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Form 6-K SK TELECOM CO LTD For: Dec 08

December 8, 2022 6:08 AM EST

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Table of Contents

 

 

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 DECEMBER 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.

 

 

 


Table of Contents

QUARTERLY BUSINESS REPORT

(From January 1, 2022 to September 30, 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.


Table of Contents
I.

COMPANY OVERVIEW

Omitted in quarterly reports in accordance with applicable Korean disclosure rules. For more information, please refer to the Company’s semi-annual business report for the six months ended June 30, 2022.

 

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 of the Company’s material consolidated subsidiaries.

 

Classification

  

Company name

  

Description of business

Wireless    SK Telecom Co., Ltd.    Wireless voice and data telecommunications services via digital wireless networks
   PS&Marketing Co., Ltd.    Sale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels
   SK O&S Co., Ltd.    Maintenance of switching stations
   Service Ace Co., Ltd.    Management and operation of customer centers
   SK M&Service Co., Ltd.    Database and online information services
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

   Home & Service Co., Ltd.    System maintenance of high-speed Internet, IPTV and fixed-line services
   SK Telink Co., Ltd.    International wireless direct-dial “00700” services and MVNO business
Other business    SK stoa Co., Ltd.    Operation of commercial retail data broadcasting channel services
   Atlas Investment    Investments
   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.

The Company’s “T Universe” service, which was launched in the second half of 2021, provides a wide array of subscription products through collaboration with various partnering businesses. T Universe offers a variety of subscription product line-ups including discounts and benefits on products relating to everyday life as well as specialized e-commerce products, and the Company plans to enhance customer value by further strengthening the convenience of the T Universe offerings in the future.

The Company’s newly launched service, “A.” (or “A dot”), is an artificial intelligence service for consumers, which is evolving to become tailored for each customer, and the Company is seeking to make it highly personalized through deep learning. In order for A. to become a service embedded in customers’ daily lives, the Company plans to integrate A. with various other services offered by the Company and third party businesses.

Another new business of the Company, “ifland,” is a metaverse platform service that emphasizes the element of “communication” in the metaverse environment, which market is expected to have a high growth potential as the contactless culture becomes more prevalent and as technological advancements in areas such as 5G, augmented reality and virtual reality are achieved.

 

A.

Industry Characteristics

The telecommunications services market can be categorized into telecommunications services (such as fixed-line, wireless and leased line services (as well as sales intermediary services relating thereto) and value-added services) and broadcasting and telecommunications convergence services (including IPTV and integrated fixed-line and mobile telecommunication 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.

 

B.

Growth Potential

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.

 

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(Unit: in 1,000 persons)

     As of September 30 
2022
     As of December 31,  

Classification

   2021      2020  

Number of subscribers

   SK Telecom      30,440        29,696        29,089  
   Others (KT, LG U+)      32,605        31,869        31,341  
   MVNO      12,259        10,355        9,111  
   Total             75,304               71,920               69,541  

 

*

Source: Wireless telecommunications service data from the MSIT as of September 30, 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;

(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 September 30,
2022
     As of December 31,  
   2021      2020  

Mobile communication services

     48.3                   48.2                   48.1  

 

*

Source: Wireless telecommunications service data from the MSIT as of September 30, 2022.

 

D.

Competitive Strengths

The Company successfully completed the Spin-off of SK Square Co., Ltd. (“SK Square”) from SK Telecom in 2021 (the “Spin-off”) to maximize shareholder value and launched “SKT 2.0.” Concurrently, the Company reorganized its business to center around five major business areas 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 nine months ended September 30, 2022, the Company recorded Won 4,343.4 billion in operating revenue and Won 465.6 billion in operating profit on a consolidated basis and Won 3,122.6 billion in operating revenue and Won 388.7 billion in operating profit for the period on a separate basis. The Company is continuing to increase its revenue and enhance its profitability by leveraging its competitiveness in the 5G market and secured 12.47 million 5G subscribers as of September 30, 2022.

 

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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 nine months ended September 30, 2022, SK Broadband Co., Ltd. (“SK Broadband”) recorded Won 3,103.0 billion in revenue on a consolidated basis, which represented a 3.8% increase from Won 2,988.5 billion for the nine months ended September 30, 2021. The sales growth was primarily attributable to the growth in SK Broadband’s media business in light of the expansion of its subscriber base, and the growth of its B2B business including an increase in the utilization rate of its new data centers.

SK Broadband’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, fix-line telecommunications, dedicated telecommunication lines and data center services. For the nine months ended September 30, 2022, the media business segment recorded Won 1,414.8 billion in revenue, which represented a 3.0% increase compared to the nine months ended September 30, 2021. For the nine months ended September 30, 2022, the fixed-line business segment recorded Won 1,688.2 billion in revenue, which represented an 4.5% increase compared to the nine months ended September 30, 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. SK Broadband 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.

 

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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 data centers, which have seen an increase in market demand recently.

 

B.

Growth Potential

(Unit: in persons)

Classification

   As of September 30,
2022
     As of December 31,  
   2021      2020  

Fixed-line Subscribers

   High-speed Internet      23,423,443        22,944,268        22,330,182  
   Fixed-line telephone      11,763,635        12,211,954        12,859,279  
   IPTV      19,689,655        19,346,812        17,872,297  
   Cable TV      12,927,463        12,986,039        13,305,796  

 

*

Source: MSIT website.

*

High-speed Internet and fixed-line telephone subscribers represent the number of subscribers as of September 30, 2022, while IPTV and cable TV subscribers represent the average number of subscribers in the second 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.

 

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Table of Contents
D.

Domestic and Overseas Market Conditions

Set forth below is the historical market share of the Company.

(Unit: in percentages)

Classification

   As of September 30,
2022
     As of December 31,  
   2021      2020  

High-speed Internet (including resales)

     28.5        28.7        29.0  

Fixed-line telephone (including Voice over Internet Protocol (“VoIP”)

     17.7        17.5        16.8  

IPTV

     30.7        30.6        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.

*

Since April 2021, VoIP subscribers of SK Telink have been included in the total clients of the Company.

*

Market shares of High-speed Internet and Fixed-line telephone represent the market shares as of September 30, 2022 and market shares of IPTV and Cable TV represent the average market shares in the second 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.

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 the leading position in the television commerce (“T-commerce”) market.

2. Key Financial Data by Business Line

 

A.

Assets

 

      (Unit: in millions of Won and percentages)  

Classification

         As of September 30,      
2022
    As of December 31,  
  2021     2020*  
   Amount     Ratio     Amount     Ratio     Amount      Ratio  

Wireless

     26,306,246       79     27,126,972       80     32,707,344        73

Fixed-line

     6,515,579       19     6,319,019       19     6,091,992        14

Other

     666,916       2     462,021       1     6,244,788        14
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Subtotal

     33,488,741       100     33,908,011       100     45,044,125        100

Consolidation Adjustment

     (2,958,966     —         (2,996,734     —         2,862,832        —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total

     30,529,775       —         30,911,277       —         47,906,957        —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

*

Includes assets that were spun-off to SK Square in the Spin-off.

 

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B.

Revenue

 

      (Unit: in millions of Won and percentages)  

Classification

   For the nine months ended
September 30,

2022
    For the year ended December 31,  
  2021     2020*  
   Amount     Ratio     Amount     Ratio     Amount     Ratio  

Wireless

     9,657,711       75     12,718,473       76     12,295,684       66

Fixed-line

     2,857,464       22     3,677,706       22     3,405,677       18

Other

     395,337       3 %       352,406       2     2,923,290       16
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     12,910,512        100     16,748,585        100     18,624,651        100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

Based on revenue prior to the Spin-off.

 

C.

Operating Profit

 

      (Unit: in millions of Won and percentages)  

Classification

   For the nine months ended
September 30,

2022
    For the year ended December 31,  
  2021     2020*  
   Amount     Ratio     Amount     Ratio     Amount     Ratio  

Wireless

     1,138,569       82     1,123,147       78     1,031,887       80

Fixed-line

     261,280       19     294,070       21     258,973       20

Other

     (14,429     (1 )%      14,550       1     645       0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     1,385,420       100     1,431,767       100     1,291,505       100

Consolidation Adjustment

     (27,851     —         (44,605     —         (42,927     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

       1,357,569       —           1,387,162       —           1,248,578       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

Based on operating profit reflecting the Spin-off.

3. Updates on Major Products and Services

 

                (Unit: in millions of Won and percentages)  

Business

 

Major Companies

 

Items

 

Major Trademarks

  For the nine months
ended September 30,
2022
    For the year ended December 31,  
  2021     2020  
  Consolidated
Sales
Amount
    Ratio     Consolidated
Sales
Amount
    Ratio     Consolidated
Sales
Amount
    Ratio  

Wireless

 

SK Telecom Co., Ltd.,
PS&Marketing Co., Ltd.,

Service Ace Co., Ltd.
SK O&S Co., Ltd.

SK M&Service Co., Ltd.

  Mobile communication service,
wireless data service,
ICT service
  T, 5GX, T Plan and others     9,657,711       74.8     12,718,473       75.9     12,295,684       66

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     2,857,464       22.1     3,677,706       22.0     3,405,677       18

Other

  SK stoa Co., Ltd.   Commercial retail data broadcasting channel services and others   Stoa ON     395,337       3.1     352,406       2.1     2,923,290       16
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    12,910,512       100.0     16,748,585       100.0     18,624,651     100
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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4. Price Trends for Major Products

[Wireless Business]

As of September 30, 2022, based on the Company’s standard monthly subscription plan, the basic service fee was Won 12,100 (including value-added tax) 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 “Basic” plan provides 8 GB of data and unlimited voice calls at Won 49,000 per month (including value-added tax). The Company provides a variety of other subscription plans catered to subscriber demand, which may be reviewed on the Company’s website at www.tworld.co.kr.

[Fixed-line Business]

In July 2022, SK Broadband launched the “Nowadays Home Integration Plan,” which provides discounts for the users subscribing to both Internet and IPTV (including telephone) services. The plan combines and simplifies the existing fixed-line integration plans (including “Home Integration Plan” and “Core Fee Plan”). The amount of discount varies by the Internet plan (at a speed of 100M/500M or higher). As for the Internet plan, the amount of discount ranges from Won 1,100 to Won 5,500, whereas the amount of discount for the IPTV plan is set as Won 2,200. A VOD coupon (Won 3,300/month) is additionally provided for customers who subscribe to premium internet plans and “B tv All” or higher IPTV plans.

In addition, to facilitate customers’ understanding of its service, SK Broadband modified some of the names of its Internet and IPTV products. English in the names were replaced with Korean, and the names were also changed to better reflect the characteristics of the products. For instance, “Wifi” was replaced with the Korean transcription of Wifi, and “Smart internet” was renamed to “Remote Care Internet.” As for IPTV, “B tv New Basic” was renamed to “B tv Economy,” and “B tv Choice” was renamed to “B tv Mini.”

In September 2022, SK Broadband launched the “Nowadays Family Integration” plan, which provides a discount for users from the same family subscribing to the Internet, mobile and IPTV plans. The plan combines the existing fixed mobile integration plans for families (including “Whole Family Plan,” “Whole Family Free,” “TV plus,” etc.) with different terms of usage and provides additional benefits. The plan provides a discount from Won 4,400 and to Won 13,200 depending on the user’s Internet plan (at a speed of 100M/500M/or above 1G). As for mobile, the plan provides a discount from Won 3,500 to Won 24,000 depending on the number of mobile phone lines connected to the plan. If IPTV is added, the plan provides an additional discount of Won 1,100 and a free B tv data pack (worth Won 5,500) for mobile phones.

SK Broadband also provides a variety of other subscription plans.

5. 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      1,124        —    
Total             To be determined      1,124        —    

 

B.

Future Investment Plan

 

Business

  

Expected investment amount

  

Expected investment for each year

   Investment effect
  

Asset type

  

Amount

  

2023

  

2024

Network/Common

   Network, systems and others    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   

 

*

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.

 

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Table of Contents

[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   Nine months ended September 30, 2022     419     To be determined   Securing subscriber network
and equipment; quality and
system improvement

6. Revenues

(Unit: in millions of Won)

 

Business

 

Sales type

 

Item

  For the nine months ended
September 30, 2022
    For the year ended
December 31, 2021
    For the year ended
December 31, 2020
 

Wireless

  Services   Mobile communication, wireless data, information communication   Export     104,572       143,149       152,518  
  Domestic     9,553,139       12,575,324       12,195,445  
  Subtotal     9,657,711       12,718,473       12,347,963  

Fixed-line

  Services   Fixed-line, high-speed Internet, data, lease line service   Export     127,795       139,846       127,618  
  Domestic     2,729,669       3,537,860       3,304,600  
  Subtotal     2,857,464       3,677,706       3,432,218  

Other

  Services   Commercial retail data broadcasting channel services   Export     —         —         —    
  Domestic     395,337       352,406       307,566  
  Subtotal     395,337       352,406       307,566  

Total

  Export     232,367       251,502       280,136  
  Domestic     12,678,145       16,497,083       15,807,611  
  Total     12,910,512       16,748,585       16,087,747  

(Unit: in millions of Won)

 

For the nine months ended
September 30, 2022

   Wireless      Fixed-line      Other      Sub total      Consolidation
adjustment
    After
consolidation
 

Total sales

     10,775,291        3,659,772        419,523        14,854,586        (1,944,074     12,910,512  

Internal sales

     1,117,580        802,308        24,186        1,944,074        (1,944,074     —    

External sales

     9,657,711        2,857,464        395,337        12,910,512        —         12,910,512  

Depreciation and amortization

     2,055,412        736,489        16,090        2,807,991        (88,585     2,719,406  

Operating profit (loss)

     1,138,569        245,281        1,670        1,385,520        (27,951     1,357,569  

Finance profit (loss)

 

    (191,014

Gain from investments in associates and joint ventures

 

    (75,909

Other non-operating profit (loss)

 

    1,488  

Profit before income tax

 

    1,092,134  

 

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Table of Contents

7. Derivative Transactions

 

A.

Current Swap Contract Applying Cash Flow Risk Hedge Accounting

Currency and interest rate swap contracts under cash flow hedge accounting as of September 30, 2022 are as follows:

[SK Telecom]

(Unit: in millions of Won and thousands of USD)

 

Borrowing

date

 

Hedged item

 

Hedged risk

 

Contract type

 

Financial institution

  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. 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

date

 

Hedged item

 

Hedged risk

 

Contract type

 

Financial institution

  Duration of
contract

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

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

8. Major Contracts

None.

9. R&D Investments

Set forth below are the Company’s R&D expenditures.

(Unit: in millions of Won except percentages)

 

Category

   For the nine
months ended
September 30,
2022
    For the year ended
December 31, 2021
    For the year ended
December 31, 2020
    Remarks  

Raw material

     11       48       54       —    

Labor

     84,056       122,445       122,906       —    

Depreciation

     102,001       147,249       169,872       —    

Commissioned service

     26,086       55,917       35,939       —    

Others

     53,140       48,048       35,209       —    

Total R&D costs

     265,294       373,707       363,980       —    

Government Subsidies

     —         —         —         —    

Accounting

   Sales and administrative expenses      251,373       347,711       353,198       —    
   Development expenses (Intangible assets)      13,921       25,996       10,782       —    

R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100)

     2.05     2.23     2.26     —    

 

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Table of Contents

10. Other information relating to investment decisions

 

A.

Trademark Policies

The Company manages its corporate brand and other product brands in a comprehensive way to protect and increase their value. The Company operates an intranet system called “Comm.ON” in order to implement consistent communication with consumers across various areas including branding, design, marketing and public relations, and systematically manages the development, registration and licensing of brands through such system.

 

B.

Business-related Intellectual Property

[SK Telecom]

As of September 30, 2022, the Company held 3,298 Korean-registered patents and 1,502 foreign-registered patents. The Company holds 740 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “T” representing its brand. The designed alphabet “T” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to constant change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.

[SK Broadband]

As of September 30, 2022, SK Broadband held 287 Korean-registered patents and 86 foreign-registered patents (including those held jointly with other companies). It also holds 294 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.

 

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 clearly recognizes the severity of the climate crisis and has been diligently fulfilling its social obligations by establishing a systematic and practical environmental management strategy system. Under the vision of “realizing a sustainable future based on ICT” and to achieve Net Zero by 2050, 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, the Company was one of the first IT companies in Korea to join the RE100 (Renewable Electricity 100%) initiative and signed a green premium contract with Korea Electric Power Corporation. The Company has been implementing company-wide adoption of renewable energy through efforts such as installing solar power generation equipment in its office buildings and base stations. 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 2021, SK Broadband declared its goal to achieve Net Zero by 2045 in an effort to actively participate in the international community’s response to climate change. Prior to the declaration, SK Broadband had already subscribed to RE100 initiative in 2020. Since 2021, SK Broadband has participated in Korea Electrical Power Corporation’s renewable energy power purchase program, “Green Premium,” to implement RE100 and is considering the installation of additional solar power generation facilities to self-produce and use renewable energy.

 

12


Table of Contents
III.

FINANCIAL INFORMATION

1. Summary Financial Information (Consolidated and Separate)

 

A.

Summary Financial Information (Consolidated)

Below is the summary consolidated financial information of the Company as of September 30, 2022, December 31, 2021 and December 31, 2020 and for the nine months ended September 30, 2022 and the years ended December 31, 2021 and 2020. The Company’s consolidated financial statements as of September 30, 2022 and December 31, 2021 and for the nine months ended September 30, 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
September 30, 2022
    As of
December 31, 2021
    As of
December 31, 2020
 

Assets

      

Current Assets

     7,318,651       6,352,665       8,775,086  

•  Cash and Cash Equivalents

     1,191,452       872,731       1,369,653  

•  Accounts Receivable – Trade, net

     2,083,277       1,913,511       2,188,893  

•  Accounts Receivable – Other, net

     569,220       548,362       979,044  

•  Others

     3,474,702       3,018,061       4,237,496  

Non-Current Assets

     23,211,124       24,558,612       39,131,871  

•  Long-Term Investment Securities

     1,314,148       1,715,078       1,648,837  

•  Investments in Associates and Joint Ventures

     2,049,980       2,197,351       14,354,113  

•  Property and Equipment, net

     12,445,644       12,871,259       13,377,077  

•  Goodwill

     2,075,009       3,869,769       4,436,194  

•  Intangible Assets, net

     3,361,437       2,072,493       3,357,524  

•  Others

     1,964,906       1,832,662       1,958,126  
  

 

 

   

 

 

   

 

 

 

Total Assets

     30,529,775       30,911,277       47,906,957  
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Current Liabilities

     7,428,963       6,960,435       8,177,967  

Non-Current Liabilities

     10,803,706       11,615,704       15,332,747  
  

 

 

   

 

 

   

 

 

 

Total Liabilities

     18,232,669       18,576,139       23,510,714  
  

 

 

   

 

 

   

 

 

 

Equity

      

Equity Attributable to Owners of the Parent Company

     11,505,328       11,579,346       23,743,894  

Share Capital

     30,493       30,493       44,639  

Capital Surplus (Deficit) and Other Capital Adjustments

     (11,538,160     (11,623,726     677,203  

Retained Earnings

     22,456,993       22,437,341       22,981,913  

Reserves

     556,002       735,238       40,139  

Non-controlling Interests

     791,778       755,792       652,349  
  

 

 

   

 

 

   

 

 

 

Total Equity

     12,297,106       12,335,138       24,396,243  
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

     30,529,775       30,911,277       47,906,957  
  

 

 

   

 

 

   

 

 

 
(Unit: in millions of Won except per share data)  
     For the nine months
ended September 30,
2022
    For the year ended
December 31, 2021
    For the year ended
December 31, 2020
 

Operating Revenue

     12,910,512       16,748,585       16,087,747  

Operating Profit

     1,357,569       1,387,162       1,248,578  

Profit Before Income Tax

     1,092,134       1,718,191       905,218  

Profit for the Period

     724,098       2,418,989       1,500,538  

Profit for the Period Attributable to Owners of the Parent Company

     699,743       2,407,523       1,504,352  

Profit for the Period Attributable to Non-controlling Interests

     24,355       11,466       (3,814

Basic Earnings Per Share (Won)

     3,159       7,191       4,093  

Diluted Earnings Per Share (Won)

     3,157       7,187       4,092  

Total Number of Consolidated Subsidiaries

     26       23       49  

 

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Table of Contents
B.

Summary Financial Information (Separate)

Below is the summary separate financial information of the Company as of September 30, 2022, December 31, 2021 and December 31, 2020 and for the nine months ended September 30, 2022 and the years ended December 31, 2021 and 2020. The Company’s unaudited separate financial statements as of September 30, 2022 and December 31, 2021 and for the nine months ended September 30, 2022 and 2021, which are prepared in accordance with K-IFRS, are attached hereto.

(Unit: in millions of Won)

 

     As of September 30,
2022
    As of December 31,
2021
    As of December 31,
2020
 

Assets

      

Current Assets

     5,189,079       4,681,493       5,047,115  

•  Cash and Cash Equivalents

     224,555       158,823       329,208  

•  Accounts Receivable – Trade, net

     1,556,149       1,514,260       1,503,552  

•  Accounts Receivable – Other, net

     523,024       520,956       434,713  

•  Others

     2,885,351       2,487,454       2,779,642  

Non-Current Assets

     20,412,042       21,707,572       26,939,336  

•  Long-Term Investment Securities

     1,042,988       1,476,361       983,688  

•  Investments in Subsidiaries and Associates

     4,634,387       4,841,139       11,357,504  

•  Property and Equipment, net

     8,978,508       9,318,408       9,157,548  

•  Goodwill

     1,306,236       1,306,236       1,306,236  

•  Intangible Assets, net

     2,745,288       3,203,330       2,665,083  

•  Others

     1,704,635       1,562,098       1,469,277  
  

 

 

   

 

 

   

 

 

 

Total Assets

     25,601,121       26,389,065       31,986,451  
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Current Liabilities

     5,438,125       5,426,477       5,076,404  

Non-Current Liabilities

     9,647,226       10,099,732       9,560,189  
  

 

 

   

 

 

   

 

 

 

Total Liabilities

     15,085,351       15,526,209       14,636,593  
  

 

 

   

 

 

   

 

 

 

Equity

      

Share Capital

     30,493       30,493       44,639  

Capital Surplus and Other Capital Adjustments

     (4,503,494     (4,576,271     289,134  

Retained Earnings

     14,839,615       14,770,618       16,684,640  

Reserves

     149,156       638,016       331,445  
  

 

 

   

 

 

   

 

 

 

Total Equity

     10,515,770       10,862,856       17,349,858  
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

     25,601,121       26,389,065       31,986,451  
  

 

 

   

 

 

   

 

 

 
     For the nine months
ended September 30,
2022
    For the year ended
December 31, 2021
    For the year ended
December 31, 2020
 

Operating Revenue

     9,318,263       12,102,830       11,746,630  

Operating Profit

     1,126,516       1,144,323       1,023,067  

Profit Before Income Tax

     1,099,690       1,369,347       941,455  

Profit for the Period

     781,623       1,073,823       758,792  

Basic Earnings Per Share (Won)

     3,535       3,183       2,044  

Diluted Earnings Per Share (Won)

     3,533       3,181       2,044  

 

14


Table of Contents

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 September 30,
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        —    

Corporate bond

   82nd    April 12, 2022    Repayment of debt      350,000      Repayment of debt      350,000        —    

Corporate bond

   83rd    August 10, 2022    Repayment of debt      395,000      Repayment of debt      395,000        —    

[SK Broadband]

 

(As of September 30,
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 (green 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.

 

B.

Use of Proceeds from Private Offerings

[SK Telecom]

None.

[SK Broadband]

None.

 

C.

Operation of Unused Proceeds

[SK Telecom]

None.

 

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Table of Contents

[SK Broadband]

None.

4. Other Matters Related to Financial Information

 

A.

Restatement of the Financial Statements

Pursuant to the resolutions of the Board of Directors and the General Meeting of Shareholders on June 10, 2021 and October 12, 2021, respectively, the Company conducted the Spin-off effective as of November 1, 2021. K-IFRS 1105 (Non-current assets held for sale and discontinued operations) was applied, and, accordingly, the consolidated statement of profit and loss for the three months and nine months ended September 30, 2021 was restated as such.

 

B.

Loss Allowance

 

  (1)

Loss Allowance of Trade and Other Receivables

 

     (Unit: in millions of Won)  
     For the nine months ended September 30, 2022  
     Gross amount      Loss Allowance      Percentage  

Accounts receivable – trade

     2,342,578        247,737        10.6

Loans

     148,156        45,721        30.9

Accounts receivable – other

     832,478        46,186        5.5

Accrued income

     2,066        0        0.0

Guarantee deposits

     288,338        300        0.1
  

 

 

    

 

 

    

 

 

 

Total

     3,613,616        339,944        9.4
  

 

 

    

 

 

    

 

 

 
     (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        11.1

Loans

     138,181        45,385        32.8

Accounts receivable – other

     870,225        46,625        5.4

Accrued income

     762        0        0.0

Guarantee deposits

     278,759        0        0.0
  

 

 

    

 

 

    

 

 

 

Total

     3,448,425        330,891        9.6
  

 

 

    

 

 

    

 

 

 
     (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        10.7

Loans

     182,721        45,024        24.6

Accounts receivable – other

     1,366,922        55,075        4.0

Accrued income

     3,418        166        4.9

Guarantee deposits

     285,507        300        0.1
  

 

 

    

 

 

    

 

 

 

Total

     4,317,419        365,063        8.5
  

 

 

    

 

 

    

 

 

 

 

  (2)

Movements in Loss Allowance of Trade and Other Receivables

 

           (Unit: in millions of Won)  
     For the nine months
ended September 30,
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

     25,329       37,547       59,184  

Reversal of loss allowance

     —         —         —    

Write-offs

     (16,671     (57,215     (57,575

Other

     395       (14,504     17,055  

Ending balance

     339,944       330,891       365,063  

 

16


Table of Contents
  (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 September 30, 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

     2,109,633       48,633       137,483       46,828       2,342,578  

Percentage

     90.06     2.08     5.87     2.00     100.0

 

C.

Inventories

 

  (1)

Detailed Categories of Inventories

 

           (Unit: in millions of Won)  

Account Category

   For the nine months
ended September 30,
2022
    For the year ended
December 31, 2021
    For the year ended
December 31, 2020
 

Merchandise

     187,117       201,126       162,196  

Goods in transit

     0       —         —    

Other inventories

     9,413       3,511       9,247  
  

 

 

   

 

 

   

 

 

 

Total

     196,530       204,637       171,443  
  

 

 

   

 

 

   

 

 

 

Percentage of inventories to total assets [Inventories / Total assets]

     0.64     0.66     0.36

Inventory turnover [Cost of sales / { ( Beginning balance of inventories + Ending balance of inventories ) / 2}]

     8.77       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.

 

17


Table of Contents
D.

Fair Value Measurement

See notes 2 and 30 of the notes to the Company’s consolidated financial statements as of September 30, 2022 and December 31, 2021 and for the nine months ended September 30, 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 62-3

   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 August 18, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency Agreement

  

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.

 

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 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 August 18, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency

Agreement

  

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 71-3

   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.

 

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 August 18, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

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.

 

19


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 50% of total assets
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term    Restriction of cross-shareholding Exclusion from corporate group
   Compliance Status    Compliant
Submission of Compliance Certificate    Compliance Status    Submitted on August 18, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency Agreement

  

Fiscal Agent

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 August 18, 2022

 

20


Table of Contents

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency
Agreement

  

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 August 18, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency
Agreement

  

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 August 18, 2022

 

21


Table of Contents

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency
Agreement

  

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 August 18, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency
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 August 18, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency
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.

 

22


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 50% of total assets
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term   

Restriction of cross-shareholding

Exclusion from corporate group

   Compliance Status    Compliant

Submission of Compliance Certificate

   Compliance Status    Submitted on August 18, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency
Agreement

  

Fiscal Agent

Unsecured Bond – Series 82-1

   April 12, 2022    April 12, 2025      240,000      March 31, 2022    Korea Securities Finance Corp.

Unsecured Bond – Series 82-2

   April 12, 2022    April 12, 2027      70,000      March 31, 2022    Korea Securities Finance Corp.

Unsecured Bond – Series 82-3

   April 12, 2022    April 12, 2042      40,000      March 31, 2022    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 August 18, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency
Agreement

  

Fiscal Agent

Unsecured Bond – Series 83-1

   August 10, 2022    August 8, 2025      300,000      July 29, 2022    Korea Securities Finance Corp.

Unsecured Bond – Series 83-2

   August10, 2022    August 10, 2027      95,000      July 29, 2022    Korea Securities Finance Corp.

 

Maintenance of Financial Ratio

   Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant

Restriction on Liens

   Key Term    The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant

Restriction on Disposition of Assets

   Key Term    Disposal of assets per fiscal year not to exceed 50% of total assets
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term   

Restriction of cross-shareholding

Exclusion from corporate group

   Compliance Status    Compliant

Submission of Compliance Certificate

   Compliance Status    To be submitted following the filing of the next annual business report

 

23


Table of Contents

[SK Broadband]    

The following are key terms and conditions of bonds issued by SK Broadband.

 

Name

   Issue Date      Maturity Date      Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
    

Fiscal Agent

Unsecured Bond – Series 45-2

     Oct. 11, 2017        Oct. 11, 2022        140,000        Sept. 20, 2017      Korea Securities Finance Corp.

 

Maintenance of Financial Ratio

   Key Term    Debt ratio no greater than 400%
   Compliance Status    Compliant

Restriction on Liens

   Key Term    The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant

Restriction on Disposition of Assets

   Key Term    Disposal of assets per fiscal year not to exceed 70% of total assets
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term   
   Compliance Status   

Submission of Compliance Certificate

   Compliance Status    Submitted on September 1, 2022

 

Name

  

Issue Date

  

Maturity Date

   Principal Amount
(millions of Won)
    

Date of Fiscal
Agency
Agreement

  

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 47-2

   Mar. 26, 2019    Mar. 26, 2024      160,000      Mar. 14, 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.

Total

   —      —        1,000,000      —      —  

 

24


Table of Contents

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 September 1, 2022
*

Beginning with Series 47, the maintenance of financial ratio requirement has changed to a consolidated basis.

 

IV.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Omitted in quarterly reports in accordance with applicable Korean disclosure rules.

 

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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

Nine months ended
September 30,
2022
   Ernst & Young Han Young    —      Disclosure of discontinued operations in the consolidated financial statements for the nine months ended September 30, 2021 included for comparison purpose    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.

*

The audit opinion is on the consolidated and separate financial statements.

 

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
 

Nine months ended September 30, 2022

   Ernst & Young Han Young    Quarterly and semi-annual review      2,700        24,100        1,348        12,036  
   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 and semi-annual 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 and semi-annual 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

Nine months ended September 30, 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

July 27, 2022

  

Audit Committee: 4

Independent Auditor: 1

   In-person    Report on results of external auditors’ 2022
semi-annual review

 

27


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VI.

CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS

1. Board of Directors

Omitted in quarterly reports in accordance with applicable Korean disclosure rules. For more information, please refer to the Company’s semi-annual business report for the six months ended June 30, 2022.

2. Audit System

Omitted in quarterly reports in accordance with applicable Korean disclosure rules. For more information, please refer to the Company’s semi-annual business report for the six months ended June 30, 2022.

3. Shareholders’ Exercise of Voting Rights

Omitted in quarterly reports in accordance with applicable Korean disclosure rules. For more information, please refer to the Company’s semi-annual business report for the six months ended June 30, 2022.

 

VII.

SHAREHOLDERS

1. Shareholdings of the Largest Shareholder and Related Persons

 

A.

Shareholdings of the Largest Shareholder and Related Persons

 

(As of September 30, 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 the 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        0.01  

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        1,711        0.00  

Seok-Dong Kim

   Officer of the Company    Common share      303        0.00        1,447        0.00  

Youngmin Yoon

   Officer of the Company    Common share      303        0.00        1,447        0.00  

Jung Ho Ahn

   Officer of the Company    Common share      303        0.00        1,447        0.00  

Junmo Kim

   Officer of the Company    Common share      303        0.00        1,447        0.00  

Kyu-nam Choi

   Officer of the Company    Common share      455        0.00        455        0.00  

Poong Young Yoon

   Officer of affiliated 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  
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

   Common share      65,688,437        30.02        65,712,503        30.03  
        

 

 

    

 

 

    

 

 

    

 

 

 

 

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B.

Overview of the Largest Shareholder

As of September 30, 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/.

 

29


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VIII.

EMPLOYEES AND DIRECTORS

1. Directors and Officers

 

A.

Directors

 

(As of September 30, 2022)

Name

 

Gender

 

Date of Birth

 

Position

 

Professional Background

 

Duration of
Term

 

End of
Current
Term

Young Sang Ryu

  Male   May 1970   Chief Executive Officer; Representative Director; Inside Director   Former Head, SK Telecom MNO business   4 years and 7 months   Mar. 24, 2024

Jong Ryeol Kang

  Male   Oct. 1964   Representative Director; Head of ICT Infrastructure Center (CSPO); Inside Director   Former Head, Corporate Culture Division   7 months   Mar. 24, 2025

Kyu-Nam Choi

  Male   Apr. 1964   Non-executive Director   Head of Investment 1 Team; Head of Environment Task Force; Former Head of Future Business Team, SUPEX Council   12 months   Mar. 24, 2024

Yong-Hak Kim

  Male   Jan. 1953   Independent Director   Former President (Professor Emeritus), Yonsei University   2 years and 7 months   Mar. 25, 2023

Seok-Dong Kim

  Male   May 1953   Independent Director   Former Chairman, Financial Services Commission   3 years and 7 months   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 7 months   Mar. 25, 2023

Youngmin Yoon

  Female   Dec. 1963   Independent Director   Professor, Department of Media and Communication at Korea University   4 years and 7 months   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 7 months   Mar. 25, 2023

2. Compensation of Directors and Officers

Omitted in quarterly reports in accordance with applicable Korean disclosure rules. For more information, please refer to the Company’s semi-annual business report for the six months ended June 30, 2022.

 

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IX.

RELATED PARTY TRANSACTIONS

1. Line of Credit Extended to the Largest Shareholder and Related Parties

None.

2. Transfer of Assets to/from the Largest Shareholder and Related Parties and Other Transactions

Purchase and Dispositions of Investments

 

(As of September 30, 2022)      (Unit: in millions of Won)

Name (Corporate name)

  

Relationship

  

Purchase and Dispositions of Investments

    

Remarks

  

Type of
Investment

   Transaction Details  
   Beginning      Increase      Decrease      Ending  

Atlas Investment

   Subsidiary    Shares      155,656        3,744        —          159,400      Capital increase

SAPEON Korea Inc.

   Subsidiary    Shares      —          19,108        19,108        —        New acquisition/disposal

SAPEON Inc.

   Subsidiary    Shares      —          48,456        —          48,456      New acquisition

SK Square (listed)

   Subsidiary    Shares      51,371        —          51,371        —        Disposal

3. Transactions with the Largest Shareholder and Related Parties

 

(Unit: in millions of Won)

Counterparty

  

Relationship
with
Counterparty

  

Type

  

Transaction Period

  

Transaction Details

  

Transaction Amount

PS&Marketing

   Affiliate    Purchase    January 1, 2022 – September 30, 2022    Marketing fees, etc.    927,265

 

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 August 16, 2022, the Company disclosed that the effective date of SK Broadband’s merger with Broadband Nowon Co., Ltd. was changed from November 7, 2022 to October 5, 2022. Such merger has subsequently been completed.

 

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2. Contingent Liabilities

 

A.

Legal Proceedings

[SK Telecom]

As of September 30, 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.

[SK Broadband]

As of September 30, 2022, there were 32 pending lawsuits against SK Broadband (aggregate amount of claims of Won 10,781 million), and provisions in the amount of Won 600 million in connection with such lawsuits were recognized.

 

B.

Other Contingent Liabilities and Guarantees for Payment

[SK Telecom]

None.

[SK Broadband]

As of September 30, 2022, SK Broadband has entered into revolving credit facilities with a limit of Won 186 billion with three 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 September 30, 2022, SK Broadband has been provided with the following material payment guarantees by other parties.

 

(Unit: in millions of Won)  

Guarantor

  

                             Guarantee Details                            

   Guaranteed Amount  

Seoul Guarantee Insurance Company

   Contract and defect performance guarantee      34,980  

Korea Content Financial Cooperative

   Contract performance guarantee      34,760  

[SK Stoa]

As of September 30, 2022, SK Stoa has been provided with the following material payment guarantees by other parties.

 

(Unit: in millions of Won)  

Guarantor

  

                             Guarantee Details                            

   Guaranteed Amount  

Kookmin Bank

   Performance guarantee      1,540  

Kookmin Bank

   Revolving credit      10,000  

 

32


Table of Contents

[SK M&Service]

As of September 30, 2022, SK M&Service has entered into the following credit facilities with financial institutions.

 

(Unit: billions of Won)

Financial Institution

   Credit Limit     

                Details                 

KEB Hana Bank

     10      Working capital loan

Industrial Bank of Korea

     15      Working capital loan

Shinhan Bank

     1      Payment guarantee

As of September 30, 2022, SK M&Service has been provided with the following material payment guarantees by other parties.

 

(Unit: in millions of Won)  

Guarantor

  

                             Guarantee Details                            

   Guaranteed Amount  

41 companies including Korea Tourism Organization

   Transaction performance guarantee      1,788  

SK Energy

   Transaction performance guarantee      700  

[SK Telink]

As of September 30, 2022, SK Telink provided the following material payment guarantee to another party.

 

(Unit: in millions of Won)

Guarantor

  

                Counterparty                 

   Guaranteed Amount     

                    Guarantee  Details                    

SK Telink

   STARNET Systems, etc.      440      Contract performance guarantee; provisional seize of bonds, etc.

As of September 30, 2022, SK Telink has been provided with the following material payment guarantees by other parties.

 

(Unit: in millions of Won)  

Guarantor

  

                             Guarantee Details                            

   Guaranteed Amount  

Seoul Guarantee Insurance Company

   Contract performance guarantee      1,372  

[SK Communications]

As of September 30, 2022, SK Communications provided the following material payment guarantee to another party.

 

(Unit: in millions of Won)

Guarantor

  

                Counterparty                 

   Guaranteed Amount     

                    Guarantee  Details                    

SK Communications

   E-payment purchaser or right holder      650      Protect funds of users of electronic financial transactions

 

33


Table of Contents

[PS&Marketing]

As of September 30, 2022, PS&Marketing has been provided with the following material payment guarantees by other parties.

 

(Unit: in millions of Won)  

Guarantor

  

                             Guarantee Details                            

   Guaranteed Amount  

Seoul Guarantee Insurance Company

   Performance guarantee      1,640  

[Home&Service]

As of September 30, 2022, Home&Service has been provided with the following material payment guarantees by other parties.

 

(Unit: in millions of Won)  

Guarantor

  

                             Guarantee Details                            

   Guaranteed Amount  

Seoul Guarantee Insurance Company

   Guarantee of specified liabilities             2  

[Service Top]

As of September 30, 2022, Service Top has been provided with the following material payment guarantees by other parties.

 

(Unit: in millions of Won)  

Guarantor

  

                             Guarantee Details                            

   Guaranteed Amount  

Seoul Guarantee Insurance Company

   Contract performance guarantee           15  

3. Status of Sanctions, etc.

Omitted in quarterly reports in accordance with applicable Korean disclosure rules. For more information, please refer to the Company’s semi-annual business report for the six months ended June 30, 2022.

4. Material Events Subsequent to the Reporting Period

Omitted in quarterly reports in accordance with applicable Korean disclosure rules. For more information, please refer to the Company’s semi-annual business report for the six months ended June 30, 2022.

 

34


Table of Contents

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: DECEMBER 8, 2022


Table of Contents

SK TELECOM CO., LTD. AND ITS SUBSIDIARIES

Interim Consolidated Financial Statements

For the Nine-Month Period ended September 30, 2022

(With the Independent Auditor’s Review Report Thereon)


Table of Contents


Table of Contents
LOGO   

Ernst & Young Han Young

Taeyoung Building, 111, Yeouigongwon-ro,

Yeongdeungpo-gu, Seoul 07241 Korea

 

Tel: +82 2 3787 6600

Fax: +82 2 783 5890

ey.com/kr

  

Report on review of interim consolidated financial statements

(English Translation of a Report Originally Issued in Korean)

The Shareholders and Board of Directors

SK Telecom Co., Ltd.

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 September 30, 2022, and the related interim consolidated statements of profit or loss, interim consolidated statements of comprehensive income for the three-month and nine-month periods ended September 30, 2022, interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the nine-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 International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”) 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 Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of 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 Standards on Auditing (“KSAs”) 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 KIFRS 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, 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 statements of profit or loss for the three-month and nine-month periods ended September 30, 2021 and related notes have been restated to present the discontinued operations separately from continuing operations.


Table of Contents

LOGO

Other matters

The interim consolidated statements of profit or loss, interim consolidated statements of comprehensive income for the three-month and nine-month period ended September 30, 2021, interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the nine-month period ended September 30, 2021, prepared in accordance with KIFRS 1034 and presented for comparative purposes, have been reviewed by KPMG Samjong Accounting Corp. whose review report dated November 12, 2021 expressed an unqualified review conclusion. The accompanying interim consolidated statements of profit or loss, interim consolidated statements of comprehensive income for the three-month and nine-month period ended September 30, 2021, interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the nine-month period ended September 30, 2021 presented for comparative purposes, except for the adjustments related to the discontinued operations as described in Notes 3 and 36 to the accompanying interim consolidated financial statements, are not different, in all material respects, from the interim consolidated statements of profit or loss, interim consolidated statements of comprehensive income for the three-month and nine-month period ended September 30, 2021, interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the nine-month period ended September 30, 2021 reviewed by KPMG Samjong Accounting Corp.

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 KSAs (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 purposes, is not different, in all material respects, from the above audited consolidated statement of financial position.

November 11, 2022

 

This report is effective as of November 11, 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.


Table of Contents

SK TELECOM CO., LTD. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021 AND

FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2022 AND 2021

 

The accompanying interim consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Group.

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 September 30, 2022 and December 31, 2021

 

(In millions of won)    Note      September 30, 2022
(Unaudited)
    December 31, 2021  

Assets

       

Current Assets:

       

Cash and cash equivalents

     29,30      W 1,191,452       872,731  

Short-term financial instruments

     29,30        647,535       508,677  

Short-term investment securities

     9,29,30        —         5,010  

Accounts receivable – trade, net

     5,29,30,31        2,083,277       1,913,511  

Short-term loans, net

     5,29,30        75,377       70,817  

Accounts receivable – other, net

     5,29,30,31,32        569,220       548,362  

Contract assets

     7,30        81,310       76,698  

Prepaid expenses

     6        1,994,419       1,987,503  

Current tax assets

     27        51       77  

Derivative financial assets

     29,30        311,125       30,110  

Inventories, net

     8        196,530       204,637  

Non-current assets held for sale

     35        8,734       8,734  

Advanced payments and others

     5,29,30,31        159,621       125,798  
     

 

 

   

 

 

 
        7,318,651       6,352,665  
     

 

 

   

 

 

 

Non-Current Assets:

       

Long-term financial instruments

     29,30        107,975       375  

Long-term investment securities

     9,29,30        1,314,148       1,715,078  

Investments in associates and joint ventures

     11        2,049,980       2,197,351  

Investment property, net

     13        26,122       23,034  

Property and equipment, net

     12,14,31,32        12,445,644        12,871,259   

Goodwill

     10        2,075,009       2,072,493  

Intangible assets, net

     15        3,361,437       3,869,769  

Long-term contract assets

     7,30        48,312       41,580  

Long-term loans, net

     5,29,30,31        27,058       21,979  

Long-term accounts receivable – other, net

     5,29,30,31,32        217,072       275,238  

Long-term prepaid expenses

     6        1,053,784       1,069,148  

Guarantee deposits, net

     5,29,30,31        176,423       186,713  

Long-term derivative

financial assets

     29,30        261,794       187,484  

Deferred tax assets

     27        329       128  

Defined benefit assets

     19        33,865       18,427  

Other non-current assets

     5,29,30        12,172       8,556  
     

 

 

   

 

 

 
        23,211,124       24,558,612  
     

 

 

   

 

 

 

Total Assets

      W 30,529,775       30,911,277  
     

 

 

   

 

 

 

(Continued)

 

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Table of Contents

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Financial Position, Continued

As of September 30, 2022 and December 31, 2021

 

(In millions of won)    Note      September 30, 2022
(Unaudited)
    December 31, 2021  

Liabilities and Equity

       

Current Liabilities:

       

Accounts payable – trade

     29,30,31      W 148,756       190,559  

Accounts payable – other

     29,30,31        1,371,736       2,071,870  

Withholdings

     29,30,31        908,962       790,489  

Contract liabilities

     7        180,958       166,436  

Accrued expenses

     29,30        1,425,951       1,295,404  

Income tax payable

     27        83,873       192,221  

Derivative financial liabilities

     29,30        —         52  

Provisions

     18,34        75,577       61,656  

Short-term borrowings

        16,29,30,32        12,998       12,998  

Current portion of long-term debt, net

     16,29,30        2,453,690       1,430,324  

Current portion of long-term payables – other

     17,29,30        397,206       398,823  

Lease liabilities

     29,30,31        369,229       349,568  

Other current liabilities

        27       35  
     

 

 

   

 

 

 
        7,428,963       6,960,435  
     

 

 

   

 

 

 

Non-Current Liabilities:

       

Debentures, excluding current portion, net

     16,29,30        6,330,784       7,037,424  

Long-term borrowings, excluding current portion, net

     16,29,30        684,367       353,122  

Long-term payables – other

     17,29,30        1,234,199       1,611,010  

Long-term lease liabilities

     29,30,31        1,197,937       1,184,714  

Long-term contract liabilities

     7        49,584       36,531  

Defined benefit liabilities

     19        24,334       13,157  

Long-term derivative financial liabilities

     29,30        321,025       321,084  

Long-term provisions

     18        44,039       65,339  

Deferred tax liabilities

     27        849,716       941,301  

Other non-current liabilities

     29,30,31        67,721       52,022  
     

 

 

   

 

 

 
        10,803,706       11,615,704  
     

 

 

   

 

 

 

Total Liabilities

        18,232,669       18,576,139  
     

 

 

   

 

 

 

Equity:

       

Share capital

     1,20        30,493       30,493  

Capital surplus and others

     20,21        (11,538,160     (11,623,726

Retained earnings

     22        22,456,993       22,437,341  

Reserves

     23        556,002       735,238  
     

 

 

   

 

 

 

Equity attributable to owners of the Parent Company

        11,505,328       11,579,346  

Non-controlling interests

        791,778       755,792  
     

 

 

   

 

 

 

Total Shareholder’s Equity

        12,297,106       12,335,138  
     

 

 

   

 

 

 

Total Liabilities and Shareholder’s Equity

      W 30,529,775       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 and nine-month periods ended September 30, 2022 and 2021

 

(In millions of won)    Note      2022
(Unaudited)
    2021
(Unaudited/ Restated)
 
     Three-month
period ended
September 30
    Nine-month
period ended
September 30
    Three-month
period ended
September 30
    Nine-month
period ended
September 30
 

Operating revenue:

     4,31           

Revenue

      W 4,343,447       12,910,512       4,215,032       12,453,275  

Operating expenses:

     31           

Labor

        581,511       1,811,775       538,727       1,657,376  

Commission

     6        1,384,627       4,065,758       1,345,251       3,999,740  

Depreciation and amortization

     4        901,190       2,719,406       928,086       2,750,217  

Network interconnection

        180,007       554,652       184,173       561,319  

Leased lines

        68,943       197,651       77,024       224,178  

Advertising

        53,582       157,721       61,205       146,985  

Rent

        34,362       103,484       42,320       128,572  

Cost of goods sold

     8        304,699       880,015       309,991       836,358  

Others

     24        368,955       1,062,481       335,235       985,582  
     

 

 

   

 

 

   

 

 

   

 

 

 
        3,877,876       11,552,943       3,822,012       11,290,327  
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     4        465,571       1,357,569       393,020       1,162,948  

Finance income

       4,26        37,070       93,474       29,344       111,148  

Finance costs

     4,26        (90,063     (284,488     (96,529     (335,754

Gain (loss) relating to investments in associates and joint ventures, net

     4,11        (51,040     (75,909     29,422       436,739  

Other non-operating income

     4,25        9,147       33,760       17,676       82,281  

Other non-operating expenses

     4,25        (8,324     (32,272     (13,840     (34,164
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income tax

     4        362,361       1,092,134       359,093       1,423,198  

Income tax expense

     27        116,755       368,036       95,604       363,222  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit from continuing operations

        245,606       724,098       263,489       1,059,976  

Profit of discontinued operations, net of taxes

     36        —         —         473,021       1,044,207  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

      W 245,606       724,098       736,510       2,104,183  
     

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to:

           

Owners of the Parent Company

      W 234,628       699,743       784,180       2,108,230  

Non-controlling interests

        10,978       24,355       (47,670     (4,047

Earnings per share:

     28           

Basic earnings per share (in won)

      W 1,059       3,159       2,194       5,894  

Basic earnings per share - continuing operations (in won)

        1,059       3,159       712       2,849  

Diluted earnings per share (in won)

        1,059       3,157       2,192       5,890  

Diluted earnings per share - continuing operations (in won)

        1,059       3,157       711       2,847  

The accompanying notes are an integral part of the interim consolidated financial statements.

 

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Table of Contents

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Comprehensive Income

For the three-month and nine-month periods ended September 30, 2022 and 2021

 

(In millions of won)      2022
(Unaudited)
    2021
(Unaudited)
 
     Note      Three-month
period ended
September 30
    Nine-month
period ended

September 30
    Three-month
period ended
September 30
    Nine-month
period ended

September 30
 

Profit for the period

      W 245,606       724,098       736,510       2,104,183  

Other comprehensive income (loss):

           

Items that will never be reclassified to profit or loss in subsequent periods, net of taxes:

           

Remeasurement of defined benefit liabilities

     19        36,129       59,624       12,815       1,863  

Net change in other comprehensive loss of investments in associates and joint ventures

     11,23        —         —         (1,454     (4,433

Valuation gain (loss) on financial assets at fair value through other comprehensive income

     23        (115,051     (485,893     286,438       985,725  

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           136,290          263,200          138,115          327,035  

Net change in unrealized fair value of derivatives

     23        (2,831     (12,395     3,603       13,928  

Foreign currency translation differences for foreign operations

     23        37,768       56,483       36,515       54,614  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss) for the period, net of taxes

        92,305       (118,981     476,032       1,378,732  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

      W 337,911       605,117       1,212,542       3,482,915  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income attributable to:

           

Owners of the Parent Company

      W 320,392       574,586       946,480       3,172,042  

Non-controlling interests

        17,519       30,531       266,062       310,873  

The accompanying notes are an integral part of the interim consolidated financial statements.

 

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Table of Contents

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Changes in Equity

For the nine-month periods ended September 30, 2022 and 2021

 

(In millions of won)           Attributable to owners of the Parent Company     Non-controlling
interests
    Total
equity
 
     Note      Share capital      Capital surplus
and others
    Retained
earnings
    Reserves     Sub-total  

Balance as of January 1, 2021

      W 44,639        677,203       22,981,913       40,139       23,743,894       652,349       24,396,243  

Total comprehensive income:

                  

Profit (loss) for the period

        —          —         2,108,230       —         2,108,230       (4,047     2,104,183  

Other comprehensive income

     11,19,23        —          —         13,785       1,050,027       1,063,812       314,920       1,378,732  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          —         2,122,015       1,050,027       3,172,042       310,873       3,482,915  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                  

Annual dividends

        —          —         (641,944     —         (641,944     (25,771     (667,715

Interim dividends

        —          —         (177,902     —         (177,902     —         (177,902

Share option

     21        —          407       —         —         407       1,441       1,848  

Interest on hybrid bonds

        —          —         (11,075     —         (11,075     —         (11,075

Acquisition of treasury shares

     20        —          (72,982     —         —         (72,982     —         (72,982

Disposal of treasury shares

     20        —          29,803       —         —         29,803       —         29,803  

Retirement of treasury shares

     20        —          1,965,952       (1,965,952     —         —         —         —    

Changes in ownership in subsidiaries, etc.

        —          226,275       —         —         226,275       (23,589     202,686  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          2,149,455       (2,796,873     —         (647,418     (47,919     (695,337
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of September 30, 2021 (Unaudited)

      W 44,639        2,826,658       22,307,055       1,090,166       26,268,518       915,303       27,183,821  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of January 1, 2022

      W 30,493        (11,623,726     22,437,341       735,238       11,579,346       755,792       12,335,138  

Total comprehensive income:

                  

Profit for the period

        —          —         699,743       —         699,743       24,355       724,098  

Other comprehensive income (loss)

     11,19,23        —          —         54,079       (179,236     (125,157     6,176       (118,981
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          —         753,822       (179,236     574,586       30,531       605,117  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                  

Annual dividends

        —          —         (361,186     —         (361,186     —         (361,186

Interim dividends

        —          —         (361,909     —         (361,909     —         (361,909

Share option

     21        —          76,876       —         —         76,876       —         76,876  

Interest on hybrid bonds

        —          —         (11,075     —         (11,075     —         (11,075

Transactions of treasury shares

     20,21        —          (4,099     —         —         (4,099     —         (4,099

Changes in ownership in subsidiaries, etc.

        —          12,789       —         —         12,789       5,455       18,244  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          85,566       (734,170     —         (648,604     5,455       (643,149
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of September 30, 2022 (Unaudited)

      W 30,493        (11,538,160     22,456,993       556,002       11,505,328       791,778       12,297,106  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 nine-month periods ended September 30, 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

      W 724,098       2,104,183  

Adjustments for income and expenses

     33        3,694,741       2,455,662  

Changes in assets and liabilities related to operating activities

     33        (37,309     (512,621
     

 

 

   

 

 

 
        4,381,530       4,047,224  

Interest received

        30,502       32,163  

Dividends received

        15,098       186,722  

Interest paid

        (192,852     (233,623

Income tax paid

        (444,769     (349,941
     

 

 

   

 

 

 

Net cash provided by operating activities

        3,789,509       3,682,545  
     

 

 

   

 

 

 

Cash flows from investing activities:

       

Cash inflows from investing activities:

       

Decrease in short-term investment securities, net

        69,909       31,674  

Collection of short-term loans

        94,855       113,170  

Decrease in long-term investment securities

        222,432       343  

Proceeds from disposals of long-term investment securities

        100,135       61,184  

Proceeds from disposals of investments in associates and joint ventures

        342,645       100,334  

Proceeds from disposals of property and equipment

        4,526       49,025  

Proceeds from disposals of intangible assets

        10,685       7,289  

Collection of long-term loans

        995       3,533  

Decrease in deposits

        8,948       1,169  

Proceeds from settlement of derivatives

        1,277       1,131  
     

 

 

   

 

 

 
        856,407       368,852  

Cash outflows for investing activities:

       

Increase in short-term financial instruments, net

        (203,223     (142,192

Increase in short-term loans

        (96,806     (81,546

Increase in long-term loans

        (9,652     (8,913

Increase in long-term financial instruments

        (330,032     (18

Acquisitions of long-term investment securities

        (320,637     (274,589

Acquisitions of investments in associates and joint ventures

        (9,056     (220,500

Acquisitions of property and equipment

        (2,125,690     (2,114,612

Acquisitions of intangible assets

        (48,212     (111,162

Increase in deposits

        (10,936     (22,151

Cash outflow for business combinations, net

        (62,312     (101,667
     

 

 

   

 

 

 
        (3,216,556     (3,077,350
     

 

 

   

 

 

 

Net cash used in investing activities

      W (2,360,149     (2,708,498
     

 

 

   

 

 

 

(Continued)

 

6


Table of Contents

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2022 and 2021

 

(In millions of won)    Note      2022
(Unaudited)
    2021
(Unaudited)
 

Cash flows from financing activities:

 

 

Cash inflows from financing activities:

       

Proceeds from issuance of debentures

      W 891,272       607,437  

Proceeds from long-term borrowings

        350,000       350,000  

Cash inflows from settlement of derivatives

        768       10  

Increase in financial liabilities at FVTPL

        —         129,123  

Transactions with non-controlling shareholders

        31,151       444,121  
     

 

 

   

 

 

 
        1,273,191       1,530,691  

Cash outflows for financing activities:

       

Repayments of short-term borrowings, net

        —         (51,344

Repayments of long-term payables – other

        (400,245     (426,267

Repayments of debentures

        (940,000     (430,000

Repayments of long-term borrowings

        (32,096     (217,477

Payments of dividends

        (723,062     (850,617

Payments of interest on hybrid bonds

        (11,075     (11,075

Repayments of lease liabilities

        (296,622     (320,968

Acquisition of treasury shares

        —         (72,982

Transactions with non-controlling shareholders

        (367     (13,564
     

 

 

   

 

 

 
        (2,403,467     (2,394,294
     

 

 

   

 

 

 

Net cash used in financing activities

        (1,130,276     (863,603
     

 

 

   

 

 

 

Net increase in cash and cash equivalents

        299,084       110,444  

Cash and cash equivalents at beginning of the period

        872,731       1,369,653  

Effects of exchange rate changes on cash and cash equivalents

        19,637       11,454  
     

 

 

   

 

 

 

Cash and cash equivalents at end of the period

      W  1,191,452         1,491,551   
     

 

 

   

 

 

 

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

September 30, 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 September 30, 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

     17,323,760        7.91  

Institutional investors and other shareholders

     131,193,409        59.95  

Kakao Corp.

     3,846,487        1.76  

Treasury shares

     801,091        0.37  
  

 

 

    

 

 

 
     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

September 30, 2022 and 2021 (Unaudited)

 

 

1.

Reporting Entity, Continued

 

  (2)

List of consolidated subsidiaries

The list of consolidated subsidiaries as of September 30, 2022 and December 31, 2021 is as follows:

 

                   Ownership (%)(*1)  

Subsidiary

   Location    Primary business   Sept. 30,
2022
     Dec. 31,
2021
 

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  
  

SK Telecom 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 Inc.(*2,3)

   USA    Manufacturing non-memory
and other electronic
integrated circuits
    62.5        —    

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  

Subsidiary 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  

Subsidiary owned by SAPEON Inc.

  

SAPEON Korea Inc.(*2,5)

   Korea    Manufacturing non-memory
and other electronic
integrated circuits
    100.0        —    

Others(*6)

  

SK Telecom Innovation Fund, L.P.

   USA    Investment     100.0        100.0  
  

SK Telecom China Fund I L.P.

   Cayman Islands    Investment     100.0        100.0  

 

9


Table of Contents

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

September 30, 2022 and 2021 (Unaudited)

 

 

1.

Reporting Entity, Continued

 

  (2)

List of consolidated subsidiaries, Continued

 

The list of consolidated subsidiaries as of September 30, 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 nine-month period ended September 30, 2022 are presented in note 1-(4).

  (*3)

The Parent Company newly established SAPEON Inc. and the ownership interest of the Parent Company in SAPEON Inc. has changed from 100% to 62.5% due to unequal paid-in capital increase of SAPEON Inc. for the nine-month period ended September 30, 2022.

  (*4)

PS&Marketing Corporation acquired 3,099,112 shares (100%) of SK m&service Co., Ltd. at W72,859 million in cash for the nine-month period ended September 30, 2022 in order to strengthen the distribution competitiveness and improve the synergy within SKT ICT Family.

  (*5)

The Parent Company newly established SAPEON Korea Inc. and disposed the entire shares of SAPEON Korea Inc. to SAPEON Inc. for W40,000 million in cash during the nine-month period ended September 30, 2022.

  (*6)

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 nine-month period ended September 30, 2022 is as follows:

 

(In millions of won)                                   
     As of September 30, 2022      For the nine-month period
ended September 30, 2022
 

Subsidiary

   Total assets      Total liabilities      Total equity      Revenue      Profit  

SK Telink Co., Ltd.

   W 190,930        56,040        134,890        230,063        16,234  

SK Broadband Co., Ltd.

     6,081,822        3,040,828        3,040,994        3,107,913        155,588  

PS&Marketing Corporation

     456,659        238,796        217,863        971,392        2,848  

SERVICE ACE Co., Ltd.

     84,622        58,138        26,484        143,627        2,117  

SERVICE TOP Co., Ltd.

     79,772        48,699        31,073        132,418        2,813  

SK O&S Co., Ltd.

     103,726        69,278        34,448        209,591        2,831  

Home & Service Co., Ltd.

     148,903        91,148        57,755        307,903        1,257  

SK stoa Co., Ltd.

     95,312        38,132        57,180        243,000        8,632  

SK m&service Co., Ltd.(*)

     158,609        95,124        63,485        141,488        3,246  

 

  (*)

The financial information is the condensed financial information after the entity was included in the scope of consolidation.

 

10


Table of Contents

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

September 30, 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.

   W 174,837        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 nine-month period ended September 30, 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

September 30, 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 nine-month period ended September 30, 2022 and as of and for the year ended December 31, 2021 are as follows:

 

(In millions of won)      
    SK Broadband Co., Ltd.(*)  

Ownership of non-controlling interests (%)

    25.3  
    As of September 30, 2022  

Current assets

  W 1,605,070  

Non-current assets

    4,503,643