profit by connecting with advertisements or commerce sites after building a critical mass of subscribers and traffic, the recent growth in the advertising and commerce markets is expected to present an opportunity for platform businesses. The importance of building a big data-based platform that is connected to various digital contents and commerce is expected to increase in the future.
C. | Cyclical Nature and Seasonality |
(1) | Security business |
The security systems business seeks to satisfy the basic need for safety and is less sensitive to economic fluctuations compared to other industries. Although the slowdown in the Korean economy and competition based on lower-cost alternatives has had a negative impact on industry growth, sustained growth is nevertheless expected due to the recent expansion of the industry into converged security markets with the integration of ICT.
(2) | Platform business |
With the mobile communication market reaching maturity, related content/service sales are showing steady growth that is unaffected by economic fluctuations. Although sales of content and commerce products may partially be affected by economic fluctuations, the overall impact of economic fluctuations is not considered to be material as the platform market is growing rapidly due to the advancement of wireless networks such as LTE, the rapid proliferation of mobile devices and smartphones and the fast growth of online and mobile commerce. The platform business is not affected by seasonality.
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D. | Domestic and Overseas Market Conditions |
(1) | Security business |
The security industry is experiencing a rapid increase in demand for CCTV, access control and other security systems due to threats including crime, natural disasters and calamities and terrorism. With increased consumer interest in safety, demand for security system services is expected to continue to grow. To date, the Korean security market is characterized by an oligopoly dominated by three leading companies due to the high barriers to entry as a result of high initial investment costs of building large-scale network systems and the effects of brand loyalty. The traditional security industry, characterized by price competition aimed at increasing market share, is expanding into a converged security market with the integration of ICT. In addition, the global converged security market integrating ICT has recently been experiencing rapid growth and increased competition due to the entry of global information technology companies. As a result, the global AI security industry, which had a market size of US$3.9 billion in 2018, is expected to grow tenfold by 2025.
(2) | Platform business |
The growth of application marketplaces, which started with Apple’s App Store, provides the platform business with new opportunities for revenue generation. The competitive paradigm is shifting from a competition among platform operators toward a competition among eco-systems that include application developers as well as platform operators.
E. | Business Overview and Competitive Strengths |
(1) | Security business |
Competition within the Korean security systems industry is intensifying as the industry is expanding into a converged security market by implementing new ICT such as AI, video security technology, IoT, big data, 5G networks and intelligent video analysis. Despite this competitive environment, in 2019, the Company’s security business (including ADT CAPS and SK Infosec) recorded Won 297.2 billion in revenue as a result of diversifying sales channels and actively pursuing marketing efforts aimed at expanding the home security market. In particular, the Company is securing new sources of growth by launching new services based on synergies with other ICT businesses of the Company, such as the T map parking service launched in June 2019, which provides users with online and offline connected parking services through T map.
In addition, the Company’s AI security service business combined with home IoT is preparing to provide new facility security services such as “total care” services for ensuring the safety of vulnerable groups and management services for large-scale factories utilizing drones.
(2) | Platform business |
OK Cashbag is a point-based loyalty marketing program which has grown to become a globaltop-tier loyalty marketing program since its inception in 1999. Customers have access to increased benefits through accumulation of loyalty reward points and partner companies use OK Cashbag as a marketing resource. As Korea’s largest loyalty mileage program, OK Cashbag maintains a leading position in the industry. The Company is continuing to develop its service in light of market conditions and customers’ needs to enhance its customers’ perception of point value and is reviewing and pursuing various plans to develop OK Cashbag into a service that goes beyond a mileage program that leverages the key competitiveness of OK Cashbag such as its platform and partnership network.
Syrup is a consumer-oriented commerce service with the goal of minimizing its customers’ time and efforts while maximizing the economic benefits by providing information about coupons and events based on time, place and occasion. To achieve this goal, Syrup combines location-based services, such asgeo-fencing, a virtual perimeter technology using a global positioning system (or, GPS) and Bluetooth Low Energy (or, BLE), with big data analysis of consumption patterns. Syrup’s business partners can benefit from cost-effective marketing through Syrup by utilizing statistics and analysis regarding consumers’ frequency of visits, preferred products, and consumption patterns.
T-Map Navigation provides map, local information, real-time traffic information and navigation services.T-Map Navigation is one of the leading location-based service platforms in Korea. By entering the O2O service area with T map Taxi, T map Public Transportation and others, the Company is expanding its mobile platform foundation that connects day to day life. In September 2016, the Company launchedT-Map x NUGU, which provides a new form of intelligent car infotainment service in collaboration with the Company’s AI service, NUGU. The Company has continued to secure subscribers by differentiating its productT-map x NUGU as a unique “AI driving assistant.” The Company has also focused on providing effective “infotainment” platforms to commercial vehicle businesses as well as providing localized content, including region-specific information and advertisements. Recently, in collaboration with ADT CAPS, the Company launched its T map parking service, which provides users with online and offline connected parking services. The Company plans to continue developing theT-Map Navigation platform by initiating open application programming interface-based services, providing services to more diverse types of devices and providing local area-based services.
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Regarding portal services, the Company’s instant messenger service,“Nate-On,” had a market share of 9.5% in the instant messenger market in Korea with 1.7 million net users during the month of September 2019. “Nate,” the Company’s Internet search portal service, realized a page-view market share of 4.5% as of September 30, 2019. (Source: Korean Click, based on fixed-line access)
2. Updates on Major Products and Services
(Unit: in millions of Won and percentages)
Business | Major Companies | Item | Major | Consolidated Sales Amount (ratio) | ||||||
Wireless | SK Telecom Co., Ltd., PS&Marketing Co., Ltd., Network O&S Co., Ltd. | Mobile communication service, wireless data service, ICT service | T, 5GX, baro, T Plan and others | 9,138,780 (68.5%) | ||||||
Fixed-line | SK Broadband Co., Ltd., SK Telink Co., Ltd. | Fixed-line phone, high speed Internet, data and network lease service | B tv, 00700 international call, 7mobile and others | 2,348,546 (17.6%) | ||||||
Commerce | Eleven Street Co., Ltd. | E-commerce | 11st, 11Pay, Gifticon and others | 436,030 (3.3%) | ||||||
Other | SK Planet Co., Ltd., Onestore Co., Ltd., SK Communications Co., Ltd., SK M&Service Co., Ltd., ADT CAPS Co., Ltd. SK Infosec Co., Ltd. | Information telecommunication, electronic finance, advertising, Internet portal service, personnel and system security, information security and others | OK Cashbag, NATE, T&CAPS, B&CAPS and others | 1,409,792 (10.6%) | ||||||
Total | 13,333,148 (100%) |
3. Price Trends for Major Products
[Wireless Business]
As of September 30, 2019, based on the Company’s standard monthly subscription plan, the basic service fee was Won 12,100 and the usage fee was Won 1.98 per second.
[Fixed-line Business]
Price fluctuations in the different services provided by SK Broadband are due to discounts provided for long term contracts, changes in equipment costs and competition between companies.
4. Investment Status
[Wireless Business]
A. | Investment in Progress |
(Unit: in 100 millions of Won)
Business | Classification | Investment period | Subject of investment | Investment effect | Expected investment amount | Amount already invested | Future investment | |||||||||||||||
Network/Common | Upgrade/ New installation | Nine months ended September 30, 2019 | | Network, systems and others | | Capacity increase and quality improvement; systems improvement | | To be determined* | | 15,779 | — | |||||||||||
Total | | To be determined | * | 15,779 | — |
* | During an earnings conference call, the Company announced that its capital expenditures for 2019 will be Won 3 trillion or less. |
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B. | Future Investment Plan |
(Unit: in 100 millions of Won)
Business | Expected investment amount | Expected investment for each year | Investment effect | |||||||||
Asset type | Amount | 2019 | 2020 | 2021 | ||||||||
Network/Common | Network, systems and others | To be determined | To be determined* | To be determined | To be determined | Upgrades to the existing services and expanded provision of network services including 5G | ||||||
Total | To be determined | To be determined* | To be determined | To be determined |
* | During an earnings conference call, the Company announced that its capital expenditures for 2019 will be Won 3 trillion or less. |
[Fixed-line Business]
A. | Investment in Progress |
In 2019, the Company plans to make capital expenditures to expand network coverage, upgrade its media platform and exchange terminals in order to enhance customer value, and does not expect such expenditures to have a material adverse effect on the Company’s financial structure through improvements in investment efficiency.
(Unit: in 100 millions of Won)
Business | Classification | Investment period | Subject of investment | Investment effect | Amount already invested | Future investment | ||||||
High-speed Internet | Upgrade/ New installation | Nine months ended September 30, 2019 | Backbone and subscriber network/ others | Expand subscriber networks and facilities | 1,661 | To be determined | ||||||
Fixed-line telephone | 31 | |||||||||||
IPTV | 1,069 | |||||||||||
Corporate Business | Increase leased-line and integrated information system | 973 | ||||||||||
Backbone network | Additional backbone equipment and lines | 267 | ||||||||||
IT infrastructure | Upgrade IT infrastructure and network management system | 80 | ||||||||||
Others | Increase network equipment and NW security | 305 | ||||||||||
Total | 4,386 |
5. Revenues
(Unit: in millions of Won)
Business | Sales type | Item | For the nine months ended September 30, 2019 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | |||||||||||||
Wireless | Services | Mobile communication | Export | 40,718 | 50,959 | 20,507 | ||||||||||||
Domestic | 9,098,062 | 12,327,938 | 13,241,628 | |||||||||||||||
Subtotal | 9,138,780 | 12,378,897 | | 13, 262,135 |
| |||||||||||||
Fixed-line | Services | Fixed-line, B2B data, high-speed Internet, IPTV | Export | 64,318 | 104,592 | 84,395 | ||||||||||||
Domestic | 2,284,228 | 2,828,006 | 2,639,756 | |||||||||||||||
Subtotal | 2,348,546 | 2,932,598 | 2,724,151 | |||||||||||||||
Commerce | Services | E-commerce | Export | 2,998 | 5,620 | 5,202 | ||||||||||||
Domestic | 433,032 | 612,459 | 1,038,969 | |||||||||||||||
Subtotal | 436,030 | 618,079 | 1,044,171 | |||||||||||||||
Other | Services | Display and search ad., content, security | Export | 67,191 | 56,925 | 36,031 | ||||||||||||
Domestic | 1,342,601 | 887,461 | 453,525 | |||||||||||||||
Subtotal | 1,409,792 | 944,386 | 489,556 | |||||||||||||||
Total | Export | 175,225 | 218,096 | 146,135 | ||||||||||||||
Domestic | 13,157,923 | 16,655,864 | 17,373,878 | |||||||||||||||
Total | 13,333,148 | 16,873,960 | 17,520,013 |
* | Revenues for the years ended December 31, 2017 were recorded based on previously applicable accounting standards ofK-IFRS 1018 andK-IFRS 1039. |
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(Unit: in millions of Won)
For the nine months | Wireless | Fixed | Commerce | Other | Sub total | Internal transaction | After consolidation | |||||||||||||||||||||
Total sales | 10,309,420 | 3,098,020 | 443,263 | 1,649,718 | 15,500,421 | (2,167,273 | ) | 13,333,148 | ||||||||||||||||||||
Internal sales | 1,170,640 | 749,474 | 7,233 | 239,926 | 2,167,273 | (2,167,273 | ) | — | ||||||||||||||||||||
External sales | 9,138,780 | 2,348,546 | 436,030 | 1,409,792 | 13,333,148 | — | 13,333,148 | |||||||||||||||||||||
Depreciation and amortization | 1,986,960 | 559,559 | 23,289 | 213,603 | 2,783,411 | — | 2,783,411 | |||||||||||||||||||||
Operating profit (loss) | 803,410 | 94,803 | 5,069 | 44,210 | 947,492 | — | 947,492 | |||||||||||||||||||||
Finance profit (loss) |
| 225,548 | ||||||||||||||||||||||||||
Gain from investments in associates and joint ventures |
| 479,876 | ||||||||||||||||||||||||||
Othernon-operating profit (loss) |
| 31,404 | ||||||||||||||||||||||||||
Profit before income tax |
| 1,170,416 |
6. Derivative Transactions
A. | Current Swap Contract Applying Cash Flow Risk Hedge Accounting |
Currency and interest rate swap contracts under cash flow hedge accounting as of September 30, 2019 are as follows:
Borrowing | Hedged item | Hedged risk | Contract type | Financial institution | Duration of contract | |||||
Jul. 20, 2007 | Unsecured foreign bonds | Foreign currency risk | Cross currency swap | Morgan Stanley and four other banks | Jul. 20, 2007 – Jul. 20, 2027 | |||||
Mar. 7, 2013 | Floating rate foreign currency denominated bonds | Foreign currency risk and interest rate risk | Cross currency interest rate swap | DBS Bank | Mar. 7, 2013 – Mar. 7, 2020 | |||||
Dec. 16, 2013 | Fixed rate foreign currency denominated loan | Foreign currency risk | Cross currency swap | Deutsche Bank | Dec. 16, 2013 – Apr. 29, 2022 | |||||
Apr. 16, 2018 | Fixed rate foreign currency denominated bonds | Foreign currency risk | Cross currency swap | The Export-Import Bank of Korea and three other banks | Apr. 16, 2018 – Apr. 16, 2023 | |||||
Aug. 13, 2018 | Unsecured foreign bonds | Foreign currency risk | Cross currency swap | Citibank | Aug. 13, 2018 – Aug. 13, 2023 | |||||
Jul. 30, 2014 | Floating rate Korean Won denominated loan | Interest rate risk | Interest rate swap | Korea Development Bank | Nov. 10, 2016 – Jul. 30, 2019 | |||||
Dec. 20, 2016 | Floating rate Korean Won denominated loan | Interest rate risk | Interest rate swap | Korea Development Bank | Dec. 20, 2016 – Dec. 20, 2021 | |||||
Dec. 21, 2017 | Floating rate Korean Won denominated loan | Interest rate risk | Interest rate swap | Korea Development Bank | Dec. 5, 2017 – Dec. 21, 2022 | |||||
Dec. 19, 2018 | Floating rate Korean Won denominated loan | Interest rate risk | Interest rate swap | Credit Agricole CIB | Mar. 19, 2019 – Dec. 14, 2023 |
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B. | Total Return Swap |
The Company has entered into a total return swap relating to Won 270 billion of beneficiary certificates issued by IGIS Privately Placed Real Estate Investment Trust No. 156 and recognized Won 4,120 million and Won 4,640 million ofnon-current derivative financial assets as of September 30, 2019 and December 31, 2018, respectively, in connection therewith.
C. | Treatment of Derivative Instruments on the Balance Sheet |
As of September 30, 2019, fair values of the above derivative instruments were as follows:
(Unit: in millions of Won)
Classification | Hedged item | Fair value | ||||||||||||
Cash flow hedge | Trading purposes | Total | ||||||||||||
Current assets: |
| |||||||||||||
Cross currency interest rate swap | Floating rate foreign currency denominated bonds | 36,897 | — | 36,897 | ||||||||||
Non-current assets: |
| |||||||||||||
Cross currency swap and cross currency interest rate swap | Fixed rate foreign currency denominated loan | 2,333 | — | 2,333 | ||||||||||
Unsecured foreign bonds | 87,748 | — | 87,748 | |||||||||||
Fixed rate foreign currency denominated bonds | 77,656 | — | 77,656 | |||||||||||
Contracts for difference: | Others | 4,120 | — | 4,120 | ||||||||||
Total derivative financial assets |
| 208,754 | ||||||||||||
Non-current liabilities: |
| |||||||||||||
Interest rate swap | Floating rate Korean Won denominated loan | (1,383 | ) | — | (1,383 | ) | ||||||||
Total derivative financial liabilities |
| (1,383 | ) |
7. Major Contracts
[SK Telecom]
(Unit: in millions of Won)
Counterparty | Contract Contents | Contract Date | Contract Amount | Note | ||||
SK Planet | 59.8% equity stake in SK Planet’s Pangyo building | Aug. 30, 2019 | 77,860 | -Real estate purchase |
[SK Broadband]
Due to the nature of the telecommunication service business, SK Broadband has entered into agreements related to the joint usage of telecommunication facilities for interconnection among telecommunication lines conduits and telecommunication service providers. Below are the major contracts of SK Broadband. In addition to the below, SK Broadband has also entered into various real estate rental agreements.
Counterparty | Contract Contents | Contract Period | Note | |||
Telecommunication service providers | Interconnection among telecommunication service providers | — | -Automatically renewed for two years at a time unless specific amendments are requested | |||
KEPCO | Provision of electric facilities | From Nov. 2019 to Nov. 2020 | -Use of electricity poles (entered on Nov. 7, 2014) -Unless special reasons arise, the usage period will be automatically renewed annually |
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Counterparty | Contract Contents | Contract Period | Note | |||
Busan Transportation Corporation | Use of telecommunication line conduits | From Aug. 2019 to Jul. 2020 | -Use of railway telecommunication conduit (Serviced areas to expand) -Absent any request to amend the agreement, usage period will be automatically renewed annually | |||
Seoul Metro | Use of telecommunication line conduits | From Jan. 2018 to Dec. 2020 | -Use of railway telecommunication conduit (Serviced areas to expand) | |||
Seoul Metro | Use of telecommunication line conduits | From May 2016 to Dec. 2020 | -Use of railway telecommunication conduit (Serviced areas to expand) -Usage period was automatically renewed every three years until 2019 -Usage period was renewed for an additional one year until 2020 |
[SK Planet]
(Unit: in millions of Won)
Counterparty | Contract Contents | Contract Date | Contract Amount | Note | ||||
SK Telecom | 59.8% equity stake in SK Planet’s Pangyo building | Aug. 30, 2019 | 77,860 | -Sale to improve the efficiency of asset portfolio |
[SK Communications]
Counterparty | Purpose | Contract Period | Contract Amount | |||
Kakao | Cost-per-click Internet search advertisement | — | Amount determined based on the number of clicks |
* | SK Communications and Kakao have agreed not to publicly disclose the contract period with respect to the contract with Kakao |
8. R&D Investments
Set forth below are the Company’s R&D expenditures.
(Unit: in millions of Won except percentages)
Category | For the nine months ended September 30, 2019 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | Remarks | ||||||||||||||
Raw material | 527 | 760 | 1,261 | — | ||||||||||||||
Labor | 99,857 | 131,792 | 139,845 | — | ||||||||||||||
Depreciation | 122,972 | 155,093 | 144,301 | — | ||||||||||||||
Commissioned service | 37,997 | 78,323 | 76,042 | — | ||||||||||||||
Others | 34,311 | 47,511 | 53,112 | — | ||||||||||||||
Total R&D costs | 295,664 | 413,480 | 414,562 | — | ||||||||||||||
Accounting | Sales and administrative expenses | 295,167 | 387,675 | 395,276 | — | |||||||||||||
Development expenses (Intangible assets) | 497 | 25,805 | 19,285 | — | ||||||||||||||
R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100) | 2.22 | % | 2.45 | % | 2.37 | % | — |
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9. | Other information relating to investment decisions |
A. | Trademark Policies |
The Company manages its corporate brand and other product brands in a comprehensive way to protect and increase their value. The Company operates an intranet system called “Comm.ON” in order to implement consistent communication with consumers across various areas including branding, design, marketing and public relations, and systematically manages the development, registration and licensing of brands through such system.
B. | Business-related Intellectual Property |
[SK Telecom]
As of September 30, 2019, the Company held 4,301 Korean-registered patents and 1,495 foreign-registered patents. The Company holds 731 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “T” representing its brand. The designed alphabet “T” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to constant change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.
[SK Broadband]
As of September 30, 2019, SK Broadband held 368 Korean-registered patents and 150 foreign-registered patents (including those held jointly with other companies). It also holds 296 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “B” representing its brand. The designed alphabet “B” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to continual change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.
[SK Planet]
As of September 30, 2019, SK Planet held 1,487 registered patents, 93 registered design marks, 919 registered trademarks and 4 copyrights (in each case including those held jointly with other companies) in Korea. It also holds various other intellectual property rights in other countries, including 247 U.S.-registered patents, 118 Chinese-registered patents, 81 Japanese-registered patents, 99 E.U.-registered patents (in each case including those held jointly with other companies) and 283 foreign registered trademarks.
[Eleven Street]
As of September 30, 2019, Eleven Street held 84 registered patents, 12 registered design marks, 577 registered trademarks and 5 copyrights (in each case including those held jointly with other companies) in Korea. It also holds various other intellectual property rights in other countries, including 24 U.S.-registered patents (including those held jointly with other companies).
[SK Communications]
As of September 30, 2019, SK Communications held 82 registered patents, 14 registered design rights and 234 registered trademarks in Korea.
C. | Business-related Pollutants and Environmental Protection |
[SK Telecom]
The Company does not directly engage in any manufacturing and therefore does not undertake any industrial processes that emit pollutants into the air or industrial processes in which hazardous materials are used.
[SK Broadband]
SK Broadband does not directly engage in any manufacturing processes that emit environmental pollutants, and more than 99% of its greenhouse gas emissions is indirect emissions from its use of external electricity. SK Broadband was selected as a business subject to allocation of emission permits as part of Korea’s greenhouse gas emissions trading scheme that commenced in 2015, and it actively fulfills its obligations and consistently achieves the targets set by the government. In addition, SK Broadband continues to invest in environment-friendly facilities for its data centers and improve the stability and efficiency of its services.
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III. FINANCIAL INFORMATION
1. | Summary Financial Information (Consolidated and Separate) |
A. | Summary Financial Information (Consolidated) |
Below is the summary consolidated financial information of the Company as of September 30, 2019, December 31, 2018 and December 31, 2017 and for the nine months ended September 30, 2019 and 2018 and the years ended December 31, 2018 and 2017. The Company’s unaudited consolidated financial statements as of September 30, 2019 and December 31, 2018 and for the nine months ended September 30, 2019 and 2018, which are prepared in accordance withK-IFRS, are attached hereto.
(Unit: in millions of Won except number of companies) | ||||||||||||
As of September 30, 2019 | As of December 31, 2018 | As of December 31, 2017 | ||||||||||
Assets | ||||||||||||
Current Assets | 8,086,130 | 7,958,839 | 6,201,799 | |||||||||
• Cash and Cash Equivalents | 1,289,713 | 1,506,699 | 1,457,735 | |||||||||
• Accounts Receivable – Trade, net | 2,218,259 | 2,008,640 | 2,126,007 | |||||||||
• Accounts Receivable – Other, net | 1,018,318 | 937,837 | 1,260,835 | |||||||||
• Others | 3,559,840 | 3,505,663 | 1,357,222 | |||||||||
Non-Current Assets | 35,897,650 | 34,410,272 | 27,226,870 | |||||||||
• Long-Term Investment Securities | 538,412 | 664,726 | 887,007 | |||||||||
• Investments in Associates and Joint Ventures | 13,404,235 | 12,811,771 | 9,538,438 | |||||||||
• Property and Equipment, net | 11,585,057 | 10,718,354 | 10,144,882 | |||||||||
• Intangible Assets, net | 4,906,522 | 5,513,510 | 3,586,965 | |||||||||
• Goodwill | 2,971,656 | 2,938,563 | 1,915,017 | |||||||||
• Others | 2,491,768 | 1,763,348 | 1,154,561 | |||||||||
Total Assets | 43,983,780 | 42,369,111 | 33,428,669 | |||||||||
Liabilities | ||||||||||||
Current Liabilities | 7,367,171 | 6,847,557 | 7,109,123 | |||||||||
Non-Current Liabilities | 13,959,964 | 13,172,304 | 8,290,351 | |||||||||
Total Liabilities | 21,327,135 | 20,019,861 | 15,399,474 | |||||||||
Equity | ||||||||||||
Equity Attributable to Owners of the Parent Company | 22,748,624 | 22,470,822 | 17,842,139 | |||||||||
Share Capital | 44,639 | 44,639 | 44,639 | |||||||||
Capital Surplus (Deficit) and Other Capital Adjustments | 651,201 | 655,084 | 196,281 | |||||||||
Retained Earnings | 22,327,723 | 22,144,541 | 17,835,946 | |||||||||
Reserves | (274,939 | ) | (373,442 | ) | (234,727 | ) | ||||||
Non-controlling Interests | (91,979 | ) | (121,572 | ) | 187,056 | |||||||
Total Equity | 22,656,645 | 22,349,250 | 18,029,195 | |||||||||
Total Liabilities and Equity | 43,983,780 | 42,369,111 | 33,428,669 | |||||||||
Number of Companies Consolidated | 49 | 44 | 39 |
(Unit: in millions of Won except per share data) | ||||||||||||||||
For the nine months ended September 30, 2019 | For the nine months ended September 30, 2018 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | |||||||||||||
Operating Revenue | 13,333,148 | 12,522,253 | 16,873,960 | 17,520,013 | ||||||||||||
Operating Profit | 947,492 | 976,478 | 1,201,760 | 1,536,626 | ||||||||||||
Profit Before Income Tax | 1,170,416 | 3,371,964 | 3,975,966 | 3,403,249 | ||||||||||||
Profit for the Period | 907,112 | 2,657,496 | 3,131,988 | 2,657,595 | ||||||||||||
Profit for the Period Attributable to Owners of the Parent Company | 916,966 | 2,642,986 | 3,127,887 | 2,599,829 | ||||||||||||
Profit for the Period Attributable toNon-controlling Interests | (9,854 | ) | 14,510 | 4,101 | 57,766 | |||||||||||
Basic and Diluted Earnings Per Share (Won) | 12,605 | 37,260 | 44,066 | 36,582 |
* | Financial information as of and for the years ended December 31, 2017 was recorded based on previously applicable accounting standards ofK-IFRS 1018 andK-IFRS 1039. |
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B. | Summary Financial Information (Separate) |
Below is the summary separate financial information of the Company as of September 30, 2019, December 31, 2018 and December 31, 2017 and for the nine months ended September 30, 2019 and 2018 and the years ended December 31, 2018 and 2017. The Company’s unaudited separate financial statements as of September 30, 2019 and December 31, 2018 and for the nine months ended September 30, 2019 and 2018, which are prepared in accordance withK-IFRS, are attached hereto.
(Unit: in millions of Won) | ||||||||||||
As of September 30, 2019 | As of December 31, 2018 | As of December 31, 2017 | ||||||||||
Assets | ||||||||||||
Current Assets | 4,754,598 | 4,679,378 | 3,768,098 | |||||||||
• Cash and Cash Equivalents | 258,133 | 877,823 | 880,583 | |||||||||
• Accounts Receivable – Trade, net | 1,488,382 | 1,354,260 | 1,520,209 | |||||||||
• Accounts Receivable – Other, net | 608,617 | 518,451 | 1,003,509 | |||||||||
• Others | 2,399,466 | 1,928,844 | 363,797 | |||||||||
Non-Current Assets | 25,178,790 | 24,168,645 | 21,789,424 | |||||||||
• Long-Term Investment Securities | 183,718 | 410,672 | 724,603 | |||||||||
• Investments in Subsidiaries and Associates | 10,583,292 | 10,188,914 | 9,152,321 | |||||||||
• Property and Equipment, net | 7,600,622 | 6,943,490 | 6,923,133 | |||||||||
• Intangible Assets, net | 3,516,538 | 4,010,864 | 3,089,545 | |||||||||
• Goodwill | 1,306,236 | 1,306,236 | 1,306,236 | |||||||||
• Others | 1,988,384 | 1,308,469 | 593,586 | |||||||||
Total Assets | 29,933,388 | 28,848,023 | 25,557,522 | |||||||||
Liabilities | ||||||||||||
Current Liabilities | 4,645,267 | 4,178,068 | 4,767,401 | |||||||||
Non-Current Liabilities | 8,172,035 | 7,782,468 | 5,782,730 | |||||||||
Total Liabilities | 12,817,302 | 11,960,536 | 10,550,131 | |||||||||
Equity | ||||||||||||
Share Capital | 44,639 | 44,639 | 44,639 | |||||||||
Capital Surplus and Other Capital Adjustments | 415,552 | 415,324 | 371,895 | |||||||||
Retained Earnings | 16,708,070 | 16,467,789 | 14,512,556 | |||||||||
Reserves | (52,175 | ) | (40,265 | ) | 78,301 | |||||||
Total Equity | 17,116,086 | 16,887,487 | 15,007,391 | |||||||||
Total Liabilities and Equity | 29,933,388 | 28,848,023 | 25,557,522 |
| (Unit: in millions of Won except per share data) | | ||||||||||||||
For the nine months ended September 30, 2019 | For the nine months ended September 30, 2018 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | |||||||||||||
Operating Revenue | 8,571,475 | 8,855,945 | 11,705,639 | 12,468,035 | ||||||||||||
Operating Profit | 833,721 | 1,048,176 | 1,307,494 | 1,697,709 | ||||||||||||
Profit Before Income Tax | 1,182,176 | 1,023,343 | 1,221,244 | 1,603,808 | ||||||||||||
Profit for the Period | 967,095 | 767,535 | 933,902 | 1,331,114 | ||||||||||||
Basic and Diluted Earnings Per Share (Won) | 13,302 | 10,699 | 13,000 | 18,613 |
* | Financial information as of and for the years ended December 31, 2017 was recorded based on previously applicable accounting standards ofK-IFRS 1018 andK-IFRS 1039. |
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2. | Other Matters Related to Financial Information |
A. | Restatement of the Financial Statements |
Not applicable.
B. | Loss Allowance |
(1) | Loss Allowance of Trade and Other Receivables |
(Unit: in millions of Won) | ||||||||||||
For the nine months ended September 30, 2019 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,488,227 | 253,010 | 10 | % | ||||||||
Loans | 157,765 | 48,241 | 31 | % | ||||||||
Accounts receivable – other | 1,620,247 | 57,036 | 4 | % | ||||||||
Accrued income | 6,707 | 166 | 2 | % | ||||||||
Guarantee deposits | 319,932 | — | — | |||||||||
Total | 4,592,878 | 358,453 | 8 | % | ||||||||
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2018 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,280,090 | 260,157 | 11 | % | ||||||||
Loans | 135,503 | 47,375 | 35 | % | ||||||||
Accounts receivable – other | 1,280,236 | 68,346 | 5 | % | ||||||||
Accrued income | 6,232 | 166 | 3 | % | ||||||||
Guarantee deposits | 315,854 | — | — | |||||||||
Total | 4,017,915 | 376,045 | 9 | % | ||||||||
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2017 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,378,203 | 239,448 | 10 | % | ||||||||
Loans | 161,015 | 47,311 | 29 | % | ||||||||
Accounts receivable – other | 1,623,295 | 75,412 | 5 | % | ||||||||
Accrued income | 3,979 | — | — | |||||||||
Guarantee deposits | 296,517 | — | — | |||||||||
Total | 4,463,009 | 362,171 | 8 | % |
(2) | Movements in Loss Allowance of Trade and Other Receivables |
(Unit: in millions of Won) | ||||||||||||
For the nine months ended September 30, 2019 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | ||||||||||
Beginning balance | 376,045 | 362,171 | 369,332 | |||||||||
Effect of change in accounting policy | — | 13,049 | — | |||||||||
Increase of loss allowance | 24,613 | 45,051 | 40,377 | |||||||||
Reversal of loss allowance | — | — | — | |||||||||
Write-offs | (61,226 | ) | (65,762 | ) | (70,802 | ) | ||||||
Other | 19,021 | 21,536 | 23,264 | |||||||||
Ending balance | 358,453 | 376,045 | 362,171 |
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(3) | Policies for Loss Allowance |
The Company establishes loss allowances based on the likelihood of recoverability of trade and other receivables based on their aging at the end of the period and past customer default experience for the past three years. With respect to trade receivables relating to wireless telecommunications services, the Company considers the likelihood of recovery based on past customer default experience and the length of default in connection with the type of default (e.g., whether the customer’s service has been terminated or is continued). For such trade receivables that have been overdue for more than two years after the customer’s service has been terminated, the Company records an allowance of 100% of such receivables. For such trade receivables that have been overdue for less than two years after the customer’s service has been terminated or relates to a customer that is continuing his service, the Company records an allowance of a certain percentage of such receivable. Consistent with customary practice, the Company writes off trade and other receivables for which the prescription period has passed or that are determined to be impossible or economically too costly to collect, including receivables that are less than Won 200,000 and more than six months overdue and receivables that have been determined to be the subject of identity theft.
(Unit: in millions of Won) | ||||||||||||||||||||
As of September 30, 2019 | ||||||||||||||||||||
Six months or less | From six months to one year | From one year to three years | More than three years | Total | ||||||||||||||||
Accounts receivable – general | 2,191,783 | 50,736 | 146,348 | 99,360 | 2,488,227 | |||||||||||||||
Percentage | 88 | % | 2 | % | 6 | % | 4 | % | 100 | % |
(4) | Aging of Accounts Receivable |
C. | Inventories |
(1) | Detailed Categories of Inventories |
(Unit: in millions of Won) | ||||||||||||
Account Category | For the nine months ended September 30, 2019 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | |||||||||
Merchandise | 176,361 | 259,524 | 243,975 | |||||||||
Goods in transit | — | — | — | |||||||||
Other inventories | 24,178 | 28,529 | 28,428 | |||||||||
Total | 200,539 | 288,053 | 272,403 | |||||||||
Percentage of inventories to total assets [ Inventories / Total assets ] | 0.46 | % | 0.68 | % | 0.81 | % | ||||||
Inventory turnover [ Cost of sales / { ( Beginning balance of inventories + Ending balance of inventories ) / 2} ] | 7.19 | 6.41 | 7.09 |
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(2) | Reporting of Inventories |
The Company holds handsets, ICT equipment for offline sales, etc. in inventory. The Company conducts physical due diligence of its inventories with its auditors at the end of each year.
D. | Fair Value Measurement |
See note 2 of the notes to the Company’s unaudited consolidated financial statements as of September 30, 2019 and December 31, 2018 and for the nine months ended September 30, 2019 and 2018, for more information.
E. | Key Terms of Debt Securities |
[SK Telecom]
The following are key terms and conditions of bonds issued by the Company. The compliance status is as of the date of the latest financial statements including the audit opinion of the independent auditor applicable to the determination of compliance status, except for the compliance status of the restriction on changes of ownership structure, which is as of the end of the reporting period.
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series61-2 | Dec. 27, 2011 | Dec. 27, 2021 | 190,000 | Dec. 19, 2011 | Hana Financial Investment Co., Ltd. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 50% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on August 20, 2019 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series62-2 | Aug. 28, 2012 | Aug. 28, 2022 | 140,000 | Aug. 22, 2012 | Meritz Securities Co., Ltd. | |||||||
Unsecured Bond – Series62-3 | Aug. 28, 2012 | Aug. 28, 2032 | 90,000 | Aug. 22, 2012 | Meritz Securities Co., Ltd. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on August 20, 2019 |
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Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series63-1 | April 23, 2013 | April 23, 2023 | 230,000 | April 17, 2013 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series63-2 | April 23, 2013 | April 23, 2033 | 130,000 | April 17, 2013 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series64-2 | May 14, 2014 | May 14, 2024 | 150,000 | April 29, 2014 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series65-1 | Oct. 28, 2014 | Oct. 28, 2019 | 160,000 | Oct. 16, 2014 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series65-2 | Oct. 28, 2014 | Oct. 28, 2021 | 150,000 | Oct. 16, 2014 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series65-3 | Oct. 28, 2014 | Oct. 28, 2024 | 190,000 | Oct. 16, 2014 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series66-1 | Feb. 26, 2015 | Feb. 26, 2022 | 100,000 | Feb. 11, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series66-2 | Feb. 26, 2015 | Feb. 26, 2025 | 150,000 | Feb. 11, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series66-3 | Feb. 26, 2015 | Feb. 26, 2030 | 50,000 | Feb. 11, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series67-2 | July 17, 2015 | July 17, 2025 | 70,000 | July 9, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series67-3 | July 17, 2015 | July 17, 2030 | 90,000 | July 9, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series68-2 | Nov. 30, 2015 | Nov. 30, 2025 | 100,000 | Nov. 18, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series68-3 | Nov. 30, 2015 | Nov. 30, 2035 | 70,000 | Nov. 18, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series69-2 | March 4, 2016 | March 4, 2021 | 100,000 | Feb. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series69-3 | March 4, 2016 | March 4, 2026 | 90,000 | Feb. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series69-4 | March 4, 2016 | March 4, 2036 | 80,000 | Feb. 22, 2016 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on August 20, 2019 |
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Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series70-2 | June 3, 2016 | June 3, 2021 | 50,000 | May 24, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series70-3 | June 3, 2016 | June 3, 2026 | 120,000 | May 24, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series70-4 | June 3, 2016 | June 3, 2031 | 50,000 | May 24, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series71-1 | April 25, 2017 | April 25, 2020 | 60,000 | April 13, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series71-2 | April 25, 2017 | April 25, 2022 | 120,000 | April 13, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series71-3 | April 25, 2017 | April 25, 2027 | 100,000 | April 13, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series71-4 | April 25, 2017 | April 25, 2032 | 90,000 | April 13, 2017 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 5 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on August 20, 2019 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series72-1 | Nov. 10, 2017 | Nov. 10, 2020 | 100,000 | Oct. 31, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series72-2 | Nov. 10, 2017 | Nov. 10, 2022 | 80,000 | Oct. 31, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series72-3 | Nov. 10, 2017 | Nov. 10, 2027 | 100,000 | Oct. 31, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series73-1 | Feb. 20, 2018 | Feb. 20, 2021 | 110,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series73-2 | Feb. 20, 2018 | Feb. 20, 2023 | 100,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series73-3 | Feb. 20, 2018 | Feb. 20, 2028 | 200,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series73-4 | Feb. 20, 2018 | Feb. 20, 2038 | 90,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series74-1 | Sept. 17, 2018 | Sept. 17, 2021 | 100,000 | Sept. 5, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series74-2 | Sept. 17, 2018 | Sept. 17, 2023 | 150,000 | Sept. 5, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series74-3 | Sept. 17, 2018 | Sept. 17, 2038 | 50,000 | Sept. 5, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series75-1 | March 6, 2019 | March 6, 2022 | 180,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series75-2 | March 6, 2019 | March 6, 2024 | 120,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series75-3 | March 6, 2019 | March 6, 2029 | 50,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series75-4 | March 6, 2019 | March 6, 2039 | 50,000 | Feb. 21, 2019 | Korea Securities Finance Corp. |
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Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 50% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction of cross-shareholding Exclusion from corporate group | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on August 20, 2019 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
Unsecured Bond – Series76-1 | July 29, 2019 | July 29, 2022 | 120,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series76-2 | July 29, 2019 | July 29, 2024 | 60,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series76-3 | July 29, 2019 | July 29, 2029 | 120,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series76-4 | July 29, 2019 | July 29, 2039 | 50,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series76-5 | July 29, 2019 | July 29, 2049 | 50,000 | July 17, 2019 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 50% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction of cross-shareholding Exclusion from corporate group | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | To be submitted after the release of the 2019 annual report |
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[SK Broadband]
The following are key terms and conditions of bonds issued by SK Broadband.
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series40-2 | Jan. 14, 2015 | Jan. 14, 2020 | 160,000 | Jan. 2, 2014 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 41 | July 15, 2015 | July 15, 2020 | 140,000 | July 3, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 42 | Oct. 6, 2015 | Oct. 6, 2020 | 130,000 | Sept. 22, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series43-1 | Oct. 5, 2016 | Oct. 5, 2019 | 50,000 | Sept. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series43-2 | Oct. 5, 2016 | Oct. 5, 2021 | 120,000 | Sept. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 44 | Feb. 3, 2017 | Feb. 3, 2022 | 150,000 | Jan. 20, 2017 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on August 23, 2019 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agency Agreement | Fiscal Agent | |||||||
Unsecured Bond – Series45-1 | Oct. 11, 2017 | Oct. 11, 2020 | 30,000 | Sept. 20, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series45-2 | Oct. 11, 2017 | Oct. 11, 2022 | 140,000 | Sept. 20, 2017 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 70% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on August 23, 2019 |
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Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
Unsecured Bond – Series46-1 | Feb. 1, 2018 | Feb. 1, 2021 | 70,000 | Jan. 19, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series46-2 | Feb. 1, 2018 | Feb. 1, 2023 | 80,000 | Jan. 19, 2018 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 70% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction on changes of ownership structure | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on August 23, 2019 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
Unsecured Bond – Series47-1 | March 26, 2019 | March 26, 2022 | 50,000 | March 14, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series47-2 | March 26, 2019 | March 26, 2024 | 160,000 | March 14, 2019 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 70% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction on changes of ownership structure | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on August 23, 2019 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
Unsecured Bond – Series48-1 | Sept. 24, 2019 | Sept. 23, 2022 | 80,000 | Sept. 10, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series48-2 | Sept. 24, 2019 | Sept. 24, 2024 | 100,000 | Sept. 10, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series48-3 | Sept. 24, 2019 | Sept. 23, 2026 | 50,000 | Sept. 10, 2018 | Korea Securities Finance Corp. |
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Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 70% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction on changes of ownership structure | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | — |
IV. | MANAGEMENT’S DISCUSSION AND ANALYSIS |
Omitted in quarterly and semi-annual reports in accordance with Korean disclosure rules.
V. | AUDITOR’S OPINION |
1. Independent Auditors and Audit Opinions
A. | Independent Auditor and Audit Opinion (Consolidated) |
Period | Independent auditor | Audit opinion | Issues noted | |||||||
Nine months ended September 30, 2019 | KPMG Samjong Accounting Corp. | — | — | |||||||
Year ended December 31, 2018 | KPMG Samjong Accounting Corp. | Unqualified | N/A | |||||||
Year ended December 31, 2017 | KPMG Samjong Accounting Corp. | Unqualified | N/A |
B. | Audit Services Contracts with Independent Auditors |
(Unit: in millions of Won except number of hours) |
| |||||||||||
Period | Auditors | Contents | Fee | Total number of hours | ||||||||
Nine months ended September 30, 2019 | KPMG Samjong Accounting Corp. | Quarterly review | 1,840 | 23,040 | ||||||||
Separate financial statements audit | ||||||||||||
Consolidated financial statements audit | ||||||||||||
English financial statements review and other audit task | ||||||||||||
Audit of internal accounting policies | ||||||||||||
Year ended December 31, 2018 | KPMG Samjong Accounting Corp. | Semi-annual review | 1,700 | 22,058 | ||||||||
Quarterly review | ||||||||||||
Separate financial statements audit | ||||||||||||
Consolidated financial statements audit | ||||||||||||
English financial statements review and other audit task | ||||||||||||
Year ended December 31, 2017 | KPMG Samjong Accounting Corp. | Semi-annual review | 1,470 | 21,098 | ||||||||
Quarterly review | ||||||||||||
Separate financial statements audit | ||||||||||||
Consolidated financial statements audit | ||||||||||||
English financial statements review and other audit task |
* | As the Company and its independent auditor enter into audit services contracts on an annual basis, the fee and total number of hours for the nine months ended September 30, 2019 above refer to the estimated fee and total number of hours for the full fiscal year 2019. |
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C. | Non-Audit Services Contracts with Independent Auditors |
(Unit: in millions of Won) | ||||||||
Period | Contract date | Service provided | Service duration | Fee | ||||
Nine months ended September 30, 2019 | February 8, 2019 | Consulting for publication of 2018 integrated annual report | February 8, 2019 – June 30, 2019 | 120 | ||||
Year ended December 31, 2018 | September 20, 2018 | Confirmation of financial information | September 20, 2018 – September 21, 2018 | 2 | ||||
March 5, 2018 | Issuance of comfort letters | March 5, 2018 – April 26, 2018 | 110 | |||||
Year ended December 31, 2017 | March 10, 2017 | Issuance of comfort letters | March 10, 2017 – March 30, 3017 | 30 | ||||
April 28, 2017 | Consulting services | April 28, 2017 – May 12, 2017 | 300 |
2. Change of Independent Auditors
Not applicable.
VI. | CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS |
1. Board of Directors
A. | Overview of the Composition of the Board of Directors |
The Board of Directors is composed of eight members: five independent directors, two inside directors and onenon-executive director. Within the Board of Directors, there are five committees: Independent Director Nomination Committee, Audit Committee, Compensation Committee, CapEx Review Committee and Corporate Citizenship Committee.
(As of September 30, 2019) | ||||||
Total number of | Inside directors | Non-executive director | Independent directors | |||
8 | Jung Ho Park, Young Sang Ryu | Dae Sik Cho | Jae Hoon Lee, Seok-Dong Kim, Jae Hyeon Ahn, Jung Ho Ahn, Youngmin Yoon |
At the 35th General Meeting of Shareholders held on March 26, 2019, Seok-Dong Kim was newly elected as an independent director and a member of the audit committee.
Jae Hoon Lee was elected as the chairman of the Board of Directors by the directors pursuant to Article 35 of the Articles of Incorporation and Article 3(1) of the regulations of the Board of Directors.
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B. | Significant Activities of the Board of Directors |
Meeting | Date | Agenda | Approval | |||
421st (the 1st meeting of 2019) | January 30, 2019 | • Contribution to company employee welfare fund for 2019
• Donation to the Korean Fencing Association
• Establishment of internal accounting management regulations
• Delegation of funding through long-term borrowings in 2019
• Financial statements as of and for the year ended December 31, 2018
• Annual business report as of and for the year ended December 31, 2018
• Participation in capital increase by SK’s investment company in Southeast Asia
• Report of internal accounting management
• Report for the period after the fourth quarter of 2018 | Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
—
— | |||
422nd (the 2nd meeting of 2019) | February 22, 2019 | • Grant of stock options
• Plan for the 35th General Meeting of Shareholders
• Approval of SK Telecom’s representative director’s concurrent service as director of SK Broadband
• Transactions with SK Broadband in 2019
• Donation for the creation of social values
• Results on internal accounting management | Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
— | |||
423rd (the 3rd meeting of 2019) | March 26, 2019 | • Election of the chairman of the Board of Directors
• Election of committee members
• Transactions with SK Holdings in the second quarter of 2019
• Donation to SK Happiness Foundation for 2019
• Donation to Chey Institute for Advanced Studies for 2019
• Establishment of eSports subsidiary | Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed | |||
424th (the 4th meeting of 2019) | April 25, 2019 | • Payment of operating costs of SUPEX Council in 2019
• Purchase of shares of SK Stoa
• Investment in foreign investment company (Atlas) for investment in Deutsche Telekom Capital Partners fund
• Follow-up report on the establishment of eSports subsidiary
• Report on the merger of SK Broadband and Tbroad
• Report for the period after the first quarter of 2019
| Approved as proposed
Approved as proposed
Approved as proposed
—
—
— |
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Meeting | Date | Agenda | Approval | |||
425th (the 5th meeting of 2019) | June 27, 2019 | • Transactions with SK Holdings in the third quarter of 2019
• Adjustment for joint R&D expenses among affiliates
• Revision of audit committee regulations | Approved as proposed
Approved as proposed
Approved as proposed | |||
426th (the 6th meeting of 2019) | July 25, 2019 | • Establishment of standard business facilities for the disabled
• Payment of interim dividend
• Real estate equity transaction with SK Planet
• Report on the statement of accounts for the first half of 2019
• Report for the period after the second quarter of 2019 | Approved as proposed
Approved as proposed
Approved as proposed
—
— | |||
427th (the 7th meeting of 2019) | September 26, 2019 | • Transactions with SK Holdings in the fourth quarter of 2019
• Changes to 2019 investment plan
• Delegation of authority for funding through long-term borrowings
• Changes to fixed-line and wireless infrastructure construction transactions in 2019 | Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed |
* | The line items that do not show approval are for reporting purposes only. |
C. | Committees within Board of Directors |
(1) | Committee structure (as of September 30, 2019) |
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(a) | Independent Director Nomination Committee |
Total number | Members | Task | ||||
Inside Directors | Independent Directors | |||||
3 | Jung Ho Park | Seok-Dong Kim, Jung Ho Ahn | Nomination of independent directors |
* | Under the Korean Commercial Code, a majority of the members of the Independent Director Nomination Committee must be independent directors. |
(b) | Compensation Review Committee |
Total number | Members | Task | ||||
Inside Directors | Independent Directors | |||||
3 | — | Jae Hoon Lee, Seok-Dong Kim, Jung Ho Ahn | Review CEO remuneration system and amount |
* | The Compensation Review Committee is a committee established by the resolution of the Board of Directors. |
(c) | Capex Review Committee |
Total number | Members | Task | ||||
Inside Directors | Independent Directors | |||||
6 | Young Sang Ryu | Jae Hoon Lee, Seok-Dong Kim, Jae Hyeon Ahn, Jung Ho Ahn, Youngmin Yoon | Review major investment plans and changes thereto |
* | The Capex Review Committee is a committee established by the resolution of the Board of Directors. |
(d) | Corporate Citizenship Committee |
Total number | Members | Task | ||||
Inside Directors | Independent Directors | |||||
3 | — | Jae Hyeon Ahn, Jung Ho Ahn, Youngmin Yoon | Review guidelines on corporate social responsibility (“CSR”) programs, etc.
|
* | The Corporate Citizenship Committee is a committee established by the resolution of the Board of Directors. |
(e) | Audit Committee |
Total number | Members | Task | ||||
Inside Directors | Independent Directors | |||||
4 | — | Jae Hoon Lee, Seok-Dong Kim, Jae Hyeon Ahn, Youngmin Yoon | Review financial statements and supervise independent audit process, etc. |
* | The Audit Committee is a committee established under the provisions of the Articles of Incorporation and the Korean Commercial Code. |
2. Audit System
The Company’s Audit Committee consists of four independent directors, Jae Hoon Lee, Seok-Dong Kim, Jae Hyeon Ahn and Youngmin Yoon.
Major activities of the Audit Committee as of September 30, 2019 are set forth below.
Meeting | Date | Agenda | Approval | |||
The 1st meeting of 2019 | January 29, 2019 | • Evaluation of internal accounting management system operation
• Review of business and audit results for 2018 and business and audit plans for 2019
• Evaluation of internal monitoring controls based on the opinion of the members of the Audit Committee
• Establishment of internal accounting management regulations
• Service transactions with SK Hynix relating to SK Academy | —
—
Approved as proposed
Approved as proposed
Approved as proposed | |||
The 2nd meeting of 2019 | February 7, 2019 | • Approval of contract for consulting services related to publication of SK Telecom’s integrated annual report for fiscal year 2018 | Approved as proposed |
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Meeting | Date | Agenda | Approval | |||
The 3rd meeting of 2019 | February 21, 2019 | • Report on the IFRS audit of fiscal year 2018
• Report on review of 2018 internal accounting management system
• Evaluation of internal accounting management system operation
• Agenda and document review for the 35th General Meeting of Shareholders
• Auditor’s report for fiscal year 2018
• Report on contract for customer appreciation gifts to fixed-line telephone customers for 2019 | —
—
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed | |||
The 4th meeting of 2019 | March 25, 2019 | • Contract for maintenance services of optical cables in 2019
• Contract for maintenance services of transmission equipment in 2019 | Approved as proposed
Approved as proposed | |||
The 5th meeting of 2019 | April 24, 2019 | • Election of the chairman of the Audit Committee
• Approval of external auditor services for fiscal year 2019
• Audit plan for fiscal year 2019 | Approved as proposed
Approved as proposed
— | |||
The 6th meeting of 2019 | June 24, 2019 | • Transaction with UbiNS Co., Ltd. for construction of transmission equipment facility in 2019 | Approved as proposed | |||
The 7th meeting of 2019 | July 24, 2019 | • Report on review by independent auditor of first half of fiscal year 2019 | — | |||
The 8th meeting of 2019 | September 25, 2019 | • Increase in purchase of consumable materials/goods of Happynarae Co., Ltd. for 2019
• Amendments to contract for customer appreciation gifts to fixed-line customers for 2019 | Approved as proposed
Approved as proposed | |||
The 9th meeting of 2019 | October 23, 2019 | • Understanding of internal accounting management system under the new External Audit Act
• Status of implementation of internal accounting management system | —
— |
* | The line items that do not show approval are for reporting purposes only. |
3. Shareholders’ Exercise of Voting Rights
A. | Voting System and Exercise of Minority Shareholders’ Rights |
Pursuant to the Articles of Incorporation as shown below, the cumulative voting system was first introduced in the general meeting of shareholders held in 2003.
Articles of Incorporation | Description | |
Article 32(3) (Election of Directors) | Cumulative voting under Article382-2 of the Korean Commercial Code will not be applied for the election of directors. | |
Article 4 of the 12th Supplement to the Articles of Incorporation (Interim Regulation) | Article 32(3) of the Articles of Incorporation shall remain effective until the day immediately preceding the date of the general meeting of shareholders held in 2003. |
During the 34th general meeting of shareholders held on March 21, 2018, the Company adopted the electronic voting method. Pursuant to Article368-4 of the Korean Commercial Code, the Company entrusted the Korea Securities Depository with the role of administering the electronic voting system, allowing shareholders to exercise their voting rights through electronic voting without attending the general meeting of shareholders.
Written voting system is not applicable. Minority shareholder rights were not exercised during the relevant period.
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VII. | SHAREHOLDERS |
1. Shareholdings of the Largest Shareholder and Related Persons
A. | Shareholdings of the Largest Shareholder and Related Persons |
(As of September 30, 2019) | (Unit: in shares and percentages) | |||||||||||||||||||||
Name | Relationship | Type of share | Number of shares owned and ownership ratio | |||||||||||||||||||
Beginning of Period | End of Period | |||||||||||||||||||||
Number of shares | Ownership ratio | Number of shares | Ownership ratio | |||||||||||||||||||
SK Holdings Co., Ltd. | Largest Shareholder | Common share | 21,624,120 | 26.78 | 21,624,120 | 26.78 | ||||||||||||||||
Tae Won Chey | Officer of affiliated company | Common share | 100 | 0.00 | 100 | 0.00 | ||||||||||||||||
Dong Hyun Jang | Officer of affiliated company | Common share | 251 | 0.00 | 251 | 0.00 | ||||||||||||||||
Jung Ho Park | Officer of the Company | Common share | 1,000 | 0.00 | 1,000 | 0.00 | ||||||||||||||||
Total | Common share | 21,625,471 | 26.78 | 21,625,471 | 26.78 |
B. | Overview of the Largest Shareholder |
As of September 30, 2019, the Company’s largest shareholder was SK Holdings. SK Holdings was established on April 13, 1991 and was made public on the securities market on November 11, 2009 under the identification code “034730.” SK Holdings is located at 26, Jong-ro,Jongno-gu, Seoul, Korea. SK Holdings’ telephone number is+82-2-2121-5114 and its website is www.sk.co.kr.
C. | Changes in Shareholdings of the Largest Shareholder |
Changes in shareholdings of the largest shareholder are as follows:
(As of September 30, 2019) | (Unit: in shares and percentages) | |||||||
Largest Shareholder | Date of the change in the largest shareholder/ Date of change in shareholding | Shares Held | Holding Ratio | Remarks | ||||
SK Holdings | January 2, 2014 | 20,367,290 | 25.22 | Shin Won Chey, SKC’s Chairman, purchased 1,000 shares | ||||
March 24, 2014 | 20,368,290 | 25.23 | Shin Won Chey, SKC’s Chairman, purchased 1,000 shares | |||||
January 2, 2015 | 20,364,290 | 25.22 | Shin Won Chey, SKC’s Chairman, disposed of 4,000 shares | |||||
March 20, 2015 | 20,363,803 | 25.22 | Appointment of CEO Dong Hyun Jang (ownership of 251 shares of the Company), Retirement of Sung Min Ha | |||||
June 9, 2015 | 20,365,006 | 25.22 | Purchase through the Share Exchange between SK Broadband and SK Telecom (Shin Won Chey, SKC’s Chairman, purchased 1,067 shares, and Myung Hyun Cho, SK Broadband’s independent director, purchased 136 shares) | |||||
August 3, 2015 | 20,364,930 | 25.22 | Myung Hyun Cho, SK Broadband’s independent director, disposed of 76 shares | |||||
March 24, 2017 | 20,364,870 | 25.22 | Retirement of Myung Hyun Cho, SK Broadband’s independent director (ownership of 60 shares of the Company) | |||||
March 28, 2017 | 20,365,370 | 25.22 | Jung Ho Park, CEO of the Company, purchased 500 shares. | |||||
March 30, 2017 | 20,365,870 | 25.22 | Jung Ho Park, CEO of the Company, purchased 500 additional shares. | |||||
July 7, 2017 | 20,364,803 | 25.22 | Shin Won Chey, SKC’s Chairman, disposed of 1,067 shares. | |||||
December 27, 2018 | 21,625,471 | 26.78 | Exchange of shares of SK Infosec with the Company in exchange for 1,260,668 shares of the Company |
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2. Distribution of Shares
A. | Shareholders with ownership of 5% or more and others |
(As of September 30, 2019) | (Unit: in shares and percentages) | |||||||||
Name (title) | Common share | |||||||||
Number of shares | Ownership ratio | Remarks | ||||||||
SK Holdings | 21,624,120 | 26.78 | % | — | ||||||
SK Telecom | 8,875,883 | 10.99 | % | Treasury shares | ||||||
National Pension Service | 8,863,034 | 10.98 | % | — | ||||||
Citibank ADR | 8,014,125 | 9.93 | % | — | ||||||
Shareholdings under the Employee Stock Ownership Program | — | — | — |
* | Due to the infeasibility of closing the shareholder register and ascertaining the shareholding status as of September 30, 2019, the information above is based on information as of the most recent record date (June 30, 2019) and beneficial ownership reports, which may differ from actual shareholding information as of September 30, 2019. |
* | On November 5, 2019, the Company sold 1,266,620 treasury shares to Kakao pursuant to Article 342 of the Korean Commercial Code in order to strengthen collaboration with Kakao through a strategic alliance. As of November 14, 2019, the Company holds 7,609,263 treasury shares (9.42% of total shares issued). See the report on “Results of Disposal of Treasury Shares” filed by the Company on November 5, 2019 for more information. |
B. | Shareholder Distribution |
(As of September 30, 2019) | (Unit: in shares and percentages) | |||||||||||||||||
Classification | Number of shareholders | Ratio (%) | Number of shares | Ratio (%) | Remarks | |||||||||||||
Total minority shareholders* | 59,535 | 99.89 | % | 30,760,459 | 38.10 | % | — |
* | Defined as shareholders whose shareholding is less than a hundredth of the total issued and outstanding shares. |
* | Due to the infeasibility of closing the shareholder register and ascertaining the shareholding status as of September 30, 2019, the information above is based on information as of the most recent record date (June 30, 2019), which may differ from actual shareholding information as of September 30, 2019. |
3. Share Price and Trading Volume in the Last Six Months
A. | Domestic Securities Market |
Types | September 2019 | August 2019 | July 2019 | June 2019 | May 2019 | April 2019 | ||||||||||||||||||||
Common stock | Highest | 241,500 | 252,500 | 262,500 | 264,000 | 263,500 | 254,500 | |||||||||||||||||||
Lowest | 236,500 | 231,500 | 245,500 | 250,000 | 247,500 | 243,000 | ||||||||||||||||||||
Average | 238,905 | 239,932 | 255,977 | 258,100 | 255,935 | 246,318 | ||||||||||||||||||||
Daily transaction volume | Highest | 629,007 | 297,802 | 219,284 | 266,833 | 523,355 | 654,331 | |||||||||||||||||||
Lowest | 62,533 | 96,680 | 70,817 | 78,692 | 97,073 | 53,742 | ||||||||||||||||||||
Monthly transaction volume | 3,824,057 | 3,947,360 | 2,613,995 | 2,927,366 | 4,601,098 | 3,503,878 |
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B. | Foreign Securities Market (New York Stock Exchange) |
Types | September 2019 | August 2019 | July 2019 | June 2019 | May 2019 | April 2019 | ||||||||||||||||||||
Depositary receipt | Highest | 22.53 | 22.87 | 24.88 | 24.92 | 24.78 | 24.82 | |||||||||||||||||||
Lowest | 21.96 | 21.30 | 22.80 | 23.49 | 23.23 | 23.63 | ||||||||||||||||||||
Average | 22.24 | 21.91 | 23.99 | 24.01 | 23.94 | 24.33 | ||||||||||||||||||||
Daily transaction volume | Highest | 503,035 | 885,622 | 678,527 | 1,216,442 | 593,788 | 661,821 | |||||||||||||||||||
Lowest | 149,652 | 192,602 | 152,570 | 179,457 | 171,914 | 120,975 | ||||||||||||||||||||
Monthly transaction volume | 5,846,037 | 9,124,927 | 6,560,964 | 9,646,202 | 7,140,445 | 6,698,742 |
VIII. EMPLOYEES AND DIRECTORS
1. | Officers and Employees |
A. | Employees |
(As of September 30, 2019) |
| (Unit: in persons and millions of Won) | ||||||||||||||||||||||||||||||||
Business segment | Gender | Number of employees | Average service year | Aggregate wage for the first nine months of 2019 | Average wage per person | |||||||||||||||||||||||||||||
Employees without a fixed term of employment | Employees with a fixed term of employment | Total | ||||||||||||||||||||||||||||||||
Total | Part-time employees | Total | Part-time employees | |||||||||||||||||||||||||||||||
— | Male | 4,307 | — | 85 | — | 4,392 | 12.6 | 443,670 | 102 | |||||||||||||||||||||||||
— | Female | 825 | — | 160 | — | 985 | 8.0 | 61,375 | 65 | |||||||||||||||||||||||||
Total | 5,132 | — | 245 | — | 5,377 | 11.7 | 505,045 | 95 |
B. | Compensation of Unregistered Officers |
(As of September 30, 2019) | (Unit: in persons and millions of Won) | |||
Number of Unregistered Officers | Aggregate wage for the first nine months of 2019 | Average wage per person | ||
106 | 45,811 | 432 |
2. | Compensation of Directors |
A. | Amount Approved at the Shareholders’ Meeting |
(As of September 30, 2019) | (Unit: in millions of Won) | |||
Classification | Number of Directors | Aggregate Amount Approved | ||
Directors | 8 | 12,000 |
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B. | Amount Paid |
B-1. Total Amount
(As of September 30, 2019) | (Unit: in millions of Won) | |||||
Number of Directors | Aggregate Amount Paid | Average Amount Paid Per Director | Remarks | |||
8 | 5,420 | 677 | — |
B-2. Amount by Classification
(As of September 30, 2019) |
| (Unit: in millions of Won) | ||||||||||||||
Classification | Number of Directors | Aggregate Amount Paid | Average Amount Paid Per Director | Remarks | ||||||||||||
Inside Directors | 3 | 5,105 | 1,702 | — | ||||||||||||
Independent Directors | 1 | 63 | 63 | — | ||||||||||||
Audit Committee Members | 4 | 252 | 63 | — | ||||||||||||
Auditor | — | — | — | — |
3. | Individual Compensation of Directors and Officers |
Omitted in quarterly reports in accordance with Korean disclosure rules.
4. | Stock Options Granted and Exercised |
A. | Stock Options Granted to Directors and Auditors |
(As of September 30, 2019) |
| |||||||||||
Classification | Number of Directors | Fair Value of Stock Options (millions of Won) | Remarks | |||||||||
Inside Directors | 3 | 260 | — | |||||||||
Independent Directors | 1 | — | — | |||||||||
Audit Committee Members | 4 | — | — | |||||||||
Total | 8 | 260 | — |
B. | Stock Options Granted and Exercised |
(As of September 30, 2019) | (Unit: in Won and shares) | |||||||||||||||||||||||||||||
Grantee | Relationship with the Company | Date of Grant | Method of Grant | Changes | Unexercised Number of Shares | Exercise Period | Exercise Price | |||||||||||||||||||||||
Granted | Exercised | Canceled | ||||||||||||||||||||||||||||
Jung Ho Park | Inside Director | March 24, 2017 | Issuance of treasury stock, cash settlement | 22,168 | — | — | 22,168 | | March 25, 2019 – March 24, 2022 | | 246,750 | |||||||||||||||||||
Jung Ho Park | Inside Director | March 24, 2017 | Issuance of treasury stock, cash settlement | 22,168 | — | — | 22,168 | | March 25, 2020 – March 24, 2023 | | 266,490 | |||||||||||||||||||
Jung Ho Park | Inside Director | March 24, 2017 | Issuance of treasury stock, cash settlement | 22,168 | — | — | 22,168 | | Mach 25, 2021 – March 24, 2024 | | 287,810 |
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(As of September 30, 2019) | (Unit: in Won and shares) | |||||||||||||||||||||||||||||
Grantee | Relationship with the Company | Date of Grant | Method of Grant | Changes | Unexercised Number of Shares | Exercise Period | Exercise Price | |||||||||||||||||||||||
Granted | Exercised | Canceled | ||||||||||||||||||||||||||||
Young Sang Ryu | Inside Director | February 20, 2018 | Issuance of treasury stock, cash settlement | 1,358 | — | — | 1,358 | | February 21, 2020 – February 20, 2023 | | 254,120 | |||||||||||||||||||
Young Sang Ryu | Inside Director | March 26, 2019 | Issuance of treasury stock, cash settlement | 1,734 | — | — | 1,734 | | March 27, 2021 – March 26, 2024 | | 254,310 | |||||||||||||||||||
Seong Ho Ha | Unregistered Officer | February 22, 2019 | Issuance of treasury stock, cash settlement | 1,369 | — | — | 1,369 | | February 23, 2021 – February 22, 2024 | | 265,260 | |||||||||||||||||||
Hyoung Il Ha | Unregistered Officer | February 22, 2019 | Issuance of treasury stock, cash settlement | 1,564 | — | — | 1,564 | | February 23, 2021 – February 22, 2024 | | 265,260 | |||||||||||||||||||
Jin Hyo Park | Unregistered Officer | February 22, 2019 | Issuance of treasury stock, cash settlement | 1,300 | — | — | 1,300 | | February 23, 2021 – February 22, 2024 | | 265,260 | |||||||||||||||||||
Poong Young Yoon | Unregistered Officer | February 22, 2019 | Issuance of treasury stock, cash settlement | 1,244 | — | — | 1,244 | | February 23, 2021 – February 22, 2024 | | 265,260 |
* | Includes stock options of unregistered officers. |
IX. | RELATED PARTY TRANSACTIONS |
1. | Line of Credit Extended to the Largest Shareholder and Related Parties |
(As of September 30, 2019) | (Unit: in millions of Won) | |||||||||||||||||||||||||||||||
Name (Corporate name) | Relationship | Account category | Change details | Accrued interest | Remarks | |||||||||||||||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||||||||||||||||||
SK Wyverns | Affiliate | | Long-term and short-term loans | | 407 | — | — | 407 | — | — |
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2. | Transfer of Assets to/from the Largest Shareholder and Related Parties and Other Transactions |
Purchase and Dispositions of Investments
(As of September 30, 2019) | (Unit: in millions of Won) | |||||||||||||||||||||||||
Name (Corporate name) | Relationship | Details | Remarks | |||||||||||||||||||||||
Type of investment | Change | |||||||||||||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||||||||||||
SK Telecom TMT Investment Corp. | Affiliate | Equity | — | 33,834 | — | 33,834 | Newly Established | |||||||||||||||||||
SE ASIA INVESTMENT PTE. LTD. | Affiliate | Equity | 111,000 | 113,470 | — | 224,470 | Capital increase | |||||||||||||||||||
Atlas Investment | Affiliate | Equity | 99,874 | 28,046 | — | 127,920 | Capital increase |
Purchase and Disposition of Securities
None.
Transfer of Assets
None.
3. | Transactions with the Largest Shareholder and Related Parties |
None.
4. | Related Party Transactions |
(Unit: in millions of Won) |
| |||||||||||||
Counterparty | Contract Contents | Contract Date | Contract Amount | Note | ||||||||||
SK Planet | 59.8% equity stake in SK Planet’s Pangyo building | Aug. 30, 2019 | 77,860 | -Real estate purchase |
See note 28 of the notes to the Company’s unaudited consolidated financial statements attached hereto for more information regarding related party transactions.
5. | Other Related Party Transactions (excluding Transactions with the Largest Shareholder and Related Parties listed above) |
A. | Provisional Payment and Loans (including loans on marketable securities) |
(As of September 30, 2019) | (Unit: in millions of Won) | |||||||||||||||||||||||||||||||
Name (Corporate name) | Relationship | Account category | Change details | Accrued interest | Remarks | |||||||||||||||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||||||||||||||||||
Baekmajang and others | Agency | | Long-term and short-term loans | | 61,787 | 71,946 | 57,053 | 76,680 | — | — | ||||||||||||||||||||||
Daehan Kanggun BCN Inc. | Investee | Long-term loans | 22,147 | — | — | 22,147 | — | — |
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X. | OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS |
1. | Developments in the Items Mentioned in Prior Reports on Important Business Matters |
A. | Summary Minutes of the General Meeting of Shareholders |
Date | Agenda | Resolution | ||
33rd Fiscal Year Meeting of Shareholders (March 24, 2017) | 1. Approval of the financial statements for the year ended December 31, 2016
2. Amendments to Articles of Incorporation
3. Election of directors
• Election of an inside director
• Election of anon-executive director
• Election of an independent director
• Election of an independent director
• Election of an independent director
4. Election of an independent director as Audit Committee member
• Election of an independent director as Audit Committee member
• Election of an independent director as Audit Committee member
5. Approval of remuneration limit for directors
6. Award of stock options | Approved (Cash dividend, Won 9,000 per share)
Approved
Approved (Jung Ho Park)
Approved (Dae Sik Cho)
Approved (Jae Hoon Lee)
Approved (Jae Hyeon Ahn)
Approved (Jung Ho Ahn)
Approved (Jae Hoon Lee)
Approved (Jae Hyeon Ahn)
Approved (Won 12 billion)
Approved | ||
34th Fiscal Year Meeting of Shareholders (March 21, 2018) | 1. Approval of the financial statements for the year ended December 31, 2017
2. Award of stock options
3. Election of directors
• Election of an inside director
• Election of an independent director
4. Election of an independent director as Audit Committee member
5. Approval of remuneration limit for directors | Approved (Cash dividend, Won 9,000 per share)
Approved
Approved (Young Sang Ryu)
Approved (Youngmin Yoon)
Approved (Youngmin Yoon)
Approved (Won 12 billion) | ||
35th Fiscal Year Meeting of Shareholders (March 26, 2019) | 1. Approval of the financial statements for the year ended December 31, 2018
2. Amendments to Articles of Incorporation
3. Approval of award of stock options
4. Award of stock options
5. Election of an independent director
6. Election of an independent director as Audit Committee member
7. Approval of remuneration limit for directors | Approved (Cash dividend, Won 9,000 per share)
Approved
Approved
Approved
Approved (Seok-Dong Kim)
Approved (Seok-Dong Kim)
Approved (Won 12 billion) |
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2. | Contingent Liabilities |
A. | Legal Proceedings |
[SK Telecom]
As of September 30, 2019, the Company is involved in various pending legal proceedings and the provisions recognized for these proceedings are not material. The management of the Company has determined that there are currently no present obligations in connection with proceedings for which no provision has been recognized. The management has also determined that the outcome of these proceedings will not have a significant impact on the Company’s financial position and operating performance.
A lawsuit brought by Nonghyup Bank against the Company regarding the validity of a credit card partnership agreement has been resolved by the parties through mediation in the previous reporting period. Pursuant to the results of the mediation, the partnership agreement between the Company and Nonghyup Bank will stay in effect until April 2021, and the Company will be responsible for settlement of fees related to customer transactions until September 2021, which is the last expiration date of the cards issued. The Company has determined that the partnership agreement and related agreements meet the definition of an onerous contract underK-IFRS 1037 and recognized its best estimate of the payment amount necessary to discharge its present obligations as of the end of the reporting period as current andnon-current provisions in the amount of Won 37,475 million and Won 30,099 million, respectively.
[SK Broadband]
As of September 30, 2019, there were 17 pending lawsuits against SK Broadband (aggregate amount of claims of Won 8,620 million). The Company does not believe that the outcome of these lawsuits will have a material impact on its consolidated financial statements.
[SK Planet]
As of September 30, 2019, there were two pending lawsuits against SK Planet (aggregate amount of claims of Won 250 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.
[Eleven Street]
As of September 30, 2019, there were three pending lawsuits against Eleven Street (aggregate amount of claims of Won 160 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.
B. | Other Contingent Liabilities |
[SK Telecom]
None.
[SK Broadband]
SK Broadband has entered into revolving credit facilities with a limit of Won 149 billion with three financial institutions including KEB Hana Bank in relation to its loans.
In connection with public offerings of notes, SK Broadband is subject to certain restrictions with respect to its debt ratio, third party payment guarantees and other limitations on liens.
SK Broadband has provided “geun” mortgage amounting to Won 4,013 million to others, including Ilsan Guksa, on a part of the Company’s buildings in connection with the leasing of the buildings.
SK Broadband has entered into a leased line contract and a resale contract for fixed-line telecommunication services with SK Telecom.
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Seoul Guarantee Insurance Company has provided a performance guarantee of Won 26,937 million to SK Broadband in connection with the performance of certain contracts and the repair of any defects.
KB Kookmin Bank has provided a payment guarantee of Won 100 million to SK Broadband in connection with itse-commerce business.
On April 24, 2019, SK Broadband resolved to sell its 100% equity interest (3,631,355 shares) in SK Stoa to SK Telecom, SK Broadband’s largest shareholder, for Won 39,999 million. The share purchase agreement was executed on April 25, 2019. The transaction is subject to governmental approvals as a closing condition, and the particulars of the transaction may change due to approval procedures and applicable laws.
[SK Planet]
As of September 30, 2019, SK Planet has entered into revolving credit facilities of up to Won 87 billion with Shinhan Bank and KEB Hana Bank.
As of September 30, 2019, Seoul Guarantee Insurance Company and KEB Hana Bank have provided guarantees of Won 3,605 million in total to SK Planet in connection with the performance of certain contracts and curing of defects.
[Dreamus Company]
As of September 30, 2019, SeoulGuarantee Insurance Company has provided a guarantee of Won 132 million in connection with the performance, prepayment and curing of defects under certain contracts related to product development.
Dreamus Company has entered into agreements with certain domestic and foreign companies for the implementation of designs and technologies in connection with product manufacturing, pursuant to which it is required to pay certain fees for the revenues generated from applicable products and the use of patents. Such fees amounted to Won 3,807 million and Won 4,463 million during the first nine months of 2019 and 2018, respectively, which were included in its cost of sales and selling and administrative expenses.
[Life & Security Holdings]
Life & Security Holdings has provided shares of ADT CAPS, CAPSTEC and ADT Security as collateral for long-term borrowings with total face value of Won 1,900 billion.
[SK Infosec]
SK Infosec has issued a blank note to SK Holdings as collateral in connection with a contract performance guarantee.
3. | Status of Sanctions, etc. |
[SK Telecom]
Date | Authority | Subject of | Sanction | Reason and the Relevant Law | Status of Implementation | Company’s Measures | ||||||
Mar. 21, 2017 | Korea Communications Commission (“KCC”) | SK Telecom | Decision of 14th KCC Meeting of 2017
• Correctional order
• Fine of Won 794 million | Payment of subsidies exceeding 115% limit and inducement of payment of discriminatory subsidies by dealers in connection with recruiting foreign customers (Articles4-5,3-1(1) and9-3 of the Mobile Device Distribution Improvement Act (“MDDIA”)) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; provided training at regional local marketing headquarters |
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Date | Authority | Subject of | Sanction | Reason and the Relevant Law | Status of Implementation | Company’s Measures | ||||||
Dec. 6, 2017 | KCC | SK Telecom | Decision of 43rd KCC Meeting of 2017
• Correctional order | Refusal, delay or omission of termination of high-speed Internet and bundled services upon customers’ request without just cause; request by customer representative to cancel termination or induce contract renewal against customers’ express intent (Article50-1(5) of the Telecommunications Business Act and Article42-1(5) of the Enforcement Decree) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; implemented improvements to work procedures | ||||||
Jan. 24, 2018 | KCC | SK Telecom | Decision of 5th KCC Meeting of 2018
• Correctional order
• Fine of Won 21.1 billion | Payment of subsidies exceeding 115% limit by dealers; payment of discriminatory subsidies by dealers; inducement of such payments (Articles4-5,3-1(1) and9-3 of the MDDIA) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; provided notice of plan for implementation of correctional order to marketing personnel; revised standard agreement and reinforced supervision | ||||||
Jan. 24, 2018 | KCC | SK Telecom | Decision of 5th KCC Meeting of 2018
• Correctional order
• Fine of Won 223.4 million | Payment of excessive subsidies contradictory with disclosure for recruitment of corporate customers (Article4-4 of the MDDIA) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; provided notice of plan for implementation of correctional order to marketing personnel; provided training and reinforced supervision of corporate business | ||||||
Jan. 24, 2018 | KCC | SK Telecom | Decision of 5th KCC Meeting of 2018
• Correctional order
• Fine of Won 27 million | Payment of subsidies exceeding 115% limit by Samsung Electronics; payment of discriminatory subsidies by Samsung Electronics; inducement of such payments (Articles4-5,3-1(1) and9-3 of the MDDIA) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; provided notice of plan for implementation of correctional order to marketing personnel; provided training and reinforced supervision | ||||||
Sept. 2, 2018 | Korea Fair Trade Commission | SK Telecom, former director | Sept. 12, 2018 decision by Seoul Central District Court
• SK Telecom: Fine of Won 50 million
• Former director: Sentence of 6 months of imprisonment (2 years of probation) | Abuse of bargaining power in transferring visiting salespeople against the intent of the head of the sales office that contracted with such salespeople (Articles 70,67-2 and23-1(4) of the Monopoly Regulation and Fair Trade Act; Article 30 of the Criminal Code) | Decision confirmed; fine paid | Provided training (twice a year); implemented compliance program for employees and executives |
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Date | Authority | Subject of | Sanction | Reason and the Relevant Law | Status of Implementation | Company’s Measures | ||||||
Mar. 20, 2019 | KCC | SK Telecom | Decision of 14th KCC Meeting of 2019
• Correctional order
• Fine of Won 975 million | Payment of subsidies exceeding 115% limit by dealers; payment of discriminatory subsidies by dealers; inducement of such payments in connection with operation of online business channels (Articles4-5,3-1(1) and9-3 of the MDDIA) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; implemented compliance monitoring of online sales guidelines; revised online request system | ||||||
June 26, 2019 | KCC | SK Telecom | Decision of 31st KCC Meeting of 2019
• Correctional order
• Fine of Won 231 million | Refusal or delay of termination of user contract without just cause (Article50-1(5) of the Telecommunications Business Act; Article42-1(5) of the Enforcement Decree) | Decision confirmed; payment of fine and implementation of correctional order pending | Addressed issues discovered during investigation, such as outbound contact with customers regarding termination without customer consent | ||||||
July 9, 2019 | KCC | SK Telecom | Decision of 33rd KCC Meeting of 2019
• Correctional order
• Fine of Won 1.5 million | Failure to maintain subsidies without change for a minimum period of seven days (Article4-3 of the MDDIA) | Decision confirmed; report on implementation of correctional order completed and payment of fine pending | Implemented improvements to work procedures (announce subsidies separately from public announcements on official website in case of notice of subsidies duringpre-order period) |
[SK Broadband]
(1) | Violation of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. |
• | Date: July 13, 2017 |
• | Sanction: SK Broadband was imposed a fine of Won 12 million for breach of restrictions on transmission of advertising information for profit. |
• | Reason and the Relevant Law: Violated Articles50-1,50-4 and 76 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. and Article 74 of its Enforcement Decree for electronic transmission of advertisements without prior consent of the recipient. |
• | Status of Implementation: Implemented improvements to advertisement transmission related activity and paid the fine in July 2017. |
• | Company’s Measures: Implement improvements to advertisement transmission related activity. |
(2) | Violation of the Telecommunications Business Act |
• | Date: December 6, 2017 |
• | Sanction: SK Broadband received a correctional order (corrective measures for damaging users’ interests in relation to high speed Internet products and gifts). |
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• | Reason and the Relevant Law: Violated Article50-1 Paragraph 5 of the Telecommunications Business Act and Article42-1 of its Enforcement Decree by providing telecommunications services in a manner different from the terms and conditions of use. |
• | Status of Implementation: Made an official announcement about having received the correctional order and paid the fine. |
• | Company’s Measures: Implement the correctional order and pay the fine. |
(3) | Violation of the Telecommunications Business Act |
• | Date: October 12, 2018 |
• | Sanction: SK Broadband received a correctional order (corrective measures for violation of the Telecommunications Business Act related to representative phone number card payment services). |
• | Reason and the Relevant Law: Violated Article50-1 Paragraph 5(2) of the Telecommunications Business Act and Article42-1 of its Enforcement Decree by failing to explain or disclose or misrepresenting important matters to users such as rates, contract conditions or rate discounts. |
• | Status of Implementation: Made an official announcement about having received the correctional order and paid the fine. |
• | Company’s Measures: Implement the correctional order and pay the fine. |
(4) | Violation of the Telecommunications Business Act |
• | Date: February 25, 2019 |
• | Sanction: SK Broadband received a correctional order and was imposed a fine of Won 2.8 million (for violation of the Telecommunications Business Act related to a misrepresentation of statistics). |
• | Reason and the Relevant Law: Violated Article88-1, Article92-1 and Article104-5(17) of the Telecommunications Business Act by failing to accurately report the number of high-speed Internet subscribers. |
• | Status of Implementation: Submitted plans for implementation of correctional order, including improvement of relevant business procedures. |
• | Company’s Measures: Implement the correctional order and pay the fine. |
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(5) | Violation of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. |
• | Date: March 15, 2019 |
• | Sanction: SK Broadband was imposed a fine of Won 4.8 million for breach of restrictions on rendering information transmission services. |
• | Reason and the Relevant Law: Violated Articles50-4 and 76 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. and Article 74 of its Enforcement Decree by failing to establish service rejection procedures against spammers. |
• | Status of Implementation: Implemented improvements to advertisement transmission related activities and paid the fine (April 2018). |
• | Company’s Measures: Implement procedures for denying services to spammers. |
(6) | Violation of the Telecommunications Business Act |
• | Date: June 26, 2019 |
• | Sanction: SK Broadband received a correctional order (corrective measures for damaging users’ interests by restricting termination of high-speed Internet and bundled services). |
• | Reason and the Relevant Law: Violated Article50-1(5) of the Telecommunications Business Act and Article42-1(5) of its Enforcement Decree by delaying, rejecting or restricting termination of user contracts without just cause. |
• | Status of Implementation: Made an official announcement about having received the correctional order, improved operating procedures and paid the fine (Won 165 million). |
• | Company’s Measures: Implement the correctional order and pay the fine. |
(7) | Collusive bidding |
• | Date: July 29, 2019 |
• | Sanction: SK Broadband received a correctional order (for unjustly restricting competition while participating in a bid for a public sector-only circuit project of public agencies) and was imposed a fine of Won 32.7 million. However, SK Broadband was ultimately exempted from both the correctional order and the fine. |
• | Reason and the Relevant Law: Violated Article19-1(3), Article19-1(8) and Article22-2(1)(2) of the Monopoly Regulation and Fair Trade Act, and Article 33 and Article35-1 of its Enforcement Decree by substantially restricting competition in a bidding process for a public sector-only circuit project by agreeing on the winning bidder, bidding participants and the bidding price in advance. SK Broadband was the first to voluntarily report the act of collusion and was granted exemption from applicable sanctions. |
• | Status of Implementation: Not applicable due to exemption. |
• | Company’s Measures: Conduct legal education regarding collusive bidding (July 1, 2019 to July 19, 2019) and establish measures to prevent recurrence, including an internal reporting channel related to collusion and a fast-track system for legal advice on related matters. |
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[Home & Service]
(1) | Violation of the Employment Insurance Act |
• | Date: January 19, 2018 |
• | Sanction: Home & Service received a fine of Won 504,000. |
• | Reason and the Relevant Law: Violated Article 15 of the Employment Insurance Act by delaying the reporting of matters related to changes in employees’ insurance eligibility. |
• | Status of Implementation: Paid the fine. |
• | Company’s Measures: Implement measures to improve reporting procedures. |
(2) | Violation of Industrial Safety and Health Act |
• | Date: March 12, 2018 |
• | Sanction: Home & Service received a fine of Won 5.04 million. |
• | Reason and the Relevant Law: Violated Article 10-2 of the Industrial Safety and Health Act by delaying the reporting of details of industrial accidents. |
• | Status of Implementation: Paid the fine. |
• | Company’s Measures: Improve management of industrial accidents. |
(3) | Violation of Industrial Safety and Health Act |
• | Date: April 30, 2018 |
• | Sanction: Home & Service received a correctional order for failing to establish an industrial safety and health committee and providing training related to employee safety and health. |
• | Reason and the Relevant Law: Violated Articles 19-1 and 31-1 of the Industrial Safety and Health Act for failing to establish an industrial safety and health committee and provide training related to employee safety and health in the first quarter of 2018. |
• | Status of Implementation: Paid the fine, resolved to establish an industrial safety and health committee on May 16, 2018 and conducted additional offline and online training programs. |
• | Company’s Measures: Implement the correctional order. |
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[SK Planet]
(1) | Violation of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. |
• | Date: April 10, 2017 |
• | Sanction: SK Planet received and paid a fine of Won 10 million for breaching of protective measures for personal information rule by not conducting additional measures for security apart from requesting ID and password with a merchant management system under IMPAY service, which was disclosed during a survey on personal information protection carried out by the KCC in August 2016. |
• | Reason and the Relevant Law: Violated Article 28 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. (Protective Measures for Personal Information). |
• | Company’s Measures: Implemented an additional authentication procedure (OTP authentication) to the merchant management system / implemented additional internal training and improved management to prevent its recurrence. |
(2) | Violation of the Foreign Exchange Transactions Act |
• | Date: April 27, 2018 |
• | Sanction: SK Planet paid a fine of Won 10 million for failing topre-register its Payment Gateway business, as required by a change in applicable law. |
• | Reason and the Relevant Law: Violated Article8-1 of the Foreign Exchange Transactions Act. |
• | Company’s Measures: Engage in close monitoring to avoid future recurrences of violation. |
[SK Telink]
(1) | Violation of the Telecommunications Business Act |
• | Date: February 4, 2016 |
• | Sanction: SK Telink received a correctional order and a fine of Won 49 million. |
• | Reason and the Relevant Law: Violated Article50-1, Paragraph 5 of the Telecommunications Business Act and Article42-1 of the related Enforcement Decree by transferring account names of cell phone lines without subscribers’ consent, changing phone numbers upon such transfer of account names, subscribing users to cell phone lines that exceed the maximum number of cell phone lines determined in the user agreement, opening accounts using a third party’s name and transferring ownership of and reselling the account, changing account names with fabricated names of foreigners and changing accounts of cell phone lines owned by foreigners whose residency period in Korea has expired. |
• | Status of Implementation: Ceased the prohibited practice, disclosed having received the correctional order in the press (May 2016) and paid the fine (May 2016). |
• | Company’s Measures: Improve operating procedures to prevent its recurrence. |
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(2) | Violation of the Telecommunications Business Act |
• | Date: October 12, 2018 |
• | Sanction: SK Telink received a correctional order and a fine of Won 55.4 million. |
• | Reason and the Relevant Law: Violated Article 50-1, Paragraph 5 of the Telecommunications Business Act and Article 42-1 of the related Enforcement Decree by failing to explain or notify of the availability of a similar service that is relatively cheaper before entering into “representative number service” (a fixed-line telephone credit card payment service) contracts with VAN operators after October 2012. |
• | Status of Implementation: Ceased the prohibited practice, disclosed the receipt of the correctional order in the press (December 2018) and paid the fine (December 2018). |
• | Company’s Measures: Improve operating procedures to prevent its recurrence. |
[Eleven Street]
(1) | Violation of the Electronic Financial Transactions Act |
• | Date: May 4, 2016 |
• | Sanction: Eleven Street received a fine of Won 25 million. |
• | Reason and the Relevant Law: Violated Article 21 (Duty to Ensure Safety) of the Electronic Financial Transactions Act. |
• | Status of Implementation: Paid the fine. |
• | Company’s Measures: Implemented procedures to prevent recurrence such as setting up various detailed test scenarios, enhancing quality assurance, organizing real-time notification processes upon detection of abnormal transactions and refining a continuous monitoring and reporting system. |
(2) | Violation of the Act on Consumer Protection in Electronic Commerce |
• | Date: August 19, 2016 (Fined); September 12, 2016 (Warned) |
• | Sanction: Eleven Street received a fine of Won 5 million. |
• | Reason and the Relevant Law: Violated Article 21 (Prohibited Acts) of the Act on Consumer Protection in Electronic Commerce. |
• | Status of Implementation: Admitted to the violation in connection with the warning but submitted a statement of objection on August 26, 2016 regarding the fine. |
• | Company’s Measures: Executed a seminar regarding the Act on Consumer Protection in Electronic Commerce to prevent recurrence, reviewed the advertisement/display approval process and implemented a continuous monitoring system. |
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(3) | Violation of the Framework Act on Logistics Policies |
• | Date: November 10, 2016 |
• | Sanction: Eleven Street received a fine of Won 156 thousand for failing to register a modification of the international logistics brokerage business on time (Within 60 days from the date of modification). |
• | Reason and the Relevant Law: Violated Article 43 of the Framework Act on Logistics Policies (Registration of international logistics brokerage business). |
• | Company’s Measures: Implemented a continuous monitoring system to prevent its recurrence in registration of a modification. |
(4) | Violation of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. |
• | Date: April 10, 2017 |
• | Sanction: Eleven Street received and paid a fine of Won 10 million for breaching regulations on personal information protection by not conducting additional measures for security apart from requesting ID and password with a merchant management system under IMPAY service, which was disclosed during an audit on personal information protection carried out by the KCC in August 2016. |
• | Reason and the Relevant Law: Violated Article 28 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. (Protective Measures for Personal Information). |
• | Company’s Measures: Implemented an additional authentication procedure (OTP authentication) to the merchant management system / implemented additional internal training and improved management to prevent its recurrence. |
4. | Use of Direct Financing |
A. | Use of Proceeds from Public Offerings |
Not applicable.
B. | Use of Proceeds from Private Offerings |
[Dreamus Company]
(As of September 30, 2019) | (Unit: in millions of Won) | |||||||||||
Classification | Payment Date | Planned Use of Proceeds | Actual Use of Proceeds | Reasons for Difference | ||||||||
Use | Amount | Use | Amount | |||||||||
Capital increase through third-party allotment | August 29, 2017 | Expansion of new businesses | 65,000 | Acquisition of equity interest in Life Design Company Inc.; acquisition of supply and distribution rights of music records/digital contents; acquisition of equity interest and investment in Groovers | 65,000 | — | ||||||
Capital increase through third-party allotment | August 10, 2018 | Strengthening of contents business and establishment of infrastructure related to music industry | 70,000 | Operating expenses for music business and investment in contents | 31,025 | A portion of proceeds remain unused as of September 30, 2019 |
73
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C. | Material Events Subsequent to the Reporting Period |
[SK Telecom]
In order to pursue a strategic alliance with Kakao, the Company decided to acquire newly-issued common shares of Kakao, and Kakao decided to acquire treasury shares of the Company. As a result, the Company sold its treasury shares in the aggregate amount of approximately Won 300 billion at a mutually agreed price level. See the report on “Decision on Acquisition of Shares of Kakao” filed by the Company on October 28, 2019 for more information.
[SK Broadband]
On November 8, 2019, the Korea Fair Trade Commission conditionally approved SK Broadband’s proposed merger with Tbroad, Tbroad Dongdaemun and KDMC.
74
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SK Telecom Co., Ltd. | ||
(Registrant) | ||
By: | /s/ Jeong Hwan Choi | |
(Signature) | ||
Name: | Jeong Hwan Choi | |
Title: | Senior Vice President |
Date: December 13, 2019
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Interim Financial Statements
(Unaudited)
September 30, 2019 and 2018
(With Independent Auditors’ Review Report Thereon)
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Page | ||||
1 | ||||
3 | ||||
5 | ||||
6 | ||||
7 | ||||
8 | ||||
Notes to the Condensed Separate Interim Financial Statements | 10 |
Table of Contents
Independent Auditors’ Review Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
SK Telecom Co., Ltd.:
Reviewed financial statements
We have reviewed the accompanying condensed separate interim financial statements of SK Telecom Co., Ltd. (the “Company”), which comprise the condensed separate statement of financial position as of September 30, 2019, the condensed separate statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2019 and 2018, the condensed separate statement of changes in equity and cash flows for the nine-month periods ended September 30, 2019 and 2018, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s responsibility
Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standards(“K-IFRS”) No. 1034,Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of condensed separate interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ review responsibility
Our responsibility is to issue a report on these condensed separate interim financial statements based on our reviews.
We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared fairly, in all material respects, in accordance withK-IFRS No. 1034,Interim Financial Reporting.
Emphasis of matter
As a matter that does not have an impact on our review conclusion, we draw attention to the matter described in Note 3 to the condensed separate interim financial statements. The Company has initially adoptedK-IFRS No. 1116 for the year beginning on January 1, 2019, and the Company has taken an exemption not to restate the condensed separate financial statements as of December 31, 2018 or for the three-month and nine-month period ended September 30, 2018, presented for comparative purposes, in accordance with transition requirements of the standards. The financial impacts of applyingK-IFRS No. 1116 are discussed in Note 3.
Table of Contents
Other matters
The separate statement of financial position of the Company as of December 31, 2018, and the related separate statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated February 28, 2019, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2018, presented for comparative purposes, is consistent, in all material respects, with the audited separate financial statements from which it has been derived.
The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.
KPMG Samjong Accounting Corp.
Seoul, Korea
November 13, 2019
This report is effective as of November 13, 2019, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
2
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SK TELECOM CO., LTD.
Condensed Separate Statements of Financial Position
As of September 30, 2019 and December 31, 2018
(In millions of won) | Note | September 30, 2019 | December 31, 2018 | |||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 25,26 | 877,823 | ||||||||||
Short-term financial instruments | 25,26 | 169,000 | 99,000 | |||||||||
Short-term investment securities | 7,25,26 | 48,226 | 47,849 | |||||||||
Accounts receivable – trade, net | 4,25,26,27 | 1,488,382 | 1,354,260 | |||||||||
Short-term loans, net | 4,25,26,27 | 68,413 | 54,336 | |||||||||
Accounts receivable – other, net | 3,4,25,26,27,28 | 608,617 | 518,451 | |||||||||
Contract assets | 6 | 3,119 | 1,689 | |||||||||
Prepaid expenses | 3,5 | 1,895,019 | 1,688,234 | |||||||||
Inventories, net | 21,146 | 22,079 | ||||||||||
Prepaid income taxes | 23 | 63,814 | — | |||||||||
Derivative financial assets | 25,26 | 36,897 | — | |||||||||
Advanced payments and others | 4,25,26 | 93,832 | 15,657 | |||||||||
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| |||||||||
4,754,598 | 4,679,378 | |||||||||||
|
|
|
| |||||||||
Non-Current Assets: | �� | |||||||||||
Long-term financial instruments | 25,26 | 382 | 382 | |||||||||
Long-term investment securities | 7,25,26 | 183,718 | 410,672 | |||||||||
Investments in subsidiaries, associates and joint ventures | 8 | 10,583,292 | 10,188,914 | |||||||||
Property and equipment, net | 3,9,27 | 7,600,622 | 6,943,490 | |||||||||
Goodwill | 1,306,236 | 1,306,236 | ||||||||||
Intangible assets, net | 3,10 | 3,516,538 | 4,010,864 | |||||||||
Long-term loans, net | 4,25,26,27 | 7,903 | 7,236 | |||||||||
Long-term accounts receivable – other | 3,4,25,26,28 | 533,909 | 274,053 | |||||||||
Long-term contract assets | 6 | 10,368 | 5,842 | |||||||||
Long-term prepaid expenses | 3,5 | 1,108,187 | 753,181 | |||||||||
Guarantee deposits | 4,25,26,27 | 187,729 | 184,887 | |||||||||
Long-term derivative financial assets | 25,26 | 139,657 | 50,805 | |||||||||
Defined benefit assets | 14 | — | 31,834 | |||||||||
Othernon-current assets | 249 | 249 | ||||||||||
|
|
|
| |||||||||
25,178,790 | 24,168,645 | |||||||||||
|
|
|
| |||||||||
Total Assets | 28,848,023 | |||||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
3
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SK TELECOM CO., LTD.
Condensed Separate Statements of Financial Position, Continued
As of September 30, 2019 and December 31, 2018
(In millions of won) | Note | September 30, 2019 | December 31, 2018 | |||||||||
Liabilities and Shareholders’ Equity |
| |||||||||||
Current Liabilities: | ||||||||||||
Accounts payable – other | 25,26,27 | 1,622,744 | ||||||||||
Contract liabilities | 6 | 67,772 | 46,075 | |||||||||
Withholdings | 25,26 | 660,119 | 696,790 | |||||||||
Accrued expenses | 25,26 | 766,087 | 664,286 | |||||||||
Income tax payable | 23 | — | 162,609 | |||||||||
Provisions | 13 | 48,608 | 49,303 | |||||||||
Current installments of long-term debt, net | 11,25,26 | 593,886 | 512,377 | |||||||||
Lease liabilities | 3,25,26,27 | 215,739 | — | |||||||||
Current installments of long-term payables – other | 12,25,26 | 422,117 | 423,884 | |||||||||
|
|
|
| |||||||||
4,645,267 | 4,178,068 | |||||||||||
|
|
|
| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 11,25,26 | 5,639,891 | 5,222,865 | |||||||||
Long-term borrowings, excluding current installments, net | 11,25,26 | 27,336 | 31,764 | |||||||||
Long-term payables – other | 12,25,26 | 1,538,937 | 1,939,082 | |||||||||
Long-term contract liabilities | 6 | 14,139 | �� | 8,358 | ||||||||
Long-term derivative financial liabilities | 25,26 | — | 1,107 | |||||||||
Long-term lease liabilities | 3,25,26,27 | 228,678 | — | |||||||||
Long-term provisions | 13 | 16,262 | 12,483 | |||||||||
Deferred tax liabilities | 3,23 | 663,105 | 523,732 | |||||||||
Defined benefit liabilities | 14 | 318 | — | |||||||||
Othernon-current liabilities | 25,26 | 43,369 | 43,077 | |||||||||
|
|
|
| |||||||||
8,172,035 | 7,782,468 | |||||||||||
|
|
|
| |||||||||
Total Liabilities | 12,817,302 | 11,960,536 | ||||||||||
|
|
|
| |||||||||
Shareholders’ Equity: | ||||||||||||
Share capital | 1,15 | 44,639 | 44,639 | |||||||||
Capital surplus and others | 15,16 | 415,552 | 415,324 | |||||||||
Retained earnings | 3,17 | 16,708,070 | 16,467,789 | |||||||||
Reserves | 18 | (52,175 | ) | (40,265 | ) | |||||||
|
|
|
| |||||||||
Total Shareholders’ Equity | 17,116,086 | 16,887,487 | ||||||||||
|
|
|
| |||||||||
Total Liabilities and Shareholders’ Equity | ₩ | 29,933,388 | 28,848,023 | |||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
4
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SK TELECOM CO., LTD.
Condensed Separate Statements of Income
For the three and nine-month periods ended September 30, 2019 and 2018
(In millions of won) | ||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||
Note | Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | ||||||||||||||||
Operating revenue: | 19,27 | |||||||||||||||||||
Revenue | ₩ | 2,911,550 | 8,571,475 | 2,925,572 | 8,855,945 | |||||||||||||||
Operating expenses: | 27 | |||||||||||||||||||
Labor | 194,454 | 578,501 | 174,779 | 508,487 | ||||||||||||||||
Commissions | 1,156,371 | 3,321,847 | 1,112,744 | 3,331,204 | ||||||||||||||||
Depreciation and amortization | 3 | 680,737 | 1,967,750 | 578,269 | 1,759,703 | |||||||||||||||
Network interconnection | 137,540 | 419,686 | 162,286 | 491,913 | ||||||||||||||||
Leased line | 54,823 | 158,437 | 70,146 | 208,975 | ||||||||||||||||
Advertising | 36,014 | 93,663 | 43,678 | 107,644 | ||||||||||||||||
Rent | 3 | 55,541 | 168,205 | 108,978 | 331,560 | |||||||||||||||
Cost of goods sold | 105,114 | 326,304 | 126,474 | 383,169 | ||||||||||||||||
Others | 20 | 238,195 | 703,361 | 237,578 | 685,114 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
2,658,789 | 7,737,754 | 2,614,932 | 7,807,769 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Operating profit | 252,761 | 833,721 | 310,640 | 1,048,176 | ||||||||||||||||
Finance income | 22 | 18,278 | 566,621 | 34,427 | 241,720 | |||||||||||||||
Finance costs | 3,22 | (65,056 | ) | (197,926 | ) | (59,087 | ) | (198,989 | ) | |||||||||||
Othernon-operating income | 21 | 4,848 | 12,317 | 2,573 | 19,067 | |||||||||||||||
Othernon-operating expenses | 21 | (7,865 | ) | (32,557 | ) | (25,650 | ) | (73,654 | ) | |||||||||||
Loss on investments in subsidiaries and associates | 8 | — | — | (12,977 | ) | (12,977 | ) | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit before income tax | 202,966 | 1,182,176 | 249,926 | 1,023,343 | ||||||||||||||||
Income tax expense | 23 | 41,878 | 215,081 | 66,604 | 255,808 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit for the period | ₩ | 161,088 | 967,095 | 183,322 | 767,535 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Earnings per share: | 24 | |||||||||||||||||||
Basic and diluted earnings per share (in won) | ₩ | 2,190 | 13,302 | 2,544 | 10,699 | |||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
5
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SK TELECOM CO., LTD.
Condensed Separate Statements of Comprehensive Income
For the three and nine-month periods ended September 30, 2019 and 2018
(In millions of won) | ||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||
Note | Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | ||||||||||||||||
Profit for the period | 967,095 | 183,322 | 767,535 | |||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||||||||||
Remeasurement of defined benefit liabilities | 14 | (395 | ) | (1,886 | ) | (85 | ) | (4,150 | ) | |||||||||||
Valuation loss on financial assets at fair value through other comprehensive income | 18 | (5,449 | ) | (12,707 | ) | (184 | ) | (40,911 | ) | |||||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||||||||||
Net change in unrealized fair value of derivatives | 18 | 9,254 | 30,871 | (4,248 | ) | (14,254 | ) | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other comprehensive income (loss) for the period, net of taxes | 3,410 | 16,278 | (4,517 | ) | (59,315 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total comprehensive income | 983,373 | 178,805 | 708,220 | |||||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
6
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Statements of Changes in Equity
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | ||||||||||||||||||||||||||||||||||||||||||||
Capital surplus and others | ||||||||||||||||||||||||||||||||||||||||||||
Note | Share capital | Paid-in surplus | Treasury shares | Hybrid bonds | Share option | Other | Sub-total | Retained earnings | Reserves | Total equity | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2017 | 2,915,887 | (2,260,626 | ) | 398,518 | 414 | (682,298 | ) | 371,895 | 14,512,556 | 78,301 | 15,007,391 | |||||||||||||||||||||||||||||||||
Impact of adoptingK-IFRS No. 1115 | — | — | — | — | — | — | — | 1,723,985 | — | 1,723,985 | ||||||||||||||||||||||||||||||||||
Impact of adoptingK-IFRS No. 1109 | — | — | — | — | — | — | — | 49,611 | (58,389 | ) | (8,778 | ) | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
Restated balance, January 1, 2018 | 2,915,887 | (2,260,626 | ) | 398,518 | 414 | (682,298 | ) | 371,895 | 16,286,152 | 19,912 | 16,722,598 | |||||||||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | — | 767,535 | — | 767,535 | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | 14,18 | — | — | — | — | — | — | — | (18,166 | ) | (41,149 | ) | (59,315 | ) | ||||||||||||||||||||||||||||||
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|
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|
|
|
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| |||||||||||||||||||||||||||
— | — | — | — | — | — | — | 749,369 | (41,149 | ) | 708,220 | ||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | — | — | — | (635,482 | ) | — | (635,482 | ) | ||||||||||||||||||||||||||||||||
Interim dividends | — | — | — | — | — | — | — | (70,609 | ) | — | (70,609 | ) | ||||||||||||||||||||||||||||||||
Share option | 16 | — | — | — | — | 441 | — | 441 | — | — | 441 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | — | — | — | — | — | — | — | (12,111 | ) | — | (12,111 | ) | ||||||||||||||||||||||||||||||||
Repayments of hybrid bonds | — | — | — | (398,518 | ) | — | (1,482 | ) | (400,000 | ) | — | — | (400,000 | ) | ||||||||||||||||||||||||||||||
Proceeds from issuance of hybrid bonds | — | — | — | 398,759 | — | — | 398,759 | — | — | 398,759 | ||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
— | — | — | 241 | 441 | (1,482 | ) | (800 | ) | (718,202 | ) | — | (719,002 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
Balance, September 30, 2018 | 2,915,887 | (2,260,626 | ) | 398,759 | 855 | (683,780 | ) | 371,095 | 16,317,319 | (21,237 | ) | 16,711,816 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
Balance, December 31, 2018 | 2,915,887 | (1,979,475 | ) | 398,759 | 1,007 | (920,854 | ) | 415,324 | 16,467,789 | (40,265 | ) | 16,887,487 | ||||||||||||||||||||||||||||||||
Impact of adoptingK-IFRS No. 1116 | 3 | — | — | — | — | — | — | — | (25,229 | ) | — | (25,229 | ) | |||||||||||||||||||||||||||||||
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Restated balance, January 1, 2019 | 2,915,887 | (1,979,475 | ) | 398,759 | 1,007 | (920,854 | ) | 415,324 | 16,442,560 | (40,265 | ) | 16,862,258 | ||||||||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | — | 967,095 | — | 967,095 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 14,18 | — | — | — | — | — | — | — | 28,188 | (11,910 | ) | 16,278 | ||||||||||||||||||||||||||||||||
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|
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|
| |||||||||||||||||||||||||||
— | — | — | — | — | — | — | 995,283 | (11,910 | ) | 983,373 | ||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | — | — | — | (646,828 | ) | — | (646,828 | ) | ||||||||||||||||||||||||||||||||
Interim dividends | — | — | — | — | — | — | — | (71,870 | ) | — | (71,870 | ) | ||||||||||||||||||||||||||||||||
Share option | 16 | — | — | — | — | 228 | — | 228 | — | — | 228 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | — | — | — | — | — | — | — | (11,075 | ) | — | (11,075 | ) | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
— | — | — | — | 228 | — | 228 | (729,773 | ) | — | (729,545 | ) | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
Balance, September 30, 2019 | 2,915,887 | (1,979,475 | ) | 398,759 | 1,235 | (920,854 | ) | 415,552 | 16,708,070 | (52,175 | ) | 17,116,086 | ||||||||||||||||||||||||||||||||
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See accompanying notes to the condensed separate interim financial statements.
7
Table of Contents
SK TELECOM CO., LTD.
Condensed Separate Statements of Cash Flows
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | Note | September 30, 2019 | September 30, 2018 | |||||||||
Cash flows from operating activities: | ||||||||||||
Cash generated from operating activities: | ||||||||||||
Profit for the period | 767,535 | |||||||||||
Adjustments for income and expenses | 29 | 1,978,804 | 2,166,079 | |||||||||
Changes in assets and liabilities related to operating activities | 29 | (840,155 | ) | (230,110 | ) | |||||||
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| |||||||||
2,105,744 | 2,703,504 | |||||||||||
Interest received | 20,866 | 25,280 | ||||||||||
Dividends received | 514,399 | 176,030 | ||||||||||
Interest paid | (172,735 | ) | (142,482 | ) | ||||||||
Income tax paid | (309,778 | ) | (372,005 | ) | ||||||||
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| |||||||||
Net cash provided by operating activities | 2,158,496 | 2,390,327 | ||||||||||
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| |||||||||
Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term financial instruments, net | — | 15,000 | ||||||||||
Collection of short-term loans | 57,053 | 154,579 | ||||||||||
Proceeds from disposal of long-term investment securities | 221,656 | 185,142 | ||||||||||
Proceeds from disposal of investments in subsidiaries and associates | — | 10,429 | ||||||||||
Proceeds from disposal of property and equipment | 7,514 | 6,749 | ||||||||||
Proceeds from disposal of intangible assets | 3,836 | 145 | ||||||||||
Collection of lease receivables | 10,884 | — | ||||||||||
|
|
|
| |||||||||
300,943 | 372,044 | |||||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term financial instruments, net | (70,000 | ) | — | |||||||||
Increase in short-term loans | (71,946 | ) | (165,842 | ) | ||||||||
Acquisition of long-term investment securities | (13,804 | ) | (990 | ) | ||||||||
Acquisition of investments in subsidiaries, associates, and joint ventures | (375,339 | ) | (323,112 | ) | ||||||||
Acquisition of property and equipment | (1,563,173 | ) | (1,304,941 | ) | ||||||||
Acquisition of intangible assets | (24,632 | ) | (21,415 | ) | ||||||||
|
|
|
| |||||||||
(2,118,894 | ) | (1,816,300 | ) | |||||||||
|
|
|
| |||||||||
Net cash used in investing activities | ) | (1,444,256 | ) | |||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
8
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SK TELECOM CO., LTD.
Condensed Separate Statements of Cash Flows, Continued
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | ||||||||||||
Note | September 30, 2019 | September 30, 2018 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Cash inflows from financing activities: | ||||||||||||
Proceeds from issuance of hybrid bonds | 398,759 | |||||||||||
Proceeds from issuance of debentures | 796,768 | 1,326,346 | ||||||||||
Cash inflows from settlement of derivatives | 11,931 | — | ||||||||||
|
|
|
| |||||||||
808,699 | 1,725,105 | |||||||||||
Cash outflows for financing activities: | ||||||||||||
Repayments of long-term borrowings | (6,441 | ) | (6,200 | ) | ||||||||
Repayments of hybrid bonds | — | (400,000 | ) | |||||||||
Repayments of long-term payables – other | (425,349 | ) | (302,867 | ) | ||||||||
Repayments of debentures | (390,000 | ) | (1,036,550 | ) | ||||||||
Payments of cash dividends | (718,698 | ) | (706,091 | ) | ||||||||
Payments of interest on hybrid bonds | (11,075 | ) | (12,111 | ) | ||||||||
Cash outflows from settlement of derivatives | — | (29,213 | ) | |||||||||
Repayments of lease liabilities | (217,372 | ) | — | |||||||||
|
|
|
| |||||||||
(1,768,935 | ) | (2,493,032 | ) | |||||||||
|
|
|
| |||||||||
Net cash used in financing activities | (960,236 | ) | (767,927 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in cash and cash equivalents | (619,691 | ) | 178,144 | |||||||||
Cash and cash equivalents at beginning of the period | 877,823 | 880,583 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents | 1 | (280 | ) | |||||||||
|
|
|
| |||||||||
Cash and cash equivalents at end of the period | 1,058,447 | |||||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
9
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
1. | Reporting Entity |
SK Telecom Co., Ltd. (“the Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The Company mainly provides wireless telecommunications services in Korea. The head office of the Company is located at 65,Eulji-ro,Jung-gu, Seoul, Korea.
The Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of September 30, 2019, the Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Holdings Co., Ltd. | 21,624,120 | 26.78 | ||||||
National Pension Service, institutional investors and other shareholders | 50,245,708 | 62.23 | ||||||
Treasury shares | 8,875,883 | 10.99 | ||||||
|
|
|
| |||||
80,745,711 | 100.00 | |||||||
|
|
|
|
2. | Basis of Preparation |
(1) | Statement of compliance |
These condensed separate interim financial statements were prepared in accordance withK-IFRS No. 1034,Interim Financial Reporting, as part of the period covered by the Company’sK-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since December 31, 2018. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.
These condensed interim financial statements are separate interim financial statements prepared in accordance withK-IFRS No.1027,Separate Financial Statements, presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.
The Company’s appliedK-IFRS No.1116,Leases, effective January 1, 2019. Changes to significant accounting policies are described in note 3.
(2) | Use of estimates and judgments |
1) Critical judgments, assumptions and estimation uncertainties
The preparation of the condensed separate interim financial statements in conformity withK-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as of and for the year ended December 31, 2018 except significant judgments and key sources of estimation uncertainty related to theK-IFRS No. 1116,Leases, that are described in note 3.
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SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
2. | Basis of Preparation, Continued |
(2) | Use of estimates and judgments, Continued |
2) Fair value measurement
A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial andnon-financial assets and liabilities. The Company has established policies and processes with respect to the measurement of fair values including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.
The Company regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Company assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements ofK-IFRS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
• | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
• | Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Information about assumptions used for fair value measurements are included in note 26.
11
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
3. | Significant Accounting Policies |
The significant accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2018, except for the following changes in accounting policies described below. The following changes in accounting policies are also expected to be reflected in the Company’s separate financial statements as at and for the year ending December 31, 2019.
(1) | Changes in accounting policies |
The Company has initially adoptedK-IFRS No. 1116from January 1, 2019. A number of other amended standards are effective from January 1, 2019, but they do not have a material effect on the Company’s condensed separate interim financial statements.
1) | K-IFRS No. 1116,Leases |
K-IFRS No. 1116 introduced a single,on-balance sheet accounting model for lessees. As a result, the Company, as a lessee, has recognizedright-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.
The Company has appliedK-IFRS No. 1116 from January 1, 2019 using the cumulative effect method with the effect of initially applying this standard as an adjustment to the opening balance of retained earnings as at January 1, 2019. Accordingly, the comparative information presented for 2018 has been presented, as previously reported, underK-IFRS No. 1017 and has not been restated. Details of the changes in accounting policies are disclosed below.
i) Definition of a lease
Previously, the Company determined at contract inception whether an arrangement was or contained a lease underK-IFRS No. 2104, Determining Whether an Arrangement Contains a Lease. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. UnderK-IFRS No. 1116, a contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
ii) As a lessee
The Company leases a number of assets including buildings and vehicles. The terms of leases are negotiated individually and include various conditions. Each lease contract is entered into with a term of 1~50 years.
As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. UnderK-IFRS No. 1116, the Company recognizesright-of-use assets and lease liabilities for most leases – i.e. theses leases are presented on the statements of financial position.
However, the Company has elected not to recognizeright-of-use assets and lease liabilities for some leases with terms less than 12 months or leases oflow-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
12
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SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
3. | Significant Accounting Policies, Continued |
(1) | Changes in accounting policies, Continued |
1) | K-IFRS No. 1116,Leases, Continued |
ii) | As a lessee, Continued |
The Company has also elected to apply the practical expedient not to separatenon-lease components and instead account for the lease andnon-lease components as a single lease component.
j | Significant accounting policies |
The Company recognizes aright-of-use asset and a lease liability at the lease commencement date. Theright-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability. The Company presents itsright-of-use assets in Property and equipment on the statements of financial position.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payment made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The Company has applied judgment to determine the lease term for some lease contracts in which it is a lessee that include extension options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities andright-of-use assets recognized. The Company has not included the extension option periods in the lease term because it is not reasonably certain to exercise such options. After the commencement date, the Company reassesses the lease term upon the occurrence of a significant event or a significant change in circumstances that is within the control of the Company that affects whether the Company is reasonably certain to exercise the extension option.
13
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
3. | Significant Accounting Policies, Continued |
(1) | Changes in accounting policies, Continued |
1) | K-IFRS No. 1116,Leases, Continued |
ii) As a lessee, Continued
k | Transition |
At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate as of January 1, 2019.Right-of-used assets are measured at their carrying amounts as ifK-IFRS No. 1116 had been applied since the commencement date, discounted using the Company’s incremental borrowing rate at the date of initial application.
The Company used the following practical expedients when applyingK-IFRS No. 1116 to leases previously classified as operating leases underK-IFRS No. 1017.
• | Excluded initial direct costs from measuring theright-of-use asset at the date of initial application. |
• | Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease. |
iii) As a lessor
The accounting policies applicable to the Company as a lessor are not different from those underK-IFRS No. 1017. However, when the Company is an intermediate lessor thesub-leases are classified with reference to theright-of-use asset arising from the head lease, not with reference to the underlying asset.
iv) Impacts on financial statements
j | Impacts on transition |
On transition toK-IFRS No. 1116, the Company recognizedright-of-use assets and lease liabilities, with the difference recognized in retained earnings. The impacts on transition are summarized below.
(In millions of won) | January 1, 2019 | |||
Impacts on the assets: | ||||
Right-of-use assets presented in property and equipment | ||||
Increase in accounts receivable – other (lease receivables) | 17,203 | |||
Adjustments in intangible assets | (2,274 | ) | ||
Decrease in advanced payments and others | (53,608 | ) | ||
|
| |||
377,873 | ||||
|
| |||
Impacts on the liabilities: | ||||
Increase in the lease liabilities | 412,407 | |||
Decrease in deferred tax liabilities | (9,305 | ) | ||
|
| |||
403,102 | ||||
|
| |||
Decrease in retained earnings | ) | |||
|
|
14
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
3. | Significant Accounting Policies, Continued |
(1) | Changes in accounting policies, Continued |
1) | K-IFRS No. 1116,Leases, Continued |
iv) Impacts on financial statements, Continued
j | Impacts on transition, Continued |
When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted average rate applied is 1.92%.
(In millions of won) | ||||
January 1, 2019 | ||||
Operating lease commitments at December 31, 2018 | ||||
Discounted using the incremental borrowing rate at January 1, 2019 | 419,141 | |||
- Recognition exemption for leases with less than 12 months of lease term at the lease commencement date | (6,617 | ) | ||
- Recognition exemption for leases oflow-value assets | (117 | ) | ||
|
| |||
Lease liabilities recognized at January 1, 2019 | ||||
|
|
k | Impacts subsequent to adoption |
As a result of initially applyingK-IFRS No. 1116, in relation to the leases that were previously classified as operating leases the Company recognized₩461,088 million ofright-of-use assets and₩444,417 million of lease liabilities as of September 30, 2019.
Also, in relation to those leases underK-IFRS No. 1116, the Company has recognized depreciation and interest costs, instead of operating lease expense. For the nine-month period ended September 30, 2019, the Company recognized₩196,672 million of depreciation charges and₩6,262 million of interest costs from those leases. Expenses related to short-term leases and leases oflow-value assets are₩56,666 million and₩61 million, respectively.
The payments of lease liabilities presented in the cash flows from financing activities would have been included in the cash flows from operating activities if the previous accounting standards were applied.
15
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
4. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (111,779 | ) | 1,488,382 | |||||||||
Short-term loans | 69,104 | (691 | ) | 68,413 | ||||||||
Accounts receivable – other(*) | 649,106 | (40,489 | ) | 608,617 | ||||||||
Accrued income | 581 | — | 581 | |||||||||
|
|
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| |||||||
2,318,952 | (152,959 | ) | 2,165,993 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 49,018 | (41,115 | ) | 7,903 | ||||||||
Long-term accounts receivable – other(*) | 533,909 | — | 533,909 | |||||||||
Guarantee deposits | 187,729 | — | 187,729 | |||||||||
|
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| |||||||
770,656 | (41,115 | ) | 729,541 | |||||||||
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|
| |||||||
(194,074 | ) | 2,895,534 | ||||||||||
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|
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|
|
(*) | Gross and carrying amounts of accounts receivable – other as of September 30, 2019 include |
(In millions of won) | December 31, 2018 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (119,842 | ) | 1,354,260 | |||||||||
Short-term loans | 54,885 | (549 | ) | 54,336 | ||||||||
Accounts receivable – other(*) | 568,878 | (50,427 | ) | 518,451 | ||||||||
Accrued income | 410 | — | 410 | |||||||||
|
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|
|
|
| |||||||
2,098,275 | (170,818 | ) | 1,927,457 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 48,344 | (41,108 | ) | 7,236 | ||||||||
Long-term accounts receivable – other(*) | 274,053 | — | 274,053 | |||||||||
Guarantee deposits | 184,887 | — | 184,887 | |||||||||
|
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|
|
|
| |||||||
507,284 | (41,108 | ) | 466,176 | |||||||||
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|
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| |||||||
(211,926 | ) | 2,393,633 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2018 include |
16
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
4. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on trade and other receivables measured at amortized costs for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||
January 1, 2019 | Impairment | Write-offs(*) | Collection of receivables previously written-off | September 30, 2019 | ||||||||||||||||
Accounts receivable – trade | 2,770 | (18,407 | ) | 7,574 | 111,779 | |||||||||||||||
Accounts receivable – other | 92,084 | 2,543 | (19,078 | ) | 6,746 | 82,295 | ||||||||||||||
|
|
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|
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| |||||||||||
5,313 | (37,485 | ) | 14,320 | 194,074 | ||||||||||||||||
|
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|
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||
January 1, 2018 | Impact of adopting K-IFRS No. 1109 | Impairment | Write-offs(*) | Collection of receivables previously written-off | September 30, 2018 | |||||||||||||||||||
Accounts receivable – trade | 12,950 | 11,756 | (14,831 | ) | 8,121 | 125,823 | ||||||||||||||||||
Accounts receivable – other | 97,547 | 99 | 2,438 | (7,794 | ) | 4,057 | 96,347 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
13,049 | 14,194 | (22,625 | ) | 12,178 | 222,170 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | The Company writes off the trade and other receivables when contractual payments are more than 5 years past due, or for reasons such as termination of operations or liquidation. |
(3) | The Company applies the practical expedient that allows the Company to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Company uses its historical credit loss experience over the past three years and classifies the accounts receivable – trade by their credit risk characteristics and days overdue. |
As the Company is a wireless telecommunications service provider, the Company’s financial assets measured at amortized cost consist primarily of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
17
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
5. | Prepaid expenses |
(1) | Details of prepaid expenses as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Current assets: |
| |||||||
Incremental costs of obtaining contracts | 1,574,309 | |||||||
Others | 59,377 | 113,925 | ||||||
|
|
|
| |||||
1,688,234 | ||||||||
|
|
|
| |||||
Non-current assets: |
| |||||||
Incremental costs of obtaining contracts | 724,233 | |||||||
Others | 20,581 | 28,948 | ||||||
|
|
|
| |||||
753,181 | ||||||||
|
|
|
|
(2) | Incremental costs of obtaining contracts |
Incremental costs of obtaining contracts that are capitalized as assets as of September 30, 2019 and the related amortization recognized as commissions for the three and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | ||||||||||||||||
2019 | 2018 | |||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Amortization recognized as commissions | 1,596,304 | 518,836 | 1,554,042 |
The Company pays commissions to its direct retail stores and authorized dealers for wireless telecommunications services for each service contract and installation contract secured. The Company capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Company expects to maintain its customers based on the Company’s historical subscriber churn rate.
18
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
6. | Contract assets and liabilities |
(1) | Details of contract assets and liabilities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | ₩ | 13,487 | 7,531 | |||||
Contract liabilities: | ||||||||
Wireless service contracts | 15,573 | 18,425 | ||||||
Customer loyalty programs | 23,016 | 17,113 | ||||||
Others | 43,322 | 18,895 | ||||||
|
|
|
| |||||
₩ | 81,911 | 54,433 | ||||||
|
|
|
|
(2) | The amount of revenue recognized for the nine-month period ended September 30, 2019 related to the contract liabilities carried forward from the prior period is |
7. | Investment Securities |
(1) | Details of short-term investment securities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||
Category | September 30, 2019 | December 31, 2018 | ||||||||
Beneficiary certificates | FVTPL | 47,849 |
(2) | Details of long-term investment securities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||
Category | September 30, 2019 | December 31, 2018 | ||||||||
Equity instruments | FVOCI(*) | ₩ | 105,831 | 333,161 | ||||||
Debt instruments | FVTPL | 77,887 | 77,511 | |||||||
|
|
|
| |||||||
₩ | 183,718 | 410,672 | ||||||||
|
|
|
|
(*) | The Company designated |
19
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
8. | Investments in Subsidiaries, Associates and Joint Ventures |
(1) | Investments in subsidiaries, associates and joint ventures as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Investments in subsidiaries | 5,286,601 | |||||||
Investments in associates and joint ventures | 5,150,701 | 4,902,313 | ||||||
|
|
|
| |||||
10,188,914 | ||||||||
|
|
|
|
(2) | Details of investments in subsidiaries as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won, except for share data) | September 30, 2019 | December 31, 2018 | ||||||||||||||
Number of shares | Ownership (%) | Carrying amount | Carrying amount | |||||||||||||
SK Telink Co., Ltd. | 1,432,627 | 100.0 | 243,988 | |||||||||||||
SK Broadband Co., Ltd. | 298,460,212 | 100.0 | 1,870,582 | 1,870,582 | ||||||||||||
SK Communications Co., Ltd. | 43,427,530 | 100.0 | 69,668 | 69,668 | ||||||||||||
PS&Marketing Corporation | 66,000,000 | 100.0 | 313,934 | 313,934 | ||||||||||||
SERVICEACE Co., Ltd. | 4,385,400 | 100.0 | 21,927 | 21,927 | ||||||||||||
SK Planet Co., Ltd. | 69,593,562 | 98.7 | 404,833 | 404,833 | ||||||||||||
Eleven Street Co., Ltd. | 8,224,709 | 80.3 | 1,049,403 | 1,049,403 | ||||||||||||
DREAMUS COMPANY (Formerly, IRIVER LIMITED)(*1) | 29,246,387 | 52.0 | 156,642 | 156,642 | ||||||||||||
SK Telecom China Holdings Co., Ltd. | — | 100.0 | 48,096 | 48,096 | ||||||||||||
Life & Security Holdings Co., Ltd. | 740,895 | 55.0 | 703,394 | 703,736 | ||||||||||||
SKT Americas, Inc. | 122 | 100.0 | 45,701 | 45,701 | ||||||||||||
Atlas Investment(*2) | — | 100.0 | 127,920 | 99,874 | ||||||||||||
SK Global Healthcare Business Group, Ltd. | — | 100.0 | 1,929 | 1,929 | ||||||||||||
One Store Co., Ltd. | 10,409,600 | 65.5 | 82,186 | 82,186 | ||||||||||||
id Quantique SA(*3) | 69,157,505 | 66.8 | 94,065 | 81,902 | ||||||||||||
SK Infosec Co., Ltd. | 12,636,024 | 100.0 | 44,410 | 44,410 | ||||||||||||
SK Telecom TMT Investment Corp.(*4) | 30,000 | 100.0 | 33,834 | — | ||||||||||||
FSK L&S Co., Ltd.(*5) | 2,415,750 | 60.0 | 17,757 | — | ||||||||||||
Incross Co., Ltd.(*6) | 2,786,455 | 34.6 | 53,722 | — | ||||||||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) and others | — | — | 48,600 | 47,790 | ||||||||||||
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| |||||||||||||
5,286,601 | ||||||||||||||||
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|
|
(*1) | The ownership has changed due to the conversion of the convertible bonds issued by DREAMUS COMPANY (Formerly, IRIVER LIMITED) during the nine-month period ended September 30, 2019. |
(*2) | The Company invested |
(*3) | The ownership has changed due to an unequalpaid-in capital increase during the nine-month period ended September 30, 2019. Also, the Company invested additional |
20
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(2) | Details of investments in subsidiaries as of September 30, 2019 and December 31, 2018 are as follows, Continued: |
(*4) | SK Telecom TMT Investment Corp. was newly established during the nine-month period ended September 30, 2019. |
(*5) | FSK L&S Co., Ltd. was reclassified as a subsidiary from an associate during the nine-month period ended September 30, 2019. |
(*6) | The Company acquired 2,786,455 shares of Incross Co., Ltd. at |
21
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(3) | Details of investments in associates and joint ventures as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won, except for share data) | September 30, 2019 | December 31, 2018 | ||||||||||||||
Number of shares | Ownership (%) | Carrying amount | Carrying amount | |||||||||||||
Investments in associates: | ||||||||||||||||
SK China Company Ltd. | 10,928,921 | 27.3 | ₩ | 601,192 | 601,192 | |||||||||||
Korea IT Fund(*1) | 190 | 63.3 | 220,957 | 220,957 | ||||||||||||
Wave City Development Co., Ltd.(*2) | 393,460 | 19.1 | 1,532 | 1,532 | ||||||||||||
KEB HanaCard Co., Ltd.(*2) | 39,902,323 | 15.0 | 253,739 | 253,739 | ||||||||||||
Daehan Kanggun BcN Co., Ltd. | 1,675,124 | 29.0 | 353 | 353 | ||||||||||||
NanoEnTek, Inc. | 7,600,649 | 28.9 | 51,138 | 51,138 | ||||||||||||
SK Technology Innovation Company | 14,700 | 49.0 | 45,864 | 45,864 | ||||||||||||
SK hynix Inc. | 146,100,000 | 20.1 | 3,374,725 | 3,374,725 | ||||||||||||
SK MENA Investment B.V. | 9,772,686 | 32.1 | 14,485 | 14,485 | ||||||||||||
SK Latin America Investment S.A. | 9,448,937 | 32.1 | 14,243 | 14,243 | ||||||||||||
S.M.Culture & Contents Co., Ltd. | 22,033,898 | 23.4 | 65,341 | 65,341 | ||||||||||||
12CM Japan, Inc. | 3,925 | 28.2 | 7,697 | 7,697 | ||||||||||||
MAKEUS Corp.(*2) | 2,153 | 8.9 | 9,773 | 9,773 | ||||||||||||
SK South East Asia Investment Pte. Ltd.(*3) | 200,000,000 | 20.0 | 224,470 | 111,000 | ||||||||||||
Pacific Telecom Inc.(*2) | 1,734,109 | 15.0 | 36,487 | 36,487 | ||||||||||||
Grab Geo Holdings PTE. LTD.(*4) | 300 | 30.0 | 30,517 | — | ||||||||||||
Carrot Co., Ltd.(*2,5) | 1,360,000 | 9.9 | 6,800 | — | ||||||||||||
Contents Wavve Co., Ltd.(*6) | 1,306,286 | 30.0 | 90,858 | — | ||||||||||||
Health Connect Co., Ltd. and others | — | — | 51,450 | 69,207 | ||||||||||||
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₩ | 5,101,621 | 4,877,733 | ||||||||||||||
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Investment in a joint venture: | ||||||||||||||||
Finnq Co., Ltd.(*7) | 6,370,000 | 49.0 | ₩ | 49,080 | 24,580 | |||||||||||
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| |||||||||||||
₩ | 5,150,701 | 4,902,313 | ||||||||||||||
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(*1) | Investment in Korea IT Fund was classified as investment in associates as the Company does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | These investments were classified as investments in associates as the Company can exercise significant influence through its right to appoint the members of board of directors even though the Company has less than 20% of equity interests. |
(*3) | The Company invested ₩113,470 million in cash in SK South East Asia Investment Pte. Ltd. for the nine-month period ended September 30, 2019. |
(*4) | The Company jointly established Grab Geo Holdings PTE. LTD. by investing ₩11,201 million in cash and ₩19,039 million in exchange of assets for the nine-month period ended September 30, 2019. |
(*5) | The Company newly invested ₩6,800 million in cash for the nine-month period ended September 30, 2019. |
22
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(3) | Details of investments in associates and joint ventures as of September 30, 2019 and December 31, 2018 are as follows, Continued: |
(*6) | The Company newly invested ₩90,858 million in cash for the nine-month period ended September 30, 2019. |
(*7) | This investment was classified as investment in a joint venture as the Company has joint control pursuant to the agreement with the other shareholders. The Company invested additional ₩24,500 million in cash during the nine-month period ended September 30, 2019. |
(4) | The market value of investments in listed subsidiaries as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won, except for share data) |
| |||||||||||||||||||||||
September 30, 2019 | December 31, 2018 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
DREAMUS COMPANY | ₩ | 5,740 | 29,246,387 | 167,874 | 6,760 | 29,246,387 | 197,706 | |||||||||||||||||
Incross Co., Ltd. | 21,850 | 2,786,455 | 60,884 | — | — | — |
(5) | The market value of investments in listed associates as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won, except for share data) |
| |||||||||||||||||||||||
September 30, 2019 | December 31, 2018 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
NanoEnTek, Inc. | ₩ | 4,460 | 7,600,649 | 33,899 | 4,235 | 7,600,649 | 32,189 | |||||||||||||||||
SK hynix Inc. | 82,200 | 146,100,000 | 12,009,420 | 60,500 | 146,100,000 | 8,839,050 | ||||||||||||||||||
SM Culture & Contents Co., Ltd. | 1,410 | 22,033,898 | 31,068 | 2,020 | 22,033,898 | 44,508 |
23
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
9. | Property and Equipment |
(1) | Details of the changes in property and equipment for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||||||
Beginning balance | Impact of adopting K-IFRS No. 1116 | Acquisition | Disposal | Transfer | Depreciation | Ending balance | ||||||||||||||||||||||
Land | ₩ | 544,419 | — | 1,568 | (3 | ) | 33,670 | — | 579,654 | |||||||||||||||||||
Buildings | 537,000 | — | 1,753 | (433 | ) | 33,312 | (28,871 | ) | 542,761 | |||||||||||||||||||
Structures | 355,739 | — | 7,521 | — | 7,289 | (26,993 | ) | 343,556 | ||||||||||||||||||||
Machinery | 4,382,375 | — | 111,451 | (5,853 | ) | 1,367,576 | (1,176,973 | ) | 4,678,576 | |||||||||||||||||||
Right-of-use assets | — | 416,552 | 343,613 | (102,405 | ) | — | (196,672 | ) | 461,088 | |||||||||||||||||||
Other | 617,837 | — | 974,990 | (990 | ) | (968,060 | ) | (72,615 | ) | 551,162 | ||||||||||||||||||
Construction in progress | 506,120 | — | 447,877 | (744 | ) | (509,428 | ) | — | 443,825 | |||||||||||||||||||
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| |||||||||||||||
₩ | 6,943,490 | 416,552 | 1,888,773 | (110,428 | ) | (35,641 | ) | (1,502,124 | ) | 7,600,622 | ||||||||||||||||||
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(In millions of won) | ||||||||||||||||||||||||
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Ending balance | |||||||||||||||||||
Land | ₩ | 525,572 | 2,418 | (29 | ) | 8,275 | — | 536,236 | ||||||||||||||||
Buildings | 546,872 | 485 | (1,330 | ) | 20,794 | (27,898 | ) | 538,923 | ||||||||||||||||
Structures | 376,755 | 4,762 | (26 | ) | 3,275 | (27,018 | ) | 357,748 | ||||||||||||||||
Machinery | 4,648,331 | 94,028 | (22,505 | ) | 727,391 | (1,216,619 | ) | 4,230,626 | ||||||||||||||||
Other | 448,203 | 371,690 | (1,479 | ) | (352,718 | ) | (75,622 | ) | 390,074 | |||||||||||||||
Construction in progress | 377,400 | 401,888 | (3,466 | ) | (493,534 | ) | — | 282,288 | ||||||||||||||||
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| |||||||||||||
₩ | 6,923,133 | 875,271 | (28,835 | ) | (86,517 | ) | (1,347,157 | ) | 6,335,895 | |||||||||||||||
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(2) | Details of theright-of-use assets as of September 30, 2019 and January 1, 2019 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | January 1, 2019 | |||||||
Land, Buildings and Structures | ₩ | 397,619 | 335,481 | |||||
Other | 63,469 | 81,071 | ||||||
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| |||||
₩ | 461,088 | 416,552 | ||||||
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24
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
10. | Intangible Assets |
(1) | Details of the changes in intangible assets for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||||||||||
Beginning balance | Impact of adopting K-IFRS No. 1116 | Acquisition | Disposal | Transfer | Amortization | Impairment | Ending balance | |||||||||||||||||||||||||
Frequency usage rights | ₩ | 3,139,978 | — | — | — | — | (361,983 | ) | — | 2,777,995 | ||||||||||||||||||||||
Land usage rights | 6,498 | — | 1,484 | — | — | (2,202 | ) | — | 5,780 | |||||||||||||||||||||||
Industrial rights | 15,300 | — | 759 | (219 | ) | — | (2,164 | ) | — | 13,676 | ||||||||||||||||||||||
Facility usage rights | 16,008 | — | 1,465 | (12 | ) | 172 | (2,080 | ) | — | 15,553 | ||||||||||||||||||||||
Club memberships | 47,411 | — | 1,113 | (850 | ) | — | — | (63 | ) | 47,611 | ||||||||||||||||||||||
Other | 785,669 | (2,274 | ) | 19,811 | (2,062 | ) | 68,402 | (213,623 | ) | — | 655,923 | |||||||||||||||||||||
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| |||||||||||||||||
₩ | 4,010,864 | (2,274 | ) | 24,632 | (3,143 | ) | 68,574 | (582,052 | ) | (63 | ) | 3,516,538 | ||||||||||||||||||||
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(In millions of won) | For the nine-month period ended September 30, 2018 | |||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Ending balance | |||||||||||||||||||
Frequency usage rights | ₩ | 2,176,940 | — | — | — | (302,916 | ) | 1,874,024 | ||||||||||||||||
Land usage rights | 7,858 | 1,860 | (49 | ) | 405 | (2,944 | ) | 7,130 | ||||||||||||||||
Industrial rights | 12,899 | 4,216 | (716 | ) | — | (2,585 | ) | 13,814 | ||||||||||||||||
Facility usage rights | 16,456 | 1,472 | (35 | ) | 99 | (2,059 | ) | 15,933 | ||||||||||||||||
Club memberships | 44,843 | 1,237 | (25 | ) | — | — | 46,055 | |||||||||||||||||
Other | 830,549 | 12,630 | (1,400 | ) | 115,188 | (211,458 | ) | 745,509 | ||||||||||||||||
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₩ | 3,089,545 | 21,415 | (2,225 | ) | 115,692 | (521,962 | ) | 2,702,465 | ||||||||||||||||
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25
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
10. | Intangible Assets, Continued |
(2) | Details of frequency usage rights as of September 30, 2019 are as follows: |
(In millions of won) | ||||||||||
Amount | Description | Commencement | Completion of | |||||||
800MHz license | ₩ | 70,952 | CDMA and LTE service | Jul. 2011 | Jun. 2021 | |||||
1.8GHz license | 282,645 | LTE service | Sept. 2013 | Dec. 2021 | ||||||
2.6GHz license | 880,285 | LTE service | Sept. 2016 | Dec. 2026 | ||||||
2.1GHz license | 237,407 | W-CDMA and LTE service | Dec. 2016 | Dec. 2021 | ||||||
3.5GHz license(*) | 1,104,023 | 5G service | Apr. 2019 | Nov. 2028 | ||||||
28GHz license(*) | 202,683 | 5G service | — | Nov. 2023 | ||||||
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| |||||||||
₩ | 2,777,995 | |||||||||
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|
(*) | The Company participated in the frequency usage rights allocation auction hosted by Ministry of Science and Information and Communication Technology (ICT) and was assigned the 3.5GHz and 28GHz bands of frequency during the year ended December 31, 2018. The considerations payable for the bands of frequency are ₩1,218,500 million and ₩207,300 million, respectively. These bands of frequency were assigned in December 2018 and the annual payments in installment of the remaining balances will be made for the next ten and five years, respectively. The Company recognized these frequency usage rights as intangible assets at the date of initial lump sum payment and began amortization for 3.5GHz license in April 2019. The amortization for 28GHz license will begin when it is in the condition necessary for it to be capable of operating in the manner intended by management. |
26
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
11. | Borrowings and Debentures |
(1) | Changes in borrowings for the nine-month period ended September 30, 2019 are as follows: |
(In millions of won) | ||||||||||||||||
Lender | Annual interest rate(%) | Maturity | Book value | |||||||||||||
Current | ₩ | 12,630 | ||||||||||||||
Non-current | 31,764 | |||||||||||||||
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As of January 1, 2019 | 44,394 | |||||||||||||||
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Borrowings repaid | Export Kreditnamnden | 1.70 | Apr. 29, 2022 | (6,441 | ) | |||||||||||
Other changes(*1): | 3,069 | |||||||||||||||
Current(*2) | 13,686 | |||||||||||||||
Non-current(*2) | 27,336 | |||||||||||||||
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As of September 30, 2019 | ₩ | 41,022 | ||||||||||||||
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|
(*1) | Other changes include the effects on foreign currency translation of foreign currency-denominated debentures and changes in present value discount for the nine-month period ended September 30, 2019. |
(*2) | ₩6,540 million were transferred fromnon-current to current for the nine-month period ended September 30, 2019. |
27
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
11. | Borrowings and Debentures, Continued |
(2) | Changes in debentures for the nine-month period ended September 30, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||
Purpose | Annual interest rate(%) | Maturity | Face value | Book value | ||||||||||||||
Current | ₩ | 500,000 | 499,747 | |||||||||||||||
Non-current | 5,243,533 | 5,222,865 | ||||||||||||||||
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As of January 1, 2019 | 5,743,533 | 5,722,612 | ||||||||||||||||
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Debentures newly issued: | ||||||||||||||||||
Unsecured corporate bonds | Operating fund | 2.03 | Mar. 6, 2022 | 180,000 | 179,234 | |||||||||||||
2.09 | Mar. 6, 2024 | 120,000 | 119,498 | |||||||||||||||
2.19 | Mar. 6, 2029 | 50,000 | 49,801 | |||||||||||||||
2.23 | Mar. 6, 2039 | 50,000 | 49,812 | |||||||||||||||
| Operating and refinancing fund | | 1.40 | Jul. 29, 2022 | 120,000 | 119,487 | ||||||||||||
1.49 | Jul. 29, 2024 | 60,000 | 59,760 | |||||||||||||||
1.50 | Jul. 29, 2029 | 120,000 | 119,552 | |||||||||||||||
1.52 | Jul. 29, 2039 | 50,000 | 49,812 | |||||||||||||||
1.56 | Jul. 29, 2049 | 50,000 | 49,812 | |||||||||||||||
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₩ | 800,000 | 796,768 | ||||||||||||||||
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Debentures repaid: | ||||||||||||||||||
Unsecured corporate bonds | | Operating and refinancing fund | | 3.24 | Aug. 28, 2019 | ₩ | (170,000 | ) | (170,000 | ) | ||||||||
Operating fund | 3.30 | May 14, 2019 | (50,000 | ) | (50,000 | ) | ||||||||||||
4.72 | May 14, 2029 | (61,757 | ) | (61,757 | ) | |||||||||||||
1.65 | Mar. 4, 2019 | (70,000 | ) | (70,000 | ) | |||||||||||||
1.62 | Jun. 3, 2019 | (50,000 | ) | (50,000 | ) | |||||||||||||
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(401,757 | ) | (401,757 | ) | |||||||||||||||
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Other changes(*1): | 99,784 | 102,468 | ||||||||||||||||
Current(*2) | 580,390 | 580,200 | ||||||||||||||||
Non-current(*2) | 5,661,170 | 5,639,891 | ||||||||||||||||
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| |||||||||||||||
As of September 30, 2019 | ₩ | 6,241,560 | 6,220,091 | |||||||||||||||
|
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|
|
(*1) | Other changes include the effects on foreign currency translation of foreign currency-denominated debentures and changes in present value discount on debentures for the nine-month period ended September 30, 2019. |
(*2) | ₩420,452 million were transferred fromnon-current to current for the nine-month period ended September 30, 2019. |
28
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
12. | Long-term Payables – other |
(1) | As of September 30, 2019 and December 31, 2018, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 10): |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Long-term payables – other | ₩ | 2,051,389 | 2,476,738 | |||||
Present value discount on long-term payables – other | (90,335 | ) | (113,772 | ) | ||||
Current installments of long-term payables – other | (422,117 | ) | (423,884 | ) | ||||
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| |||||
Carrying amount at period end | ₩ | 1,538,937 | 1,939,082 | |||||
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(2) | The Company repaid ₩425,349 million of the principal amounts of long-term payables – other related to the acquisition of frequency usage rights for the nine-month period ended September 30, 2019. The repayment schedule of the principal amount of long-term payables – other as of September 30, 2019 is as follows: |
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ₩ | 425,349 | ||
1~3 years | 647,589 | |||
3~5 years | 413,385 | |||
More than 5 years | 565,066 | |||
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| |||
₩ | 2,051,389 | |||
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29
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
13. | Provisions |
Changes in provisions for the nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | For the nine-month period ended September 30, 2019 | As of September 30, 2019 | ||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non- current | ||||||||||||||||||||||
Provision for restoration | ₩ | 59,548 | 2,597 | (524 | ) | (467 | ) | 61,154 | 44,892 | 16,262 | ||||||||||||||||||
Emission allowance | 2,238 | 3,495 | (1,085 | ) | (932 | ) | 3,716 | 3,716 | — | |||||||||||||||||||
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₩ | 61,786 | 6,092 | (1,609 | ) | (1,399 | ) | 64,870 | 48,608 | 16,262 | |||||||||||||||||||
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(In millions of won) | For the nine-month period ended September 30, 2018 | As of September 30, 2018 | ||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non- current | ||||||||||||||||||||||
Provision for installment of handset subsidy | ₩ | 3,874 | — | (1,075 | ) | (2,799 | ) | — | — | — | ||||||||||||||||||
Provision for restoration | 56,162 | 3,656 | (621 | ) | (456 | ) | 58,741 | 42,928 | 15,813 | |||||||||||||||||||
Emission allowance | 4,650 | 2,896 | (1,334 | ) | (3,306 | ) | 2,906 | 2,906 | — | |||||||||||||||||||
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|
|
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|
|
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|
| |||||||||||||||
₩ | 64,686 | 6,552 | (3,030 | ) | (6,561 | ) | 61,647 | 45,834 | 15,813 | |||||||||||||||||||
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30
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
14. | Defined Benefit Liabilities (Assets) |
(1) | Details of defined benefit liabilities (assets) as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Present value of defined benefit obligations | ₩ | 366,787 | 332,044 | |||||
Fair value of plan assets | (366,469 | ) | (363,878 | ) | ||||
|
|
|
| |||||
₩ | 318 | (31,834 | ) | |||||
|
|
|
|
(2) | Changes in defined benefit obligations for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | For the nine-month period ended | |||||||
September 30, 2019 | September 30, 2018 | |||||||
Beginning balance | ₩ | 332,044 | 278,778 | |||||
Current service cost | 33,951 | 30,684 | ||||||
Interest cost | 6,360 | 6,507 | ||||||
Remeasurement | ||||||||
- Adjustment based on experience | 2,000 | 3,808 | ||||||
Benefit paid | (11,610 | ) | (6,513 | ) | ||||
Others | 4,042 | 3,566 | ||||||
|
|
|
| |||||
Ending balance | ₩ | 366,787 | 316,830 | |||||
|
|
|
|
(3) | Changes in plan assets for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | For the nine-month period ended | |||||||
September 30, 2019 | September 30, 2018 | |||||||
Beginning balance | ₩ | 363,878 | 318,860 | |||||
Interest income | 6,773 | 7,144 | ||||||
Remeasurement | (526 | ) | (1,968 | ) | ||||
Contribution | 20,000 | 9,000 | ||||||
Benefit paid | (21,868 | ) | (16,155 | ) | ||||
Others | (1,788 | ) | 5,938 | |||||
|
|
|
| |||||
Ending balance | ₩ | 366,469 | 322,819 | |||||
|
|
|
|
(4) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the statement of income) and capitalized intoconstruction-in-progress, for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | For the nine-month period ended | |||||||
September 30, 2019 | September 30, 2018 | |||||||
Current service cost | ₩ | 33,951 | 30,684 | |||||
Net interest income | (413 | ) | (637 | ) | ||||
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|
|
| |||||
₩ | 33,538 | 30,047 | ||||||
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|
31
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
15. | Share Capital and Capital Surplus and Others |
(1) | The Company’s outstanding share capital consists entirely of common shares with a par value of ₩500. The number of authorized, issued and outstanding common shares and the details of capital surplus and others as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won, except for share data) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Number of authorized shares | 220,000,000 | 220,000,000 | ||||||
Number of issued shares | 80,745,711 | 80,745,711 | ||||||
Share capital: | ||||||||
Common share | ₩ | 44,639 | 44,639 | |||||
Capital surplus and others: | ||||||||
Paid-in capital surplus | 2,915,887 | 2,915,887 | ||||||
Treasury shares | (1,979,475 | ) | (1,979,475 | ) | ||||
Hybrid bonds(*) | 398,759 | 398,759 | ||||||
Share option(note 16) | 1,235 | 1,007 | ||||||
Others | (920,854 | ) | (920,854 | ) | ||||
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| |||||
₩ | 415,552 | 415,324 | ||||||
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|
|
(*) | Hybrid bonds issued by the Company are classified as equity as there is no contractual obligation for delivery of financial assets to the bond holders. These are subordinated bonds which rank before common shares in the event of a liquidation or reorganization of the Company. |
(2) | There were no changes in share capital during the nine-month periods ended September 30, 2019 and 2018 and details of shares outstanding as of September 30, 2019 and 2018 are as follows: |
(In shares) | ||||||||||||||||||||||||
September 30, 2019 | September 30, 2018 | |||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 80,745,711 | 8,875,883 | 71,869,828 | 80,745,711 | 10,136,551 | 70,609,160 |
32
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
16. | Share option |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows: |
Series |
|
| ||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | |||||||
Grant date | March 24, 2017 | February 20, 2018 | February 22, 2019 | March 26, 2019 | ||||||||
Types of shares to be issued | Registered common shares | |||||||||||
Grant method | Reissue of treasury shares | Reissue of treasury shares, Cash-settlement | ||||||||||
Number of shares (in shares) | 22,168 | 22,168 | 22,168 | 1,358 | 5,477 | 1,734 | ||||||
Exercise price (in won) | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | ||||||
Exercise period | Mar. 25, 2019 ~ Mar. 24, 2022 | Mar. 25, 2020 ~ Mar. 24, 2023 | Mar. 25, 2021 ~ Mar. 24, 2024 | Feb. 21, 2020 ~ Feb. 20, 2023 | Feb. 23, 2021 ~ Feb. 22, 2024 | Mar. 27, 2021 ~ Mar. 26, 2024 | ||||||
Vesting conditions | 2 years’ service from the grant date | 3 years’ service from the grant date | 4 years’ service from the grant date | 2 years’ service from the grant date | 2 years’ service from the grant date | 2 years’ service from the grant date |
(2) | Share compensation expense recognized for the nine-month period ended September 30, 2019 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | Share compensation expense | |||
Accumulated compensation expenses as of December 31, 2018 | ₩ | 1,007 | ||
For the nine-month period ended September 30, 2019 | 228 | |||
In subsequent periods | 249 | |||
|
| |||
₩ | 1,484 | |||
|
|
(3) | The Company used binomial option pricing model in the measurement of the fair value of share options at the grant date and the inputs used in the model are as follows: |
(In won) | Series | |||||||||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | |||||||||||||||||||
Risk-free interest rate | 1.86 | % | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | ||||||||||||
Estimated option’s life | 5 years | 6 years | 7 years | 5 years | 5 years | 5 years | ||||||||||||||||||
Share price | 262,500 | 262,500 | 262,500 | 243,500 | 259,000 | 253,000 | ||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | ||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | ||||||||||||
Exercise price | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | ||||||||||||||||||
Per share fair value of the option | 27,015 | 20,240 | 15,480 | 23,988 | 8,600 | 8,111 |
33
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
17. | Retained Earnings |
Retained earnings as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Appropriated: | ||||||||
Legal reserve | ₩ | 22,320 | 22,320 | |||||
Reserve for business expansion | 11,531,138 | 10,531,138 | ||||||
Reserve for technology development | 4,265,300 | 3,321,300 | ||||||
|
|
|
| |||||
15,818,758 | 13,874,758 | |||||||
Unappropriated | 889,312 | 2,593,031 | ||||||
|
|
|
| |||||
₩ 16,708,070 | 16,467,789 | |||||||
|
|
|
|
18. | Reserves |
(1) | Details of reserves, net of taxes, as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Valuation gain (loss) on FVOCI | ₩ | (40,734 | ) | 2,047 | ||||
Valuation loss on derivatives | (11,441 | ) | (42,312 | ) | ||||
|
|
|
| |||||
₩ | (52,175 | ) | (40,265 | ) | ||||
|
|
|
|
(2) | Changes in reserves for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||
Valuation gain (loss) on financial assets at FVOCI | Valuation gain (loss) on available-for-sale financial assets | Valuation gain (loss) on derivatives | Total | |||||||||||||
Balance at December 31, 2017 | ₩ | — | 148,873 | (70,572 | ) | 78,301 | ||||||||||
Impact of adoptingK-IFRS No.1109 | 90,484 | (148,873 | ) | — | (58,389 | ) | ||||||||||
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|
|
|
|
|
|
| |||||||||
Balance at January 1, 2018 | 90,484 | — | (70,572 | ) | 19,912 | |||||||||||
Changes, net of taxes | (26,895 | ) | — | (14,254 | ) | (41,149 | ) | |||||||||
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|
|
|
|
| |||||||||
Balance at September 30, 2018 | 63,589 | — | (84,826 | ) | (21,237 | ) | ||||||||||
|
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|
|
|
|
|
| |||||||||
Balance at January 1, 2019 | 2,047 | — | (42,312 | ) | (40,265 | ) | ||||||||||
Changes, net of taxes | (42,781 | ) | — | 30,871 | (11,910 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at September 30, 2019 | ₩ | (40,734 | ) | — | (11,441 | ) | (52,175 | ) | ||||||||
|
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34
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
19. | Operating revenue |
Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Company’s revenue and future cash flows is as follows:
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Products transferred at a point in time: |
| |||||||||||||||
Product sales | ₩ | 24,245 | 68,349 | 36,688 | 106,655 | |||||||||||
Services transferred over time: |
| |||||||||||||||
Wireless service revenue(*1) | 2,486,354 | 7,334,826 | 2,484,567 | 7,551,174 | ||||||||||||
Cellular interconnection revenue | 126,400 | 386,057 | 155,901 | 462,837 | ||||||||||||
Other(*2) | 274,551 | 782,243 | 248,416 | 735,279 | ||||||||||||
|
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|
|
|
|
|
| |||||||||
2,887,305 | 8,503,126 | 2,888,884 | 8,749,290 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 2,911,550 | 8,571,475 | 2,925,572 | 8,855,945 | ||||||||||||
|
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|
|
|
|
|
|
(*1) | Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through usage charges collected from the wireless subscribers. |
(*2) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
Most of the Company’s transactions are occurring in Korea as it principally operates its businesses in Korea.
20. | Other Operating Expenses |
Details of other operating expenses for the three and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Communication | ₩ | 8,018 | 22,926 | 7,080 | 21,244 | |||||||||||
Utilities | 69,157 | 182,157 | 62,597 | 170,150 | ||||||||||||
Taxes and dues | 3,399 | 20,221 | 2,601 | 18,452 | ||||||||||||
Repair | 62,217 | 183,748 | 65,080 | 181,754 | ||||||||||||
Research and development | 77,212 | 238,497 | 78,623 | 229,807 | ||||||||||||
Training | 8,439 | 20,297 | 8,030 | 19,723 | ||||||||||||
Bad debt (Reversal of loss allowance) for accounts receivable – trade | (253 | ) | 2,770 | 3,163 | 11,756 | |||||||||||
Other | 10,006 | 32,745 | 10,404 | 32,228 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 238,195 | 703,361 | 237,578 | 685,114 | ||||||||||||
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35
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
21. | OtherNon-operating Income and Expenses |
Details of othernon-operating income and expenses for the three and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Othernon-operating Income: | ||||||||||||||||
Gain on disposal of property and equipment and intangible assets | ₩ | 1,910 | 4,609 | 520 | 1,520 | |||||||||||
Others | 2,938 | 7,708 | 2,053 | 17,547 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 4,848 | 12,317 | 2,573 | 19,067 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Othernon-operating Expenses: | ||||||||||||||||
Loss on disposal of property and equipment and intangible assets | ₩ | 2,930 | 10,574 | 9,704 | 25,683 | |||||||||||
Donations | 2,916 | 12,809 | 12,409 | 40,559 | ||||||||||||
Bad debt for accounts receivable – other | 895 | 2,543 | 940 | 2,438 | ||||||||||||
Others | 1,124 | 6,631 | 2,597 | 4,974 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 7,865 | 32,557 | 25,650 | 73,654 | ||||||||||||
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36
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
22. | Finance Income and Costs |
(1) | Details of finance income and costs for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Finance Income: | ||||||||||||||||
Interest income | ₩ | 11,338 | 26,157 | 6,389 | 30,673 | |||||||||||
Gain on sale of accounts receivable – other | 2,366 | 14,353 | 9,202 | 17,341 | ||||||||||||
Dividends | 218 | 514,399 | 14,572 | 177,490 | ||||||||||||
Gain on foreign currency transactions | 1,833 | 6,245 | 3,251 | 11,720 | ||||||||||||
Gain on foreign currency translations | 1,807 | 3,717 | — | 894 | ||||||||||||
Gain relating to financial assets at FVTPL | 716 | 840 | 487 | 2,179 | ||||||||||||
Gain relating to financial liabilities at FVTPL | — | 56 | — | — | ||||||||||||
Gain on valuation of derivatives | — | 465 | 526 | 1,423 | ||||||||||||
Gain on settlement of derivatives | — | 389 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 18,278 | 566,621 | 34,427 | 241,720 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Finance Costs: | ||||||||||||||||
Interest expenses | ₩ | 60,995 | 186,878 | 55,340 | 173,723 | |||||||||||
Loss on foreign currency transactions | 2,629 | 6,601 | 2,113 | 10,763 | ||||||||||||
Loss on foreign currency translations | 1,432 | 3,347 | 1,260 | 615 | ||||||||||||
Loss on sale of accounts receivable – other | — | 560 | — | — | ||||||||||||
Loss relating to financial assets at FVTPL | — | 180 | 11 | 589 | ||||||||||||
Loss relating to financial liabilities at FVTPL | — | 43 | 363 | 1,143 | ||||||||||||
Loss on settlement of derivatives | — | 317 | — | 12,156 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 65,056 | 197,926 | 59,087 | 198,989 | ||||||||||||
|
|
|
|
|
|
|
|
(2) | Details of interest income included in finance income for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Interest income on cash equivalents and short-term financial instruments | ₩ | 2,789 | 8,381 | 4,569 | 12,208 | |||||||||||
Interest income on loans and others | 8,549 | 17,776 | 1,820 | 18,465 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 11,338 | 26,157 | 6,389 | 30,673 | ||||||||||||
|
|
|
|
|
|
|
|
37
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
22. | Finance Income and Costs, Continued |
(3) | Details of interest expenses included in finance costs for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Interest expenses on borrowings | ₩ | 1,526 | 4,429 | 286 | 3,108 | |||||||||||
Interest expenses on debentures | 45,455 | 134,778 | 43,672 | 134,650 | ||||||||||||
Others | 14,014 | 47,671 | 11,382 | 35,965 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 60,995 | 186,878 | 55,340 | 173,723 | ||||||||||||
|
|
|
|
|
|
|
|
(4) | Details of impairment losses (reversal of impairment loss) on financial assets for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Accounts receivable – trade | ₩ | (253 | ) | 2,770 | 3,163 | 11,756 | ||||||||||
Other receivables | 895 | 2,543 | 940 | 2,438 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 642 | 5,313 | 4,103 | 14,194 | ||||||||||||
|
|
|
|
|
|
|
|
23. | Income Tax Expense |
Income tax expense was calculated by considering current tax expense adjusted to changes in estimates related to prior periods, and deferred tax expense due to origination and reversal of temporary differences.
38
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
24. | Earnings per Share |
(1) | Basic earnings per share |
1) | Basic earnings per share for the three and nine-month periods ended September 30, 2019 and 2018 are calculated as follows: |
(In millions of won, except for share data) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Profit for the period | ₩ | 161,088 | 967,095 | 183,322 | 767,535 | |||||||||||
Interest on hybrid bonds | (3,692 | ) | (11,075 | ) | (3,691 | ) | (12,111 | ) | ||||||||
Profit for the period available for common shares | 157,396 | 956,020 | 179,631 | 755,424 | ||||||||||||
Weighted average number of common shares outstanding | 71,869,828 | 71,869,828 | 70,609,160 | 70,609,160 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Basic earnings per share (in won) | ₩ | 2,190 | 13,302 | 2,544 | 10,699 | |||||||||||
|
|
|
|
|
|
|
|
2) | The weighted average number of common shares outstanding for the nine-month periods ended September 30, 2019 and 2018 are calculated as follows: |
(In shares) | Weighted number of shares | |||||||||||
Number of shares | Three-month period ended September 30 | Nine-month period ended September 30 | ||||||||||
Issued common shares at January 1, 2019 | 80,745,711 | 80,745,711 | 80,745,711 | |||||||||
Effect of treasury shares | (8,875,883 | ) | (8,875,883 | ) | (8,875,883 | ) | ||||||
|
|
|
|
|
| |||||||
Weighted average number of common shares outstanding at September 30, 2019 | 71,869,828 | 71,869,828 | 71,869,828 | |||||||||
|
|
|
|
|
|
(In shares) | Weighted number of shares | |||||||||||
Number of shares | Three-month period ended September 30 | Nine-month period ended September 30 | ||||||||||
Issued common shares at January 1, 2018 | 80,745,711 | 80,745,711 | 80,745,711 | |||||||||
Effect of treasury shares | (10,136,551 | ) | (10,136,551 | ) | (10,136,551 | ) | ||||||
|
|
|
|
|
| |||||||
Weighted average number of common shares outstanding at September 30, 2018 | 70,609,160 | 70,609,160 | 70,609,160 | |||||||||
|
|
|
|
|
|
(2) | Diluted earnings per share |
For the nine-month periods ended September 30, 2019 and 2018, diluted earnings per share are the same as basic earnings per share as there are no dilutive potential common shares.
39
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
25. | Categories of Financial Instruments |
(1) | Financial assets by category as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||
September 30, 2019 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives- hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | ₩ | — | — | 258,133 | — | 258,133 | ||||||||||||||
Financial instruments | — | — | 169,382 | — | 169,382 | |||||||||||||||
Short-term investment securities | 48,226 | — | — | — | 48,226 | |||||||||||||||
Long-term investment securities(*) | 77,887 | 105,831 | — | — | 183,718 | |||||||||||||||
Accounts receivable – trade | — | — | 1,488,382 | — | 1,488,382 | |||||||||||||||
Loans and other receivables | 812,991 | — | 594,161 | — | 1,407,152 | |||||||||||||||
Derivative financial assets | — | — | — | 176,554 | 176,554 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 939,104 | 105,831 | 2,510,058 | 176,554 | 3,731,547 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Company designated ₩105,831 million of equity instruments that are not held for trading as financial assets measured at FVOCI. |
(In millions of won) | ||||||||||||||||||||
December 31, 2018 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives- hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | ₩ | — | — | 877,823 | — | 877,823 | ||||||||||||||
Financial instruments | — | — | 99,382 | — | 99,382 | |||||||||||||||
Short-term investment securities | 47,849 | — | — | — | 47,849 | |||||||||||||||
Long-term investment securities(*) | 77,511 | 333,161 | — | — | 410,672 | |||||||||||||||
Accounts receivable – trade | — | — | 1,354,260 | — | 1,354,260 | |||||||||||||||
Loans and other receivables | 485,325 | — | 554,048 | — | 1,039,373 | |||||||||||||||
Derivative financial assets | 10,947 | — | — | 39,858 | 50,805 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 621,632 | 333,161 | 2,885,513 | 39,858 | 3,880,164 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Company designated ₩333,161 million of equity instruments that are not held for trading as financial assets measured at FVOCI. |
40
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
25. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||
September 30, 2019 | ||||
Financial liabilities at amortized cost | ||||
Borrowings | ₩ | 41,022 | ||
Debentures | 6,220,091 | |||
Lease liabilities | 444,417 | |||
Accounts payable – other and others | 5,095,260 | |||
|
| |||
₩ | 11,800,790 | |||
|
|
(In millions of won) | ||||||||||||||||
December 31, 2018 | ||||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives- hedging instrument | Total | |||||||||||||
Derivative financial liabilities | ₩ | — | — | 1,107 | 1,107 | |||||||||||
Borrowings | — | 44,394 | — | 44,394 | ||||||||||||
Debentures(*) | 61,813 | 5,660,799 | — | 5,722,612 | ||||||||||||
Accounts payable – other and others | — | 5,181,029 | — | 5,181,029 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 61,813 | 10,886,222 | 1,107 | 10,949,142 | ||||||||||||
|
|
|
|
|
|
|
|
(*) | Debentures classified as financial liabilities at FVTPL as of December 31, 2018 are structured bonds, and they were designated as financial liabilities at FVTPL in order to eliminate a measurement inconsistency with the related derivatives. |
41
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Financial Risk Management |
(1) | Financial risk management |
The Company is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates and interest rates. The Company implements a risk management system to monitor and manage these specific risks.
The Company’s financial assets consist of cash and cash equivalents, financial instruments, investment securities, and accounts receivable – trade and other. Financial liabilities consist of accounts payable – other and others, borrowings, debentures and lease liabilities.
1) | Market risk |
(i) | Currency risk |
The Company is exposed to currency risk mainly on exchange fluctuations on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Company.
Monetary assets and liabilities denominated in foreign currencies as of September 30, 2019 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||
USD | 24,285 | ₩ | 29,173 | 1,226,873 | ₩ | 1,473,842 | ||||||||||
EUR | 2,582 | 3,395 | — | — | ||||||||||||
JPY | 14,698 | 164 | — | — | ||||||||||||
Others | — | 167 | — | — | ||||||||||||
|
|
|
| |||||||||||||
₩ | 32,899 | ₩ | 1,473,842 | |||||||||||||
|
|
|
|
In addition, the Company has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.
As of September 30, 2019, a hypothetical change in exchange rates by 10% would have increased (reduced) the Company’s profit before income taxes as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD | ₩ | 2,844 | (2,844 | ) | ||||
EUR | 340 | (340 | ) | |||||
JPY | 16 | (16 | ) | |||||
Others | 17 | (17 | ) | |||||
|
|
|
| |||||
₩ | 3,217 | (3,217 | ) | |||||
|
|
|
|
42
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk |
The interest rate risk of the Company arises from borrowings, debentures and long-term payables – other. Since the Company’s interest-bearing assets are mostly fixed-interest bearing assets, the Company’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.
The Company performs various analysis to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Company takes various measures such as refinancing, renewal, alternative financing and hedging.
As of September 30, 2019, floating-rate debentures amount to ₩360,390 million, and the Company has entered into interest rate swaps to hedge interest rate risk related to floating-rate debentures. Therefore, profit before income taxes for the nine-month period ended September 30, 2019 would not have been affected by the changes in interest rates of floating-rate debenture.
As of September 30, 2019, the floating-rate long-term payables – other are ₩2,051,389 million. If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the period ended September 30, 2019, would change by ₩15,386 million in relation to floating-rate long-term payables – other that are exposed to interest rate risk.
43
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk |
The maximum credit exposure as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Cash and cash equivalents | ₩ | 258,082 | 877,781 | |||||
Financial instruments | 169,382 | 99,382 | ||||||
Investment securities | 900 | 900 | ||||||
Accounts receivable – trade | 1,488,382 | 1,354,260 | ||||||
Loans and other receivables | 1,407,152 | 1,039,373 | ||||||
Derivative financial assets | 176,554 | 50,805 | ||||||
|
|
|
| |||||
₩ | 3,500,452 | 3,422,501 | ||||||
|
|
|
|
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Company evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors. Based on such information, the Company establishes credit limits for each customer or counterparty.
The Company establishes loss allowance in respect of accounts receivable – trade and other. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Also, the Company’s credit risk can arise from transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Company has a policy to deal only with financial institutions with high credit ratings. The amount of maximum exposure to credit risk of the Company is the carrying amount of financial assets as of September 30, 2019.
44
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
3) | Liquidity risk |
The Company’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalents balances and have enough liquidity through various committed credit lines. The Company maintains enough liquidity within credit lines through robust operating activities.
Contractual maturities of financial liabilities as of September 30, 2019 are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | ||||||||||||||||
Borrowings(*) | ₩ | 41,022 | 43,048 | 14,616 | 28,432 | — | ||||||||||||||
Debentures(*) | 6,220,091 | 7,379,697 | 760,112 | 3,494,456 | 3,125,129 | |||||||||||||||
Lease liabilities | 444,417 | 470,586 | 223,125 | 222,823 | 24,638 | |||||||||||||||
Accounts payable – other and others(*) | 5,095,260 | 5,278,317 | 3,550,686 | 1,149,373 | 578,258 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 11,800,790 | 13,171,648 | 4,548,539 | 4,895,084 | 3,728,025 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | Includes interest payables. |
The Company does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
As of September 30, 2019, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | ||||||||||||||||
Assets | ₩ | 176,554 | 180,527 | 58,044 | 110,765 | 11,718 |
(2) | Capital management |
The Company manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall capital management strategy of the Company is the same as that of the Company for the year ended December 31, 2018.
The Company monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity; both are from the financial statements.
45
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Financial Risk Management, Continued |
(2) | Capital management, Continued |
Debt-equity ratio as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Total liabilities | ₩ | 12,817,302 | 11,960,536 | |||||
Total equity | 17,116,086 | 16,887,487 | ||||||
Debt-equity ratio | 74.88 | % | 70.82 | % |
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of September 30, 2019 are as follows: |
(In millions of won) | September 30, 2019 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | ₩ | 939,104 | — | 861,217 | 77,887 | 939,104 | ||||||||||||||
Derivative hedging instruments | 176,554 | — | 176,554 | — | 176,554 | |||||||||||||||
FVOCI | 105,831 | 54,446 | — | 51,385 | 105,831 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 1,221,489 | 54,446 | 1,037,771 | 129,272 | 1,221,489 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | ₩ | 41,022 | — | 42,226 | — | 42,226 | ||||||||||||||
Debentures | 6,220,091 | — | 6,731,127 | — | 6,731,127 | |||||||||||||||
Long-term payables – other | 1,961,054 | — | 2,048,150 | — | 2,048,150 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 8,222,167 | — | 8,821,503 | — | 8,821,503 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
46
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
2) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2018 are as follows: |
(In millions of won) | December 31, 2018 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | ₩ | 621,632 | — | 544,121 | 77,511 | 621,632 | ||||||||||||||
Derivative hedging instruments | 39,858 | — | 39,858 | — | 39,858 | |||||||||||||||
FVOCI | 333,161 | 292,399 | — | 40,762 | 333,161 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 994,651 | 292,399 | 583,979 | 118,273 | 994,651 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | ₩ | 61,813 | — | 61,813 | — | 61,813 | ||||||||||||||
Derivative hedging instruments | 1,107 | — | 1,107 | — | 1,107 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 62,920 | — | 62,920 | — | 62,920 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | ₩ | 44,394 | — | 45,229 | — | 45,229 | ||||||||||||||
Debentures | 5,660,799 | — | 6,033,601 | — | 6,033,601 | |||||||||||||||
Long-term payables – other | 2,362,966 | — | 2,439,593 | — | 2,439,593 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 8,068,159 | — | 8,518,423 | — | 8,518,423 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.
Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI) is measured based on the bid price at the end of the reporting date.
The Company uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used to such valuation methods include swap rate, interest rate, and risk premium, and the Company performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
47
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
Interest rates used by the Company for the fair value measurement as of September 30, 2019 are as follows:
Interest rate | ||||
Derivative instruments | 1.00% ~ 2.29% | |||
Borrowings and debentures | 1.62% ~ 1.68% | |||
Long-term payables – other | 1.58% ~ 1.71% |
3) | There have been no transfers between Level 2 to Level 1 for the nine-month period ended September 30, 2019. The changes of financial assets classified as Level 3 for the nine-month period ended September 30, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||
Balance at January 1, 2019 | Valuation | Acquisition | Disposal | Balance at September 30, 2019 | ||||||||||||||||
FVTPL | ₩ | 77,511 | 333 | 604 | (561 | ) | 77,887 | |||||||||||||
FVOCI | 40,762 | (2,577 | ) | 13,200 | — | 51,385 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 118,273 | (2,244 | ) | 13,804 | (561 | ) | 129,272 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
48
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Financial Risk Management, Continued |
(4) | Enforceable master netting agreement or similar agreement |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | ||||||||||||||||||||
September 30, 2019 | ||||||||||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the statement of financial position | Relevant financial instruments not offset | Net amount | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Accounts receivable – trade and others | ₩ | 72,013 | (71,768 | ) | 245 | — | 245 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities: | ||||||||||||||||||||
Accounts payable – trade and others | ₩ | 71,768 | (71,768 | ) | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of won) | December 31, 2018 | |||||||||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the statement of financial position | Relevant financial instruments not offset | Net amount | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Derivatives(*) | ₩ | 1,867 | — | 1,867 | (1,107 | ) | 760 | |||||||||||||
Accounts receivable – trade and others | 92,000 | (92,000 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 93,867 | (92,000 | ) | 1,867 | (1,107 | ) | 760 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities: | ||||||||||||||||||||
Derivatives(*) | ₩ | 1,107 | — | 1,107 | (1,107 | ) | — | |||||||||||||
Accounts payable – trade and others | 92,324 | (92,000 | ) | 324 | — | 324 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 93,431 | (92,000 | ) | 1,431 | (1,107 | ) | 324 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The balance represents the net amount under the standard terms and conditions of International Swap and Derivatives Association. |
49
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate Controlling Entity | SK Holdings Co., Ltd. | |
Subsidiaries | SK Planet Co., Ltd. and 48 others(*) | |
Joint ventures | Dogus Planet, Inc. and 3 others | |
Associates | SK hynix Inc. and 43 others | |
Others | The Ultimate Controlling Entity’s other subsidiaries and associates, etc. |
(*) | As of September 30, 2019, subsidiaries of the Company are as follows: |
Company | Ownership percentage(%)(*1) | Types of business | ||||||
Subsidiaries owned by the Company | SK Telink Co., Ltd. | 100.0 | Telecommunication and Mobile Virtual Network Operator service | |||||
SK Communications Co., Ltd. | 100.0 | Internet website services | ||||||
SK Broadband Co., Ltd. | 100.0 | Telecommunication services | ||||||
PS&Marketing Corporation | 100.0 | Communications device retail business | ||||||
SERVICE ACE Co., Ltd. | 100.0 | Call center management service | ||||||
SERVICE TOP Co., Ltd. | 100.0 | Call center management service | ||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) | 100.0 | Base station maintenance service | ||||||
SK Telecom China Holdings Co., Ltd. | 100.0 | Investment (holdings company) | ||||||
SK Global Healthcare Business Group, Ltd. | 100.0 | Investment | ||||||
YTK Investment Ltd. | 100.0 | Investment association | ||||||
Atlas Investment | 100.0 | Investment association | ||||||
SKT Americas, Inc. | 100.0 | Information gathering and consulting | ||||||
One store Co., Ltd. | 65.5 | Telecommunication services | ||||||
SK Planet Co., Ltd. | 98.7 | Telecommunication services, system software development and supply services | ||||||
Eleven Street Co., Ltd. | 80.3 | E-Commerce | ||||||
DREAMUS COMPANY (Formerly, IRIVER LIMITED)(*2) | 52.0 | Manufacturing digital audio players and other portable media devices | ||||||
SK Infosec Co., Ltd. | 100.0 | Information security service | ||||||
Life & Security Holdings Co., Ltd. | 55.0 | Investment (holdings company) | ||||||
Quantum Innovation Fund I | 59.9 | Investment | ||||||
SK Telecom Japan Inc. | 100.0 | Information gathering and consulting | ||||||
id Quantique SA | 66.8 | Quantum information and communications service | ||||||
SK Telecom TMT Investment Corp. | 100.0 | Investment | ||||||
FSK L&S Co., Ltd.(*3) | 60.0 | Freight and logistics consulting business | ||||||
Incross Co., Ltd.(*4) | 34.6 | Media representative business | ||||||
SK Telecom CS T1 Co., Ltd.(*5) | 100.0 | E-Sports business | ||||||
Happy Hanool Co., Ltd.(*6) | 100.0 | Service | ||||||
Subsidiaries owned by SK Planet Co., Ltd. | SK m&service Co., Ltd. | 100.0 | Database and internet website service | |||||
SK Planet Japan, K. K. | 79.8 | Digital contents sourcing service | ||||||
SKP GLOBAL HOLDINGS PTE. LTD. | 100.0 | Investment (holdings company) | ||||||
SKP America LLC. | 100.0 | Digital contents sourcing service | ||||||
K-net Culture and Contents Venture Fund | 59.0 | Capital investing in startups | ||||||
Subsidiaries owned by DREAMUS COMPANY (Formerly, IRIVER LIMITED) | iriver Enterprise Ltd. | 100.0 | Management of Chinese subsidiaries | |||||
iriver China Co., Ltd. | 100.0 | Sales and manufacturing of MP3 and 4 | ||||||
Dongguan iriver Electronics Co., Ltd. | 100.0 | Sales and Manufacturing ofe-book | ||||||
groovers Japan Co., Ltd. | 100.0 | Digital music contents sourcing and distribution service | ||||||
LIFE DESIGN COMPANY Inc. | 100.0 | Selling of goods in Japan |
50
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Transactions with Related Parties, Continued |
(1) | List of related parties, Continued |
Company | Ownership percentage(%)(*1) | Types of business | ||||||
Subsidiary owned by SK Infosec Co., Ltd. | SKinfosec Information Technology (Wuxi) Co., Ltd.(*7) | 100.0 | System software development and supply services | |||||
Subsidiaries owned by Life & Security Holdings Co., Ltd. | ADT CAPS Co., Ltd. | 100.0 | Unmanned security | |||||
CAPSTEC Co., Ltd. | 100.0 | Manned security | ||||||
ADT SECURITY Co., Ltd. | 100.0 | Sales and trade of anti-theft devices and surveillance devices | ||||||
Subsidiary owned by SK Telink Co., Ltd. | SK TELINK VIETNAM Co., Ltd. | 100.0 | Communications device retail business | |||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | 100.0 | Operation of information and communication facility | |||||
SK stoa Co., Ltd. | 100.0 | Other telecommunication retail business | ||||||
Subsidiary owned by id Quantique SA | id Quantique LLC | 100.0 | Quantum information and communications service | |||||
Subsidiary owned by FSK L&S Co., Ltd. | FSK L&S (Shanghai) Co., Ltd.(*3) | 66.0 | Logistics business | |||||
Subsidiaries owned by Incross Co., Ltd. | Infra Communications Co., Ltd.(*4) | 100.0 | Service operation | |||||
Mindknock Co., Ltd. (*8) | 100.0 | Software development | ||||||
Others(*9) | SK Telecom Innovation Fund, L.P. | 100.0 | Investment | |||||
SK Telecom China Fund I L.P. | 100.0 | Investment |
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Company or subsidiaries of the Company. |
(*2) | DREAMUS COMPANY(Formerly, IRIVER LIMITED) merged groovers Inc. during the nine-month period ended September 30, 2019. |
(*3) | FSK L&S Co., Ltd. was reclassified as a subsidiary from an associate during the nine-month period ended September 30, 2019, and thus FSK L&S (Shanghai) Co., Ltd., a subsidiary of FSK L&S Co., Ltd. was included in the subsidiary. |
(*4) | The Company acquired 2,786,455 shares of Incross Co., Ltd. at ₩53,722 million in cash for the nine-month period ended September 30, 2019 in order to expand digital advertising business through the integration of the Company’s technological capabilities. |
(*5) | The Company newly established SK Telecom CS T1 Co., Ltd. for the nine-month period ended September 30, 2019. |
(*6) | The Company newly established Happy Hanool Co., Ltd. during the nine-month period ended September 30, 2019. |
(*7) | SK Infosec Co., Ltd. newly established SKinfosec Information Technology (Wuxi) Co., Ltd. during the nine-month period ended September 30, 2019. |
(*8) | Mindknock Co., Ltd. was reclassified as a subsidiary from an associate as Incross Co., Ltd. acquired additional shares of Mindknock Co., Ltd. during the nine-month period ended September 30, 2019. |
(*9) | Others are owned together by Atlas Investment and another subsidiary of the Company. |
51
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Transactions with Related Parties, Continued |
(1) | List of related parties, Continued |
As of September 30, 2019, the Company belongs to SK Group, a conglomerate as defined in theMonopoly Regulation and Fair Trade Act of the Republic of Korea. All of the other entities included in SK Group are considered related parties of the Company.
(2) | Compensation to the key management |
The Company considers registered directors (3 executive and 5non-executive directors) who have substantial role and responsibility in planning, operations, and relevant controls of the business as key management. The compensation given to such key management for the three and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Salaries | ₩ | 545 | 5,420 | 779 | 3,995 | |||||||||||
Defined benefits plan expenses | 142 | 1,095 | 121 | 799 | ||||||||||||
Share option | 66 | 260 | 170 | 441 | ||||||||||||
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₩ | 753 | 6,775 | 1,070 | 5,235 | ||||||||||||
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Compensation for the key management includes salaries,non-monetary salaries, and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) |
| |||||||||||||||||||||||||
For the period ended September 30, 2019 | ||||||||||||||||||||||||||
Operating revenue and others | Operating expense and others(*) | Acquisition of property and equipment | ||||||||||||||||||||||||
Scope | Company | Three- month | Nine- month | Three- month | Nine- month | Three- month | Nine- month | |||||||||||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd.(*2) | ₩ | 3,312 | 8,018 | 91,613 | 428,975 | 7,678 | 13,404 | ||||||||||||||||||
Subsidiaries | SK Broadband Co., Ltd. | 27,686 | 81,268 | 137,823 | 401,751 | 7,052 | 10,812 | |||||||||||||||||||
PS&Marketing Corporation(*3) | 2,860 | 9,225 | 478,124 | 1,193,402 | 338 | 580 | ||||||||||||||||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) | 1,015 | 3,369 | 55,174 | 164,449 | 13,736 | 21,244 | ||||||||||||||||||||
SK Planet Co., Ltd. | 371 | 1,941 | 26,123 | 70,962 | 2,438 | 8,950 | ||||||||||||||||||||
SK Telink Co., Ltd.(*4) | 11,625 | 235,888 | 5,211 | 17,707 | — | — | ||||||||||||||||||||
SERVICE ACE Co., Ltd.(*5) | 2,013 | 13,425 | 34,292 | 98,864 | — | — | ||||||||||||||||||||
SERVICE TOP Co., Ltd.(*6) | 2,262 | 15,425 | 36,013 | 101,725 | — | — | ||||||||||||||||||||
Eleven Street Co., Ltd. | 855 | 6,378 | 1,478 | 4,546 | — | — | ||||||||||||||||||||
Others(*7) | 9,734 | 85,817 | 33,983 | 87,975 | 1,785 | 3,298 | ||||||||||||||||||||
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58,421 | 452,736 | 808,221 | 2,141,381 | 25,349 | 44,884 | |||||||||||||||||||||
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Associates | F&U Credit information Co., Ltd. | 288 | 872 | 13,291 | 35,066 | — | — | |||||||||||||||||||
SK hynix Inc.(*8) | 6,585 | 238,983 | 19 | 195 | — | — | ||||||||||||||||||||
KEB HanaCard Co., Ltd. | 99 | 693 | 634 | 1,700 | — | — | ||||||||||||||||||||
SK Wyverns Co., Ltd. | 296 | 886 | 3,005 | 18,005 | — | — | ||||||||||||||||||||
Others(*9) | 219 | 8,350 | 3,014 | 9,174 | — | 37 | ||||||||||||||||||||
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7,487 | 249,784 | 19,963 | 64,140 | — | 37 | |||||||||||||||||||||
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Other | SK Engineering & Construction Co., Ltd. | 559 | 1,796 | 101 | 101 | 2,400 | 7,400 | |||||||||||||||||||
SK Innovation Co., Ltd. | 5,680 | 10,920 | 952 | 1,345 | — | — | ||||||||||||||||||||
SK Networks Co., Ltd. | 680 | 2,651 | 3,793 | 11,609 | — | 443 | ||||||||||||||||||||
SK Networks service Co., Ltd. | 187 | 534 | 12,553 | 31,835 | 514 | 524 | ||||||||||||||||||||
SK Telesys Co., Ltd. | 53 | 154 | 252 | 695 | 4,429 | 11,723 | ||||||||||||||||||||
SK TNS Co., Ltd. | 50 | 151 | 11,317 | 22,352 | 75,923 | 189,978 | ||||||||||||||||||||
SK energy Co., Ltd. | 858 | 1,988 | 11 | 161 | — | — | ||||||||||||||||||||
SKC Infra Services Co., Ltd. | 44 | 58 | 1,933 | 6,142 | — | 186 | ||||||||||||||||||||
SK E&S Co., Ltd. | 457 | 1,423 | — | 101 | — | — | ||||||||||||||||||||
Others | 3,535 | 8,531 | 1,866 | 4,714 | 24,074 | 24,074 | ||||||||||||||||||||
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12,103 | 28,206 | 32,778 | 79,055 | 107,340 | 234,328 | |||||||||||||||||||||
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₩ | 81,323 | 738,744 | 952,575 | 2,713,551 | 140,367 | 292,653 | ||||||||||||||||||||
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53
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and nine-month periods ended September 30, 2019 and 2018 are as follows, Continued: |
(*1) | Operating expenses and others include lease payments by the Company. |
(*2) | Operating expenses and others include ₩216,241 million of dividends paid by the Company. |
(*3) | Operating expenses and others include ₩645,156 million paid to PS&Marketing Corporation relating to purchase of accounts receivables resulting from sale of handsets. |
(*4) | Operating revenue and others include ₩199,995 million of dividend income received. |
(*5) | Operating revenue and others include ₩7,499 million of dividend income received. |
(*6) | Operating revenue and others include ₩8,900 million of dividend income received. |
(*7) | Operating revenue and others include ₩60,597 million of dividend income received from Life & Security Holdings Co., Ltd. and SK Infosec Co., Ltd. |
(*8) | Operating revenue and others include ₩219,151 million of dividend income received. |
(*9) | Operating revenue and others include ₩8,350 million of dividend income received from Korea IT Fund and UniSK. |
54
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and nine-month periods ended September 30, 2019 and 2018 are as follows, Continued: |
(In millions of won) |
| |||||||||||||||||||||||||
For the period ended September 30, 2018 | ||||||||||||||||||||||||||
Operating revenue and others | Operating expense and others | Acquisition of property and equipment | ||||||||||||||||||||||||
Scope | Company | Three-month | Nine-month | Three-month | Nine-month | Three-month | Nine-month | |||||||||||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd.(*1) | ₩ | 2,727 | 8,538 | 96,274 | 428,244 | 8,964 | 15,732 | ||||||||||||||||||
Subsidiaries | SK Broadband Co., Ltd. | 29,411 | 87,129 | 139,386 | 403,036 | 15,660 | 20,007 | |||||||||||||||||||
PS&Marketing Corporation(*2) | 2,666 | 8,720 | 382,500 | 1,120,402 | 362 | 424 | ||||||||||||||||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) | 1,099 | 3,153 | 53,988 | 159,855 | 12,332 | 22,382 | ||||||||||||||||||||
SK Planet Co., Ltd. | 4,578 | 18,969 | 12,921 | 26,944 | 771 | 938 | ||||||||||||||||||||
SK Telink Co., Ltd. | 13,669 | 42,802 | 5,725 | 16,951 | — | — | ||||||||||||||||||||
SERVICE ACE Co., Ltd. | 1,936 | 5,804 | 32,546 | 97,838 | — | — | ||||||||||||||||||||
SERVICE TOP Co., Ltd. | 2,111 | 6,403 | 35,894 | 115,211 | — | — | ||||||||||||||||||||
Eleven Street Co., Ltd. | 1,974 | 1,974 | 1,595 | 1,595 | — | — | ||||||||||||||||||||
SK techx Co., Ltd.(*3) | 812 | 3,373 | 11,961 | 96,258 | 9,782 | 11,064 | ||||||||||||||||||||
Others(*4) | 15,789 | 28,360 | 18,090 | 39,569 | 321 | 2,974 | ||||||||||||||||||||
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74,045 | 206,687 | 694,606 | 2,077,659 | 39,228 | 57,789 | |||||||||||||||||||||
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Associates | F&U Credit information Co., Ltd. | 393 | 1,181 | 11,296 | 34,553 | — | — | |||||||||||||||||||
HappyNarae Co., Ltd. | 22 | 75 | 3,997 | 8,781 | 15,017 | 36,271 | ||||||||||||||||||||
SK hynix Inc.(*5) | 6,593 | 163,486 | 14 | 220 | — | — | ||||||||||||||||||||
KEB HanaCard Co., Ltd. | 3,149 | 12,087 | 3,773 | 11,615 | — | — | ||||||||||||||||||||
Others(*6) | 2,331 | 4,590 | 7,472 | 25,606 | 355 | 478 | ||||||||||||||||||||
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12,488 | 181,419 | 26,552 | 80,775 | 15,372 | 36,749 | |||||||||||||||||||||
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Other | SK Engineering & Construction Co., Ltd. | 542 | 2,500 | — | 134 | — | — | |||||||||||||||||||
SK Innovation Co., Ltd. | 2,166 | 6,334 | 181 | 700 | — | — | ||||||||||||||||||||
SK Networks Co., Ltd. | 4,800 | 10,605 | 3,512 | 11,191 | 368 | 435 | ||||||||||||||||||||
SK Networks Service Co., Ltd. | 162 | 478 | 10,178 | 33,038 | 717 | 2,277 | ||||||||||||||||||||
SK Telesys Co., Ltd. | 36 | 139 | 200 | 639 | 18,882 | 46,080 | ||||||||||||||||||||
SK TNS Co., Ltd. | 25 | 75 | 10,915 | 17,672 | 91,420 | 180,587 | ||||||||||||||||||||
SK energy Co., Ltd. | 462 | 1,795 | 7 | 152 | — | — | ||||||||||||||||||||
SKC Infra Services Co., Ltd. | 8 | 41 | 2,181 | 6,651 | 421 | 927 | ||||||||||||||||||||
SK Infosec Co., Ltd. | — | 76 | 7,439 | 22,555 | 2,548 | 3,669 | ||||||||||||||||||||
Others | 2,471 | 8,230 | 1,380 | 3,865 | — | — | ||||||||||||||||||||
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10,672 | 30,273 | 35,993 | 96,597 | 114,356 | 233,975 | |||||||||||||||||||||
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₩ | 99,932 | 426,917 | 853,425 | 2,683,275 | 177,920 | 344,245 | ||||||||||||||||||||
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55
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and nine-month periods ended September 30, 2019 and 2018 are as follows, Continued: |
(*1) | Operating expenses and others include ₩203,635 million of dividends paid by the Company. |
(*2) | Operating expenses and others include ₩643,239 million paid to PS&Marketing Corporation relating to purchase of accounts receivables resulting from sale of handsets. |
(*3) | Transactions with SK techx Co., Ltd. that occurred before merger with SK Planet Co., Ltd. |
(*4) | Operating revenue and others include ₩10,090 million of dividends received from SK Global Healthcare Business Group, Ltd. |
(*5) | Operating revenue and others include ₩146,100 million of dividends received. |
(*6) | Operating revenue and others include ₩3,715 million of dividends received from Korea IT Fund and UniSK. |
56
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) |
| |||||||||||||
September 30, 2019 | ||||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd. | ₩ | — | 3,191 | 29,479 | |||||||||
Subsidiaries | SK Broadband Co., Ltd. | — | 7,575 | 41,573 | ||||||||||
PS&Marketing Corporation | — | 918 | 96,953 | |||||||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) | — | 155 | 25,555 | |||||||||||
SK Planet Co., Ltd. | — | 384 | 17,894 | |||||||||||
SK Telink Co., Ltd. | — | 8,727 | 2,502 | |||||||||||
SERVICE ACE Co., Ltd. | — | 198 | 21,524 | |||||||||||
SERVICE TOP Co., Ltd. | — | 529 | 23,409 | |||||||||||
Eleven Street Co., Ltd. | — | 596 | 1,809 | |||||||||||
One store Co., Ltd. | — | 319 | 27,503 | |||||||||||
SK m&service Co., Ltd. | — | 2,128 | 6,131 | |||||||||||
Others | — | 1,012 | 25,089 | |||||||||||
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— | 22,541 | 289,942 | ||||||||||||
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Associates | F&U Credit information Co., Ltd. | — | — | 4,550 | ||||||||||
SK hynix Inc. | — | 1,181 | 1 | |||||||||||
Wave City Development Co., Ltd. | — | 31,523 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*) | 22,147 | — | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 572 | 4,234 | |||||||||||
Others | 408 | — | 94 | |||||||||||
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22,555 | 33,276 | 8,879 | ||||||||||||
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Other | SK Engineering and Construction Co., Ltd. | — | 544 | — | ||||||||||
SK Innovation Co., Ltd. | — | 4,712 | 23,433 | |||||||||||
SK Networks Co., Ltd. | — | 510 | 23,226 | |||||||||||
SK Networks Services Co., Ltd. | — | — | 3,270 | |||||||||||
SK Telesys Co., Ltd. | — | 26 | 594 | |||||||||||
SK TNS Co., Ltd. | — | 10 | 30,130 | |||||||||||
SK Energy Co., Ltd. | — | 265 | 61 | |||||||||||
Others | — | 1,949 | 4,614 | |||||||||||
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— | 8,016 | 85,328 | ||||||||||||
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₩ | 22,555 | 67,024 | 413,628 | |||||||||||
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(*) | As of September 30, 2019, the Company recognized the entire balance of loans to Daehan Kanggun BcN Co., Ltd. as loss allowances. |
57
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of September 30, 2019 and December 31, 2018 are as follows, Continued: |
(In millions of won) |
| |||||||||||||
December 31, 2018 | ||||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd. | ₩ | — | 2,119 | 88,103 | |||||||||
Subsidiaries | SK Broadband Co., Ltd. | — | 7,637 | 69,069 | ||||||||||
PS&Marketing Corporation | — | 250 | 82,034 | |||||||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) | — | 35 | 42,683 | |||||||||||
SK Planet Co., Ltd. | — | 1,003 | 45,268 | |||||||||||
SK Telink Co., Ltd. | — | 8,353 | 4,629 | |||||||||||
SERVICE ACE Co., Ltd. | — | 123 | 24,629 | |||||||||||
SERVICE TOP Co., Ltd. | — | 138 | 30,771 | |||||||||||
Eleven Street Co., Ltd. | — | 2,086 | 3,141 | |||||||||||
One Store Co., Ltd. | — | 1,178 | 27,164 | |||||||||||
SK m&service Co., Ltd. | — | 3,366 | 5,894 | |||||||||||
Others | — | 401 | 28,776 | |||||||||||
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— | 24,570 | 364,058 | ||||||||||||
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Associates | F&U Credit information Co., Ltd. | — | 92 | 5,725 | ||||||||||
SK hynix Inc. | — | 12,840 | 89 | |||||||||||
Wave City Development Co., Ltd. | — | 37,263 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*) | 22,147 | — | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 541 | 11,311 | |||||||||||
Others | 407 | 111 | 1,762 | |||||||||||
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22,554 | 50,847 | 18,887 | ||||||||||||
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Other | SK Engineering and Construction Co., Ltd. | — | 441 | 760 | ||||||||||
SK Innovation Co., Ltd. | — | 2,297 | 798 | |||||||||||
SK Networks Co., Ltd. | — | 1,226 | 327 | |||||||||||
SK Networks Services Co., Ltd. | — | 11 | 7,849 | |||||||||||
SK Telesys Co., Ltd. | — | 19 | 4,163 | |||||||||||
SK TNS Co., Ltd. | — | — | 78,421 | |||||||||||
SK Energy Co., Ltd. | — | 790 | 102 | |||||||||||
Others | — | 1,732 | 4,591 | |||||||||||
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— | 6,516 | 97,011 | ||||||||||||
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₩ | 22,554 | 84,052 | 568,059 | |||||||||||
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(*) | As of December 31, 2018, the Company recognized the entire balance of loans to Daehan Kanggun BcN Co., Ltd. as loss allowances. |
(5) | The details of the additional investments and disposal of subsidiaries and associates for the nine-month period ended September 30, 2019 are described in note 8. |
58
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
28. | Commitments and Contingencies |
(1) | Accounts receivables from sale of handsets |
The sales agents of the Company sell handsets to the Company’s subscribers on an installment basis. The Company entered into comprehensive agreements to purchase accounts receivables from handset sales with retail stores and authorized dealers, and to transfer the accounts receivables from handset sales to special purpose companies which were established with the purpose of liquidating receivables, respectively.
The accounts receivables from sale of handsets amounting to ₩916,844 million as of September 30, 2019 which the Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.
(2) | Legal claims and litigations |
As of September 30, 2019, the Company is involved in various legal claims and litigation. Provision recognized in relation to these claims and litigation is immaterial. In connection with those legal claims and litigation for which no provision was recognized, management does not believe the Company has a present obligation, nor is it expected any of these claims or litigation will have a significant impact on the Company’s financial position or operating results in the event an outflow of resources is ultimately necessary.
59
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
29. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | For the nine-month period ended | |||||||
September 30, 2019 | September 30, 2018 | |||||||
Gain on foreign currency translations | ₩ | (3,717 | ) | (894 | ) | |||
Interest income | (26,157 | ) | (30,673 | ) | ||||
Dividends | (514,399 | ) | (177,490 | ) | ||||
Gain relating to financial assets at FVTPL | (840 | ) | (2,179 | ) | ||||
Gain on disposal of property and equipment and intangible assets | (4,609 | ) | (1,520 | ) | ||||
Gain relating to financial liabilities at FVTPL | (56 | ) | — | |||||
Gain on valuation of derivatives | (465 | ) | (1,423 | ) | ||||
Gain on settlement of derivatives | (389 | ) | — | |||||
Gain on sale of accounts receivable – other | (14,353 | ) | (17,341 | ) | ||||
Other income | (109 | ) | — | |||||
Loss on foreign currency translations | 3,347 | 615 | ||||||
Bad debt for accounts receivable – trade | 2,770 | 11,756 | ||||||
Bad debt for accounts receivable – other | 2,543 | 2,438 | ||||||
Loss relating to financial assets at FVTPL | 180 | 589 | ||||||
Depreciation and amortization | 2,084,176 | 1,869,119 | ||||||
Loss on disposal of property and equipment and intangible assets | 10,574 | 25,683 | ||||||
Loss on impairment of property and equipment and intangible assets | 63 | — | ||||||
Interest expenses | 186,878 | 173,723 | ||||||
Loss relating to financial liabilities at FVTPL | 43 | 1,143 | ||||||
Loss on settlement of derivatives | 317 | 12,156 | ||||||
Loss on investments in subsidiaries and associates | — | 12,977 | ||||||
Loss on sale of accounts receivable – other | 560 | — | ||||||
Retirement benefit expenses | 33,538 | 30,047 | ||||||
Share option | 228 | 441 | ||||||
Income tax expense | 215,081 | 255,808 | ||||||
Other expenses | 3,600 | 1,104 | ||||||
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₩ | 1,978,804 | 2,166,079 | ||||||
|
|
|
|
60
Table of Contents
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
29. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the nine-month periods ended September 30, 2019 are as follows: |
(In millions of won) | For the nine-month period ended | |||||||
September 30, 2019 | September 30, 2018 | |||||||
Accounts receivable – trade | ₩ | (144,571 | ) | (346,574 | ) | |||
Accounts receivable – other | (56,105 | ) | 373,035 | |||||
Advance payments | (87,811 | ) | (2,754 | ) | ||||
Prepaid expenses | (260,393 | ) | 55,681 | |||||
Inventories | 933 | 4,043 | ||||||
Long-term accounts receivable – other | (254,742 | ) | (30,554 | ) | ||||
Long-term prepaid expenses | (355,006 | ) | — | |||||
Guarantee deposits | 1,253 | (6,188 | ) | |||||
Contract assets | (5,956 | ) | (7,608 | ) | ||||
Accounts payable – other | 260,891 | (133,672 | ) | |||||
Withholdings | (36,671 | ) | (38,351 | ) | ||||
Deposits received | (744 | ) | 539 | |||||
Accrued expenses | 81,845 | (98,810 | ) | |||||
Provisions | (524 | ) | (3,874 | ) | ||||
Long-term provisions | — | 2,501 | ||||||
Plan assets | 1,868 | 7,155 | ||||||
Retirement benefit payment | (11,610 | ) | (6,513 | ) | ||||
Contract liabilities | 18,898 | 6,815 | ||||||
Others | 8,290 | (4,981 | ) | |||||
|
|
|
| |||||
₩ | (840,155 | ) | (230,110 | ) | ||||
|
|
|
|
(3) | Significantnon-cash transactions for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | For the nine-month period ended | |||||||
September 30, 2019 | September 30, 2018 | |||||||
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets | ₩ | (13,429 | ) | (429,670 | ) | |||
Increase ofright-of-use assets upon adoption ofK-IFRS 1116 | 339,029 | — |
61
Table of Contents
SK TELECOM CO., LTD. AND SUBSIDIARIES
Condensed Consolidated Interim Financial Statements
(Unaudited)
September 30, 2019 and 2018
(With Independent Auditors’ Review Report Thereon)
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1 | ||||
3 | ||||
5 | ||||
6 | ||||
7 | ||||
8 | ||||
Notes to the Condensed Consolidated Interim Financial Statements | 10 |
Table of Contents
Independent Auditors’ Review Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
SK Telecom Co., Ltd.:
Reviewed financial statements
We have reviewed the accompanying condensed consolidated interim financial statements of SK Telecom Co., Ltd. and its subsidiaries (the “Group”), which comprise the condensed consolidated statement of financial position as of September 30, 2019, the condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2019 and 2018, the condensed consolidated statements of changes in equity and cash flows for the nine-month periods ended September 30, 2019 and 2018, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s responsibility
Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards(“K-IFRS”) No. 1034,Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of condensed consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ review responsibility
Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews.
We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared fairly, in all material respects, in accordance withK-IFRS No. 1034,Interim Financial Reporting.
Emphasis of matter
As a matter that does not have an impact on our review conclusion, we draw attention to the matter described in note 3 to the condensed consolidated interim financial statements. The Group has initially adoptedK-IFRS No. 1116 for the year beginning on January 1, 2019, and the Group has taken an exemption not to restate the condensed consolidated financial statements as of December 31, 2018 or for the three-month and nine-month periods ended September 30, 2018 presented for comparative purposes, in accordance with transition requirements of the standards. The financial impacts of applyingK-IFRS No. 1116 are discussed in note 3.
Table of Contents
Other matters
The consolidated statement of financial position of the Group as of December 31, 2018, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated February 28, 2019, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2018, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.
The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.
KPMG Samjong Accounting Corp.
Seoul, Korea
November 13, 2019
This report is effective as of November 13, 2019, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any. |
2
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Statements of Financial Position
As of September 30, 2019 and December 31, 2018
(In millions of won) | Note | September 30, 2019 | December 31, 2018 | |||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 26,27 | ₩ | 1,289,713 | 1,506,699 | ||||||||
Short-term financial instruments | 26,27 | 829,018 | 1,045,676 | |||||||||
Short-term investment securities | 9,26,27 | 144,513 | 195,080 | |||||||||
Accounts receivable – trade, net | 5,26,27,28 | 2,218,259 | 2,008,640 | |||||||||
Short-term loans, net | 5,26,27,28 | 75,102 | 59,094 | |||||||||
Accounts receivable – other, net | 3,5,26,27,28,29 | 1,018,318 | 937,837 | |||||||||
Prepaid expenses | 3,6 | 1,945,131 | 1,769,559 | |||||||||
Contract assets | 7 | 123,870 | 90,072 | |||||||||
Inventories, net | 8 | 200,539 | 288,053 | |||||||||
Prepaid income taxes | 24 | 65,820 | — | |||||||||
Derivative financial assets | 26,27 | 36,897 | 13 | |||||||||
Advanced payments and others | 5,26,27,28 | 138,950 | 58,116 | |||||||||
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| |||||||||
8,086,130 | 7,958,839 | |||||||||||
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| |||||||||
Non-Current Assets: | ||||||||||||
Long-term financial instruments | 26,27 | 1,219 | 1,221 | |||||||||
Long-term investment securities | 9,26,27 | 538,412 | 664,726 | |||||||||
Investments in associates and joint ventures | 10 | 13,404,235 | 12,811,771 | |||||||||
Property and equipment, net | 3,11,28,29 | 11,585,057 | 10,718,354 | |||||||||
Goodwill | 2,971,656 | 2,938,563 | ||||||||||
Intangible assets, net | 3,12 | 4,906,522 | 5,513,510 | |||||||||
Long-term contract assets | 7 | 60,577 | 43,821 | |||||||||
Long-term loans, net | 5,26,27,28 | 34,422 | 29,034 | |||||||||
Long-term accounts receivable – other | 3,5,26,27,29 | 544,893 | 274,053 | |||||||||
Long-term prepaid expenses | 3,6 | 1,225,417 | 895,272 | |||||||||
Guarantee deposits | 5,26,27,28 | 317,609 | 313,140 | |||||||||
Long-term derivative financial assets | 26,27 | 171,857 | 55,444 | |||||||||
Deferred tax assets | 24 | 105,901 | 92,465 | |||||||||
Defined benefit assets | 16 | — | 31,926 | |||||||||
Othernon-current assets | 5,26,27 | 29,873 | 26,972 | |||||||||
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|
| |||||||||
35,897,650 | 34,410,272 | |||||||||||
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|
|
| |||||||||
Total Assets | ₩ | 43,983,780 | 42,369,111 | |||||||||
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|
|
See accompanying notes to the condensed consolidated interim financial statements.
3
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Statements of Financial Position, Continued
As of September 30, 2019 and December 31, 2018
(In millions of won) | ||||||||||||
Note | September 30, 2019 | December 31, 2018 | ||||||||||
Liabilities and Shareholders’ Equity |
| |||||||||||
Current Liabilities: | ||||||||||||
Short-term borrowings | 13,26,27 | ₩ | 50,000 | 80,000 | ||||||||
Current installments of long-term debt, net | 13,26,27 | 1,020,205 | 984,272 | |||||||||
Current installments of long-term payables – other | 14,26,27 | 422,117 | 424,243 | |||||||||
Lease liabilities | 3,26,27,28 | 304,807 | — | |||||||||
Accounts payable – trade | 26,27,28 | 455,288 | 381,302 | |||||||||
Accounts payable – other | 26,27,28 | 2,108,604 | 1,913,813 | |||||||||
Withholdings | 26,27,28 | 1,332,502 | 1,353,663 | |||||||||
Accrued expenses | 26,27 | 1,403,376 | 1,299,217 | |||||||||
Income tax payable | 24 | 17,764 | 182,343 | |||||||||
Provisions | 15,29 | 86,488 | 87,993 | |||||||||
Contract liabilities | 7 | 165,742 | 140,711 | |||||||||
Other current liabilities | 278 | — | ||||||||||
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| |||||||||
7,367,171 | 6,847,557 | |||||||||||
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| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 13,26,27 | 7,159,488 | 6,572,211 | |||||||||
Long-term borrowings, excluding current installments, net | 13,26,27,29 | 1,987,519 | 2,015,365 | |||||||||
Long-term payables – other | 14,26,27 | 1,545,301 | 1,968,784 | |||||||||
Long-term contract liabilities | 7 | 35,000 | 43,102 | |||||||||
Defined benefit liabilities | 16 | 207,341 | 141,529 | |||||||||
Long-term derivative financial liabilities | 26,27 | 1,383 | 4,184 | |||||||||
Long-term lease liabilities | 3,26,27,28 | 428,959 | — | |||||||||
Long-term provisions | 15,29 | 62,528 | 99,215 | |||||||||
Deferred tax liabilities | 3,24 | 2,451,436 | 2,269,792 | |||||||||
Othernon-current liabilities | 26,27 | 81,009 | 58,122 | |||||||||
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| |||||||||
13,959,964 | 13,172,304 | |||||||||||
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| |||||||||
Total Liabilities | 21,327,135 | 20,019,861 | ||||||||||
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| |||||||||
Shareholders’ Equity: | ||||||||||||
Share capital | 1,17 | 44,639 | 44,639 | |||||||||
Capital surplus and others | 17,18 | 651,201 | 655,084 | |||||||||
Retained earnings | 3,19 | 22,327,723 | 22,144,541 | |||||||||
Reserves | 20 | (274,939 | ) | (373,442 | ) | |||||||
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| |||||||||
Equity attributable to owners of the Parent Company | 22,748,624 | 22,470,822 | ||||||||||
Non-controlling interests | 3 | (91,979 | ) | (121,572 | ) | |||||||
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| |||||||||
Total Shareholders’ Equity | 22,656,645 | 22,349,250 | ||||||||||
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|
| |||||||||
Total Liabilities and Shareholders’ Equity | ₩ | 43,983,780 | 42,369,111 | |||||||||
|
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See accompanying notes to the condensed consolidated interim financial statements.
4
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Statements of Income
For the three and nine-month periods ended September 30, 2019 and 2018
(In millions of won) | ||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||
Note | Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | ||||||||||||||||
Operating revenue: | 4,28 | |||||||||||||||||||
Revenue | ₩ | 4,561,213 | 13,333,148 | 4,186,392 | 12,522,253 | |||||||||||||||
Operating expenses: | 28 | |||||||||||||||||||
Labor | 699,387 | 2,089,667 | 538,528 | 1,624,055 | ||||||||||||||||
Commissions | 1,302,716 | 3,832,785 | 1,266,093 | 3,745,048 | ||||||||||||||||
Depreciation and amortization | 3,4 | 961,910 | 2,783,411 | 767,529 | 2,321,230 | |||||||||||||||
Network interconnection | 183,897 | 561,008 | 212,229 | 646,018 | ||||||||||||||||
Leased line | 67,084 | 204,105 | 79,594 | 236,739 | ||||||||||||||||
Advertising | 111,166 | 301,682 | 119,923 | 330,515 | ||||||||||||||||
Rent | 3 | 59,661 | 177,077 | 134,139 | 396,896 | |||||||||||||||
Cost of goods sold | 8 | 499,415 | 1,316,779 | 418,288 | 1,228,108 | |||||||||||||||
Others | 21 | 373,887 | 1,119,142 | 345,961 | 1,017,166 | |||||||||||||||
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4,259,123 | 12,385,656 | 3,882,284 | 11,545,775 | |||||||||||||||||
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| |||||||||||||
Operating profit | 4 | 302,090 | 947,492 | 304,108 | 976,478 | |||||||||||||||
Finance income | 4,23 | 29,749 | 94,221 | 106,285 | 188,877 | |||||||||||||||
Finance costs | 3,4,23 | (106,927 | ) | (319,769 | ) | (95,954 | ) | (272,237 | ) | |||||||||||
Othernon-operating income | 4,22 | 20,328 | 36,816 | 36,223 | 58,568 | |||||||||||||||
Othernon-operating expenses | 4,22 | (16,306 | ) | (68,220 | ) | (41,178 | ) | (114,410 | ) | |||||||||||
Gain on investments in subsidiaries, associates and joint ventures, net | 4,10 | 120,455 | 479,876 | 992,448 | 2,534,688 | |||||||||||||||
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Profit before income tax | 4 | 349,389 | 1,170,416 | 1,301,932 | 3,371,964 | |||||||||||||||
Income tax expense | 24 | 74,964 | 263,304 | 252,109 | 714,468 | |||||||||||||||
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| |||||||||||||
Profit for the period | ₩ | 274,425 | 907,112 | 1,049,823 | 2,657,496 | |||||||||||||||
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Attributable to: | ||||||||||||||||||||
Owners of the Parent Company | ₩ | 274,380 | 916,966 | 1,031,375 | 2,642,986 | |||||||||||||||
Non-controlling interests | 45 | (9,854 | ) | 18,448 | 14,510 | |||||||||||||||
Earnings per share: | 25 | |||||||||||||||||||
Basic and diluted earnings per share (in won) | ₩ | 3,766 | 12,605 | 14,555 | 37,260 | |||||||||||||||
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See accompanying notes to the condensed consolidated interim financial statements.
5
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
For the three and nine-month periods ended September 30, 2019 and 2018
(In millions of won) | 2019 | 2018 | ||||||||||||||||||
Note | Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | ||||||||||||||||
Profit for the period | ₩ | 274,425 | 907,112 | 1,049,823 | 2,657,496 | |||||||||||||||
Other comprehensive income (loss): |
| |||||||||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||||||||||
Remeasurement of defined benefit liabilities | 16 | 2,368 | (8,381 | ) | 751 | (9,987 | ) | |||||||||||||
Net change in other comprehensive income of investments in associates | 10,20 | (1,096 | ) | (3,512 | ) | (1,477 | ) | (4,394 | ) | |||||||||||
Valuation loss on financial assets at fair value through other comprehensive income | 20 | (5,448 | ) | (11,654 | ) | (831 | ) | (42,723 | ) | |||||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||||||||||
Net change in other comprehensive income of investments in associates and joint ventures | 10,20 | 27,763 | 101,373 | (71,042 | ) | (20,040 | ) | |||||||||||||
Net change in unrealized fair value of derivatives | 20 | 6,744 | 35,887 | (5,328 | ) | (14,289 | ) | |||||||||||||
Foreign currency translation differences for foreign operations | 20 | (4,830 | ) | 6,358 | (9,057 | ) | 15,349 | |||||||||||||
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Other comprehensive income (loss) for the period, net of taxes | 25,501 | 120,071 | (86,984 | ) | (76,084 | ) | ||||||||||||||
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| |||||||||||||
Total comprehensive income | ₩ | 299,926 | 1,027,183 | 962,839 | 2,581,412 | |||||||||||||||
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Total comprehensive income (loss) attributable to: | ||||||||||||||||||||
Owners of the Parent Company | ₩ | 299,082 | 1,035,644 | 944,293 | 2,566,537 | |||||||||||||||
Non-controlling interests | 844 | (8,461 | ) | 18,546 | 14,875 |
See accompanying notes to the condensed consolidated interim financial statements.
6
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Statements of Changes in Equity
For the nine-month periods September 30, 2019 and 2018
(In millions of won) | ||||||||||||||||||||||||||||||||
Controlling Interest | Non- controlling interests | Total equity | ||||||||||||||||||||||||||||||
Note | Share capital | Capital surplus and others | Retained earnings | Reserves | Sub-total | |||||||||||||||||||||||||||
Balance, December 31, 2017 | ₩ | 44,639 | 196,281 | 17,835,946 | (234,727 | ) | 17,842,139 | 187,056 | 18,029,195 | |||||||||||||||||||||||
Impact of adoptingK-IFRS No. 1115 | — | — | 1,900,049 | — | 1,900,049 | — | 1,900,049 | |||||||||||||||||||||||||
Impact of adoptingK-IFRS No. 1109 | — | — | 60,026 | (68,804 | ) | (8,778 | ) | — | (8,778 | ) | ||||||||||||||||||||||
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Restated balance, January 1, 2018 | 44,639 | 196,281 | 19,796,021 | (303,531 | ) | 19,733,410 | 187,056 | 19,920,466 | ||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the period | — | — | 2,642,986 | — | 2,642,986 | 14,510 | 2,657,496 | |||||||||||||||||||||||||
Other comprehensive income (loss) | 10,16,20 | — | — | (23,899 | ) | (52,550 | ) | (76,449 | ) | 365 | (76,084 | ) | ||||||||||||||||||||
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| |||||||||||||||||||
— | — | 2,619,087 | (52,550 | ) | 2,566,537 | 14,875 | 2,581,412 | |||||||||||||||||||||||||
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Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | — | — | (635,482 | ) | — | (635,482 | ) | — | (635,482 | ) | ||||||||||||||||||||||
Interim dividends | — | — | (70,609 | ) | — | (70,609 | ) | — | (70,609 | ) | ||||||||||||||||||||||
Interest on hybrid bonds | — | — | (12,111 | ) | — | (12,111 | ) | — | (12,111 | ) | ||||||||||||||||||||||
Repayments of hybrid bonds | — | (400,000 | ) | — | — | (400,000 | ) | — | (400,000 | ) | ||||||||||||||||||||||
Proceeds from issuance of hybrid bonds bonds | — | 398,759 | — | — | 398,759 | — | 398,759 | |||||||||||||||||||||||||
Share option | 18 | — | 441 | — | — | 441 | 126 | 567 | ||||||||||||||||||||||||
Changes in ownership in subsidiaries | — | 311,541 | — | — | 311,541 | 76,287 | 387,828 | |||||||||||||||||||||||||
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| |||||||||||||||||||
— | 310,741 | (718,202 | ) | — | (407,461 | ) | 76,413 | (331,048 | ) | |||||||||||||||||||||||
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Balance, September 30, 2018 | ₩ | 44,639 | 507,022 | 21,696,906 | (356,081 | ) | 21,892,486 | 278,344 | 22,170,830 | |||||||||||||||||||||||
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Balance, December 31, 2018 | ₩ | 44,639 | 655,084 | 22,144,541 | (373,442 | ) | 22,470,822 | (121,572 | ) | 22,349,250 | ||||||||||||||||||||||
Impact of adoptingK-IFRS No. 1116 | 3 | — | — | (24,186 | ) | — | (24,186 | ) | (503 | ) | (24,689 | ) | ||||||||||||||||||||
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Restated balance, January 1, 2019 | ₩ | 44,639 | 655,084 | 22,120,355 | (373,442 | ) | 22,446,636 | (122,075 | ) | 22,324,561 | ||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit (loss) for the period | — | — | 916,966 | — | 916,966 | (9,854 | ) | 907,112 | ||||||||||||||||||||||||
Other comprehensive income | 10,16,20 | — | — | 20,175 | 98,503 | 118,678 | 1,393 | 120,071 | ||||||||||||||||||||||||
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— | — | 937,141 | 98,503 | 1,035,644 | (8,461 | ) | 1,027,183 | |||||||||||||||||||||||||
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Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | — | — | (646,828 | ) | — | (646,828 | ) | — | (646,828 | ) | ||||||||||||||||||||||
Interim dividends | — | — | (71,870 | ) | — | (71,870 | ) | — | (71,870 | ) | ||||||||||||||||||||||
Interest on hybrid bonds | — | — | (11,075 | ) | — | (11,075 | ) | — | (11,075 | ) | ||||||||||||||||||||||
Share option | 18 | — | 228 | — | — | 228 | 504 | 732 | ||||||||||||||||||||||||
Changes in ownership in subsidiaries | — | (4,111 | ) | — | — | (4,111 | ) | 38,053 | 33,942 | |||||||||||||||||||||||
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|
|
| |||||||||||||||||||
— | (3,883 | ) | (729,773 | ) | — | (733,656 | ) | 38,557 | (695,099 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance, September 30, 2019 | ₩ | 44,639 | 651,201 | 22,327,723 | (274,939 | ) | 22,748,624 | (91,979 | ) | 22,656,645 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
7
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | Note | September 30, 2019 | September 30, 2018 | |||||||||
Cash flows from operating activities: | ||||||||||||
Cash generated from operating activities: | ||||||||||||
Profit for the period | ₩ | 907,112 | 2,657,496 | |||||||||
Adjustments for income and expenses | 30 | 3,102,395 | 837,318 | |||||||||
Changes in assets and liabilities related to operating activities | 30 | (866,168 | ) | (483,832 | ) | |||||||
|
|
|
| |||||||||
3,143,339 | 3,010,982 | |||||||||||
Interest received | 39,487 | 41,990 | ||||||||||
Dividends received | 237,424 | 193,962 | ||||||||||
Interest paid | (259,800 | ) | (179,262 | ) | ||||||||
Income tax paid | (322,232 | ) | (388,747 | ) | ||||||||
|
|
|
| |||||||||
Net cash provided by operating activities | 2,838,218 | 2,678,925 | ||||||||||
|
|
|
| |||||||||
Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term financial instruments, net | 255,569 | 373,505 | ||||||||||
Decrease in short-term investment securities, net | 51,637 | — | ||||||||||
Collection of short-term loans | 60,951 | 160,622 | ||||||||||
Decrease in long-term financial instruments | 3 | 5 | ||||||||||
Proceeds from disposals of long-term investment securities | 230,751 | 365,987 | ||||||||||
Proceeds from disposals of investments in associates and joint ventures | 220 | 44,505 | ||||||||||
Proceeds from disposals of property and equipment | 12,965 | 51,663 | ||||||||||
Proceeds from disposals of intangible assets | 5,838 | 9,720 | ||||||||||
Collection of long-term loans | 1,646 | 9,833 | ||||||||||
Decrease in deposits | 7,545 | 6,509 | ||||||||||
Proceeds from settlement of derivatives | 519 | — | ||||||||||
Collection of lease receivables | 20,148 | — | ||||||||||
Proceeds from disposals of othernon-current assets | — | 956 | ||||||||||
Proceeds from disposals of subsidiaries | 4,863 | — | ||||||||||
Cash inflow from business combinations | 5,016 | 8,163 | ||||||||||
Cash inflow from transfers of business | 45,658 | — | ||||||||||
|
|
|
| |||||||||
703,329 | 1,031,468 | |||||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term investment securities, net | — | (4,379 | ) | |||||||||
Increase in short-term loans | (74,531 | ) | (168,543 | ) | ||||||||
Increase in long-term loans | (7,702 | ) | (4,710 | ) | ||||||||
Acquisition of long-term investment securities | (74,277 | ) | (10,732 | ) | ||||||||
Acquisition of investments in associates and joint ventures | (263,383 | ) | (196,593 | ) | ||||||||
Acquisition of property and equipment | (2,235,781 | ) | (1,852,323 | ) | ||||||||
Acquisition of intangible assets | (45,901 | ) | (68,167 | ) | ||||||||
Increase in deposits | (5,471 | ) | (4,264 | ) | ||||||||
Cash outflow for business combinations | (36,900 | ) | (48,532 | ) | ||||||||
Cash outflow for liquidation of subsidiaries | (927 | ) | (1,836 | ) | ||||||||
|
|
|
| |||||||||
(2,744,873 | ) | (2,360,079 | ) | |||||||||
|
|
|
| |||||||||
Net cash used in investing activities | ₩ | (2,041,544 | ) | (1,328,611 | ) | |||||||
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
8
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Statements of Cash Flows, Continued
For the nine-month periods ended September 30, 2019 and 2018
(In millions of won) | Note | September 30, 2019 | September 30, 2018 | |||||||||
Cash flows from financing activities: | ||||||||||||
Cash inflows from financing activities: | ||||||||||||
Proceeds from issuance of debentures | ₩ | 1,234,938 | 1,809,641 | |||||||||
Proceeds from issuance of hybrid bonds | — | 398,759 | ||||||||||
Cash inflows from capital increase by subsidiaries | — | 499,926 | ||||||||||
Cash inflows from capital contribution fromnon-controlling shareholders | 3,933 | — | ||||||||||
Cash inflows from settlement of derivatives | 11,931 | — | ||||||||||
|
|
|
| |||||||||
1,250,802 | 2,708,326 | |||||||||||
Cash outflows for financing activities: | ||||||||||||
Decrease in short-term borrowings, net | (30,466 | ) | (78,393 | ) | ||||||||
Repayments of long-term payables – other | (427,369 | ) | (304,672 | ) | ||||||||
Repayments of debentures | (730,000 | ) | (1,086,550 | ) | ||||||||
Repayments of long-term borrowings | (37,253 | ) | (58,354 | ) | ||||||||
Cash outflows from settlement of derivatives | — | (29,278 | ) | |||||||||
Payments of cash dividends | (718,698 | ) | (706,091 | ) | ||||||||
Payments of interest on hybrid bonds | (11,075 | ) | (12,112 | ) | ||||||||
Repayments of hybrid bonds | — | (400,000 | ) | |||||||||
Repayments of lease liabilities | (287,896 | ) | — | |||||||||
Transactions with thenon-controlling shareholders | (26,631 | ) | (76,805 | ) | ||||||||
|
|
|
| |||||||||
(2,269,388 | ) | (2,752,255 | ) | |||||||||
|
|
|
| |||||||||
Net cash used in financing activities | (1,018,586 | ) | (43,929 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in cash and cash equivalents |
| (221,912 | ) | 1,306,385 | ||||||||
Cash and cash equivalents at beginning of the period | 1,506,699 | 1,457,735 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents | 4,926 | (568 | ) | |||||||||
|
|
|
| |||||||||
Cash and cash equivalents at end of the period |
| ₩ | 1,289,713 | 2,763,552 | ||||||||
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
9
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
1. | Reporting Entity |
(1) | General |
SK Telecom Co., Ltd. (“the Parent Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications services in Korea. The head office of the Parent Company is located at 65,Eulji-ro,Jung-gu, Seoul, Korea.
The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of September 30, 2019, the Parent Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Holdings Co., Ltd. | 21,624,120 | 26.78 | ||||||
National Pension Service, institutional investors and other shareholders | 50,245,708 | 62.23 | ||||||
Treasury shares | 8,875,883 | 10.99 | ||||||
|
|
|
| |||||
80,745,711 | 100.00 | |||||||
|
|
|
|
(2) | List of subsidiaries |
The list of subsidiaries as of September 30, 2019 and December 31, 2018 is as follows:
Ownership (%)(*1) | ||||||||||||||
Subsidiary | Location | Primary business | Sept. 30, 2019 | Dec. 31, 2018 | ||||||||||
Subsidiaries owned by the Parent Company | SK Telink Co., Ltd. | Korea | Telecommunication and Mobile Virtual Network Operator service | 100.0 | 100.0 | |||||||||
SK Communications Co., Ltd. | Korea | Internet website services | 100.0 | 100.0 | ||||||||||
SK Broadband Co., Ltd. | Korea | Telecommunication services | 100.0 | 100.0 | ||||||||||
PS&Marketing Corporation | Korea | Communications device retail business | 100.0 | 100.0 | ||||||||||
SERVICEACE Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SERVICE TOP Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) | Korea | Base station maintenance service | 100.0 | 100.0 | ||||||||||
SK Telecom China Holdings Co., Ltd. | China | Investment (holdings company) | 100.0 | 100.0 | ||||||||||
SK Global Healthcare Business Group, Ltd. | Hong Kong | Investment | 100.0 | 100.0 | ||||||||||
YTK Investment Ltd. | Cayman Islands | Investment association | 100.0 | 100.0 | ||||||||||
Atlas Investment | Cayman Islands | Investment association | 100.0 | 100.0 | ||||||||||
SKT Americas, Inc. | USA | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
One store Co., Ltd. | Korea | Telecommunication services | 65.5 | 65.5 | ||||||||||
SK Planet Co., Ltd. | Korea | Telecommunication services, system software development and supply services | 98.7 | 98.7 | ||||||||||
Eleven Street Co., Ltd.(*2) | Korea | E-commerce | 80.3 | 81.8 | ||||||||||
DREAMUS COMPANY (Formerly, IRIVER LIMITED)(*3) | Korea | Manufacturing digital audio players and other portable media devices | 52.0 | 52.6 | ||||||||||
SK Infosec Co., Ltd. | Korea | Information security service | 100.0 | 100.0 | ||||||||||
Life & Security Holdings Co., Ltd. | Korea | Investment(holdings company) | 55.0 | 55.0 | ||||||||||
Quantum Innovation Fund I | Korea | Investment | 59.9 | 59.9 | ||||||||||
SK Telecom Japan Inc. | Japan | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
id Quantique SA(*4) | Switzerland | Quantum information and communications service | 66.8 | 65.6 | ||||||||||
SK Telecom TMT Investment Corp.(*5) | USA | Investment | 100.0 | — | ||||||||||
FSK L&S Co., Ltd.(*5) | Korea | Freight and logistics consulting business | 60.0 | 60.0 | ||||||||||
Incross Co., Ltd.(*5) | Korea | Media representative business | 34.6 | — |
10
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of September 30, 2019 and December 31, 2018 is as follows, Continued:
Ownership (%)(*1) | ||||||||||||||
Subsidiary | Location | Primary business | Sept. 30, 2019 | Dec. 31, 2018 | ||||||||||
Subsidiaries owned by the Parent Company | SK Telecom CS T1 Co., Ltd.(*5) | Korea | E-Sports business | 100.0 | — | |||||||||
Happy Hanool Co., Ltd.(*5) | Korea | Service | 100.0 | — | ||||||||||
Subsidiaries owned by SK Planet Co., Ltd. | SK m&service Co., Ltd. | Korea | Data base and internet website service | 100.0 | 100.0 | |||||||||
SK Planet Japan, K. K. | Japan | Digital contents sourcing service | 79.8 | 79.8 | ||||||||||
SKP GLOBAL HOLDINGS PTE. LTD. | Singapore | Investment (holdings company) | 100.0 | 100.0 | ||||||||||
SKP America LLC. | USA | Digital contents sourcing service | 100.0 | 100.0 | ||||||||||
shopkick Management Company, Inc.(*5) | USA | Investment | — | 100.0 | ||||||||||
shopkick, Inc.(*5) | USA | Reward points-basedin-store shopping application development | — | 100.0 | ||||||||||
K-net Culture and Contents Venture Fund | Korea | Capital investing in startups | 59.0 | 59.0 | ||||||||||
Subsidiaries owned by DREAMUS COMPANY (Formerly, IRIVER LIMITED) | iriver Enterprise Ltd. | Hong Kong | Management of Chinese subsidiaries | 100.0 | 100.0 | |||||||||
iriver Inc.(*5) | USA | Marketing and sales in North America | — | 100.0 | ||||||||||
iriver China Co., Ltd. | China | Sales of and manufacturing MP3 and 4 | 100.0 | 100.0 | ||||||||||
Dongguan iriver Electronics Co., Ltd. | China | Sales of and manufacturinge-book | 100.0 | 100.0 | ||||||||||
groovers Japan Co., Ltd. | Japan | Digital music contents sourcing and distribution service | 100.0 | 100.0 | ||||||||||
LIFE DESIGN COMPANY Inc. | Japan | Sale of goods in Japan | 100.0 | 100.0 | ||||||||||
groovers Inc.(*5) | Korea | Sale of contents and Mastering Quality Sound album | — | 100.0 | ||||||||||
Subsidiary owned by SK Infosec Co., Ltd. | SKinfosec Information Technology (Wuxi) Co., Ltd.(*5) | China | System software development and supply services | 100.0 | — | |||||||||
Subsidiaries owned by Life & Security Holdings Co., Ltd. | ADT CAPS Co., Ltd. | Korea | Unmanned security | 100.0 | 100.0 | |||||||||
CAPSTEC Co., Ltd. | Korea | Manned security | 100.0 | 100.0 | ||||||||||
ADT SECURITY Co., Ltd. | Korea | Sales and trade of anti-theft devices and surveillance devices | 100.0 | 100.0 | ||||||||||
Subsidiary owned by SK Telink Co., Ltd. | SK TELINK VIETNAM Co., Ltd. | Vietnam | Communications device retail business | 100.0 | 100.0 | |||||||||
Subsidiaries owned by SK Broadband Co.,Ltd. | Home & Service Co., Ltd. | Korea | Operation of information and communications facility | 100.0 | 100.0 | |||||||||
SK stoa Co., Ltd. | Korea | Other telecommunication retail business | 100.0 | 100.0 | ||||||||||
Subsidiary owned by id Quantique SA | Id Quantique LLC | Korea | Quantum information and communications service | 100.0 | 100.0 | |||||||||
Subsidiary owned by FSK L&S Co., Ltd. | FSK L&S (Shanghai) Co., Ltd.(*5) | China | Logistics business | 66.0 | — | |||||||||
Subsidiaries owned by Incross Co., Ltd. | Infra Communications Co., Ltd.(*5) | Korea | Service operation | 100.0 | — | |||||||||
Mindknock Co., Ltd.(*5) | Korea | Software development | 100.0 | — | ||||||||||
Others(*6) | SK Telecom Innovation Fund, L.P | USA | Investment | 100.0 | 100.0 | |||||||||
SK Telecom China Fund I L.P. | Cayman Islands | Investment | 100.0 | 100.0 |
11
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of September 30, 2019 and December 31, 2018 is as follows, Continued:
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Parent Company or subsidiaries of the Parent Company. |
(*2) | 80.3% of the shares issued by Eleven Street Co., Ltd. are owned by the Parent Company and 18.2% of redeemable convertible preferred shares with voting rights are owned bynon-controlling shareholder. During the nine-month period ended September 30, 2019, Eleven Street Co., Ltd. acquired 1.5% of its outstanding shares from SK Planet Co., Ltd., which is currently held as treasury shares as of September 30, 2019. The Parent Company is obliged to guarantee dividend of at least 1% per annum of the preferred share’s issue price to the investor by the date on which Eleven Street Co., Ltd. is publicly listed or qualifying listing period is completed, whichever occurs first. The present value of obligatory dividends amounting to ₩18,675 million are recognized as financial liabilities as of September 30, 2019. |
(*3) | The ownership has changed due to the conversion of the convertible bonds issued by DREAMUS COMPANY (Formerly, IRIVER LIMITED) during the nine-month period ended September 30, 2019. |
(*4) | The ownership has changed due to an unequalpaid-in capital increase of id Quantique SA during the nine-month period ended September 30, 2019. |
(*5) | Details of changes in the consolidation scope for the nine-month period ended September 30, 2019 are presented and explained separately in Note1-(4). |
(*6) | Others are owned together by Atlas Investment and another subsidiary of the Parent Company. |
12
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries |
Condensed financial information of the significant subsidiaries as of and for the nine-month period ended September 30, 2019 is as follows:
(In millions of won) | ||||||||||||||||||||
As of September 30, 2019 | For the nine-month period ended September 30, 2019 | |||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd.(*1) | ₩ | 328,040 | 127,688 | 200,352 | 272,968 | 14,595 | ||||||||||||||
Eleven Street Co., Ltd. | 971,070 | 476,495 | 494,575 | 443,263 | 4,621 | |||||||||||||||
SK m&service Co., Ltd. | 116,554 | 66,579 | 49,975 | 158,565 | 2,628 | |||||||||||||||
SK Communications Co., Ltd. | 72,667 | 30,728 | 41,939 | 30,281 | (9,633 | ) | ||||||||||||||
SK Broadband Co., Ltd. | 4,463,781 | 2,818,170 | 1,645,611 | 2,416,974 | 56,656 | |||||||||||||||
K-net Culture and Contents Venture Fund | 147,688 | 20,873 | 126,815 | — | (3 | ) | ||||||||||||||
PS&Marketing Corporation | 481,382 | 264,423 | 216,959 | 1,257,650 | 911 | |||||||||||||||
SERVICE ACE Co., Ltd. | 89,163 | 62,652 | 26,511 | 152,385 | 2,692 | |||||||||||||||
SERVICE TOP Co., Ltd. | 64,971 | 48,789 | 16,182 | 141,980 | 749 | |||||||||||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) | 80,652 | 41,621 | 39,031 | 185,930 | (448 | ) | ||||||||||||||
SK Planet Co., Ltd. | 668,133 | 360,514 | 307,619 | 204,979 | (10,068 | ) | ||||||||||||||
DREAMUS COMPANY (Formerly, IRIVER LIMITED)(*2) | 188,494 | 46,435 | 142,059 | 135,156 | (23,310 | ) | ||||||||||||||
SKP America LLC. | 50,827 | 1,117 | 49,710 | — | (350,732 | ) | ||||||||||||||
Life & Security Holdings Co., Ltd.(*3) | 2,678,247 | 2,339,779 | 338,468 | 681,163 | 14,156 | |||||||||||||||
SK Infosec Co., Ltd.(*4) | 157,404 | 66,483 | 90,921 | 191,585 | 12,823 | |||||||||||||||
One store Co., Ltd. | 131,625 | 82,244 | 49,381 | 96,752 | (1,693 | ) | ||||||||||||||
Home & Service Co., Ltd. | 122,629 | 81,650 | 40,979 | 269,982 | (252 | ) | ||||||||||||||
SK stoa Co., Ltd. | 65,761 | 56,699 | 9,062 | 138,096 | (1,485 | ) | ||||||||||||||
FSK L&S Co., Ltd.(*5) | 47,137 | 18,435 | 28,702 | 101,312 | 942 | |||||||||||||||
Incross Co., Ltd.(*6) | 126,872 | 59,700 | 67,172 | 9,027 | 2,939 |
(*1) | The condensed financial information of SK Telink Co., Ltd. is consolidated financial information including SK TELINK VIETNAM Co., Ltd. |
(*2) | The condensed financial information of DREAMUS COMPANY(Formerly, IRIVER LIMITED) is consolidated financial information including iriver Enterprise Ltd. and four other subsidiaries of DREAMUS COMPANY(Formerly, IRIVER LIMITED). |
(*3) | The condensed financial information of Life & Security Holdings Co., Ltd. is consolidated financial information including ADT CAPS Co., Ltd. and two other subsidiaries of Life & Security Holdings Co., Ltd. |
(*4) | The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SKinfosec Information Technology (Wuxi) Co., Ltd. |
(*5) | The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. |
(*6) | The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary from the effective date of acquisition to September 30, 2019. |
13
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries, Continued |
Condensed financial information of the significant subsidiaries as of and for the year ended December 31, 2018 is as follows:
(In millions of won) | ||||||||||||||||||||
As of December 31, 2018 | 2018 | |||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd.(*1) | ₩ | 493,972 | 107,565 | 386,407 | 373,019 | 39,962 | ||||||||||||||
Eleven Street Co., Ltd.(*2) | 1,045,946 | 495,907 | 550,039 | 228,000 | (9,507 | ) | ||||||||||||||
SK m&service Co., Ltd. | 97,924 | 48,182 | 49,742 | 208,936 | (119 | ) | ||||||||||||||
SK Communications Co., Ltd. | 79,646 | 28,458 | 51,188 | 41,604 | (10,323 | ) | ||||||||||||||
SK Broadband Co., Ltd. | 4,266,458 | 2,682,236 | 1,584,222 | 3,158,877 | 154,999 | |||||||||||||||
K-net Culture and Contents Venture Fund | 147,691 | 20,873 | 126,818 | — | 58,584 | |||||||||||||||
PS&Marketing Corporation | 432,699 | 216,624 | 216,075 | 1,587,203 | 76 | |||||||||||||||
SERVICE ACE Co., Ltd. | 76,770 | 45,229 | 31,541 | 198,164 | 4,217 | |||||||||||||||
SERVICE TOP Co., Ltd. | 74,452 | 49,400 | 25,052 | 205,574 | 5,276 | |||||||||||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) | 81,773 | 42,257 | 39,516 | 265,183 | 1,089 | |||||||||||||||
SK Planet Co., Ltd. | 753,630 | 436,501 | 317,129 | 672,648 | (436,106 | ) | ||||||||||||||
DREAMUS COMPANY (Formerly, IRIVER LIMITED)(*3) | 204,479 | 44,620 | 159,859 | 137,849 | (21,314 | ) | ||||||||||||||
SKP America LLC. | 383,697 | — | 383,697 | — | (370 | ) | ||||||||||||||
Life & Security Holdings Co., Ltd.(*4) | 2,611,838 | 2,261,456 | 350,382 | 197,487 | 6,038 | |||||||||||||||
SK Infosec Co., Ltd.(*5) | 183,896 | 54,301 | 129,595 | — | — | |||||||||||||||
One store Co., Ltd. | 116,716 | 65,890 | 50,826 | 110,284 | (13,903 | ) | ||||||||||||||
Home & Service Co., Ltd. | 87,159 | 45,341 | 41,818 | 325,177 | (1,264 | ) | ||||||||||||||
SK stoa Co., Ltd. | 41,305 | 37,560 | 3,745 | 116,459 | (16,987 | ) |
(*1) | The condensed financial information of SK Telink Co., Ltd. is consolidated financial information including SK TELINK VIETNAM Co., Ltd. |
(*2) | The condensed financial information of Eleven Street Co., Ltd. includes four months of revenue and profit and loss since thespin-off on August 31, 2018. |
(*3) | The condensed financial information of DREAMUS COMPANY(Formerly, IRIVER LIMITED) is consolidated financial information including iriver Enterprise Ltd. and six other subsidiaries of DREAMUS COMPANY(Formerly, IRIVER LIMITED). |
(*4) | The condensed financial information of Life & Security Holdings Co., Ltd. is consolidated financial information including ADT CAPS Co., Ltd. and two other subsidiaries, including three months of revenue and profit and loss since Life & Security Holdings Co., Ltd. acquired by the Parent Company on October 1, 2018. |
(*5) | SK Infosec Co., Ltd. was acquired by the Parent Company and newly included in consolidation as of December 27, 2018. |
14
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
1. | Reporting Entity, Continued |
(4) | Changes in subsidiaries |
The list of subsidiaries that were newly included in consolidation during the nine-month period ended September 30, 2019 is as follows: |
Subsidiary | Reason | |
SK Telecom TMT Investment Corp. | Established by the Parent Company | |
FSK L&S Co., Ltd. | Acquired by the Parent Company | |
FSK L&S (Shanghai) Co., Ltd. | Subsidiary of FSK L&S Co., Ltd. | |
Incross Co., Ltd. | Acquired by the Parent Company | |
Infra Communications Co., Ltd. | Subsidiary of Incross Co., Ltd. | |
Mindknock Co., Ltd. | Acquired by Incross Co., Ltd. | |
SK Telecom CS T1 Co., Ltd. | Established by the Parent Company | |
Happy Hanool Co., Ltd. | Established by the Parent Company | |
SKinfosec Information Technology (Wuxi) Co., Ltd. | Established by SK Infosec Co., Ltd. |
The list of subsidiaries that were excluded from consolidation during the nine-month period ended September 30, 2019 is as follows: |
Subsidiary | Reason | |
groovers Inc. | Merged into DREAMUS COMPANY(Formerly, IRIVER LIMITED) | |
shopkick Management Company, Inc. | Disposed | |
shopkick, Inc. | Disposed | |
iriver Inc. | Disposed |
15
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
1. | Reporting Entity, Continued |
(5) | The financial information of significantnon-controlling interests of the Group as of and for the nine-month period ended September 30, 2019, and as of and for the year ended December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||||||
DREAMUS COMPANY (Formerly, IRIVER LIMITED) | Eleven Street Co., Ltd. | Life & Security Holdings Co., Ltd. | Incross Co., Ltd. | |||||||||||||
Ownership ofnon-controlling interests (%) | 48.04 | 18.48 | 45.00 | 65.40 | ||||||||||||
As of September 30, 2019 | ||||||||||||||||
Current assets | ₩ | 129,332 | 807,769 | 159,729 | 115,685 | |||||||||||
Non-current assets | 59,162 | 163,301 | 2,518,518 | 11,187 | ||||||||||||
Current liabilities | (41,704 | ) | (443,932 | ) | (310,114 | ) | (58,953 | ) | ||||||||
Non-current liabilities | (4,731 | ) | (32,563 | ) | (2,029,665 | ) | (747 | ) | ||||||||
Net assets | 142,059 | 494,575 | 338,468 | 67,172 | ||||||||||||
Fair value adjustment and others | — | (18,675 | ) | (1,221,305 | ) | — | ||||||||||
Net assets on the consolidated financial statements | 142,059 | 475,900 | (882,837 | ) | 67,172 | |||||||||||
Carrying amount ofnon-controlling interests | 68,606 | 87,924 | (397,276 | ) | 42,369 | |||||||||||
For the nine-month period ended September 30, 2019 | ||||||||||||||||
Revenue | ₩ | 135,156 | 443,263 | 681,163 | 9,027 | |||||||||||
Profit (Loss) for the period | (23,310 | ) | 4,621 | 14,156 | 2,939 | |||||||||||
Depreciation of the fair value adjustment and others | — | (484 | ) | (10,736 | ) | — | ||||||||||
Profit (Loss) for the period on the consolidated financial statements | (23,310 | ) | 4,137 | 3,420 | 2,939 | |||||||||||
Total comprehensive income (loss) | (21,067 | ) | 4,125 | 3,420 | 2,939 | |||||||||||
Profit (Loss) attributable tonon-controlling interests | (11,124 | ) | 752 | 1,524 | 1,854 | |||||||||||
Net cash provided by (used in) operating activities | ₩ | (7,548 | ) | 14,441 | 197,008 | (3,556 | ) | |||||||||
Net cash provided by (used in) investing activities | (2,105 | ) | 114,249 | (133,418 | ) | 17,728 | ||||||||||
Net cash used in financing activities | (2,246 | ) | (69,479 | ) | (28,926 | ) | (620 | ) | ||||||||
Effects on exchange rate changes on cash and cash equivalents | 963 | 60 | — | — | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (10,936 | ) | 59,271 | 34,664 | 13,552 | |||||||||||
Dividends declared tonon-controlling interests | ₩ | — | 17,500 | 14,394 | — |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
1. | Reporting Entity, Continued |
(5) | The financial information of significantnon-controlling interests of the Group as of and for the nine-month period ended September 30, 2019, and as of and for the year ended December 31, 2018 are as follows, Continued: |
DREAMUS COMPANY (Formerly, IRIVER LIMITED) | Eleven Street Co., Ltd. | Life & Security Holdings Co., Ltd. | ||||||||||
Ownership ofnon-controlling interests (%) | 47.36 | 18.19 | 45.00 | |||||||||
As of December 31, 2018 | ||||||||||||
Current assets | ₩ | 150,014 | 923,153 | 124,091 | ||||||||
Non-current assets | 54,465 | 122,793 | 2,487,747 | |||||||||
Current liabilities | (41,957 | ) | (486,391 | ) | (243,064 | ) | ||||||
Non-current liabilities | (2,663 | ) | (9,516 | ) | (2,018,392 | ) | ||||||
Net assets | 159,859 | 550,039 | 350,382 | |||||||||
Fair value adjustment and others | — | (23,191 | ) | (1,216,347 | ) | |||||||
Net assets on the consolidated financial statements | 159,859 | 526,848 | (865,965 | ) | ||||||||
Carrying amount ofnon-controlling interests | 76,204 | 95,811 | (389,684 | ) | ||||||||
2018 | ||||||||||||
Revenue | ₩ | 137,849 | 228,000 | 197,487 | ||||||||
Profit (Loss) for the year | (21,314 | ) | (9,507 | ) | 6,038 | |||||||
Depreciation of the fair value adjustment and others | — | (161 | ) | (2,954 | ) | |||||||
Profit (Loss) for the year on the consolidated financial statements | (21,314 | ) | (9,668 | ) | 3,084 | |||||||
Total comprehensive income (loss) | (21,125 | ) | (8,897 | ) | (991 | ) | ||||||
Profit (Loss) attributable tonon-controlling interests | (10,094 | ) | (1,758 | ) | 1,387 | |||||||
Net cash provided by (used in) operating activities | ₩ | 13,635 | (69,347 | ) | (23,451 | ) | ||||||
Net cash used in investing activities | (10,169 | ) | (470,211 | ) | (139,430 | ) | ||||||
Net cash provided by financing activities | 69,267 | 494,923 | 124,076 | |||||||||
Net increase (decrease) in cash and cash equivalents | 72,733 | (44,635 | ) | (38,805 | ) | |||||||
Dividend paid tonon-controlling interests | ₩ | — | — | — |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
2. | Basis of Preparation |
(1) | Statement of compliance |
These condensed consolidated interim financial statements were prepared in accordance withK-IFRS No. 1034,Interim Financial Reporting, as part of the period covered by the Group’sK-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since December 31, 2018. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.
The Group’s appliedK-IFRS No. 1116,Leases, effective January 1, 2019. Changes to significant accounting policies are described in note 3.
(2) | Use of estimates and judgments |
1) Critical judgments, assumptions and estimation uncertainties
The preparation of the condensed consolidated interim financial statements in conformity withK-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2018 except significant judgments and key sources of estimation uncertainty related to theK-IFRS No. 1116,Leases that are described in note 3.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
2. | Basis of Preparation, Continued |
(2) | Use of estimates and judgments, Continued |
2) Fair value measurement
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial andnon-financial assets and liabilities. The Group has established policies and processes with respect to the measurement of fair values including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.
The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Group assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements ofK-IFRS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
• | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
• | Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Information about assumptions used for fair value measurements are included in note 27.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
3. | Significant Accounting Policies |
The significant accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2018, except for the following changes in accounting policies described below. The following changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2019.
(1) | Changes in accounting policies |
The Group has initially adoptedK-IFRS No. 1116from January 1, 2019. A number of other amended standards are effective from January 1, 2019, but they do not have a material effect on the Group’s condensed consolidated interim financial statements.
1) | K-IFRS No. 1116,Leases |
K-IFRS No. 1116 introduced a single,on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognizedright-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.
The Group has appliedK-IFRS No. 1116 from January 1, 2019 using the cumulative effect method with the effect of initially applying this standard as an adjustment to the opening balance of retained earnings as at January 1, 2019. Accordingly, the comparative information presented for 2018 has been presented, as previously reported, underK-IFRS No. 1017 and has not been restated. Details of the changes in accounting policies are disclosed below.
i) | Definition of a lease |
Previously, the Group determined at contract inception whether an arrangement was or contained a lease underK-IFRS No. 2104, Determining Whether an Arrangement Contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. UnderK-IFRS No. 1116, a contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
ii) | As a lessee |
The Group leases a number of assets including buildings and vehicles. The terms of leases are negotiated individually and include various conditions. Each lease contract is entered into with a term of 1~50 years.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. UnderK-IFRS 1116, the Group recognizesright-of-use assets and lease liabilities for most leases – i.e. theses leases are presented on the consolidated statements of financial position.
However, the Group has elected not to recognizeright-of-use assets and lease liabilities for some leases with terms less than 12 months or leases oflow-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
3. | Significant Accounting Policies, Continued |
(1) | Changes in accounting policies, Continued |
1) | K-IFRS No. 1116,Leases, Continued |
ii) | As a lessee, Continued |
The Group has also elected to apply the practical expedient not to separatenon-lease components and instead account for the lease andnon-lease components as a single lease component.
j | Significant accounting policies |
The Group recognizes aright-of-use asset and a lease liability at the lease commencement date. Theright-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability. The Group presents itsright-of-use assets in property and equipment on the consolidated statements of financial position.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payment made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The Group has applied judgment to determine the lease term for some lease contracts in which it is a lessee that include extension options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities andright-of-use assets recognized. The Group has not included the extension option periods in the lease term because it is not reasonably certain to exercise such options. After the commencement date, the Group reassesses the lease term upon the occurrence of a significant event or a significant change in circumstances that is within the control of the Group that affects whether the Group is reasonably certain to exercise the extension option.
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Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
3. | Significant Accounting Policies, Continued |
(1) | Changes in accounting policies, Continued |
1) | K-IFRS No. 1116,Leases, Continued |
ii) | As a lessee, Continued |
k | Transition |
At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as of January 1, 2019.Right-of-used assets are measured at either:
• | their carrying amount as ifK-IFRS No. 1116 had been applied since the commencement date, discounted using the lessee’s incremental borrowing rate at the date of initial application; or |
• | an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. |
The Group used the following practical expedients when applyingK-IFRS No. 1116 to leases previously classified as operating leases underK-IFRS No. 1017.
• | Excluded initial direct costs from measuring theright-of-use asset at the date of initial application. |
• | Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease. |
iii) | As a lessor |
The accounting policies applicable to the Group as a lessor are not different from those underK-IFRS No. 1017. However, when the Group is an intermediate lessor thesub-leases are classified with reference to theright-of-use asset arising from the head lease, not with reference to the underlying asset.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
3. | Significant Accounting Policies, Continued |
(1) | Changes in accounting policies, Continued |
1) | K-IFRS No. 1116,Leases, Continued |
iv) | Impacts on consolidated financial statements |
j | Impacts on transition |
On transition toK-IFRS No. 1116, the Group recognizedright-of-use assets and lease liabilities, with the difference recognized in retained earnings. The impacts on transition are summarized below.
(In millions of won) | ||||
January 1, 2019 | ||||
Impacts on the assets: | ||||
Right-of-use assets presented in property and equipment | ₩ | 654,449 | ||
Increase in accounts receivable – other (lease receivables) | 31,355 | |||
Adjustments in property and equipment, intangible assets | (3,387 | ) | ||
Decrease in advanced payments and others | (52,584 | ) | ||
|
| |||
629,833 | ||||
|
| |||
Impacts on the liabilities: | ||||
Increase in the lease liabilities | 663,827 | |||
Decrease in deferred tax liabilities | (9,305 | ) | ||
|
| |||
654,522 | ||||
|
| |||
Decrease in retained earnings | (24,186 | ) | ||
Decrease innon-controlling interests | ₩ | (503 | ) |
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted average rate applied is 2.11%.
(In millions of won) | ||||
January 1, 2019 | ||||
Operating lease commitments at December 31, 2018 | ₩ | 766,978 | ||
Discounted using the incremental borrowing rate at January 1, 2019 | 735,051 | |||
- Recognition exemption for leases with less than 12 months of lease term at the lease commencement date | (66,548 | ) | ||
- Recognition exemption for leases oflow-value assets | (4,676 | ) | ||
|
| |||
Lease liabilities recognized at January 1, 2019 | ₩ | 663,827 | ||
|
|
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
3. | Significant Accounting Policies, Continued |
(1) | Changes in accounting policies, Continued |
1) | K-IFRS No. 1116,Leases, Continued |
iv) | Impacts for on consolidated financial statements, Continued |
k | Impacts subsequent to adoption |
As a result of initially applyingK-IFRS No. 1116, in relation to the leases that were previously classified as operating leases, the Group recognized ₩730,673 million ofright-of-use assets and ₩733,766 million of lease liabilities as of September 30, 2019.
Also, in relation to those leases underK-IFRS No. 1116, the Group has recognized depreciation and interest costs, instead of operating lease expense. For the nine-month period ended September 30, 2019, the Group recognized ₩262,267 million of depreciation charges and ₩11,787 million of interest costs from those leases. Expenses related to short-term leases and leases oflow-value assets are ₩113,703 million and ₩3,205 million, respectively.
The payments of lease liabilities presented in the cash flows from financing activities would have been included in the cash flows from operating activities if the previous accounting standards were applied.
4. | Operating Segments |
The Group’s operating segments have been identified to be each business unit, by which the Group provides independent services and merchandise. The Group’s reportable segments are cellular services, which include cellular voice service, wireless data service and wireless internet services; fixed-line telecommunication services, which include telephone services, internet services, and leased line services;e-commerce services, the open marketplace platform; and all other businesses, which include the Group’s internet portal services and other immaterial operations, each of which does not meet the quantitative threshold to be considered as a reportable segment and are presented collectively as others.
(1) | Segment information for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||||||
Cellular Services | Fixed-line telecommu- nication services | E-commerce Services | Others | Sub-total | Adjustments | Total | ||||||||||||||||||||||
Total revenue | ₩ | 10,309,420 | 3,098,020 | 443,263 | 1,649,718 | 15,500,421 | (2,167,273 | ) | 13,333,148 | |||||||||||||||||||
Inter-segment revenue | 1,170,640 | 749,474 | 7,233 | 239,926 | 2,167,273 | (2,167,273 | ) | — | ||||||||||||||||||||
External revenue | 9,138,780 | 2,348,546 | 436,030 | 1,409,792 | 13,333,148 | — | 13,333,148 | |||||||||||||||||||||
Depreciation and amortization | 1,986,960 | 559,559 | 23,289 | 213,603 | 2,783,411 | — | 2,783,411 | |||||||||||||||||||||
Operating profit | 803,410 | 94,803 | 5,069 | 44,210 | 947,492 | — | 947,492 | |||||||||||||||||||||
Finance income and costs, net | (225,548 | ) | ||||||||||||||||||||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | 479,876 | |||||||||||||||||||||||||||
Othernon-operating income and expense, net | (31,404 | ) | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Profit before income tax | 1,170,416 |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
4. | Operating Segments, Continued |
(1) | Segment information for the nine-month periods ended September 30, 2019 and 2018 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||||||
Cellular Services | Fixed-line telecommu- nication services | E-commerce Services(*) | Others(*) | Sub-total | Adjustments | Total | ||||||||||||||||||||||
Total revenue | ₩ | 10,531,096 | 2,876,241 | 446,359 | 762,181 | 14,615,877 | (2,093,624 | ) | 12,522,253 | |||||||||||||||||||
Inter-segment revenue | 1,180,515 | 715,115 | 16,548 | 181,446 | 2,093,624 | (2,093,624 | ) | — | ||||||||||||||||||||
External revenue | 9,350,581 | 2,161,126 | 429,811 | 580,735 | 12,522,253 | — | 12,522,253 | |||||||||||||||||||||
Depreciation and amortization | 1,772,934 | 474,561 | 8,666 | 65,069 | 2,321,230 | — | 2,321,230 | |||||||||||||||||||||
Operating profit (loss) | 1,035,390 | 127,254 | (48,149 | ) | (138,017 | ) | 976,478 | — | 976,478 | |||||||||||||||||||
Finance income and costs, net | (83,360 | ) | ||||||||||||||||||||||||||
Gain relating to investments in associates and joint ventures, net | 2,534,688 | |||||||||||||||||||||||||||
Othernon-operating income and expense, net | (55,842 | ) | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Profit before income tax | 3,371,964 |
(*) | Segment information for the nine-month period ended September 30, 2018 was recast to reflect Eleven Street Co., Ltd. only in the“E-Commerce Services” segment, with all the other businesses that were previously included in the“E-Commerce Services” segment now presented in “others” segment. |
Since there are no intersegment sales of inventory or depreciable assets, there is no unrealized intersegment profit to be eliminated on consolidation. The Group principally operates its businesses in Korea and the revenue amounts earned outside of Korea are immaterial. Therefore, no entity-wide geographical information is presented.
No single customer contributed 10% or more to the Group’s total revenue for the nine-month periods ended September 30, 2019 and 2018.
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
4. | Operating Segments, Continued |
(2) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows: |
(In millions of won) | ||||||||||
For the nine-month period ended | ||||||||||
September 30, 2019 | September 30, 2018 | |||||||||
Products transferred at a point in time: |
| |||||||||
Cellular revenue | Goods(*1) | ₩ | 903,277 | 902,728 | ||||||
Fixed-line telecommunication revenue | Goods | 112,863 | 72,313 | |||||||
Other revenue | Goods | 106,294 | 72,083 | |||||||
Products | 30,969 | 24,564 | ||||||||
|
|
|
| |||||||
1,153,403 | 1,071,688 | |||||||||
|
|
|
| |||||||
Services transferred over time: |
| |||||||||
Cellular revenue | Wireless service(*2) | 7,191,880 | 7,376,379 | |||||||
Cellular interconnection | 369,645 | 437,524 | ||||||||
Other(*3) | 673,978 | 633,950 | ||||||||
Fixed-line telecommunication revenue | Fixed-line telephone service | 204,169 | 219,840 | |||||||
Fixed-line interconnection | 69,706 | 77,170 | ||||||||
Internet Protocol Television(*4) | 956,485 | 824,985 | ||||||||
International calls | 56,226 | 61,282 | ||||||||
Internet service and miscellaneous(*5) | 949,097 | 905,536 | ||||||||
E-commerce services revenue | E-commerce service | 436,030 | 429,811 | |||||||
Other revenue | Miscellaneous(*6) | 1,272,529 | 484,088 | |||||||
|
|
|
| |||||||
12,179,745 | 11,450,565 | |||||||||
|
|
|
| |||||||
₩ | 13,333,148 | 12,522,253 | ||||||||
|
|
|
|
(*1) | Cellular revenue includes revenue from sales of handsets and other electronic accessories. |
(*2) | Wireless service includes revenue from wireless voice and data transmission services principally derived from usage charges to wireless subscribers. |
(*3) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
(*4) | IPTV service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers. |
(*5) | Internet service includes revenue from the broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services. |
(*6) | Miscellaneous other revenue includes revenue from considerations received for the security service, development and maintenance of system software, and digital contents platform services. |
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SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
5. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of Septembrer 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||
September 30, 2019 | ||||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | ₩ | 2,471,146 | (252,887 | ) | 2,218,259 | |||||||
Short-term loans | 75,793 | (691 | ) | 75,102 | ||||||||
Accounts receivable – other(*) | 1,075,354 | (57,036 | ) | 1,018,318 | ||||||||
Accrued income | 6,707 | (166 | ) | 6,541 | ||||||||
Guarantee deposits (Other current assets) | 2,323 | — | 2,323 | |||||||||
|
|
|
|
|
| |||||||
3,631,323 | (310,780 | ) | 3,320,543 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 81,972 | (47,550 | ) | 34,422 | ||||||||
Long-term accounts receivable – other(*) | 544,893 | — | 544,893 | |||||||||
Guarantee deposits | 317,609 | — | 317,609 | |||||||||
Long-term accounts receivable – trade (Othernon-current assets) | 17,081 | (123 | ) | 16,958 | ||||||||
|
|
|
|
|
| |||||||
961,555 | (47,673 | ) | 913,882 | |||||||||
|
|
|
|
|
| |||||||
₩ | 4,592,878 | (358,453 | ) | 4,234,425 | ||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of September 30, 2019 include ₩812,991 million of financial instruments classified as FVTPL. |
(In millions of won) | ||||||||||||
December 31, 2018 | ||||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | ₩ | 2,268,680 | (260,040 | ) | 2,008,640 | |||||||
Short-term loans | 59,643 | (549 | ) | 59,094 | ||||||||
Accounts receivable – other(*) | 1,006,183 | (68,346 | ) | 937,837 | ||||||||
Accrued income | 6,232 | (166 | ) | 6,066 | ||||||||
Guarantee deposits (Other current assets) | 2,714 | — | 2,714 | |||||||||
|
|
|
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| |||||||
3,343,452 | (329,101 | ) | 3,014,351 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 75,860 | (46,826 | ) | 29,034 | ||||||||
Long-term accounts receivable – other(*) | 274,053 | — | 274,053 | |||||||||
Guarantee deposits | 313,140 | — | 313,140 | |||||||||
Long-term accounts receivable – trade (Othernon-current assets) | 11,410 | (117 | ) | 11,293 | ||||||||
|
|
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|
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| |||||||
674,463 | (46,943 | ) | 627,520 | |||||||||
|
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|
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|
| |||||||
₩ | 4,017,915 | (376,044 | ) | 3,641,871 | ||||||||
|
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|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2018 include ₩489,617 million of financial instruments classified as FVTPL. |
27
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
5. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on trade and other receivables measured at amortized costs for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
January 1, 2019 | Impairment | Write-offs(*) | Collection of receivables previously written-off | Business Combination | September 30, 2019 | |||||||||||||||||||
Accounts receivable – trade | ₩ | 260,157 | 21,253 | (39,423 | ) | 9,536 | 1,487 | 253,010 | ||||||||||||||||
Accounts receivable – other | 115,887 | 3,360 | (21,803 | ) | 7,464 | 535 | 105,443 | |||||||||||||||||
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| |||||||||||||
₩ | 376,044 | 24,613 | (61,226 | ) | 17,000 | 2,022 | 358,453 | |||||||||||||||||
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(In millions of won) | ||||||||||||||||||||||||
January 1, 2018 | Impact of adopting K-IFRS No. 1109 | Impairment | Write-offs(*) | Collection of receivables previously written-off | September 30, 2018 | |||||||||||||||||||
Accounts receivable – trade | ₩ | 239,448 | 12,950 | 27,344 | (23,191 | ) | 11,037 | 267,588 | ||||||||||||||||
Accounts receivable – other | 122,723 | 99 | 5,483 | (14,013 | ) | 4,807 | 119,099 | |||||||||||||||||
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| |||||||||||||
₩ | 362,171 | 13,049 | 32,827 | (37,204 | ) | 15,844 | 386,687 | |||||||||||||||||
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(*) | The Group writes off the trade and other receivables when contractual payments are more than 5 years past due, or for reasons such as shut-down or liquidation. |
(3) | The Group applies the practical expedient that allows the Group to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Group uses its historical credit loss experience over the past three years and classifies the accounts receivable – trade by their credit risk characteristics and days overdue. |
As the Group is a wireless and fixed-line telecommunications service provider, the Group’s financial assets measured at amortized cost consist primarily of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
28
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
6. | Prepaid expenses |
(1) | Details of prepaid expenses as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Current assets: |
| |||||||
Incremental costs of obtaining contracts | ₩ | 1,801,681 | 1,577,992 | |||||
Others | 143,450 | 191,567 | ||||||
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| |||||
₩ | 1,945,131 | 1,769,559 | ||||||
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| |||||
Non-current assets: | ||||||||
Incremental costs of obtaining contracts | ₩ | 1,137,543 | 799,607 | |||||
Others | 87,874 | 95,665 | ||||||
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| |||||
₩ | 1,225,417 | 895,272 | ||||||
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|
(2) | Incremental costs of obtaining contracts |
Incremental costs of obtaining contracts that are capitalized as assets and the related amortization recognized as commissions during the three and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Amortization recognized as commissions | ₩ | 568,582 | 1,603,194 | 511,362 | 1,531,089 |
The Group pays commissions to authorized dealers or incurs costs by its direct retail stores for wireless telecommunications services for each service contract and installation contract secured. The Group capitalized certain costs associated with commissions paid to authorized dealers or incurred by its direct retail stores to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Group expects to maintain its customers based on the Group’s historical subscriber churn rate.
29
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
7. | Contract assets and liabilities |
(1) | Details of contract assets and liabilities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | ₩ | 184,447 | 133,893 | |||||
Contract liabilities: | ||||||||
Wireless service contracts | 15,573 | 18,425 | ||||||
Customer loyalty programs | 23,016 | 17,113 | ||||||
Fixed-line service contracts | 61,028 | 57,327 | ||||||
Commerce service | 33 | 10 | ||||||
Security service | 35,390 | 38,109 | ||||||
Others | 65,702 | 52,829 | ||||||
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| |||||
₩ | 200,742 | 183,813 | ||||||
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|
|
(2) | The amount of revenue recognized for the nine-month period ended September 30, 2019 related to the contract liabilities carried forward from the prior period is ₩81,694 million. |
8. | Inventories |
(1) | Details of inventories as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
September 30, 2019 | December 31, 2018 | |||||||||||||||||||||||
Acquisition cost | Write-down | Carrying amount | Acquisition cost | Write-down | Carrying amount | |||||||||||||||||||
Merchandise | ₩ | 188,737 | (12,376 | ) | 176,361 | 268,366 | (8,842 | ) | 259,524 | |||||||||||||||
Finished goods | 3,850 | (1,961 | ) | 1,889 | 1,260 | (251 | ) | 1,009 | ||||||||||||||||
Work in process | 3,793 | (517 | ) | 3,276 | 3,985 | (338 | ) | 3,647 | ||||||||||||||||
Raw materials | 12,081 | (7,233 | ) | 4,848 | 11,729 | (2,706 | ) | 9,023 | ||||||||||||||||
Supplies | 14,165 | — | 14,165 | 14,850 | — | 14,850 | ||||||||||||||||||
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| |||||||||||||
₩ | 222,626 | (22,087 | ) | 200,539 | 300,190 | (12,137 | ) | 288,053 | ||||||||||||||||
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(2) | Inventories recognized as operating expenses for the nine-month periods ended September 30, 2019 and 2018 are ₩1,067,008 million and ₩1,054,779 million, respectively, which are included in the cost of goods sold. |
30
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
9. | Investment Securities |
(1) | Details of short-term investment securities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||
Category | September 30, 2019 | December 31, 2018 | ||||||||
Beneficiary certificates | FVTPL | ₩ | 144,513 | 195,080 |
(2) | Details of long-term investment securities as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||
Category | September 30, 2019 | December 31, 2018 | ||||||||
Equity instruments | FVOCI(*) | ₩ | 391,659 | 542,496 | ||||||
FVTPL | 2,201 | — | ||||||||
|
|
|
| |||||||
393,860 | 542,496 | |||||||||
Debt instruments | FVOCI | 4,801 | 2,147 | |||||||
FVTPL | 139,751 | 120,083 | ||||||||
|
|
|
| |||||||
144,552 | 122,230 | |||||||||
|
|
|
| |||||||
₩ | 538,412 | 664,726 | ||||||||
|
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|
|
(*) | The Group designated ₩391,659 million of equity instruments that are not held for trading as financial assets at FVOCI. During the nine-month period ended September 30, 2019, the Group disposed 6,109,000 shares of the common shares issued by Hana Financial Group Inc. in exchange for ₩221,146 million in cash. The valuation gain on financial assets at FVOCI of ₩30,073 million was reclassified from reserves to retained earnings. |
31
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
10. | Investments in Associates and Joint Ventures |
(1) | Investments in associates and joint ventures accounted for using the equity method as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | December 31, 2018 | ||||||||||||||||||
Country | Ownership (%) | Carrying amount | Ownership (%) | Carrying amount | ||||||||||||||||
Investments in associates: | ||||||||||||||||||||
SK China Company Ltd. | China | 27.3 | ₩ | 577,101 | 27.3 | ₩ | 551,548 | |||||||||||||
Korea IT Fund(*1) | Korea | 63.3 | 285,516 | 63.3 | 281,684 | |||||||||||||||
KEB HanaCard Co., Ltd.(*2) | Korea | 15.0 | 294,772 | 15.0 | 288,457 | |||||||||||||||
NanoEnTek, Inc. | Korea | 28.9 | 41,983 | 28.9 | 40,974 | |||||||||||||||
SK Technology Innovation Company | Cayman Islands | 49.0 | 45,603 | 49.0 | 42,469 | |||||||||||||||
SK hynix Inc. | Korea | 20.1 | 11,498,445 | 20.1 | 11,208,315 | |||||||||||||||
SK MENA Investment B.V. | Netherlands | 32.1 | 15,455 | 32.1 | 14,420 | |||||||||||||||
SM Culture & Contents Co., Ltd. | Korea | 23.4 | 63,350 | 23.4 | 63,801 | |||||||||||||||
Hello Nature., Ltd. | Korea | 49.9 | 24,040 | 49.9 | 28,549 | |||||||||||||||
12CM Japan, Inc. | Japan | 28.2 | 7,951 | 28.2 | 7,734 | |||||||||||||||
MAKEUS Corp.(*2) | Korea | 8.9 | 8,922 | 8.9 | 9,193 | |||||||||||||||
SK South East Asia Investment Pte. Ltd. | Singapore | 20.0 | 224,470 | 20.0 | 111,000 | |||||||||||||||
Pacific Telecom Inc.(*2) | USA | 15.0 | 40,629 | 15.0 | 37,075 | |||||||||||||||
Health Connect Co., Ltd. and others | — | — | 222,610 | — | 106,394 | |||||||||||||||
|
|
|
| |||||||||||||||||
13,350,847 | 12,791,613 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||
Dogus Planet, Inc.(*3) | Turkey | 50.0 | 17,748 | 50.0 | 12,487 | |||||||||||||||
Finnq Co., Ltd.(*3) | Korea | 49.0 | 25,429 | 49.0 | 7,671 | |||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC(*3) | USA | 50.0 | 8,409 | — | — | |||||||||||||||
NEXTGEN ORCHESTRATION, LLC(*3) | USA | 50.0 | 1,802 | — | — | |||||||||||||||
Celcom Planet(*4) | Malaysia | — | — | 44.7 | — | |||||||||||||||
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|
|
| |||||||||||||||||
53,388 | 20,158 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
₩ | 13,404,235 | ₩ | 12,811,771 | |||||||||||||||||
|
|
|
|
(*1) | Investment in Korea IT Fund was classified as investment in associates as the Group does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | These investments were classified as investments in associates as the Group can exercise significant influence through its right to appoint the members of board of directors even though the Group has less than 20% of equity interests. |
(*3) | These investments were classified as investment in joint ventures as the Group has a joint control pursuant to the agreement with the other shareholders. |
(*4) | Investment in Celcom Planet was disposed during the nine-month period ended September 30, 2019. |
32
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
10. | Investments in Associates and Joint Ventures, Continued |
(2) | The market value of investments in listed associates as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
September 30, 2019 | December 31, 2018 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
NanoEnTek, Inc. | ₩ | 4,460 | 7,600,649 | 33,899 | 4,235 | 7,600,649 | 32,189 | |||||||||||||||||
SK hynix Inc. | 82,200 | 146,100,000 | 12,009,420 | 60,500 | 146,100,000 | 8,839,050 | ||||||||||||||||||
SM Culture & Contents Co., Ltd. | 1,410 | 22,033,898 | 31,068 | 2,020 | 22,033,898 | 44,508 |
(3) | The condensed financial information of significant associates as of and for the nine-month period ended September 30, 2019 and as of and for the year ended December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||||||
SK hynix Inc. | KEB HanaCard Co., Ltd. | Korea IT Fund | SK China Company Ltd. | |||||||||||||
As of September 30, 2019 | ||||||||||||||||
Current assets | ₩ | 14,175,499 | 7,772,208 | 94,065 | 626,077 | |||||||||||
Non-current assets | 49,496,252 | 209,108 | 356,749 | 1,406,093 | ||||||||||||
Current liabilities | 6,827,424 | 1,125,591 | — | 48,473 | ||||||||||||
Non-current liabilities | 8,578,101 | 5,230,124 | — | 177,936 | ||||||||||||
For the nine-month period ended September 30, 2019 | ||||||||||||||||
Revenue | 20,063,622 | 910,256 | 31,397 | 68,070 | ||||||||||||
Profit for the period | 2,134,639 | 49,847 | 16,197 | 5,914 | ||||||||||||
Other comprehensive income (loss) | 318,045 | (607 | ) | — | (30,256 | ) | ||||||||||
Total comprehensive income (loss) | 2,452,684 | 49,240 | 16,197 | (24,342 | ) |
(In millions of won) | ||||||||||||||||
SK hynix Inc. | KEB HanaCard Co., Ltd. | Korea IT Fund | SK China Company Ltd. | |||||||||||||
As of December 31, 2018 | ||||||||||||||||
Current assets | ₩ | 19,894,146 | 7,781,888 | 118,024 | 677,686 | |||||||||||
Non-current assets | 43,764,189 | 202,251 | 326,740 | 1,221,736 | ||||||||||||
Current liabilities | 13,031,852 | 1,122,538 | — | 71,396 | ||||||||||||
Non-current liabilities | 3,774,152 | 5,286,179 | — | 117,094 | ||||||||||||
2018 | ||||||||||||||||
Revenue | 40,445,066 | 1,642,133 | 57,430 | 117,132 | ||||||||||||
Profit for the period | 15,539,984 | 106,675 | 45,110 | 30,274 | ||||||||||||
Other comprehensive loss | (67,219 | ) | (4,344 | ) | (13,422 | ) | (16,149 | ) | ||||||||
Total comprehensive income | 15,472,765 | 102,331 | 31,688 | 14,125 |
33
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
10. | Investments in Associates and Joint Ventures, Continued |
(4) | The condensed financial information of significant joint ventures as of and for the nine-month period ended September 30, 2019 and as of and for the year ended December 31, 2018 are as follows: |
(In millions of won) | ||||||||
Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||
As of September 30, 2019 | ||||||||
Current assets | ₩ | 62,086 | 51,727 | |||||
Cash and cash equivalents | 55,327 | 5,146 | ||||||
Non-current assets | 24,608 | 13,468 | ||||||
Current liabilities | 50,327 | 6,238 | ||||||
Accounts payable, other payables and provision | 43,674 | 1,224 | ||||||
Non-current liabilities | 871 | 7,226 | ||||||
For the nine-month period ended September 30, 2019 | ||||||||
Revenue | 60,003 | 1,021 | ||||||
Depreciation and amortization | (4,113 | ) | (3,634 | ) | ||||
Interest income | 908 | 9 | ||||||
Interest expenses | (77 | ) | (152 | ) | ||||
Profit (Loss) for the period | 10,135 | (12,160 | ) | |||||
Total comprehensive income (loss) | 10,135 | (12,160 | ) | |||||
(In millions of won) | ||||||||
Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||
As of December 31, 2018 | ||||||||
Current assets | ₩ | 43,127 | 11,985 | |||||
Cash and cash equivalents | 42,416 | 10,434 | ||||||
Non-current assets | 20,239 | 15,435 | ||||||
Current liabilities | 37,105 | 5,070 | ||||||
Accounts payable, other payables and provision | 28,432 | 87 | ||||||
Non-current liabilities | 1,287 | 7,579 | ||||||
2018 | ||||||||
Revenue | 99,770 | 232 | ||||||
Depreciation and amortization | (5,427 | ) | (3,490 | ) | ||||
Interest income | 1,635 | 5 | ||||||
Interest expenses | — | (301 | ) | |||||
Profit (Loss) for the period | 642 | (17,995 | ) | |||||
Total comprehensive income (loss) | 642 | (18,166 | ) |
34
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
10. | Investments in Associates and Joint Ventures, Continued |
(5) | Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||
September 30, 2019 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
SK hynix Inc.(*1,2) | ₩ | 48,250,727 | 20.1 | 10,306,159 | 1,192,286 | 11,498,445 | ||||||||||||||
KEB HanaCard Co., Ltd. | 1,625,601 | 15.0 | 243,840 | 50,932 | 294,772 | |||||||||||||||
Korea IT Fund | 450,814 | 63.3 | 285,516 | — | 285,516 | |||||||||||||||
SK China Company Ltd.(*1) | 1,804,107 | 27.3 | 492,002 | 85,099 | 577,101 | |||||||||||||||
(In millions of won) | ||||||||||||||||||||
December 31, 2018 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
SK hynix Inc.(*1,2) | ₩ | 46,843,742 | 20.1 | 10,005,624 | 1,202,691 | 11,208,315 | ||||||||||||||
KEB HanaCard Co., Ltd. | 1,575,422 | 15.0 | 236,313 | 52,144 | 288,457 | |||||||||||||||
Korea IT Fund | 444,764 | 63.3 | 281,684 | — | 281,684 | |||||||||||||||
SK China Company Ltd.(*1) | 1,708,612 | 27.3 | 465,959 | 85,589 | 551,548 |
(*1) | Net assets of these consolidated entities represent net assets excluding those attributable to theirnon-controlling interests. |
(*2) | The ownership interest is based on the number of shares owned by the Parent Company as divided by the total shares issued by the investee company. The Group applied the equity method using the effective ownership interest which is based on the number of shares owned by the Parent Company and the investee’s total shares outstanding. The effective ownership interest applied for the equity method is 21.36%. |
35
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
10. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | For the nine-month period ended September 30, 2019 | |||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profits (losses) | Other comprehensive income (loss) | Other increase (decrease) | Ending balance | |||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||
SK China Company Ltd. | ₩ | 551,548 | — | 301 | 25,252 | — | 577,101 | |||||||||||||||||
Korea IT Fund(*1) | 281,684 | — | 10,258 | 1,706 | (8,132 | ) | 285,516 | |||||||||||||||||
KEB HanaCard Co., Ltd. | 288,457 | — | 6,265 | 50 | — | 294,772 | ||||||||||||||||||
NanoEnTek, Inc. | 40,974 | — | 1,079 | (70 | ) | — | 41,983 | |||||||||||||||||
SK Technology Innovation Company | 42,469 | — | 59 | 3,075 | — | 45,603 | ||||||||||||||||||
SK hynix Inc.(*1) | 11,208,315 | — | 444,880 | 64,401 | (219,151 | ) | 11,498,445 | |||||||||||||||||
SK MENA Investment B.V. | 14,420 | — | 10 | 1,025 | — | 15,455 | ||||||||||||||||||
SM Culture & Contents Co., Ltd. | 63,801 | — | 7 | (458 | ) | — | 63,350 | |||||||||||||||||
Health Connect Co., Ltd. and others(*1,2) | 299,945 | 242,047 | (2,885 | ) | 5,576 | (16,061 | ) | 528,622 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
12,791,613 | 242,047 | 459,974 | 100,557 | (243,344 | ) | 13,350,847 | ||||||||||||||||||
Investments in joint ventures: |
| |||||||||||||||||||||||
Dogus Planet, Inc. | 12,487 | (81 | ) | 5,049 | 293 | — | 17,748 | |||||||||||||||||
Finnq Co., Ltd. | 7,671 | 24,500 | (6,031 | ) | (711 | ) | — | 25,429 | ||||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC | — | 8,135 | — | — | 274 | 8,409 | ||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC | — | 1,743 | — | — | 59 | 1,802 | ||||||||||||||||||
Celcom Planet(*3) | — | 6,141 | (6,141 | ) | — | — | — | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
20,158 | 40,438 | (7,123 | ) | (418 | ) | 333 | 53,388 | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 12,811,771 | 282,485 | 452,851 | 100,139 | (243,011 | ) | 13,404,235 | |||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
(*1) | Dividends declared by the associates are deducted from the carrying amount during the for the nine-month period ended September 30, 2019. |
(*2) | The acquisition for the nine-month period ended September 30, 2019 includes |
(*3) | Investment in Celcom Planet was disposed during the nine-month period ended September 30, 2019. |
36
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
10. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the nine-month periods ended September 30, 2019 and 2018 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profits (losses) | Other comprehensive income (loss) | Other increase (decrease) | Ending balance | |||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||
SK China Company Ltd. | ₩ | 526,099 | — | 1,451 | (3,956 | ) | — | 523,594 | ||||||||||||||||
Korea IT Fund(*) | 257,003 | — | 26,467 | (7,496 | ) | (3,499 | ) | 272,475 | ||||||||||||||||
KEB HanaCard Co., Ltd. | 280,988 | — | 10,510 | (6,484 | ) | — | 285,014 | |||||||||||||||||
NanoEnTek, Inc. | 38,718 | — | (270 | ) | (601 | ) | — | 37,847 | ||||||||||||||||
SK Technology Innovation Company | 42,511 | — | (26 | ) | 1,654 | — | 44,139 | |||||||||||||||||
HappyNarae Co., Ltd. | 21,873 | — | 3,240 | 7 | — | 25,120 | ||||||||||||||||||
SK hynix Inc.(*) | 8,130,000 | — | 2,515,916 | (6,188 | ) | (146,100 | ) | 10,493,628 | ||||||||||||||||
SK MENA Investment B.V. | 13,853 | — | (4 | ) | 523 | — | 14,372 | |||||||||||||||||
SM Culture & Contents Co., Ltd. | 64,966 | — | (1,431 | ) | (315 | ) | — | 63,220 | ||||||||||||||||
Xian Tianlong Science and Technology Co., Ltd. | 25,891 | (25,553 | ) | (338 | ) | — | — | — | ||||||||||||||||
Hello Nature., Ltd. | — | — | 372 | — | 29,880 | 30,252 | ||||||||||||||||||
12CM Japan, Inc. | — | 7,697 | (16 | ) | (85 | ) | — | 7,596 | ||||||||||||||||
MAKEUS Corp. | — | 9,773 | (286 | ) | — | — | 9,487 | |||||||||||||||||
SK SOUTH EAST ASIA INVESTMENT PTE. LTD. (Formerly, SE ASIA INVESTMENT PTE. LTD.) | — | 111,000 | — | — | — | 111,000 | ||||||||||||||||||
Pacific Telecom Inc. | — | 36,487 | — | — | — | 36,487 | ||||||||||||||||||
Daehan Kanggun BcN Co., Ltd. and others(*) | 96,479 | 17,942 | (3,416 | ) | (113 | ) | (8,280 | ) | 102,612 | |||||||||||||||
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9,498,381 | 157,346 | 2,552,169 | (23,054 | ) | (127,999 | ) | 12,056,843 | |||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||||||
Dogus Planet, Inc. | 13,991 | (76 | ) | 1,785 | (1,648 | ) | (98 | ) | 13,954 | |||||||||||||||
Finnq Co., Ltd. | 16,474 | — | (6,402 | ) | (46 | ) | — | 10,026 | ||||||||||||||||
12CM GLOBAL PTE. LTD. | 9,592 | (9,631 | ) | 42 | (3 | ) | — | — | ||||||||||||||||
Celcom Planet and others | — | 12,932 | (12,932 | ) | — | — | — | |||||||||||||||||
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40,057 | 3,225 | (17,507 | ) | (1,697 | ) | (98 | ) | 23,980 | ||||||||||||||||
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₩ | 9,538,438 | 160,571 | 2,534,662 | (24,751 | ) | (128,097 | ) | 12,080,823 | ||||||||||||||||
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(*) | Dividends received from the associates are deducted from the carrying amount during the nine-month period ended September 30, 2018. |
37
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
10. | Investments in Associates and Joint Ventures, Continued |
(7) | The Group discontinued the application of equity method to the following investees due to their carrying amounts being reduced to zero. The details of cumulative unrecognized equity method losses as of September 30, 2019 are as follows: |
(In millions of won) | ||||||||||||||||
Unrecognized loss | Unrecognized change in equity | |||||||||||||||
For the nine-month period ended September 30, 2019 | Cumulative loss | For the nine-month period ended September 30, 2019 | Cumulative loss | |||||||||||||
Wave City Development Co., Ltd. | ) | 4,923 | — | — | ||||||||||||
Daehan Kanggun BcN Co., Ltd. and others | (3,384 | ) | 12,026 | — | 365 | |||||||||||
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₩ | (4,995 | ) | 16,949 | — | 365 | |||||||||||
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11. | Property and Equipment |
(1) | Details of the changes in property and equipment for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Impact of adopting K-IFRS No. 1116 | Acquisition | Disposal | Transfer | Depreciation | Impairment | Business Combination | Ending balance | ||||||||||||||||||||||||||||
Land | ₩ | 938,344 | — | 1,568 | (3 | ) | 33,627 | — | — | 569 | 974,105 | |||||||||||||||||||||||||
Buildings | 863,294 | — | 2,097 | (447 | ) | 36,189 | (41,187 | ) | — | 658 | 860,604 | |||||||||||||||||||||||||
Structures | 356,039 | — | 7,521 | — | 7,339 | (27,001 | ) | — | — | 343,898 | ||||||||||||||||||||||||||
Machinery | 7,146,724 | — | 431,809 | (23,211 | ) | 1,518,408 | (1,709,953 | ) | — | — | 7,363,777 | |||||||||||||||||||||||||
Other | 848,596 | (1,113 | ) | 1,049,482 | (1,721 | ) | (967,355 | ) | (150,640 | ) | (127 | ) | 214 | 777,336 | ||||||||||||||||||||||
Right-of-use assets | — | 654,449 | 469,229 | (131,720 | ) | — | (262,267 | ) | — | 982 | 730,673 | |||||||||||||||||||||||||
Construction in progress | 565,357 | — | 696,179 | (10,840 | ) | (716,032 | ) | — | — | — | 534,664 | |||||||||||||||||||||||||
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₩ | 10,718,354 | 653,336 | 2,657,885 | (167,942 | ) | (87,824 | ) | (2,191,048 | ) | (127 | ) | 2,423 | 11,585,057 | |||||||||||||||||||||||
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(In millions of won) | ||||||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Business Combination | Disposal of subsidiaries | Ending balance | |||||||||||||||||||||||||
Land | ₩ | 862,861 | 2,418 | (7,151 | ) | 8,275 | — | — | — | 866,403 | ||||||||||||||||||||||
Buildings | 882,650 | 920 | (4,149 | ) | 20,795 | (39,057 | ) | — | — | 861,159 | ||||||||||||||||||||||
Structures | 378,575 | 4,763 | (26 | ) | 3,276 | (27,071 | ) | — | — | 359,517 | ||||||||||||||||||||||
Machinery | 7,079,798 | 412,275 | (27,542 | ) | 777,206 | (1,656,915 | ) | 20 | — | 6,584,842 | ||||||||||||||||||||||
Other | 531,057 | 392,333 | (4,445 | ) | (352,321 | ) | (101,034 | ) | 500 | (3,079 | ) | 463,011 | ||||||||||||||||||||
Construction in progress | 409,941 | 520,930 | (3,585 | ) | (582,834 | ) | — | — | — | 344,452 | ||||||||||||||||||||||
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₩ | 10,144,882 | 1,333,639 | (46,898 | ) | (125,603 | ) | (1,824,077 | ) | 520 | (3,079 | ) | 9,479,384 | ||||||||||||||||||||
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38
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
11. | Property and Equipment, Continued |
(2) | Details of theright-of-use assets as of September 30, 2019 and January 1, 2019 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | January 1, 2019 | |||||||
Buildings, Land and Structures | ₩ | 630,267 | 532,029 | |||||
Other | 100,406 | 122,420 | ||||||
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₩ | 730,673 | 654,449 | ||||||
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12. | Intangible Assets |
(1) | Details of the changes in intangible assets for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2019 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Impact of adopting K-IFRS No. 1116 | Acquisition | Disposal | Transfer | Amortization | Impairment | Business Combination | Ending balance | ||||||||||||||||||||||||||||
Frequency usage rights | ₩ | 3,139,978 | — | — | — | — | (361,983 | ) | — | — | 2,777,995 | |||||||||||||||||||||||||
Land usage rights | 10,511 | — | 1,484 | (415 | ) | — | (3,751 | ) | — | — | 7,829 | |||||||||||||||||||||||||
Industrial rights | 83,627 | — | 1,064 | (537 | ) | 1,870 | (3,531 | ) | — | (14,467 | ) | 68,026 | ||||||||||||||||||||||||
Development costs | 8,990 | — | 1,471 | — | 1,542 | (4,055 | ) | (661 | ) | 4,790 | 12,077 | |||||||||||||||||||||||||
Facility usage rights | 31,027 | — | 1,465 | (12 | ) | 234 | (5,706 | ) | — | — | 27,008 | |||||||||||||||||||||||||
Customer relations | 625,091 | — | 250 | (258 | ) | 304 | (25,541 | ) | — | — | 599,846 | |||||||||||||||||||||||||
Club memberships | 80,475 | — | 2,299 | (1,574 | ) | (1,200 | ) | — | (63 | ) | 1,188 | 81,125 | ||||||||||||||||||||||||
Brand | 374,096 | — | — | — | — | — | — | — | 374,096 | |||||||||||||||||||||||||||
Other | 1,159,715 | (2,274 | ) | 38,686 | (2,820 | ) | 86,840 | (311,272 | ) | (486 | ) | (9,869 | ) | 958,520 | ||||||||||||||||||||||
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₩ | 5,513,510 | (2,274 | ) | 46,719 | (5,616 | ) | 89,590 | (715,839 | ) | (1,210 | ) | (18,358 | ) | 4,906,522 | ||||||||||||||||||||||
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(In millions of won) | ||||||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2018 | ||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Impairment | Business Combination | Ending balance | |||||||||||||||||||||||||
Frequency usage rights | ₩ | 2,176,940 | — | — | — | (302,916 | ) | — | — | 1,874,024 | ||||||||||||||||||||||
Land usage rights | 15,750 | 2,600 | (842 | ) | 406 | (5,737 | ) | — | — | 12,177 | ||||||||||||||||||||||
Industrial rights | 111,347 | 4,274 | (768 | ) | 4,119 | (5,314 | ) | — | 55 | 113,713 | ||||||||||||||||||||||
Development costs | 4,103 | 3,968 | — | — | (1,319 | ) | — | 209 | 6,961 | |||||||||||||||||||||||
Facility usage rights | 36,451 | 1,472 | (36 | ) | 100 | (5,806 | ) | — | — | 32,181 | ||||||||||||||||||||||
Customer relations | 4,035 | 213 | — | 126 | (1,391 | ) | — | — | 2,983 | |||||||||||||||||||||||
Club memberships | 73,614 | 4,510 | (2,304 | ) | — | — | (173 | ) | — | 75,647 | ||||||||||||||||||||||
Other | 1,164,725 | 48,503 | (12,284 | ) | 160,149 | (291,158 | ) | (904 | ) | 9,942 | 1,078,973 | |||||||||||||||||||||
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₩ | 3,586,965 | 65,540 | (16,234 | ) | 164,900 | (613,641 | ) | (1,077 | ) | 10,206 | 3,196,659 | |||||||||||||||||||||
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39
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
12. | Intangible Assets, Continued |
(2) | Details of frequency usage rights as of September 30, 2019 are as follows: |
(In millions of won) | ||||||||||||||
Amount | Description | Commencement of amortization | Completion of amortization | |||||||||||
800MHz license | ₩ | 70,952 | CDMA and LTE service | Jul. 2011 | Jun. 2021 | |||||||||
1.8GHz license | 282,645 | LTE service | Sept. 2013 | Dec. 2021 | ||||||||||
2.6GHz license | 880,285 | LTE service | Sept. 2016 | Dec. 2026 | ||||||||||
2.1GHz license | 237,407 | W-CDMA and LTE service | Dec. 2016 | Dec. 2021 | ||||||||||
3.5GHz license(*) | 1,104,023 | 5G service | Apr. 2019 | Nov. 2028 | ||||||||||
28GHz license(*) | 202,683 | 5G service | — | Nov. 2023 | ||||||||||
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₩ | 2,777,995 | |||||||||||||
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(*) | The Group participated in the frequency usage rights allocation auction hosted by Ministry of Science and Information and Communication Technology(ICT) and was assigned the 3.5GHz and 28GHz bands of frequency during the year ended December 31, 2018. The considerations payable for the bands of frequency are ₩1,218,500 million and ₩207,300 million, respectively. These bands of frequency were assigned in December 2018 and the annual payments in installment of the remaining balances will be made for the next ten and five years, respectively. The Group recognized these frequency usage rights as intangible assets at the date of initial lump sum payment and began amortization for 3.5GHz license in April 2019. The amortization for 28GHz license will begin when it is in the condition necessary for it to be capable of operating in the manner intended by management. |
13. | Borrowings and Debentures |
(1) | Short-term borrowings as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||||
Lender | Annual interest rate(%) | September 30, 2019 | December 31, 2018 | |||||||||||
Short-term borrowings | Shinhan Bank | 3.36 | ₩ | 30,000 | 30,000 | |||||||||
Shinhan Bank | 2.27 | — | 30,000 | |||||||||||
Shinhan Bank | 3.63 | 15,000 | 15,000 | |||||||||||
KEB Hana Bank | 3.24 | 5,000 | 5,000 | |||||||||||
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₩ | 50,000 | 80,000 | ||||||||||||
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40
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
13. | Borrowings and Debentures, Continued |
(2) | Changes in the long-term borrowings for the nine-month period ended September 30, 2019 are as follows: |
(In millions of won) | ||||||||||||||
Lender | Annual interest rate(%) | Maturity | Book value | |||||||||||
Current | ₩ | 89,631 | ||||||||||||
Non-current | 2,015,365 | |||||||||||||
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As of January 1, 2019 | 2,104,996 | |||||||||||||
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Repayments of long-term borrowings: | ||||||||||||||
Korea Development Bank | 2.20 | Jul. 30, 2019 | (9,750 | ) | ||||||||||
Korea Development Bank | 2.20 | Jul. 30, 2019 | (2,500 | ) | ||||||||||
Korea Development Bank | 2.32 | Dec. 20, 2021 | (9,187 | ) | ||||||||||
Korea Development Bank | 2.78 | Dec. 21, 2022 | (9,375 | ) | ||||||||||
Export Kreditnamnden | 1.70 | Apr. 29, 2022 | (6,441 | ) | ||||||||||
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(37,253 | ) | |||||||||||||
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Other changes(*1) | 7,569 | |||||||||||||
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Current(*2) | 87,793 | |||||||||||||
Non-current(*2) | 1,987,519 | |||||||||||||
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As of September 30, 2019 | ₩ | 2,075,312 | ||||||||||||
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(*1) | Other changes include the effects on foreign currency translation of foreign currency-denominated long-term borrowings and changes in present value discount during the nine-month period ended September 30, 2019. |
(*2) | ₩6,540 million were transferred fromnon-current to current for the nine-month period ended September 30, 2019. |
41
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
13. | Borrowings and Debentures, Continued |
(3) | Changes in debentures for the nine-month period ended September 30, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||
Purpose | Annual interest rate(%) | Maturity | Face value | Book value | ||||||||||||||
Current | ₩ | 895,479 | 894,641 | |||||||||||||||
Non-current | 6,598,963 | 6,572,211 | ||||||||||||||||
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As of January 1, 2019 | 7,494,442 | 7,466,852 | ||||||||||||||||
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Debentures newly issued: |
| |||||||||||||||||
Unsecured corporate bonds | Operating fund | 2.03 | Mar. 6, 2022 | 180,000 | 179,234 | |||||||||||||
2.09 | Mar. 6, 2024 | 120,000 | 119,498 | |||||||||||||||
2.19 | Mar. 6, 2029 | 50,000 | 49,801 | |||||||||||||||
2.23 | Mar. 6, 2039 | 50,000 | 49,812 | |||||||||||||||
Operating and refinancing fund | 1.40 | Jul. 29, 2022 | 120,000 | 119,487 | ||||||||||||||
1.49 | Jul. 29, 2024 | 60,000 | 59,760 | |||||||||||||||
1.50 | Jul. 29, 2029 | 120,000 | 119,552 | |||||||||||||||
1.52 | Jul. 29, 2039 | 50,000 | 49,812 | |||||||||||||||
1.56 | Jul. 29, 2049 | 50,000 | 49,812 | |||||||||||||||
Refinancing fund(*1) | 2.00 | Mar. 26, 2022 | 50,000 | 49,781 | ||||||||||||||
2.09 | Mar. 26, 2024 | 160,000 | 159,300 | |||||||||||||||
Operating and refinancing fund(*1) | 1.71 | Sept. 23, 2022 | 80,000 | 79,684 | ||||||||||||||
1.71 | Sept. 23, 2024 | 100,000 | 99,610 | |||||||||||||||
1.86 | Sept. 23, 2026 | 50,000 | 49,795 | |||||||||||||||
Private placement corporate bonds | Operating fund | — | Oct. 1, 2023 | 5,758 | 5,178 | |||||||||||||
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₩ | 1,245,758 | 1,240,116 | ||||||||||||||||
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Debentures repaid: | ||||||||||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 3.24 | Aug. 28, 2019 | (170,000 | ) | (170,000 | ) | |||||||||||
Operating fund | 3.30 | May 14, 2019 | ₩ | (50,000 | ) | (50,000 | ) | |||||||||||
4.72 | May 14, 2029 | (61,757 | ) | (61,757 | ) | |||||||||||||
1.65 | Mar. 4, 2019 | (70,000 | ) | (70,000 | ) | |||||||||||||
1.62 | Jun. 3, 2019 | (50,000 | ) | (50,000 | ) | |||||||||||||
Corporate bonds | Operating fund(*1) | 3.49 | Apr. 2, 2019 | (210,000 | ) | (210,000 | ) | |||||||||||
2.76 | Sept. 28, 2019 | (130,000 | ) | (130,000 | ) | |||||||||||||
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₩ | (741,757 | ) | (741,757 | ) | ||||||||||||||
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Other changes(*2) | 121,853 | 126,689 | ||||||||||||||||
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Current(*3) | 932,444 | 932,412 | ||||||||||||||||
Non-current(*3) | 7,187,852 | 7,159,488 | ||||||||||||||||
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As of September 30, 2019 | ₩ | 8,120,296 | 8,091,900 | |||||||||||||||
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(*1) | Debentures were issued by SK Broadband Co., Ltd., one of the subsidiaries. |
(*2) | Other changes include the effects from translation of foreign currency-denominated debentures and changes in present value discount on debentures during the nine-month period ended September 30, 2019. |
(*3) | ₩720,314 million were transferred fromnon-current to current for the nine-month period ended September 30, 2019. |
42
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
14. | Long-term Payables – other |
(1) | Long-term payables – other as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Payables related to acquisition of frequency usage rights | ₩ | 1,538,937 | 1,939,082 | |||||
Other(*) | 6,364 | 29,702 | ||||||
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₩ | 1,545,301 | 1,968,784 | ||||||
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(*) | Other includes accounts payable – other for the installments on the acquisition of telecommunication equipment by Life & Security Holdings Co., Ltd. |
(2) | As of September 30, 2019 and December 31, 2018, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 12): |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Long-term payables – other | ₩ | 2,051,389 | 2,476,738 | |||||
Present value discount on long-term payables – other | (90,335 | ) | (113,772 | ) | ||||
Current installments of long-term payables – other | (422,117 | ) | (423,884 | ) | ||||
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Carrying amount at period end | 1,939,082 | |||||||
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(3) | The Group repaid ₩425,349 million of the principal amount of long-term payables – other related to the acquisition of frequency usage rights during the nine-month period ended September 30, 2019. The repayment schedule of the principal amount of long-term payables – other as of September 30, 2019 is as follows: |
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ₩ | 425,349 | ||
1~3 years | 647,589 | |||
3~5 years | 413,385 | |||
More than 5 years | 565,066 | |||
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₩ | 2,051,389 | |||
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43
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
15. | Provisions |
Changes in provisions for the nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2019 | As of September 30, 2019 | |||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Business Combination | Ending balance | Current | Non-current | ||||||||||||||||||||||||||||
Provision for restoration | ₩ | 77,741 | 3,688 | (2,514 | ) | (1,704 | ) | 83 | 40 | 77,334 | 44,905 | 32,429 | ||||||||||||||||||||||||
Emission allowance | 2,238 | 3,495 | (1,085 | ) | (932 | ) | — | — | 3,716 | 3,716 | — | |||||||||||||||||||||||||
Other provisions(*) | 107,229 | 708 | (28,223 | ) | (103 | ) | (11,645 | ) | — | 67,966 | 37,867 | 30,099 | ||||||||||||||||||||||||
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₩ | 187,208 | 7,891 | (31,822 | ) | (2,739 | ) | (11,562 | ) | 40 | 149,016 | 86,488 | 62,528 | ||||||||||||||||||||||||
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(*) | ₩37,475 million of current provisions and ₩30,099 million ofnon-current provisions are included in the other provisions relating to SK Planet Co., Ltd.’s onerous contracts. (See note 29) |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the nine-month period ended September 30, 2018 | As of September 30, 2018 | |||||||||||||||||||||||||||||||||||
Beginning balance | Impact of adopting K-IFRS No. 1115 | Increase | Utilization | Reversal | Other | Ending balance | Current | Non-current | ||||||||||||||||||||||||||||
Provision for installment of handset subsidy | ₩ | 3,874 | — | — | (1,075 | ) | (2,799 | ) | — | — | — | — | ||||||||||||||||||||||||
Provision for restoration | 73,267 | — | 3,712 | (676 | ) | (654 | ) | 105 | 75,754 | 43,541 | 32,213 | |||||||||||||||||||||||||
Emission allowance | 4,650 | — | 2,896 | (1,334 | ) | (3,306 | ) | — | 2,906 | 2,906 | — | |||||||||||||||||||||||||
Other provisions | 2,935 | (215 | ) | 555 | (134 | ) | (536 | ) | — | 2,605 | 2,605 | — | ||||||||||||||||||||||||
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₩ | 84,726 | (215 | ) | 7,163 | (3,219 | ) | (7,295 | ) | 105 | 81,265 | 49,052 | 32,213 | ||||||||||||||||||||||||
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44
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
16. | Defined Benefit Liabilities (Assets) |
(1) | Details of defined benefit liabilities (assets) as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Present value of defined benefit obligations | ₩ | 1,026,714 | 926,302 | |||||
Fair value of plan assets | (819,373 | ) | (816,699 | ) | ||||
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Defined benefit assets(*) | — | (31,926 | ) | |||||
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Defined benefit liabilities | 207,341 | 141,529 | ||||||
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(*) | Since the Group entities neither have legally enforceable right nor intention to settle the defined benefit obligations of Group entities with defined benefit assets of other Group entities, defined benefit assets of Group entities have been separately presented from defined benefit liabilities. |
(2) | Changes in defined benefit obligations for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | For the nine-month period ended | |||||||
September 30, 2019 | September 30, 2018 | |||||||
Beginning balance | ₩ | 926,302 | 679,625 | |||||
Business combination | 3,653 | — | ||||||
Current service cost | 127,404 | 101,018 | ||||||
Interest cost | 17,480 | 15,320 | ||||||
Remeasurement: | ||||||||
- Adjustment based on experience | 8,264 | 8,267 | ||||||
Benefit paid | (60,336 | ) | (32,739 | ) | ||||
Others | 3,947 | 552 | ||||||
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Ending balance | ₩ | 1,026,714 | 772,043 | |||||
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(3) | Changes in plan assets for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | For the nine-month period ended | |||||||
September 30, 2019 | September 30, 2018 | |||||||
Beginning balance | ₩ | 816,699 | 663,617 | |||||
Business combination | 3,207 | — | ||||||
Interest income | 14,786 | 14,488 | ||||||
Remeasurement | (1,302 | ) | (4,106 | ) | ||||
Contribution | 51,254 | 33,153 | ||||||
Benefit paid | (66,119 | ) | (41,501 | ) | ||||
Others | 848 | 4,414 | ||||||
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Ending balance | ₩ | 819,373 | 670,065 | |||||
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45
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
16. | Defined Benefit Liabilities (Assets), Continued |
(4) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the statement of income) and capitalized intoconstruction-in-progress, for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | For the nine-month period ended | |||||||
September 30, 2019 | September 30, 2018 | |||||||
Current service cost | ₩ | 127,404 | 101,018 | |||||
Net interest cost | 2,694 | 832 | ||||||
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₩ | 130,098 | 101,850 | ||||||
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17. | Share Capital and Capital Surplus and Others |
(1) | The Parent Company’s outstanding share capital consists entirely of common shares with a par value of |
(In millions of won, except for share data) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Number of authorized shares | 220,000,000 | 220,000,000 | ||||||
Number of issued shares | 80,745,711 | 80,745,711 | ||||||
Share capital: | ||||||||
Common shares | ₩ | 44,639 | 44,639 | |||||
Capital surplus and others: | ||||||||
Paid-in capital surplus | 2,915,887 | 2,915,887 | ||||||
Treasury shares | (1,979,475 | ) | (1,979,475 | ) | ||||
Hybrid bonds(*1) | 398,759 | 398,759 | ||||||
Share option(note 18) | 1,236 | 1,007 | ||||||
Others(*2) | (685,206 | ) | (681,094 | ) | ||||
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₩ | 651,201 | 655,084 | ||||||
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(*1) | Hybrid bonds issued by the Parent Company are classified as equity as there is no contractual obligation for delivery of financial assets to the bond holders. These are subordinated bonds which rank before common shares in the event of a liquidation or reorganization of the Parent Company. |
(*2) | Others primarily consist of the excess of the consideration paid by the Group over the carrying values of net assets acquired from entities under common control. |
(2) | There were no changes in share capital during the nine-month periods ended September 30, 2019 and 2018 and details of shares outstanding as of September 30, 2019 and 2018 are as follows: |
(In shares) | September 30, 2019 | September 30, 2018 | ||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 80,745,711 | 8,875,883 | 71,869,828 | 80,745,711 | 10,136,551 | 70,609,160 |
46
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
18. | Share option |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows: |
Parent Company | ||||||||||||
Series | ||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | |||||||
Grant date | March 24, 2017 | February 20, 2018 | February 22, 2019 | March 26, 2019 | ||||||||
Types of shares to be issued | Registered common shares | |||||||||||
Grant method | Reissue of treasury shares | Reissue of treasury shares, cash settlement | ||||||||||
Number of shares (in shares) | 22,168 | 22,168 | 22,168 | 1,358 | 5,477 | 1,734 | ||||||
Exercise price (in won) | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | ||||||
Exercise period | Mar. 25, 2019 ~ Mar. 24, 2022 | Mar. 25, 2020 ~ Mar. 24, 2023 | Mar. 25, 2021 ~ Mar. 24, 2024 | Feb. 21, 2020 ~ Feb. 20, 2023 | Feb. 23, 2021 ~ Feb. 22, 2024 | Mar. 27, 2021 ~ Mar. 26, 2024 | ||||||
Vesting conditions | 2 years’ service from the grant date | 3 years’ service from the grant date | 4 years’ service from the grant date | 2 years’ service from the grant date | 2 years’ service from the grant date | 2 years’ service from the grant date |
One store Co., Ltd.(*) | DREAMUS COMPANY (Formerly, IRIVER LIMITED) | |||||||
1-1 | 1-2 | 1-3 | ||||||
Grant date | April 27, 2018 | March 28, 2019 | March 28, 2019 | March 28, 2019 | ||||
Types of shares to be issued | Common shares of One store Co., Ltd. | Common shares of DREAMUS COMPANY (Formerly, IRIVER LIMITED) | ||||||
Grant method | Issuance of new shares | Issuance of new shares, reissue of treasury shares, cash settlement | ||||||
Number of shares (in shares)(*) | 978,650 | 406,681 | 406,672 | 406,647 | ||||
Exercise price (in won) | 5,390 | 9,160 | 9,160 | 9,160 | ||||
Exercise period | Apr. 28, 2020 ~ Apr. 27, 2024 | Mar. 29, 2021 ~ Mar. 28, 2024 | Mar. 29, 2022 ~ Mar. 28, 2025 | Mar. 29, 2023 ~ Mar. 28, 2026 | ||||
Vesting conditions | 2 years’ service from the grant date | 2 years’ service from the grant date | 3 years’ service from the grant date | 4 years’ service from the grant date |
(*) | Parts of the grant of One store Co., Ltd. that have not met the vesting conditions have been forfeited during the nine-month period ended September 30, 2019 and during the year ended December 31, 2018. |
Incross Co., Ltd. | ||||||||
3 | 4 | 5 | 6 | |||||
Grant date | March 30, 2016 | March 7, 2017 | March 7, 2018 | March 7, 2019 | ||||
Types of shares to be issued | Common shares of Incross Co., Ltd. | |||||||
Grant method | Issuance of new shares, reissue of treasury shares | |||||||
Number of shares (in shares) | 19,750 | 29,625 | 9,900 | 6,600 | ||||
Exercise price (in won) | 10,571 | 17,485 | 25,861 | 16,895 | ||||
Exercise period | Mar. 31, 2020 ~ Mar. 30, 2022 | Mar. 8, 2021 ~ Mar. 6, 2023 | Mar. 8, 2022 ~ Mar. 6, 2024 | Mar. 8, 2023 ~ Mar. 6, 2025 | ||||
Vesting conditions | 3 years’ service from the grant date | 3 years’ service from the grant date | 3 years’ service from the grant date | 3 years’ service from the grant date |
47
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
18. | Share option, Continued |
(2) | Share compensation expense recognized during the nine-month period ended September 30, 2019 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | Share compensation expense | |||
Accumulated compensation expenses as of December 31, 2018 | ₩ | 1,203 | ||
For the nine-month period ended September 30, 2019 | 732 | |||
In subsequent periods | 1,844 | |||
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₩ | 3,779 | |||
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(3) | The Group used binomial option pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows: |
(In won) | Parent Company | |||||||||||||||||||||||
Series | ||||||||||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | |||||||||||||||||||
Risk-free interest rate | 1.86 | % | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | ||||||||||||
Estimated option’s life | 5 years | 6 years | 7 years | 5 years | 5 years | 5 years | ||||||||||||||||||
Share price (Closing price on the preceding day) | 262,500 | 262,500 | 262,500 | 243,500 | 259,000 | 253,000 | ||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | ||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | ||||||||||||
Exercise price | 246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | ||||||||||||||||||
Per share fair value of the option | 27,015 | 20,240 | 15,480 | 23,988 | 8,600 | 8,111 |
(In won) | DREAMUS COMPANY (Formerly, IRIVER LIMITED) | |||||||||||||||
One store Co., Ltd. | 1-1 | 1-2 | 1-3 | |||||||||||||
Risk-free interest rate | 2.61 | % | 1.73 | % | 1.77 | % | 1.82 | % | ||||||||
Estimated option’s life | 6 years | — | — | — | ||||||||||||
Share price (Closing price on the preceding day)(*) | 4,925 | 8,950 | 8,950 | 8,950 | ||||||||||||
Expected volatility | 9.40 | % | 16.17 | % | 16.17 | % | 16.17 | % | ||||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
Exercise price | 5,390 | 9,160 | 9,160 | 9,160 | ||||||||||||
Per share fair value of the option | 566 | 1,132 | 1,372 | 1,542 | ||||||||||||
(In won) | Incross Co., Ltd. | |||||||||||||||
3 | 4 | 5 | 6 | |||||||||||||
Risk-free interest rate | 2.09 | % | 1.35 | % | 1.50 | % | 1.76 | % | ||||||||
Estimated option’s life | 6 years | 6 years | 6 years | 6 years | ||||||||||||
Share price (Closing price on the preceding day) | 17,993 | 43,843 | 27,300 | 17,000 | ||||||||||||
Expected volatility | 20.67 | % | 18.67 | % | 21.28 | % | 25.58 | % | ||||||||
Expected dividends | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
Exercise price | 10,571 | 17,485 | 25,861 | 16,895 | ||||||||||||
Per share fair value of the option | 1,965 | 9,423 | 7,277 | 4,887 |
(*) | One store Co., Ltd., a subsidiary of the Parent Company, is an unlisted stock, and the share price is calculated using the discounted cash flow model. |
48
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
19. | Retained Earnings |
Retained earnings as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Appropriated: | ||||||||
Legal reserve | ₩ | 22,320 | 22,320 | |||||
Reserve for business expansion | 11,531,138 | 10,531,138 | ||||||
Reserve for technology development | 4,265,300 | 3,321,300 | ||||||
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15,818,758 | 13,874,758 | |||||||
Unappropriated | 6,508,965 | 8,269,783 | ||||||
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₩ | 22,327,723 | 22,144,541 | ||||||
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20. | Reserves |
(1) | Details of reserves, net of taxes, as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Valuation loss on financial assets at FVOCI | ₩ | (40,269 | ) | (124 | ) | |||
Other comprehensive loss of investments in associates | (236,774 | ) | (334,637 | ) | ||||
Valuation loss on derivatives | (5,714 | ) | (41,601 | ) | ||||
Foreign currency translation differences for foreign operations | 7,818 | 2,920 | ||||||
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₩ | (274,939 | ) | (373,442 | ) | ||||
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(2) | Changes in reserves for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
Valuation gain (loss) on financial assets at FVOCI | Valuation gain (loss) on available-for-sale financial assets | Other comprehensive income (loss) of investments in associates | Valuation gain (loss) on derivatives | Foreign currency translation differences for foreign operations | Total | |||||||||||||||||||
Balance at December 31, 2017 | ₩ | — | 168,211 | (320,060 | ) | (73,828 | ) | (9,050 | ) | (234,727 | ) | |||||||||||||
Impact of adoptingK-IFRS | 99,407 | (168,211 | ) | — | — | — | (68,804 | ) | ||||||||||||||||
Balance at January 1, 2018 | 99,407 | — | (320,060 | ) | (73,828 | ) | (9,050 | ) | (303,531 | ) | ||||||||||||||
Changes, net of taxes | (28,705 | ) | — | (24,434 | ) | (14,289 | ) | 14,878 | (52,550 | ) | ||||||||||||||
Balance at September 30, 2018 | 70,702 | — | (344,494 | ) | (88,117 | ) | 5,828 | (356,081 | ) | |||||||||||||||
Balance at January 1, 2019 | (124 | ) | — | (334,637 | ) | (41,601 | ) | 2,920 | (373,442 | ) | ||||||||||||||
Changes, net of taxes | (40,145 | ) | — | 97,863 | 35,887 | 4,898 | 98,503 | |||||||||||||||||
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Balance at September 30, 2019 | ₩ | (40,269 | ) | — | (236,774 | ) | (5,714 | ) | 7,818 | (274,939 | ) | |||||||||||||
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49
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
21. | Other Operating Expenses |
Details of other operating expenses for the three and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Communication | ₩ | 11,726 | 32,601 | 8,123 | 24,746 | |||||||||||
Utilities | 90,272 | 237,537 | 81,955 | 221,418 | ||||||||||||
Taxes and dues | 7,970 | 34,728 | 6,657 | 30,111 | ||||||||||||
Repair | 87,336 | 268,646 | 89,704 | 260,027 | ||||||||||||
Research and development | 93,631 | 289,619 | 94,110 | 281,808 | ||||||||||||
Training | 10,099 | 25,900 | 10,440 | 26,109 | ||||||||||||
Bad debt for accounts receivable – trade | 6,000 | 21,253 | 7,133 | 27,344 | ||||||||||||
Travel | 7,056 | 21,942 | 6,144 | 19,473 | ||||||||||||
Supplies and others | 59,797 | 186,916 | 41,695 | 126,130 | ||||||||||||
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₩ | 373,887 | 1,119,142 | 345,961 | 1,017,166 | ||||||||||||
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22. | OtherNon-operating Income and Expenses |
Details of othernon-operating income and expenses for the three and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
OtherNon-operating Income: | ||||||||||||||||
Gain on disposal of property and equipment and intangible assets | ₩ | 4,276 | 11,769 | 31,725 | 35,265 | |||||||||||
Gain on business transfer | 10,147 | 10,147 | — | — | ||||||||||||
Others | 5,905 | 14,900 | 4,498 | 23,303 | ||||||||||||
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₩ | 20,328 | 36,816 | 36,223 | 58,568 | ||||||||||||
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OtherNon-operating Expenses: | ||||||||||||||||
Loss on impairment of property and equipment and intangible assets | ₩ | — | 1,337 | — | 1,077 | |||||||||||
Loss on disposal of property and equipment and intangible assets | 8,777 | 34,805 | 18,065 | 37,821 | ||||||||||||
Donations | 3,320 | 15,776 | 16,725 | 48,724 | ||||||||||||
Bad debt for accounts receivable – other | 1,265 | 3,360 | 937 | 5,483 | ||||||||||||
Loss on impairment of investment assets | 272 | 1,670 | 441 | 3,175 | ||||||||||||
Others | 2,672 | 11,272 | 5,010 | 18,130 | ||||||||||||
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₩ | 16,306 | 68,220 | 41,178 | 114,410 | ||||||||||||
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50
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
23. | Finance Income and Costs |
(1) | Details of finance income and costs for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Finance Income: | ||||||||||||||||
Interest income | ₩ | 17,817 | 46,912 | 14,031 | 49,251 | |||||||||||
Gain on sale of accounts receivable – other | 2,366 | 14,353 | 9,202 | 17,341 | ||||||||||||
Dividends | — | 9,924 | 19,752 | 34,894 | ||||||||||||
Gain on foreign currency transactions | 3,523 | 9,168 | 4,127 | 13,587 | ||||||||||||
Gain on foreign currency translations | 4,915 | 9,928 | — | 3,795 | ||||||||||||
Gain relating to financial assets at FVTPL | 1,128 | 3,026 | 58,647 | 68,586 | ||||||||||||
Gain relating to financial liabilities at FVTPL | — | 56 | — | — | ||||||||||||
Gain on valuation of derivatives | — | 465 | 526 | 1,423 | ||||||||||||
Gain on settlement of derivatives | — | 389 | — | — | ||||||||||||
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₩ | 29,749 | 94,221 | 106,285 | 188,877 | ||||||||||||
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Finance Costs: | ||||||||||||||||
Interest expenses | ₩ | 98,730 | 300,504 | 71,031 | 218,007 | |||||||||||
Loss on sale of accounts receivable – other | — | 561 | 1,066 | 5,446 | ||||||||||||
Loss on foreign currency transactions | 4,486 | 10,111 | 3,207 | 13,064 | ||||||||||||
Loss on foreign currency translations | 3,711 | 8,051 | 1,687 | 3,043 | ||||||||||||
Loss relating to financial liabilities at FVTPL | — | 43 | 363 | 1,143 | ||||||||||||
Loss relating to financial assets at FVTPL | — | 182 | 7,598 | 8,376 | ||||||||||||
Loss on settlement of derivatives | — | 317 | 65 | 12,221 | ||||||||||||
Other financial commissions | — | — | 10,937 | 10,937 | ||||||||||||
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| |||||||||
₩ | 106,927 | 319,769 | 95,954 | 272,237 | ||||||||||||
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(2) | Details of interest income included in finance income for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Interest income on cash equivalents and short-term financial instruments | ₩ | 7,202 | 22,351 | 8,831 | 23,450 | |||||||||||
Interest income on loans and others | 10,615 | 24,561 | 5,200 | 25,801 | ||||||||||||
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|
|
|
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| |||||||||
₩ | 17,817 | 46,912 | 14,031 | 49,251 | ||||||||||||
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51
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
23. | Finance Income and Costs, Continued |
(3) | Details of interest expenses included in finance costs for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Interest expenses on borrowings | ₩ | 26,149 | 77,777 | 2,126 | 8,458 | |||||||||||
Interest expenses on debentures | 56,376 | 168,252 | 57,260 | 172,844 | ||||||||||||
Others | 16,205 | 54,475 | 11,645 | 36,705 | ||||||||||||
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| |||||||||
₩ | 98,730 | 300,504 | 71,031 | 218,007 | ||||||||||||
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|
(4) | Details of impairment losses on financial assets for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Accounts receivable – trade | ₩ | 6,000 | 21,253 | 7,133 | 27,344 | |||||||||||
Other receivables | 1,265 | 3,360 | 937 | 5,483 | ||||||||||||
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| |||||||||
₩ | 7,265 | 24,613 | 8,070 | 32,827 | ||||||||||||
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24. | Income Tax Expense |
Income tax expense was calculated by considering current tax expense adjusted to changes in estimates related to prior periods, and deferred tax expense due to origination and reversal of temporary differences.
52
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
25. | Earnings per Share |
(1) | Basic earnings per share |
1) | Basic earnings per share for the three and nine-month periods ended September 30, 2019 and 2018 are calculated as follows: |
(In millions of won, except for share data) | 2019 | 2018 | ||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Profit attributable to owners of the Parent Company on common shares | ₩ | 274,380 | 916,966 | 1,031,375 | 2,642,986 | |||||||||||
Interest on hybrid bonds | (3,692 | ) | (11,075 | ) | (3,691 | ) | (12,111 | ) | ||||||||
Profit for the period available for common shares | 270,688 | 905,891 | 1,027,684 | 2,630,875 | ||||||||||||
Weighted average number of common shares outstanding | 71,869,828 | 71,869,828 | 70,609,160 | 70,609,160 | ||||||||||||
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| |||||||||
Basic earnings per share (in won) | ₩ | 3,766 | 12,605 | 14,555 | 37,260 | |||||||||||
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2) | The weighted average number of common shares outstanding for the three and nine-month periods ended September 30, 2019 and 2018 are calculated as follows: |
(In shares) | Weighted number of shares | |||||||||||
Number of shares | Three-month period ended September 30 | Nine-month period ended September 30 | ||||||||||
Issued common shares at January 1, 2019 | 80,745,711 | 80,745,711 | 80,745,711 | |||||||||
Treasury shares at January 1, 2019 | (8,875,883 | ) | (8,875,883 | ) | (8,875,883 | ) | ||||||
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| |||||||
Weighted average number of common shares outstanding at September 30, 2019 | 71,869,828 | 71,869,828 | 71,869,828 | |||||||||
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(In shares) | Weighted number of shares | |||||||||||
Number of shares | Three-month period ended September 30 | Nine-month period ended September 30 | ||||||||||
Issued common shares at January 1, 2018 | 80,745,711 | 80,745,711 | 80,745,711 | |||||||||
Treasury shares at January 1, 2018 | (10,136,551 | ) | (10,136,551 | ) | (10,136,551 | ) | ||||||
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| |||||||
Weighted average number of common shares outstanding at September 30, 2018 | 70,609,160 | 70,609,160 | 70,609,160 | |||||||||
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(2) | Diluted earnings per share |
For the nine-month periods ended September 30, 2019 and 2018, diluted earnings per share are the same as basic earnings per share as there are no dilutive potential common shares.
53
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Categories of Financial Instruments |
(1) | Financial assets by category as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | September 30, 2019 | |||||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Debt instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | |||||||||||||||||||
Cash and cash equivalents | ₩ | — | — | — | 1,289,713 | — | 1,289,713 | |||||||||||||||||
Financial instruments | — | — | — | 830,237 | — | 830,237 | ||||||||||||||||||
Short-term investment securities | 144,513 | — | — | — | — | 144,513 | ||||||||||||||||||
Long-term investment securities(*) | 141,952 | 391,659 | 4,801 | — | — | 538,412 | ||||||||||||||||||
Accounts receivable – trade | — | — | — | 2,235,217 | — | 2,235,217 | ||||||||||||||||||
Loans and other receivables | 812,991 | — | — | 1,186,217 | — | 1,999,208 | ||||||||||||||||||
Derivative financial assets | 4,120 | — | — | — | 204,634 | 208,754 | ||||||||||||||||||
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|
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| |||||||||||||
₩ | 1,103,576 | 391,659 | 4,801 | 5,541,384 | 204,634 | 7,246,054 | ||||||||||||||||||
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(*) | The Group designated ₩391,659 million of equity instruments that are not held for trading as financial assets measured at FVOCI. |
(In millions of won) | December 31, 2018 | |||||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Debt instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | |||||||||||||||||||
Cash and cash equivalents | ₩ | — | — | — | 1,506,699 | — | 1,506,699 | |||||||||||||||||
Financial instruments | — | — | — | 1,046,897 | — | 1,046,897 | ||||||||||||||||||
Short-term investment securities | 195,080 | — | — | — | — | 195,080 | ||||||||||||||||||
Long-term investment securities(*) | 120,083 | 542,496 | 2,147 | — | — | 664,726 | ||||||||||||||||||
Accounts receivable – trade | — | — | — | 2,019,933 | — | 2,019,933 | ||||||||||||||||||
Loans and other receivables | 489,617 | — | — | 1,132,321 | — | 1,621,938 | ||||||||||||||||||
Derivative financial assets | 15,586 | — | — | — | 39,871 | 55,457 | ||||||||||||||||||
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| |||||||||||||
₩ | 820,366 | 542,496 | 2,147 | 5,705,850 | 39,871 | 7,110,730 | ||||||||||||||||||
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(*) | The Group designated ₩542,496 million of equity instruments that are not held for trading as financial assets measured at FVOCI. |
54
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
26. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||
September 30, 2019 | ||||||||||||
Financial liabilities at amortized cost | Derivatives hedging instrument | Total | ||||||||||
Accounts payable – trade | ₩ | 455,288 | — | 455,288 | ||||||||
Derivative financial liabilities | — | 1,383 | 1,383 | |||||||||
Borrowings | 2,125,312 | — | 2,125,312 | |||||||||
Debentures | 8,091,900 | — | 8,091,900 | |||||||||
Lease liabilities | 733,766 | — | 733,766 | |||||||||
Accounts payable – other and others | 6,542,176 | — | 6,542,176 | |||||||||
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|
|
| |||||||
₩ | 17,948,442 | 1,383 | 17,949,825 | |||||||||
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|
(In millions of won) | ||||||||||||||||
December 31, 2018 | ||||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Accounts payable – trade | ₩ | — | 381,302 | — | 381,302 | |||||||||||
Derivative financial liabilities | — | — | 4,184 | 4,184 | ||||||||||||
Borrowings | — | 2,184,996 | — | 2,184,996 | ||||||||||||
Debentures(*) | 61,813 | 7,405,039 | — | 7,466,852 | ||||||||||||
Accounts payable – other and others | — | 6,762,782 | — | 6,762,782 | ||||||||||||
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| |||||||||
₩ | 61,813 | 16,734,119 | 4,184 | 16,800,116 | ||||||||||||
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(*) | Debentures classified as financial liabilities at FVTPL as of December 31, 2018 are structured bonds, and they were designated as financial liabilities at FVTPL in order to eliminate a measurement inconsistency with the related derivatives. |
55
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Financial Risk Management |
(1) | Financial risk management |
The Group is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates and interest rates. The Group implements a risk management system to monitor and manage these specific risks.
The Group’s financial assets consist of cash and cash equivalents, financial instruments, investment securities, and accounts receivable – trade and other. Financial liabilities consist of accounts payable – other and others, borrowings, debentures and lease liabilities.
1) | Market risk |
(i) | Currency risk |
The Group incurs exchange position due to revenue and expenses from its global operations. Major foreign currencies where the currency risk occur are USD, JPY and EUR. The Group determines the currency risk management policy after considering the nature of business and the presence of methods that mitigate the currency risk for each Group entities. Currency risk occurs on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of each Group entity. The Group manages currency risk arising from business transactions by using currency forwards, etc.
Monetary assets and liabilities denominated in foreign currencies as of September 30, 2019 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||
USD | 124,068 | ₩ | 149,043 | 1,598,783 | ₩ | 1,920,606 | ||||||||||
EUR | 2,726 | 3,585 | 339 | 446 | ||||||||||||
JPY | 857,121 | 9,544 | 225,792 | 2,514 | ||||||||||||
Others | — | 22,721 | — | 12,352 | ||||||||||||
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| |||||||||||||
₩ | 184,893 | ₩ | 1,935,918 | |||||||||||||
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|
|
In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.
As of September 30, 2019, a hypothetical change in exchange rates by 10% would have increase (reduce) the Group’s profit before income tax as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD | ₩ | 5,883 | (5,883 | ) | ||||
EUR | 314 | (314 | ) | |||||
JPY | 703 | (703 | ) | |||||
Others | 1,037 | (1,037 | ) | |||||
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| |||||
₩ | 7,937 | (7,937 | ) | |||||
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56
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk |
The interest rate risk of the Group arises from debenture, borrowings, and long-term payables – other. Since the Group’s interest-bearing assets are mostly fixed interest-bearing assets, the Group’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.
The Group performs various analysis to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Group takes various measures such as refinancing, renewal, alternative financing and hedging.
As of September 30, 2019, the floating-rate borrowings and debenture of the Group are ₩208,169 million and ₩360,390 million, respectively, and the Group has entered into interest rate swap agreements for most of floating rate borrowings and debentures to hedge interest rate risk. If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the nine-month period ended September 30, 2019, would change by ₩1,051 million in relation to floating-rate borrowings that are exposed to interest rate risk.
As of September 30, 2019, the floating-rate long-term payables – other are ₩2,051,389 million. If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the nine-month ended September 30, 2019, would change by ₩15,386 million in relation to floating-rate long-term payables – other that are exposed to interest rate risk.
2) | Credit risk |
The maximum credit exposure as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Cash and cash equivalents | ₩ | 1,289,377 | 1,506,432 | |||||
Financial instruments | 830,237 | 1,046,897 | ||||||
Investment securities | 11,722 | 11,672 | ||||||
Accounts receivable – trade | 2,235,217 | 2,019,933 | ||||||
Loans and other receivables | 1,999,208 | 1,621,938 | ||||||
Derivative financial assets | 208,754 | 55,457 | ||||||
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|
|
| |||||
₩ | 6,574,515 | 6,262,329 | ||||||
|
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|
|
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Group evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors. Based on such information, the Group establishes credit limits for each customer or counterparty.
57
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk, Continued |
The Group establishes a loss allowance in respect of accounts receivable – trade. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Also, the Group’s credit risk can arise from transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Group has a policy to deal only with financial institutions with high credit ratings. The amount of maximum exposure to credit risk of the Group is the carrying amount of financial assets as of September 30, 2019.
3) | Liquidity risk |
The Group’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalents balances and have enough liquidity through various committed credit lines. The Group maintains enough liquidity within credit lines through active operating activities.
Contractual maturities of financial liabilities as of September 30, 2019 are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | ||||||||||||||||
Accounts payable – trade | ₩ | 455,288 | 455,288 | 455,288 | — | — | ||||||||||||||
Borrowings(*) | 2,125,312 | 2,520,187 | 232,579 | 2,287,608 | — | |||||||||||||||
Debentures(*) | 8,091,900 | 9,372,331 | 1,151,092 | 5,044,485 | 3,176,754 | |||||||||||||||
Lease liabilities | 733,766 | 785,672 | 313,960 | 364,512 | 107,200 | |||||||||||||||
Accounts payable – other and others(*) | 6,542,176 | 6,730,898 | 5,003,907 | 1,148,733 | 578,258 | |||||||||||||||
|
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|
|
|
|
|
|
| |||||||||||
₩ | 17,948,442 | 19,864,376 | 7,156,826 | 8,845,338 | 3,862,212 | |||||||||||||||
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(*) | Includes interest payables. |
The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
As of September 30, 2019, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | ||||||||||||||||
Assets | ₩ | 204,634 | 208,607 | 58,044 | 138,845 | 11,718 | ||||||||||||||
Liabilities | (1,383 | ) | (1,383 | ) | — | (1,383 | ) | — | ||||||||||||
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|
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|
|
| |||||||||||
₩ | 203,251 | 207,224 | 58,044 | 137,462 | 11,718 | |||||||||||||||
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58
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Financial Risk Management, Continued |
(2) | Capital management |
The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Group is the same as that of the Group as of and for the year ended December 31, 2018.
The Group monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity both from the financial statements.
Debt-equity ratio as of September 30, 2019 and December 31, 2018 are as follows:
(In millions of won) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Total liabilities | ₩ | 21,327,135 | 20,019,861 | |||||
Total equity | 22,656,645 | 22,349,250 | ||||||
Debt-equity ratio | 94.13 | % | 89.58 | % |
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of September 30, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||
September 30, 2019 | ||||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | ₩ | 1,103,576 | — | 961,624 | 141,952 | 1,103,576 | ||||||||||||||
Derivatives hedging instruments | 204,634 | — | 204,634 | — | 204,634 | |||||||||||||||
FVOCI | 396,460 | 55,368 | — | 341,092 | 396,460 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 1,704,670 | 55,368 | 1,166,258 | 483,044 | 1,704,670 | |||||||||||||||
|
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|
|
|
|
|
|
| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
Derivatives hedging instruments | ₩ | 1,383 | — | 1,383 | — | 1,383 | ||||||||||||||
|
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|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | ₩ | 2,125,312 | — | 2,308,919 | — | 2,308,919 | ||||||||||||||
Debentures | 8,091,900 | — | 8,664,808 | — | 8,664,808 | |||||||||||||||
Long-term payables – other | 1,967,418 | — | 2,054,513 | — | 2,054,513 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 12,184,630 | — | 13,028,240 | — | 13,028,240 | |||||||||||||||
|
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59
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
2) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||
December 31, 2018 | ||||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | ₩ | 820,366 | — | 695,992 | 124,374 | 820,366 | ||||||||||||||
Derivatives hedging instruments | 39,871 | — | 39,871 | — | 39,871 | |||||||||||||||
FVOCI | 544,643 | 293,925 | — | 250,718 | 544,643 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 1,404,880 | 293,925 | 735,863 | 375,092 | 1,404,880 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | ₩ | 61,813 | — | 61,813 | — | 61,813 | ||||||||||||||
Derivative financial liabilities | 4,184 | — | 4,184 | — | 4,184 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 65,997 | — | 65,997 | — | 65,997 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | ₩ | 2,184,996 | — | 2,378,843 | — | 2,378,843 | ||||||||||||||
Debentures | 7,405,039 | — | 7,868,472 | — | 7,868,472 | |||||||||||||||
Long-term payables – other | 2,393,027 | — | 2,469,653 | — | 2,469,653 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 11,983,062 | — | 12,716,968 | — | 12,716,968 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.
Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI) is measured based on the bid price at the end of the reporting date.
The Group uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used to such valuation methods include swap rate, interest rate, and risk premium, and the Group performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
60
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
Interest rates used by the Group for the fair value measurement as of September 30, 2019 are as follows:
Interest rate | ||
Derivative instruments | 1.00% ~ 2.29% | |
Borrowings and debentures | 1.62% ~ 2.32% | |
Long-term payables – other | 1.58% ~ 1.71% |
3) | There have been no transfers between Level 2 and Level 1 for the nine-month period ended September 30, 2019. The changes of financial assets classified as Level 3 for the nine-month period ended September 30, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
Balance at January 1, 2019 | Gain for the period | OCI | Acquisition | Disposal | Balance at September 30, 2019 | |||||||||||||||||||
FVTPL | ₩ | 124,374 | 2,085 | 2,009 | 19,690 | (6,206 | ) | 141,952 | ||||||||||||||||
FVOCI | 250,718 | — | 4,786 | 91,805 | (6,217 | ) | 341,092 | |||||||||||||||||
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₩ | 375,092 | 2,085 | 6,795 | 111,495 | (12,423 | ) | 483,044 | |||||||||||||||||
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61
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
27. | Financial Risk Management, Continued |
(4) | Enforceable master netting agreement or similar agreement |
1) | Carrying amount of financial instruments recognized of which offset agreements are applicable as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||
September 30, 2019 | ||||||||||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the statement of financial position | Relevant financial instruments not offset | Net amount | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Accounts receivable – trade and others | ₩ | 91,869 | (90,279 | ) | 1,590 | — | 1,590 | |||||||||||||
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Financial liabilities: | ||||||||||||||||||||
Accounts payable – trade and others | ₩ | 90,279 | (90,279 | ) | — | — | — | |||||||||||||
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December 31, 2018 | ||||||||||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the statement of financial position | Relevant financial instruments not offset | Net amount | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Derivatives(*) | ₩ | 1,867 | — | 1,867 | (1,107 | ) | 760 | |||||||||||||
Accounts receivable – trade and others | 95,990 | (95,920 | ) | 70 | — | 70 | ||||||||||||||
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₩ | 97,857 | (95,920 | ) | 1,937 | (1,107 | ) | 830 | |||||||||||||
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Financial liabilities: | ||||||||||||||||||||
Derivatives(*) | ₩ | 1,107 | — | 1,107 | (1,107 | ) | — | |||||||||||||
Accounts payable – trade and others | 95,920 | (95,920 | ) | — | — | — | ||||||||||||||
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₩ | 97,027 | (95,920 | ) | 1,107 | (1,107 | ) | — | |||||||||||||
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(*) | The balance represents the net amount under the standard terms and conditions of International Swap and Derivatives Association. |
62
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
28. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate Controlling Entity | SK Holdings Co., Ltd. | |
Joint ventures | Dogus Planet, Inc. and 3 others | |
Associates | SK hynix Inc. and 43 others | |
Others | The Ultimate Controlling Entity’s subsidiaries and associates, etc. |
As of September 30, 2019, the Group belongs to SK Group, a conglomerate as defined in theMonopoly Regulation and Fair Trade Act of the Republic of Korea. All of the other entities included in SK Group are considered related parties of the Group.
(2) | Compensation for the key management |
The Parent Company considers registered directors (3 executive and 5non-executive directors) who have substantial role and responsibility in planning, operations, and relevant controls of the business as key management. The compensation given to such key management for the three and nine-month periods ended September 30, 2019 and 2018 are as follows:
(In millions of won) | ||||||||||||||||
2019 | 2018 | |||||||||||||||
Three-month period ended September 30 | Nine-month period ended September 30 | Three-month period ended September 30 | Nine-month period ended September 30 | |||||||||||||
Salaries | ₩ | 545 | 5,420 | 779 | 3,995 | |||||||||||
Defined benefits plan expenses | 142 | 1,095 | 121 | 799 | ||||||||||||
Share option | 66 | 260 | 170 | 441 | ||||||||||||
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₩ | 753 | 6,775 | 1,070 | 5,235 | ||||||||||||
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Compensation for the key management includes salaries,non-monetary salaries and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.
63
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
28. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||
For the period ended September 30, 2019 | ||||||||||||||||||||||||||
Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment | ||||||||||||||||||||||||
Scope | Company | Three- month | Nine- month | Three- month | Nine- month | Three- month | Nine- month | |||||||||||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd.(*2) | ₩ | 8,652 | 25,455 | 112,775 | 503,033 | 18,217 | 28,925 | ||||||||||||||||||
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Associates | F&U Credit information Co., Ltd. | 581 | 1,795 | 15,296 | 41,388 | — | — | |||||||||||||||||||
SK hynix Inc.(*3) | 14,292 | 255,440 | 40 | 409 | — | — | ||||||||||||||||||||
KEB HanaCard Co., Ltd. | 99 | 693 | 634 | 1,700 | — | — | ||||||||||||||||||||
SK Wyverns Co., Ltd. | 317 | 952 | 3,135 | 18,388 | — | — | ||||||||||||||||||||
Others(*4) | 1,525 | 9,855 | 3,809 | 10,069 | — | 37 | ||||||||||||||||||||
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16,814 | 268,735 | 22,914 | 71,954 | — | 37 | |||||||||||||||||||||
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Other | SK Engineering & Construction Co., Ltd. | 2,223 | 7,286 | 342 | 820 | 2,400 | 7,400 | |||||||||||||||||||
SK Innovation Co., Ltd. | 9,664 | 21,073 | 961 | 1,354 | — | — | ||||||||||||||||||||
SK Networks Co., Ltd.(*5) | 5,418 | 24,137 | 328,742 | 801,098 | — | 443 | ||||||||||||||||||||
SK Networks Service Co., Ltd. | 238 | 768 | 20,568 | 54,336 | 717 | 743 | ||||||||||||||||||||
SK Telesys Co., Ltd. | 117 | 353 | 2,234 | 6,791 | 11,859 | 27,272 | ||||||||||||||||||||
SK TNS Co., Ltd. | 62 | 179 | 11,939 | 23,841 | 127,966 | 290,302 | ||||||||||||||||||||
SK Energy Co., Ltd. | 2,437 | 10,626 | 70 | 421 | — | — | ||||||||||||||||||||
SK hynix Semiconductor (China) Ltd. | 14,431 | 59,876 | — | — | — | — | ||||||||||||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. | 3,786 | 10,181 | 31 | 100 | — | — | ||||||||||||||||||||
Others | 23,533 | 62,291 | 45,518 | 76,850 | 30,205 | 50,868 | ||||||||||||||||||||
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61,909 | 196,770 | 410,405 | 965,611 | 173,147 | 377,028 | |||||||||||||||||||||
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₩ | 87,375 | 490,960 | 546,094 | 1,540,598 | 191,364 | 405,990 | ||||||||||||||||||||
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(*1) | Operating expense and others include lease payments by the Group. |
(*2) | Operating expense and others include ₩216,241 million of dividends paid by the Parent Company. |
(*3) | Operating revenue and others include ₩219,151 million of dividends received from SK hynix Inc. which was deducted from the investment in associates. |
(*4) | Operating revenue and others include ₩8,350 million of dividends received from Korea IT Fund and UniSK which was deducted from the investment in associates. |
(*5) | Operating expenses and others include costs for handset purchases amounting to ₩779,858 million. |
64
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
28. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and nine-month periods ended September 30, 2019 and 2018 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||||
For the period ended September 30, 2018 | ||||||||||||||||||||||||||
Operating revenue and others | Operating expense and others | Acquisition of property and equipment | ||||||||||||||||||||||||
Scope | Company | Three-month | Nine-month | Three-month | Nine-month | Three-month | Nine-month | |||||||||||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd.(*1) | ₩ | 5,019 | 16,313 | 119,113 | 494,320 | 25,835 | 45,079 | ||||||||||||||||||
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Associates | F&U Credit information Co., Ltd. | 711 | 2,061 | 13,357 | 40,963 | — | — | |||||||||||||||||||
HappyNarae Co., Ltd. | 176 | 1,942 | 5,465 | 12,926 | 17,333 | 41,495 | ||||||||||||||||||||
SK hynix Inc.(*2) | 7,475 | 166,878 | 14 | 220 | — | — | ||||||||||||||||||||
KEB HanaCard Co., Ltd. | 3,151 | 12,089 | 3,818 | 11,655 | — | — | ||||||||||||||||||||
Others(*3) | 2,354 | 5,282 | 3,964 | 22,441 | 355 | 898 | ||||||||||||||||||||
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13,867 | 188,252 | 26,618 | 88,205 | 17,688 | 42,393 | |||||||||||||||||||||
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Other | SK Engineering & Construction Co., Ltd. | 895 | 3,662 | 220 | 792 | — | — | |||||||||||||||||||
SK Innovation Co., Ltd. | 2,326 | 6,739 | 181 | 700 | — | — | ||||||||||||||||||||
SK Networks Co., Ltd.(*4) | 7,020 | 17,236 | 299,440 | 852,769 | 376 | 460 | ||||||||||||||||||||
SK Networks Service Co., Ltd. | 194 | 576 | 21,934 | 67,780 | 726 | 2,759 | ||||||||||||||||||||
SK Telesys Co., Ltd. | 74 | 268 | 2,533 | 8,460 | 29,115 | 68,024 | ||||||||||||||||||||
SK TNS Co., Ltd. | 35 | 107 | 12,339 | 21,190 | 133,089 | 256,331 | ||||||||||||||||||||
SK Energy Co., Ltd. | 2,694 | 5,963 | 241 | 646 | — | — | ||||||||||||||||||||
SKC Infra Services Co., Ltd. | 10 | 51 | 14,322 | 36,184 | 3,789 | 16,447 | ||||||||||||||||||||
SK infosec Co., Ltd. | 131 | 634 | 12,446 | 39,671 | 6,175 | 8,725 | ||||||||||||||||||||
SK trading international Co., Ltd. | 11,269 | 11,308 | — | — | — | — | ||||||||||||||||||||
Others | 8,444 | 43,306 | 6,021 | 14,414 | — | — | ||||||||||||||||||||
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33,092 | 89,850 | 369,677 | 1,042,606 | 173,270 | 352,746 | |||||||||||||||||||||
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₩ | 51,978 | 294,415 | 515,408 | 1,625,131 | 216,793 | 440,218 | ||||||||||||||||||||
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(*1) | Operating expenses and others include ₩203,635 million of dividends paid by the Parent Company. |
(*2) | Operating revenue and others include ₩146,100 million of dividends received from the associates which was deducted from the investment in associates. |
(*3) | Operating revenue and others include ₩4,338 million of dividends declared by Korea IT Fund, KIF Stonebridge IT Investment Fund and UniSK which were deducted from the investment in associates. |
(*4) | Operating expenses and others include costs for handset purchases. |
65
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
28. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of September 30, 2019 and December 31, 2018 are as follows: |
(In millions of won) | ||||||||||||||
September 30, 2019 | ||||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd. | ₩ | — | 7,695 | 47,895 | |||||||||
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Associates | F&U Credit information Co., Ltd. | — | 5 | 4,654 | ||||||||||
SK hynix Inc. | — | 11,400 | 1 | |||||||||||
Wave City Development Co., Ltd. | — | 31,523 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*) | 22,147 | — | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 572 | 4,234 | |||||||||||
Others | 408 | 1,595 | 94 | |||||||||||
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22,555 | 45,095 | 8,983 | ||||||||||||
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Other | SK Engineering & Construction Co., Ltd. | — | 1,806 | 2 | ||||||||||
SK Innovation Co., Ltd. | — | 7,093 | 23,556 | |||||||||||
SK Networks Co., Ltd. | — | 2,904 | 138,792 | |||||||||||
SK Networks Services Co., Ltd. | — | 11 | 4,194 | |||||||||||
SK Telesys Co., Ltd. | — | 53 | 4,834 | |||||||||||
SK Energy Co., Ltd. | — | 2,015 | 860 | |||||||||||
SK hystec Co., Ltd. | — | 1,396 | 238 | |||||||||||
SK hynix Semiconductor (China) Ltd. | — | 9,537 | — | |||||||||||
Others | — | 17,628 | 50,925 | |||||||||||
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— | 42,443 | 223,401 | ||||||||||||
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95,233 | 280,279 | |||||||||||||
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(*) | As of September 30, 2019, the Parent Company recognized the entire balance of loans to Daehan Kanggun BcN Co., Ltd. as loss allowances. |
66
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
28. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of September 30, 2019 and December 31, 2018 are as follows, Continued: |
(In millions of won) | ||||||||||||||
December 31, 2018 | ||||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Holdings Co., Ltd. | ₩ | — | 5,987 | 139,260 | |||||||||
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Associates | F&U Credit information Co., Ltd. | — | 98 | 5,801 | ||||||||||
SK hynix Inc. | — | 14,766 | 89 | |||||||||||
Wave City Development Co., Ltd. | — | 37,263 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*) | 22,147 | — | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 541 | 11,311 | |||||||||||
Others | 407 | 130 | 1,764 | |||||||||||
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22,554 | 52,798 | 18,965 | ||||||||||||
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Other | SK Engineering & Construction Co., Ltd. | — | 1,561 | 760 | ||||||||||
SK Networks Co., Ltd. | — | 2,647 | 167,433 | |||||||||||
SK Networks Services Co., Ltd. | — | 54 | 8,946 | |||||||||||
SK Telesys Co., Ltd. | — | 154 | 39,188 | |||||||||||
SK TNS Co., Ltd. | — | — | 89,017 | |||||||||||
SK Innovation Co., Ltd. | — | 4,696 | 1,019 | |||||||||||
SK Energy Co., Ltd. | — | 5,511 | 887 | |||||||||||
SK Gas Co., Ltd. | — | 2,225 | 60 | |||||||||||
SK hystec Co., Ltd. | — | 2,661 | 75 | |||||||||||
Others | — | 8,958 | 8,066 | |||||||||||
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— | 28,467 | 315,451 | ||||||||||||
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87,252 | 473,676 | |||||||||||||
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(*) | As of December 31, 2018, the Parent Company recognized the entire balance of loans to Daehan Kanggun BcN Co., Ltd. as loss allowances. |
(5) | SK Infosec Co., Ltd. and SK Telink Co., Ltd., subsidiaries of the Parent Company, provided a blank note to SK Holdings Co., Ltd. with regard to performance guarantee. |
(6) | The details of additional investments and disposal of associates and joint ventures for the nine-month period ended September 30, 2019 as presented in note 10. |
67
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
29. | Commitments and Contingencies |
(1) | Collateral assets and commitments |
SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount of ₩4,013 million as of September 30, 2019.
In addition, Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company, has pledged its shares of ADT CAPS Co., Ltd., CAPSTEC Co., Ltd., and ADT SECURITY Co., Ltd. for the long-term borrowings with a face value of ₩1,900,000 million as of September 30, 2019.
(2) | Legal claims and litigations |
As of September 30, 2019 the Group is involved in various legal claims and litigation. Provision recognized in relation to these claims and litigation is immaterial. In connection with those legal claims and litigation for which no provision was recognized, management does not believe the Group has a present obligation, nor is it expected any of these claims or litigation will have a significant impact on the Group’s financial position or operating results in the event an outflow of resources is ultimately necessary.
Meanwhile, the pending litigation over the validity of partnership contract that the Group was involved as the defendant (Plaintiff: Nonghyup Bank) was settled by the agreement between the parties during the year ended December 31, 2018. As a result of the settlement, the credit card business partnership between the Group and Nonghyup Bank will be maintained until April 2021, and the Group is obligated to pay the commission fees based on the customers’ credit card usage until September 2021, the expiration date of the credit cards. The Group determined that the contract and the subsidiary agreements meet the definition of an onerous contract according toK-IFRS No.1037, for which the Group recognized provisions with the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. In this regard, ₩37,475 million and ₩30,099 million are recognized as current provisions andnon-current provisions, respectively as of September 30, 2019.
(3) | Accounts receivables from sale of handsets |
The sales agents of the Parent Company sell handsets to the Parent Company’s subscribers on an installment basis. The Parent Company entered into comprehensive agreements to purchase accounts receivables from handset sales with retail stores and authorized dealers and to transfer the accounts receivables from handset sales to special purpose companies which were established with the purpose of liquidating receivables, respectively.
The accounts receivables from sale of handsets amounting to ₩916,844 million as of September 30, 2019 which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.
(4) On April 26, 2019, the board of directors of SK Broadband Co., Ltd., a subsidiary of the Parent Company resolved to approve SK Broadband Co., Ltd.’s merger with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. in order to strengthen the competitiveness and enhance the synergy as a comprehensive media company. SK Broadband Co., Ltd. will merge Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. which are planned to be merged and dissolved by the date of merger expected to be on March 1, 2020. This transaction is conditional upon receipt of regulatory approval from relevant authorities and may be subject to change by the licensing process and related laws and regulations.
68
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
30. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||
For the nine-month period ended | ||||||||
September 30, 2019 | September 30, 2018 | |||||||
Interest income | ₩ | (46,912 | ) | (49,251 | ) | |||
Dividends | (9,924 | ) | (34,894 | ) | ||||
Gain on foreign currency translations | (9,928 | ) | (3,795 | ) | ||||
Gain on valuation of derivatives | (465 | ) | (1,423 | ) | ||||
Gain on settlement of derivatives | (389 | ) | — | |||||
Gain on sale of accounts receivable – other | (14,353 | ) | (17,341 | ) | ||||
Gain on investments in subsidiaries, associates and joint ventures, net | (479,876 | ) | (2,534,688 | ) | ||||
Gain on disposal of property and equipment and intangible assets | (11,769 | ) | (35,265 | ) | ||||
Gain relating to financial assets at FVTPL | (3,026 | ) | (68,586 | ) | ||||
Gain relating to financial liabilities at FVTPL | (56 | ) | — | |||||
Other income | (10,486 | ) | (280 | ) | ||||
Interest expense | 300,504 | 218,007 | ||||||
Loss on foreign currency translations | 8,051 | 3,043 | ||||||
Loss on sale of accounts receivable – other | 561 | 5,446 | ||||||
Income tax expense | 263,304 | 714,468 | ||||||
Expense related to defined benefit plan | 130,098 | 101,850 | ||||||
Share option | 732 | 567 | ||||||
Depreciation and amortization | 2,906,887 | 2,437,718 | ||||||
Bad debt for accounts receivable – trade | 21,253 | 27,344 | ||||||
Loss on disposal of property and equipment and intangible assets | 34,805 | 37,821 | ||||||
Loss on impairment of property and equipment and intangible assets | 1,337 | 1,077 | ||||||
Bad debt for accounts receivable – other | 3,360 | 5,483 | ||||||
Loss on settlement of derivatives | 317 | 12,221 | ||||||
Loss relating to financial assets at FVTPL | 182 | 8,376 | ||||||
Loss relating to financial liabilities at FVTPL | 43 | 1,143 | ||||||
Loss on impairment of investment assets | 1,670 | 3,175 | ||||||
Other expenses | 16,475 | 5,102 | ||||||
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837,318 | ||||||||
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69
Table of Contents
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the nine-month periods ended September 30, 2019 and 2018
30. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||
For the nine-month period ended | ||||||||
September 30, 2019 | September 30, 2018 | |||||||
Accounts receivable – trade | ₩ | (189,692 | ) | (459,345 | ) | |||
Accounts receivable – other | (54,422 | ) | 222,456 | |||||
Advance payments | (94,194 | ) | 11,117 | |||||
Prepaid expenses | (572,685 | ) | 19,570 | |||||
Value-Added Tax refundable | 9,121 | 5,624 | ||||||
Inventories | 77,571 | 16,165 | ||||||
Long-term accounts receivable – other | (254,742 | ) | (30,554 | ) | ||||
Contract assets | (49,733 | ) | 8,850 | |||||
Guarantee deposits | 3,827 | (3,373 | ) | |||||
Accounts payable – trade | (17,669 | ) | (87,811 | ) | ||||
Accounts payable – other | 285,990 | (51,411 | ) | |||||
Withholdings | (60,299 | ) | (75,567 | ) | ||||
Contract liabilities | 13,191 | (15,072 | ) | |||||
Deposits received | (277 | ) | 1,482 | |||||
Accrued expenses | 88,542 | (23,896 | ) | |||||
Value-Added Tax payable | 18,967 | 10,142 | ||||||
Provisions | (28,549 | ) | (4,360 | ) | ||||
Long-term provisions | (1,770 | ) | 3,149 | |||||
Plan assets | 14,865 | 8,348 | ||||||
Retirement benefit payment | (60,336 | ) | (32,739 | ) | ||||
Others | 6,126 | (6,607 | ) | |||||
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₩ | (866,168 | ) | (483,832 | ) | ||||
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(3) | Significantnon-cash transactions for the nine-month periods ended September 30, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||
For the nine-month period ended | ||||||||
September 30, 2019 | September 30, 2018 | |||||||
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets | ₩ | (38,862 | ) | (521,311 | ) | |||
Increase ofright-of-use assets upon adoption ofK-IFRS 1116 | 461,784 | — |
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