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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF JUNE 2022
COMMISSION FILE NUMBER: 333-04906
SK Telecom Co., Ltd.
(Translation of registrant’s name into English)
65, Eulji-ro, Jung-gu
Seoul 04539, Korea
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 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 a Form 6-K submission or other Commission filing on EDGAR.
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QUARTERLY BUSINESS REPORT
(From January 1, 2022 to March 31, 2022)
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. THE COMPANY HAS MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.
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I. COMPANY OVERVIEW
Omitted in quarterly reports in accordance with applicable Korean disclosure rules.
II. BUSINESS
1. Business Overview
Each company in the consolidated entity is a separate legal entity providing independent services and products. The Company’s 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 and (3) other businesses consisting of commercial retail data broadcasting channel business, among others.
Set forth below is a summary description of the business of each company within the Company’s consolidation scope 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
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PS&Marketing Co., Ltd. | Sale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels
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SK O&S Co., Ltd. | Maintenance of switching stations
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Service Ace Co., Ltd. | Management and operation of customer centers
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SK M&Service Co., Ltd. | Database and online information services
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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 services including VOD
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Home & Service Co., Ltd. | System maintenance of high-speed Internet, IPTV and fixed-line services
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SK Telink Co., Ltd. | International wireless direct-dial “00700” services, voice services using Internet protocol and MVNO business
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Other business | SK stoa Co., Ltd. | Operation of commercial retail data broadcasting channel services
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Atlas Investment | Investments
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SK Telecom Innovation Fund, L.P. | Investments |
[Wireless Business]
Wireless telecommunications companies provide services based on 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 3G, 4G and 5G markets on the basis of its technological leadership and network management technology. With the world’s first commercialization of 5G technology in 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.
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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. (“Service Ace”) and Service Top Co., Ltd., the Company operates customer service centers in Seoul and provides telemarketing services. Additionally, SK O&S Co., Ltd. (“SK O&S”), the Company’s subsidiary responsible for the operation of the Company’s networks, provides customers with quality network services and provides the Company with technological know-how in network operations.
The Company plans to maintain stable growth in the sales of its wireless business based on a solid expansion in the number of 5G subscribers, while continuously enhancing profitability by pursuing efficient investments in, and operation of, its wireless networks and the stabilization of market competition.
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 advanced smartphones which enable the provision of New ICT services for advanced multimedia contents, mobile commerce, mobility and other related services. In addition, the ultra-low latency and high capacity characteristics of 5G networks as well as the advancement of AI are expected to accelerate the introduction of new services and the growth of IoT-based B2B businesses.
B. Growth Potential
(Unit: in 1,000 persons) | ||||||||||||||
Classification | As of March 31, | As of December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||||
Number of subscribers | SK Telecom | 29,832 | 29,696 | 29,089 | ||||||||||
Others (KT, LG U+) | 32,083 | 31,869 | 31,341 | |||||||||||
MVNO | 10,995 | 10,355 | 9,111 | |||||||||||
Total | 72,910 | 71,920 | 69,541 |
* | Source: Wireless telecommunications service data from the MSIT as of March 31, 2022. |
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;
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(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 (excluding MVNO subscribers).
(Unit: in percentages) | ||||||||||||
Classification | As of March 31, | As of December 31, | ||||||||||
2022 | 2021 | 2020 | ||||||||||
Mobile communication services | 48.2 | 48.2 | 48.1 |
* | Source: Wireless telecommunications service data from the MSIT as of March 31, 2022. |
D. Competitive Strengths
The Company successfully completed the Spin-off of SK Square Co., Ltd. (“SK Square”) from SK Telecom (the “Spin-off”) in 2021 to maximize shareholder value and launched “SKT 2.0.” Concurrently, the Company reorganized its business to center around five major business segments and is seeking maximization of overall corporate value by establishing and executing strategies optimized for each business segment and pursuing growth in each segment. For the three months ended March 31, 2022, the Company recorded Won 4.28 trillion in operating revenue and Won 4.32 trillion in operating profit on a consolidated basis and Won 3.08 trillion in operating revenue and Won 0.36 trillion in operating profit for the period on a separate basis. The Company is continuing to improve sales growth and profit margin by leveraging its competitiveness in the 5G market and secured 10.88 million 5G subscribers as of March 31, 2022. The Company was also ranked as the top service provider in the MNO service sector in the National Customer Satisfaction Index (“NCSI”) in April 2022 and became the first across all industries in Korea to rank first for 25 consecutive years since the commencement of NCSI in 1998. The Company is actively striving to achieve tangible growth in new businesses in addition to maintaining its competitiveness in the fixed-line and wireless businesses.
SK Telink Co., Ltd. (“SK Telink”), a consolidated subsidiary of the Company, operates its MVNO service, “SK 7Mobile,” which is offered at reasonable rates and provides excellent quality. SK Telink is increasing its efforts to develop low-cost distribution channels and create niche markets through targeted marketing towards customers including foreign workers, middle-aged adults and students.
SK O&S, 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. In addition, Service Ace is developing its competence as a marketing company while providing top-quality customer service.
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]
For the three months ended March 31, 2022, SK Broadband Co., Ltd. (“SK Broadband”) recorded Won 1.03 trillion in revenue on a consolidated basis, which represented a 6.1% increase from Won 967.0 billion for the three months ended March 31, 2021. The sales growth was primarily attributable to continued expansion of the subscriber base, increase in sales of media platforms including home shopping and advertisements, business acquisition of SK Telink and growth of our B2B business.
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The Company’s business is divided into the media business segment, which provides IPTV and cable TV services, and the fixed-line business segment, which provides high-speed Internet, telecommunications and Internet data center services. For the three months ended March 31, 2022, the media business segment recorded Won 470.4 billion in revenue, which represented a 3.9% increase compared to the three months ended March 31, 2021. For the three months ended March 31, 2022, the fixed-line business segment recorded Won 555.6 billion in revenue, which represented an 8% increase compared to the three months ended March 31, 2021.
A. Industry Characteristics
The domestic telecommunication service industry displays the typical characteristics of a domestic industry given that its coverage area is limited to Korea. As a result, the size of the industry is greatly affected by the domestic economic factors including the domestic user population and the level of telecommunication service expenditures in light of the domestic income level. Domestic telecommunication companies may expand overseas through acquisitions or direct expansion, but the overseas telecommunication service industries are subject to inherently different industry characteristics from the domestic one, depending on the regulatory and demand characteristics of each country.
The broadcasting business involves the planning, programming or production of broadcasting programs and transmission to viewers through telecommunication facilities. The broadcasting market can be categorized into terrestrial broadcasting, fixed-line TV broadcasting, satellite broadcasting and programming-providing businesses, in each case pursuant to the Broadcasting Act, as well as Internet multimedia broadcasting business pursuant to the Internet Multimedia Broadcast Services Act. The Company engages in the fixed-line TV broadcasting business, which is defined as the business of managing and operating fixed-line TV broadcasting stations (including their facilities and employees for the purpose of providing multi-channel broadcasting) and providing broadcasts through transmission and line facilities. The Internet multimedia broadcasting refers to the broadcasting of programs through a combination of various contents including data, video, voice, sound and/or e-commerce, including real-time broadcasting, while guaranteeing a consistent service quality through a bidirectional Internet protocol using a broadband integrated information network.
As a result of the government’s direct and indirect control over the fixed-line telecommunications industry, ranging from service licensing to business activities, the industry’s overall growth potential and degree of competition are greatly affected by the government’s regulatory policies. The fixed-line telecommunications industry is also a technology-intensive industry that evolves rapidly and continuously through the development of communications technology and equipment, which requires proactive responses in meeting the needs of subscribers by developing new services and penetrating the market. Fixed-line telecommunications services have become universal and essential means of communication and act as the foundation for integration and convergence with various other services. The essential nature of such services provides stable demand, resulting in low sensitivity to economic conditions.
In addition, 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. While 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+, the intensity of competition is growing as digitalization of communication technologies and devices leads to the convergence of fixed-line and wireless services, as well as broadcasting and telecommunications, and technology for faster data communication services is developed.
In the high-speed Internet services market, the demand for faster and more reliable premium Giga Internet services is increasing due to the growth in usage of home mobile networks using Wi-Fi and an increased consumption of high-definition large media content.
With the mergers and acquisitions among IPTV service providers and multiple service operators, the paid broadcasting market has reorganized around IPTV operators, and companies are moving away from competition based on subscriber base expansion to competition based on media platform services. The transition to a contactless service society due to COVID-19 has led to increased consumption of paid content by viewers, accelerating competition through the ability to source unique contents. The Company expects new growth in the home platform domain by providing customized services using ICT convergence technologies such as AI and big data in addition to differentiated contents.
In the corporate business market, the Company is continuing its efforts to generate stable returns by securing growth drivers in new service areas such as cloud computing, while also strengthening its competitiveness in the traditional fixed line-based business through expansion of core infrastructure including Internet data centers, which have seen an increase in market demand recently.
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B. Growth Potential
(Unit: in persons) | ||||||||||||||
Classification | As of March 31, | As of December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||||
Fixed-line Subscribers | High-speed Internet | 23,117,451 | 22,944,268 | 22,330,182 | ||||||||||
Fixed-line telephone | 12,055,057 | 12,211,954 | 12,859,279 | |||||||||||
IPTV | 19,003,970 | 19,003,970 | 17,872,297 | |||||||||||
Cable TV | 13,044,615 | 13,044,615 | 13,305,796 |
* | Source: MSIT website. |
* | High-speed Internet and fixed-line telephone subscribers represent the number of subscribers as of March 31, 2022, while IPTV and cable TV subscribers represent the average number of subscribers in the first half of 2021. |
C. Cyclical Nature and Seasonality
High-speed Internet and fixed-line telephone services operate in mature markets that are comparatively less sensitive to cyclical economic changes as the services provided by different operators have become less differentiated. TV services have become necessities that provide broadcasting, and the market, which is subject to a subscriber-based business model, has little sensitivity to cyclical economic changes. 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 March 31, | As of December 31, | ||||||||||
2022 | 2021 | 2020 | ||||||||||
High-speed Internet (including resales) | 28.6 | 28.7 | 29.0 | |||||||||
Fixed-line telephone (including Voice over Internet Protocol (“VoIP”) | 17.6 | 17.5 | 16.8 | |||||||||
IPTV | 30.5 | 30.5 | 30.3 | |||||||||
Cable TV | 22.2 | 22.2 | 22.5 |
* | 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. |
* | Market shares of High-speed Internet and Fixed-line telephone represent the market shares as of March 31, 2022 and market shares of IPTV and Cable TV represent the average market shares in the first half of 2021. |
SK Broadband is engaged in a number of business areas including high-speed Internet, home telephone, corporate business, IPTV and cable TV pursuant to the relevant communications regulations such as the Telecommunications Business Act, the Internet Multimedia Broadcast Services Act and the Broadcasting Act. 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+.
[Other Businesses]
The commercial retail data broadcasting channel business offers an interactive service that integrates television home shopping and data shopping services. Such service allows television viewers to use video-on-demand (“VOD”) services to purchase products sold on television home shopping channels, which were previously only available for purchase in real-time when such relevant programming was being broadcast.
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In order to secure core competencies at an early stage and achieve differentiation, the Company has been actively searching for high-efficiency television channels while increasing the competitiveness of its content production capacity by building the Company’s own media center and adopting a media wall with the objective of transforming it into an eco-friendly digital studio. In addition to enhancing the convenience of shopping experience by offering various media content on its mobile live platform, the Company was the first in the industry to launch a cloud-based television application service, “Stoa ON,” which provides personalized digital television shopping services. Furthermore, the Company has been establishing itself as a leading shopping channel service provider by securing a diverse product portfolio and engaging in product development in areas ranging from fashion to health food. Within three years following the spin-off of SK stoa Co., Ltd. (“SK Stoa”) into a separate entity, its commercial retail data broadcasting channel business has attained a leading position in the television commerce (“T-commerce”) market. In 2021, sales of the Company’s commercial retail data broadcasting channel business amounted to Won 316.2 billion.
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., Service Ace Co., Ltd. SK O&S Co., Ltd. | Mobile communication service, wireless data service, ICT service | T, 5GX, T Plan and others | 3,216,145 | 75.2 | % | ||||||||
Fixed-line | SK Broadband Co., Ltd., SK Telink Co., Ltd. Home & Service Co., Ltd. | Fixed-line phone, high-speed Internet, data and network lease service | B tv, 00700 international call, 7mobile and others | 947,557 | 22.2 | % | ||||||||
Other | SK stoa Co., Ltd. | Commercial retail data broadcasting channel services and others | Stoa ON | 113,506 | 2.7 | % | ||||||||
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Total | 4,277,208 | 100 | % | |||||||||||
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3. Price Trends for Major Products
[Wireless Business]
As of March 31, 2022, 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. Among the 4G-based plans, the “T-Plan Safe 4G” provides 4 GB of data and unlimited voice calls at Won 50,000 per month (including value-added tax). Among the 5G-based plans, the “Slim Plan” provides 10 GB of data and unlimited voice calls at Won 55,000 per month (including value-added tax). The Company provides a variety of other subscription plans catered to subscriber demand.
[Fixed-line Business]
In January 2022, SK Broadband launched “PlayZ,” an all-in-one Playbox that allows users to access various over-the-top (“OTT”) streaming apps and entertainment contents in both the fixed-line and wireless environments, similar to smart TVs. The product features an integrated search of OTT contents and allows users to enjoy other forms of entertainment, such as games and karaoke, on a larger screen. “PlayZ” is available for purchase for single payment of Won 79,000 or at Won 2,200 per month for 36-month installments.
In February 2022, SK Broadband launched a “rechargeable smart remote control” that can control smart TVs and “B tv” set-up boxes in an integrated manner. The product is available for rent at Won 440 per month based on a 60-month subscription period.
In addition, SK Broadband expanded its lineup of tablet products by launching “B tv air2 Samsung,” which allows users to access IPTV services anywhere in the house, as a follow-on product of “B tv air Lenovo,” which was launched in June 2021. The product is available for purchase for single payment of Won 316,800 or at Won 8,800 per month for 36-month installments.
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SK Broadband also provides a variety of other subscription plans.
4. Investment Status
[Wireless Business]
A. Investment in Progress
(Unit: in billions of Won) | ||||||||||||||||||||
Business | Classification | Investment period | Subject of investment | Investment effect | Expected investment amount | Amount already invested | Future investment | |||||||||||||
Network/Common | Upgrade/ New installation | Year ended December 31, 2022 | Network, systems and others | | Capacity increase and quality improvement; systems improvement | | To be determined | 197 | — | |||||||||||
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Total | To be determined | 197 | — | |||||||||||||||||
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B. Future Investment Plan
(Unit: in billions of Won) | ||||||||||||
Business | Expected investment amount | Expected investment for each year | Investment effect | |||||||||
Asset type | Amount | 2022 | 2023 | 2024 | ||||||||
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 |
* | The Company indicated during the earnings conference call held on February 9, 2022 that the level of capital expenditures for 2022 is expected to be similar to that of 2021. |
[Fixed-line Business]
A. Investment in Progress and Future Investment Plan
(Unit: in billions of Won) | ||||||||||
Purpose of investment | Subject of investment | Investment period | Amount already invested | Future investment | Investment effect | |||||
Coverage expansion, upgrade of media platform | Network, systems, Internet data center and others | Three months ended March 31, 2022 | 82.3 | To be determined | Quality and system improvement |
5. Revenues
(Unit: in millions of Won) | ||||||||||||||||||
Business | Sales | Item | For the three months ended March 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | |||||||||||||
Wireless | Services | Mobile communication, wireless data, information communication | Export | 29,633 | 143,149 | 152,518 | ||||||||||||
Domestic | 3,186,512 | 12,575,324 | 12,195,445 | |||||||||||||||
Subtotal | 3,216,145 | 12,718,473 | 12,347,963 | |||||||||||||||
Fixed-line | Services | Fixed-line, high-speed Internet, data, lease line service | Export | 43,170 | 139,846 | 127,618 | ||||||||||||
Domestic | 904,387 | 3,537,860 | 3,304,600 | |||||||||||||||
Subtotal | 947,557 | 3,677,706 | 3,432,218 | |||||||||||||||
Other | Services | Commercial retail data broadcasting channel services | Export | — | — | — | ||||||||||||
Domestic | 113,506 | 352,406 | 307,566 | |||||||||||||||
Subtotal | 113,506 | 352,406 | 307,566 | |||||||||||||||
Export | 72,803 | 251,502 | 280,136 | |||||||||||||||
Total | Domestic | 4,204,405 | 16,497,083 | 15,807,611 | ||||||||||||||
Total | 4,277,208 | 16,748,585 | 16,087,747 |
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(Unit: in millions of Won) | ||||||||||||||||||||||||
For the three months ended March 31, 2022 | Wireless | Fixed-line | Other | Sub total | Internal transaction | After consolidation | ||||||||||||||||||
Total sales | 3,588,021 | 1,209,798 | 120,332 | 4,918,151 | (640,943 | ) | 4,277,208 | |||||||||||||||||
Internal sales | 371,876 | 262,241 | 6,826 | 640,943 | (640,943 | ) | — | |||||||||||||||||
External sales | 3,216,145 | 947,557 | 113,506 | 4,277,208 | — | 4,277,208 | ||||||||||||||||||
Depreciation and amortization | 689,065 | 248,270 | 3,846 | 941,181 | (30,297 | ) | 910,884 | |||||||||||||||||
Operating profit (loss) | 360,669 | 82,169 | 3,494 | 446,332 | (13,939 | ) | 432,393 | |||||||||||||||||
Finance profit (loss) |
| (68,774 | ) | |||||||||||||||||||||
Gain from investments in associates and joint ventures |
| (38,445 | ) | |||||||||||||||||||||
Other non-operating profit (loss) |
| 1,834 | ||||||||||||||||||||||
Profit before income tax |
| 327,008 |
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 March 31, 2022 are as follows:
[SK Telecom]
(Unit: in millions of Won and thousands of USD)
Borrowing date | Hedged item | Hedged risk | Contract type | Financial | Duration of contract | |||||
July 20, 2007 | Fixed rate foreign currency denominated bonds | Foreign currency risk | Cross currency swap | Morgan Stanley and four other banks | July 20, 2007 – July 20, 2027 | |||||
Dec. 16, 2013 | Fixed rate foreign currency denominated borrowings | Foreign currency risk | Cross currency swap | Deutsche Bank | Dec. 16, 2013 – Apr. 29, 2022 | |||||
Dec. 21, 2017 | Floating rate Korean Won denominated borrowings | Interest rate risk | Interest rate swap | The Korea Development Bank | Dec. 21, 2017 – Dec. 21, 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 | Fixed rate foreign currency denominated bonds | Foreign currency risk | Cross currency swap | Citibank | Aug. 13, 2018 – Aug. 13, 2023 | |||||
Dec. 19, 2018 | Floating rate Korean Won denominated borrowings | Interest rate risk | Interest rate swap | Credit Agricole CIB | Mar. 19, 2019 – Dec. 14, 2023 | |||||
Mar. 4, 2020 | Floating rate foreign currency denominated bonds | Foreign currency and interest rate risks | Cross currency interest rate swap | Citibank | Mar. 4, 2020 – June 4, 2025 |
[SK Broadband]
Borrowing | Hedged item | Hedged risk | Contract type | Financial | Duration of contract | |||||
Dec. 21, 2017 | Floating rate Korean Won denominated borrowings | Interest rate risk | Interest rate swap | The Korea Development Bank | Dec. 5, 2017 – Dec. 21, 2022 | |||||
Aug. 13, 2018 | Non-guaranteed foreign currency denominated bonds (face value of USD 300,000) | Foreign currency risk | Cross currency swap | Citibank Korea | Aug. 13, 2018 – Aug. 13, 2023 | |||||
Dec. 19, 2018 | Floating rate Korean Won denominated borrowings | Interest rate risk | Interest rate swap | Credit Agricole CIB | Mar. 19, 2019 – Dec. 14, 2023 |
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7. Major Contracts
None.
8. R&D Investments
Set forth below are the Company’s R&D expenditures.
(Unit: in millions of Won except percentages) | ||||||||||||||||||
Category | For the three months ended March 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | Remarks | ||||||||||||||
Raw material | 3 | 48 | 54 | — | ||||||||||||||
Labor | 20,929 | 122,445 | 122,906 | — | ||||||||||||||
Depreciation | 35,458 | 147,249 | 169,872 | — | ||||||||||||||
Commissioned service | 8,788 | 55,917 | 35,939 | — | ||||||||||||||
Others | 15,031 | 48,048 | 35,209 | — | ||||||||||||||
Total R&D costs | 80,209 | 373,707 | 363,980 | — | ||||||||||||||
Government Subsidies | — | — | — | — | ||||||||||||||
Accounting | Sales and administrative expenses | 78,081 | 347,711 | 353,198 | — | |||||||||||||
Development expenses (Intangible assets) | 2,128 | 25,996 | 10,782 | — | ||||||||||||||
R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100) | 1.88 | % | 2.23 | % | 2.26 | % | — |
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 March 31, 2022, the Company held 3,352 Korean-registered patents and 1,376 foreign-registered patents. The Company holds 734 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 March 31, 2022, SK Broadband held 288 Korean-registered patents and 142 foreign-registered patents (including those held jointly with other companies). It also holds 293 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.
10
Table of Contents
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. Nevertheless, the Company is committed to fulfilling its social obligations with a sense of responsibility for its impact on the society and the environment on a company-wide basis. Under the vision of “realizing a sustainable future based on ICT,” the Company is making efforts to (1) preemptively respond to climate change, (2) improve its environmental management system and (3) create an eco-friendly green culture. To this end, in December 2020, the Company was one of the first companies in Korea to join the RE100 (Renewable Energy 100%) initiative, which aims to source 100% of its energy needs from renewable energy sources by 2050. In addition, the Company leads in energy savings and environmental protections based on ICT technology, and recently became the first company in the telecommunications industry to obtain carbon emission rights by reducing greenhouse gas through integration of telecommunications equipment and technology upgrades.
[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 March 31, 2022, December 31, 2021 and December 31, 2020 and for the three months ended March 31, 2022 and 2021 and the years ended December 31, 2021 and 2020. The Company’s consolidated financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021, which are prepared in accordance with K-IFRS, are attached hereto.
(Unit: in millions of Won except number of companies) | ||||||||||||
As of March 31, 2022 | As of December 31, 2021 | As of December 31, 2020 | ||||||||||
Assets | ||||||||||||
Current Assets | 6,544,841 | 6,352,665 | 8,775,086 | |||||||||
• Cash and Cash Equivalents | 894,661 | 872,731 | 1,369,653 | |||||||||
• Accounts Receivable – Trade, net | 1,981,245 | 1,913,511 | 2,188,893 | |||||||||
• Accounts Receivable – Other, net | 621,062 | 548,362 | 979,044 | |||||||||
• Others | 3,047,873 | 3,018,061 | 4,237,496 | |||||||||
Non-Current Assets | 24,029,827 | 24,558,612 | 39,131,871 | |||||||||
• Long-Term Investment Securities | 1,636,311 | 1,715,078 | 1,648,837 | |||||||||
• Investments in Associates and Joint Ventures | 2,218,636 | 2,197,351 | 14,354,113 | |||||||||
• Property and Equipment, net | 12,571,404 | 12,871,259 | 13,377,077 | |||||||||
• Goodwill | 2,075,009 | 3,869,769 | 4,436,194 | |||||||||
• Intangible Assets, net | 3,683,997 | 2,072,493 | 3,357,524 | |||||||||
• Others | 1,844,470 | 1,832,662 | 1,958,126 | |||||||||
|
|
|
|
|
| |||||||
Total Assets | 30,574,668 | 30,911,277 | 47,906,957 | |||||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Current Liabilities | 6,935,288 | 6,960,435 | 8,177,967 | |||||||||
Non-Current Liabilities | 11,369,913 | 11,615,704 | 15,332,747 | |||||||||
Total Liabilities | 18,305,201 | 18,576,139 | 23,510,714 | |||||||||
Equity | ||||||||||||
Equity Attributable to Owners of the Parent Company | 11,505,561 | 11,579,346 | 23,743,894 | |||||||||
Share Capital | 30,493 | 30,493 | 44,639 | |||||||||
Capital Surplus (Deficit) and Other Capital Adjustments | (11,560,041 | ) | (11,623,726 | ) | 677,203 | |||||||
Retained Earnings | 22,297,108 | 22,437,341 | 22,981,913 | |||||||||
Reserves | 738,001 | 735,238 | 40,139 | |||||||||
Non-controlling Interests | 763,906 | 755,792 | 652,349 | |||||||||
|
|
|
|
|
| |||||||
Total Equity | 12,269,467 | 12,335,138 | 24,396,243 | |||||||||
|
|
|
|
|
| |||||||
Total Liabilities and Equity | 30,574,668 | 30,911,277 | 47,906,957 | |||||||||
|
|
|
|
|
| |||||||
Total Number of Consolidated Subsidiaries | 26 | 23 | 49 | |||||||||
|
|
|
|
|
|
(Unit: in millions of Won except per share data)
For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | |||||||||||||
Operating Revenue | 4,277,208 | 4,113,097 | 16,748,585 | 16,087,747 | ||||||||||||
Operating Profit | 432,393 | 374,216 | 1,387,162 | 1,248,578 | ||||||||||||
Profit Before Income Tax | 327,008 | 486,550 | 1,718,191 | 905,218 | ||||||||||||
Profit for the Period | 220,345 | 571,975 | 2,418,989 | 1,500,538 | ||||||||||||
Profit for the Period Attributable to Owners of the Parent Company | 211,253 | 558,265 | 2,407,523 | 1,504,352 | ||||||||||||
Profit for the Period Attributable to Non-controlling Interests | 9,092 | 13,710 | 11,466 | (3,814 | ) | |||||||||||
Basic Earnings Per Share (Won) | 953 | 1,559 | 7,191 | 4,093 | ||||||||||||
Diluted Earnings Per Share (Won) | 952 | 1,558 | 7,187 | 4,092 |
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B. Summary Financial Information (Separate)
Below is the summary separate financial information of the Company as of March 31, 2022, December 31, 2021 and December 31, 2020 and for the three months ended March 31, 2022 and 2021 and the years ended December 31, 2021 and 2020. The Company’s unaudited separate financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021 and for the years ended December 31, 2021 and 2020, which are prepared in accordance with K-IFRS, are attached hereto.
(Unit: in millions of Won) | ||||||||||||
As of March 31, 2022 | As of December 31, 2021 | As of December 31, 2020 | ||||||||||
Assets | ||||||||||||
Current Assets | 4,767,302 | 4,681,493 | 5,047,115 | |||||||||
• Cash and Cash Equivalents | 77,923 | 158,823 | 329,208 | |||||||||
• Accounts Receivable – Trade, net | 1,515,770 | 1,514,260 | 1,503,552 | |||||||||
• Accounts Receivable – Other, net | 598,897 | 520,956 | 434,713 | |||||||||
• Others | 2,574,712 | 2,487,454 | 2,779,642 | |||||||||
Non-Current Assets | 21,323,479 | 21,707,572 | 26,939,336 | |||||||||
• Long-Term Investment Securities | 1,405,103 | 1,476,361 | 983,688 | |||||||||
• Investments in Subsidiaries and Associates | 4,910,050 | 4,841,139 | 11,357,504 | |||||||||
• Property and Equipment, net | 9,093,711 | 9,318,408 | 9,157,548 | |||||||||
• Goodwill | 1,306,236 | 1,306,236 | 1,306,236 | |||||||||
• Intangible Assets, net | 3,027,801 | 3,203,330 | 2,665,083 | |||||||||
• Others | 1,580,578 | 1,562,098 | 1,469,277 | |||||||||
|
|
|
|
|
| |||||||
Total Assets | 26,090,781 | 26,389,065 | 31,986,451 | |||||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Current Liabilities | 5,570,836 | 5,426,477 | 5,076,404 | |||||||||
Non-Current Liabilities | 9,738,615 | 10,099,732 | 9,560,189 | |||||||||
Total Liabilities | 15,309,451 | 15,526,209 | 14,636,593 | |||||||||
Equity | ||||||||||||
Share Capital | 30,493 | 30,493 | 44,639 | |||||||||
Capital Surplus and Other Capital Adjustments | (4,499,135 | ) | (4,576,271 | ) | 289,134 | |||||||
Retained Earnings | 14,672,285 | 14,770,618 | 16,684,640 | |||||||||
Reserves | 577,687 | 638,016 | 331,445 | |||||||||
|
|
|
|
|
| |||||||
Total Equity | 10,781,330 | 10,862,856 | 17,349,858 | |||||||||
|
|
|
|
|
| |||||||
Total Liabilities and Equity | 26,090,781 | 26,389,065 | 31,986,451 | |||||||||
|
|
|
|
|
|
(Unit: in millions of Won except per share data) | ||||||||||||||||
For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | |||||||||||||
Operating Revenue | 3,077,393 | 2,980,718 | 12,102,830 | 11,746,630 | ||||||||||||
Operating Profit | 356,941 | 307,302 | 1,144,323 | 1,023,067 | ||||||||||||
Profit Before Income Tax | 338,627 | 580,865 | 1,369,347 | 941,455 | ||||||||||||
Profit for the Period | 252,018 | 466,013 | 1,073,823 | 758,792 | ||||||||||||
Basic Earnings Per Share (Won) | 1,140 | 1,299 | 3,183 | 2,044 | ||||||||||||
Diluted Earnings Per Share (Won) | 1,139 | 1,299 | 3,181 | 2,044 |
13
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2. Dividends and Others
Omitted in quarterly reports in accordance with applicable Korean disclosure rules.
3. Use of Direct Financing
A. Use of Proceeds from Public Offerings
[SK Telecom]
(As of March 31, 2022) | (Unit: in millions of Won) |
Category | Bond Series | Payment Date | Planned Use of Proceeds | Actual Use of Proceeds | Reasons for Difference | |||||||||||||||||
Use | Amount | Use | Amount | |||||||||||||||||||
Corporate bond | 78th | January 14, 2020 | Repayment of debt | 60,000 | Repayment of debt | 60,000 | — | |||||||||||||||
Corporate bond | 78th | January 14, 2020 | Working capital | 360,000 | Working capital | 360,000 | — | |||||||||||||||
Corporate bond | 79th | October 19, 2020 | Repayment of debt | 290,000 | Repayment of debt | 290,000 | — | |||||||||||||||
Corporate bond | 80th | January 15, 2021 | Repayment of debt | 310,000 | Repayment of debt | 310,000 | — | |||||||||||||||
Corporate bond | 81st | October 28, 2021 | Repayment of debt | 200,000 | Repayment of debt | 200,000 | — |
[SK Broadband]
(As of March 31, 2022) | (Unit: in millions of Won) |
Category | Bond Series | Payment Date | Planned Use of Proceeds | Actual Use of Proceeds | Reasons for Difference | |||||||||||||||
Use | Amount | Use | Amount | |||||||||||||||||
Corporate bond | Series 49-1 | June 11, 2020 | Repayment of debt | 100,000 | Repayment of debt | 100,000 | — | |||||||||||||
Corporate bond | Series 49-2 | June 11, 2020 | Repayment of debt | 59,200 | Repayment of debt | 59,200 | — | |||||||||||||
Corporate bond | Series 49-2 | June 11, 2020 | Working capital | 40,800 | Working capital | 40,800 | — | |||||||||||||
Corporate bond | Series 50 | September 25, 2020 | Repayment of debt | 160,000 | Repayment of debt | 160,000 | — | |||||||||||||
Corporate bond | Series 51 | July 13, 2021 | Repayment of debt | 100,000 | Repayment of debt | 100,000 | — | |||||||||||||
Corporate bond | Series 52-1 | January 25, 2022 | Repayment of debt | 100,000 | Repayment of debt | 100,000 | — | |||||||||||||
Corporate bond | Series 52-2 | January 25, 2022 | Repayment of debt | 50,000 | Repayment of debt | 50,000 | — |
* | Series 52-2 issued as of January 25, 2022 is an ESG bond (green bond). Series 52-2 was issued for the purpose of repayment of funds raised to be invested in the conversion of hybrid fiber-coaxial (“HFC”) network to fiber-to-the-home (“FTTH”) network, which has a positive impact on the environment, and the proceeds from the bond offering were used for the intended purpose. See the ESG bond report published in the socially responsible investment bond segment of the Korea Exchange for more information on the use of proceeds from this ESG bond offering. |
14
Table of Contents
B. | Use of Proceeds from Private Offerings |
[SK Telecom]
None.
[SK Broadband]
None.
C. | Operation of Unused Proceeds |
[SK Telecom]
None.
[SK Broadband]
None.
4. Other Matters Related to Financial Information
A. | Restatement of the Financial Statements |
Pursuant to the resolution of the general meeting of shareholders on October 12, 2021, the Company conducted the Spin-off effective as of November 1, 2021. Profit and loss of the spun-off divisions were separately presented as income from discontinued operations, and the consolidated statement of profit and loss for the three months ended March 31, 2021 was restated as such.
B. | Loss Allowance |
(1) | Loss Allowance of Trade and Other Receivables |
(Unit: in millions of Won) | ||||||||||||
For the three months ended March 31, 2022 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,240,786 | 249,273 | 11 | % | ||||||||
Loans | 142,466 | 45,204 | 32 | % | ||||||||
Accounts receivable – other | 940,726 | 47,056 | 5 | % | ||||||||
Accrued income | 665 | — | 0 | % | ||||||||
Guarantee deposits | 283,194 | 300 | 0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 3,607,837 | 341,833 | 9 | % | ||||||||
|
|
|
|
|
|
15
Table of Contents
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2021 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,160,498 | 238,881 | 11 | % | ||||||||
Loans | 138,181 | 45,385 | 33 | % | ||||||||
Accounts receivable – other | 870,225 | 46,625 | 5 | % | ||||||||
Accrued income | 762 | — | 0 | % | ||||||||
Guarantee deposits | 278,759 | 0 | 0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 3,448,425 | 330,891 | 10 | % | ||||||||
|
|
|
|
|
|
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2020 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade | 2,478,851 | 264,498 | 11 | % | ||||||||
Loans | 182,721 | 45,024 | 25 | % | ||||||||
Accounts receivable – other | 1,366,922 | 55,075 | 4 | % | ||||||||
Accrued income | 3,418 | 166 | 5 | % | ||||||||
Guarantee deposits | 285,507 | 300 | 0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 4,317,419 | 365,063 | 8 | % | ||||||||
|
|
|
|
|
|
(2) Movements in Loss Allowance of Trade and Other Receivables
(Unit: in millions of Won) | ||||||||||||
For the three months ended March 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | ||||||||||
Beginning balance | 330,891 | 365,063 | 346,399 | |||||||||
Effect of change in accounting policy | — | — | — | |||||||||
Increase of loss allowance | 9,300 | 37,547 | 59,184 | |||||||||
Reversal of loss allowance | — | — | — | |||||||||
Write-offs | 1,247 | (57,215 | ) | (57,575 | ) | |||||||
Other | 395 | (14,504 | ) | 17,055 | ||||||||
Ending balance | 341,833 | 330,891 | 365,063 |
(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). 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.
(4) Aging of Accounts Receivable
(Unit: in millions of Won) | ||||||||||||||||||||
As of March 31, 2022 | ||||||||||||||||||||
Six months or less | From six months to one year | From one year to three years | More than three years | Total | ||||||||||||||||
Accounts receivable – general | 2,008,824 | 47,607 | 139,047 | 45,308 | 2,240,786 | |||||||||||||||
Percentage | 89.6 | % | 2.1 | % | 6.2 | % | 2.0 | % | 100.0 | % |
16
Table of Contents
C. Inventories
(1) Detailed Categories of Inventories
(Unit: in millions of Won) | ||||||||||||
Account Category | For the three months ended March 31, 2022 | For the year ended December 31, 2021 | For the year ended December 31, 2020 | |||||||||
Merchandise | 206,272 | 201,126 | 162,196 | |||||||||
Goods in transit | — | — | — | |||||||||
Other inventories | 17,137 | 3,511 | 9,247 | |||||||||
|
|
|
|
|
| |||||||
Total | 223,409 | 204,637 | 171,443 | |||||||||
|
|
|
|
|
| |||||||
Percentage of inventories to total assets [Inventories / Total assets] | 0.73 | % | 0.66 | % | 0.36 | % | ||||||
Inventory turnover [Cost of sales / { ( Beginning balance of inventories + Ending balance of inventories ) / 2}] | 5.75 | 6.20 | 7.60 |
(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 external auditors at the end of each year.
D. Fair Value Measurement
See notes 2 and 30 of the notes to the Company’s consolidated financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021 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 – Series 62-2 | Aug. 28, 2012 | Aug. 28, 2022 | 140,000 | Aug. 22, 2012 | Meritz Securities Co., Ltd. | |||||
Unsecured Bond – Series 62-3 | 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 | Not applicable | ||
Compliance Status | Not applicable | |||
Submission of Compliance Certificate | Compliance Status | Submitted on March 23, 2022 |
17
Table of Contents
Name | Issue Date | Maturity Date | Principal Amount | Date of Fiscal Agency | Fiscal Agent | |||||
Unsecured Bond – Series 63-1 | Apr. 23, 2013 | Apr. 23, 2023 | 230,000 | Apr. 17, 2013 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 63-2 | Apr. 23, 2013 | Apr. 23, 2033 | 130,000 | Apr. 17, 2013 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 64-2 | May 14, 2014 | May 14, 2024 | 150,000 | April 29, 2014 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 65-3 | Oct. 28, 2014 | Oct. 28, 2024 | 190,000 | Oct. 16, 2014 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 66-2 | Feb. 26, 2015 | Feb. 26, 2025 | 150,000 | Feb. 11, 2015 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 66-3 | Feb. 26, 2015 | Feb. 26, 2030 | 50,000 | Feb. 11, 2015 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 67-2 | July 17, 2015 | July 17, 2025 | 70,000 | July 9, 2015 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 67-3 | July 17, 2015 | July 17, 2030 | 90,000 | July 9, 2015 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 68-2 | Nov. 30, 2015 | Nov. 30, 2025 | 100,000 | Nov. 18, 2015 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 68-3 | Nov. 30, 2015 | Nov. 30, 2035 | 70,000 | Nov. 18, 2015 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 69-3 | Mar. 4, 2016 | Mar. 4, 2026 | 90,000 | Feb. 22, 2016 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 69-4 | Mar. 4, 2016 | Mar. 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 | Not applicable | ||
Compliance Status | Not applicable | |||
Submission of Compliance Certificate | Compliance Status | Submitted on March 23, 2022 |
Name | Issue Date | Maturity Date | Principal Amount | Date of Fiscal Agency | Fiscal Agent | |||||
Unsecured Bond – Series 70-3 | June 3, 2016 | June 3, 2026 | 120,000 | May 24, 2016 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 70-4 | June 3, 2016 | June 3, 2031 | 50,000 | May 24, 2016 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 71-2 | April 25, 2017 | Apr. 25, 2022 | 120,000 | Apr. 13, 2017 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 71-3 | Apr. 25, 2017 | Apr. 25, 2027 | 100,000 | Apr. 13, 2017 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 71-4 | Apr. 25, 2017 | Apr. 25, 2032 | 90,000 | Apr. 13, 2017 | Korea Securities Finance Corp. |
18
Table of Contents
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 | Not applicable | ||
Compliance Status | Not applicable | |||
Submission of Compliance Certificate | Compliance Status | Submitted on March 23, 2022 |
Name | Issue Date | Maturity Date | Principal Amount | Date of Fiscal Agency Agreement | Fiscal Agent | |||||
Unsecured Bond – Series 72-2 | Nov. 10, 2017 | Nov. 10, 2022 | 80,000 | Oct. 31, 2017 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 72-3 | Nov. 10, 2017 | Nov. 10, 2027 | 100,000 | Oct. 31, 2017 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 73-2 | Feb. 20, 2018 | Feb. 20, 2023 | 100,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 73-3 | Feb. 20, 2018 | Feb. 20, 2028 | 200,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 73-4 | Feb. 20, 2018 | Feb. 20, 2038 | 90,000 | Feb. 6. 2018 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 74-2 | Sept. 17, 2018 | Sept. 17, 2023 | 150,000 | Sept. 5, 2018 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 74-3 | Sept. 17, 2018 | Sept. 17, 2038 | 50,000 | Sept. 5, 2018 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 75-2 | Mar. 6, 2019 | Mar. 6, 2024 | 120,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 75-3 | Mar. 6, 2019 | Mar. 6, 2029 | 50,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 75-4 | Mar. 6, 2019 | Mar. 6, 2039 | 50,000 | Feb. 21, 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 | Submitted on March 23, 2022 |
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Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||
Unsecured Bond – Series 76-1 | July 29, 2019 | July 29, 2022 | 120,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 76-2 | July 29, 2019 | July 29, 2024 | 60,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 76-3 | July 29, 2019 | July 29, 2029 | 120,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 76-4 | July 29, 2019 | July 29, 2039 | 50,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 76-5 | 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 | Submitted on March 23, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||
Unsecured Bond – Series 77-1 | Oct. 22, 2019 | Oct. 21, 2022 | 230,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 77-2 | Oct. 22, 2019 | Oct. 22, 2024 | 70,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 77-3 | Oct. 22, 2019 | Oct. 22, 2029 | 40,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 77-4 | Oct. 22, 2019 | Oct. 22, 2039 | 60,000 | Oct. 10, 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 | Submitted on March 23, 2022 |
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Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||
Unsecured Bond – Series 78-1 | Jan. 14, 2020 | Jan. 13, 2023 | 170,000 | Dec. 31, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 78-2 | Jan. 14, 2020 | Jan. 14, 2025 | 130,000 | Dec. 31, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 78-3 | Jan. 14, 2020 | Jan. 14, 2030 | 50,000 | Dec. 31, 2019 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 78-4 | Jan. 14, 2020 | Jan. 14, 2040 | 70,000 | Dec. 31, 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 | Submitted on March 23, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||
Unsecured Bond – Series 79-1 | Oct. 19, 2020 | Oct. 19, 2025 | 140,000 | Oct. 6, 2020 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 79-2 | Oct. 19, 2020 | Oct. 19, 2030 | 40,000 | Oct. 6, 2020 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 79-3 | Oct. 19, 2020 | Oct. 19, 2040 | 110,000 | Oct. 6, 2020 | 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 | Submitted on March 23, 2022 |
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Name | Issue Date | Maturity Date | Principal Amount | Date of Fiscal Agreement | Fiscal Agent | |||||
Unsecured Bond – Series 80-1 | Jan. 15, 2021 | Jan. 14, 2024 | 80,000 | Jan. 5, 2021 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 80-2 | Jan. 15, 2021 | Jan. 15, 2026 | 80,000 | Jan. 5, 2021 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 80-3 | Jan. 15, 2021 | Jan. 15, 2031 | 50,000 | Jan. 5, 2021 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 80-4 | Jan. 15, 2021 | Jan. 15, 2041 | 100,000 | Jan. 5, 2021 | 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 | Submitted on March 23, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal Agreement | Fiscal Agent | |||||
Unsecured Bond – Series 81-1 | Oct. 28, 2021 | Oct. 28, 2024 | 90,000 | Oct. 18, 2021 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 81-2 | Oct. 28, 2021 | Oct. 28, 2026 | 70,000 | Oct. 18, 2021 | Korea Securities Finance Corp. | |||||
Unsecured Bond – Series 81-3 | Oct. 28, 2021 | Oct. 28, 2041 | 40,000 | Oct. 18, 2021 | 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 | Submitted on March 31, 2022 |
[SK Broadband]
The following are key terms and conditions of bonds issued by SK Broadband.
Name | Issue Date | Maturity Date | Principal Amount | Date of Fiscal Agreement | Fiscal Agent | |||||
Unsecured Bond – Series 45-2 | Oct. 11, 2017 | Oct. 11, 2022 | 140,000 | Sept. 20, 2017 | 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 | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 18, 2022 |
Name | Issue Date | Maturity Date | Principal Amount (millions of Won) | Date of Fiscal | Fiscal Agent | |||||||
Unsecured Bond – Series 46-2 | Feb. 1, 2018 | Feb. 1, 2023 | 80,000 | Jan. 19, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 47-1 | Mar. 26, 2019 | Mar. 26, 2022 | 50,000 | Mar. 14, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 47-2 | Mar. 26, 2019 | Mar. 26, 2024 | 160,000 | Mar. 14, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 48-1 | Sept. 24, 2019 | Sept. 23, 2022 | 80,000 | Sept. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 48-2 | Sept. 24, 2019 | Sept. 24, 2024 | 100,000 | Sept. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 48-3 | Sept. 24, 2019 | Sept. 23, 2026 | 50,000 | Sept. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 49-1 | June 11, 2020 | June 9, 2023 | 100,000 | June 1, 2020 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 49-2 | June 11, 2020 | June 11, 2025 | 100,000 | June 1, 2020 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 50 | Sept. 25, 2020 | Sept. 25, 2025 | 160,000 | Sept. 15, 2020 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 51 | July 13, 2021 | July 12, 2024 | 100,000 | July 1, 2021 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 52-1 | Jan. 25, 2022 | Jan. 24, 2025 | 100,000 | Jan. 13, 2022 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 52-2 | Jan. 25, 2022 | Jan. 25, 2032 | 50,000 | Jan. 13, 2022 | 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 April 18, 2022 |
* | Beginning with Series 47, the maintenance of financial ratio requirement has changed to a consolidated basis. |
* | Compliance certificates for Series 52-1 and Series 52-2 issued as of January 25, 2022 are expected to be submitted after the submission of the semi-annual business report for the first six months of fiscal year 2022. |
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IV. MANAGEMENT’S DISCUSSION AND ANALYSIS
Omitted in quarterly reports in accordance with applicable Korean disclosure rules.
V. AUDITOR’S OPINION
1. Independent Auditors and Audit Opinions
A. Independent Auditor and Audit Opinion (Separate and Consolidated)
Period | Independent auditor | Audit opinion | Emphasis of Matter | Critical Audit Matters | ||||
Three months ended March 31, 2022 | Ernst & Young Han Young | — | Although not affecting our review opinion, users of this review report should pay special attention to notes 3 and 36 of the notes to the Company’s consolidated financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021. Pursuant to the resolution of the general meeting of shareholders on October 12, 2021, the Company conducted the Spin-off effective as of November 1, 2021. Profit and loss of the spun-off divisions were separately presented as income from discontinued operations, and the consolidated statement of profit and loss for the three months ended March 31, 2021 was restated as such. See notes 3 and 36 of the notes to the Company’s consolidated financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021 for more information. | N/A | ||||
Year ended December 31, 2021 | KPMG Samjong Accounting Corp. | Unqualified | Spin-off and disclosure of discontinued operations in the consolidated financial statements | Revenue recognition; assessment of impairment of cash-generating unit of fixed-line telecommunication services | ||||
Year ended December 31, 2020 | KPMG Samjong Accounting Corp. | Unqualified | Retroactive application of change in accounting policy related to change to determination of lease period | Revenue recognition; assessment of impairment of cash-generating unit of security services, assessment of fair value of customer relationship |
Note: All consolidated subsidiaries of the Company that are subject to audits and whose audits have been completed received unqualified audit opinions.
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B. Audit Services Contracts with Independent Auditors
(Unit: in millions of Won except number of hours) | ||||||||||||||||||||
Period | Auditors | Contents | Audit Contract | Actual Performance | ||||||||||||||||
Fee | Total number of hours | Fee | Total number of hours | |||||||||||||||||
Three months ended March 31, 2022 | Ernst & Young Han Young | Quarterly review/Consolidated financial statements review | 2,700 | 24,100 | 241 | 2,800 | ||||||||||||||
Separate financial statements audit | ||||||||||||||||||||
Consolidated financial statements audit | ||||||||||||||||||||
English financial statements review and other audit task | ||||||||||||||||||||
Internal accounting system audit | ||||||||||||||||||||
Year ended December 31, 2021 | KPMG Samjong Accounting Corp. | Quarterly review | 2,450 | 24,500 | 2,450 | 24,500 | ||||||||||||||
Separate financial statements audit | ||||||||||||||||||||
Consolidated financial statements audit | ||||||||||||||||||||
English financial statements review and other audit task | ||||||||||||||||||||
Internal accounting system audit | ||||||||||||||||||||
Year ended December 31, 2020 | KPMG Samjong Accounting Corp. | Quarterly review | 2,360 | 23,600 | 2,360 | 23,600 | ||||||||||||||
Separate financial statements audit | ||||||||||||||||||||
Consolidated financial statements audit | ||||||||||||||||||||
English financial statements review and other audit task | ||||||||||||||||||||
Internal accounting system audit |
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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 | ||||||
Three months ended March 31, 2022 | — | — | — | — | ||||||
Year ended December 31, 2021 | May 17, 2021 | Confirmation of financial information in connection with frequency reallocation application | May 17, 2021 – May 24, 2021 | 2 | ||||||
May 26, 2021 | Audit and review of financial statements of the newly established company and subsidiaries involved in the Spin-off | May 26, 2021 – July 28, 2021 | 1,143 | |||||||
August 5, 2021 | Review of carve-out financial statements in connection with the Spin-off | August 5, 2021 – August 13,2021 | 10 | |||||||
Year ended December 31, 2020 | July 23, 2020 | Confirmation of financial information | July 23, 2020 – July 30, 2020
| 30 | ||||||
December 8, 2020 | Confirmation of financial information | December 8, 2020 – December 10, 2020
| 30 | |||||||
December 30, 2020 | Consulting services for new business group model research project | December 31, 2020 – February 12, 2021 | 90 |
D. Discussions between Audit Committee and Independent Auditors
Date | Attendance | Method | Key Matters Discussed | |||
February 22, 2022 | Audit Committee: 4 Independent Auditor: 1 | In-person | Report on 2021 critical audit matters and results of audit of financial statements; report on results of 2021 internal accounting management system audit | |||
April 27, 2022 | Audit Committee: 4 Independent Auditor: 1 | In-person | Report on 2021 Public Company Accounting Oversight Board audit results; report on 2022 audit plan and selection of critical audit matters |
VI. CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS
1. Board of Directors
Omitted in quarterly reports in accordance with applicable Korean disclosure rules.
2. Audit System
Omitted in quarterly reports in accordance with applicable Korean disclosure rules.
3. Shareholders’ Exercise of Voting Rights
Omitted in quarterly reports in accordance with applicable Korean disclosure rules.
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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 March 31, 2022) | (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 Inc. | Largest Shareholder | Common share | 65,668,397 | 30.01 | 65,668,397 | 30.01 | ||||||||||||||
Tae Won Chey | Officer of affiliated company | Common share | 303 | 0.00 | 303 | 0.00 | ||||||||||||||
Dong Hyun Jang | Officer of affiliated company | Common share | 762 | 0.00 | 762 | 0.00 | ||||||||||||||
Jung Ho Park | Officer of the Company | Common share | 10,932 | 0.00 | 21,530 | 0.00 | ||||||||||||||
Young Sang Ryu | Officer of the Company | Common share | 3,340 | 0.00 | 7,340 | 0.00 | ||||||||||||||
Yong-Hak Kim | Officer of the Company | Common share | 303 | 0.00 | 303 | 0.00 | ||||||||||||||
Seok-Dong Kim | Officer of the Company | Common share | 303 | 0.00 | 303 | 0.00 | ||||||||||||||
Youngmin Yoon | Officer of the Company | Common share | 303 | 0.00 | 303 | 0.00 | ||||||||||||||
Jung Ho Ahn | Officer of the Company | Common share | 303 | 0.00 | 303 | 0.00 | ||||||||||||||
Junmo Kim | Officer of the Company | Common share | 303 | 0.00 | 303 | 0.00 | ||||||||||||||
Kyu-nam Choi | Officer of the Company | Common share | 455 | 0.00 | 455 | 0.00 | ||||||||||||||
Poong Young Yoon | Officer of the Company | Common share | 2,733 | 0.00 | 2,733 | 0.00 | ||||||||||||||
Jong Ryeol Kang | Officer of the Company | Common share | 0 | 0.00 | 3,484 | 0.00 | ||||||||||||||
|
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| |||||||||||||
Total | Common share | 65,688,437 | 30.02 | 65,706,519 | 30.03 | |||||||||||||||
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B. Overview of the Largest Shareholder
As of March 31, 2022, the Company’s largest shareholder was SK Inc. SK Inc. was established on April 13, 1991 and was made public on the securities market on November 11, 2009 under the identification code “034730.” SK Inc. is located at 26, Jong-ro, Jongno-gu, Seoul, Korea. SK Inc.’s telephone number is +82-2-2121-5114 and its website is https://www.sk-inc.com/.
VIII. EMPLOYEES AND DIRECTORS
1. Directors and Officers
A. Directors
(As of March 31, 2022)
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Name | Gender | Date of Birth | Position | Professional Background | Duration of | End of Current | ||||||
Young Sang Ryu | Male | May 1970 | Chief Executive Officer; Representative Director; Inside Director | Director, SK Telecom MNO business | 4 years and 1 month | Mar. 24, 2024 | ||||||
Jong Ryeol Kang | Male | Oct. 1964 | Representative Director; Head of ICT Infrastructure Center (CSPO); Inside Director | Head, Corporate Culture Division | 1 month | Mar. 24, 2025 | ||||||
Kyu-Nam Choi | Male | Apr. 1964 | Non-executive Director | Head of Investment 1 Team; Head of Environment Task Force; Head of Future Business Team, SUPEX Council | 6 months | Mar. 24, 2024 | ||||||
Yong-Hak Kim | Male | Jan. 1953 | Independent Director | President (Professor Emeritus), Yonsei University | 2 years and 1 month | Mar. 25, 2023 | ||||||
Seok-Dong Kim | Male | May 1953 | Independent Director | Chairman, Financial Services Commission | 3 years and 1 month | Mar. 24, 2025 | ||||||
Jung Ho Ahn | Male | Feb. 1978 | Independent Director | Professor, Graduate School of Convergence Science and Technology at Seoul National University | 5 years and 1 month | Mar. 25, 2023 | ||||||
Youngmin Yoon | Female | Dec. 1963 | Independent Director | Professor, Department of Media and Communication at Korea University | 4 years and 1 month | Mar. 24, 2024 | ||||||
Junmo Kim | Male | Sep. 1976 | Independent Director | Professor, Department of Electrical Engineering at Korea Advanced Institute of Science and Technology | 2 years and 1 month | Mar. 25, 2023 |
* | At the 38th General Meeting of Shareholders held on March 25, 2022, Jong Ryeol Kang was newly appointed as an inside director and Seok-Dong Kim was re-elected as an independent director and a member of the audit committee. |
2. Compensation of Directors and Officers
Omitted in quarterly reports in accordance with applicable Korean disclosure rules.
IX. RELATED PARTY TRANSACTIONS
1. Line of Credit Extended to the Largest Shareholder and Related Parties
None.
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2. Transfer of Assets to/from the Largest Shareholder and Related Parties and Other Transactions
Purchase and Dispositions of Investments
(Unit: in millions of Won) | ||||||||||||||||||||||||
Purchase and Dispositions of Investments | ||||||||||||||||||||||||
(As of March 31, 2022) Name (Corporate name) |
| Transaction Details | ||||||||||||||||||||||
Relationship | Type of Investment | Beginning | Increase | Decrease | Ending | Remarks | ||||||||||||||||||
Start-up Win-win Fund | Affiliate | Shares | 5,676 | — | 4,850 | 826 | Principal distribution | |||||||||||||||||
Smart SKT Infinitum Game Fund | Affiliate | Shares | 3,000 | 1,000 | — | 4,000 | Capital increase | |||||||||||||||||
UCT Kakao-SK Telecom ESG Fund | Affiliate | Shares | 2,000 | 2,000 | — | 4,000 | Capital increase | |||||||||||||||||
Atlas Investment | Subsidiary | Shares | 155,656 | 2,286 | — | 157,942 | Capital increase | |||||||||||||||||
Quantum Innovation Fund I | Subsidiary | Shares | 11,935 | 240 | — | 12,175 | Capital increase | |||||||||||||||||
SAPEON Korea Inc. | Subsidiary | Shares | — | 19,108 | — | 19,108 | New acquisition | |||||||||||||||||
SAPEON Inc. | Subsidiary | Shares | — | 48,228 | — | 48,228 | New acquisition | |||||||||||||||||
SK Square (listed) | Subsidiary | Shares | 51,371 | — | 307 | 51,064 | Disposal | |||||||||||||||||
CMES Inc. | Affiliate | | Preferred Shares | | — | 10,000 | — | 10,000 | Acquisition of preferred shares |
3. Transactions with the Largest Shareholder and Related Parties
(Unit: in millions of Won) | ||||||||||
Counterparty | Relationship | Type | Transaction Period | Transaction Details | Transaction | |||||
PS&Marketing | Affiliate | Purchase | January 1, 2022 – March 31, 2022 | Marketing fees, etc. | 338,738 |
X. OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS
1. Developments in the Items Mentioned in Prior Reports on Important Business Matters
On February 9, 2022, the Company announced its strategic direction and sales target in the “Future Business and Management Plan” fair disclosure report. See “II.1. Business Overview” for more information on business progress and “III. Financial Information” for more information on business performance.
On March 30, 2022, the Company announced that SK Broadband will merge with Broadband Nowon Co., Ltd. in its “Decision on Merger” report. Such filing is currently pending and has not been completed.
2. Contingent Liabilities
A. Legal Proceedings
[SK Telecom]
As of March 31, 2022, 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.
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[SK Broadband]
As of March 31, 2022, there were 32 pending lawsuits against SK Broadband (aggregate amount of claims of Won 13,834 million), and provisions in the amount of Won 10,928 million in connection with such lawsuits were recognized.
B. Other Contingent Liabilities
[SK Telecom]
None.
[SK Broadband]
As of March 31, 2022, SK Broadband has entered into revolving credit facilities with a limit of Won 192 billion with two financial institutions including 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 1,513 million on certain of its buildings, including Gyeyang Guksa, in connection with leasing of such buildings.
SK Broadband has entered into a leased line contract and a resale contract for fixed-line telecommunication services with SK Telecom.
As of March 31, 2022, Seoul Guarantee Insurance Company has provided a performance guarantee of Won 24,286 million to SK Broadband in connection with the performance of certain contracts and the repair of any defects, and Korea Content Financial Cooperative has provided a performance guarantee of Won 33,857 million in connection with the performance of certain contracts.
[SK Stoa]
As of March 31, 2022, Kookmin Bank has provided a payment guarantee of Won 1.5 billion in connection with e-commerce transaction payables.
3. Status of Sanctions, etc.
Omitted in quarterly reports in accordance with applicable Korean disclosure rules.
4. Material Events Subsequent to the Reporting Period
(1) On April 28, 2022, the Board of Directors resolved to dispose the Company’s treasury shares as follows:
Classification | Content | |
Type and number of shares | 29,311 common shares | |
Disposal price | Won 56,800 per share | |
Amount of disposal | Won 1,665 million | |
Period of disposal | April 29, 2022 - May 20, 2022 | |
Purpose of disposal | Bonus payment | |
Method of disposal | Over-the-counter |
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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/ Heejun Chung | ||
(Signature) | ||
Name: | Heejun Chung | |
Title: | Senior Vice President |
Date: June 9, 2022
Table of Contents
SK TELECOM CO., LTD. AND ITS SUBSIDIARIES
Interim Consolidated Financial Statements
(Unaudited)
For the Three-Month Period ended March 31, 2022
(With Independent Auditor’s Review Report Thereon)
SK TELECOM CO., LTD. AND ITS SUBSIDIARIES
Table of Contents
Report on review of interim consolidated financial statements | Page | |||
1 | ||||
3 | ||||
4 | ||||
5 | ||||
6 | ||||
8 |
Table of Contents
Report on review of interim consolidated financial statements
The Shareholders and Board of Directors
SK Telecom Co., Ltd.
Report on the financial statements
We have reviewed the accompanying interim consolidated financial statements of SK Telecom Co., Ltd. and its subsidiaries (the “Group”), which comprise the interim consolidated statement of financial position as of March 31, 2022, and the related interim consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the three-month period then ended, and a summary of significant accounting policies and other explanatory information.
Management’s responsibility for the interim consolidated financial statements
Management is responsible for the preparation and fair presentation of these interim consolidated financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1034 Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of interim consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express a conclusion on these interim consolidated financial statements based on our review.
We conducted our review in accordance with the review standards for interim financial statements in the Republic of Korea. A review of interim financial information consists 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 Auditing Standards (“KGAAS”) 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 review, nothing has come to our attention that causes us to believe that the accompanying interim consolidated financial statements are not prepared fairly, in all material respects, in accordance with K-IFRS 1034 Interim Financial Reporting.
Emphasis of matter
We draw to attention to Notes 3 and 36, which describes that pursuant to the resolution of shareholders’ meeting held on October 12, 2021, the SK Telecom Co., Ltd. completed the spin-off of certain businesses as of November 1, 2021. The businesses spun off are presented as discontinued operations, and the comparative interim consolidated statement of profit or loss for the three-month period ended March 31, 2021 and related notes have been restated to present the discontinued operations separately from continuing operations. Our conclusion is not modified in respect of this matter.
A member firm of Ernst & Young Global Limited
Table of Contents
Other matters
The interim consolidated statement of profit or loss, interim consolidated statement of comprehensive income, interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the three-month period ended March 31, 2021, prepared in accordance with K-IFRS 1034 and presented for comparative purpose, have been reviewed by KPMG Samjong Accounting Corp. whose review report dated May 14, 2021 expressed an unqualified review conclusion.
Moreover, the consolidated statement of financial position as of December 31, 2021, and the related consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended which have been audited by KPMG Samjong Accounting Corp., in accordance with KGAAS (not presented herein), whose report dated March 10, 2022 expressed an unqualified opinion. The accompanying consolidated statement of financial position as of December 31, 2021 presented for comparative purpose is not different, in all material respects, from the above audited consolidated statement of financial position.
May 13, 2022
This report is effective as of May 13, 2022, the independent auditor’s review report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the independent auditor’s review report date to the time this review report is used. Such events and circumstances could significantly affect the accompanying interim consolidated financial statements and may result in modification to this review report.
A member firm of Ernst & Young Global Limited
Table of Contents
SK TELECOM CO., LTD. (the “Parent Company”) AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2022 AND DECEMBER 31, 2021 AND
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2022 AND 2021
The accompanying interim consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Parent Company.
Ryu, Young-Sang
Chief Executive Officer
SK TELECOM CO., LTD.
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Interim Consolidated Statements of Financial Position
As of March 31, 2022 and December 31, 2021
(In millions of won) | Note | March 31, 2022 (Unaudited) | December 31, 2021 | |||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 29,30 | 872,731 | ||||||||||
Short-term financial instruments | 29,30 | 491,576 | 508,677 | |||||||||
Short-term investment securities | 9,29,30 | — | 5,010 | |||||||||
Accounts receivable – trade, net | 5,29,30,31 | 1,981,245 | 1,913,511 | |||||||||
Short-term loans, net | 5,29,30,31 | 73,031 | 70,817 | |||||||||
Accounts receivable – other, net | 5,29,30,31,32 | 621,062 | 548,362 | |||||||||
Contract assets | 7,30 | 74,399 | 76,698 | |||||||||
Prepaid expenses | 6 | 2,019,981 | 1,987,503 | |||||||||
Current tax assets | 27 | 107 | 77 | |||||||||
Derivative financial assets | 29,30 | 30,007 | 30,110 | |||||||||
Inventories, net | 8 | 223,409 | 204,637 | |||||||||
Non-current assets held for sale | 35 | 8,734 | 8,734 | |||||||||
Advanced payments and others | 5,29,30,31 | 126,629 | 125,798 | |||||||||
|
|
|
| |||||||||
6,544,841 | 6,352,665 | |||||||||||
|
|
|
| |||||||||
Non-Current Assets: | ||||||||||||
Long-term financial instruments | 29,30 | 375 | 375 | |||||||||
Long-term investment securities | 9,29,30 | 1,636,311 | 1,715,078 | |||||||||
Investments in associates and joint ventures | 11 | 2,218,636 | 2,197,351 | |||||||||
Investment property, net | 13 | 23,416 | 23,034 | |||||||||
Property and equipment, net | 12,14,31,32 | 12,571,404 | 12,871,259 | |||||||||
Goodwill | 10 | 2,075,009 | 2,072,493 | |||||||||
Intangible assets, net | 15 | 3,683,997 | 3,869,769 | |||||||||
Long-term contract assets | 7,30 | 39,389 | 41,580 | |||||||||
Long-term loans, net | 5,29,30,31 | 24,231 | 21,979 | |||||||||
Long-term accounts receivable – other, net | 5,29,30,31,32 | 272,608 | 275,238 | |||||||||
Long-term prepaid expenses | 6 | 1,063,719 | 1,069,148 | |||||||||
Guarantee deposits, net | 5,29,30,31 | 186,902 | 186,713 | |||||||||
Long-term derivative financial assets | 29,30 | 211,675 | 187,484 | |||||||||
Deferred tax assets | 27 | 128 | 128 | |||||||||
Defined benefit assets | 19 | 10,929 | 18,427 | |||||||||
Other non-current assets | 5,29,30 | 11,098 | 8,556 | |||||||||
|
|
|
| |||||||||
24,029,827 | 24,558,612 | |||||||||||
|
|
|
| |||||||||
Total Assets | 30,911,277 | |||||||||||
|
|
|
|
(Continued)
1
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Interim Consolidated Statements of Financial Position, Continued
As of March 31, 2022 and December 31, 2021
(In millions of won) | Note | March 31, 2022 (Unaudited) | December 31, 2021 | |||||||||
Liabilities and Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable – trade | 29,30,31 | 190,559 | ||||||||||
Accounts payable – other | 29,30,31 | 2,006,674 | 2,071,870 | |||||||||
Withholdings | 29,30,31 | 952,650 | 790,489 | |||||||||
Contract liabilities | 7 | 164,289 | 166,436 | |||||||||
Accrued expenses | 29,30 | 1,119,899 | 1,295,404 | |||||||||
Current tax liabilities | 27 | 249,524 | 192,221 | |||||||||
Derivative financial liabilities | 29,30 | 16 | 52 | |||||||||
Provisions | 18,34 | 67,295 | 61,656 | |||||||||
Short-term borrowings | 16,29,30 | 167,998 | 12,998 | |||||||||
Current installments of long-term debt, net | 16,29,30 | 1,300,526 | 1,430,324 | |||||||||
Current installments of long-term payables – other | 17,29,30 | 393,920 | 398,823 | |||||||||
Lease liabilities | 29,30,31 | 361,397 | 349,568 | |||||||||
Other current liabilities | 48 | 35 | ||||||||||
|
|
|
| |||||||||
6,935,288 | 6,960,435 | |||||||||||
|
|
|
| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 16,29,30 | 6,876,379 | 7,037,424 | |||||||||
Long-term borrowings, excluding current installments, net | 16,29,30 | 546,845 | 353,122 | |||||||||
Long-term payables – other | 17,29,30 | 1,223,821 | 1,611,010 | |||||||||
Long-term lease liabilities | 29,30,31 | 1,238,900 | 1,184,714 | |||||||||
Long-term contract liabilities | 7 | 35,294 | 36,531 | |||||||||
Defined benefit liabilities | 19 | 31,606 | 13,157 | |||||||||
Long-term derivative financial liabilities | 29,30 | 321,025 | 321,084 | |||||||||
Long-term provisions | 18 | 61,540 | 65,339 | |||||||||
Deferred tax liabilities | 27 | 978,667 | 941,301 | |||||||||
Other non-current liabilities | 29,30,31 | 55,836 | 52,022 | |||||||||
|
|
|
| |||||||||
11,369,913 | 11,615,704 | |||||||||||
|
|
|
| |||||||||
Total Liabilities | 18,305,201 | 18,576,139 | ||||||||||
|
|
|
| |||||||||
Equity: | ||||||||||||
Share capital | 1,20 | 30,493 | 30,493 | |||||||||
Capital surplus and others | 20,21 | (11,560,041 | ) | (11,623,726 | ) | |||||||
Retained earnings | 22 | 22,297,108 | 22,437,341 | |||||||||
Reserves | 23 | 738,001 | 735,238 | |||||||||
|
|
|
| |||||||||
Equity attributable to owners of the Parent Company | 11,505,561 | 11,579,346 | ||||||||||
Non-controlling interests | 763,906 | 755,792 | ||||||||||
|
|
|
| |||||||||
Total Equity | 12,269,467 | 12,335,138 | ||||||||||
|
|
|
| |||||||||
Total Liabilities and Equity | 30,911,277 | |||||||||||
|
|
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
2
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Interim Consolidated Statements of Profit or Loss
For the three-month periods ended March 31, 2022 and 2021
(In millions of won, except for earnings per share) | Note | 2022 (Unaudited) | 2021 (Unaudited/ Restated) | |||||||||
Continuing operations | ||||||||||||
Operating revenue: | 4,31 | |||||||||||
Revenue | 4,113,097 | |||||||||||
|
|
|
| |||||||||
Operating expenses: | 31 | |||||||||||
Labor | 637,113 | 580,997 | ||||||||||
Commissions | 6 | 1,310,239 | 1,303,339 | |||||||||
Depreciation and amortization | 4 | 910,884 | 909,106 | |||||||||
Network interconnection | 189,390 | 193,937 | ||||||||||
Leased lines | 67,624 | 74,385 | ||||||||||
Advertising | 49,237 | 31,085 | ||||||||||
Rent | 42,081 | 45,857 | ||||||||||
Cost of goods sold | 8 | 307,615 | 279,403 | |||||||||
Others | 24 | 330,632 | 320,772 | |||||||||
|
|
|
| |||||||||
3,844,815 | 3,738,881 | |||||||||||
|
|
|
| |||||||||
Operating profit | 4 | 432,393 | 374,216 | |||||||||
Finance income | 4,26 | 24,317 | 59,549 | |||||||||
Finance costs | 4,26 | (93,091 | ) | (79,337 | ) | |||||||
Gain (loss) relating to investments in associates and joint ventures, net | 4,11 | (38,445 | ) | 127,734 | ||||||||
Other non-operating income | 4,25 | 15,741 | 12,585 | |||||||||
Other non-operating expenses | 4,25 | (13,907 | ) | (8,197 | ) | |||||||
|
|
|
| |||||||||
Profit before income tax | 4 | 327,008 | 486,550 | |||||||||
Income tax expense | 27 | 106,663 | 130,727 | |||||||||
|
|
|
| |||||||||
Profit from continuing operations | 220,345 | 355,823 | ||||||||||
Profit of discontinued operations, net of taxes | 36 | — | 216,152 | |||||||||
|
|
|
| |||||||||
Profit for the period | 571,975 | |||||||||||
|
|
|
| |||||||||
Attributable to: | ||||||||||||
Owners of the Parent Company | 558,265 | |||||||||||
Non-controlling interests | 9,092 | 13,710 | ||||||||||
Earnings per share | 28 | |||||||||||
Basic earnings per share (in won) | 1,559 | |||||||||||
Basic earnings per share—continuing operations (in won) | 953 | 963 | ||||||||||
Diluted earnings per share (in won) | 952 | 1,558 | ||||||||||
Diluted earnings per share—continuing operations (in won) | 952 | 962 |
The accompanying notes are an integral part of the interim consolidated financial statements.
3
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Interim Consolidated Statements of Comprehensive Income
For the three-month periods ended March 31, 2022 and 2021
(In millions of won) | Note | 2022 (Unaudited) | 2021 (Unaudited) | |||||||||
Profit for the period | 571,975 | |||||||||||
Other comprehensive income (loss): | ||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||
Remeasurement of defined benefit plans | 19 | 12,690 | (18,782 | ) | ||||||||
Net change in other comprehensive loss of investments in associates and joint ventures | 11,23 | — | (1,503 | ) | ||||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income | 23 | (55,524 | ) | 169,679 | ||||||||
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 | 11,23 | 62,694 | 114,619 | |||||||||
Net change in unrealized fair value of derivatives | 23 | (10,066 | ) | (3,103 | ) | |||||||
Foreign currency translation differences for foreign operations | 23 | 3,927 | 16,131 | |||||||||
|
|
|
| |||||||||
Other comprehensive income for the period, net of taxes | 13,721 | 277,041 | ||||||||||
|
|
|
| |||||||||
Total comprehensive income | 849,016 | |||||||||||
|
|
|
| |||||||||
Total comprehensive income attributable to: | ||||||||||||
Owners of the Parent Company | 835,904 | |||||||||||
Non-controlling interests | 6,658 | 13,112 |
The accompanying notes are an integral part of the interim consolidated financial statements.
4
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Interim Consolidated Statements of Changes in Equity
For the three-month periods ended March 31, 2022 and 2021
(In millions of won) | ||||||||||||||||||||||||||||||||
Attributable to owners of the Parent Company | ||||||||||||||||||||||||||||||||
Note | Share capital | Capital surplus and others | Retained earnings | Reserves | Sub-total | Non-controlling interests | Total equity | |||||||||||||||||||||||||
Balance as of January 1, 2021 | 677,203 | 22,981,913 | 40,139 | 23,743,894 | 652,349 | 24,396,243 | ||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the period | — | — | 558,265 | — | 558,265 | 13,710 | 571,975 | |||||||||||||||||||||||||
Other comprehensive income (loss) | 11,19,23 | — | — | (18,723 | ) | 296,362 | 277,639 | (598 | ) | 277,041 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
— | — | 539,542 | 296,362 | 835,904 | 13,112 | 849,016 | ||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | — | — | (641,944 | ) | — | (641,944 | ) | (5,763 | ) | (647,707 | ) | |||||||||||||||||||||
Share option | 21 | — | 47 | — | — | 47 | 216 | 263 | ||||||||||||||||||||||||
Interest on hybrid bonds | — | — | (3,692 | ) | — | (3,692 | ) | — | (3,692 | ) | ||||||||||||||||||||||
Acquisition of treasury shares | 20 | — | (72,982 | ) | — | — | (72,982 | ) | — | (72,982 | ) | |||||||||||||||||||||
Disposal of treasury shares | 20 | — | 29,642 | — | — | 29,642 | — | 29,642 | ||||||||||||||||||||||||
Changes in ownership in subsidiaries, etc. | — | 6,305 | — | — | 6,305 | 12,011 | 18,316 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
— | (36,988 | ) | (645,636 | ) | — | (682,624 | ) | 6,464 | (676,160 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance as of March 31, 2021 (Unaudited) | 640,215 | 22,875,819 | 336,501 | 23,897,174 | 671,925 | 24,569,099 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance as of January 1, 2022 | (11,623,726 | ) | 22,437,341 | 735,238 | 11,579,346 | 755,792 | 12,335,138 | |||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the period | — | — | 211,253 | — | 211,253 | 9,092 | 220,345 | |||||||||||||||||||||||||
Other comprehensive income (loss) | 11,19,23 | — | — | 13,392 | 2,763 | 16,155 | (2,434 | ) | 13,721 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
— | — | 224,645 | 2,763 | 227,408 | 6,658 | 234,066 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | — | — | (361,186 | ) | — | (361,186 | ) | — | (361,186 | ) | ||||||||||||||||||||||
Share option | 21 | — | 74,246 | — | — | 74,246 | — | 74,246 | ||||||||||||||||||||||||
Interest on hybrid bonds | — | — | (3,692 | ) | — | (3,692 | ) | — | (3,692 | ) | ||||||||||||||||||||||
Disposal of treasury shares | 20 | — | 2,891 | — | — | 2,891 | — | 2,891 | ||||||||||||||||||||||||
Changes in ownership in subsidiaries, etc. | — | (13,452 | ) | — | — | (13,452 | ) | 1,456 | (11,996 | ) | ||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
— | 63,685 | (364,878 | ) | — | (301,193 | ) | 1,456 | (299,737 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance as of March 31, 2022 (Unaudited) | (11,560,041 | ) | 22,297,108 | 738,001 | 11,505,561 | 763,906 | 12,269,467 | |||||||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
5
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Interim Consolidated Statements of Cash Flows
For the three-month periods ended March 31, 2022 and 2021
(In millions of won) | Note | 2022 (Unaudited) | 2021 (Unaudited) | |||||||||
Cash flows from operating activities: | ||||||||||||
Cash generated from operating activities: | ||||||||||||
Profit for the period | 571,975 | |||||||||||
Adjustments for income and expenses | 33 | 1,301,819 | 937,576 | |||||||||
Changes in assets and liabilities related to operating activities | 33 | (144,067 | ) | (522,978 | ) | |||||||
|
|
|
| |||||||||
1,378,097 | 986,573 | |||||||||||
Interest received | 8,497 | 9,034 | ||||||||||
Dividends received | 23 | 23 | ||||||||||
Interest paid | (70,154 | ) | (69,616 | ) | ||||||||
Income tax paid | (21,763 | ) | (34,913 | ) | ||||||||
|
|
|
| |||||||||
Net cash provided by operating activities | 1,294,700 | 891,101 | ||||||||||
|
|
|
| |||||||||
Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term financial instruments, net | — | 77,894 | ||||||||||
Decrease in short-term investment securities, net | 69,733 | 41,367 | ||||||||||
Collection of short-term loans | 32,817 | 43,047 | ||||||||||
Proceeds from disposals of long-term investment securities | 8,768 | 14,681 | ||||||||||
Proceeds from disposals of investments in associates and joint ventures | 6,880 | 100,334 | ||||||||||
Proceeds from disposals of property and equipment | 2,058 | 2,401 | ||||||||||
Proceeds from disposals of intangible assets | 4,870 | 1,130 | ||||||||||
Collection of long-term loans | 121 | 1,246 | ||||||||||
Decrease in guarantee deposits | 1,636 | 1,879 | ||||||||||
Proceeds from settlement of derivatives | 443 | 403 | ||||||||||
|
|
|
| |||||||||
127,326 | 284,382 | |||||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term financial instruments, net | (47,297 | ) | — | |||||||||
Increase in short-term loans | (34,290 | ) | (16,070 | ) | ||||||||
Increase in long-term loans | (3,170 | ) | (3,155 | ) | ||||||||
Acquisitions of long-term investment securities | (13,479 | ) | (15,018 | ) | ||||||||
Acquisitions of investments in associates and joint ventures | (3,007 | ) | (8,135 | ) | ||||||||
Acquisitions of property and equipment | (747,510 | ) | (755,139 | ) | ||||||||
Acquisitions of intangible assets | (10,857 | ) | (8,945 | ) | ||||||||
Increase in guarantee deposits | (6,009 | ) | (1,677 | ) | ||||||||
Cash outflow for business combinations, net | (62,312 | ) | — | |||||||||
|
|
|
| |||||||||
(927,931 | ) | (808,139 | ) | |||||||||
|
|
|
| |||||||||
Net cash used in investing activities | (523,757 | ) | ||||||||||
|
|
|
|
(Continued)
6
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Interim Consolidated Statements of Cash Flows, Continued
For the three-month periods ended March 31, 2022 and 2021
(In millions of won) | Note | 2022 (Unaudited) | 2021 (Unaudited) | |||||||||
Cash flows from financing activities: | ||||||||||||
Cash inflows from financing activities: | ||||||||||||
Proceeds from short-term borrowings | — | |||||||||||
Proceeds from issuance of debentures | 149,302 | 308,757 | ||||||||||
Proceeds from long-term borrowings | 200,000 | 50,000 | ||||||||||
Transactions with non-controlling shareholders | 168 | 30,511 | ||||||||||
|
|
|
| |||||||||
504,470 | 389,268 | |||||||||||
Cash outflows for financing activities: | ||||||||||||
Repayments of long-term payables – other | (400,245 | ) | (426,220 | ) | ||||||||
Repayments of debentures | (480,000 | ) | (280,000 | ) | ||||||||
Repayments of long-term borrowings | (6,250 | ) | (9,342 | ) | ||||||||
Payments of interest on hybrid bonds | (3,692 | ) | — | |||||||||
Repayments of lease liabilities | (87,847 | ) | (97,813 | ) | ||||||||
Acquisition of treasury shares | — | (72,982 | ) | |||||||||
Transactions with non-controlling shareholders | — | (13,503 | ) | |||||||||
|
|
|
| |||||||||
(978,034 | ) | (899,860 | ) | |||||||||
|
|
|
| |||||||||
Net cash used in financing activities | (473,564 | ) | (510,592 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in cash and cash equivalents | 20,531 | (143,248 | ) | |||||||||
Cash and cash equivalents at beginning of the period | 872,731 | 1,369,653 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents | 1,399 | 4,934 | ||||||||||
|
|
|
| |||||||||
Cash and cash equivalents at end of the period | 1,231,339 | |||||||||||
|
|
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
7
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
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 March 31, 2022, the Parent Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Inc. | 65,668,397 | 30.01 | ||||||
National Pension Service | 20,389,153 | 9.32 | ||||||
Institutional investors and other shareholders | 128,098,793 | 58.53 | ||||||
Kakao Corp. | 3,846,487 | 1.76 | ||||||
Treasury shares | 830,314 | 0.38 | ||||||
|
|
|
| |||||
218,833,144 | 100.00 | |||||||
|
|
|
|
These interim consolidated financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individually as “Group entity”). SK Inc. is the ultimate controlling entity of the Parent Company.
On November 1, 2021, the date of spin-off, the Parent Company completed the spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments. (See note 36)
8
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
1. | Reporting Entity, Continued |
(2) | List of consolidated subsidiaries |
The | list of consolidated subsidiaries as of March 31, 2022 and December 31, 2021 is as follows: |
Ownership (%)(*1) | ||||||||||
Subsidiary | Location | Primary business | Mar. 31, 2022 | Dec. 31, | ||||||
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 | 74.3 | 74.3 | ||||||
PS&Marketing Corporation | Korea | Communications device retail business | 100.0 | 100.0 | ||||||
SERVICE ACE 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. | 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 | ||||||
Quantum Innovation Fund I | Korea | Investment | 59.9 | 59.9 | ||||||
SK Telecom Japan Inc. | Japan | Information gathering and consulting | 100.0 | 100.0 | ||||||
Happy Hanool Co., Ltd. | Korea | Service | 100.0 | 100.0 | ||||||
SK stoa Co., Ltd. | Korea | Other telecommunication retail business | 100.0 | 100.0 | ||||||
Broadband Nowon Co., Ltd. | Korea | Cable broadcasting services | 100.0 | 100.0 | ||||||
SAPEON Korea Inc.(*2,3) | Korea | Manufacturing non-memory and other electronic integrated circuits | 100.0 | — | ||||||
SAPEON Inc.(*2,3) | USA | Manufacturing non-memory and other electronic integrated circuits | 100.0 | — | ||||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | Korea | Operation of information and communication facility | 100.0 | 100.0 | |||||
Media S Co., Ltd. | Korea | Production and supply services of broadcasting programs | 100.0 | 100.0 | ||||||
Subsidiaries owned by PS&Marketing Corporation | SK m&service Co., Ltd.(*2,4) | Korea | Database and Internet website service | 100.0 | — | |||||
Subsidiary owned by Quantum Innovation Fund I | PanAsia Semiconductor Materials LLC. | Korea | Investment | 66.4 | 66.4 | |||||
Subsidiary owned by SK Telecom Japan Inc. | SK Planet Japan, K. K. | Japan | Digital contents sourcing service | 79.8 | 79.8 | |||||
Others(*5) | 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 |
9
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
1. | Reporting Entity, Continued |
(2) | List of consolidated subsidiaries, Continued |
The list of consolidated subsidiaries as of March 31, 2022 and December 31, 2021 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) | Details of changes in the consolidation scope for the three-month period ended March 31, 2022 are presented in note 1-(4). |
(*3) | The Parent Company newly established SAPEON Korea Inc. and SAPEON Inc. for the three-month period ended March 31, 2022. |
(*4) | PS&Marketing Corporation acquired 3,099,112 shares (100%) of SK m&service Co., Ltd. at |
(*5) | Others are owned by Atlas Investment and another subsidiary of the Parent Company. |
(3) | Condensed financial information of subsidiaries |
1) | Condensed financial information of significant consolidated subsidiaries as of and for the three-month period ended March 31, 2022 is as follows: |
(In millions of won) |
| |||||||||||||||||||
As of March 31, 2022 | For the three-month period ended March 31, 2022 | |||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit | |||||||||||||||
SK Telink Co., Ltd. | 55,861 | 125,160 | 76,413 | 6,303 | ||||||||||||||||
SK Broadband Co., Ltd. | 5,914,094 | 2,995,092 | 2,919,002 | 1,028,246 | 49,489 | |||||||||||||||
PS&Marketing Corporation | 459,500 | 242,812 | 216,688 | 355,011 | 1,400 | |||||||||||||||
SERVICE ACE Co., Ltd. | 86,444 | 62,877 | 23,567 | 50,029 | 427 | |||||||||||||||
SERVICE TOP Co., Ltd. | 76,295 | 54,081 | 22,214 | 44,513 | 994 | |||||||||||||||
SK O&S Co., Ltd. | 84,284 | 50,628 | 33,656 | 61,075 | 542 | |||||||||||||||
Home & Service Co., Ltd. | 123,461 | 80,386 | 43,075 | 101,313 | 1,495 | |||||||||||||||
SK stoa Co., Ltd. | 99,626 | 48,195 | 51,431 | 89,479 | 3,392 |
10
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries, Continued |
2) | Condensed financial information of significant consolidated subsidiaries as of and for the year ended December 31, 2021 is as follows: |
(In millions of won) |
| |||||||||||||||||||
As of December 31, 2021 | 2021 | |||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit | |||||||||||||||
SK Telink Co., Ltd. | 52,821 | 122,016 | 313,404 | 8,846 | ||||||||||||||||
SK Broadband Co., Ltd. | 5,971,505 | 3,091,837 | 2,879,668 | 4,058,997 | 213,468 | |||||||||||||||
PS&Marketing Corporation | 478,745 | 263,457 | 215,288 | 1,445,540 | 3,179 | |||||||||||||||
SERVICE ACE Co., Ltd. | 99,059 | 66,496 | 32,563 | 197,146 | 2,519 | |||||||||||||||
SERVICE TOP Co., Ltd. | 72,026 | 46,067 | 25,959 | 185,452 | 2,066 | |||||||||||||||
SK O&S Co., Ltd. | 95,748 | 58,870 | 36,878 | 285,591 | 69 | |||||||||||||||
Home & Service Co., Ltd. | 131,947 | 90,775 | 41,172 | 405,255 | 550 | |||||||||||||||
SK stoa Co., Ltd. | 107,943 | 59,931 | 48,012 | 316,249 | 19,163 |
(4) Changes in subsidiaries
The list of subsidiaries that were newly included in consolidation for the three-month period ended March 31, 2022 is as follows:
Subsidiary | Reason | |
SAPEON Korea Inc. | Established by the Parent Company | |
SAPEON Inc. | Established by the Parent Company | |
SK m&service Co., Ltd. | Acquired by PS&Marketing Corporation |
11
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the three-month period ended March 31, 2022 and as of and for the year ended December 31, 2021 are as follows: |
| ||||
SK Broadband Co., Ltd. | ||||
Ownership of non-controlling interests (%) | 25.1 | |||
As of March 31, 2022 | ||||
Current assets | ||||
Non-current assets | 4,629,994 | |||
Current liabilities | (1,231,685 | ) | ||
Non-current liabilities | (1,763,407 | ) | ||
Net assets | 2,919,002 | |||
Fair value adjustment and others | (33,230 | ) | ||
Net assets on the consolidated financial statements | 2,885,772 | |||
Carrying amount of non-controlling interests | 725,194 | |||
For the three-month period ended March 31, 2022 | ||||
Revenue | ||||
Profit for the period | 49,489 | |||
Depreciation of the fair value adjustment and others | — | |||
Profit for the period on the consolidated financial statements | 49,489 | |||
Total comprehensive income | 39,333 | |||
Profit attributable to non-controlling interests | 12,437 | |||
Net cash provided by operating activities | ||||
Net cash used in investing activities | (81,596 | ) | ||
Net cash used in financing activities | (90,230 | ) | ||
Effects of exchange rate changes on cash and cash equivalents | 90 | |||
Net increase in cash and cash equivalents | 37,905 | |||
Dividends paid to non-controlling interests for the three-month period ended March 31, 2022 |
12
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the three-month period ended March 31, 2022 and as of and for the year ended December 31, 2021 are as follows, Continued: |
(In millions of won) | ||||
SK Broadband Co., Ltd. | ||||
Ownership of non-controlling interests (%) | 24.9 |
As of December 31, 2021 | ||||
Current assets | ||||
Non-current assets | 4,762,970 | |||
Current liabilities | (1,410,823 | ) | ||
Non-current liabilities | (1,681,014 | ) | ||
Net assets | 2,879,668 | |||
Fair value adjustment and others | (23,000 | ) | ||
Net assets on the consolidated financial statements | 2,856,668 | |||
Carrying amount of non-controlling interests | 725,540 |
2021 | ||||
Revenue | ||||
Profit for the year | 213,468 | |||
Depreciation of the fair value adjustment and others | — | |||
Profit for the period on the consolidated financial statements | 213,468 | |||
Total comprehensive income | 224,107 | |||
Profit attributable to non-controlling interests | 53,645 | |||
Net cash provided by operating activities | ||||
Net cash used in investing activities | (624,191 | ) | ||
Net cash used in financing activities | (237,241 | ) | ||
Effects of exchange rate changes on cash and cash equivalents | (59 | ) | ||
Net increase in cash and cash equivalents | 203,147 | |||
Dividends paid to non-controlling interests for the |
13
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
2. | Basis of Preparation |
(1) | Statement of compliance |
These interim condensed consolidated financial statements were prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) 1034 Interim Financial Reporting as part of the period covered by the Group’s K-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, 2021. These interim consolidated financial statements do not include all of the disclosures required for full annual financial statements.
(2) | Use of estimates and judgments |
1) Critical judgments, assumptions and estimation uncertainties
The preparation of the interim consolidated financial statements in conformity with K-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 interim consolidated 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, 2021.
14
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
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 and non-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 of K-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 30.
15
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
3. | Significant Accounting Policies |
The significant accounting policies applied by the Group in these interim consolidated 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, 2021. The Group has not early applied the new and revised K-IFRS and interpretations that have been issued but are not yet effective.
The following new and amended K-IFRS and interpretations are effective from January 1, 2022, initially, but these amended standards are not expected to have a significant impact on the Group’s interim consolidated financial statements.
• | Onerous Contracts – Cost of Fulfilling a Contract (Amendments to K-IFRS 1037). |
• | Reference to Conceptual Framework (Amendments to K-IFRS 1103). |
• | Property, Plant and Equipment: Proceeds before Intended Use (Amendments to K-IFRS 1016). |
• | Annual Improvements to K-IFRS 2018-2020. |
Meanwhile, as described in note 36, the Parent Company carried out spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments pursuant to the resolution of the Board of Directors on June 10, 2021 and approval of shareholders’ meeting on October 12, 2021. The Group has applied K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations, and accordingly, presented profit or loss of the spin-off business as discontinued operations. The comparative interim consolidated statement of profit or loss for the three-month period ended March 31, 2021 and related notes have been restated to present the discontinued operations separately from continuing operations.
16
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
4. | Operating Segments |
The Group’s operating segments have been identified to be each business unit, by which the Group provides different services and merchandise. The Group’s reportable segments include: 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; and all other businesses, which include providing shopping channel and digital platform for selling products 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 three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
For the three-month period ended March 31, 2022 | ||||||||||||||||||||||||
Cellular services | Fixed-line telecommunication services | Others | Sub-total | Adjustments | Total | |||||||||||||||||||
Total revenue | 1,209,798 | 120,332 | 4,918,151 | (640,943 | ) | 4,277,208 | ||||||||||||||||||
Inter-segment revenue | 371,876 | 262,241 | 6,826 | 640,943 | (640,943 | ) | — | |||||||||||||||||
External revenue | 3,216,145 | 947,557 | 113,506 | 4,277,208 | — | 4,277,208 | ||||||||||||||||||
Depreciation and amortization | 689,065 | 248,270 | 3,846 | 941,181 | (30,297 | ) | 910,884 | |||||||||||||||||
Operating profit | 360,669 | 82,169 | 3,494 | 446,332 | (13,939 | ) | 432,393 | |||||||||||||||||
Finance income and costs, net |
| (68,774 | ) | |||||||||||||||||||||
Loss relating to investments in associates and joint ventures, net |
| (38,445 | ) | |||||||||||||||||||||
Other non-operating income and expense, net |
| 1,834 | ||||||||||||||||||||||
Profit before income tax |
| 327,008 |
(In millions of won) | ||||||||||||||||||||||||||||
For the three-month period ended March 31, 2021 (Restated) | ||||||||||||||||||||||||||||
Continuing operations | Discontinued operations | |||||||||||||||||||||||||||
Cellular services | Fixed-line telecommunication services | Others (*) | Sub-total | Adjustments | Total | |||||||||||||||||||||||
Total revenue | 1,162,627 | 83,638 | 4,751,463 | (638,366 | ) | 4,113,097 | 786,495 | |||||||||||||||||||||
Inter-segment revenue | 374,653 | 261,711 | 2,002 | 638,366 | (638,366 | ) | — | 119,131 | ||||||||||||||||||||
External revenue | 3,130,545 | 900,916 | 81,636 | 4,113,097 | — | 4,113,097 | 667,364 | |||||||||||||||||||||
Depreciation and amortization | 700,105 | 232,436 | 2,300 | 934,841 | (25,735 | ) | 909,106 | 87,376 | ||||||||||||||||||||
Operating profit (loss) | 309,025 | 81,169 | (380 | ) | 389,814 | (15,598 | ) | 374,216 | 14,565 | |||||||||||||||||||
Finance income and costs, net |
| (19,788 | ) | (14,055 | ) | |||||||||||||||||||||||
Gain relating to investments in associates and joint ventures, net |
| 127,734 | 194,721 | |||||||||||||||||||||||||
Other non-operating income and expense, net |
| 4,388 | 2,056 | |||||||||||||||||||||||||
Profit before income tax |
| 486,550 | 197,287 |
17
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
4. | Operating Segments, Continued |
(1) | Segment information for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued: |
(*) The Parent Company carried out spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments for the year ended December 31, 2021. Accordingly, the Group reclassified SK stoa Co., Ltd. from Commerce Services segment to Others segment.
The Group has restated the previously reported segment information for the three-month period ended March 31, 2021 to reflect reclassification of operating segments due to the spin-off.
Since there are no intersegment sales of inventories 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 three-month periods ended March 31, 2022 and 2021.
(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 three-month period ended | |||||||||
March 31, 2022 | March 31, 2021 (Restated) | |||||||||
Goods and Services transferred at a point in time: |
| |||||||||
Cellular revenue | Goods and others(*1) | 237,921 | ||||||||
Fixed-line telecommunication revenue | Goods and others | 18,872 | 20,081 | |||||||
Other revenue | Others(*2) | 103,995 | 76,002 | |||||||
|
|
|
| |||||||
363,937 | 334,004 | |||||||||
|
|
|
| |||||||
Goods and Services transferred over time: |
| |||||||||
Cellular revenue | Wireless service(*3) | 2,526,450 | 2,486,028 | |||||||
Cellular interconnection | 129,911 | 121,108 | ||||||||
Other(*4) | 316,242 | 285,488 | ||||||||
Fixed-line telecommunication revenue | Fixed-line service | 46,173 | 53,107 | |||||||
Cellular interconnection | 6,606 | 18,829 | ||||||||
Internet Protocol Television(*5) | 449,959 | 436,087 | ||||||||
International calls | 43,998 | 41,535 | ||||||||
Internet service and miscellaneous(*6) | 381,949 | 331,277 | ||||||||
Other revenue | Miscellaneous(*2) | 11,983 | 5,634 | |||||||
|
|
|
| |||||||
3,913,271 | 3,779,093 | |||||||||
|
|
|
| |||||||
Discontinued operations | — | 667,364 | ||||||||
|
|
|
| |||||||
4,780,461 | ||||||||||
|
|
|
|
18
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
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, Continued: |
(*1) | Cellular revenue includes revenue from sales of handsets and other electronic accessories. |
(*2) | Miscellaneous other revenue includes revenue from considerations received for the product sales-type data broadcasting channel use and sales of goods through data broadcasting. |
(*3) | Wireless service includes revenue from wireless voice and data transmission services principally derived from usage charges to wireless subscribers. |
(*4) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
(*5) | IPTV service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers. |
(*6) | Internet service includes revenue from the high speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services. |
19
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
5. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | March 31, 2022 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (249,243 | ) | 1,981,245 | |||||||||
Short-term loans | 73,700 | (669 | ) | 73,031 | ||||||||
Accounts receivable – other(*) | 666,240 | (45,178 | ) | 621,062 | ||||||||
Accrued income | 665 | — | 665 | |||||||||
Guarantee deposits (Other current assets) | 95,992 | — | 95,992 | |||||||||
|
|
|
|
|
| |||||||
3,067,085 | (295,090 | ) | 2,771,995 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 68,766 | (44,535 | ) | 24,231 | ||||||||
Long-term accounts receivable – other(*) | 274,486 | (1,878 | ) | 272,608 | ||||||||
Guarantee deposits | 187,202 | (300 | ) | 186,902 | ||||||||
Long-term accounts receivable – trade (Other non-current assets) | 10,298 | (30 | ) | 10,268 | ||||||||
|
|
|
|
|
| |||||||
540,752 | (46,743 | ) | 494,009 | |||||||||
|
|
|
|
|
| |||||||
(341,833 | ) | 3,266,004 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of March 31, 2022 include |
(In millions of won) | December 31, 2021 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (238,847 | ) | 1,913,511 | |||||||||
Short-term loans | 71,750 | (933 | ) | 70,817 | ||||||||
Accounts receivable – other(*) | 593,109 | (44,747 | ) | 548,362 | ||||||||
Accrued income | 762 | — | 762 | |||||||||
Guarantee deposits (Other current assets) | 92,046 | — | 92,046 | |||||||||
|
|
|
|
|
| |||||||
2,910,025 | (284,527 | ) | 2,625,498 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 66,431 | (44,452 | ) | 21,979 | ||||||||
Long-term accounts receivable – other(*) | 277,116 | (1,878 | ) | 275,238 | ||||||||
Guarantee deposits | 186,713 | — | 186,713 | |||||||||
Long-term accounts receivable – trade (Other non-current assets) | 8,140 | (34 | ) | 8,106 | ||||||||
|
|
|
|
|
| |||||||
538,400 | (46,364 | ) | 492,036 | |||||||||
|
|
|
|
|
| |||||||
(330,891 | ) | 3,117,534 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2021 include |
20
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
5. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on trade and other receivables measured at amortized cost for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
January 1, 2022 | Impairment | Write-offs(*) | Collection of receivables previously written- off | Business combination | March 31, 2022 | |||||||||||||||||||
Accounts receivable – trade | 9,195 | (1,909 | ) | 3,103 | 3 | 249,273 | ||||||||||||||||||
Accounts receivable – other, etc. | 92,010 | 105 | (52 | ) | 105 | 392 | 92,560 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
9,300 | (1,961 | ) | 3,208 | 395 | 341,833 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||
January 1, 2021 | Impairment | Write-offs(*) | Collection of receivables previously written- off | March 31, 2021 | ||||||||||||||||
Accounts receivable – trade | 7,475 | (4,686 | ) | 855 | 268,142 | |||||||||||||||
Accounts receivable – other, etc. | 100,565 | (55 | ) | (297 | ) | 5,660 | 105,873 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
7,420 | (4,983 | ) | 6,515 | 374,015 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Group writes off trade and other receivables that are determined to be uncollectable due to reasons, such as termination of operations or bankruptcy. |
(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 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 primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
Receivables related to other revenue mainly consist of receivables from corporate customers. The Group transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Group is not exposed to significant credit concentration risk as the Group regularly assesses their credit risk by monitoring their credit ratings. While the contract assets are subject to the impairment requirements, no significant expected credit loss has been identified.
21
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
6. | Prepaid Expenses |
The Group pays commissions to its retail stores and authorized dealers, primarily for wireless and fixed-line telecommunication services. The Group 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 Group expects to maintain its customers.
(1) | Details of prepaid expenses as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Current assets: |
| |||||||
Incremental costs of obtaining contracts | 1,886,680 | |||||||
Others | 123,429 | 100,823 | ||||||
|
|
|
| |||||
1,987,503 | ||||||||
|
|
|
| |||||
Non-current assets: |
| |||||||
Incremental costs of obtaining contracts | 977,236 | |||||||
Others | 81,243 | 91,912 | ||||||
|
|
|
| |||||
1,069,148 | ||||||||
|
|
|
|
(2) | Incremental costs of obtaining contracts |
The amortization and impairment losses in connection with incremental costs of obtaining contracts recognized for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021(*) | |||||||
Amortization and impairment losses recognized | 654,241 |
(*) | Includes amounts related to discontinued operations. |
22
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
7. | Contract Assets and Liabilities |
In case of providing both wireless telecommunication services and sales of handsets, the Group allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Group recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.
(1) | Details of contract assets and liabilities as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | 118,278 | |||||||
Contract liabilities: | ||||||||
Wireless service contracts | 18,674 | 18,397 | ||||||
Customer loyalty programs | 11,200 | 12,699 | ||||||
Fixed-line service contracts | 126,985 | 118,600 | ||||||
Others | 42,724 | 53,271 | ||||||
|
|
|
| |||||
202,967 | ||||||||
|
|
|
|
(2) | The amount of revenue recognized for the three-month periods ended March 31, 2022 and 2021 related to the contract liabilities carried forward from the prior period are |
8. | Inventories |
(1) | Details of inventories as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
March 31, 2022 | December 31, 2022 | |||||||||||||||||||||||
Acquisition cost | Valuation allowance | Carrying amount | Acquisition cost | Valuation allowance | Carrying amount | |||||||||||||||||||
Merchandise | (4,654 | ) | 206,272 | 204,545 | (3,419 | ) | 201,126 | |||||||||||||||||
Supplies | 17,137 | — | 17,137 | 3,511 | — | 3,511 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(4,654 | ) | 223,409 | 208,056 | (3,419 | ) | 204,637 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(2) | Cost of inventories recognized as operating expenses for the three-month periods ended March 31, 2022 and 2021 are |
23
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
9. | Investment Securities |
(1) | Details of short-term investment securities as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||
Category | March 31, 2022 | December 31, 2021 | ||||||||
Beneficiary certificates | FVTPL | 5,010 |
(2) | Details of long-term investment securities as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||
Category | March 31, 2022 | December 31, 2021 | ||||||||||
Equity instruments | FVOCI | (*) | 1,510,428 | |||||||||
FVTPL | 52,652 | 57,830 | ||||||||||
|
|
|
| |||||||||
1,483,695 | 1,568,258 | |||||||||||
Debt instruments | FVOCI | 1,202 | 1,177 | |||||||||
FVTPL | 151,414 | 145,643 | ||||||||||
|
|
|
| |||||||||
152,616 | 146,820 | |||||||||||
|
|
|
| |||||||||
1,715,078 | ||||||||||||
|
|
|
|
(*) | The Group designated investments in equity instruments that are not held for trading as financial assets at FVOCI, and the amounts of those equity instruments as of March 31, 2022 and December 31, 2021 are |
24
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
10. | Business Combinations |
(1) | 2022 |
1) | Acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation: |
PS&Marketing Corporation obtained control over SK m&service Co., Ltd. by acquiring its 3,099,112 shares (100%) for the three-month period ended March 31, 2022. As this transaction is a business combination under common control, the assets acquired and liabilities assumed were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements, and the difference between the consideration transferred and the carrying amounts of net assets was recognized as capital surplus and others. Subsequent to the acquisition of control, SK m&service Co., Ltd. recognized revenue of18,777 million and net profit ofW619 million. Meanwhile, assuming that business combination has occurred as of January 1, 2022, the Group would have recognized revenue ofW57,804 million and net profit ofW1,157 million.W
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name | SK m&service Co., Ltd. | |
Location | 16th floor, 34, Supyo-ro, Jung-gu, Seoul, Korea | |
CEO | Park, Jeong-Min | |
Industry | Database and Internet website service |
(ii) | Considerations transferred and identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents | 10,547 | |||
Accounts receivable – trade and other, net | 76,035 | |||
Inventories | 3,349 | |||
Property and equipment, net | 27,138 | |||
Intangible assets, net | 12,462 | |||
Goodwill | 2,515 | |||
Other assets | 10,395 | |||
Accounts payable – trade and other | (53,894 | ) | ||
Income tax payable | (399 | ) | ||
Lease liabilities | (6,503 | ) | ||
Provisions | (991 | ) | ||
Defined benefit liabilities | (2,739 | ) | ||
Other liabilities | (18,337 | ) | ||
|
| |||
59,578 | ||||
|
| |||
III. Capital surplus and others(I - II) | ||||
|
|
25
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
10. | Business Combinations, Continued |
(2) | 2021 |
1) | Merger of ADT CAPS Co., Ltd. by SK Shieldus Co., Ltd.(Formerly, ADT CAPS Co, Ltd., at the time of merger, SK Infosec Co., Ltd.): |
On March 4, 2021, SK Infosec Co., Ltd. merged with ADT CAPS Co., Ltd., a subsidiary of SK Infosec Co., Ltd., to improve management efficiency. As this transaction is a business combination under common control, the assets acquired and liabilities assumed were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements, and there is no effect on the assets and liabilities of the consolidated financial statements. After the date of the merger, SK Infosec Co., Ltd. changed its name to ADT CAPS Co., Ltd. and then again, in October 2021, ADT CAPS Co., Ltd. changed its name to SK Shieldus Co., Ltd.
Identifiable assets acquired and liabilities assumed were transferred to the spin-off company.
26
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
10. | Business Combinations, Continued |
(2) | 2021, Continued |
2) Acquisition of Studio Dolphin Co., Ltd. by DREAMUS COMPANY:
DREAMUS COMPANY obtained control over Studio Dolphin Co., Ltd. by acquiring its 10,000 shares(100%) for the year ended December 31, 2021. The consideration transferred was1,500 million in cash, and the difference between the fair value of net assets acquired and the consideration transferred amounting toW1,465 million was recognized as goodwill.W
Identifiable assets acquired and liabilities assumed and goodwill were transferred to the spin-off company.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name | Studio Dolphin Co., Ltd. | |
Location | 3rd floor, 10, Jandari-ro 7an-gil, Mapo-gu, Seoul, Korea | |
CEO | Kim, Dong-Hee | |
Industry | Music and sound recording business |
(ii) | Considerations transferred and identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Cash and cash equivalents | 20 | |||
Accounts receivable – trade and other, net | 31 | |||
Other assets | 7 | |||
Accounts payable – trade and other | (4 | ) | ||
Short-term borrowings | (2 | ) | ||
Other liabilities | (17 | ) | ||
|
| |||
35 | ||||
|
| |||
III. Goodwill(I - II) | ||||
|
|
27
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
10. | Business Combinations, Continued |
(2) | 2021, Continued |
3) Acquisition of YLP Inc. by T map Mobility Co., Ltd.:
T map Mobility Co., Ltd. obtained control over YLP Inc. by acquiring its 168,012 shares(100%). during the year ended December 31, 2021. The consideration transferred was79,000 million, among whichW55,598 million was paid in cash to acquire 118,242 shares(70.4%) and on June 29, 2021, T map Mobility Co., Ltd. issued 267,700 of its new common shares (with a fair value ofW23,402 million) to the shareholders of YLP Inc. in exchange for the remaining 49,770 shares(29.6%) owned by those shareholders. The difference between the fair value of net assets acquired and the consideration transferred amounting toW69,516 million was recognized as goodwill.W
Identifiable assets acquired and liabilities assumed and goodwill were transferred to the spin-off company.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name | YLP Inc. | |
Location | 1740, Cheongwon-ro, Pyeongtaek-si, Gyeonggi-do, Korea | |
CEO | Lee, Hyeok-Ju | |
Industry | Freight forwarders and cargo agents |
(ii) | Considerations transferred and identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
Fair value of shares of T map Mobility Co., Ltd. | 23,402 | |||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents | 1,897 | |||
Financial instruments | 4,000 | |||
Accounts receivable – trade and other, net | 4,480 | |||
Property and equipment, net | 431 | |||
Intangible assets, net | 3,595 | |||
Other assets | 325 | |||
Borrowings | (1,000 | ) | ||
Accounts payable – trade and other | (3,542 | ) | ||
Lease liabilities | (327 | ) | ||
Other liabilities | (48 | ) | ||
Deferred tax liabilities | (327 | ) | ||
|
| |||
9,484 | ||||
|
| |||
III. Goodwill(I - II) | ||||
|
|
28
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
10. | Business Combinations, Continued |
(2) | 2021, Continued |
4) Acquisition of Rokmedia Co., Ltd. by One Store Co., Ltd.:
One Store Co., Ltd. obtained control over Rokmedia Co., Ltd. by acquiring its 60,000 shares(100%) for the year ended December 31, 2021. The consideration transferred was40,000 million in cash, and the difference between the fair value of net assets acquired and the consideration transferred amounting toW33,641 million was recognized as goodwill.W
Identifiable assets acquired and liabilities assumed and goodwill were transferred to the spin-off company.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name | Rokmedia Co., Ltd. | |
Location | 3rd floor, 330, Seongam-ro, Mapo-gu, Seoul, Korea | |
CEO | Kang, Jun-Gyu / Kim, Jeong-Su | |
Industry | Publishing and telecommunications retail business |
(ii) | Considerations transferred and identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents | 719 | |||
Financial instruments | 2,170 | |||
Accounts receivable – trade and other, net | 1,374 | |||
Inventories | 933 | |||
Other assets | 3,212 | |||
Short-term loans, net | 30 | |||
Property and equipment, net | 792 | |||
Intangible assets, net | 2,677 | |||
Accounts payable – trade and other | (1,885 | ) | ||
Contract liabilities | (1,401 | ) | ||
Borrowings | (1,485 | ) | ||
Provisions | (385 | ) | ||
Lease liabilities | (56 | ) | ||
Other liabilities | �� | (111 | ) | |
Deferred tax liabilities | (135 | ) | ||
Income tax payable | (90 | ) | ||
|
| |||
6,359 | ||||
|
| |||
III. Goodwill(I - II) | ||||
|
|
29
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
10. | Business Combinations, Continued |
(2) | 2021, Continued |
5) Acquisition of GOOD SERVICE Co., Ltd. by T map Mobility Co., Ltd.:
T map Mobility Co., Ltd. obtained control by acquiring 2,000 shares (100%) of GOOD SERVICE Co., Ltd. for the year ended December 31, 2021. The consideration transferred was10,000 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting toW4,844 million was recognized as goodwill.W
Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name | GOOD SERVICE Co., Ltd. | |
Location | 4th floor, 54, Daeheung-ro, Mapo-gu, Seoul, Korea | |
CEO | Kim, Seung-Wook | |
Industry | Surrogate driving service business and related business |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents | 1,328 | |||
Financial instruments | 116 | |||
Accounts receivable – trade and other, net | 1,881 | |||
Property and equipment, net | 116 | |||
Intangible assets, net | 3,492 | |||
Accounts payable – trade and other | (883 | ) | ||
Other liabilities | (85 | ) | ||
Deferred tax liabilities | (696 | ) | ||
Lease liabilities | (113 | ) | ||
|
| |||
5,156 | ||||
|
| |||
III. Goodwill(I - II) | ||||
|
|
30
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
11. | Investments in Associates and Joint Ventures |
(1) | Investments in associates and joint ventures accounted for using the equity method as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | March 31, 2022 | December 31, 2021 | ||||||||||||||||||
Country | Ownership (%) | Carrying amount | Ownership (%) | Carrying amount | ||||||||||||||||
Investments in associates: | ||||||||||||||||||||
SK China Company Ltd. | China | 27.3 | 27.3 | |||||||||||||||||
Korea IT Fund(*1) | Korea | 63.3 | 340,002 | 63.3 | 339,976 | |||||||||||||||
HanaCard Co., Ltd.(*2) | Korea | 15.0 | 358,163 | 15.0 | 349,866 | |||||||||||||||
UniSK | China | 49.0 | 20,180 | 49.0 | 19,156 | |||||||||||||||
SK Technology Innovation Company | | Cayman Islands | | 49.0 | 65,617 | 49.0 | 86,301 | |||||||||||||
SK MENA Investment B.V. | Netherlands | 32.1 | 15,633 | 32.1 | 15,343 | |||||||||||||||
SK Latin America Investment S.A. | Spain | 32.1 | 14,020 | 32.1 | 14,004 | |||||||||||||||
SK South East Asia Investment Pte. Ltd. | Singapore | 20.0 | 359,564 | 20.0 | 348,782 | |||||||||||||||
Pacific Telecom Inc.(*2) | USA | 15.0 | 45,151 | 15.0 | 43,789 | |||||||||||||||
S.M. Culture & Contents Co., Ltd. | Korea | 23.1 | 58,962 | 23.1 | 60,261 | |||||||||||||||
Digital Games International Pte. Ltd. | Singapore | 33.3 | 2,191 | 33.3 | 2,208 | |||||||||||||||
Invites Healthcare Co., Ltd. | Korea | 27.1 | 15,942 | 27.1 | 26,474 | |||||||||||||||
Nam Incheon Broadcasting Co., Ltd. | Korea | 27.3 | 12,783 | 27.3 | 12,525 | |||||||||||||||
Home Choice Corp.(*2) | Korea | 17.8 | 2,917 | 17.8 | 3,052 | |||||||||||||||
CMES Inc.(*2,3) | Korea | 7.7 | 900 | — | — | |||||||||||||||
12CM JAPAN and others(*2,4) | — | — | 68,430 | — | 72,605 | |||||||||||||||
|
|
|
| |||||||||||||||||
2,209,102 | 2,188,096 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||
Finnq Co., Ltd. (*6) | Korea | 49.0 | 5,609 | 49.0 | 7,255 | |||||||||||||||
UTC Kakao-SK Telecom ESG Fund(*5,6) | Korea | 48.2 | 3,925 | 48.2 | 2,000 | |||||||||||||||
|
|
|
| |||||||||||||||||
9,534 | 9,255 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
2,197,351 | ||||||||||||||||||||
|
|
|
|
(*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 the Board of Directors even though the Group has less than 20% of equity interests. |
(*3) | As the Group obtained significant influence over the investee, |
(*4) | The Group additionally contributed |
31
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
11. | Investments in Associates and Joint Ventures, Continued |
(1) | Investments in associates and joint ventures accounted for using the equity method as of March 31, 2022 and December 31, 2021 are as follows, Continued: |
(*5) | The Group additionally contributed |
(*6) | These investments were classified as investments in joint ventures as the Group has a joint control pursuant to the agreement with the other shareholders. |
(2) | The market value of investments in listed associates as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
S.M.Culture & Contents Co.,Ltd. | 22,033,898 | 114,576 | 4,485 | 22,033,898 | 98,822 |
.
32
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
11. | Investments in Associates and Joint Ventures, Continued |
(3) | The financial information of significant associates as of and for the three-month period ended March 31, 2022 and as of and for the year ended December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||
HanaCard Co., Ltd. | Korea IT Fund | SK China Company Ltd. | SK South East Asia Investment Pte. Ltd. | |||||||||||||
As of March 31, 2022 | ||||||||||||||||
Current assets | 120,426 | 1,076,812 | 78,362 | |||||||||||||
Non-current assets | 444,735 | 416,419 | 2,040,459 | 3,008,286 | ||||||||||||
Current liabilities | 2,189,626 | — | 47,094 | 421,807 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-current liabilities | 5,430,168 | — | 337,976 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
For the three-month period ended March 31, 2022 | ||||||||||||||||
Revenue | — | 13,245 | 45 | |||||||||||||
Profit (loss) for the period | 54,594 | 41 | (7,692 | ) | (4,004 | ) | ||||||||||
Other comprehensive income | 3,344 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total comprehensive income (loss) | 57,938 | 41 | (7,692 | ) | (4,004 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(In millions of won) | ||||||||||||||||
HanaCard Co., Ltd. | Korea IT Fund | SK China Company Ltd. | SK South East Asia Investment Pte. Ltd. | |||||||||||||
As of December 31, 2021 | ||||||||||||||||
Current assets | 117,172 | 1,124,219 | 133,110 | |||||||||||||
Non-current assets | 465,333 | 419,632 | 1,849,102 | 2,853,184 | ||||||||||||
Current liabilities | 1,281,783 | — | 53,199 | 412,962 | ||||||||||||
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| |||||||||
Non-current liabilities | 6,284,587 | — | 316,470 | — | ||||||||||||
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| |||||||||
2021 | ||||||||||||||||
Revenue | 58,741 | 80,241 | 9,945 | |||||||||||||
Profit (loss) for the year | 250,484 | 50,107 | 933,475 | (188,678 | ) | |||||||||||
Other comprehensive income (loss) | 909 | (6,847 | ) | 326,661 | 304,700 | |||||||||||
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|
|
|
|
|
|
| |||||||||
Total comprehensive income | 251,393 | 43,260 | 1,260,136 | 116,022 | ||||||||||||
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|
33
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
11. | Investments in Associates and Joint Ventures, Continued |
(4) | Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
KEB HanaCard Co., Ltd. | 15.0 | 313,275 | 44,888 | 358,163 | ||||||||||||||||
Korea IT Fund | 536,845 | 63.3 | 340,002 | — | 340,002 | |||||||||||||||
SK China Company Ltd.(*) | 2,731,880 | 27.3 | 745,017 | 83,630 | 828,647 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*) | 1,797,820 | 20.0 | 359,564 | — | 359,564 |
(In millions of won) | ||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
KEB HanaCard Co., Ltd. | 15.0 | 304,351 | 45,515 | 349,866 | ||||||||||||||||
Korea IT Fund | 536,804 | 63.3 | 339,976 | — �� | 339,976 | |||||||||||||||
SK China Company Ltd.(*) | 2,603,336 | 27.3 | 709,961 | 83,793 | 793,754 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*) | 1,743,908 | 20.0 | 348,782 | — | 348,782 |
(*) | Net assets of these entities represent net assets excluding those attributable to their non-controlling interests. |
34
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
11. | Investments in Associates and Joint Ventures, Continued |
(5) | Changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended March 31, 2022 | |||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profits (losses) | Other compre- hensive income (loss) | Other increase | Ending balance | |||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||
SK China Company Ltd. | — | (14,053 | ) | 48,946 | — | 828,647 | ||||||||||||||||||
Korea IT Fund | 339,976 | — | 26 | — | — | 340,002 | ||||||||||||||||||
KEB HanaCard Co., Ltd. | 349,866 | — | 7,560 | 737 | — | 358,163 | ||||||||||||||||||
UniSK | 19,156 | — | 647 | 377 | — | 20,180 | ||||||||||||||||||
SK Technology Innovation Company | 86,301 | — | (22,219 | ) | 1,535 | — | 65,617 | |||||||||||||||||
SK MENA Investment B.V. | 15,343 | — | (1 | ) | 291 | — | 15,633 | |||||||||||||||||
SK Latin America Investment S.A. | 14,004 | — | 29 | (13 | ) | — | 14,020 | |||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 348,782 | — | (523 | ) | 11,305 | — | 359,564 | |||||||||||||||||
Pacific Telecom Inc. | 43,789 | — | 782 | 580 | — | 45,151 | ||||||||||||||||||
S.M. Culture & Contents Co., Ltd. | 60,261 | — | (1,328 | ) | — | 29 | 58,962 | |||||||||||||||||
Digital Games International Pte. Ltd. | 2,208 | — | (49 | ) | 32 | — | 2,191 | |||||||||||||||||
Invites Healthcare Co., Ltd. | 26,474 | — | (10,500 | ) | (32 | ) | — | 15,942 | ||||||||||||||||
Nam Incheon Broadcasting Co., Ltd. | 12,525 | — | 258 | — | — | 12,783 | ||||||||||||||||||
Home Choice Corp. | 3,052 | — | (136 | ) | 1 | — | 2,917 | |||||||||||||||||
CMES Inc.(*1) | — | — | — | — | 900 | 900 | ||||||||||||||||||
12CM JAPAN and others(*2) | 72,605 | (4,923 | ) | 2,006 | (1,258 | ) | — | 68,430 | ||||||||||||||||
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| |||||||||||||
2,188,096 | (4,923 | ) | (37,501 | ) | 62,501 | 929 | 2,209,102 | |||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||||||
Finnq Co., Ltd. | 7,255 | — | (1,848 | ) | 202 | — | 5,609 | |||||||||||||||||
UTC Kakao-SK Telecom ESG Fund | 2,000 | 2,000 | (75 | ) | — | — | 3,925 | |||||||||||||||||
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9,255 | 2,000 | (1,923 | ) | 202 | — | 9,534 | ||||||||||||||||||
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| |||||||||||||
(2,923 | ) | (39,424 | ) | 62,703 | 929 | 2,218,636 | ||||||||||||||||||
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|
(*1) | As the Group obtained significant influence over the investee, |
(*2) | The acquisition for the three-month period ended March 31, 2022 includes |
35
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
11. | Investments in Associates and Joint Ventures, Continued |
(5) | Changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | For the three-month period ended March 31, 2021 | |||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profits (losses)(*4) | Other compre- hensive income (loss) | Other increase (decrease) | Ending balance | |||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||
SK China Company Ltd. | — | 32 | 32,146 | — | 587,311 | |||||||||||||||||||
Korea IT Fund | 323,294 | — | 15 | — | — | 323,309 | ||||||||||||||||||
KEB HanaCard Co., Ltd. | 314,930 | — | 10,259 | (195 | ) | — | 324,994 | |||||||||||||||||
SK Telecom CS T1 Co., Ltd. | 53,010 | — | (3,699 | ) | (76 | ) | — | 49,235 | ||||||||||||||||
NanoEnTek, Inc. | 43,190 | — | 836 | 30 | — | 44,056 | ||||||||||||||||||
UniSK | 15,700 | — | 335 | 471 | — | 16,506 | ||||||||||||||||||
SK Technology Innovation Company | 41,579 | — | 17,314 | 1,832 | — | 60,725 | ||||||||||||||||||
SK MENA Investment B.V. | 14,043 | — | (1 | ) | 531 | — | 14,573 | |||||||||||||||||
SK hynix Inc.(*1) | 12,251,861 | — | 208,154 | 58,926 | (170,937 | ) | 12,348,004 | |||||||||||||||||
SK Latin America Investment S.A. | 13,930 | — | (36 | ) | (103 | ) | — | 13,791 | ||||||||||||||||
Grab Geo Holdings PTE. LTD. | 30,063 | — | — | — | — | 30,063 | ||||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 311,990 | — | 4,235 | 20,834 | — | 337,059 | ||||||||||||||||||
Pacific Telecom Inc. | 39,723 | — | — | 984 | — | 40,707 | ||||||||||||||||||
S.M. Culture & Contents Co., Ltd. | 62,248 | — | (2,095 | ) | 268 | — | 60,421 | |||||||||||||||||
Contents Wavve Co., Ltd. | 75,803 | — | (6,728 | ) | — | — | 69,075 | |||||||||||||||||
Hello Nature Co., Ltd.(*2) | 11,969 | — | (2,665 | ) | — | (1,730 | ) | 7,574 | ||||||||||||||||
Digital Games International Pte. Ltd. | 6,449 | — | (1,583 | ) | 123 | — | 4,989 | |||||||||||||||||
Invites Healthcare Co., Ltd. | 25,536 | 7,000 | (2,617 | ) | 4 | — | 29,923 | |||||||||||||||||
Nam Incheon Broadcasting Co., Ltd. | 10,902 | — | 570 | — | — | 11,472 | ||||||||||||||||||
NANO-X IMANGING LTD. | 28,484 | — | — | — | 1,192 | 29,676 | ||||||||||||||||||
Home Choice Corp. | 3,585 | — | (151 | ) | — | — | 3,434 | |||||||||||||||||
Carrot General Insurance Co., Ltd. | 13,469 | — | (2,500 | ) | (125 | ) | — | 10,844 | ||||||||||||||||
12CM JAPAN and others(*3) | 65,750 | 2,007 | 970 | (958 | ) | 340 | 68,109 | |||||||||||||||||
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|
|
| |||||||||||||
14,312,641 | 9,007 | 220,645 | 114,692 | (171,135 | ) | 14,485,850 | ||||||||||||||||||
Investments in joint ventures: | ||||||||||||||||||||||||
Dogus Planet, Inc. | 15,071 | — | 611 | (1,424 | ) | — | 14,258 | |||||||||||||||||
Finnq Co., Ltd. | 13,342 | — | (1,669 | ) | (118 | ) | — | 11,555 | ||||||||||||||||
NEXTGEN BROADCAST SERVICES CO., LLC | 5,850 | 5,570 | — | — | 342 | 11,762 | ||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC | 1,600 | — | — | — | 67 | 1,667 | ||||||||||||||||||
Techmaker GmbH | 5,609 | — | — | — | — | 5,609 | ||||||||||||||||||
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| |||||||||||||
41,472 | 5,570 | (1,058 | ) | (1,542 | ) | 409 | 44,851 | |||||||||||||||||
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| |||||||||||||
14,577 | 219,587 | 113,150 | (170,726 | ) | 14,530,701 | |||||||||||||||||||
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36
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
11. | Investments in Associates and Joint Ventures, Continued |
(5) | Changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued: |
(*1) | Other increase (decrease) includes the dividends declared by SK hynix Inc. for the three-month period ended March 31, 2021. |
(*2) | The Group recognized |
(*3) | The acquisition for the three-month period ended March 31, 2021 includes |
(*4) | Includes amounts related to discontinued operations. |
(6) | 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 March 31, 2022 are as follows: |
(In millions of won) | Unrecognized loss | Unrecognized change in equity | ||||||||||||||
For the three-month period ended March 31, 2022 | Cumulative loss | For the three-month period ended March 31, 2022 | Cumulative loss | |||||||||||||
Wave City Development Co., Ltd. | 8,573 | — | — | |||||||||||||
Daehan Kanggun BcN Co., Ltd. and others | — | 5,780 | — | (124 | ) | |||||||||||
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| |||||||||
14,353 | — | (124 | ) | |||||||||||||
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37
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
12. | Property and Equipment |
Changes in property and equipment for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||
For the three-month period ended March 31, 2022 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Business combination(*) | Ending balance | ||||||||||||||||||||||
Land | — | (3 | ) | 3,055 | — | 2,789 | 978,641 | |||||||||||||||||||||
Buildings | 794,453 | 137 | (100 | ) | 13,240 | (13,479 | ) | 8,583 | 802,834 | |||||||||||||||||||
Structures | 291,279 | 1 | — | 6,826 | (9,505 | ) | — | 288,601 | ||||||||||||||||||||
Machinery | 7,997,927 | 58,491 | (910 | ) | 322,304 | (575,956 | ) | — | 7,801,856 | |||||||||||||||||||
Other | 487,716 | 86,709 | (286 | ) | (59,053 | ) | (24,422 | ) | 8,554 | 499,218 | ||||||||||||||||||
Right-of-use assets | 1,559,333 | 167,149 | (16,098 | ) | (7,007 | ) | (99,792 | ) | 6,331 | 1,609,916 | ||||||||||||||||||
Construction in progress | 767,751 | 115,306 | (237 | ) | (293,363 | ) | — | 881 | 590,338 | |||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
427,793 | (17,634 | ) | (13,998 | ) | (723,154 | ) | 27,138 | 12,571,404 | ||||||||||||||||||||
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|
|
|
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|
|
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|
|
|
(*) | Includes assets from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
(In millions of won) | ||||||||||||||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation(*) | Reclassified as held for sale | Ending balance | ||||||||||||||||||||||
Land | — | — | 5,836 | — | (20,507 | ) | 1,024,652 | |||||||||||||||||||||
Buildings | 858,606 | 280 | (158 | ) | 15,498 | (13,824 | ) | (8,669 | ) | 851,733 | ||||||||||||||||||
Structures | 317,403 | 524 | (1 | ) | 7,723 | (9,365 | ) | (6,104 | ) | 310,180 | ||||||||||||||||||
Machinery | 8,376,212 | 47,345 | (6,000 | ) | 368,505 | (604,038 | ) | — | 8,182,024 | |||||||||||||||||||
Other | 653,616 | 107,708 | (181 | ) | (89,973 | ) | (49,320 | ) | — | 621,850 | ||||||||||||||||||
Right-of-use assets | 1,472,035 | 192,210 | (83,916 | ) | — | (110,294 | ) | — | 1,470,035 | |||||||||||||||||||
Construction in progress | 659,882 | 122,243 | (86 | ) | (342,041 | ) | — | — | 439,998 | |||||||||||||||||||
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|
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| |||||||||||||||
470,310 | (90,342 | ) | (34,452 | ) | (786,841 | ) | (35,280 | ) | 12,900,472 | |||||||||||||||||||
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|
|
(*) | Includes amounts related to discontinued operations. |
38
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
13. | Investment Property |
(1) | Changes in investment property for the three-month period ended March 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||
For the three-month period ended March 31, 2022 | ||||||||||||||||
Beginning balance | Transfer | Depreciation | Ending balance | |||||||||||||
Land | 181 | — | 6,252 | |||||||||||||
Buildings | 7,353 | 231 | (181 | ) | 7,403 | |||||||||||
Right-of-use assets | 9,610 | 516 | (365 | ) | 9,761 | |||||||||||
|
|
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|
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|
|
| |||||||||
928 | (546 | ) | 23,416 | |||||||||||||
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|
|
|
|
|
|
(2) | The Group recognized lease income of |
14. | Leases |
(1) | Details of the right-of-use assets as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Land, buildings and structures | 1,392,925 | |||||||
Others | 184,787 | 166,408 | ||||||
|
|
|
| |||||
1,559,333 | ||||||||
|
|
|
|
(2) | Details of amounts recognized in the interim consolidated statements of profit or loss for the three-month periods ended March 31, 2022 and 2021 as a lessee are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021(*) | |||||||
Depreciation of right-of-use assets: | ||||||||
Land, buildings and structures | 90,175 | |||||||
Others | 15,682 | 20,119 | ||||||
|
|
|
| |||||
99,792 | 110,294 | |||||||
|
|
|
| |||||
Interest expense on lease liabilities | 5,470 |
(*) | Includes amounts related to discontinued operations. |
Expenses related to short-term leases and leases of low-value assets the Group recognized are not material.
(3) | The total cash outflows due to lease payments for the three-month periods ended March 31, 2022 and 2021 amounted to |
39
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
15. | Intangible Assets |
(1) | Changes in intangible assets for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
For the three-month period ended March 31, 2022 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Business combination(*) | Ending balance | ||||||||||||||||||||||
Frequency usage rights | — | — | — | (119,195 | ) | — | 2,440,494 | |||||||||||||||||||||
Land usage rights | 2,732 | — | — | — | (457 | ) | — | 2,275 | ||||||||||||||||||||
Industrial rights | 55,954 | 2,014 | — | (105 | ) | (1,170 | ) | 3 | 56,696 | |||||||||||||||||||
Development costs | 200 | — | — | — | (77 | ) | 657 | 780 | ||||||||||||||||||||
Facility usage rights | 17,874 | 204 | (1 | ) | 34 | (1,341 | ) | — | 16,770 | |||||||||||||||||||
Customer relations | 327,257 | — | — | — | (6,772 | ) | — | 320,485 | ||||||||||||||||||||
Club memberships(*1) | 88,494 | 1,719 | (4,655 | ) | — | — | 1,389 | 86,947 | ||||||||||||||||||||
Other(*2) | 817,569 | 6,374 | — | 18,749 | (93,555 | ) | 10,413 | 759,550 | ||||||||||||||||||||
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|
|
|
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|
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|
|
|
|
|
| |||||||||||||||
10,311 | (4,656 | ) | 18,678 | (222,567 | ) | 12,462 | 3,683,997 | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
(*) | Includes assets from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
(In millions of won) | ||||||||||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization(*3) | Ending balance | |||||||||||||||||||
Frequency usage rights | — | — | — | (124,527 | ) | 1,808,238 | ||||||||||||||||||
Land usage rights | 4,720 | — | — | — | (594 | ) | 4,126 | |||||||||||||||||
Industrial rights | 71,442 | 1,655 | (1 | ) | (119 | ) | (1,555 | ) | 71,422 | |||||||||||||||
Development costs | 9,364 | 83 | — | — | (952 | ) | 8,495 | |||||||||||||||||
Facility usage rights | 21,880 | 180 | (3 | ) | 2 | (1,526 | ) | 20,533 | ||||||||||||||||
Customer relations | 919,863 | — | (56 | ) | — | (15,072 | ) | 904,735 | ||||||||||||||||
Club memberships(*1) | 106,865 | 1,334 | (418 | ) | — | — | 107,781 | |||||||||||||||||
Brands(*1) | 374,096 | — | — | — | — | 374,096 | ||||||||||||||||||
Other(*2) | 995,199 | 3,330 | (4 | ) | 44,437 | (102,512 | ) | 940,450 | ||||||||||||||||
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| |||||||||||||
6,582 | (482 | ) | 44,320 | (246,738 | ) | 4,239,876 | ||||||||||||||||||
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|
|
(*1) | Club memberships and brands are classified as intangible assets with indefinite useful lives and are not amortized. |
(*2) | Other intangible assets primarily consist of computer software and others. |
(*3) | Includes amounts related to discontinued operations. |
40
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
15. | Intangible Assets, Continued |
(2) | Details of frequency usage rights as of March 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||
Amount | Description | Commencement of amortization | Completion of amortization | |||||||||||||
800MHz license | LTE service | Jul. 2021 | Jun. 2026 | |||||||||||||
1.8GHz license | 493,654 | LTE service | Dec. 2021 | Dec. 2026 | ||||||||||||
2.6GHz license | 576,735 | LTE service | Sept. 2016 | Dec. 2026 | ||||||||||||
2.1GHz license | 371,007 | W-CDMA and LTE service | Dec. 2021 | Dec. 2026 | ||||||||||||
3.5GHz license | 802,924 | 5G service | Apr. 2019 | Nov. 2028 | ||||||||||||
28GHz license | 9,533 | 5G service | Jan. 2021 | Nov. 2023 | ||||||||||||
|
| |||||||||||||||
|
|
16. | Borrowings and Debentures |
(1) | Short-term borrowings as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||
Lender | Annual interest rate (%) | March 31, 2022 | December 31, 2021 | |||||||||||
Short-term borrowings | Woori Bank | 2.59 | — | |||||||||||
KIWOOM Securities Co., Ltd. | 1.81 | 50,000 | — | |||||||||||
Shinhan Investment Corp. | 1.81 | 50,000 | — | |||||||||||
Hana Financial Investment Co., Ltd. | 4.20 | 4,642 | 4,642 | |||||||||||
DB Financial Investment Co., Ltd. | 4.00 | 2,785 | 2,785 | |||||||||||
Shinhan Investment Corp. | 4.20 | 5,571 | 5,571 | |||||||||||
Shinhan Bank | 3.30 | 5,000 | — | |||||||||||
|
|
|
| |||||||||||
12,998 | ||||||||||||||
|
|
|
|
41
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
16. | Borrowings and Debentures, Continued |
(2) | Changes in long-term borrowings for the three-month period ended March 31, 2022 are as follows: |
(In millions of won, thousands of other currencies) | ||||||||||||||||
Lender | Annual interest rate (%) | Maturity | Book value | |||||||||||||
Current | ||||||||||||||||
Non-current | 353,122 | |||||||||||||||
|
| |||||||||||||||
As of January 1, 2022 | 394,187 | |||||||||||||||
|
| |||||||||||||||
New long-term borrowings: | ||||||||||||||||
DBS Bank Ltd. | 2.68 | Mar. 10, 2025 | 200,000 | |||||||||||||
Repayments of long-term borrowings: | ||||||||||||||||
Korea Development Bank(*1) | 3M CD + 0.71 | Dec. 21, 2022 | (3,125 | ) | ||||||||||||
Credit Agricole CIB(*1) | 3M CD + 0.82 | Dec. 14, 2023 | (3,125 | ) | ||||||||||||
|
| |||||||||||||||
(6,250 | ) | |||||||||||||||
|
| |||||||||||||||
Other changes(*2) | 166 | |||||||||||||||
Current(*3) | 41,258 | |||||||||||||||
Non-current(*3) | 546,845 | |||||||||||||||
|
| |||||||||||||||
As of March 31, 2022 | ||||||||||||||||
|
|
(*1) | As of March 31, 2022, 3M CD rate is 1.51%. |
(*2) | Other changes include the effects on foreign currency translation of long-term borrowings and changes in present value discount for the three-month period ended March 31, 2022. |
(*3) |
|
42
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
16. | Borrowings and Debentures, Continued |
(3) | Changes in debentures for the three-month period ended March 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||||
Purpose | Annual interest rate (%) | Maturity | Face value | Book value | ||||||||||||||||
Current | 1,389,259 | |||||||||||||||||||
Non-current | 7,058,250 | 7,037,424 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
As of January 1, 2022 | 8,448,250 | 8,426,683 | ||||||||||||||||||
Debentures newly issued: | ||||||||||||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2.58 | Jan. 24, 2025 | 100,000 | 99,545 | |||||||||||||||
2.92 | Jan. 25, 2032 | 50,000 | 49,757 | |||||||||||||||||
|
|
|
| |||||||||||||||||
150,000 | 149,302 | |||||||||||||||||||
|
|
|
| |||||||||||||||||
Debentures repaid: | ||||||||||||||||||||
Unsecured corporate bonds | | Operating and refinancing fund | | 2.40 | Feb. 26, 2022 | (100,000 | ) | (100,000 | ) | |||||||||||
Unsecured corporate bonds | Operating fund | 2.03 | Mar. 6, 2022 | (180,000 | ) | (180,000 | ) | |||||||||||||
Unsecured corporate bonds(*1) | Operating fund | 2.26 | Feb. 3, 2022 | (150,000 | ) | (150,000 | ) | |||||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2.00 | Mar. 26, 2022 | (50,000 | ) | (50,000 | ) | |||||||||||||
|
|
|
| |||||||||||||||||
(480,000 | ) | (480,000 | ) | |||||||||||||||||
|
|
|
| |||||||||||||||||
Other changes(*2) | 37,950 | 39,662 | ||||||||||||||||||
Current(*3) | 1,260,000 | 1,259,268 | ||||||||||||||||||
Non-current(*3) | 6,896,200 | 6,876,379 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
As of March 31, 2022 | 8,135,647 | |||||||||||||||||||
|
|
|
|
(*1) | Unsecured corporate bonds were issued by SK Broadband Co., Ltd., a subsidiary of the Parent Company. |
(*2) | Other changes include the effects on foreign currency translation of debentures and changes in discount on issuance of debentures for the three-month period ended March 31, 2022. |
(*3) |
|
43
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
17. | Long-term Payables – other |
(1) | As of March 31, 2022 and December 31, 2021, details of long-term payables – other which consist of payables related to the acquisition of frequency usage rights are as follows (See note 15): |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Long-term payables - other | 2,090,715 | |||||||
Present value discount on long-term payables – other | (72,729 | ) | (80,882 | ) | ||||
Current installments of long-term payables – other | (393,920 | ) | (398,823 | ) | ||||
|
|
|
| |||||
Carrying amount at December 31 | 1,611,010 | |||||||
|
|
|
|
(2) | The principal amounts of long-term payables – other repaid for the three-month periods ended March 31, 2022 and 2021 are |
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1~3 years | 738,300 | |||
3~5 years | 460,538 | |||
More than 5 years | 91,387 | |||
|
| |||
|
|
44
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
18. | Provisions |
Changes in provisions for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the three-month period ended March 31, 2022 | As of March 31, 2022 | |||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Business combination | Ending balance | Current | Non-current | ||||||||||||||||||||||||||||
Provision for restoration | 1,343 | (1,623 | ) | (62 | ) | 35 | 991 | 115,415 | 64,804 | 50,611 | ||||||||||||||||||||||||||
Emission allowance | 1,885 | 722 | — | (666 | ) | — | — | 1,941 | 1,941 | — | ||||||||||||||||||||||||||
Other provisions | 10,379 | 1,130 | (1 | ) | (11 | ) | (18 | ) | — | 11,479 | 550 | 10,929 | ||||||||||||||||||||||||
|
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|
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|
|
|
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|
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| |||||||||||||||||||
3,195 | (1,624 | ) | (739 | ) | 17 | 991 | 128,835 | 67,295 | 61,540 | |||||||||||||||||||||||||||
|
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|
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|
|
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|
|
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|
|
|
(In millions of won) | ||||||||||||||||||||||||||||||||
For the three-month period ended March 31, 2021 | As of March 31, 2021 | |||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Ending balance | Current | Non-current | |||||||||||||||||||||||||
Provision for restoration | 3,655 | (1,568 | ) | (318 | ) | 31 | 115,453 | 48,690 | 66,763 | |||||||||||||||||||||||
Emission allowance | 7,424 | 271 | — | (712 | ) | — | 6,983 | 6,983 | — | |||||||||||||||||||||||
Other provisions(*) | 29,800 | 1,061 | (7,405 | ) | (6 | ) | — | 23,450 | 12,176 | 11,274 | ||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
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|
| |||||||||||||||||
4,987 | (8,973 | ) | (1,036 | ) | 31 | 145,886 | 67,849 | 78,037 | ||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
45
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
19. | Defined Benefit Liabilities (Assets) |
(1) | Details of defined benefit liabilities (assets) as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Present value of defined benefit obligations | 1,035,016 | |||||||
Fair value of plan assets | (1,041,273 | ) | (1,040,286 | ) | ||||
|
|
|
| |||||
Defined benefit assets(*) | (10,929 | ) | (18,427 | ) | ||||
|
|
|
| |||||
Defined benefit liabilities | 31,606 | 13,157 | ||||||
|
|
|
|
(*) | Since the Group entities neither have legally enforceable right nor intention to settle the defined benefit obligations of the Group entities with defined benefit assets of other Group entities, defined benefit assets of the Group entities have been separately presented from defined benefit liabilities. |
(2) | Changes in present value of defined benefit obligations for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021 | |||||||
Beginning balance | 1,278,550 | |||||||
Current service cost | 34,233 | 48,245 | ||||||
Interest cost | 6,555 | 7,184 | ||||||
Remeasurement - Demographic assumption | (5,672 | ) | — | |||||
- Financial assumption | (31,830 | ) | — | |||||
- Adjustment based on experience | 14,779 | 22,166 | ||||||
Business combinations | 29,357 | — | ||||||
Benefit paid | (24,202 | ) | (30,582 | ) | ||||
Others | 3,714 | (2,960 | ) | |||||
|
|
|
| |||||
Ending balance | 1,322,603 | |||||||
|
|
|
|
(3) | Changes in fair value of plan assets for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021 | |||||||
Beginning balance | 1,127,163 | |||||||
Interest income | 6,521 | 6,288 | ||||||
Remeasurement | (4,495 | ) | (1,901 | ) | ||||
Contributions | 7,534 | 12,002 | ||||||
Benefit paid | (38,398 | ) | (37,991 | ) | ||||
Business combinations | 26,618 | — | ||||||
Others | 3,207 | (4,133 | ) | |||||
|
|
|
| |||||
Ending balance | 1,101,428 | |||||||
|
|
|
|
46
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
19. | Defined Benefit Liabilities (Assets), Continued |
(4) | Total cost of defined benefit plan, which is recognized in profit or loss (included in labor in the interim consolidated statements of profit or loss) and capitalized into construction-in-progress, for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021(*) | |||||||
Current service cost | 48,245 | |||||||
Net interest cost | 34 | 896 | ||||||
|
|
|
| |||||
49,141 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
20. | 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) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Number of authorized shares | 670,000,000 | 670,000,000 | ||||||
Number of issued shares(*1) | 218,833,144 | 218,833,144 | ||||||
Share capital: | ||||||||
Common share(*2) | 30,493 | |||||||
Capital surplus and others: | ||||||||
Paid-in surplus | 1,771,000 | 1,771,000 | ||||||
Treasury shares | (38,041 | ) | (57,314 | ) | ||||
Hybrid bonds(*3) | 398,759 | 398,759 | ||||||
Share option(Note 21) | 1,992 | 47,166 | ||||||
Others(*4) | (13,693,751 | ) | (13,783,337 | ) | ||||
|
|
|
| |||||
(11,623,726 | ) | |||||||
|
|
|
|
(*1) | As a result of stock split and spin-off for the year ended December 31, 2021, the number of shares that the Parent Company is allowed to issue under article of incorporation changed from 220,000,000 shares with a par value of |
(*2) | The Parent Company’s share capital decreased by |
(*3) | As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Group classified the hybrid bonds as equity. When in liquidation or bankruptcy, these hybrid bonds are senior only to common shares. |
47
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
20. | Share Capital and Capital Surplus and Others, Continued |
(1) | The Parent Company’s outstanding share capital consists entirely of common shares with a par value of |
(*4) | Others primarily consist of the excess of the consideration paid by the Group over the carrying amount of net assets acquired from entities under common control. |
(2) | There were no changes in share capital for the three-month periods ended March 31, 2022 and 2021, and details of shares outstanding as of March 31, 2022 and 2021 are as follows: |
(In shares) | March 31, 2022 | March 31, 2021 | ||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 218,833,144 | 830,314 | 218,002,830 | 80,745,711 | 9,585,568 | 71,160,143 |
(3) | Details of treasury shares as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won, except for share data) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Number of shares(*) | 830,314 | 1,250,992 | ||||||
Acquisition cost | 57,314 |
(*) | The Parent Company distributed 420,678 treasury shares (acquisition cost: |
48
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
21. | Share-based Payment |
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows: |
1) | Equity-settled share-based payment arrangement |
Parent Company | ||||||||||||||
Series | ||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5(*2) | 6(*2) | ||||||||
Grant date | March 24, 2017 | February 20, 2018 | February 22, 2019 | March 26, 2019 | March 26, 2020 | March 25, 2021 | ||||||||
Types of shares to be issued | Registered common shares | |||||||||||||
Grant method | Reissue of treasury shares, Cash settlement | |||||||||||||
Number of shares(*1) (in share) | 67,320 | 67,320 | 4,124 | 12,685 | 5,266 | 381,937 | 94,657 | |||||||
Exercise price(*1) (in won) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||
Exercise period | Mar. 25, 2020 | Mar. 25, 2021 | Feb. 21, 2020 | Feb. 23, 2021 | Mar. 27, 2021 | Mar. 27, 2023 | Mar. 26, 2023 | |||||||
~ | ~ | ~ | ~ | ~ | ~ | ~ | ||||||||
Mar. 24, 2023 | Mar. 24, 2024 | Feb. 20, 2023 | Feb. 22, 2024 | Mar. 26, 2024 | Mar. 26, 2027 | Mar. 25, 2026 | ||||||||
Vesting conditions | 3 years’ service from the grant date | 4 years’ service from the | 2 years’ service from the | 2 years’ service from the | 2 years’ service from the | 3 years’ service from the | 2 years’ service from the |
Parent Company | ||||
Series | ||||
7-1 | 7-2 | |||
Grant date | March 25, 2022 | |||
Types of shares to be issued | Registered common shares | |||
Grant method | Reissue of treasury shares, Cash settlement | |||
Number of shares (in share) | 295,275 | 120,441 | ||
Exercise price (in won) | 56,860 | 56,860 | ||
Exercise period | Mar. 26, 2025 | Mar. 26, 2024 | ||
~ | ~ | |||
Mar. 25, 2029 | Mar. 25, 2027 | |||
Vesting conditions | 3 years’ service from the grant date | 2 years’ service from the grant date |
49
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
21. | Share-based Payment, Continued |
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows, Continued: |
2) | Cash-settled share-based payment arrangement |
Share appreciation rights of SK Telecom Co., Ltd.(*3) | Share appreciation rights of SK Square Co., Ltd.(*3) | |||||||
Grant date | January 1, 2021 | |||||||
Grant method | Cash settlement | |||||||
Number of shares (in shares)(*1) | 207,686 | 134,253 | ||||||
Exercise price (in won)(*1) | 50,276 | |||||||
Exercise period | Jan. 1, 2023 ~ Mar. 28, 2024 | |||||||
Vesting conditions | 2 years’ service from the grant date |
(*1) | Number of shares granted and exercise price are adjusted as a result of stock split and spin-off for the year ended December 31, 2021, and the remaining part of 1-1st share option was fully exercised for the three-month period ended March 31, 2022. |
(*2) | Parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2021. |
(*3) | The Parent Company newly established the long-term incentive policy as part of the compensation related to the growth of corporate value on the beginning of the prior year and granted cash settled share appreciation rights to executives. Meanwhile, parts of the grant that have not met the vesting conditions have been forfeited for the three-month period ended March 31, 2022. |
As a result of spin-off during the year ended December 31, 2021, there are no share options granted by subsidiaries of the Parent Company as of March 31, 2022.
(2) | Share compensation expense recognized for the three-month period ended March 31, 2022 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | ||||
Share compensation expense | ||||
As of December 31, 2021 | ||||
For the three-month period ended March 31, 2022 | 74,246 | |||
In subsequent periods | 5,135 | |||
|
| |||
|
|
As of March 31, 2022, the carrying amount of liabilities recognized by the Group in relation to the cash-settled share-based payment arrangement is2,257 million.W
50
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
21. | Share-based Payment, Continued |
(3) | The Parent Company used binomial option pricing model in the measurement of the fair value of the share options at grant date, and the inputs used in the model are as follows: |
1) | Equity-settled share-based payment arrangement |
(In won) | Parent Company | |||||||||||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | 7-1 | 7-2 | ||||||||||||||||||||||||||||
Risk-free interest rate | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | 1.55 | % | 2.80 | % | 2.68 | % | ||||||||||||||||||
Estimated option’s life | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | 5 years | 5 years | |||||||||||||||||||||||||||
Share price (Closing price on the preceding day)(*) | 52,500 | 52,500 | 48,700 | 51,800 | 50,600 | 34,900 | 49,800 | 57,300 | 57,300 | |||||||||||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | 25.70 | % | 24.20 | % | 24.20 | % | ||||||||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | 4.00 | % | 3.40 | % | 3.40 | % | ||||||||||||||||||
Exercise price(*) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | 56,860 | 56,860 | |||||||||||||||||||||||||||
Per-share fair value of the option(*) | 4,048 | 3,096 | 4,798 | 1,720 | 1,622 | 192 | 8,142 | 11,772 | 10,435 |
2) | Cash-settled share-based payment arrangement |
(In won) | Share appreciation rights of SK Telecom Co., Ltd. | Share appreciation rights of SK Square Co., Ltd. | ||||||
Risk-free interest rate | 2.37 | % | 2.37 | % | ||||
Estimated option’s life | 3.25 years | 3.25 years | ||||||
Share price on the remeasurement date | 56,900 | 56,800 | ||||||
Expected volatility | 24.20 | % | 24.20 | % | ||||
Expected dividends | 3.50 | % | 0.00 | % | ||||
Exercise price(*) | 50,276 | 50,276 | ||||||
Per-share fair value of the option | 9,591 | 12,231 |
(*) | Share price (closing price on the preceding day), exercise price and per-share fair value of the option are adjusted as a result of stock split and spin-off during the year ended December 31, 2021. |
Meanwhile, the Board of Directors of the Parent Company resolved to dispose its treasury shares for the purpose of allotment of shares as bonus payment on October 12, 2021. The transaction is equity-settled share-based payment transactions in accordance with K-IFRS 1102, and 505,350 shares (before stock split) were granted on October 12, 2021(grant date). 7,700 shares (before stock split) out of 505,350 shares (before stock split) were transferred to the spin-off company on November 1, 2021. Vesting conditions are 6 months from the grant date, and per-share fair value on the grant date are measured at300,500 that is closing price of common shares on the grant date before stock split and spin-off. The fair value of these share-based payment on the grant date isW151,858 million, among which the awards with a fair value ofW9,935 million were transferred to the spin-off company.W
51
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
22. | Retained Earnings |
Retained earnings as of March 31, 2022 and December 31, 2021 are as follows:
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Appropriated: | ||||||||
Legal reserve | 22,320 | |||||||
Reserve for business expansion | 9,631,138 | 11,631,138 | ||||||
Reserve for technology development | 4,365,300 | 4,365,300 | ||||||
|
|
|
| |||||
13,996,438 | 15,996,438 | |||||||
Unappropriated retained earnings | 8,278,350 | 6,418,583 | ||||||
|
|
|
| |||||
22,437,341 | ||||||||
|
|
|
|
23. | Reserves |
(1) Details of reserves, net of taxes, as of March 31, 2022 and December 31, 2021 are as follows:
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Valuation gain on financial assets at FVOCI | 633,240 | |||||||
Other comprehensive income of investments in associates and joint ventures | 116,464 | 53,770 | ||||||
Valuation gain on derivatives | 25,600 | 33,918 | ||||||
Foreign currency translation differences for foreign operations | 18,221 | 14,310 | ||||||
|
|
|
| |||||
735,238 | ||||||||
|
|
|
|
(2) Changes in reserves for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) |
| |||||||||||||||||||
Valuation gain on financial assets at FVOCI | Other comprehensive income (loss) of investments in associates and joint ventures | Valuation gain on derivatives | Foreign currency translation differences for foreign operations | Total | ||||||||||||||||
Balance at January 1, 2021 | (392,333 | ) | 17,615 | (24,122 | ) | 40,139 | ||||||||||||||
Changes, net of taxes | 169,679 | 113,115 | (2,733 | ) | 16,301 | 296,362 | ||||||||||||||
Balance at March 31, 2021 | (279,218 | ) | 14,882 | (7,821 | ) | 336,501 | ||||||||||||||
Balance at January 1, 2022 | 53,770 | 33,918 | 14,310 | 735,238 | ||||||||||||||||
Changes, net of taxes | (55,524 | ) | 62,694 | (8,318 | ) | 3,911 | 2,763 | |||||||||||||
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|
| |||||||||||
Balance at March 31, 2022 | 116,464 | 25,600 | 18,221 | 738,001 | ||||||||||||||||
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
24. | Other Operating Expenses |
Details of other operating expenses for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021 (Restated) | |||||||
Communication | 8,504 | |||||||
Utilities | 95,213 | 87,497 | ||||||
Taxes and dues | 7,899 | 6,524 | ||||||
Repair | 96,272 | 95,985 | ||||||
Research and development | 78,081 | 83,499 | ||||||
Training | 7,050 | 6,164 | ||||||
Bad debt expenses | 9,195 | 6,876 | ||||||
Travel | 2,753 | 1,563 | ||||||
Supplies and other | 26,620 | 24,160 | ||||||
|
|
|
| |||||
320,772 | ||||||||
|
|
|
|
25. | Other Non-Operating Income and Expenses |
Details of other non-operating income and expenses for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021 (Restated) | |||||||
Other Non-operating Income: | ||||||||
Gain on disposal of property and equipment and intangible assets | 2,529 | |||||||
Others | 10,818 | 10,056 | ||||||
|
|
|
| |||||
12,585 | ||||||||
|
|
|
| |||||
Other Non-operating Expenses: | ||||||||
Loss on disposal of property and equipment and intangible assets | 2,363 | |||||||
Donations | 5,250 | 3,567 | ||||||
Other bad debt expenses | 108 | 84 | ||||||
Others | 6,430 | 2,183 | ||||||
|
|
|
| |||||
8,197 | ||||||||
|
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|
|
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
26. | Finance Income and Costs |
(1) | Details of finance income and costs for the three-month periods ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021 (Restated) | |||||||
Finance Income: | ||||||||
Interest income | 8,515 | |||||||
Gain on sale of accounts receivable – other | 1,043 | 7,921 | ||||||
Dividend income | 1,517 | 1,039 | ||||||
Gain on foreign currency transactions | 1,351 | 854 | ||||||
Gain on foreign currency translations | 2,704 | 5,914 | ||||||
Gain relating to financial assets at FVTPL | 7,892 | 35,306 | ||||||
|
|
|
| |||||
59,549 | ||||||||
|
|
|
| |||||
Finance Costs: | ||||||||
Interest expenses | 68,365 | |||||||
Loss on sale of accounts receivable – other | 2,837 | — | ||||||
Loss on foreign currency transactions | 1,145 | 519 | ||||||
Loss on foreign currency translations | 9,999 | 5,398 | ||||||
Loss relating to financial assets at FVTPL | 5,185 | 5,055 | ||||||
|
|
|
| |||||
79,337 | ||||||||
|
|
|
|
(2) | Details of interest income included in finance income for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021(*) | |||||||
Interest income on cash equivalents and financial instruments | 5,210 | |||||||
Interest income on loans and others | 6,134 | 7,040 | ||||||
|
|
|
| |||||
12,250 | ||||||||
|
|
|
|
(*) Includes amounts related to discontinued operations.
(3) Details of interest expenses included in finance costs for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021(*) | |||||||
Interest expense on borrowings | 18,416 | |||||||
Interest expense on debentures | 52,438 | 56,056 | ||||||
Others | 18,265 | 12,023 | ||||||
|
|
|
| |||||
86,495 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
54
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
26. | Finance Income and Costs, Continued |
(4) | Details of impairment losses for financial assets for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021(*) | |||||||
Accounts receivable – trade | 7,475 | |||||||
Other receivables | 105 | (55 | ) | |||||
|
|
|
| |||||
7,420 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
27. | 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.
28. | Earnings per Share |
The Parent Company carried out stock split on October 28, 2021. Basic and diluted earnings per share for the three-month period ended March 31, 2021 has been retroactively adjusted to reflect the effect of the stock split.
(1) | Basic earnings per share |
1) | Basic earnings per share for the three-month periods ended March 31, 2022 and 2021 are calculated as follows: |
(In millions of won, except for share data and basic earnings per share) | For the three-month periods ended | |||||||
March 31, 2022 | March 31, 2021 (Restated) | |||||||
Basic earnings per share attributable to owners of the Parent Company: |
| |||||||
Profit from continuing operations attributable to owners of the Parent Company | 346,056 | |||||||
Interest on hybrid bonds | (3,692 | ) | (3,692 | ) | ||||
|
|
|
| |||||
Profit from continuing operation attributable to owners of the Parent Company on common shares | 207,561 | 342,364 | ||||||
Profit of discontinued operations attributable to owners of the Parent Company on common shares | — | 212,209 | ||||||
Weighted average number of common shares outstanding | 217,892,622 | 355,828,900 | ||||||
|
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|
| |||||
Basic earnings per share (in won) Continuing operations | 963 | |||||||
Discontinued operations | — | 596 | ||||||
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55
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | Earnings per Share, Continued |
2) The weighted average number of common shares outstanding for the three-month periods ended March 31, 2022 and 2021 are calculated as follows:
(In shares) | For the three-month period ended March 31, 2022 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2022 | 218,833,144 | 218,833,144 | ||||||
Treasury shares at January 1, 2022 | (1,250,992 | ) | (1,250,992 | ) | ||||
Disposal of treasury shares | 420,678 | 310,470 | ||||||
|
|
|
| |||||
218,002,830 | 217,892,622 | |||||||
|
|
|
|
(In shares) | For the three-month period ended March 31, 2021 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2021 | 403,728,555 | 403,728,555 | ||||||
Treasury shares at January 1, 2021 | (47,092,790 | ) | (47,092,790 | ) | ||||
Acquisition of treasury shares | (1,440,000 | ) | (1,190,000 | ) | ||||
Disposal of treasury shares | 604,950 | 383,135 | ||||||
|
|
|
| |||||
355,800,715 | 355,828,900 | |||||||
|
|
|
|
(2) | Diluted earnings per share |
1) | Diluted earnings per share for the three-month periods ended March 31, 2022 and 2021 are calculated as follows: |
(In millions of won, except for share data and diluted earnings per share) | For the three-month periods ended | |||||||
March 31, 2022 | March 31, 2021 (Restated) | |||||||
Profit from continuing operations attributable to owners of the Parent Company on common shares | 342,364 | |||||||
Profit of discontinued operations attributable to owners of the Parent Company on common shares | — | 212,209 | ||||||
|
|
|
| |||||
Adjusted weighted average number of common shares outstanding | 218,032,957 | 355,982,035 | ||||||
|
|
|
| |||||
Diluted earnings per share (in won) | ||||||||
Continuing operations | 962 | |||||||
Discontinued operations | — | 596 | ||||||
|
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | Earnings per Share, Continued |
2) | The adjusted weighted average number of common shares outstanding for the three-month periods ended March 31, 2022 and 2021 are calculated as follows: |
(2) | Diluted earnings per share, Continued |
(In shares) | For the three-month periods ended | |||||||
March 31, 2022 | March 31, 2021 | |||||||
Outstanding shares at January 1 | 217,582,152 | 356,635,765 | ||||||
Effect of treasury shares | 310,470 | (806,865 | ) | |||||
Effect of share option | 140,335 | 153,135 | ||||||
|
|
|
| |||||
Adjusted weighted average number of common shares outstanding | 218,032,957 | 355,982,035 | ||||||
|
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|
|
29. | Categories of Financial Instruments |
(1) | Financial assets by category as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | March 31, 2022 | |||||||||||||||||||||||
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 | — | — | 386,525 | — | 894,661 | |||||||||||||||||||
Financial instruments | 376,400 | — | — | 115,551 | — | 491,951 | ||||||||||||||||||
Long-term investment securities(*) | 204,066 | 1,431,042 | 1,203 | — | — | 1,636,311 | ||||||||||||||||||
Accounts receivable – trade | — | — | — | 1,991,513 | — | 1,991,513 | ||||||||||||||||||
Loans and other receivables | 458,426 | — | — | 816,065 | — | 1,274,491 | ||||||||||||||||||
Derivative financial assets | 34,490 | — | — | — | 207,192 | 241,682 | ||||||||||||||||||
|
|
|
|
|
|
|
|
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|
|
| |||||||||||||
1,431,042 | 1,203 | 3,309,654 | 207,192 | 6,530,609 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) The Group designated1,431,042 million of equity instruments that are not held for trading as financial assets at FVOCI.W
(In millions of won) | December 31, 2021 | |||||||||||||||||||||||
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 | — | — | 367,153 | — | 872,731 | |||||||||||||||||||
Financial instruments | 389,368 | — | — | 119,684 | — | 509,052 | ||||||||||||||||||
Short-term investment securities | 5,010 | — | — | — | — | 5,010 | ||||||||||||||||||
Long-term investment securities(*) | 203,473 | 1,510,428 | 1,177 | — | — | 1,715,078 | ||||||||||||||||||
Accounts receivable – trade | — | — | — | 1,921,617 | — | 1,921,617 | ||||||||||||||||||
Loans and other receivables | 459,959 | — | — | 735,958 | — | 1,195,917 | ||||||||||||||||||
Derivative financial assets | 34,933 | — | — | — | 182,661 | 217,594 | ||||||||||||||||||
|
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|
|
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|
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|
| |||||||||||||
1,510,428 | 1,177 | 3,144,412 | 182,661 | 6,436,999 | ||||||||||||||||||||
|
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(*) | The Group designated |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | March 31, 2022 | |||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Accounts payable – trade | 151,052 | — | 151,052 | |||||||||||||
Derivative financial liabilities | 321,025 | — | 16 | 321,041 | ||||||||||||
Borrowings | — | 756,101 | — | 756,101 | ||||||||||||
Debentures | — | 8,135,647 | — | 8,135,647 | ||||||||||||
Lease liabilities(*) | — | 1,600,297 | — | 1,600,297 | ||||||||||||
Accounts payable - other and others | — | 4,994,017 | — | 4,994,017 | ||||||||||||
|
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|
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|
|
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| |||||||||
15,637,114 | 16 | 15,958,155 | ||||||||||||||
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|
|
|
|
|
|
(In millions of won) | December 31, 2021 | |||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Accounts payable – trade | 190,559 | — | 190,559 | |||||||||||||
Derivative financial liabilities | 321,025 | — | 111 | 321,136 | ||||||||||||
Borrowings | — | 407,185 | — | 407,185 | ||||||||||||
Debentures | — | 8,426,683 | — | 8,426,683 | ||||||||||||
Lease liabilities(*) | — | 1,534,282 | — | 1,534,282 | ||||||||||||
Accounts payable - other and others | — | 5,524,692 | — | 5,524,692 | ||||||||||||
|
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|
|
|
|
|
| |||||||||
16,083,401 | 111 | 16,404,537 | ||||||||||||||
|
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|
|
|
|
|
(*) | Lease liabilities are not applicable on category of financial liabilities but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities. |
58
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
30. | 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 receivables, etc. Financial liabilities consist of accounts payable – trade and other, borrowings, debentures, lease liabilities and others.
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, EUR and JPY. 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 March 31, 2022 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||
USD | 63,343 | 1,537,651 | ||||||||||||||
EUR | 5,445 | 7,356 | — | — | ||||||||||||
Others | — | 171 | — | 105 | ||||||||||||
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| |||||||||||||
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|
|
In addition, the Group has entered into currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.
As of March 31, 2022, a hypothetical change in exchange rates by 10% would have increased (decreased) the Group’s profit before income tax as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD | (3,036 | ) | ||||||
EUR | 736 | (736 | ) | |||||
Others | 7 | (7 | ) | |||||
|
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| |||||
(3,779 | ) | |||||||
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59
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
30. | 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 borrowings, debentures 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 March 31, 2022, floating-rate borrowings and debentures amount to31,250 million andW363,240 million, respectively, and the Group has entered into interest rate swaps to hedge interest rate risk related to the floating-rate borrowings and debentures. Therefore, profit before income taxes for the three-month period ended March 31, 2022 would not have been affected by the changes in interest rates of floating-rate borrowings and debentures.W
As of March 31, 2022, the floating-rate long-term payables – other are1,690,470 million. If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the three-month period ended March 31, 2022, would change byW4,226 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.W
Interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). Especially, in the case of LIBOR, all of the calculations were suspended as of December 31, 2021, except for the overnight, one month, three months, six months, and 12 months of USD LIBOR, and the aforementioned five USD LIBORs will also be suspended as of June 30, 2023. The alternative interest rate benchmark of USD LIBOR is the Secured Overnight Financing Rate(“SOFR”). Meanwhile, in case of Korean CD rate, the alternative interest rate benchmark has selected as Korea Overnight Financing Repo Rate(“KOFR”), and as part of interest rate benchmark reform, the interest rate has been disclosed through Korea Securities Depository since November 26, 2021. KOFR is calculated using the overnight RP rate as collateral for government bonds and monetary stabilization bonds. However, unlike LIBOR, calculation of CD rate will not be suspended, it is unclear when and how the transition to KOFR will take place.
The Group plans to include fallback clauses into financial instruments relating to LIBOR to which calculation has not been suspended yet or change their LIBOR directly to alternative interest rates before the calculation is suspended.
60
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
30. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk, Continued |
The Group’s financial instruments exposed to the risk arising from interest rate benchmark reform as of March 31, 2022 are indexed to the USD LIBOR. The Group is exposed to legal risk to amend the terms of contracts on the financial instruments subject to interest rate benchmark reform as well as process and operation risks to manage such amendments. In addition, the Group is exposed to the risk of monitoring the market trend regarding the alternative interest rate and establishing the corresponding risk management strategy. If the IBOR is designated as the hedged item, the Group is required to replace it to an alternative benchmark interest and review the effects on the hedging relationship. In addition, the Group is exposed to the risk of minimizing hedge ineffectiveness by aligning the method and timing of the transition to the alternative benchmark interest applied to the hedged item and the hedging instrument.
The Group evaluates the extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of IBOR reform and how to manage communication about IBOR reform with counterparties.
Non-derivative financial liabilities
The Parent Company’s non-derivative financial liabilities subject to interest rate benchmark reform as of December 31, 2021 were floating-rate bonds indexed to USD LIBOR. As explained above, the Group is discussing with the counterparty about including the fallback clauses as of March 31, 2022.
Derivatives
The Group’s most derivative instruments designated as cash flow hedge are governed by contracts based on the International Swaps and Derivatives Association (ISDA)’s master agreements. As part of interest rate benchmark reform, ISDA has included a new fallback clause regarding which alterative benchmark interest rate to be applied when the calculation of major IBOR is suspended in the master agreement. The master agreement is applied to derivative contracts after January 25, 2021, and the transaction parties is required to adhere to ISDA protocol to include the same fallback clause to derivative contracts before January 25, 2021. The Group has adhered to ISDA protocol for transition to the alternative benchmark interest rate, and the fallback clause will be included when counterparties adhere to the protocol to include. The Group’s counterparties have adhered to ISDA protocol and agreed to include the fallback clause.
Hedge accounting
The Group’s hedged items and hedging instruments as of March 31, 2022 are indexed to USD LIBOR. These benchmark rates are quoted each day, and the IBOR cash flows are exchanged with counterparties as usual.
61
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
30. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk |
The maximum credit exposure as of March 31, 2022 and December 31, 2021 are as follows:
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Cash and cash equivalents | 872,550 | |||||||
Financial instruments | 491,951 | 509,052 | ||||||
Investment securities | 2,102 | 2,077 | ||||||
Accounts receivable – trade | 1,991,513 | 1,921,617 | ||||||
Contract assets | 113,788 | 118,278 | ||||||
Loans and other receivables | 1,274,491 | 1,195,917 | ||||||
Derivative financial assets | 241,682 | 217,594 | ||||||
|
|
|
| |||||
4,837,085 | ||||||||
|
|
|
|
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.
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 are 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 March 31, 2022.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
30. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
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 March 31, 2022 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 | 151,052 | 151,052 | — | — | ||||||||||||||||
Borrowings(*) | 756,101 | 784,415 | 220,239 | 564,176 | — | |||||||||||||||
Debentures(*) | 8,135,647 | 9,175,084 | 1,475,319 | 4,739,384 | 2,960,381 | |||||||||||||||
Lease liabilities | 1,600,297 | 1,699,941 | 377,129 | 1,076,900 | 245,912 | |||||||||||||||
Accounts payable – other and others(*) | 4,994,017 | 5,056,117 | 3,731,593 | 1,232,691 | 91,833 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
16,866,609 | 5,955,332 | 7,613,151 | 3,298,126 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | 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 March 31, 2022, 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 | 217,907 | 32,463 | 157,609 | 27,835 | ||||||||||||||||
Liabilities | (16 | ) | (16 | ) | (16 | ) | — | — | ||||||||||||
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|
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| |||||||||||
217,891 | 32,447 | 157,609 | 27,835 | |||||||||||||||||
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63
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
30. | 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, 2021.
The Group monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity from the consolidated financial statements.
Debt-equity ratio as of March 31, 2022 and December 31, 2021 are as follows:
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Total liabilities | 18,576,139 | |||||||
Total equity | 12,269,467 | 12,335,138 | ||||||
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Debt-equity ratios | 149.19 | % | 150.60 | % | ||||
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(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of March 31, 2022 are as follows: |
(In millions of won) | March 31, 2022 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | 41,030 | 1,341,274 | 199,507 | 1,581,811 | ||||||||||||||||
Derivative hedging instruments | 207,192 | — | 207,192 | — | 207,192 | |||||||||||||||
FVOCI | 1,432,245 | 1,263,550 | — | 168,695 | 1,432,245 | |||||||||||||||
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1,304,580 | 1,548,466 | 368,202 | 3,221,248 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | — | 321,025 | 321,025 | ||||||||||||||||
Derivative hedging instruments | 16 | — | 16 | — | 16 | |||||||||||||||
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— | 16 | 321,025 | 321,041 | |||||||||||||||||
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Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 734,507 | — | 734,507 | ||||||||||||||||
Debentures | 8,135,647 | — | 8,108,937 | — | 8,108,937 | |||||||||||||||
Long-term payables – other | 1,617,741 | — | 1,621,909 | — | 1,621,909 | |||||||||||||||
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— | 10,465,353 | — | 10,465,353 | |||||||||||||||||
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
30. | 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, 2021 are as follows: |
(In millions of won) | December 31, 2021 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | 55,455 | 1,359,915 | 182,951 | 1,598,321 | ||||||||||||||||
Derivative hedging instruments | 182,661 | — | 182,661 | — | 182,661 | |||||||||||||||
FVOCI | 1,511,605 | 1,344,434 | — | 167,171 | 1,511,605 | |||||||||||||||
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1,399,889 | 1,542,576 | 350,122 | 3,292,587 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | — | 321,025 | 321,025 | ||||||||||||||||
Derivative hedging instruments | 111 | — | 111 | — | 111 | |||||||||||||||
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— | 111 | 321,025 | 321,136 | |||||||||||||||||
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Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 392,237 | — | 392,237 | ||||||||||||||||
Debentures | 8,426,683 | — | 8,679,472 | — | 8,679,472 | |||||||||||||||
Long-term payables – other | 2,009,833 | — | 2,010,852 | — | 2,010,852 | |||||||||||||||
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— | 11,082,561 | — | 11,082,561 | |||||||||||||||||
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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 and financial assets at FVTPL) 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.
Interest rates used by the Group for the fair value measurement as of March 31, 2022 are as follows:
Interest rate | ||
Derivative instruments | 0.32% ~ 3.59% | |
Borrowings and debentures | 1.74% ~ 3.30% | |
Long-term payables – other | 2.43% ~ 3.16% |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
30. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
3) | There have been no transfers between Level 2 and Level 1 for the three-month period ended March 31, 2022. The changes of financial assets classified as Level 3 for the three-month period ended March 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
Balance at January 1, 2022 | Profit or loss | OCI | Acquisition | Disposal | Transfer | Balance at March 31, 2022 | ||||||||||||||||||||||
Financial assets |
| |||||||||||||||||||||||||||
FVTPL | (5,185 | ) | — | 12,999 | (7,539 | ) | 16,281 | 199,507 | ||||||||||||||||||||
FVOCI | 167,171 | — | 2,424 | — | — | (900 | ) | 168,695 | ||||||||||||||||||||
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(5,185 | ) | 2,424 | 12,999 | (7,539 | ) | 15,381 | 368,202 | |||||||||||||||||||||
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Financial liabilities |
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FVTPL | — | — | — | — | — | (321,025 | ) |
(4) | Enforceable master netting agreement or similar agreement |
Carrying amounts of financial instruments recognized of which offset agreements are applicable as of March 31, 2022 and December 31, 2021 are as follows:
(In millions of won) | March 31, 2022 | |||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the interim consolidated statement of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (195,742 | ) | 9,374 | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (195,742 | ) | 6,186 |
(In millions of won) | December 31, 2021 | |||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the consolidated statement of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (189,424 | ) | 8,404 | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (189,424 | ) | 11,425 |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
31. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate Controlling Entity | SK Inc. | |
Joint ventures | Finnq Co., Ltd. and another | |
Associates | SK China Company Ltd. and 43 others | |
Others | The Ultimate Controlling Entity’s subsidiaries and associates, etc. |
For the periods presented, the Group belongs to SK Group, a conglomerate as defined in the Monopoly 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 5 non-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-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021 | |||||||
Salaries | 3,480 | |||||||
Retirement benefits | 313 | 1,815 | ||||||
Share compensation expense | 67 | 32 | ||||||
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5,327 | ||||||||
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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. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
31. | Transactions with Related Parties, Continued |
(3) Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | For the three-month period ended March 31, 2022 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expenses and others(*1) | Acquisition of property and equipment and others | ||||||||||
Ultimate Controlling Entity Associates | SK Inc.(*2) | 197,864 | 3,795 | |||||||||||
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F&U Credit information Co., Ltd. | 741 | 12,062 | — | |||||||||||
HanaCard Co., Ltd. | 5,610 | 1,085 | 2 | |||||||||||
Daehan Kanggun BcN Co., Ltd. | 2,445 | — | — | |||||||||||
Others | 51 | 1,064 | — | |||||||||||
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8,847 | 14,211 | 2 | ||||||||||||
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Others | SK Innovation Co., Ltd. | 2,786 | 4,951 | — | ||||||||||
SK Networks Co., Ltd.(*3) | 975 | 238,361 | — | |||||||||||
SK Networks Service Co., Ltd. | 1,539 | 16,961 | 75 | |||||||||||
SK Energy Co., Ltd. | 830 | 24 | — | |||||||||||
Content Wavve Co., Ltd. | 3 | 23,516 | — | |||||||||||
SK Shieldus Co., Ltd. | 6,335 | 38,096 | 1,684 | |||||||||||
Eleven Street Co., Ltd. | 7,063 | 6,507 | — | |||||||||||
SK Planet Co., Ltd. | 3,058 | 22,845 | 586 | |||||||||||
SK hynix Inc. | 10,149 | 39 | — | |||||||||||
DREAMUS COMPANY | 769 | 23,234 | — | |||||||||||
One Store Co., Ltd. | 4,148 | 2 | — | |||||||||||
T map Mobility Co., Ltd. | 4,065 | 1,261 | — | |||||||||||
UbiNS Co., Ltd. | 23 | 10,944 | 4,329 | |||||||||||
SK Geo Centric Co., Ltd. | 148 | — | — | |||||||||||
SK Ecoplant Co., Ltd. | 631 | — | — | |||||||||||
SK RENT A CAR Co., Ltd. | 1,865 | 3,815 | — | |||||||||||
SK Magic Co., Ltd. | 588 | 267 | — | |||||||||||
Others | 4,964 | 5,642 | 3,307 | |||||||||||
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49,939 | 396,465 | 9,981 | ||||||||||||
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608,540 | 13,778 | |||||||||||||
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(*1) | Operating expenses and others include lease payments by the Group. |
(*2) | Operating expenses and others include |
(*3) | Operating expenses and others include costs for handset purchases amounting to |
68
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
31. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | For the three-month period ended March 31, 2021 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expenses and others(*1) | Acquisition of property and equipment and others | ||||||||||
Ultimate Controlling Entity Associates | SK Inc. (*2) | 285,366 | 2,168 | |||||||||||
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F&U Credit information Co., Ltd. | 786 | 12,715 | — | |||||||||||
SK hynix Inc.(*3) | 200,383 | 134 | — | |||||||||||
HanaCard Co., Ltd. | 20 | 842 | — | |||||||||||
SK Wyverns Co., Ltd.(*4) | 202 | 8,203 | — | |||||||||||
Content Wavve Co., Ltd. | 19 | 695 | — | |||||||||||
Others | 13,272 | 432 | — | |||||||||||
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214,682 | 23,021 | — | ||||||||||||
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Others | SK Ecoplant Co., Ltd. | 2,761 | — | — | ||||||||||
SK Innovation Co., Ltd. | 12,101 | 4,631 | — | |||||||||||
SK Networks Co., Ltd.(*5) | 2,985 | 301,471 | 24 | |||||||||||
SK Networks Services Co., Ltd. | 1,746 | 17,225 | 12 | |||||||||||
SK Telesys Co., Ltd. | 70 | 1,366 | 1,562 | |||||||||||
SK TNS Co., Ltd. | 59 | 4,337 | 22,378 | |||||||||||
SK Energy Co., Ltd. | 2,410 | 408 | — | |||||||||||
SK hynix Semiconductor (China) Ltd. | 15,923 | — | — | |||||||||||
SK Battery Hungary Kft. | 9,304 | — | — | |||||||||||
SK Geo Centric Co., Ltd. | 2,779 | 8 | — | |||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. | 3,506 | — | — | |||||||||||
Happy Narae Co., Ltd. | 2,081 | 4,604 | 4,941 | |||||||||||
Others | 31,699 | 37,824 | 5,593 | |||||||||||
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87,424 | 371,874 | 34,510 | ||||||||||||
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680,261 | 36,678 | |||||||||||||
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(*1) | Operating expenses and others include lease payments by the Group. |
(*2) | Operating expenses and others include |
(*3) | Operating revenue and others include |
(*4) | Transactions with SK Wyverns Co., Ltd. occurred before disposal. |
(*5) | Operating expenses and others include costs for handset purchases amounting to |
69
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
31. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | March 31, 2022 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable –other, etc. | ||||||||||
Ultimate Controlling Entity Associates | SK Inc. | 1,064 | 145,795 | |||||||||||
F&U Credit information Co., Ltd. | — | — | 5,164 | |||||||||||
Wave City Development Co., Ltd.(*1) | — | 2,623 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,148 | 2,534 | — | |||||||||||
HanaCard Co., Ltd. | — | 1,733 | 13,160 | |||||||||||
SK USA, Inc. | — | — | 2,265 | |||||||||||
Others | — | 1 | 60 | |||||||||||
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22,148 | 6,891 | 20,649 | ||||||||||||
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SK hynix Inc. | — | 9,809 | 107 | |||||||||||
SK Planet Co., Ltd. | — | 2,040 | 32,752 | |||||||||||
Eleven Street Co., Ltd. | — | 3,518 | 13,209 | |||||||||||
SK Shieldus Co., Ltd. | — | 3,609 | 22,839 | |||||||||||
SK Innovation Co., Ltd. | — | 4,796 | 34,891 | |||||||||||
SK Networks Co., Ltd. | — | 431 | 171,205 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 785 | 22,851 | |||||||||||
Incross Co., Ltd. | — | 2,623 | 10,073 | |||||||||||
UbiNS Co., Ltd. | — | 2 | 11,272 | |||||||||||
Mintit Co., Ltd. | — | 18,451 | 38 | |||||||||||
Happy Narae Co., Ltd. | — | 20 | 5,397 | |||||||||||
Content Wavve Co., Ltd. | — | 154 | 30,695 | |||||||||||
Others | — | 7,927 | 51,776 | |||||||||||
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— | 54,165 | 407,105 | ||||||||||||
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62,120 | 573,549 | |||||||||||||
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(*1) | As of March 31, 2022, the Parent Company recognized loss allowance amounting to |
(*2) | As of March 31, 2022, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
70
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
31. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of March 31, 2022 and December 31, 2021 are as follows, Continued: |
(In millions of won) | December 31, 2021 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable –other, etc. | ||||||||||
Ultimate Controlling Entity Associates | SK Inc. | 2,092 | 69,652 | |||||||||||
F&U Credit information Co., Ltd. | — | 4 | 5,265 | |||||||||||
Wave City Development Co., Ltd.(*1) | — | 2,623 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 3,857 | — | |||||||||||
HanaCard Co., Ltd. | — | 529 | 48,020 | |||||||||||
Others | — | 84 | 1,197 | |||||||||||
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22,147 | 7,097 | 54,482 | ||||||||||||
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Others | SK Innovation Co., Ltd. | — | 3,022 | 38,022 | ||||||||||
SK Networks Co., Ltd. | — | 241 | 198,631 | |||||||||||
Mintit Co., Ltd. | — | 17,929 | 131 | |||||||||||
SK hynix Inc. | — | 11,526 | 166 | |||||||||||
Happy Narae Co., Ltd. | — | 6 | 49,349 | |||||||||||
SK m&service Co., Ltd. | — | 1,453 | 18,921 | |||||||||||
SK Shieldus Co., Ltd. | — | 2,649 | 24,593 | |||||||||||
Content Wavve Co., Ltd. | — | 183 | 9,873 | |||||||||||
Incross Co., Ltd. | — | 3,610 | 11,829 | |||||||||||
Eleven Street Co., Ltd. | — | 2,851 | 7,782 | |||||||||||
SK Planet Co., Ltd. | — | 668 | 31,652 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 116 | 16,715 | |||||||||||
UbiNS Co., Ltd. | — | 24 | 14,932 | |||||||||||
Others | — | 8,307 | 29,106 | |||||||||||
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— | 52,585 | 451,702 | ||||||||||||
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61,774 | 575,836 | |||||||||||||
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(*1) | As of December 31, 2021, the Parent Company recognized loss allowance amounting to |
(*2) | As of December 31, 2021, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
(5) | The Group has granted SK REIT Co., Ltd. the right of first offer regarding the disposal of real estate owned by the Group. Whereby, the negotiation period is within 3 to 5 years from June 30, 2021, date of agreement, and the Group has been granted the right by SK REIT Co., Ltd. to lease the real estate in preference to a third party if SK REIT Co., Ltd. purchases the real estate from the Group. |
(6) | The details of additional investments and disposal of associates and joint ventures for the three-month period ended March 31, 2022 are as presented in note 11. |
71
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
32. | 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 of1,513 million as of March 31, 2022.W
(2) | Legal claims and litigations |
As of March 31, 2022, 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.
(3) | Accounts receivable 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 receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special purpose companies which were established with the purpose of liquidating receivables, respectively.
Accounts receivable from sales of handsets amounting to495,860 million andW493,277 million as of March 31, 2022 and December 31, 2021, respectively, which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.W
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
33. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
|
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| |||||
March 31, 2022 | March 31, 2021 | |||||||
Interest income | (12,250 | ) | ||||||
Dividend income | (1,517 | ) | (1,039 | ) | ||||
Gain on foreign currency translations | (2,704 | ) | (8,427 | ) | ||||
Gain on sale of accounts receivable – other | (1,043 | ) | (7,921 | ) | ||||
Loss (gain) relating to investments in associates and joint ventures, net | 38,445 | (322,455 | ) | |||||
Gain on disposal of property and equipment and intangible assets | (4,923 | ) | (2,738 | ) | ||||
Gain relating to financial instruments at FVTPL | (7,892 | ) | (40,341 | ) | ||||
Other income | (1,929 | ) | (6,405 | ) | ||||
Interest expenses | 73,925 | 86,495 | ||||||
Loss on foreign currency translations | 9,999 | 6,231 | ||||||
Loss on sale of accounts receivable – other | 2,837 | — | ||||||
Income tax expense | 106,663 | 111,862 | ||||||
Expense related to defined benefit plan | 34,267 | 49,141 | ||||||
Share compensation expense | 74,729 | 1,045 | ||||||
Bonus paid by treasury shares | 24,338 | 29,642 | ||||||
Depreciation and amortization | 946,267 | 1,033,579 | ||||||
Bad debt expenses | 9,195 | 7,475 | ||||||
Loss on disposal of property and equipment and intangible assets | 2,119 | 6,029 | ||||||
Other bad debt expenses (reversal) | 105 | (55 | ) | |||||
Loss relating to financial instruments at FVTPL | 5,185 | 5,775 | ||||||
Other expenses | 3,563 | 1,933 | ||||||
|
|
|
| |||||
937,576 | ||||||||
|
|
|
|
73
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
33. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021 | |||||||
Accounts receivable – trade | (21,364 | ) | ||||||
Accounts receivable – other | (59,175 | ) | 8,928 | |||||
Advanced payments | 6,899 | (25,429 | ) | |||||
Prepaid expenses | (31,842 | ) | (53,064 | ) | ||||
Inventories | (46,952 | ) | (50,572 | ) | ||||
Long-term accounts receivable – other | 12,391 | 46,059 | ||||||
Contract assets | 2,376 | (16,689 | ) | |||||
Guarantee deposits | 4,775 | 474 | ||||||
Accounts payable – trade | (29,616 | ) | (32,512 | ) | ||||
Accounts payable – other | 90,924 | (395,361 | ) | |||||
Withholdings | 120,086 | 130,954 | ||||||
Contract liabilities | (11,219 | ) | 14,912 | |||||
Deposits received | 88 | 2,910 | ||||||
Accrued expenses | (205,514 | ) | (126,783 | ) | ||||
Provisions | (100 | ) | (7,415 | ) | ||||
Long-term provisions | (39 | ) | 1,477 | |||||
Plan assets | 30,864 | 25,989 | ||||||
Retirement benefits paid | (24,202 | ) | (30,582 | ) | ||||
Others | 35,550 | 5,090 | ||||||
|
|
|
| |||||
(522,978 | ) | |||||||
|
|
|
|
(3) | Significant non-cash transactions for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021 | |||||||
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets | (479,402 | ) | ||||||
Increase of right-of-use assets | 167,149 | 192,210 | ||||||
Contribution in kind for investments | — | 7,000 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
34. | Emissions Liabilities |
(1) | The quantity of emissions rights allocated free of charge for each implementation year as of March 31, 2022 are as follows: |
(In tCO2-eQ) | ||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in 2022 | Total | |||||||||||||
Emissions rights allocated free of charge | 814,842 | 1,033,764 | 1,013,006 | 2,861,612 |
(2) | Changes in emissions rights quantities the Parent Company held are as follows: |
(In tCO2-eQ) | ||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in the three-month period ended March 31, 2022 | Total | |||||||||||||
Beginning | (60,977 | ) | — | — | (60,977 | ) | ||||||||||
Allocation at no cost | 814,842 | 1,033,764 | 1,013,006 | 2,861,612 | ||||||||||||
Additional allocation | 217,643 | — | — | 217,643 | ||||||||||||
Purchase | 68,471 | — | — | 68,471 | ||||||||||||
Surrender or shall be surrendered | (1,039,979 | ) | (1,087,455 | ) | (1,140,316 | ) | (3,267,750 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ending | — | (53,691 | ) | (127,310 | ) | (181,001 | ) | |||||||||
|
|
|
|
|
|
|
|
(3) | As of March 31, 2022, the estimated annual greenhouse gas emissions quantities of the Parent Company are 1,140,316 tCO2-eQ. |
35. | Non-current Assets Held for Sale |
On February 25, 2021, the Parent Company has decided to dispose of the investments in an associate engaged in mobility business to T map Mobility Co., Ltd. pursuant to the approval of the Board of Directors and reclassified entire shares of the investments in associates as non-current assets held for sale. The disposal is expected to take place in 2022 after approval by the Financial Services Commission.
(In millions of won) | ||||||
March 31, 2022 | ||||||
Investments in associates | Carrot General Insurance Co., Ltd. |
75
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
36. | Spin-off |
(1) | In accordance with the resolution of the Board of Directors held on June 10, 2021 and shareholders’ meeting held on October 12, 2021, the Parent Company completed the spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments on November 1, 2021, and the registration of the spin-off was completed as of November 2, 2021. The details of the spin-off are as follows: |
Method of spin-off | Horizontal spin-off | |
Company | SK Telecom Co., Ltd. (Surviving Company) | |
SK Square Co., Ltd. (Spin-off Company) | ||
Effective date of spin-off | November 1, 2021 |
(2) | The details of financial information due to the spin-off of its businesses of managing investments in semiconductor, New ICT and other business and making new investments are as follows: |
1) | Statements of Profit or Loss |
The details of profit or loss of discontinued operations for the three-month period ended March 31, 2021 are as follows:
(In millions of won) | ||||
For the three-month period ended March 31, 2021 | ||||
Operating revenue | ||||
Operating expenses: | 652,799 | |||
Labor | 235,412 | |||
Commission | 88,075 | |||
Depreciation and amortization | 87,376 | |||
Network interconnection | 243 | |||
Advertising | 44,132 | |||
Rent | 160 | |||
Cost of goods sold | 109,245 | |||
Others | 88,156 | |||
|
| |||
Operating profit | 14,565 | |||
Finance income | 6,981 | |||
Finance costs | 21,036 | |||
Gain relating to investments in associates and joint ventures, | 194,721 | |||
Other non-operating income | 7,453 | |||
Other non-operating expenses | 5,397 | |||
|
| |||
Profit before income tax | 197,287 | |||
Income tax benefit | (18,865 | ) | ||
Profit for the period | ||||
|
|
76
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Interim Consolidated Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
36. | Spin-off, Continued |
(2) | The details of financial information due to the spin-off of its businesses of managing investments in semiconductor, New ICT and other business and making new investments are as follows, Continued: |
2) | Statements of Cash Flows |
The details of cash flows from discontinued operations for the three-month period ended March 31, 2021 are as follows:
(In millions of won) | ||||
For the three-month period ended March 31, 2021 | ||||
Cash flows from operating activities | ||||
Cash flows from investing activities | 2,528 | |||
Cash flows from financing activities | 18,448 |
(3) | Subsequent to the spin-off, the Parent Company lost control over the related businesses. The spin-off was accounted for by derecognizing all related assets and liabilities. The net assets of the spin-off business as of spin-off date was recognized in capital surplus and others. The details of assets and liabilities derecognized from the consolidated financial statements due to the spin-off of its businesses of managing investments in semiconductor, New ICT and other business and making new investments are as follows: |
(In millions of won) | ||||
December 31, 2021 | ||||
Current assets | ||||
Non-current assets | 19,269,615 | |||
|
| |||
Total assets | ||||
Current liabilities | ||||
Non-current liabilities | 4,676,324 | |||
|
| |||
Total liabilities | ||||
|
| |||
Net assets | ||||
|
|
(4) | The Parent Company has obligation to jointly and severally reimburse the Parent Company’s liabilities incurred prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act. |
37. | Subsequent Events |
The Board of Directors of the Parent Company resolved to pay interim dividend at the Board’s meeting on April 28, 2022, and the details are as follows:
Classification | Description | |
Interim dividend amount | ||
Dividend rate | 1.44% | |
Dividend date | March 31, 2022 | |
Date of distribution | According to Article 165 of Capital Market and Financial Investment Business Act 12-3, the Parent Company plans to distribute dividends by May 18, 2022. |
77
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SK TELECOM CO., LTD.
Interim Separate Financial Statements
(Unaudited)
For the Three-Month Period ended March 31, 2022
(With Independent Auditor’s Review Report Thereon)
SK TELECOM CO., LTD.
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Page | ||||
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3 | ||||
4 | ||||
5 | ||||
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8 |
Table of Contents
Report on review of interim separate financial statements
The Shareholders and Board of Directors
SK Telecom Co., Ltd.
Report on financial statements
We have reviewed the accompanying interim separate financial statements of SK Telecom Co., Ltd. (the “Company”), which comprise the interim separate statement of financial position as of March 31, 2022, and the related interim separate statements of profit or loss, comprehensive income, changes in equity and cash flows for the three-month period then ended, and a summary of significant accounting policies and other explanatory information.
Management’s responsibility for the interim separate financial statements
Management is responsible for the preparation and fair presentation of these interim separate financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1034 Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of interim separate financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express a conclusion on these interim separate financial statements based on our review.
We conducted our review in accordance with the review standards for interim financial statements in the Republic of Korea. A review of interim financial information consists 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 Auditing Standards (“KGAAS”) 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 review, nothing has come to our attention that causes us to believe that the accompanying interim separate financial statements are not prepared fairly, in all material respects, in accordance with K-IFRS 1034 Interim Financial Reporting.
A member firm of Ernst & Young Global Limited
Table of Contents
Other matters
The interim separate statement of profit or loss, interim separate statement of comprehensive income, interim separate statement of changes in equity and interim separate statement of cash flows for the three-month period ended March 31, 2021, prepared in accordance with K-IFRS 1034 and presented for comparative purpose, have been reviewed by KPMG Samjong Accounting Corp. whose review report dated May 14, 2021 expressed an unqualified review conclusion.
Moreover, the separate statement of financial position as of December 31, 2021, and the related separate statement of profit or loss, separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended which have been audited by KPMG Samjong Accounting Corp., in accordance with KGAAS (not presented herein), whose report dated March 10, 2022 expressed an unqualified opinion. The accompanying separate statement of financial position as of December 31, 2021 presented for comparative purpose is not different, in all material respects, from the above audited separate statement of financial position.
May 13, 2022
This report is effective as of May 13, 2022, the independent auditor’s review report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the independent auditor’s review report date to the time this review report is used. Such events and circumstances could significantly affect the accompanying interim separate financial statements and may result in modification to this review report. |
A member firm of Ernst & Young Global Limited
Table of Contents
SK TELECOM CO., LTD. (the “Company”)
INTERIM SEPARATE FINANCIAL STATEMENTS
AS OF MARCH 31, 2022 AND DECEMBER 31, 2021 AND
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2022 AND 2021
The accompanying interim separate financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Company.
Ryu, Young-Sang
Chief Executive Officer
SK TELECOM CO., LTD.
Table of Contents
SK TELECOM CO., LTD.
Interim Separate Statements of Financial Position
As of March 31, 2022 and December 31, 2021
(In millions of won) | ||||||||||||
Note | March 31, 2022 (Unaudited) | December 31, 2021 | ||||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 27,28 | 158,823 | ||||||||||
Short-term financial instruments | 27,28 | 425,400 | 379,000 | |||||||||
Accounts receivable – trade, net | 4,27,28,29 | 1,515,770 | 1,514,260 | |||||||||
Short-term loans, net | 4,27,28,29 | 66,193 | 62,724 | |||||||||
Accounts receivable – other, net | 4,27,28,29,30 | 598,897 | 520,956 | |||||||||
Contract assets | 6,28 | 10,768 | 10,078 | |||||||||
Prepaid expenses | 5 | 1,939,344 | 1,913,419 | |||||||||
Guarantee deposits | 4,27,28,29 | 49,556 | 51,739 | |||||||||
Derivative financial assets | 27,28 | 25,558 | 25,428 | |||||||||
Inventories, net | 26,111 | 8,962 | ||||||||||
Non-current assets held for sale | 33 | 20,000 | 20,000 | |||||||||
Advanced payments and others | 4,27,28 | 11,782 | 16,104 | |||||||||
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|
|
| |||||||||
4,767,302 | 4,681,493 | |||||||||||
|
|
|
| |||||||||
Non-Current Assets: | ||||||||||||
Long-term financial instruments | 27,28 | 354 | 354 | |||||||||
Long-term investment securities | 7,27,28 | 1,405,103 | 1,476,361 | |||||||||
Investments in subsidiaries, associates and joint ventures | 8,33 | 4,910,050 | 4,841,139 | |||||||||
Property and equipment, net | 9,11,29 | 9,093,711 | 9,318,408 | |||||||||
Investment property, net | 10 | 57,185 | 45,100 | |||||||||
Goodwill | 1,306,236 | 1,306,236 | ||||||||||
Intangible assets, net | 12 | 3,027,801 | 3,203,330 | |||||||||
Long-term loans, net | 4,27,28,29 | 815 | 201 | |||||||||
Long-term accounts receivable – other | 4,27,28,30 | 281,491 | 287,179 | |||||||||
Long-term contract assets | 6,28 | 19,741 | 19,399 | |||||||||
Long-term prepaid expenses | 5 | 939,553 | 951,441 | |||||||||
Guarantee deposits | 4,27,28,29 | 105,217 | 106,091 | |||||||||
Long-term derivative financial assets | 27,28 | 175,973 | 152,084 | |||||||||
Other non-current assets | 249 | 249 | ||||||||||
|
|
|
| |||||||||
21,323,479 | 21,707,572 | |||||||||||
|
|
|
| |||||||||
Total Assets | 26,389,065 | |||||||||||
|
|
|
|
(Continued)
1
Table of Contents
SK TELECOM CO., LTD.
Interim Separate Statements of Financial Position, Continued
As of March 31, 2022 and December 31, 2021
(In millions of won) | ||||||||||||
Note | March 31, 2022 (Unaudited) | December 31, 2021 | ||||||||||
Liabilities and Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable – other | 27,28,29 | 2,072,195 | ||||||||||
Contract liabilities | 6 | 65,017 | 72,624 | |||||||||
Withholdings | 27,28 | 725,042 | 608,069 | |||||||||
Accrued expenses | 27,28 | 651,469 | 764,863 | |||||||||
Current tax liabilities | 25 | 217,064 | 158,837 | |||||||||
Provisions | 15,32 | 58,831 | 54,137 | |||||||||
Short-term borrowings | 13,27,28 | 150,000 | — | |||||||||
Current installments of long-term debt, net | 13,27,28 | 966,333 | 976,195 | |||||||||
Lease liabilities | 27,28,29 | 333,538 | 316,169 | |||||||||
Current installments of long-term payables – other | 14,27,28 | 393,920 | 398,823 | |||||||||
Other current liabilities | 27,28 | 16,957 | 4,565 | |||||||||
|
|
|
| |||||||||
5,570,836 | 5,426,477 | |||||||||||
|
|
|
| |||||||||
Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 13,27,28 | 5,596,966 | 5,835,400 | |||||||||
Long-term borrowings, excluding current installments, net | 13,27,28 | 500,000 | 300,000 | |||||||||
Long-term payables – other | 14,27,28 | 1,223,821 | 1,611,010 | |||||||||
Long-term contract liabilities | 6 | 8,570 | 9,149 | |||||||||
Long-term derivative financial liabilities | 27,28 | 321,025 | 321,025 | |||||||||
Long-term lease liabilities | 27,28,29 | 1,091,178 | 1,045,926 | |||||||||
Long-term provisions | 15 | 37,602 | 42,432 | |||||||||
Deferred tax liabilities | 25 | 922,402 | 883,311 | |||||||||
Defined benefit liabilities | 16 | 5,266 | 6,902 | |||||||||
Other non-current liabilities | 27,28 | 31,785 | 44,577 | |||||||||
|
|
|
| |||||||||
9,738,615 | 10,099,732 | |||||||||||
|
|
|
| |||||||||
Total Liabilities | 15,309,451 | 15,526,209 | ||||||||||
|
|
|
| |||||||||
Equity: | ||||||||||||
Share capital | 1,17 | 30,493 | 30,493 | |||||||||
Capital surplus and others | 17,18 | (4,499,135 | ) | (4,576,271 | ) | |||||||
Retained earnings | 19 | 14,672,285 | 14,770,618 | |||||||||
Reserves | 20 | 577,687 | 638,016 | |||||||||
|
|
|
| |||||||||
Total Equity | 10,781,330 | 10,862,856 | ||||||||||
|
|
|
| |||||||||
Total Liabilities and Equity | 26,389,065 | |||||||||||
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|
|
The accompanying notes are an integral part of the interim separate financial statements.
2
Table of Contents
SK TELECOM CO., LTD.
Interim Separate Statements of Profit or Loss
For the three-month periods ended March 31, 2022 and 2021
(In millions of won, except for earnings per share) | ||||||||||||
Note | 2022 (Unaudited) | 2021 (Unaudited) | ||||||||||
Operating revenue: | 21,29 | |||||||||||
Revenue | 2,980,718 | |||||||||||
Operating expenses: | 29 | |||||||||||
Labor | 291,863 | 247,545 | ||||||||||
Commissions | 5 | 1,154,732 | 1,173,360 | |||||||||
Depreciation and amortization | 677,864 | 688,368 | ||||||||||
Network interconnection | 144,046 | 141,269 | ||||||||||
Leased lines | 45,882 | 54,996 | ||||||||||
Advertising | 16,879 | 13,202 | ||||||||||
Rent | 28,095 | 29,555 | ||||||||||
Cost of goods sold | 125,027 | 102,897 | ||||||||||
Others | 22 | 236,064 | 222,224 | |||||||||
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|
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| |||||||||
2,720,452 | 2,673,416 | |||||||||||
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|
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| |||||||||
Operating profit | 356,941 | 307,302 | ||||||||||
Finance income | 24 | 45,732 | 233,910 | |||||||||
Finance costs | 24 | (67,250 | ) | (58,431 | ) | |||||||
Other non-operating income | 23 | 13,631 | 3,529 | |||||||||
Other non-operating expenses | 23 | (11,377 | ) | (5,445 | ) | |||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net | 8 | 950 | 100,000 | |||||||||
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| |||||||||
Profit before income tax | 338,627 | 580,865 | ||||||||||
Income tax expense | 25 | 86,609 | 114,852 | |||||||||
|
|
|
| |||||||||
Profit for the period | 466,013 | |||||||||||
|
|
|
| |||||||||
Earnings per share: | 26 | |||||||||||
Basic earnings per share (in won) |
| 1,299 | ||||||||||
Diluted earnings per share (in won) |
| 1,139 | 1,299 |
The accompanying notes are an integral part of the interim separate financial statements.
3
Table of Contents
SK TELECOM CO., LTD.
Interim Separate Statements of Comprehensive Income
For the three-month periods ended March 31, 2022 and 2021
(In millions of won) | Note | 2022 (Unaudited) | 2021 (Unaudited) | |||||||||
Profit for the period | 466,013 | |||||||||||
Other comprehensive income (loss): | ||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||
Remeasurement of defined benefit plans | 16 | 14,527 | (16,729 | ) | ||||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income | 20 | (57,221 | ) | 171,320 | ||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||
Net change in unrealized fair value of derivatives | 20 | (3,108 | ) | (1,630 | ) | |||||||
|
|
|
| |||||||||
Other comprehensive income (loss) for the period, net of taxes | (45,802 | ) | 152,961 | |||||||||
|
|
|
| |||||||||
Total comprehensive income | 618,974 | |||||||||||
|
|
|
|
The accompanying notes are an integral part of the interim separate financial statements.
4
Table of Contents
SK TELECOM CO., LTD.
Interim Separate Statements of Changes in Equity
For the three-month periods ended March 31, 2022 and 2021
(In millions of won) | Share capital | Capital surplus and others | Retained earnings | Reserves | Total equity | |||||||||||||||||||||||||||||||||||||||
Note | Paid-in surplus | Treasury shares | Hybrid bonds | Share option | Other | Sub-total | ||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2021 | 2,915,887 | (2,123,661 | ) | 398,759 | 1,481 | (903,332 | ) | 289,134 | 16,684,640 | 331,445 | 17,349,858 | |||||||||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | — | 466,013 | — | 466,013 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 16,20 | — | — | — | — | — | — | — | (16,729 | ) | 169,690 | 152,961 | ||||||||||||||||||||||||||||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
— | — | — | — | — | — | — | 449,284 | 169,690 | 618,974 | |||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | — | — | — | (641,944 | ) | — | (641,944 | ) | ||||||||||||||||||||||||||||||||
Share option | 18 | — | — | — | — | 47 | — | 47 | — | — | 47 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | — | — | — | — | — | — | — | (3,692 | ) | — | (3,692 | ) | ||||||||||||||||||||||||||||||||
Acquisition of treasury shares | 17 | — | — | (72,982 | ) | — | — | — | (72,982 | ) | — | — | (72,982 | ) | ||||||||||||||||||||||||||||||
Disposal of treasury shares | 17 | — | — | 26,983 | — | — | 2,659 | 29,642 | — | — | 29,642 | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | — | (45,999 | ) | — | 47 | 2,659 | (43,293 | ) | (645,636 | ) | — | (688,929 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Balance as of March 31, 2021 (Unaudited) | 2,915,887 | (2,169,660 | ) | 398,759 | 1,528 | (900,673 | ) | 245,841 | 16,488,288 | 501,135 | 17,279,903 | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Balance as of January 1, 2022 | 1,771,000 | (57,314 | ) | 398,759 | 47,166 | (6,735,882 | ) | (4,576,271 | ) | 14,770,618 | 638,016 | 10,862,856 | ||||||||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | — | 252,018 | — | 252,018 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 16,20 | — | — | — | — | — | — | — | 14,527 | (60,329 | ) | (45,802 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | — | — | — | — | — | — | 266,545 | (60,329 | ) | 206,216 | ||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | — | — | — | (361,186 | ) | — | (361,186 | ) | ||||||||||||||||||||||||||||||||
Share option | 18 | — | — | — | — | 45,888 | 28,358 | 74,246 | — | — | 74,246 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | — | — | — | — | — | — | — | (3,692 | ) | — | (3,692 | ) | ||||||||||||||||||||||||||||||||
Transactions of treasury shares | 17,18 | — | — | 19,273 | — | (91,062 | ) | 74,679 | 2,890 | — | — | 2,890 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | — | 19,273 | — | (45,174 | ) | 103,037 | 77,136 | (364,878 | ) | — | (287,742 | ) | ||||||||||||||||||||||||||||||||
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Balance as of March 31, 2022 (Unaudited) | 1,771,000 | (38,041 | ) | 398,759 | 1,992 | (6,632,845 | ) | (4,499,135 | ) | 14,672,285 | 577,687 | 10,781,330 | ||||||||||||||||||||||||||||||||
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The accompanying notes are an integral part of the interim separate financial statements.
5
Table of Contents
SK TELECOM CO., LTD.
Interim Separate Statements of Cash Flows
For the three-month periods ended March 31, 2022 and 2021
(In millions of won) | ||||||||||||
Note | 2022 (Unaudited) | 2021 (Unaudited) | ||||||||||
Cash flows from operating activities: | ||||||||||||
Cash generated from operating activities: | ||||||||||||
Profit for the period | 466,013 | |||||||||||
Adjustments for income and expenses | 31 | 934,816 | 610,058 | |||||||||
Changes in assets and liabilities related to operating activities | 31 | (34,254 | ) | (285,507 | ) | |||||||
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| |||||||||
1,152,580 | 790,564 | |||||||||||
Interest received | 5,819 | 5,567 | ||||||||||
Interest paid | (58,399 | ) | (54,959 | ) | ||||||||
Income tax paid | (498 | ) | (370 | ) | ||||||||
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| |||||||||
Net cash provided by operating activities | 1,099,502 | 740,802 | ||||||||||
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| |||||||||
Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term financial instruments, net | — | 57,000 | ||||||||||
Collection of short-term loans | 29,830 | 41,580 | ||||||||||
Proceeds from disposals of long-term investment securities | — | 5,312 | ||||||||||
Proceeds from disposals of investments in subsidiaries, associates and joint ventures | 5,800 | 100,000 | ||||||||||
Proceeds from disposals of property and equipment | 1,369 | 734 | ||||||||||
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| |||||||||
36,999 | 204,626 | |||||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term financial instruments, net | (46,400 | ) | — | |||||||||
Increase in short-term loans | (33,954 | ) | (15,733 | ) | ||||||||
Acquisitions of long-term investment securities | (10,000 | ) | (10,000 | ) | ||||||||
Acquisitions of investments in subsidiaries, associates and joint ventures | (62,660 | ) | (88,820 | ) | ||||||||
Acquisitions of property and equipment | (653,996 | ) | (554,501 | ) | ||||||||
Acquisitions of intangible assets | (2,690 | ) | (2,160 | ) | ||||||||
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| |||||||||
(809,700 | ) | (671,214 | ) | |||||||||
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| |||||||||
Net cash used in investing activities | (466,588 | ) | ||||||||||
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|
(Continued)
6
Table of Contents
SK TELECOM CO., LTD.
Interim Separate Statements of Cash Flows, Continued
For the three-month periods ended March 31, 2022 and 2021
(In millions of won) | ||||||||||||
Note | 2022 (Unaudited) | 2021 (Unaudited) | ||||||||||
Cash flows from financing activities: | ||||||||||||
Cash inflows from financing activities: | ||||||||||||
Proceeds from short-term borrowings | — | |||||||||||
Proceeds from long-term borrowings | 200,000 | — | ||||||||||
Proceeds from issuance of debentures | — | 308,757 | ||||||||||
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| |||||||||
350,000 | 308,757 | |||||||||||
Cash outflows for financing activities: | ||||||||||||
Repayments of long-term payables – other | (400,245 | ) | (425,349 | ) | ||||||||
Repayments of debentures | (280,000 | ) | (210,000 | ) | ||||||||
Payments of interest on hybrid bonds | (3,692 | ) | — | |||||||||
Repayments of lease liabilities | (73,759 | ) | (73,215 | ) | ||||||||
Acquisition of treasury shares | — | (72,982 | ) | |||||||||
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| |||||||||
(757,696 | ) | (781,546 | ) | |||||||||
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| |||||||||
Net cash used in financing activities | (407,696 | ) | (472,789 | ) | ||||||||
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| |||||||||
Net decrease in cash and cash equivalents | (80,895 | ) | (198,575 | ) | ||||||||
Cash and cash equivalents at beginning of the period | 158,823 | 329,208 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents | (5 | ) | 2 | |||||||||
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| |||||||||
Cash and cash equivalents at end of the period | 130,635 | |||||||||||
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|
The accompanying notes are an integral part of the interim separate financial statements.
7
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
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 March 31, 2022, the Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Inc. | 65,668,397 | 30.01 | ||||||
National Pension Service | 20,389,153 | 9.32 | ||||||
Institutional investors and other shareholders | 128,098,793 | 58.53 | ||||||
Kakao Corp. | 3,846,487 | 1.76 | ||||||
Treasury shares | 830,314 | 0.38 | ||||||
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| |||||
218,833,144 | 100.00 | |||||||
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|
On November 1, 2021, the date of spin-off, the Company completed the spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments.
2. | Basis of Preparation |
(1) | Statement of compliance |
These interim condensed separate financial statements were prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) 1034 Interim Financial Reporting as part of the period covered by the Company’s K-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, 2021. These interim separate financial statements do not include all of the disclosures required for full annual financial statements.
These interim financial statements are interim separate financial statements prepared in accordance with K-IFRS 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.
(2) | Use of estimates and judgments |
1) Critical judgments, assumptions and estimation uncertainties
The preparation of the interim separate financial statements in conformity with K-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 interim separate 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 separate financial statements as of and for the year ended December 31, 2021.
8
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
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 and non-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 of K-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 28.
3. | Significant Accounting Policies |
The significant accounting policies applied by the Company in these interim separate 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, 2021, except for the adoption of new and revised K-IFRS applied from January 1, 2022, which are summarized below. The Company has not early applied the new and revised K-IFRS and interpretations that have been issued but are not yet effective.
The following new and amended K-IFRS and interpretations are effective from January 1, 2022, initially, but these amended standards are not expected to have a significant impact on the Company’s interim separate financial statements.
• | Onerous Contracts – Cost of Fulfilling a Contract (Amendments to K-IFRS 1037). |
• | Reference to Conceptual Framework (Amendments to K-IFRS 1103). |
• | Property, Plant and Equipment: Proceeds before Intended Use (Amendments to K-IFRS 1016). |
• | Annual Improvements to K-IFRS 2018-2020. |
9
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
4. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | March 31, 2022 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (101,004 | ) | 1,515,770 | |||||||||
Short-term loans | 66,862 | (669 | ) | 66,193 | ||||||||
Accounts receivable – other(*) | 634,287 | (35,390 | ) | 598,897 | ||||||||
Guarantee deposits | 49,556 | — | 49,556 | |||||||||
Accrued income | 173 | — | 173 | |||||||||
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| |||||||
2,367,652 | (137,063 | ) | 2,230,589 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 41,858 | (41,043 | ) | 815 | ||||||||
Long-term accounts receivable – other(*) | 281,491 | — | 281,491 | |||||||||
Guarantee deposits | 105,217 | — | 105,217 | |||||||||
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| |||||||
428,566 | (41,043 | ) | 387,523 | |||||||||
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| |||||||
(178,106 | ) | 2,618,112 | ||||||||||
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|
(*) | Gross and carrying amounts of accounts receivable – other as of March 31, 2022 include |
(In millions of won) | December 31, 2021 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (92,762 | ) | 1,514,260 | |||||||||
Short-term loans | 63,358 | (634 | ) | 62,724 | ||||||||
Accounts receivable – other(*) | 556,141 | (35,185 | ) | 520,956 | ||||||||
Guarantee deposits | 51,739 | — | 51,739 | |||||||||
Accrued income | 331 | — | 331 | |||||||||
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| |||||||
2,278,591 | (128,581 | ) | 2,150,010 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 41,238 | (41,037 | ) | 201 | ||||||||
Long-term accounts receivable – other(*) | 287,179 | — | 287,179 | |||||||||
Guarantee deposits | 106,091 | — | 106,091 | |||||||||
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| |||||||
434,508 | (41,037 | ) | 393,471 | |||||||||
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| |||||||
(169,618 | ) | 2,543,481 | ||||||||||
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|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2021 include |
10
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
4. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on trade and other receivables measured at amortized cost for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
January 1, 2022 | Impairment | Write-offs(*) | Collection of receivables previously written-off | March 31, 2022 | ||||||||||||||||
Accounts receivable – trade | 5,894 | (216 | ) | 2,564 | 101,004 | |||||||||||||||
Accounts receivable – other, etc. | 76,856 | (91 | ) | (54 | ) | 391 | 77,102 | |||||||||||||
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5,803 | (270 | ) | 2,955 | 178,106 | ||||||||||||||||
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(In millions of won) | ||||||||||||||||||||
January 1, 2021 | Impairment | Write-offs(*) | Collection of receivables previously written-off | March 31, 2021 | ||||||||||||||||
Accounts receivable – trade | 2,088 | (205 | ) | 2,807 | 106,998 | |||||||||||||||
Accounts receivable – other, etc. | 76,170 | 109 | (244 | ) | 424 | 76,459 | ||||||||||||||
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2,197 | (449 | ) | 3,231 | 183,457 | ||||||||||||||||
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(*) | The Company writes off trade and other receivables that are determined to be uncollectable due to reasons such as termination of operations or bankruptcy. |
(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 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 primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
Receivables related to other revenue mainly consist of receivables from corporate customers. The Company transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Company is not exposed to significant credit concentration risk as the Company regularly assesses their credit risk by monitoring their credit ratings. While the contract assets are subject to the impairment requirements, no significant expected credit loss has been identified.
11
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
5. | Prepaid Expenses |
The Company pays commissions to its retail stores and authorized dealers for wireless telecommunications services. 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.
(1) | Details of prepaid expenses as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Current assets: |
| |||||||
Incremental costs of obtaining contracts | 1,878,149 | |||||||
Others | 50,144 | 35,270 | ||||||
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| |||||
1,913,419 | ||||||||
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| |||||
Non-current assets: |
| |||||||
Incremental costs of obtaining contracts | 931,655 | |||||||
Others | 17,847 | 19,786 | ||||||
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| |||||
951,441 | ||||||||
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|
|
(2) | Incremental costs of obtaining contracts |
The amortization in connection with incremental costs of obtaining contracts recognized for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | For the three-month period ended | |||||||
March 31, 2022 | March 31, 2021 | |||||||
Amortization recognized | 640,540 |
12
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
6. | Contract Assets and Liabilities |
In case of providing both wireless telecommunication services and sales of handsets, the Company allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Company recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.
(1) | Details of contract assets and liabilities as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | 29,477 | |||||||
Contract liabilities: | ||||||||
Wireless service contracts | 18,674 | 18,397 | ||||||
Customer loyalty programs | 11,200 | 12,699 | ||||||
Others | 43,713 | 50,677 | ||||||
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81,773 | ||||||||
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(2) | The amount of revenue recognized for the three-month periods ended March 31, 2022 and 2021 related to the contract liabilities carried forward from the prior periods are |
13
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
7. | Investment Securities |
(1) | There were no short-term investment securities as of March 31, 2022 and December 31, 2021. |
(2) | Details of long-term investment securities as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||
Category | March 31, 2022 | December 31, 2021 | ||||||||||
Equity instruments | FVOCI(*) | 1,383,223 | ||||||||||
Debt instruments | FVTPL | 103,130 | 93,138 | |||||||||
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| |||||||||
1,476,361 | ||||||||||||
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(*) | The Company designated investments in equity instruments that are not held for trading as financial assets at FVOCI, and the amounts of those equity instruments as of March 31, 2022 and December 31, 2021 are |
14
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
8. | Investments in Subsidiaries, Associates and Joint Ventures |
(1) | Investments in subsidiaries, associates and joint ventures as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Investments in subsidiaries | 3,148,741 | |||||||
Investments in associates and joint ventures | 1,691,448 | 1,692,398 | ||||||
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| |||||
4,841,139 | ||||||||
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|
(2) | Details of investments in subsidiaries as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||||||
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 | 74.3 | 2,195,452 | 2,195,452 | ||||||||||||
SK Communications Co., Ltd. | 43,427,530 | 100.0 | 24,927 | 24,927 | ||||||||||||
PS&Marketing Corporation | 66,000,000 | 100.0 | 313,934 | 313,934 | ||||||||||||
SERVICE ACE Co., Ltd. | 4,385,400 | 100.0 | 21,927 | 21,927 | ||||||||||||
SK Telecom China Holdings Co., Ltd. | — | 100.0 | 48,096 | 48,096 | ||||||||||||
SKT Americas, Inc. | 122 | 100.0 | 31,203 | 31,203 | ||||||||||||
Atlas Investment(*1) | — | 100.0 | 157,942 | 155,656 | ||||||||||||
SK stoa Co., Ltd. | 3,631,355 | 100.0 | 40,029 | 40,029 | ||||||||||||
Broadband Nowon Co., Ltd. | 1,140,000 | 100.0 | 19,975 | 19,975 | ||||||||||||
Quantum Innovation Fund I(*1) | — | 59.9 | 12,174 | 11,935 | ||||||||||||
SAPEON Korea Inc.(*2) | 200,000 | 100.0 | 19,108 | — | ||||||||||||
SAPEON Inc.(*2) | 4,000 | 100.0 | 48,228 | — | ||||||||||||
SK O&S Co., Ltd. and others | — | — | 41,619 | 41,619 | ||||||||||||
|
|
|
| |||||||||||||
3,148,741 | ||||||||||||||||
|
|
|
|
(*1) | The Company additionally acquired shares for the three-month period ended March 31, 2022, but there is no change in the ownership interest. |
(*2) | The Company newly established SAPEON Korea Inc. and SAPEON Inc. for the three-month period ended March 31, 2022. |
15
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(3) | Details of investments in associates and joint ventures as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||||||
Number of shares | Ownership (%) | Carrying amount | Carrying amount | |||||||||||||
Investments in associates: | ||||||||||||||||
SK China Company Ltd. | 10,928,921 | 27.3 | 601,192 | |||||||||||||
Korea IT Fund(*1) | 190 | 63.3 | 220,957 | 220,957 | ||||||||||||
HanaCard Co., Ltd.(*2) | 39,902,323 | 15.0 | 253,739 | 253,739 | ||||||||||||
SK Technology Innovation Company | 14,700 | 49.0 | 45,864 | 45,864 | ||||||||||||
S.M. Culture & Contents Co., Ltd. | 22,033,898 | 23.1 | 65,341 | 65,341 | ||||||||||||
SK South East Asia Investment Pte. Ltd. | 300,000,000 | 20.0 | 344,240 | 344,240 | ||||||||||||
Pacific Telecom Inc.(*2) | 1,734,109 | 15.0 | 36,487 | 36,487 | ||||||||||||
Digital Games International Pte. Ltd. | 10,000,000 | 33.3 | 4,539 | 4,539 | ||||||||||||
Invites Healthcare Co., Ltd. | 489,999 | 27.1 | 35,000 | 35,000 | ||||||||||||
CMES Inc.(*2,3) | 42,520 | 7.7 | 900 | — | ||||||||||||
12CM JAPAN and others(*2,4) | — | — | 72,014 | 75,864 | ||||||||||||
|
|
|
| |||||||||||||
1,680,273 | 1,683,223 | |||||||||||||||
|
|
|
| |||||||||||||
Investments in joint ventures: | ||||||||||||||||
Finnq Co., Ltd.(*6) | 6,370,000 | 49.0 | 7,175 | 7,175 | ||||||||||||
UTC Kakao-SK Telecom ESG Fund(*5,6) | — | 48.2 | 4,000 | 2,000 | ||||||||||||
|
|
|
| |||||||||||||
11,175 | 9,175 | |||||||||||||||
|
|
|
| |||||||||||||
1,692,398 | ||||||||||||||||
|
|
|
|
(*1) | Investments 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 the Board of Directors even though the Company has less than 20% of equity interests. |
(*3) | As the Company obtained significant influence over the investee, |
(*4) | The Company additionally contributed |
(*5) | The Company additionally contributed |
(*6) | These investments were classified as investments in joint ventures as the Company has a joint control pursuant to the agreement with the other shareholders. |
16
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(4) | The market value of investments in listed associates as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
S.M.Culture & Contents Co., Ltd. | 22,033,898 | 114,576 | 4,485 | 22,033,898 | 98,822 |
9. | Property and Equipment |
Changes in property and equipment for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||||||||||||||
For the three-month period ended March 31, 2022 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Ending balance | |||||||||||||||||||
Land | — | (3 | ) | 3,514 | — | 625,125 | ||||||||||||||||||
Buildings | 564,976 | 137 | (100 | ) | 13,727 | (10,175 | ) | 568,565 | ||||||||||||||||
Structures | 290,813 | 1 | — | 6,828 | (9,500 | ) | 288,142 | |||||||||||||||||
Machinery | 5,331,485 | 3,665 | (120 | ) | 302,611 | (398,237 | ) | 5,239,404 | ||||||||||||||||
Right-of-use assets | 1,370,897 | 151,518 | (11,278 | ) | (14,801 | ) | (87,565 | ) | 1,408,771 | |||||||||||||||
Other | 439,982 | 82,713 | (262 | ) | (59,345 | ) | (18,774 | ) | 444,314 | |||||||||||||||
Construction in progress | 698,641 | 94,524 | (237 | ) | (273,538 | ) | — | 519,390 | ||||||||||||||||
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|
|
|
|
|
|
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| |||||||||||||
332,558 | (12,000 | ) | (21,004 | ) | (524,251 | ) | 9,093,711 | |||||||||||||||||
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|
|
|
(In millions of won) | ||||||||||||||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Reclassified as held for sale | Ending balance | ||||||||||||||||||||||
Land | — | — | 5,837 | — | (20,507 | ) | 623,701 | |||||||||||||||||||||
Buildings | 587,958 | 280 | (106 | ) | 15,668 | (10,420 | ) | (8,669 | ) | 584,711 | ||||||||||||||||||
Structures | 316,895 | 5 | — | 7,718 | (9,352 | ) | (6,104 | ) | 309,162 | |||||||||||||||||||
Machinery | 5,354,992 | 6,857 | (114 | ) | 325,666 | (396,445 | ) | — | 5,290,956 | |||||||||||||||||||
Right-of-use assets | 1,323,111 | 108,704 | (22,006 | ) | — | (91,608 | ) | — | 1,318,201 | |||||||||||||||||||
Other | 405,140 | 82,611 | (137 | ) | (90,240 | ) | (20,562 | ) | — | 376,812 | ||||||||||||||||||
Construction in progress | 531,081 | 63,968 | — | (282,986 | ) | — | — | 312,063 | ||||||||||||||||||||
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| |||||||||||||||
262,425 | (22,363 | ) | (18,337 | ) | (528,387 | ) | (35,280 | ) | 8,815,606 | |||||||||||||||||||
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17
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
10. | Investment Property |
(1) | Changes in investment property for the three-month period ended March 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||
For the three-month period ended March 31, 2022 | ||||||||||||||||
Beginning balance | Transfer | Depreciation | Ending balance | |||||||||||||
Land | (278 | ) | — | 16,806 | ||||||||||||
Buildings | 21,768 | (194 | ) | (496 | ) | 21,078 | ||||||||||
Right-of-use assets | 6,248 | 14,853 | (1,800 | ) | 19,301 | |||||||||||
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| |||||||||
14,381 | (2,296 | ) | 57,185 | |||||||||||||
|
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|
|
|
|
|
(2) | The Company recognized lease income of |
11. | Leases |
(1) | Details of the right-of-use assets as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Land, buildings and structures | 1,139,024 | |||||||
Others | 249,685 | 231,873 | ||||||
|
|
|
| |||||
1,370,897 | ||||||||
|
|
|
|
(2) | Details of amounts recognized in the interim separate statements of profit or loss for the three-month periods ended March 31, 2022 and 2021 as a lessee are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Depreciation of right-of-use assets: | ||||||||
Land, buildings and structures | 72,693 | |||||||
Others | 18,250 | 18,915 | ||||||
|
|
|
| |||||
91,608 | ||||||||
|
|
|
| |||||
Interest expense on lease liabilities | 4,122 |
Expenses related to short-term leases and leases of low-value assets the Company recognized are not material.
(3) | The total cash outflows due to lease payments for the three-month periods ended March 31, 2022 and 2021 amounted to |
18
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
12. | Intangible Assets |
(1) | Changes in intangible assets for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
For the three-month period ended March 31, 2022 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Ending balance | |||||||||||||||||||
Frequency usage rights | — | — | — | (119,195 | ) | 2,440,494 | ||||||||||||||||||
Land usage rights | 2,449 | — | — | — | (404 | ) | 2,045 | |||||||||||||||||
Industrial rights | 10,934 | 2,014 | — | (111 | ) | (1,170 | ) | 11,667 | ||||||||||||||||
Facility usage rights | 14,355 | 204 | (1 | ) | 38 | (695 | ) | 13,901 | ||||||||||||||||
Club memberships(*1) | 51,356 | 11 | — | — | — | 51,367 | ||||||||||||||||||
Other(*2) | 564,547 | 461 | — | 8,630 | (65,311 | ) | 508,327 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2,690 | (1 | ) | 8,557 | (186,775 | ) | 3,027,801 | ||||||||||||||||||
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|
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|
|
|
|
(In millions of won) | ||||||||||||||||||||
For the three-month period ended March 31, 2021 | ||||||||||||||||||||
Beginning balance | Acquisition | Transfer | Amortization | Ending balance | ||||||||||||||||
Frequency usage rights | — | — | (124,527 | ) | 1,808,238 | |||||||||||||||
Land usage rights | 4,103 | — | — | (465 | ) | 3,638 | ||||||||||||||
Industrial rights | 9,659 | 1,631 | — | (686 | ) | 10,604 | ||||||||||||||
Facility usage rights | 15,061 | 180 | 1 | (664 | ) | 14,578 | ||||||||||||||
Club memberships(*1) | 50,698 | 33 | — | — | 50,731 | |||||||||||||||
Other(*2) | 652,797 | 316 | 27,443 | (68,498 | ) | 612,058 | ||||||||||||||
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| |||||||||||
2,160 | 27,444 | (194,840 | ) | 2,499,847 | ||||||||||||||||
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|
|
(*1) | Club memberships are classified as intangible assets with indefinite useful lives and are not amortized. |
(*2) | Other intangible assets primarily consist of computer software and others. |
(2) | Details of frequency usage rights as of March 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||
Amount | Description | Commencement of amortization | Completion of amortization | |||||||||||||
800 MHz license | LTE service | Jul. 2021 | Jun. 2026 | |||||||||||||
1.8 GHz license | 493,654 | LTE service | Dec. 2021 | Dec. 2026 | ||||||||||||
2.6 GHz license | 576,735 | LTE service | Sept. 2016 | Dec. 2026 | ||||||||||||
2.1 GHz license | 371,007 | W-CDMA and LTE service | Dec. 2021 | Dec. 2026 | ||||||||||||
3.5 GHz license | 802,924 | 5G service | Apr. 2019 | Nov. 2028 | ||||||||||||
28 GHz license | 9,533 | 5G service | Jan. 2021 | Nov. 2023 | ||||||||||||
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| |||||||||||||||
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19
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
13. | Borrowings and Debentures |
(1) | Short-term borrowings as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||
Lender | Annual interest rate (%) | March 31, 2022 | December 31, 2021 | |||||||||
Woori Bank | 2.59 | — | ||||||||||
KIWOOM Securities Co., Ltd. | 1.81 | 50,000 | — | |||||||||
Shinhan Investment Corp. | 1.81 | 50,000 | — | |||||||||
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|
| |||||||||
— | ||||||||||||
|
|
|
|
(2) | Changes in long-term borrowings for the three-month period ended March 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||
Lender | Annual interest rate (%) | Maturity | Book value | |||||||||||||
Current | ||||||||||||||||
Non-current | 300,000 | |||||||||||||||
|
| |||||||||||||||
As of January 1, 2022 | 306,728 | |||||||||||||||
|
| |||||||||||||||
New long-term borrowings: | DBS Bank Ltd. | 2.68 | Mar. 10, 2025 | 200,000 | ||||||||||||
Other changes(*) | 157 | |||||||||||||||
Current | 6,885 | |||||||||||||||
Non-current | 500,000 | |||||||||||||||
|
| |||||||||||||||
As of March 31, 2022 | ||||||||||||||||
|
|
(*) | Other changes include the effects on foreign currency translation of long-term borrowings and changes in present value discount on long-term borrowings for the three-month period ended March 31, 2022. |
20
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
13. | Borrowings and Debentures, Continued |
(3) | Changes in debentures for the three-month period ended March 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||||
Purpose | Annual interest rate (%) | Maturity | Face value | Book value | ||||||||||||||||
Current | 969,467 | |||||||||||||||||||
Non-current | 5,852,600 | 5,835,400 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
As of January 1, 2022 | 6,822,600 | 6,804,867 | ||||||||||||||||||
|
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|
| |||||||||||||||||
Debentures repaid: | ||||||||||||||||||||
Unsecured corporate bonds | | Operating and refinancing fund | | 2.40 | Feb. 26, 2022 | (100,000 | ) | (100,000 | ) | |||||||||||
Operating fund | 2.03 | Mar. 6, 2022 | (180,000 | ) | (180,000 | ) | ||||||||||||||
|
|
|
| |||||||||||||||||
(280,000 | ) | (280,000 | ) | |||||||||||||||||
|
|
|
| |||||||||||||||||
Other changes(*1) | 30,360 | 31,547 | ||||||||||||||||||
Current(*2) | 960,000 | 959,448 | ||||||||||||||||||
Non-current(*2) | 5,612,960 | 5,596,966 | ||||||||||||||||||
|
|
|
| |||||||||||||||||
As of March 31, 2022 | 6,556,414 | |||||||||||||||||||
|
|
|
|
(*1) | Other changes include the effects on foreign currency translation of debentures and changes in discount on issuance of debentures for the three-month period ended March 31, 2022. |
(*2) |
|
21
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
14. | Long-Term Payables – Other |
(1) | As of March 31, 2022 and December 31, 2021, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 12): |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Long-term payables – other | 2,090,715 | |||||||
Present value discount on long-term payables – other | (72,729 | ) | (80,882 | ) | ||||
Current installments of long-term payables – other | (393,920 | ) | (398,823 | ) | ||||
|
|
|
| |||||
Carrying amount at period end | 1,611,010 | |||||||
|
|
|
|
(2) | The principal amount of long-term payables – other repaid for the three-month periods ended March 31, 2022 and 2021 are |
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 3 years | 738,300 | |||
3 ~ 5 years | 460,538 | |||
More than 5 years | 91,387 | |||
|
| |||
|
|
15. | Provisions |
Changes in provisions for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | For the three-month period ended March 31, 2022 | As of March 31, 2022 | ||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non-current | ||||||||||||||||||||||
Provision for restoration | 1,333 | (1,525 | ) | — | 94,492 | 56,890 | 37,602 | |||||||||||||||||||||
Emission allowance | 1,885 | 722 | — | (666 | ) | 1,941 | 1,941 | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
2,055 | (1,525 | ) | (666 | ) | 96,433 | 58,831 | 37,602 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | For the three-month period ended March 31, 2021 | As of March 31, 2021 | ||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non-current | ||||||||||||||||||||||
Provision for restoration | 2,170 | (1,511 | ) | — | 92,625 | 42,710 | 49,915 | |||||||||||||||||||||
Emission allowance | 7,424 | 271 | — | (712 | ) | 6,983 | 6,983 | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
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|
| |||||||||||||||
2,441 | (1,511 | ) | (712 | ) | 99,608 | 49,693 | 49,915 | |||||||||||||||||||||
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22
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
16. | Defined Benefit Liabilities |
(1) | Details of defined benefit liabilities as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||
Present value of defined benefit obligations | 483,001 | |||||||||||
Fair value of plan assets | (466,523 | ) | (476,099 | ) | ||||||||
|
|
|
| |||||||||
6,902 | ||||||||||||
|
|
|
|
(2) | Changes in present value of defined benefit obligations for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Beginning balance | 464,846 | |||||||
Current service cost | 13,383 | 14,086 | ||||||
Interest cost | 2,862 | 2,725 | ||||||
Remeasurement | ||||||||
- Demographic assumption | (5,672 | ) | — | |||||
- Financial assumption | (31,830 | ) | — | |||||
- Adjustment based on experience | 14,842 | 22,280 | ||||||
Benefit paid | (8,195 | ) | (11,107 | ) | ||||
Others | 3,398 | 1,760 | ||||||
|
|
|
| |||||
Ending balance | 494,590 | |||||||
|
|
|
|
(3) | Changes in fair value of plan assets for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Beginning balance | 457,425 | |||||||
Interest income | 2,752 | 2,680 | ||||||
Remeasurement | (2,552 | ) | 304 | |||||
Contribution | 5,000 | 10,000 | ||||||
Benefit paid | (17,805 | ) | (17,111 | ) | ||||
Others | 3,029 | 1,328 | ||||||
|
|
|
| |||||
Ending balance | 454,626 | |||||||
|
|
|
|
23
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
16. | Defined Benefit Liabilities, Continued |
(4) | Total cost of defined benefit plan, which is recognized in profit or loss (included in labor in the interim separate statements of profit or loss) and capitalized into construction-in-progress, for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Current service cost | 14,086 | |||||||
Net interest cost | 110 | 45 | ||||||
|
|
|
| |||||
14,131 | ||||||||
|
|
|
|
17. | Share Capital and Capital Surplus and Others |
(1) | The Company’s outstanding share capital consists entirely of common shares with a par value of |
(In millions of won, except for share data) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Number of authorized shares | 670,000,000 | 670,000,000 | ||||||
Number of issued shares(*1) | 218,833,144 | 218,833,144 | ||||||
Share capital: | ||||||||
Common share(*2) | 30,493 | |||||||
Capital surplus and others: | ||||||||
Paid-in surplus | 1,771,000 | 1,771,000 | ||||||
Treasury shares | (38,041 | ) | (57,314 | ) | ||||
Hybrid bonds(*3) | 398,759 | 398,759 | ||||||
Share option(Note 18) | 1,992 | 47,166 | ||||||
Others | (6,632,845 | ) | (6,735,882 | ) | ||||
|
|
|
| |||||
(4,576,271 | ) | |||||||
|
|
|
|
(*1) | As a result of stock split and the spin-off for the year ended December 31, 2021, the number of shares that the Company is allowed to issue under its article of incorporation has changed from 220,000,000 shares with a par value of |
(*2) | The Company’s share capital decreased by |
(*3) | As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Company classified the hybrid bonds as equity. When in liquidation or bankruptcy, these hybrid bonds are senior only to common shares. |
24
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
17. | Share Capital and Capital Surplus and Others, Continued |
(2) | There were no changes in share capital for the three-month periods ended March 31, 2022 and 2021, and details of shares outstanding as of March 31, 2022 and 2021 are as follows: |
(In shares) | ||||||||||||||||||||||||
March 31, 2022 | March 31, 2021 | |||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 218,833,144 | 830,314 | 218,002,830 | 80,745,711 | 9,585,568 | 71,160,143 |
(3) | Treasury shares as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won, except for share data) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Number of shares(*) | 830,314 | 1,250,992 | ||||||
Acquisition cost | 57,314 |
(*) | The Company distributed 420,678 treasury shares (acquisition cost: |
25
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
18. | Share-based Payment |
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows: |
1) | Equity-settled share-based payment arrangement |
Series | ||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5(*2) | 6(*2) | ||||||||
Grant date | March 24, 2017 | February 20, 2018 | February 22, 2019 | March 26, 2019 | March 26, 2020 | March 25, 2021 | ||||||||
Types of shares to be issued | Registered common shares | |||||||||||||
Grant method | Reissue of treasury shares, Cash settlement | |||||||||||||
Number of shares(*1) (in share) | 67,320 | 67,320 | 4,124 | 12,685 | 5,266 | 381,937 | 94,657 | |||||||
Exercise price(*1) (in won) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||
Exercise period | Mar. 25, 2020 | Mar. 25, 2021 | Feb. 21, 2020 | Feb. 23, 2021 | Mar. 27, 2021 | Mar. 27, 2023 | Mar. 26, 2023 | |||||||
~ | ~ | ~ | ~ | ~ | ~ | ~ | ||||||||
Mar. 24, 2023 | Mar. 24, 2024 | Feb. 20, 2023 | Feb. 22, 2024 | Mar. 26, 2024 | Mar. 26, 2027 | Mar. 25, 2026 | ||||||||
Vesting conditions | 3 years’ service from the grant date | 4 years’ service from | 2 years’ service from | 2 years’ service from | 2 years’ service from | 3 years’ service from the grant date | 2 years’ service from the grant date |
Series | ||||
7-1 | 7-2 | |||
Grant date | March 25, 2022 | |||
Types of shares to be issued | Registered common shares | |||
Grant method | Reissue of treasury shares, Cash settlement | |||
Number of shares (in share) | 295,275 | 120,441 | ||
Exercise price (in won) | 56,860 | 56,860 | ||
Exercise period | Mar. 26, 2025 | Mar. 26, 2024 | ||
~ | ~ | |||
Mar. 25, 2029 | Mar. 25, 2027 | |||
Vesting conditions | 3 years’ service from the grant date | 2 years’ service from the grant date |
26
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
18. | Share-based Payment, Continued |
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows, Continued: |
2) | Cash-settled share-based payment arrangement |
Share appreciation rights of SK Telecom Co., Ltd.(*3) | Share appreciation rights of SK Square Co., Ltd.(*3) | |||||||
Grant date | January 1, 2021 | |||||||
Grant method | Cash settlement | |||||||
Number of shares(*1) (in share) | 207,686 | 134,253 | ||||||
Exercise price(*1) (in won) | 50,276 | |||||||
Exercise period | Jan. 1, 2023 ~ Mar. 28, 2024 | |||||||
Vesting conditions | 2 years’ service from the grant date |
(*1) | Number of shares granted and exercise price are adjusted as a result of stock split and the spin-off for the year ended December 31, 2021, and the remaining part of 1-1st share option was fully exercised for the three-month period ended March 31, 2022. |
(*2) | Parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2021. |
(*3) | The Company newly established the long-term incentive policy as part of the compensation related to the growth of corporate value on the beginning of the prior year and granted cash settled share appreciation rights to executives. Meanwhile, parts of the grant that have not met the vesting conditions have been forfeited for the three-month period ended March 31, 2022. |
(2) | Share compensation expense recognized for the three-month period ended March 31, 2022 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | ||||
Share compensation expense | ||||
As of December 31, 2021 | ||||
For the three-month period ended March 31, 2022 | 74,246 | |||
In subsequent periods | 5,135 | |||
|
| |||
|
|
As of March 31, 2022, the carrying amount of liabilities recognized by the Company in relation to the cash-settled share-based payment arrangement is2,257 million.W
27
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
18. | Share-based Payment, Continued |
(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: |
1) | Equity-settled share-based payment arrangement |
(In won) | Series | |||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||||||
Risk-free interest rate | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | 1.55 | % | ||||||||||||||
Estimated option’s life | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | |||||||||||||||||||||
Share price | ||||||||||||||||||||||||||||
(Closing price on the preceding day)(*) | 52,500 | 52,500 | 48,700 | 51,800 | 50,600 | 34,900 | 49,800 | |||||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | 25.70 | % | ||||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | 4.00 | % | ||||||||||||||
Exercise price(*) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||||||||||||||||
Per-share fair value of the option(*) | 4,048 | 3,096 | 4,798 | 1,720 | 1,622 | 192 | 8,142 |
(In won) | Series | |||||||
7-1 | 7-2 | |||||||
Risk-free interest rate | 2.80 | % | 2.68 | % | ||||
Estimated option’s life | 5 years | 5 years | ||||||
Share price | ||||||||
(Closing price on the preceding day) | 57,300 | 57,300 | ||||||
Expected volatility | 24.20 | % | 24.20 | % | ||||
Expected dividends | 3.40 | % | 3.40 | % | ||||
Exercise price | 56,860 | 56,860 | ||||||
Per-share fair value of the option | 11,772 | 10,435 |
2) | Cash-settled share-based payment arrangement |
(In won) | Share appreciation rights of SK Telecom Co., Ltd. | Share appreciation rights of SK Square Co., Ltd. | ||||||
Risk-free interest rate | 2.37 | % | 2.37 | % | ||||
Estimated option’s life | 3.25 years | 3.25 years | ||||||
Share price on the remeasurement date | 56,900 | 56,800 | ||||||
Expected volatility | 24.20 | % | 24.20 | % | ||||
Expected dividends | 3.50 | % | 0.00 | % | ||||
Exercise price(*) | 50,276 | 50,276 | ||||||
Per-share fair value of the option | 9,591 | 12,231 |
(*) | Share price (closing price on the preceding day), exercise price and per-share fair value of the option are adjusted as a result of stock split and spin-off for the year ended December 31, 2021. |
Meanwhile, the Board of Directors of the Company resolved to dispose its treasury shares for the purpose of allotment of shares as bonus payment on October 12, 2021. The transaction is equity-settled share-based payment transactions in accordance with K-IFRS 1102, and 505,350 shares (before stock split) were granted on October 12, 2021(grant date). 7,700 shares (before stock split) out of 505,350 shares (before stock split) were transferred to the spin-off company on November 1, 2021. Vesting conditions are 6 months from the grant date and per-share fair value on the grant date are measured at300,500 that is closing price of common shares on the grant date before stock split and spin-off. The fair value of these share-based payment on the grant date isW151,858 million, among which the awards with a fair value ofW9,935 million were transferred to the spin-off company.W
28
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
19. | Retained Earnings |
Retained earnings as of as of March 31, 2022 and December 31, 2021 are as follows:
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Appropriated: | ||||||||
Legal reserve | 22,320 | |||||||
Reserve for business expansion | 9,631,138 | 11,631,138 | ||||||
Reserve for technology development | 4,365,300 | 4,365,300 | ||||||
|
|
|
| |||||
13,996,438 | 15,996,438 | |||||||
Unappropriated retained earnings | 653,527 | (1,248,140 | ) | |||||
|
|
|
| |||||
14,770,618 | ||||||||
|
|
|
|
20. | Reserves |
(1) | Details of reserves, net of taxes, as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Valuation gain on financial assets at FVOCI | 613,010 | |||||||
Valuation gain on derivatives | 21,898 | 25,006 | ||||||
|
|
|
| |||||
638,016 | ||||||||
|
|
|
|
(2) | Changes in reserves for the three-month periods ended March 31, 2022 and 2021 as follows: |
(In millions of won) | ||||||||||||
Valuation gain on financial assets at FVOCI | Valuation gain on derivatives | Total | ||||||||||
Balance at January 1, 2021 | 8,199 | 331,445 | ||||||||||
Changes, net of taxes | 171,320 | (1,630 | ) | 169,690 | ||||||||
|
|
|
|
|
| |||||||
Balance at March 31, 2021 | 494,566 | 6,569 | 501,135 | |||||||||
|
|
|
|
|
| |||||||
Balance at January 1, 2022 | 613,010 | 25,006 | 638,016 | |||||||||
Changes, net of taxes | (57,221 | ) | (3,108 | ) | (60,329 | ) | ||||||
|
|
|
|
|
| |||||||
Balance at March 31, 2022 | 21,898 | 577,687 | ||||||||||
|
|
|
|
|
|
29
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
21. | 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) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Products transferred at a point in time: |
| |||||||
Product sales | 9,914 | |||||||
Services transferred over time: |
| |||||||
Wireless service revenue(*1) | 2,587,076 | 2,531,758 | ||||||
Cellular interconnection revenue | 132,388 | 127,750 | ||||||
Others(*2) | 334,505 | 311,296 | ||||||
|
|
|
| |||||
3,053,969 | 2,970,804 | |||||||
|
|
|
| |||||
2,980,718 | ||||||||
|
|
|
|
(*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. |
The Company has a right to consideration from a customer in an amount that corresponds directly with the value to the subscriber of the Company’s performance completed; thus, as a practical expedient, the Company recognizes revenue in the amount to which the Company has a right to invoice.
Most of the Company’s transactions are occurring in Korea as it principally operates its businesses in Korea.
30
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
22. | Other Operating Expenses |
Details of other operating expenses for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Communication | 7,096 | |||||||
Utilities | 72,011 | 65,516 | ||||||
Taxes and dues | 2,520 | 2,227 | ||||||
Repair | 54,352 | 48,779 | ||||||
Research and development | 78,081 | 83,499 | ||||||
Training | 4,959 | 4,311 | ||||||
Bad debt expenses | 5,894 | 2,088 | ||||||
Other | 11,597 | 8,708 | ||||||
|
|
|
| |||||
222,224 | ||||||||
|
|
|
|
31
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
23. | Other Non-Operating Income and Expenses |
Details of other non-operating income and expenses for the three-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Other Non-operating Income: | ||||||||
Gain on disposal of property and equipment and intangible assets | 725 | |||||||
Others | 9,278 | 2,804 | ||||||
|
|
|
| |||||
3,529 | ||||||||
|
|
|
| |||||
Other Non-operating Expenses: | ||||||||
Loss on disposal of property and equipment and intangible assets | 1,118 | |||||||
Donations | 5,000 | 3,249 | ||||||
Other bad debt expenses (reversal) | (91 | ) | 109 | |||||
Others | 4,739 | 969 | ||||||
|
|
|
| |||||
5,445 | ||||||||
|
|
|
|
32
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
24. | Finance Income and Costs |
(1) | Details of finance income and costs for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Finance Income: | ||||||||
Interest income | 6,880 | |||||||
Gain on sale of accounts receivable – other | 1,043 | 7,921 | ||||||
Dividend income | 37,227 | 184,599 | ||||||
Gain on foreign currency transactions | 821 | 581 | ||||||
Gain on foreign currency translations | 284 | 192 | ||||||
Gain relating to financial instruments at FVTPL | — | 33,737 | ||||||
|
|
|
| |||||
233,910 | ||||||||
|
|
|
| |||||
Finance Costs: | ||||||||
Interest expenses | 58,047 | |||||||
Loss on sale of accounts receivable – trade | 2,837 | — | ||||||
Loss on foreign currency transactions | 722 | 325 | ||||||
Loss on foreign currency translations | 169 | 15 | ||||||
Loss relating to financial instruments at FVTPL | 7 | 44 | ||||||
|
|
|
| |||||
58,431 | ||||||||
|
|
|
|
(2) | Details of interest income included in finance income for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Interest income on cash equivalents and short-term financial instruments | 962 | |||||||
Interest income on loans and others | 4,937 | 5,918 | ||||||
|
|
|
| |||||
6,880 | ||||||||
|
|
|
|
(3) | Details of interest expenses included in finance costs income for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Interest expense on borrowings | 801 | |||||||
Interest expense on debentures | 43,551 | 47,001 | ||||||
Others | 16,397 | 10,245 | ||||||
|
|
|
| |||||
58,047 | ||||||||
|
|
|
|
33
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
24. | Finance Income and Costs, Continued |
(4) | Details of impairment losses for financial assets for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Accounts receivable – trade | 2,088 | |||||||
Other receivables | (91 | ) | 109 | |||||
|
|
|
| |||||
2,197 | ||||||||
|
|
|
|
25. | 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.
34
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
26. | Earnings per Share |
The Company carried out stock split on October 28, 2021. Basic and diluted earnings per share for the three-month period ended March 31, 2021 has been retroactively adjusted to reflect the effect of the stock split.
(1) | Basic earnings per share |
1) | Basic earnings per share for the three-month periods ended March 31, 2022 and 2021 are calculated as follows: |
(In millions of won, except for share data and basic earnings per share) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Profit for the period | 466,013 | |||||||
Interest on hybrid bonds | (3,692 | ) | (3,692 | ) | ||||
|
|
|
| |||||
Profit for the period on common shares | 248,326 | 462,321 | ||||||
Weighted average number of common shares outstanding | 217,892,622 | 355,828,900 | ||||||
|
|
|
| |||||
Basic earnings per share (in won) | 1,299 | |||||||
|
|
|
|
2) | The weighted average number of common shares outstanding for the three-month periods ended March 31, 2022 and 2021 are calculated as follows: |
(In shares) | For the three-month period ended March 31, 2022 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2022 | 218,833,144 | 218,833,144 | ||||||
Treasury shares at January 1, 2022 | (1,250,992 | ) | (1,250,992 | ) | ||||
Disposal of treasury shares | 420,678 | 310,470 | ||||||
|
|
|
| |||||
218,002,830 | 217,892,622 | |||||||
|
|
|
|
(In shares) | For the three-month period ended March 31, 2021 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares at January 1, 2021 | 403,728,555 | 403,728,555 | ||||||
Treasury shares at January 1, 2021 | (47,092,790 | ) | (47,092,790 | ) | ||||
Acquisition of treasury shares | (1,440,000 | ) | (1,190,000 | ) | ||||
Disposal of treasury shares | 604,950 | 383,135 | ||||||
|
|
|
| |||||
355,800,715 | 355,828,900 | |||||||
|
|
|
|
35
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
26. | Earnings per Share, Continued |
(2) | Diluted earnings per share |
1) | Diluted earnings per share for the three-month periods ended March 31, 2022 and 2021 are calculated as follows: |
(In millions of won, except for share data and diluted earnings per share) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Profit for the period on common shares | 462,321 | |||||||
Adjusted weighted average number of common shares outstanding | 218,032,957 | 355,982,035 | ||||||
|
|
|
| |||||
Diluted earnings per share (in won) | 1,299 | |||||||
|
|
|
|
2) | The adjusted weighted average number of common shares outstanding for the three-month periods ended March 31, 2022 and 2021 are calculated as follows: |
(In shares) | ||||||||||||
For the three-month period ended | ||||||||||||
March 31, 2022 | March 31, 2021 | |||||||||||
Outstanding shares at January 1 | 217,582,152 | 356,635,765 | ||||||||||
Effect of treasury shares | 310,470 | (806,865 | ) | |||||||||
Effect of share option | 140,335 | 153,135 | ||||||||||
|
|
|
| |||||||||
Adjusted weighted average number of common shares outstanding | 218,032,957 | 355,982,035 | ||||||||||
|
|
|
|
36
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
27. | Categories of Financial Instruments |
(1) | Financial assets by category as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
March 31, 2022 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 74,323 | — | 77,923 | ||||||||||||||||
Financial instruments | 336,400 | — | 89,354 | — | 425,754 | |||||||||||||||
Long-term investment securities(*) | 103,130 | 1,301,973 | — | — | 1,405,103 | |||||||||||||||
Accounts receivable – trade | — | — | 1,515,770 | — | 1,515,770 | |||||||||||||||
Loans and other receivables | 458,426 | — | 643,916 | — | 1,102,342 | |||||||||||||||
Derivative financial assets | 25,001 | — | — | 176,530 | 201,531 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1,301,973 | 2,323,363 | 176,530 | 4,728,423 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Company designated |
(In millions of won) | ||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 133,823 | — | 158,823 | ||||||||||||||||
Financial instruments | 290,000 | — | 89,354 | — | 379,354 | |||||||||||||||
Long-term investment securities(*) | 93,138 | 1,383,223 | — | — | 1,476,361 | |||||||||||||||
Accounts receivable – trade | — | — | 1,514,260 | — | 1,514,260 | |||||||||||||||
Loans and other receivables | 459,959 | — | 569,262 | — | 1,029,221 | |||||||||||||||
Derivative financial assets | 25,001 | — | — | 152,511 | 177,512 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
1,383,223 | 2,306,699 | 152,511 | 4,735,531 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Company designated |
37
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
27. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | ||||||||||||
March 31, 2022 | ||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Total | ||||||||||
Derivative financial liabilities | — | 321,025 | ||||||||||
Borrowings | — | 656,885 | 656,885 | |||||||||
Debentures | — | 6,556,414 | 6,556,414 | |||||||||
Lease liabilities(*) | — | 1,424,716 | 1,424,716 | |||||||||
Accounts payable – other and others | — | 4,597,878 | 4,597,878 | |||||||||
|
|
|
|
|
| |||||||
13,235,893 | 13,556,918 | |||||||||||
|
|
|
|
|
|
(In millions of won) |
| |||||||||||
December 31, 2021 | ||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Total | ||||||||||
Derivative financial liabilities | — | 321,025 | ||||||||||
Borrowings | — | 306,728 | 306,728 | |||||||||
Debentures | — | 6,804,867 | 6,804,867 | |||||||||
Lease liabilities(*) | — | 1,362,095 | 1,362,095 | |||||||||
Accounts payable – other and others | — | 5,070,674 | 5,070,674 | |||||||||
|
|
|
|
|
| |||||||
13,544,364 | 13,865,389 | |||||||||||
|
|
|
|
|
|
(*) | Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities. |
38
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | Financial Risk Management |
(1) | Financial risk management |
The Company is exposed to market risk, credit risk and liquidity 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, accounts receivable – trade and other receivables, etc. Financial liabilities consist of accounts payable – other, borrowings, debentures, lease liabilities and others.
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 March 31, 2022 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||
USD | 18,979 | 1,215,438 | ||||||||||||||
EUR | 110 | 148 | — | — | ||||||||||||
Others | — | 171 | — | 21 | ||||||||||||
|
|
|
| |||||||||||||
|
|
|
|
In addition, the Company has entered into currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.
As of March 31, 2022, a hypothetical change in exchange rates by 10% would have increased (decreased) the Company’s profit before income tax as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD | (483 | ) | ||||||
EUR | 15 | (15 | ) | |||||
Others | 15 | (15 | ) | |||||
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| |||||
(513 | ) | |||||||
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|
39
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | 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 March 31, 2022, floating-rate debentures amount to363,240 million, and the Company has entered into interest rate swaps to hedge interest rate risk related to the floating-rate debentures. Therefore, profit before income taxes for the three-month period ended March 31, 2022 would not have been affected by the changes in interest rates of floating-rate debentures.W
As of March 31, 2022, the floating-rate long-term payables – other are1,690,470 million. If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the three-month period ended March 31, 2022, would change byW4,226 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.W
Interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). Especially, in the case of LIBOR, all of the calculations were suspended as of December 31, 2021, except for the overnight, one month, three months, six months, and 12 months of USD LIBOR, and the aforementioned five USD LIBORs will also be suspended as of June 30, 2023. The alternative interest rate of USD LIBOR is the Secured Overnight Financing Rate(“SOFR”).
The Company plans to include fallback clauses into financial instruments relating to LIBOR to which calculation has not been suspended yet or change their LIBOR directly to alternative interest rates before the calculation is suspended.
40
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) Market risk, Continued
(ii) Interest rate risk, Continued
Interest rate benchmark reform and associated risks, Continued
The Company’s financial instruments exposed to the risk arising from interest rate benchmark reform as of March 31, 2022 are indexed to the USD LIBOR. The Company is exposed to legal risk to amend the terms of contracts on the financial instruments subject to interest rate benchmark reform as well as process and operation risks to manage such amendments. In addition, the Company is exposed to the risk of monitoring the market trend regarding the alternative interest rate and establishing the corresponding risk management strategy. If the IBOR is designated as the hedged item, the Company is required to replace it to an alternative benchmark interest and review the effects on the hedging relationship. In addition, the Company is exposed to the risk of minimizing hedge ineffectiveness by aligning the method and timing of the transition to the alternative benchmark interest applied to the hedged item and the hedging instrument.
The Company evaluates the extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of IBOR reform and how to manage communication about IBOR reform with counterparties.
Non-derivative financial liabilities
The Company’s non-derivative financial liabilities subject to interest rate benchmark reform as of December 31, 2021 were floating-rate bonds indexed to USD LIBOR. As explained above, the Company is discussing with the counterparty about including the fallback clauses as of March 31, 2022.
Derivatives
The Company’s derivative instruments designated as cash flow hedge are governed by contracts based on the International Swaps and Derivatives Association (ISDA)’s master agreements. As part of interest rate benchmark reform, ISDA has included a new fallback clause regarding which alterative benchmark interest rate to be applied when the calculation of major IBOR is suspended in the master agreement. The master agreement is applied to derivative contracts after January 25, 2021, and the transaction parties is required to adhere to ISDA protocol to include the same fallback clause to derivative contracts before January 25, 2021. The Company has adhered to ISDA protocol for transition to the alternative benchmark interest rate, and the fallback clause will be included when counterparties adhere to the protocol to include. The Company’s counterparties have adhered to ISDA protocol and agreed to include the fallback clause.
Hedge accounting
The Company’s hedged items and hedging instruments as of March 31, 2022 are indexed to USD LIBOR. These benchmark rates are quoted each day, and the IBOR cash flows are exchanged with counterparties as usual.
41
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) Credit risk
The maximum credit exposure as of March 31, 2022 and December 31, 2021 are as follows:
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Cash and cash equivalents | 158,791 | |||||||
Financial instruments | 425,754 | 379,354 | ||||||
Investment securities | 900 | 900 | ||||||
Accounts receivable – trade | 1,515,770 | 1,514,260 | ||||||
Contract assets | 30,509 | 29,477 | ||||||
Loans and other receivables | 1,102,342 | 1,029,221 | ||||||
Derivative financial assets | 201,531 | 177,512 | ||||||
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3,289,515 | ||||||||
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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 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 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 Company’s maximum exposure to credit risk is equal to each financial asset’s carrying amount as of March 31, 2022.
42
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | 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 active operating activities.
Contractual maturities of financial liabilities as of March 31, 2022 are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 – 5 years | More than 5 years | ||||||||||||||||
Borrowings(*) | 682,437 | 166,399 | 516,038 | — | ||||||||||||||||
Debentures(*) | 6,556,414 | 7,517,735 | 1,144,713 | 3,470,308 | 2,902,714 | |||||||||||||||
Lease liabilities | 1,424,716 | 1,513,427 | 335,751 | 958,745 | 218,931 | |||||||||||||||
Accounts payable -other and others(*) | 4,597,878 | 4,659,575 | 3,341,099 | 1,226,643 | 91,833 | |||||||||||||||
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14,373,174 | 4,987,962 | 6,171,734 | 3,213,478 | |||||||||||||||||
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(*) | 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 March 31, 2022, 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 | 186,094 | 26,072 | 132,187 | 27,835 |
(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 strategy of the Company is the same as that for the year ended December 31, 2021.
The Company monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity from the separate financial statements.
Debt-equity ratio as of March 31, 2022 and December 31, 2021 are as follows:
(In millions of won) | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
Total liabilities | 15,526,209 | |||||||
Total equity | 10,781,330 | 10,862,856 | ||||||
Debt-equity ratios | 142.00 | % | 142.93 | % |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | Financial Risk Management, Continued |
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | March 31, 2022 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | 798,426 | 128,131 | 926,557 | ||||||||||||||||
Derivative hedging instruments | 176,530 | — | 176,530 | — | 176,530 | |||||||||||||||
FVOCI | 1,301,973 | 1,260,441 | — | 41,532 | 1,301,973 | |||||||||||||||
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1,260,441 | 974,956 | 169,663 | 2,405,060 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
Derivative financial liabilities | — | — | 321,025 | 321,025 | ||||||||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 645,504 | — | 645,504 | ||||||||||||||||
Debentures | 6,556,414 | — | 6,561,142 | — | 6,561,142 | |||||||||||||||
Long-term payables – other | 1,617,741 | — | 1,621,909 | — | 1,621,909 | |||||||||||||||
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— | 8,828,555 | — | 8,828,555 | |||||||||||||||||
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(In millions of won) | December 31, 2021 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | 774,960 | 118,138 | 893,098 | ||||||||||||||||
Derivative hedging instruments | 152,511 | — | 152,511 | — | 152,511 | |||||||||||||||
FVOCI | 1,383,223 | 1,340,791 | — | 42,432 | 1,383,223 | |||||||||||||||
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1,340,791 | 927,471 | 160,570 | 2,428,832 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
Derivative financial liabilities | — | — | 321,025 | 321,025 | ||||||||||||||||
Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 301,232 | — | 301,232 | ||||||||||||||||
Debentures | 6,804,867 | — | 7,058,585 | — | 7,058,585 | |||||||||||||||
Long-term payables – other | 2,009,833 | — | 2,010,852 | — | 2,010,852 | |||||||||||||||
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— | 9,370,669 | — | 9,370,669 | |||||||||||||||||
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44
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of March 31, 2022 and December 31, 2021 are as follows, Continued: |
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.
Interest rates used by the Company for the fair value measurement as of March 31, 2022 are as follows:
Interest rate | ||
Derivative instruments | 0.32% ~ 3.23% | |
Borrowings and debentures | 1.74% ~ 3.11% | |
Long-term payables – other | 2.43% ~ 3.16% |
2) | There have been no transfers between Level 2 and Level 1 for the three-month period ended March 31, 2022. The changes of financial assets and liabilities classified as Level 3 for the three-month period ended March 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||||
Balance at January 1, 2022 | Profit or loss | Acquisition | Transfer | Balance at March 31, 2022 | ||||||||||||||||
Financial assets: |
| |||||||||||||||||||
FVTPL | (7 | ) | 10,000 | — | 128,131 | |||||||||||||||
FVOCI | 42,432 | — | — | (900 | ) | 41,532 | ||||||||||||||
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(7 | ) | 10,000 | (900 | ) | 169,663 | |||||||||||||||
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Financial liabilities: |
| |||||||||||||||||||
FVTPL | — | — | — | (321,025 | ) |
45
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
28. | 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 March 31, 2022 and December 31, 2021 are as follows:
(In millions of won) | ||||||||||||||||
March 31, 2022 | ||||||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the interim separate statement of financial position | ||||||||||||||
Financial assets: | ||||||||||||||||
Accounts receivable – trade and others | (78,697 | ) | 85 | |||||||||||||
Financial liabilities: | ||||||||||||||||
Accounts payable – other and others | (78,697 | ) | — |
(In millions of won) | ||||||||||||
December 31, 2021 | ||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the separate statement of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (86,838 | ) | — | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (86,838 | ) | 4,684 |
46
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate Controlling Entity | SK Inc. | |
Subsidiaries | SK Broadband Co., Ltd. and 25 others(*) | |
Joint ventures | Finnq Co., Ltd. and another | |
Associates | SK China Company Ltd. and 43 others | |
Others | The Ultimate Controlling Entity’s subsidiaries and associates, etc. |
(*) | As of March 31, 2022, subsidiaries of the Company are as follows: |
Subsidiary | Ownership percentage(%)(*1) | Primary 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. | 74.3 | 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. | 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 | ||||
Quantum Innovation Fund I | 59.9 | Investment | ||||
SK Telecom Japan Inc. | 100.0 | Information gathering and consulting | ||||
Happy Hanool Co., Ltd. | 100.0 | Service | ||||
SK stoa Co., Ltd. | 100.0 | Other telecommunication retail business | ||||
Broadband Nowon Co., Ltd. | 100.0 | Cable broadcasting services | ||||
SAPEON Korea Inc.(*2) | 100.0 | Manufacturing non-memory and other electronic integrated circuits | ||||
SAPEON Inc.(*2) | 100.0 | Manufacturing non-memory and other electronic integrated circuits | ||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | 100.0 | Operation of information and communication facility | |||
Media S Co., Ltd. | 100.0 | Production and supply services of broadcasting programs | ||||
Subsidiary owned by PS&Marketing Corporation | SK m&service Co., Ltd.(*3) | 100.0 | Database and internet website service | |||
Subsidiary owned by Quantum Innovation Fund I | PanAsia Semiconductor Materials LLC. | 66.4 | Investment | |||
Subsidiary owned by SK Telecom Japan Inc. | SK Planet Japan, K. K. | 79.8 | Digital Contents sourcing service | |||
Others(*4) | SK Telecom Innovation Fund, L.P. | 100.0 | Investment | |||
SK Telecom China Fund I L.P. | 100.0 | Investment |
47
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Transactions with Related Parties, Continued |
(1) | List of related parties, Continued: |
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Company or subsidiaries of the Company. |
(*2) | The Company newly established SAPEON Korea Inc. and SAPEON Inc. for the three-month period ended March 31, 2022. |
(*3) | PS&Marketing Corporation acquired shares (100%) of SK m&service Co., Ltd. for the three-month period ended March 31, 2022. |
(*4) | Others are owned by Atlas Investment and another subsidiary of the Company. |
As of March 31, 2022, the Company is included in SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act. All of the other entities included in SK Group are considered related parties of the Company.
(2) | Compensation for the key management |
The Company considers registered directors (3 executive and 5 non-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-month periods ended March 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Salaries | 3,480 | |||||||
Retirement benefits | 313 | 1,815 | ||||||
Share compensation expense | 67 | 32 | ||||||
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5,327 | ||||||||
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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.
48
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | For the three-month period ended March 31, 2022 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expenses and others (*1) | Acquisition of property and equipment and others | ||||||||||
Ultimate Controlling Entity | SK Inc.(*2) | 178,175 | 1,769 | |||||||||||
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Subsidiaries | SK Broadband Co., Ltd. | 27,881 | 140,409 | — | ||||||||||
PS&Marketing Corporation(*3) | 2,391 | 336,347 | — | |||||||||||
SK O&S Co., Ltd.(*4) | 3,847 | 57,920 | 1,275 | |||||||||||
SK Telink Co., Ltd.(*5) | 27,755 | 5,245 | — | |||||||||||
SERVICE ACE Co., Ltd.(*6) | 10,885 | 31,427 | — | |||||||||||
SERVICE TOP Co., Ltd.(*7) | 10,174 | 31,314 | — | |||||||||||
SK Communications Co., Ltd. | 355 | 558 | 293 | |||||||||||
Broadband Nowon Co., Ltd.(*8) | 13,721 | — | — | |||||||||||
Others | 918 | 6,965 | — | |||||||||||
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97,927 | 610,185 | 1,568 | ||||||||||||
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Associates | F&U Credit information Co., Ltd. | 190 | 10,534 | — | ||||||||||
SK USA, Inc. | — | 1,009 | — | |||||||||||
HanaCard Co., Ltd. | 2,525 | 739 | 2 | |||||||||||
Daehan Kanggun BcN Co., Ltd. | 2,445 | — | — | |||||||||||
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5,160 | 12,282 | 2 | ||||||||||||
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Others | SK Innovation Co., Ltd. | 1,695 | 3,473 | — | ||||||||||
SK Networks Co., Ltd. | 256 | 3,861 | — | |||||||||||
SK Networks Service Co., Ltd. | 196 | 10,249 | — | |||||||||||
SK Energy Co., Ltd. | 524 | 10 | — | |||||||||||
Content Wavve Co., Ltd. | 3 | 23,516 | — | |||||||||||
Happy Narae Co., Ltd. | 26 | 2,683 | 2,913 | |||||||||||
SK Shieldus Co., Ltd. | 4,693 | 24,284 | 1,519 | |||||||||||
Eleven Street Co., Ltd. | 1,502 | 6,014 | — | |||||||||||
SK Planet Co., Ltd. | 1,735 | 19,880 | 110 | |||||||||||
SK hynix Inc. | 8,289 | 39 | — | |||||||||||
DREAMUS COMPANY | 727 | 23,095 | — | |||||||||||
One Store Co., Ltd. | 4,012 | — | — | |||||||||||
T map Mobility Co., Ltd. | 2,398 | 1,249 | — | |||||||||||
UbiNS Co., Ltd. | — | 135 | 3,080 | |||||||||||
Others | 5,122 | 3,513 | 196 | |||||||||||
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31,178 | 122,001 | 7,818 | ||||||||||||
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922,643 | 11,157 | |||||||||||||
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49
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued: |
(*1) | Operating expenses and others include lease payments by the Company. |
(*2) | Operating expenses and others include |
(*3) | Operating expenses and others include |
(*4) | Operating revenue and others include |
(*5) | Operating revenue and others include |
(*6) | Operating revenue and others include |
(*7) | Operating revenue and others include |
(*8) | Operating revenue and others include |
50
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | For the three-month period ended March 31, 2021 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expenses and others(*1) | Acquisition of property and equipment and others | ||||||||||
Ultimate Controlling Entity | SK Inc.(*2) | 263,876 | 1,450 | |||||||||||
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Subsidiaries | SK Broadband Co., Ltd. | 23,388 | 135,122 | — | ||||||||||
PS&Marketing Corporation(*3) | 3,349 | 350,088 | 16 | |||||||||||
SK O&S Co., Ltd. | 845 | 55,696 | 805 | |||||||||||
SK Planet Co., Ltd. | 1,080 | 20,742 | — | |||||||||||
SK Telink Co., Ltd.(*4) | 20,535 | 10,211 | — | |||||||||||
SERVICE ACE Co., Ltd. | 2,938 | 31,878 | — | |||||||||||
SERVICE TOP Co., Ltd. | 2,103 | 35,225 | — | |||||||||||
Eleven Street Co., Ltd. | 909 | 3,273 | — | |||||||||||
One Store Co., Ltd. | 3,635 | — | — | |||||||||||
SK Shieldus Co., Ltd.(*5) | 13,967 | 16,337 | 328 | |||||||||||
DREAMUS COMPANY | 699 | 21,581 | — | |||||||||||
Others | 2,258 | 6,532 | 39 | |||||||||||
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75,706 | 686,685 | 1,188 | ||||||||||||
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| |||||||||
Associates | F&U Credit information Co., Ltd. | 190 | 10,757 | — | ||||||||||
SK hynix Inc.(*6) | 178,798 | 39 | — | |||||||||||
HanaCard Co., Ltd. | 20 | 842 | — | |||||||||||
SK Wyverns Co., Ltd.(*7) | 199 | 8,203 | — | |||||||||||
Content Wavve Co., Ltd. | 7 | 695 | — | |||||||||||
Others | 7,117 | 138 | — | |||||||||||
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| |||||||||
186,331 | 20,674 | — | ||||||||||||
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|
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| |||||||||
Others | SK Ecoplant Co., Ltd. (Formerly, SK Engineering & Construction Co., Ltd.) | 480 | — | — | ||||||||||
SK Innovation Co., Ltd. | 2,201 | 3,509 | — | |||||||||||
SK Networks Co., Ltd. | 377 | 2,111 | 24 | |||||||||||
SK Networks Service Co., Ltd. | 169 | 9,037 | — | |||||||||||
SK Telesys Co., Ltd. | 33 | 76 | 980 | |||||||||||
SK TNS Co., Ltd. | 39 | 3,479 | 19,956 | |||||||||||
SK Energy Co., Ltd. | 374 | 20 | — | |||||||||||
SKC Infra Service Co., Ltd. | 4 | 2,578 | — | |||||||||||
SK ENS Co., Ltd. | 404 | — | — | |||||||||||
UbiNS Co., Ltd. | — | 196 | 778 | |||||||||||
Happy Narae Co., Ltd. | 28 | 3,720 | 4,422 | |||||||||||
Others | 2,357 | 3,090 | 117 | |||||||||||
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| |||||||||
6,466 | 27,816 | 26,277 | ||||||||||||
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| |||||||||
999,051 | 28,915 | |||||||||||||
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued: |
(*1) | Operating expenses and others include lease payments by the Company. |
(*2) | Operating expenses and others include |
(*3) | Operating expenses and others include |
(*4) | Operating revenue and others include |
(*5) | Operating revenue and others include |
(*6) | Operating revenue and others include |
(*7) | Transactions with SK Wyverns Co., Ltd. occurred before disposal. |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of March 31, 2022 and December 31, 2021 are as follows: |
(In millions of won) | March 31, 2022 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. | 1,025 | 139,413 | |||||||||||
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| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | — | 8,326 | 259,938 | ||||||||||
PS&Marketing Corporation | — | 1,305 | 68,262 | |||||||||||
SK O&S Co., Ltd. | — | 3,049 | 25,561 | |||||||||||
SK Telink Co., Ltd. | — | 19,684 | 21,707 | |||||||||||
Broadband Nowon Co., Ltd. | — | 13,721 | — | |||||||||||
SERVICE ACE Co., Ltd. | — | 8,627 | 18,368 | |||||||||||
SERVICE TOP Co., Ltd. | — | 8,006 | 17,150 | |||||||||||
SK Communications Co., Ltd. | — | 25 | 11,963 | |||||||||||
Others | — | 1,060 | 20,243 | |||||||||||
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|
|
|
| |||||||||
— | 63,803 | 443,192 | ||||||||||||
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| |||||||||
Associates | F&U Credit information Co., Ltd. | — | — | 4,308 | ||||||||||
Wave City Development Co., Ltd.(*1) | — | 2,623 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,148 | 2,534 | — | |||||||||||
HanaCard Co., Ltd. | — | 1,204 | 8,283 | |||||||||||
SK USA, Inc. | — | — | 2,265 | |||||||||||
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|
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| |||||||||
22,148 | 6,361 | 14,856 | ||||||||||||
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| |||||||||
Others | SK hynix Inc. | — | 9,809 | 107 | ||||||||||
SK Planet Co., Ltd. | — | 1,663 | 20,986 | |||||||||||
Eleven Street Co., Ltd. | — | 453 | 6,620 | |||||||||||
One Store Co., Ltd. | — | 368 | 13,132 | |||||||||||
SK Shieldus Co., Ltd. | — | 1,817 | 14,931 | |||||||||||
SK Innovation Co., Ltd. | — | 2,688 | 34,302 | |||||||||||
SK Networks Co., Ltd. | — | 180 | 33,176 | |||||||||||
SK Networks Services Co., Ltd. | — | — | 5,101 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 45 | 11,091 | |||||||||||
Incross Co., Ltd. | — | 1,271 | 9,225 | |||||||||||
UbiNS Co., Ltd. | — | — | 3,385 | |||||||||||
Mintit Co., Ltd. | — | 17,840 | — | |||||||||||
Happy Narae Co., Ltd. | — | — | 5,092 | |||||||||||
Content Wavve Co., Ltd. | — | 154 | 30,687 | |||||||||||
DREAMUS COMPANY | — | 184 | 29,405 | |||||||||||
Others | — | 5,034 | 2,237 | |||||||||||
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| |||||||||
— | 41,506 | 219,477 | ||||||||||||
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| |||||||||
112,695 | 816,938 | |||||||||||||
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|
|
(*1) | As of March 31, 2022, the Company recognized loss allowance amounting to |
(*2) | As of March 31, 2022, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
53
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of March 31, 2022 and December 31, 2021 are as follows, Continued: |
(In millions of won) | December 31, 2021 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. | 2,059 | 50,054 | |||||||||||
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| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | — | 7,374 | 273,875 | ||||||||||
PS&Marketing Corporation | — | 1,247 | 66,097 | |||||||||||
SK O&S Co., Ltd. | — | 59 | 52,609 | |||||||||||
SK Telink Co., Ltd. | — | 15,765 | 20,826 | |||||||||||
SERVICE ACE Co., Ltd. | — | 466 | 24,791 | |||||||||||
SERVICE TOP Co., Ltd. | — | 2 | 24,859 | |||||||||||
SK Communications Co., Ltd. | — | 28 | 12,113 | |||||||||||
Others | — | 39 | 2,324 | |||||||||||
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| |||||||||
— | 24,980 | 477,494 | ||||||||||||
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| |||||||||
Associates | F&U Credit information Co., Ltd. | — | 3 | 4,394 | ||||||||||
Wave City Development Co., Ltd.(*1) | — | 2,623 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 3,857 | — | |||||||||||
HanaCard Co., Ltd. | — | 433 | 42,110 | |||||||||||
Others | — | 71 | 1,104 | |||||||||||
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| |||||||||
22,147 | 6,987 | 47,608 | ||||||||||||
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| |||||||||
Others | SK hynix Inc. | — | 11,526 | 166 | ||||||||||
SK Planet Co., Ltd. | — | 661 | 25,337 | |||||||||||
Eleven Street Co., Ltd. | — | 486 | 7,555 | |||||||||||
One Store Co., Ltd. | — | 8 | 13,325 | |||||||||||
SK m&service Co., Ltd. | — | 1,363 | 17,754 | |||||||||||
SK Shieldus Co., Ltd. | — | 1,068 | 16,172 | |||||||||||
SK Innovation Co., Ltd. | — | 3,020 | 37,136 | |||||||||||
SK Networks Co., Ltd. | — | 108 | 33,613 | |||||||||||
SK Networks Services Co., Ltd. | — | — | 7,374 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 116 | 11,069 | |||||||||||
Incross Co., Ltd. | — | 1,687 | 10,904 | |||||||||||
UbiNS Co., Ltd. | — | 1 | 9,886 | |||||||||||
Mintit Co., Ltd. | — | 17,868 | 131 | |||||||||||
Happy Narae Co., Ltd. | — | — | 48,484 | |||||||||||
Content Wavve Co., Ltd. | — | 183 | 9,865 | |||||||||||
Others | — | 7,529 | 7,198 | |||||||||||
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|
|
|
| |||||||||
— | 45,624 | 255,969 | ||||||||||||
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| |||||||||
79,650 | 831,125 | |||||||||||||
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|
|
|
|
(*1) | As of December 31, 2021, the Company recognized loss allowance amounting to |
(*2) | As of December 31, 2021, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
54
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
29. | Transactions with Related Parties, Continued |
(5) | The Company has granted SK REIT Co., Ltd. the right of first offer regarding the disposal of real estate owned by the Company. Whereby, the negotiation period is within 3 to 5 years from June 30, 2021, date of agreement, and the Company has been granted the right by SK REIT Co., Ltd. to lease the real estate in preference to a third party if SK REIT Co., Ltd. purchases the real estate from the Company. |
(6) | There were additional investments and disposal transactions in subsidiaries, associates and joint ventures for the three-month period ended March 31, 2022 are as presented in note 8. |
30. Commitments and Contingencies
(1) | Accounts receivable 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 receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special-purpose companies which were established with the purpose of liquidating receivables, respectively.
Accounts receivable from sales of handsets amounting to495,860 million andW493,277 million as of March 31, 2022 and December 31, 2021, respectively, which the Company purchased according to the relevant comprehensive agreement, are recognized as accounts receivable – other and long-term accounts receivable – other.W
(2) | Legal claims and litigations |
As of March 31, 2022, the Company is involved in various legal claims and litigations. Provision recognized in relation to these claims and litigations is immaterial. In connection with those legal claims and litigations for which no provision was recognized, management does not believe the Company has a present obligation, nor is it expected that any of these claims or litigations will have a significant impact on the Company’s financial position or operating results in the event an outflow of resources is ultimately necessary.
(3) | Obligation relating to spin-off |
The Company carried out the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments on November 1, 2021. The Company has obligation to jointly and severally reimburse the Company’s liabilities incurred prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act.
55
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
31. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Gain on foreign currency translations | (192 | ) | ||||||
Interest income | (6,357 | ) | (6,880 | ) | ||||
Dividend income | (37,227 | ) | (184,599 | ) | ||||
Gain relating to investments in subsidiaries, associates and joint ventures | (950 | ) | (100,000 | ) | ||||
Gain relating to financial instruments at FVTPL | — | (33,737 | ) | |||||
Gain on disposal of property and equipment and intangible assets | (4,353 | ) | (725 | ) | ||||
Gain on sale of accounts receivable – other | (1,043 | ) | (7,921 | ) | ||||
Other income | (1,525 | ) | — | |||||
Loss on foreign currency translations | 169 | 15 | ||||||
Bad debt expenses | 5,894 | 2,088 | ||||||
Other Bad debt expenses(reversal) | (91 | ) | 109 | |||||
Loss relating to financial instruments at FVTPL | 7 | 44 | ||||||
Depreciation and amortization | 713,322 | 723,227 | ||||||
Loss on disposal of property and equipment and intangible assets | 1,729 | 1,118 | ||||||
Loss on sale of accounts receivable – other | 2,837 | — | ||||||
Interest expense | 63,515 | 58,047 | ||||||
Expense related to defined benefit plan | 13,493 | 14,131 | ||||||
Bonus paid by treasury shares | 23,666 | 29,642 | ||||||
Share compensation expense | 74,729 | 47 | ||||||
Income tax expense | 86,609 | 114,852 | ||||||
Other expenses | 676 | 792 | ||||||
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|
|
| |||||
610,058 | ||||||||
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|
56
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
31. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Accounts receivable – trade | (219 | ) | ||||||
Accounts receivable – other | (33,194 | ) | 35,519 | |||||
Advanced payments | 4,833 | (2,362 | ) | |||||
Prepaid expenses | (25,924 | ) | (1,256 | ) | ||||
Inventories | (17,149 | ) | (4,989 | ) | ||||
Long-term accounts receivable – other | 5,675 | 40,726 | ||||||
Long-term prepaid expenses | 11,083 | (36,123 | ) | |||||
Guarantee deposits | 4,020 | 2,633 | ||||||
Contract assets | (1,032 | ) | (999 | ) | ||||
Accounts payable – other | 31,573 | (343,775 | ) | |||||
Withholdings | 116,973 | 62,626 | ||||||
Deposits received | 662 | 1,179 | ||||||
Accrued expenses | (119,655 | ) | (33,800 | ) | ||||
Plan assets | 12,805 | 7,111 | ||||||
Retirement benefits paid | (8,195 | ) | (11,107 | ) | ||||
Contract liabilities | (8,186 | ) | 952 | |||||
Others | (1,286 | ) | (1,623 | ) | ||||
|
|
|
| |||||
(285,507 | ) | |||||||
|
|
|
|
(3) | Significant non-cash transactions for the three-month periods ended March 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
For the three-month period ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets | (400,780 | ) | ||||||
Increase of right-of-use assets | 151,518 | 108,704 | ||||||
Contribution in kind for investments | — | 7,000 | ||||||
Transfer from property and equipment to investment property | 14,381 | — |
57
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
32. | Emissions Liabilities |
(1) | The quantity of emissions rights allocated free of charge for each implementation year as of March 31, 2022 are as follows: |
(In tCO2-eQ) | ||||||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in 2022 | Total | |||||||||||||||||
Emissions rights allocated free of charge | 814,842 | 1,033,764 | 1,013,006 | 2,861,612 |
(2) | Changes in emissions rights quantities the Company held are as follows: |
(In tCO2-eQ) | ||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in the three- month period ended March 31, 2022 | Total | |||||||||||||
Beginning | (60,977 | ) | — | — | (60,977 | ) | ||||||||||
Allocation at no cost | 814,842 | 1,033,764 | 1,013,006 | 2,861,612 | ||||||||||||
Additional allocation | 217,643 | — | — | 217,643 | ||||||||||||
Purchase | 68,471 | — | — | 68,471 | ||||||||||||
Surrendered or shall be surrendered | (1,039,979 | ) | (1,087,455 | ) | (1,140,316 | ) | (3,267,750 | ) | ||||||||
|
|
|
|
|
|
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| |||||||||
Ending | — | (53,691 | ) | (127,310 | ) | (181,001 | ) | |||||||||
|
|
|
|
|
|
|
|
(3) | As of March 31, 2022, the estimated annual greenhouse gas emissions quantities of the Company are 1,140,316 tCO2-eQ. |
58
Table of Contents
SK TELECOM CO., LTD.
Notes to the Interim Separate Financial Statements
For the three-month periods ended March 31, 2022 and 2021 (Unaudited)
33. | Non-current Assets Held for Sale |
On February 25, 2021, the Company has decided to dispose of the investments in an associate engaged in mobility business to T map Mobility Co., Ltd. pursuant to the approval of the Board of Directors and reclassified entire shares of the investments in associates as non-current assets held for sale.
(In millions of won) | ||||||
March 31, 2022 | ||||||
Investments in associates | Carrot General Insurance Co., Ltd. |
34. | Subsequent Events |
The Board of Directors of the Company resolved to pay interim dividend at the Board’s meeting on April 28, 2022, and the details are as follows:
Classification | Description | |
Interim dividend amount | ||
Dividend rate | 1.44% | |
Dividend date | March 31, 2022 | |
Date of distribution | According to Article 165 of Capital Market and Financial Investment Business Act 12-3, the Company plans to distribute dividends by May 18, 2022. |
59