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 SEPTEMBER 2020
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.
SEMI-ANNUAL BUSINESS REPORT
(From January 1, 2020 to June 30, 2020)
THIS IS A SUMMARY OF THE SEMI-ANNUAL BUSINESS REPORT ORIGINALLY PREPARED IN KOREAN WHICH IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION.
IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS.
ALL REFERENCES TO THE “COMPANY” SHALL MEAN SK TELECOM CO., LTD. AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS CONSOLIDATED SUBSIDIARIES. REFERENCES TO “SK TELECOM” SHALL MEAN SK TELECOM CO., LTD., BUT SHALL NOT INCLUDE ITS CONSOLIDATED SUBSIDIARIES.
UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED FOR USE IN KOREA (“K-IFRS”) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.
I. | COMPANY OVERVIEW |
1. Company Overview
The Company’s semi-annual business report for the six months ended June 30, 2020 includes the following consolidated subsidiaries:
Name |
Date of Establishment |
Principal Business |
Total Assets as of Dec. 31, 2019 (millions of Won) |
Material Subsidiary* |
||||||||
SK Telink Co., Ltd. |
Apr. 9, 1998 | Telecommunication services and satellite broadcasting services | 265,725 | Material | ||||||||
SK M&Service Co., Ltd. |
Feb. 10, 2000 | Online information services | 109,699 | Material | ||||||||
SK Communications Co., Ltd. |
Sept. 19, 1996 | Internet portal and other Internet information services | 67,327 | |||||||||
SK Broadband Co., Ltd. |
Sept. 5, 1997 | Fixed-line telecommunication services, multimedia and Internet protocol TV (“IPTV”) services | 4,447,549 | Material | ||||||||
Tbroad Nowon Broadcasting Co., Ltd. |
June 15, 2001 | Cable broadcasting services | 10,421 | |||||||||
Home & Service Co., Ltd. |
June 5, 2017 | Information and telecommunication network maintenance | 113,176 | Material | ||||||||
SK stoa Co., Ltd. |
Dec. 1, 2017 | Data broadcasting and commercial retail platform services | 70,754 | |||||||||
K-net Culture and Contents Venture Fund |
Nov. 24, 2008 | Investment partnership | 151,493 | Material | ||||||||
PS&Marketing Co., Ltd. |
Apr. 3, 2009 | Sale of telecommunication devices | 439,947 | Material | ||||||||
Service Ace Co., Ltd. |
Jul. 1, 2010 | Customer center management services | 80,844 | Material | ||||||||
Service Top Co., Ltd. |
Jul. 1, 2010 | Customer center management services | 66,932 | |||||||||
SK O&S Co., Ltd. (formerly known as Network O&S Co., Ltd.) |
Jul. 1, 2010 | Network maintenance services | 96,446 | Material | ||||||||
SK Planet Co., Ltd. |
Oct. 1, 2011 | Telecommunication and platform services | 595,838 | Material | ||||||||
Dreamus Company (formerly known as Iriver Ltd.) |
Jul. 12, 2000 | Audio device manufacturing | 171,586 | Material | ||||||||
Iriver Enterprise Ltd. |
Jan. 14, 2014 | Management of Chinese subsidiary | 1,689 | |||||||||
Iriver China Co., Ltd. |
Jun. 24, 2004 | Electronic device manufacturing | 2,185 | |||||||||
DongGuan Iriver Electronics Co., Ltd. |
Jul. 6, 2006 | Electronic device manufacturing | — | |||||||||
Life Design Company Inc. (formerly known as S.M. Life Design Company Japan Inc.) |
June 25, 2008 | Japanese merchandise business | 8,681 | |||||||||
SK Telecom China Holdings Co., Ltd. |
Jul. 12, 2007 | Investment (holding company) | 47,572 | |||||||||
SK Global Healthcare Business Group, Ltd. |
Sept. 14, 2012 | Investment (SPC) | 25,610 | |||||||||
SK Planet Japan, K. K. |
Mar. 14, 2012 | Digital contents sourcing services | 56,451 | |||||||||
SK Planet Global Holdings Pte. Ltd. |
Aug. 10, 2012 | Investment (holding company) | 415 |
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Name |
Date of Establishment |
Principal Business |
Total Assets as of Dec. 31, 2019 (millions of Won) |
Material Subsidiary* | ||||||
SKT Americas, Inc. | Dec. 29, 1995 | Information collection and management consulting services | 30,704 | |||||||
SKP America LLC | Jan. 27, 2012 | Digital contents sourcing services | 48,344 | |||||||
YTK Investment Ltd. | Jul. 1, 2010 | Investment | 3,424 | |||||||
Atlas Investment | Jun. 24, 2011 | Investment | 116,576 | Material | ||||||
SK Telecom Innovation Fund, L.P. | Jan. 15, 2016 | Investment | 47,879 | |||||||
SK Telecom China Fund I L.P. | Sept. 14, 2011 | Investment | 19,896 | |||||||
Onestore Co., Ltd. | Mar. 1, 2016 | Contents distribution | 236,329 | Material | ||||||
SK telecom Japan Inc. | Mar. 1, 2018 | Information collection and management consulting services | 10,730 | |||||||
id Quantique Ltd. | Oct. 29, 2001 | QRNG technology development | 38,303 | |||||||
Eleven Street Co., Ltd. | Sept. 1, 2018 | E-commerce and Internet-related services | 923,424 | Material | ||||||
SK TELINK VIETNAM Co., Ltd. | Aug. 30, 2018 | Sale of telecommunication devices | 3,084 | |||||||
Quantum Innovation Fund I | Dec. 3, 2018 | Investment | 8,000 | |||||||
Life & Security Holdings Co., Ltd. | Mar. 21, 2014 | Holding company | 2,639,781 | Material | ||||||
ADT CAPS Co., Ltd. | Jan. 22, 1971 | Unmanned security services | 706,808 | Material | ||||||
CAPSTEC Co., Ltd. | Jan. 1, 2005 | Manned security services | 29,569 | |||||||
SK Infosec Co., Ltd. | Jun. 26, 2000 | Information security services | 158,424 | Material | ||||||
Id Quantique LLC | Jul. 27, 2018 | Quantum information and communications services | 1,177 | |||||||
FSK L&S Co., Ltd. | Oct. 20, 2016 | Logistics consulting services | 47,550 | |||||||
FSK L&S (Shanghai) Co., Ltd. | Jul. 29, 2010 | International cargo transportation agent | 23,454 | |||||||
FSK L&S Vietnam Company Limited | May 5, 2020 | International cargo transportation agent | 0 | |||||||
FSK L&S (Hungary) Co., Ltd. | Sept. 13, 2019 | International cargo transportation agent | 532 | |||||||
SK Telecom TMT Investment Corp. | Jan. 4, 2019 | Investment | 33,482 | |||||||
Incross Co., Ltd. | Aug. 13, 2007 | Advertising agency services | 144,263 | Material | ||||||
Infra Communications Co., Ltd. | Aug. 1, 2017 | Operation of mobile services | 1,569 | |||||||
Happy Hanool Co., Ltd. | Aug. 8, 2019 | Services | 800 | |||||||
SKinfosec Information Technology (wuxi) Co., Ltd. | Aug. 21, 2019 | System software development and supply services | 453 | |||||||
Mindknock Co., Ltd. | Jan. 23, 2018 | Software development services | 458 |
* | Material Subsidiary means a subsidiary with total assets of Won 75 billion or more as of the end of the latest fiscal year. |
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Changes in subsidiaries during the six months ended June 30, 2020 are set forth below.
Change |
Name |
Remarks | ||
Additions |
Tbroad Nowon Broadcasting Co., Ltd. | Newly acquired by SK Telecom | ||
FSK L&S Vietnam Company Limited | Newly established by FSK L&S Co., Ltd. | |||
Exclusions |
ADT SECURITY Co., Ltd. | Merged into ADT CAPS Co., Ltd. |
A. | Corporate Legal Business Name: SK Telecom Co., Ltd. |
B. | Date of Incorporation: March 29, 1984 |
C. | Location of Headquarters |
(1) | Address: 65 Euljiro, Jung-gu, Seoul, Korea |
(2) | Phone: +82-2-6100-2114 |
(3) | Website: http://www.sktelecom.com |
D. | Major Businesses |
(1) | Wireless business |
The Company provides wireless telecommunications services, characterized by its competitive strengths in handheld devices, affordable pricing, network coverage and an extensive contents library. The Company continues to maintain its reputation as the unparalleled premium network operator in the 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. In particular, in order to expedite its customers’ realization of the benefits of 5G services, the Company is pursuing efficient coverage expansion through the establishment of “5G Clusters” focused on services, key commercial districts and business-to-business (“B2B”).
In order to strengthen its sales channels, the Company has been offering a variety of fixed-line and wireless telecommunication convergence products through its subsidiary, PS&Marketing Co., Ltd. (“PS&Marketing”). PS&Marketing provides differentiated service to customers through the establishment of new sales channels and product development. Through its subsidiaries Service Ace Co., Ltd. and Service Top Co., Ltd., the Company operates customer service centers in Seoul and provides telemarketing services. Additionally, SK O&S Co., Ltd. (“SK O&S”), the Company’s subsidiary responsible for the operation of the Company’s networks, including its 5G network, provides customers with quality network services and provides the Company with technological know-how in network operations.
The Company plans to increase its profitability by strengthening its retention policy, which is the fundamental basis of competitiveness for telecommunication companies in this data-intensive era. The Company will lead the information and communication technology (“ICT”) trend by providing products through which customers can have a distinctive experience and by providing innovative services to transition to service-based competition.
The Company plans to further utilize its big data analysis capabilities to seek momentum for growth in new business areas.
(2) | Fixed-line business |
SK Broadband Co., Ltd. (“SK Broadband”) is engaged in providing telecommunications, broadcasting and new media services and various other services that are permitted to be carried out by SK Broadband under relevant regulations, as well as business activities that are directly or indirectly related to providing those services. In 1999, SK Broadband launched its high-speed Internet service in Seoul, Busan, Incheon and Ulsan and currently provides such services nationwide. SK Broadband also commercialized its TV-Portal service in July 2006 and its IPTV service in January 2009 upon receipt of permit in September 2008. In April 2019, SK Broadband decided to launch an integrated over-the-top (“OTT”) platform “wavve,” combining its OTT service “oksusu” with POOQ, an OTT service alliance of Korea’s three terrestrial broadcasters. SK Broadband is focusing on strengthening the competitiveness of the combined OTT service through an increased investment in content and thereby developing it into a key service in the 5G era. In addition, SK Broadband’s merger with Tbroad Co., Ltd. (“Tbroad”) obtained all requisite regulatory approvals in January 2020, and the merger became effective as of April 30, 2020.
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(3) | Security business |
In the field of security business, the Company has completed its converged security business portfolio ranging from physical security to information security through the acquisitions of new material subsidiaries ADT CAPS Co., Ltd. (“ADT CAPS”) and SK Infosec Co., Ltd. (“SK Infosec”). Due to a growing number of single-person households and increasing awareness for crime prevention, the security industry has been growing steadily in recent years. New markets for physical security have also been developing as a result of integrating cutting-edge ICT, such as big data, Internet of Things (“IoT”) and AI, and bio-recognition technologies. The domestic market size of the physical security industry expanded from Won 3.6 trillion in 2012 to Won 5.5 trillion in 2017 (at an average annual growth rate of 8.7%), and is expected to grow to Won 7.9 trillion (at an average annual growth rate of 7.5%) in 2022. The Company plans to expand its security business into one of its major business areas by leveraging such industry growth and synergies with its other ICT-based businesses.
(4) | Commerce business |
The Company is a leading player in the Korean e-commerce industry through its material subsidiary Eleven Street Co., Ltd. (“Eleven Street”), which operates an e-commerce platform service that connects various sellers and purchasers through its online and mobile platforms. In addition, the Company continues to evolve into a commerce portal by providing differentiated shopping-related services covering shopping information, product search and purchases, relying on the strength of the Company’s core principles of innovation supported by its advanced technological capabilities, including artificial intelligence (“AI”)-based commerce search technology and customized recommendations based on big data analysis.
See “II.1. Business Overview” for more information.
E. | Credit Ratings |
(1) | Corporate bonds and other long-term securities |
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Credit rating date |
Subject of rating |
Credit rating |
Credit rating entity |
Rating classification | ||||
February 5, 2018 |
Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
February 5, 2018 |
Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
February 6, 2018 |
Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
April 10, 2018 |
Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
April 11, 2018 |
Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
April 16, 2018 |
Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
May 29, 2018 |
Hybrid securities | AA+ (Stable) | Korea Ratings | Current rating | ||||
August 31, 2018 |
Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
August 31, 2018 |
Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
August 31, 2018 |
Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
February 20, 2019 |
Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
February 20, 2019 |
Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
February 20, 2019 |
Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
May 31, 2019 |
Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
June 4, 2019 |
Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating | ||||
June 18, 2019 |
Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
July 15, 2019 |
Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
July 15, 2019 |
Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
July 15, 2019 |
Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
October 4, 2019 |
Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
October 7, 2019 |
Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
October 8, 2019 |
Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
December 26, 2019 |
Corporate bond | AAA (Stable) | Korea Ratings | Current rating | ||||
December 27, 2019 |
Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Current rating | ||||
December 27, 2019 |
Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Current rating | ||||
June 16, 2020 |
Corporate bond | AAA (Stable) | Korea Ratings | Regular rating | ||||
June 18, 2020 |
Corporate bond | AAA (Stable) | Korea Investors Service, Inc. | Regular rating | ||||
June 22, 2020 |
Corporate bond | AAA (Stable) | NICE Investors Service, Co., Ltd. | Regular rating |
* | Rating definition: “AAA” - The certainty of principal and interest payment is at the highest level with extremely low investment risk and is stable such that it will not be influenced by reasonably foreseeable changes in external factors. |
* | Rating definition: “AA” - The certainty of principal and interest payment is extremely high with very low investment risk, but has slightly inferior factors compared to “AAA” rating. |
(2) | Commercial paper (“CP”) and short-term bonds |
Credit rating date |
Subject of rating |
Credit rating | Credit rating entity |
Rating classification | ||||
April 10, 2018 |
CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
April 10, 2018 |
Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
April 11, 2018 |
CP | A1 | Korea Ratings | Current rating | ||||
April 11, 2018 |
Short-term bond | A1 | Korea Ratings | Current rating | ||||
April 16, 2018 |
CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
April 16, 2018 |
Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
August 31, 2018 |
CP | A1 | Korea Ratings | Regular rating | ||||
August 31, 2018 |
CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
August 31, 2018 |
CP | A1 | NICE Investors Service Co., Ltd. | Regular rating |
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Credit rating date |
Subject of rating |
Credit rating | Credit rating entity |
Rating classification | ||||
August 31, 2018 |
Short-term bond | A1 | Korea Ratings | Regular rating | ||||
August 31, 2018 |
Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
August 31, 2018 |
Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
May 31, 2019 |
CP | A1 | Korea Ratings | Current rating | ||||
May 31, 2019 |
Short-term bond | A1 | Korea Ratings | Current rating | ||||
June 4, 2019 |
CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 4, 2019 |
Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 18, 2019 |
CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 18, 2019 |
Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
October 4, 2019 |
CP | A1 | Korea Ratings | Regular rating | ||||
October 4, 2019 |
Short-term bond | A1 | Korea Ratings | Regular rating | ||||
October 7, 2019 |
CP | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 7, 2019 |
Short-term bond | A1 | Korea Investors Service, Inc. | Regular rating | ||||
October 8, 2019 |
CP | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
October 8, 2019 |
Short-term bond | A1 | NICE Investors Service Co., Ltd. | Regular rating | ||||
June 16, 2020 |
CP | A1 | Korea Ratings | Current rating | ||||
June 16, 2020 |
Short-term bond | A1 | Korea Ratings | Current rating | ||||
June 18, 2020 |
CP | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 18, 2020 |
Short-term bond | A1 | Korea Investors Service, Inc. | Current rating | ||||
June 22, 2020 |
CP | A1 | NICE Investors Service Co., Ltd. | Current rating | ||||
June 22, 2020 |
Short-term bond | A1 | NICE Investors Service Co., Ltd. | Current rating |
* | Rating definition: “A1” - Timely repayment capability is at the highest level with extremely low investment risk and is stable such that it will not be influenced by reasonably foreseeable changes in external factors. |
(3) | International credit ratings |
Date of credit rating |
Subject of rating |
Credit rating of securities |
Credit rating agency |
Rating type | ||||
October 23, 2017 |
Bonds denominated in foreign currency | A- (Stable) | Fitch Ratings | Regular rating | ||||
April 8, 2018 |
Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Current rating | ||||
April 9, 2018 |
Bonds denominated in foreign currency | A3 (Stable) | Moody’s Investors Service | Current rating | ||||
May 8, 2018 |
Bonds denominated in foreign currency | A- (Stable) | S&P Global Ratings | Regular rating | ||||
May 10, 2018 |
Bonds denominated in foreign currency | A3 (Negative) | Moody’s Investors Service | Regular rating | ||||
October 15, 2018 |
Bonds denominated in foreign currency | A- (Negative) | Fitch Ratings | Regular rating | ||||
March 6, 2019 |
Bonds denominated in foreign currency | A- (Negative) | S&P Global Ratings | Regular rating | ||||
May 30, 2019 |
Bonds denominated in foreign currency | A3 (Negative) | Moody’s Investors Service | Regular rating | ||||
October 14, 2019 |
Bonds denominated in foreign currency | A- (Negative) | Fitch Ratings | Regular rating | ||||
June 11, 2020 |
Bonds denominated in foreign currency | A3 (Negative) | Moody’s Investors Service | Regular rating |
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(4) | Listing (registration or designation) of Company’s shares and special listing status |
Listing (registration or designation) of stock |
Date of listing (registration or designation) | Special listing | Special listing and applicable regulations | |||
KOSPI Market of Korea Exchange | November 7, 1989 | Not applicable | Not applicable |
2. Company History
March 1984: Establishment of Korea Mobile Telecommunications Co., Ltd.
November 1989: Listing on the KOSPI Market of the Korea Exchange
March 1997: Change of name to SK Telecom Co., Ltd.
March 2008: Acquisition of Hanaro Telecom (the predecessor entity of SK Broadband)
October 2011: Spin-off of SK Planet Co., Ltd. (“SK Planet”)
June 2015: Comprehensive exchange of shares of SK Broadband
April 2016: Spin-off and merger of the location-based services business and the mobile phone verification services business of SK Planet
December 2017: Comprehensive exchange of shares of SK Telink Co., Ltd. (“SK Telink”)
December 2018: Comprehensive exchange of shares of SK Infosec
A. | Location of Headquarters |
• | 22 Dohwa-dong, Mapo-gu, Seoul (July 11, 1988) |
• | 16-49 Hangang-ro 3-ga, Yongsan-gu, Seoul (November 19, 1991) |
• | 267 Namdaemun-ro 5-ga, Jung-gu, Seoul (June 14, 1995) |
• | 99 Seorin-dong, Jongro-gu, Seoul (December 20, 1999) |
• | 65 Euljiro, Jung-gu, Seoul (December 13, 2004) |
B. | Significant Changes in Management |
At the 32nd General Meeting of Shareholders held on March 18, 2016, Dae Sik Cho was re-elected as an inside director and Dae Shick Oh was re-elected as an independent director and member of the audit committee of the Company’s board of directors (the “Board of Directors”). At the 33rd General Meeting of Shareholders held on March 24, 2017, Jung Ho Park was elected as an inside director and Dae Sik Cho was elected as a non-executive director. Jae Hoon Lee and Jae Hyeon Ahn were re-elected as independent directors and members of the audit committee and Jung Ho Ahn was elected as an independent director. At the 34th General Meeting of Shareholders held on March 21, 2018, Young Sang Ryu was elected as an inside director and Youngmin Yoon was elected as an independent director and member of the audit committee of the Board of Directors. At the 35th General Meeting of Shareholders held on March 26, 2019, Seok-Dong Kim was elected as an independent director and member of the audit committee of the Board of Directors. At the 36th General Meeting of Shareholders held on March 26, 2020, Jung Ho Park was re-elected as an inside director, Dae Sik Cho was re-elected as a non-executive director, Jung Ho Ahn was re-elected as an independent director and member of the audit committee of the Board of Directors, Yong-Hak Kim was newly elected as an independent director and member of the audit committee and Junmo Kim was newly elected as an independent director.
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C. | Change in Company Name |
On January 2, 2017, SK M&Service Co., Ltd. (“SK M&Service”), one of the Company’s subsidiaries, changed its name to SK M&Service Co., Ltd. from M&Service Co., Ltd. in accordance with a resolution at its general meeting of shareholders on December 26, 2016.
On October 23, 2018, Life & Security Holdings Co., Ltd. (“Life & Security Holdings”), one of the Company’s subsidiaries, changed its name to Life & Security Holdings Co., Ltd., from Siren Holdings Korea Co., Ltd., in accordance with a resolution at its extraordinary meeting of shareholders.
On March 28, 2019, Iriver Ltd., one of the Company’s subsidiaries, changed its name to Dreamus Company in accordance with a resolution at its general meeting of shareholders.
On April 17, 2019, Network O&S Co., Ltd., one of the Company’s subsidiaries, changed its name to SK O&S Co., Ltd. pursuant to a resolution at its extraordinary meeting of shareholders.
D. | Mergers, Acquisitions and Restructuring |
(1) Establishment of SK TechX Co., Ltd. and Onestore
In March 2016, SK Planet spun off its platform business and T Store business and established SK TechX Co., Ltd. (“SK TechX”) and Onestore. The Company exchanged 12,323,905 shares of SK Planet for 6,323,905 shares of SK TechX and 6,000,000 shares of Onestore at the time of the spin-off. The Company later acquired an additional 4,409,600 shares of Onestore at a purchase price of Won 22 billion by participating in the follow-on rights offering. The Company did not participate in the subsequent follow-on rights offering and as of June 30, 2020, the Company had a 52.7% interest in Onestore.
(2) Spin-off and merger of SK Planet’s location-based services business and mobile phone verification services business
Through the merger of SK Planet’s location-based services business and mobile phone verification services business into SK Telecom, the Company seeks to provide a solid base for continued growth, especially in the next generation platform business. The spin-off and merger was effective as of April 5, 2016 and was registered as of April 7, 2016. SK Planet is a wholly-owned subsidiary of the Company, and as the Company did not issue any new shares in connection with the merger, there was no change in the share ownership of the Company.
(3) Establishment of Hana-SK Fintech Corporation
In order to provide an everyday finance platform, the Company entered into a joint venture agreement with Hana Financial Group, in accordance with the resolution of the Board of Directors on July 28, 2016. Combining the Company’s leading mobile technology and big data analysis capabilities with Hana Financial Group’s financial service, Hana-SK Fintech Corporation plans to provide innovative mobile financial services such as mobile asset management, easy payment and overseas wire transfer services. SK Telecom holds a 49% equity stake in the joint venture, and Hana Financial Group holds the remaining 51%.
(4) Capital contribution of shares of NSOK Co., Ltd. (“NSOK”) for new shares of SK Telink
On October 25, 2016, the Company made a capital contribution of all shares of NSOK owned by the Company to SK Telink in exchange for 219,967 newly issued shares of SK Telink, which resulted in an increase of the Company’s equity interest in SK Telink to 85.86%.
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(5) Acquisition of shares of SM Mobile Communications
In October 2016, the Company transferred the media platform businesses Hotzil and 5Ducks to SM Mobile Communications in exchange for 1,200,000 shares of SM Mobile Communications. As a result, the Company owned a 46.2% equity interest in SM Mobile Communications as of June 30, 2020.
(6) Exchange of shares of SK Communications Co., Ltd. (“SK Communications”)
On November 24, 2016, the Board of Directors resolved to approve the payment of cash consideration in lieu of the issuance of shares of the Company in a comprehensive exchange of shares of SK Communications. The amount of cash consideration was based on a share exchange ratio of one common share of the Company to 0.0125970 common share of SK Communications. In February 2017, SK Communications became a wholly-owned subsidiary of the Company.
(7) Acquisition of shares of Iriver
The Company acquired 4,699,248 shares of Iriver at a purchase price of Won 5,320 in connection with a capital contribution. The Company’s equity interest in Iriver following the acquisition is 45.9%. See “Report on Important Business Matters (Decision on Capital Increase)” filed on July 17, 2017 by Iriver for more information.
(8) Acquisition of newly issued shares of SK China Company Limited (“SK China”)
On July 28, 2017, the Company acquired newly issued shares of SK China to find investment opportunities in ICT and other promising areas of growth in China. In exchange for newly issued shares of SK China, the Company contributed its full equity interest in each of SKY Property Management Limited (“SKY”) and SK Industrial Development China Co., Ltd. (“SK IDC”) as well as cash, equal to the following amounts: 1) SKY stock: USD 276,443,440.64, 2) SK IDC stock: USD 108,072,007.67 and 3) Cash: USD 100,000,000.00. As a result of the acquisition, the Company holds 10,928,921 shares and a 27.27% of equity interest in SK China. See “Report on Decision on Acquisition of SK China Shares” filed by the Company on July 28, 2017 for more information about this transaction.
(9) Exchange of shares of SK Telink
On September 28, 2017, the Company disclosed a resolution approving the payment of cash consideration in lieu of the issuance of shares of SK Telecom in an exchange of shares of SK Telink. The amount of cash consideration was based on a share exchange ratio of 1:1.0687714. The exchange was completed on December 14, 2017, upon which exchange SK Telink became a wholly-owned subsidiary of the Company.
(10) Acquisition of shares of FSK L&S Co., Ltd.
On February 6, 2016, the Company acquired 2,415,750 shares of FSK L&S Co., Ltd. at a purchase price of Won 17.8 billion from SK Holdings Co., Ltd. (“SK Holdings”) to utilize its logistics sharing infrastructure with its counterparties and pursue new business opportunities. As a result of the acquisition, the Company had a 60% equity interest in FSK L&S Co., Ltd.
(11) Acquisition of shares of id Quantique SA
In order to increase the value of the Company by enhancing its position as the top mobile network operator (“MNO”) through utilizing quantum cryptography and by generating returns from its global business, the Company acquired an additional 41,157,506 shares of id Quantique SA on April 30, 2018. As a result, the Company owns a total of 58.1% of the issued and outstanding shares (44,157,506 shares), and has acquired control, of id Quantique SA.
(12) Acquisition of shares of Siren Holdings Korea Co., Ltd.
The Company acquired shares of Siren Holdings Korea Co., Ltd. (“SHK”), which wholly owns ADT CAPS, in order to strengthen its security business and expand its residential customer base. See “Report on Decision on Acquisition of Shares of Siren Holdings Korea Co., Ltd.” filed on May 8, 2018 for more information.
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* | Siren Investments Korea Co., Ltd. merged with and into SHK with SHK as the surviving entity, following which CAPSTEC Co., Ltd. (“CAPSTEC”) and ADT SECURITY Co., Ltd. (“ADT SECURITY”), which were subsidiaries of ADT CAPS, became subsidiaries of SHK. |
* | SHK changed its name to Life & Security Holdings Co., Ltd. in accordance with a resolution at its extraordinary meeting of shareholders on October 23, 2018. |
(13) Capital increase of Iriver
On July 26, 2018, the board of directors of Iriver, a subsidiary of the Company, resolved to approve a capital increase of Won 70,000 million through third-party allotment and subsequently issued 7,990,867 common shares. The Company participated in the capital increase and paid Won 65,000 million to subscribe 7,420,091 common shares of Iriver on August 10, 2018, resulting in an increase of the Company’s ownership interest from 45.9% to 53.7%.
(14) Exchange of shares of SK Infosec
On October 26, 2018, the Company announced the decision of the Board of Directors to approve the comprehensive exchange of shares of SK Infosec for shares of the Company. The share exchange ratio was one common share of the Company to 0.0997678 common share of SK Infosec. The share exchange was completed on December 27, 2018, upon which SK Infosec became a wholly-owned subsidiary of the Company.
(15) Acquisition of shares of SK stoa Co., Ltd. (“SK Stoa”)
On April 25, 2019, the Board of Directors resolved to acquire the 100% equity interest in SK Stoa owned by SK Broadband, a subsidiary of the Company, in order to expand its T-commerce business and maximize synergies with other ICT businesses of the Company. On January 3, 2020, the Company acquired 3,631,355 shares of SK Stoa after obtaining governmental approvals.
(16) Acquisition of shares of Tbroad Nowon Broadcasting Co., Ltd. (“Tbroad Nowon”)
On April 26, 2019, the Board of Directors resolved to acquire shares of Tbroad Nowon to enhance the Company’s competitiveness in the media business pursuant to a share purchase agreement with Tbroad Nowon’s largest shareholder, Tbroad. The Company acquired a 55.00% equity interest, or 627,000 shares, of Tbroad Nowon at a purchase price of Won 10.4 billion. See the report on “Amendment Regarding Decision on Acquisition of Tbroad Nowon” filed by the Company on January 28, 2020 for more information.
(17) Disposal of shares of SMC and Shopkick
On June 11, 2019, SKP America, a subsidiary of the Company, disposed of its 100% equity interest in SMC and SMC’s wholly-owned subsidiary Shopkick.
(18) Acquisition of shares of Incross Co., Ltd. (“Incross”)
On June 28, 2019, the Company acquired 2,786,455 shares of Incross in order to strengthen its digital advertising business. The Company’s equity interest in Incross following the acquisition is 34.6%. See the report on “Decision on Acquisition of Shares of Incross” filed by the Company on April 11, 2019, as amended on June 3, 2019 for more information.
(19) Capital increase of Content Alliance Platform Inc. (“Content Alliance Platform”)
The Company participated in a capital increase by Content Alliance Platform in the amount of Won 90 billion through third-party allotment in order to provide innovative media services and contents to customers and to enhance its competitiveness as a differentiated mobile OTT platform. See the report on “Participation in Capital Increase by Content Alliance Platform” filed by the Company on April 5, 2019, as amended on June 28, 2019.
11
(20) Acquisition of newly-issued shares of Kakao Corp. (“Kakao”)
In order to pursue a strategic alliance with Kakao, the Company acquired newly-issued common shares of Kakao in the aggregate amount of approximately Won 300 billion through third-party allotment. Kakao acquired treasury shares of the Company. See the report on “Results of Disposal of Treasury Shares” filed by the Company on November 5, 2019 for more information.
[SK Broadband]
(1) Establishment of a subsidiary
On May 23, 2017, SK Broadband’s board of directors resolved to approve the establishment of a subsidiary. On June 5, 2017, SK Broadband established Home & Service Co., Ltd. (“Home & Service”), a subsidiary responsible for the management of customer service operations. Home & Service was incorporated by SK Broadband under the Korean Commercial Code. The subsidiary was capitalized at Won 46 billion and the Korea Fair Trade Commission approved the subsidiary’s incorporation as an SK affiliate on July 1, 2017.
(2) Spin-off
On August 16, 2017, SK Broadband’s board of directors resolved to approve the spin-off of its T-commerce subsidiary through a spin-off and subsequent establishment of a subsidiary pursuant to Article 530-2 and 530-12 of the Korean Commercial Code, with both companies from the simple vertical spin-off remaining as existing companies. The spin-off was effective as of December 1, 2017, and the subsidiary was capitalized at Won 15 billion, with SK Broadband holding a 100% equity interest. The Korea Fair Trade Commission approved the subsidiary’s incorporation as an SK affiliate on January 1, 2018.
(3) Transfer of business
On April 5, 2019, SK Broadband’s board of directors resolved to approve an agreement for the transfer of its OTT service, oksusu, to Content Alliance Platform (POOQ), a joint venture among KBS, MBC and SBS. The transaction was completed on September 18, 2019.
(4) Transfer of subsidiary shares
On April 24, 2019, SK Broadband’s board of directors approved the transfer of its 100% equity interest (3,631,355 shares) in SK Stoa, a subsidiary of SK Broadband, to SK Telecom. On December 30, 2019, the Ministry of Science and ICT (“MSIT”) approved the change in the largest capital contributor, and the transaction was completed on January 3, 2020.
(5) Merger of Tbroad, Tbroad Dongdaemun Broadcasting Co., Ltd. (“Tbroad Dongdaemun”) and Korea Digital Cable Media Center (“KDMC”) with and into SK Broadband
On April 26, 2019, SK Broadband’s board of directors resolved to enter into a merger agreement pursuant to which Tbroad, Tbroad Dongdaemun and KDMC will merge with and into SK Broadband. On January 23, 2020, the parties entered into an amendment to the merger agreement due to changes in the merger timeline, and on March 26, 2020, the entry into the merger agreement was approved as proposed at the extraordinary general meeting of shareholders. The merger was completed as of April 30, 2020.
[SK Telink]
(1) Acquisition of shares of NSOK
In accordance with the resolution of its board of directors on September 22, 2016, SK Telink received a capital contribution of 408,435 shares (an 83.9% equity interest) of NSOK owned by SK Telecom. On October 25, 2016, SK Telink acquired the remaining 78,200 outstanding shares (a 16.1% equity interest) of NSOK, pursuant to which NSOK became a wholly-owned subsidiary of SK Telink.
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In accordance with the resolution of its board of directors on April 12, 2017, SK Telink acquired 525,824 additional shares of NSOK pursuant to a rights offering for an aggregate amount of Won 40.0 billion (or Won 76,071 per share), resulting in SK Telink’s ownership of 1,012,459 shares (a 100% equity interest) of NSOK.
(2) Comprehensive exchange of shares
On September 28, 2017, SK Telink’s board of directors approved a comprehensive exchange of shares with SK Telecom, pursuant to which SK Telecom would acquire SK Telink’s remaining outstanding shares for cash consideration in lieu of issuance of shares of SK Telecom. The share exchange agreement was subsequently approved at the extraordinary general meeting of shareholders held on November 9, 2017.
Following the exchange, there were no changes to SK Telecom’s share ownership interest level or to management structure, and SK Telecom and SK Telink will remain as corporate entities. SK Telink became a wholly-owned subsidiary of SK Telecom and remains as an unlisted corporation, while SK Telecom remains as a listed corporation.
(3) Disposal of NSOK shares
Pursuant to the resolution of its board of directors on October 8, 2018, SK Telink entered into an agreement to sell 1,012,459 shares of NSOK (representing a 100.00% equity interest) to Life & Security Holdings. The date of sale was October 10, 2018, and the sale consideration amount was Won 100 billion. See “Report on Disposal of Shares of Related Party” filed on October 8, 2018 by SK Telink for more information about this transaction.
(4) Change in location of headquarters
As of April 20, 2020, SK Telink changed the location of its headquarters to 144 Mapo T-town, Mapo-daero, Mapo-gu, Seoul pursuant to a resolution of its board of directors on April 16, 2020.
(5) Transfer of access ID business
On May 22, 2020, the board of directors of SK Telink resolved to transfer its access ID business and related assets to ADT CAPS, a related party, for Won 0.4 billion, effective as of May 31, 2020.
(6) Transfer of device business
On May 22, 2020, the board of directors of SK Telink resolved to transfer its device business and related assets to SK Networks Co., Ltd., a related party, for Won 4.2 billion, effective as of July 1, 2020. As such transfer qualified as a simplified business transfer, the board resolution served as requisite approval in lieu of approval by the general meeting of shareholders.
[Life & Security Holdings]
(1) Spin-off and merger of certain businesses of ADT CAPS
On May 18, 2018, in order to seek a more efficient corporate structure through reorganization, Life & Security Holdings spun off ADT CAPS’ holding company business (i.e., the business of controlling its subsidiaries CAPSTEC and ADT SECURITY through the ownership of shares of these subsidiaries) from ADT CAPS and merged it with and into Life & Security Holdings, with Life & Security Holdings and ADT CAPS surviving these transactions.
[ADT CAPS]
(1) Merger of NSOK
Pursuant to resolutions of the board of directors on October 8, 2018 and the general meeting of shareholders on October 23, 2018, ADT CAPS merged NSOK with and into itself effective as of December 1, 2018 to seek new sources of growth, taking into account the growth potential of the physical security market.
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(2) Merger of ADT SECURITY
Pursuant to resolutions of the board of directors on November 14, 2019 and the general meeting of shareholders on November 29, 2019, ADT CAPS completed the merger of ADT SECURITY with and into itself effective as of January 1, 2020 to enhance management efficiency.
[Eleven Street]
(1) Establishment of Eleven Street
On July 31, 2018, the board of directors of SK Planet resolved to spin off its 11st business division (including Scinic, Gifticon and 11Pay) into a newly established company, Eleven Street, effective as of September 1, 2018. In the spin-off, newly issued shares of the spun-off company were allocated in proportion to the equity interest of the shareholders as of the date of such allocation, at a ratio of 0.14344419 newly issued share for 1 share of SK Planet (8,383,931 common shares).
(2) Capital increase of Eleven Street
Pursuant to the resolution of the board of directors on September 7, 2018, Eleven Street issued new shares through a third-party allotment in order to increase its capital, allocating all such new shares to Nile Holdings Co., Ltd. The payment date was September 28, 2018. After the capital increase, SK Telecom holds a 80.26% interest in Eleven Street. See “Report on Decision on Capital Increase of Eleven Street Co., Ltd.” filed by the Company on September 7, 2018 for more information.
(3) Acquisition of shares of Hello Nature Co., Ltd. (“Hello Nature”)
On October 10, 2018, Eleven Street acquired 281,908 shares of Hello Nature, a fresh food delivery service provider, from SK Planet for Won 29.9 billion. As a result of this acquisition, Eleven Street owns a 49.90% interest in Hello Nature.
(4) Acquisition of shares of KOREACENTER Co., Ltd. (“KOREACENTER”)
Pursuant to the resolution of the board of directors on December 26, 2018, Eleven Street acquired 578,521 shares owned by the shareholders of KOREACENTER (Gi Rok Kim and three other individuals) and 578,521 newly issued shares of KOREACENTER, for a total consideration of Won 27.5 billion, in order to form a strategic alliance and promote its commerce services and global business.
(5) Share repurchase
Pursuant to the resolution at its general shareholders’ meeting held on March 26, 2019 approving a share repurchase and the resolution of its board of directors held on April 26, 2019 approving the terms of such repurchase, Eleven Street repurchased 158,429 units of its own shares from SK Planet for Won 42.5 billion and 203 units of its own shares from certain other shareholders (Young-hoon Jeon and four others) for Won 50 million, effective as of August 30, 2019, in order to enhance the value of its shares. As a result of this repurchase, Eleven Street owns 1.55% of its total shares issued as treasury shares.
[SK Infosec]
(1) Merger of Bizen Co., Ltd. (“Bizen”)
Pursuant to a resolution of its board of directors on November 28, 2014, SK Infosec decided to merge Bizen with and into itself, with SK Infosec as the surviving entity, effective as of January 20, 2015, in order to strengthen its competitiveness through the creation of business synergies. The merger was completed based on a merger ratio of 1:0.0797984.
(2) Comprehensive exchange of shares
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On October 25, 2018, the board of directors of SK Infosec resolved to enter into a share exchange agreement with SK Telecom pursuant to which the shareholders of record of SK Infosec would be allotted 0.00997678 treasury share of SK Telecom in exchange for one common share of SK Infosec on December 27, 2018, after which SK Infosec would become a wholly-owned subsidiary of SK Telecom. The share exchange agreement was executed on November 26, 2018 and the comprehensive share exchange was completed on December 27, 2018.
[SK Planet]
Effective as of March 1, 2016, SK Planet spun off its platform business and T Store business in order to enhance the competitiveness of each business for future growth.
Effective as of April 5, 2016, SK Planet spun off its location-based services business and mobile phone verification services business and merged them into the Company in order to further concentrate its resources on its commerce business.
On May 29, 2017, the board of directors of SK Planet resolved to transfer the operations and assets related to its BENEPIA business for Won 7.5 billion to SK M&Service as of July 1, 2017.
On July 17, 2017, the board of directors of SK Planet resolved to (1) spin-off SK Planet’s advertising agency business as a newly established company, SM Contents & Communications, in order to strengthen the competitiveness of the business for future growth, which spin-off was effective as of October 1, 2017 and (2) sell 100% of its shares of SM Contents & Communications to SM Culture & Contents Co., Ltd. to further concentrate business capabilities and efficiently allocate management resources. The closing date of the sale transaction was October 24, 2017.
On June 19, 2018, the board of directors of SK Planet resolved to spin off its 11st business (including Scinic, Gifticon and 11Pay) into a newly established company, effective as of September 1, 2018, in order to enhance the level of specialization and competitiveness of its businesses by strengthening their core competencies and obtain further growth potential of the businesses. See the “Report on Decision on Spin-off of SK Planet’s 11st Business” filed on June 19, 2018 for more information.
On June 19, 2018, the board of directors of SK Planet resolved to merge SK TechX with and into SK Planet, effective as of September 1, 2018, with a merger ratio between SK Planet and SK TechX of 1:3.0504171, in order to enhance management efficiency and create synergies. See the “Report on Decision on Merger of SK TechX into SK Planet” filed on June 19, 2018 for more information.
SK Planet decided to reduce the par value of its shares from Won 500 to Won 150 to improve its financial structure through coverage of losses. The capital reduction is effective as of April 27, 2020.
[SK M&Service]
(1) Acquisition of SK Planet’s BENEPIA business
Pursuant to the resolutions of its board of directors and its extraordinary shareholders meeting held on May 29, 2017, SK M&Service decided to acquire SK Planet’s BENEPIA business (including agency service for the Flexible Benefit Plan and related tangible and intangible assets, goodwill, systems, etc.) for Won 7.5 billion on July 1, 2017.
[Dreamus Company]
(1) Merger with Iriver CS Co., Ltd. (“Iriver CS”)
Pursuant to the resolution of its board of directors on November 18, 2014, Dreamus Company merged Iriver CS, a subsidiary of the Company, with and into itself on January 31, 2015, with the purpose of enhancing competitiveness through management rationalization and maximization of synergy. The merger was completed based on a merger ratio of 1:0 with no capital increase. The merger and merger registration were completed on January 31, 2015 and February 2, 2015, respectively. Since this merger qualified as a small-scale merger, the approval of the merger by a resolution of the board of directors substituted for the approval by a general meeting of shareholders.
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(2) Acquisition of shares of S.M. Life Design Company Japan Inc.
Pursuant to the resolution of its board of directors on July 17, 2017, Dreamus Company approved a contract to acquire a total of 1,000,000 shares of S.M. Life Design Company Japan Inc. (a 100% equity interest) from S.M. Entertainment Japan Co., Ltd. with the purposes of entering foreign markets and maximizing business synergy. Dreamus Company acquired control of S.M. Life Design Company Japan Inc. upon its completion of payment for the shares on September 1, 2017.
(3) Merger of S.M. Mobile Communications JAPAN Inc.
Pursuant to the resolution of its board of directors on July 17, 2017, Dreamus Company decided to merge with S.M. Mobile Communications JAPAN Inc., a contents and information distribution company, with the purpose of reinforcing its contents based device business and enhancing managerial efficiency. As of October 1, 2017, Dreamus Company merged S.M. Mobile Communications JAPAN Inc. into it with a merger ratio of 1:1.6041745, based on which Dreamus Company issued 4,170,852 new common shares.
(4) Acquisition of important assets (Supply and distribution rights for music and digital contents)
On February 28, 2018, Dreamus Company entered into an agreement with S.M. Entertainment Co., Ltd. to acquire supply and distribution rights for music and digital contents of S.M. Entertainment Co., Ltd., JYP Entertainment Corporation and Big Hit Entertainment. Through this arrangement, the Company plans to increase sales by entering the music and sound recording industries and to create synergies through strategic alliances.
(5) Merger between subsidiaries
In order to achieve management efficiency and maximize organizational operation synergies, groovers Japan Co., Ltd. and SM Mobile Communications Japan Inc., each of which was a Japanese subsidiary of Dreamus Company, completed their merger with groovers Japan Co., Ltd. as the surviving entity, effective as of July 1, 2018.
(6) Investment in groovers Inc. (“Groovers”)
On July 26, 2018, the board of directors of Dreamus Company resolved to make an equity investment of Won 11,000 million (2,200,000 common shares) in Groovers for the purposes of providing operating funds to improve its financial structure and pursue new businesses. Payment was completed on July 27, 2018, and the Company’s ownership interest after such equity investment is 100%.
(7) Transfer of Music Mate business between Groovers and SK TechX
On August 31, 2018, pursuant to the resolutions of its board of directors and the extraordinary meeting of shareholders, each of which was held on June 28, 2018, Groovers acquired all properties, assets and rights related to the Music Mate streaming service from SK TechX for Won 3,570 million.
(8) Merger of Groovers
Pursuant to the resolution of its board of directors on December 26, 2018, Dreamus Company merged Groovers, a provider of music, contents and other services, with and into itself on March 1, 2019, in order to seek synergies by integrating management resources and enhance management efficiency. The merger was completed based on a merger ratio of 1:0 with no capital increase. The merger and merger registration were completed on March 1, 2019 and March 5, 2019, respectively. Since this merger qualified as a small-scale merger, the approval of the merger by a resolution of the board of directors substituted for the approval by a general meeting of shareholders.
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(9) Disposal of shares of Iriver Inc.
Pursuant to the resolution of its board of directors on July 18, 2019, Dreamus Company disposed of all of its shares in Iriver Inc., effective as of September 1, 2019, with the goal of achieving sustainable growth of its device business by improving its financial structure and profitability and maintaining its business expertise and continuity of operations.
(10) Merger between subsidiaries
In order to achieve management efficiency and maximize organizational operation synergies, Life Design Company Inc. and groovers Japan Co., Ltd., each of which is a Japanese subsidiary of Dreamus Company, completed their merger with Life Design Company Inc. as the surviving entity, effective as of December 15, 2019.
[Incross]
(1) Spin-off of Infra Communications Co., Ltd. (“Infra Communications”)
Effective as of August 1, 2017, Incross spun off its business related to the operation agency service of the integrated mobile application marketplace “Onestore” into a newly established company, Infra Communications, in order to strengthen the expertise and enhance management efficiency of each of its businesses, to respond effectively to the external environment by re-investing the value generated from each business into such business, and to grow and develop such business through strategic and efficient allocation of management resources.
(2) Transfer of mobile advertising network business
Effective as of April 1, 2017, Incross acquired SK Planet’s mobile advertising network business, “Syrup Ad.”
(3) Transfer of media representative business
Effective as of March 17, 2020, Incross acquired SK Stoa’s advertisement media agency and advertising agency businesses.
3. Total Number of Shares
A. | Total Number of Shares |
(As of June 30, 2020) | (Unit: in shares) | |||||||||||||||
Classification |
Share type | Remarks | ||||||||||||||
Common shares | Preferred shares |
Total | ||||||||||||||
I. Total number of authorized shares |
220,000,000 | — | 220,000,000 | — | ||||||||||||
II. Total number of shares issued to date |
89,278,946 | — | 89,278,946 | — | ||||||||||||
III. Total number of shares retired to date |
8,533,235 | — | 8,533,235 | — | ||||||||||||
a. reduction of capital |
— | — | — | — | ||||||||||||
b. retirement with profit |
8,533,235 | — | 8,533,235 | — | ||||||||||||
c. redemption of redeemable shares |
— | — | — | — | ||||||||||||
d. others |
— | — | — | — | ||||||||||||
IV. Total number of shares (II-III) |
80,745,711 | — | 80,745,711 | — | ||||||||||||
V. Number of treasury shares |
7,609,263 | — | 7,609,263 | — | ||||||||||||
VI. Number of shares outstanding (IV-V) |
73,136,448 | — | 73,136,448 | — |
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B. | Treasury Shares |
There were no acquisitions and dispositions of treasury shares during the reporting period.
4. Status of Voting Rights
(As of June 30, 2020) | (Unit: in shares) | |||||||||
Classification |
Number of shares | Remarks | ||||||||
Total shares (A) |
Common share | 80,745,711 | — | |||||||
Preferred share | — | — | ||||||||
Number of shares without voting rights (B) |
Common share | 7,609,263 | Treasury shares | |||||||
Preferred share | — | — | ||||||||
Shares without voting rights pursuant to the Company’s articles of incorporation (the “Articles of Incorporation”) (C) |
Common share | — | — | |||||||
Preferred share | — | — | ||||||||
Shares with restricted voting rights pursuant to Korean law (D) |
Common share | — | — | |||||||
Preferred share | — | — | ||||||||
Shares with reestablished voting rights (E) |
Common share | — | — | |||||||
Preferred share | — | — | ||||||||
The number of shares with exercisable voting right s (F = A - B - C - D + E) |
Common share | 73,136,448 | — | |||||||
Preferred share | — | — |
5. Dividends and Others
A. | Dividends |
(1) | Distribution of cash dividends was approved during the 34th General Meeting of Shareholders held on March 21, 2018. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
(2) | Distribution of interim dividends of Won 1,000 was approved during the 416th Board of Directors’ Meeting on July 26, 2018. |
(3) | Distribution of cash dividends was approved during the 35th General Meeting of Shareholders held on March 26, 2019. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
(4) | Distribution of interim dividends of Won 1,000 was approved during the 426th Board of Directors’ Meeting on July 25, 2019. |
(5) | Distribution of cash dividends was approved during the 36th General Meeting of Shareholders held on March 26, 2020. |
• | Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved. |
(6) | Distribution of interim dividends of Won 1,000 was approved during the 438th Board of Directors’ Meeting on July 21, 2020. |
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B. | Dividends for the Last Three Fiscal Years |
(Unit: in millions of Won, except per share data and percentages) | ||||||||||||||||
Classification |
As of and for the six months ended June 30, 2020 |
As of and for the year ended December 31, 2019 |
As of and for the year ended December 31, 2018 |
|||||||||||||
Par value per share (Won) |
|
500 | 500 | 500 | ||||||||||||
(Consolidated) Net income |
|
736,650 | 889,907 | 3,127,887 | ||||||||||||
Net income per share (Won) |
|
9,971 | 12,144 | 44,066 | ||||||||||||
Total cash dividend |
|
73,136 | 730,098 | 717,438 | ||||||||||||
Total stock dividends |
|
— | — | — | ||||||||||||
(Consolidated) Percentage of cash dividend to available income (%) |
|
9.9 | 82.0 | 22.9 | ||||||||||||
Cash dividend yield ratio (%) |
Common shares | 0.4 | 3.7 | 3.6 | ||||||||||||
Preferred shares | — | — | — | |||||||||||||
Stock dividend yield ratio (%) |
Common shares | — | — | — | ||||||||||||
Preferred shares | — | — | — | |||||||||||||
Cash dividend per share (Won) |
Common shares | 1,000 | 10,000 | 10,000 | ||||||||||||
Preferred shares | — | — | — | |||||||||||||
Stock dividend per share (share) |
Common shares | — | — | — | ||||||||||||
Preferred shares | — | — | — |
* | The total amount of cash dividends was calculated by adding the total amount of cash dividends resolved at the general meeting of shareholders for the relevant fiscal year and any quarterly cash dividends paid during such fiscal year (including interim dividends) in accordance with applicable disclosure requirements. |
* | Consolidated net income is based on equity attributable to owners of the parent company. |
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II. | BUSINESS |
1. Business Overview
Each company in the consolidated entity is a separate legal entity providing independent services and products. The business is primarily separated into (1) the wireless business consisting of cellular voice, wireless data and wireless Internet services, (2) the fixed-line business consisting of fixed-line telephone, high speed Internet, data and network lease services, among others, (3) commerce business, (4) security business and (5) other businesses consisting of platform services and Internet portal services, among others.
Set forth below is a summary business description of material consolidated subsidiaries.
Classification |
Company name |
Description of business | ||
Wireless |
SK Telecom Co., Ltd. | Wireless voice and data telecommunications services via digital wireless networks | ||
PS&Marketing Co., Ltd. | Sale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels | |||
SK O&S Co., Ltd. | Maintenance of switching stations | |||
Service Ace Co., Ltd | Management and operation of customer centers | |||
Fixed-line |
SK Broadband Co., Ltd. |
High-speed Internet, TV, telephone, commercial data and other fixed-line services and management of the transmission system for online digital contents Various media-related services, such as channel management services including video-on-demand (“VOD”) | ||
SK Telink Co., Ltd. | International wireless direct-dial “00700” services, voice services using Internet protocol and Mobile Virtual Network Operator (“MVNO”) business | |||
Home & Service Co., Ltd. | System maintenance of high-speed Internet, IPTV and fixed-line services | |||
Security |
Life & Security Holdings Co., Ltd. |
Holding company | ||
ADT CAPS Co., Ltd. | Unmanned machine-based security and manned security services | |||
SK Infosec Co., Ltd. | Comprehensive information protection services and integrated computer system consulting and implementation services | |||
Commerce |
Eleven Street Co., Ltd. |
E-commerce and Internet-related businesses | ||
Other business |
SK Planet Co., Ltd. |
Information telecommunications business and development and supply of software | ||
Onestore Co., Ltd. | Operation of mobile application store | |||
Dreamus Company | Online music service and distribution of records and digital content | |||
SK M&Service Co., Ltd. | System software development, distribution and technical support services and other online information services | |||
K-net Culture and Contents Venture Fund | Start-up investment support | |||
Atlas Investment | Investments | |||
Incross Co., Ltd. | Advertising |
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[Wireless Business]
A. | Industry Characteristics |
The telecommunications services market can be categorized into telecommunications services (such as fixed-line, wireless, leased line and value-added services) and broadcasting and telecommunications convergence services. Pursuant to the Telecommunications Business Act, the telecommunications services market can be further classified into basic telecommunications (fixed-line and wireless telecommunications), special category telecommunications (resale of telecommunications equipment, facilities and services) and value-added telecommunications (Internet connection and management, media contents and others). The size of the domestic telecommunications services market is determined based on various factors specific to Korea, including size of population that uses telecommunication services and telecommunications expenditures per capita. While it is possible for Korean telecommunication service providers to provide services abroad through acquisitions or otherwise, foreign telecommunication services markets have their own characteristics depending, among others, on the regulatory environment and demand for telecommunication services.
The Korean mobile communication market is considered to have reached its maturation stage with more than a 100% penetration rate. However, the Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology and the development of highly advanced smartphones which enable the provision of convergence services for multimedia contents, mobile commerce, telematics, new media and other related services. In addition, through further advancements in LTE networks and the commercialization of 5G networks in 2019, B2B businesses, such as the corporate “connected workforce” business which can directly contribute to an enhancement in productivity, are expected to grow rapidly.
B. | Growth Potential |
(Unit: in 1,000 persons) | ||||||||||||||
As of June 30, | As of December 31, | |||||||||||||
Classification |
2020 | 2019 | 2018 | |||||||||||
Number of subscribers |
SK Telecom | 28,932 | 28,648 | 27,382 | ||||||||||
Others (KT, LGU+) | 32,396 | 31,539 | 29,989 | |||||||||||
MVNO | 7,339 | 7,750 | 7,989 | |||||||||||
Total | 68,668 | 67,937 | 65,360 |
* | Source: Wireless subscriber data from the MSIT as of June 30, 2020. |
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
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(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 June 30, | As of December 31, | ||||||||||
2020 | 2019 | 2018 | ||||||||||
Mobile communication services |
47.2 | 47.6 | 47.7 |
* | Source: Wireless subscriber data from the MSIT as of June 30, 2020. |
D. | Business Overview and Competitive Strengths |
The Company is seeking to transform itself from a telecommunications service provider into a comprehensive ICT service provider. It has continued to innovate the scope of its services and achieved strong growth in subscribers amid fierce competition and rate cuts.
As a result of positive customer responses to a series of customer value innovation programs such as no-contract plans, safe roaming and the T Plan, as well as its position as the top player in the 5G services market in terms of number of subscribers, the Company secured approximately 3.35 million 5G subscribers as of June 30, 2020. The churn rate remained relatively stable at a record low of 0.9% (excluding MVNO subscribers). In the second quarter of 2020, the Company recorded revenue of Won 4,602.8 billion and an operating profit of Won 359.5 billion on a consolidated basis, and revenue of Won 2,939.8 billion and an operating profit of Won 270.3 billion on a separate basis.
In the telecommunications technology domain, in June 2018, the Company secured frequency bandwidths that are optimal for the commercialization of 5G services at a reasonable bid price. In the fourth quarter of 2018, the Company began to build its 5G networks, focusing on Seoul and other metropolitan areas. The Company began its first 5G transmission in December 2018 and is focusing on establishing 5G networks with enhanced stability and security through the application of quantum cryptography communication and AI networks.
In April 2019, the Company launched the world’s first 5G subscription services. The Company had 2.08 million 5G subscribers as of December 31, 2019, and the number of 5G subscribers is expected to continue to grow. The Company believes that 5G services would have the greatest impact on customer experiences in media, augmented reality (“AR”) / virtual reality (“VR”) and games, which are the areas that the Company believes would draw the highest level of interest from its customers. The Company is launching services related to these areas, such as the 5GX Boost Park. The Company plans to lead the 5G era by providing differentiated content in various areas including sports and entertainment.
SK Telink, a consolidated subsidiary of the Company, expanded its operations to the MVNO business based on its technical expertise and know-how obtained in its international telecommunications business and launched its MVNO service, ‘SK 7Mobile,’ which is offered at reasonable rates and provides excellent quality. SK Telink is increasing its efforts to develop low-cost distribution channels and create niche markets through targeted marketing towards customers including foreign workers, middle-aged adults and students. An MVNO leases the networks of an MNO and provides wireless telecommunication services under its own brand and fee structure, without owning telecommunication networks or frequencies.
SK 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. Network quality is a core competitive factor for not only the traditional consumer market but also for the expanding B2B market, and its importance will only increase in the 5G network era.
PS&Marketing, a subsidiary of the Company, provides a sales platform for products of the Company and SK Broadband including fixed-line and wireless telecommunication products that address customers’ needs for various convergence products. PS&Marketing provides differentiated service to clients through the establishment of new sales channels and product development.
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[Fixed-line Business]
A. Industry Characteristics
The telecommunications services market can be categorized into telecommunications services (such as fixed-line, wireless, leased line and value-added services) and broadcasting and telecommunications convergence services (such as IPTV, cable TV and bundled fixed-line/wireless 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 broadcasting business involves the planning, programming or production of broadcasting programs and transmission to viewers through telecommunication facilities. Pursuant to the Broadcasting Act, the broadcasting market can be categorized into terrestrial broadcasting, fixed-line TV broadcasting, satellite broadcasting and programming-providing businesses. The Company engages in the fixed-line TV broadcasting business, which is defined as the business of managing and operating fixed-line TV broadcasting stations (including their facilities and employees for the purpose of providing multi-channel broadcasting) and providing broadcasts through transmission and line facilities.
The fixed-line telecommunications industry is 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.
The Korean fixed-line services industry is marked by a high level of market concentration, as the government is highly selective in granting telecommunications business licenses. The competitive landscape of the fixed-line and wireless services markets is dominated by its three leading operators, the Company (including SK Broadband), KT and LG U+. Growing competition within the industry has promoted rapid technological evolution, including the convergence of fixed-line and wireless services, as well as broadcasting and telecommunications.
B. Growth Potential
(Unit: in 1,000 persons) | ||||||||||||||
Classification |
As of June 30, | As of December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||||
Fixed-line Subscribers |
High-speed Internet | 22,152 | 21,906 | 21,286 | ||||||||||
Fixed-line telephone | 13,206 | 13,600 | 14,334 | |||||||||||
IPTV | 16,833 | 16,440 | 15,054 | |||||||||||
Cable TV | 13,558 | 13,642 | 13,925 |
* | Source: MSIT website. |
* | The number of IPTV and cable TV subscribers as of June 30, 2020 is based on the average number of subscribers in the last six months of 2019. |
C. | Cyclical Nature and Seasonality |
High-speed Internet, fixed-line telephone and pay TV services are mature markets that are comparatively less sensitive to cyclical economic changes as such services have become more of a necessity and the market has matured. The telecommunications services market overall is not expected to be particularly affected by economic downturns due to the low income elasticity of demand for telecommunication services.
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D. | Domestic and Overseas Market Conditions |
Set forth below is the historical market share of the Company.
(Unit: in percentages) | ||||||||||||
As of June 30, | As of December 31, | |||||||||||
Classification |
2020 | 2019 | 2018 | |||||||||
High-speed Internet (including resales) |
29.5 | 25.6 | 25.4 | |||||||||
Fixed-line telephone (including Voice over Internet Protocol (“VoIP”) |
16.8 | 16.8 | 16.8 | |||||||||
IPTV |
30.2 | 30.3 | 30.3 | |||||||||
Cable TV |
22.4 | 22.4 | 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. |
* | The market share of IPTV and cable TV subscribers as of June 30, 2020 is based on the average number of subscribers in the last six months of 2019. |
In each of its principal business areas, SK Broadband principally competes on the basis of price, service quality and speed. In the IPTV business, the ability to offer complex services and differentiated contents are becoming increasingly important. General telecommunications businesses operate in a licensed industry with a high barrier of entry, which is dominated by SK Broadband, KT and LG U+.
E. | Business Overview and Competitive Strengths |
In the second quarter of 2020, SK Broadband recorded Won 918.4 billion in revenue, Won 60.8 billion in operating profit and Won 39.9 billion in profit on a consolidated basis. SK Broadband achieved revenue growth compared to the second quarter of 2019 as a result of the mergers during the period and an increase in B2B sales, including content delivery network services.
In the case of high-speed Internet, revenue increased compared to the second quarter of 2019 due to an increase in the proportion of subscribers of premium services, such as Giga Internet. Despite the absence of new cinematic releases and other new content, the IPTV service business continued its solid growth compared to the second quarter of 2019 due to the growth in subscribers and platform sales. Revenue from the corporate business increased compared to the first quarter of 2020 and the second quarter of 2019 as a result of SK Broadband’s anticipatory response to data traffic growth.
[Security Business]
A. | Industry Characteristics |
The security systems service business provides security services to governments, companies and individuals with the purpose of protecting tangible and intangible assets and human resources. Depending on the risk prevention method used, the security business can be classified into machine-based security, security system integration (“SI”) and manned security. Machine-based security operates by receiving information that is detected and transmitted by various sensors and cameras installed at the target facilities through control facility equipment and taking prompt and appropriate action, such as dispatching an agent or contacting the police or the fire department, if an abnormality is detected. Security SI is a service that integrates installation, operation, maintenance and repair of various equipment and systems by analyzing the appropriate security system for customer facilities, such as buildings, factories and schools. Manned security services deploy security personnel to areas subject to security, who perform on-site security services such as patrols and access control of buildings and facilities. The Company’s primary business in the security industry is its unmanned security service, and its business areas consist of the following:
Classification |
Product | |
Machine-based security |
CAPS service (unmanned security service), access control, view guard (CCTV), attendance management, drinking water management | |
Security SI and maintenance and repair |
Access control (entry and parking), CCTV (recording, camera, monitor, network equipment), other security systems | |
Integrated security services (machine-based security + manned security) |
Machine-based security services, manned security services (security, cleaning, concierge, etc.) |
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B. | Growth Potential |
The size of the physical security industry in terms of revenue is as follows:
(Unit: in millions of Won except percentages) | ||||||||||||
2019 | 2018 | Change (%) | ||||||||||
Dispatch security services |
1,727,972 | 1,726,210 | 0.1 | % | ||||||||
Video security services |
415,647 | 401,777 | 3.5 | % | ||||||||
Other security services |
536,208 | 485,004 | 10.6 | % | ||||||||
Total |
2,679,827 | 2,612,991 | 2.6 | % |
* | Source: Korea Information Industry Association (2019 Korean Information Security Services Industry Survey published in December 2019). 2019 figures are estimates. |
C. | Cyclical Nature and Seasonality |
The security systems business seeks to satisfy the basic need for safety and is less sensitive to economic fluctuations compared to other industries. Although the slowdown in the Korean economy and competition based on lower-cost alternatives has had a negative impact on industry growth, sustained growth is nevertheless expected due to the recent expansion of the industry into converged security markets with the integration of ICT.
D. | Domestic and Overseas Market Conditions |
The security industry is experiencing a rapid increase in demand for CCTV, access control and other security systems due to threats including crime, natural disasters and calamities and terrorism. With increased consumer interest in safety, demand for security system services is expected to continue to grow. To date, the Korean security market is characterized by an oligopoly dominated by three leading companies due to the high barriers to entry as a result of high initial investment costs of building large-scale network systems and the effects of brand loyalty. The traditional security industry, characterized by price competition aimed at increasing market share, is expanding into a converged security market with the integration of ICT. In addition, the global converged security market integrating ICT has recently been experiencing rapid growth and increased competition due to the entry of global information technology companies. As a result, the global AI security industry, which had a market size of US$3.9 billion in 2018, is expected to grow tenfold by 2025.
E. | Business Overview and Competitive Strengths |
For the six months ended June 30, 2020, ADT CAPS recorded Won 391.1 billion in revenue and Won 55.3 billion in operating profit, and it has secured approximately 620,000 subscribers as of June 30, 2020, including subscribers to newly launched businesses.
Due to the saturation of the unmanned security market, the net growth rate in the number of ADT CAPS’ unmanned security contracts decreased in 2019 compared to the previous year. However, ADT CAPS was able to record approximately Won 740 billion in revenue in 2019, exceeding expectations, due to increases in the number of new subscribers acquired through the SK distribution network and sales in newly-launched businesses, such as CAPS Home and parking services.
Although the unmanned security market is expected to remain saturated in 2020, ADT CAPS will pursue efforts to improve its core unmanned security business through the development of products and market approaches that are tailored to the needs of various customers, while steadily improving its new security businesses at the same time.
In particular, through the merger of ADT SECURITY, a provider of security equipment and solutions, with and into itself, ADT CAPS plans to reach customers with a diverse range of products as a convergence security company in 2020.
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Unmanned security services range from crime prevention based on cutting-edge sensors and prompt dispatch of security personnel to follow-up services. With increased efforts to reduce false alarms, ADT CAPS continues to reduce dispatch and control costs, thereby improving service quality and ultimately generating new sources of revenue to establish a positive cycle for continuous growth.
Video security services provide objective security through full identification of subjects with the use of high-definition video, made convenient and safe through a diverse lineup of products and remote control services. Access security services provide outsider access control, employee attendance checks and even drinking water management, which are made user-friendly and convenient due to the integration of cutting edge AI-based technology such as fingerprint, facial and mobile recognition. ADT CAPS plans to continue advancing such technology-based services and deliver more convenient and safer security services to customers through innovative technologies.
The SI business provides comprehensive security solutions suitable for the management of large buildings, such as access control and energy, fire safety and parking management services. ADT CAPS is striving to provide customers with the best comprehensive security solution, including more economical and optimized products through the development of innovative technologies.
[Commerce Business]
A. Industry Characteristics
Electronic commerce, or e-commerce, refers to transactions of goods and services that are processed electronically by information processing systems, such as personal computers, and can be classified into “online order” and “online order brokerage” businesses. The mail order brokerage business refers to the act of intermediating a transaction between a seller and a buyer by an online shopping mall, and the online order business refers to direct sales of goods and services by an online shopping mall. Online shopping malls can be categorized, based on the range of products that they handle, into special malls that handle products limited to specific categories and general malls that handle products across multiple categories. The Korean e-commerce market started to grow in the early 2000s with the spread of the Internet, and it is now going through a second period of growth in the form of mobile commerce as a result of the removal of time and space constraints on shopping following the proliferation of smartphones beginning in 2010, the simplification and improved convenience of payment services, the expansion of fast delivery services following intense competition in such services beginning in 2018, the combination of offline and online shopping experiences (omni-channel and O2O services) and advancements in personalization and recommendation services based on AI. 11st, which is an online order brokerage business, is known as an “open market business” within the e-commerce market. As a result of leading the trend of mobile commerce and pursuing innovative customer experience since the early stages of its business, 11st has grown into a major player in the e-commerce market.
B. Growth Potential
As of December 31, 2019, the size of the Korean e-commerce market was Won 134.6 trillion, accounting for approximately 28% of the total online and offline distribution market and demonstrating rapid growth at an annual average growth rate of over 25% for the past three years. In addition, mobile transactions accounted for 64.4% of the total e-commerce transaction value in 2019, after surpassing 50% for the first time in 2016. Considering the current acceleration in the shift of products traditionally sold offline, such as food products, food delivery services, apparels and household products, to the mobile e-commerce platform, mobile e-commerce is expected to continue its growth in the future.
Year |
2019 | 2018 | 2017 | 2016 | ||||
E-commerce transaction value (trillion Won) |
134.6 | 113.7 | 94.2 | 65.6 | ||||
Annual growth rate |
18.3% | 20.8% | 43.6% | 21.5% |
* | Source: Statistics Korea, “Online Shopping Trends.” |
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C. Cyclical Nature and Seasonality
While the commerce industry is inherently affected by fluctuations in the economy to a certain extent, their effect on the e-commerce market has been limited due to its ongoing rapid growth.
D. Domestic and Overseas Market Conditions
The mobile-centered online commerce market is expected to grow steadily due to the further growth potential of the Internet shopping population, the development of online business models by offline commerce operators and the growth of mobile commerce. New business models are expected to emerge and proliferate into new markets as diverse lifestyle services that go beyond commodities are incorporated into the area of commerce.
E. Business Overview and Competitive Strengths
Focusing on the 11st Marketplace, the Company plans to continue expanding the commerce ecosystem of 11st, and ultimately enhance its corporate value by providing diverse and innovative shopping experiences based on technology and strengthening customer benefits using synergies with other ICT businesses of the Company. In particular, the Company’s 11st business recorded an operating profit in 2019 and, as a result, established a foundation for sustainable growth. 11st has become a leader in the Korean e-commerce market through steady growth since its launch in 2008, with the largest number of unique visitors per month (at an average of 17 million unique visitors per month in 2019), by building customer trust and through effective marketing, despite its late entry into the online commerce market that was previously dominated by two players, Gmarket and Auction. 11st has also firmly established itself as a market leader and top player in the Korean mobile commerce market by rapidly responding to the shift of the e-commerce market towards mobile platforms. In addition, the Company has made efforts to gain the market’s confidence and improve customer satisfaction since the launch of 11st, resulting in recognition by certifications from KS-SQI (Service Quality Index) for twelve consecutive years, KCSI (Consumer Satisfaction Index) for eleven consecutive years and CCM (Consumer Centered Management). Based on the large user base of 11st, the Company plans to expand the product offerings of 11st based on expanded partnerships with third parties and upgrade services, thereby continuing to strengthen the unique value of 11st as a commerce portal through improvements in customer’s convenience and continuous innovation.
[Other Businesses]
OK Cashbag, operated by SK Planet, is a point-based loyalty marketing program which has grown to become a global top-tier loyalty marketing program since its inception in 1999. Customers have access to increased benefits through accumulation of loyalty reward points and partner companies use OK Cashbag as a marketing resource. As Korea’s largest loyalty mileage program, OK Cashbag maintains a leading position in the industry. The Company is continuing to develop its service in light of market conditions and customers’ needs to enhance its customers’ perception of point value and is reviewing and pursuing various plans to develop OK Cashbag into a service that goes beyond a mileage program that leverages the key competitiveness of OK Cashbag such as its platform and partnership network.
Syrup is a service that provides information about coupons and events based on time, place and occasion, thereby maximizing economic benefits for consumers, as well as a marketing tool based on consumption behavior data that enables its business partners to achieve smart, low-cost and high-efficiency marketing. In 2019, based on big data accumulated over the years, Syrup expanded its service to the area of mobile finance, which allows users to check their financial assets and provides an integrated process including recommendation for and subscription to customized financial products. The Company plans to continue developing Syrup to provide more practical benefits to its customers in their daily lives.
Incross, a material subsidiary of the Company, primarily focuses on the digital advertising media representative business, which involves establishing media strategies and executing advertising on behalf of advertisers and advertising agencies, and its “Dawin” business, Korea’s first video advertising network platform. In April 2020, Incross launched T-Deal, a CPS (cost per sales) advertising product that utilizes SK Telecom’s text messaging services. In addition, Infra Communications, a subsidiary of Incross, provides operational services for the integrated mobile application market “Onestore.”
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FLO, launched in December 2018 by Dreamus Company, a material subsidiary of the Company, is a music streaming service that recommends music and provides a user experience (“UX”) tailored to individual users. Based on AI, FLO recommends music for its users by closely analyzing such user’s music listening history and provides various playlists on a home screen that changes daily by applying an adaptive UX. As of June 30, 2020, the market share of FLO in terms of number of average unique visitors (calculated based on the total mobile monthly active users of FLO, Melon, Genie, NAVER Music, Vibe, Bugs and YouTube Music) was approximately 21.1% (Source: Korean Click). In addition to its online music service, Dreamus Company operates a music records and digital content distribution business, artist merchandise business and device business under the “Astell&Kern” brand.
2. Updates on Major Products and Services
(Unit: in millions of Won and percentages) |
||||||||||||||||||||
Business |
Major Companies | Item | Major Trademarks |
Consolidated Sales Amount |
Ratio | |||||||||||||||
Wireless |
|
SK Telecom Co., Ltd., PS&Marketing Co., Ltd., Service Ace Co., Ltd. SK O&S Co., Ltd. |
|
|
Mobile communication service, wireless data service, ICT service |
|
|
T, 5GX, baro, T Plan and others |
|
6,064,979 | 67 | % | ||||||||
Fixed-line |
|
SK Broadband Co., Ltd., SK Telink Co., Ltd. |
|
|
Fixed-line phone, high speed Internet, data and network lease service |
|
|
B tv, 00700 international call, 7mobile and others |
|
1,609,354 | 18 | % | ||||||||
Security |
ADT CAPS Co., Ltd. | |
Manned and unmanned security, information security and others |
|
|
T&CAPS, B&CAPS and others |
|
575,508 | 6 | % | ||||||||||
Commerce |
Eleven Street Co., Ltd. | E-commerce | |
11st, 11Pay, Gifticon and others |
|
375,912 | 4 | % | ||||||||||||
Other |
|
SK Planet Co., Ltd., Onestore Co., Ltd., SK M&Service Co., Ltd., Incross Co., Ltd. |
|
|
Information telecommunication, electronic finance, advertising, Internet portal service |
|
|
OK Cashbag, NATE and others |
|
427,456 | 5 | % | ||||||||
Total |
9,053,209 | 100 | % |
3. Price Trends for Major Products
[Wireless Business]
As of June 30, 2020, based on the Company’s standard monthly subscription plan, the basic service fee was Won 12,100 and the usage fee was Won 1.98 per second. Among the 4G-based “T-Plans” launched in 2018, the “Medium Plan” provides 4 GB of data and unlimited voice calls at Won 50,000 per month (including value-added tax). Among the “5GX Plans” launched in 2019, the “Slim Plan” provides 8 GB of data and unlimited voice calls at Won 55,000 per month (including value-added tax). The Company provides a variety of other subscription plans catered to subscriber demand.
[Fixed-line Business]
SK Broadband offers a variety of subscription plans catering to customer needs, and the price of its services varies accordingly. In the case of IPTV, SK Broadband launched the “B tv All” plan, which provides all of the available B tv channels excluding pay channels at Won 18,700 per month in the case of three-year subscriptions, in July 2019. Other “All”-based packaged plans include “All + Point” and “All + Movie” (Won 20,900 per month) plans.
In the case of Internet, SK Broadband launched the “Giga Premium X” series in December 2018, including the “Giga Premium X2.5” plan, which provides a maximum transmission speed of 2.5 Gbps and Giga WiFi Premium services for Won 44,000 per month in the case of three-year subscriptions. In addition, as a result of the merger with Tbroad in April 2020, Tbroad’s cable Internet plans, such as the optical LAN plan (Won 19,800 per month), have been incorporated as part of SK Broadband’s services. SK Broadband also provides a variety of other subscription plans.
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[Commerce Business]
Eleven Street acts as an intermediary in e-commerce transactions between sellers and buyers on 11st, and charges sellers sales commissions in accordance with the terms of use as consideration for execution of transactions, payment settlement and security measures. Although the amount of sales commissions vary by product category, it is generally set at market standard rates ranging from 10% to 12% of the transaction value. Such sales commission rate structure has largely remained unchanged since the launch of 11st, although the Company occasionally offers temporary promotional reductions for certain periods in order to encourage transactions.
4. Investment Status
[Wireless Business]
A. | Investment in Progress |
(Unit: in billions of Won) | ||||||||||||||||||||||||||
Business |
Classification | Investment period |
Subject of investment |
Investment effect | Expected investment amount |
Amount already invested |
Future investment |
|||||||||||||||||||
Network/Common |
|
Upgrade/ New installation |
|
Six months ended June 30, 2020 |
|
|
Network, systems and others |
|
|
Capacity increase and quality improvement; systems improvement |
|
To be determined |
1,224 | — | ||||||||||||
Total |
To be determined |
1,224 | — |
B. | Future Investment Plan |
(Unit: in billions of Won) | ||||||||||||||
Business |
Expected investment amount | Expected investment for each year | Investment effect | |||||||||||
Asset type | Amount | 2019 | 2020 | 2021 | ||||||||||
Network/Common |
|
Network, systems and others |
|
To be determined |
To be determined |
To be determined |
To be determined |
Upgrades to the existing services and expanded provision of network services including 5G | ||||||
Total |
To be determined |
To be determined |
To be determined |
To be determined |
[Fixed-line Business]
A. | Investment in Progress and Future Investment Plan |
(Unit: in 100 millions 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 |
Six months ended June 30, 2020 |
2,405 | To be determined |
Secure subscriber networks and equipment; quality and system improvements |
* | The amount of capital expenditures before the merger with Tbroad on April 30, 2020 was approximately Won 6.9 billion. |
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5. Revenues
(Unit: in millions of Won) | ||||||||||||||||||
Business |
Sales |
Item |
For the six months ended June 30, 2020 |
For the year ended December 31, 2019 |
For the year ended December 31, 2018 |
|||||||||||||
Wireless |
Services | Mobile communication | Export | 90,474 | 141,496 | 50,959 | ||||||||||||
Domestic | 5,974,505 | 12,030,919 | 12,327,938 | |||||||||||||||
Subtotal | 6,064,979 | 12,172,415 | 12,378,897 | |||||||||||||||
Fixed-line |
Services | Fixed-line, B2B data, high-speed Internet, IPTV |
Export | 69,204 | 96,962 | 104,592 | ||||||||||||
Domestic | 1,540,150 | 3,445,469 | 2,828,006 | |||||||||||||||
Subtotal | 1,609,354 | 3,542,431 | 2,932,598 | |||||||||||||||
Security |
Services | Personnel and system security, information security and others | Export | 6,996 | — | — | ||||||||||||
Domestic | 568,512 | 913,301 | 197,487 | |||||||||||||||
Subtotal | 575,508 | 913,301 | 197,487 | |||||||||||||||
Commerce |
Services | E-commerce | Export | 693 | 3,829 | 5,620 | ||||||||||||
Domestic | 375,219 | 526,660 | 612,459 | |||||||||||||||
Subtotal | 375,912 | 530,489 | 618,079 | |||||||||||||||
Other |
Services | Display and search ad., contents |
Export | 24,013 | 81,844 | 56,925 | ||||||||||||
Domestic | 403,443 | 503,222 | 689,974 | |||||||||||||||
Subtotal | 427,456 | 585,066 | 746,899 | |||||||||||||||
Total |
Export | 191,380 | 324,131 | 218,096 | ||||||||||||||
Domestic | 8,861,829 | 17,419,571 | 16,655,864 | |||||||||||||||
Total | 9,053,209 | 17,743,702 | 16,873,960 |
(Unit: in millions of Won) | ||||||||||||||||||||||||||||||||
For the six months ended June 30, 2020 |
Wireless | Fixed | Security | Commerce | Other | Sub total | Internal transaction |
After consolidation |
||||||||||||||||||||||||
Total sales |
6,841,043 | 2,118,040 | 611,115 | 382,890 | 551,769 | 10,504,857 | (1,451,648 | ) | 9,053,209 | |||||||||||||||||||||||
Internal sales |
776,064 | 508,686 | 35,607 | 6,978 | 124,313 | 1,451,648 | (1,451,648 | ) | — | |||||||||||||||||||||||
External sales |
6,064,979 | 1,609,354 | 575,508 | 375,912 | 427,456 | 9,053,209 | — | 9,053,209 | ||||||||||||||||||||||||
Depreciation and amortization |
1,397,947 | 399,878 | 115,735 | 16,924 | 30,188 | 1,960,672 | — | 1,960,672 | ||||||||||||||||||||||||
Operating profit (loss) |
524,797 | 100,325 | 54,727 | 2,486 | (20,823 | ) | 661,512 | — | 661,512 | |||||||||||||||||||||||
Finance profit (loss) |
|
(138,493 | ) | |||||||||||||||||||||||||||||
Gain from subsidiaries, investments in associates and joint ventures |
|
407,899 | ||||||||||||||||||||||||||||||
Other non-operating profit (loss) |
|
(12,652 | ) | |||||||||||||||||||||||||||||
Profit before income tax |
|
918,266 |
6. Derivative Transactions
A. | Current Swap Contract Applying Cash Flow Risk Hedge Accounting |
Currency and interest rate swap contracts under cash flow hedge accounting as of June 30, 2020 are as follows:
(Unit: in millions of Won and thousands of USD) | ||||||||||
Borrowing date |
Hedged item |
Hedged risk |
Contract type |
Financial |
Duration of contract | |||||
Jul. 20, 2007 |
Foreign currency denominated unsecured bonds | Foreign currency risk | Cross currency swap | Morgan Stanley and four other banks | Jul. 20, 2007 – Jul. 20, 2027 | |||||
Dec. 16, 2013 |
Fixed rate foreign currency denominated loan | Foreign currency risk | Cross currency swap | Deutsche Bank | Dec. 16, 2013 – Apr. 29, 2022 | |||||
Apr. 16, 2018 |
Fixed rate foreign currency denominated bonds | Foreign currency risk | Cross currency swap | The Export-Import Bank of Korea and three other banks | Apr. 16, 2018 – Apr. 16, 2023 | |||||
Mar. 4, 2020 |
Floating rate foreign currency denominated bonds | Foreign currency and interest rate risks | Cross currency interest rate swap | Citibank | Mar. 4, 2020 – Jun. 4, 2025 | |||||
Aug. 13, 2018 |
Foreign currency denominated unsecured bonds | Foreign currency risk | Cross currency swap | Citibank | Aug. 13, 2018 – Aug. 13, 2023 | |||||
Dec. 20, 2016 |
Floating rate Korean Won denominated loan | Interest rate risk | Interest rate swap | Korea Development Bank | Dec. 20, 2016 – Dec. 20, 2021 | |||||
Dec. 21, 2017 |
Floating rate Korean Won denominated loan | Interest rate risk | Interest rate swap | Korea Development Bank | Dec. 5, 2017 – Dec. 21, 2022 | |||||
Dec. 19, 2018 |
Floating rate Korean Won denominated loan | Interest rate risk | Interest rate swap | Credit Agricole CIB | Mar. 19, 2019 – Dec. 14, 2023 |
30
B. | Balance Settlement Agreements |
In 2017, SK Broadband entered into a lease agreement with GL Gasan Metro Co., Ltd. (“GL Gasan Metro”), which engages in real estate development and leasing, in order to develop an internet data center. In connection with such real estate development, GL Gasan Metro raised funds by issuing subordinated bonds to Aegis Specialized Investment Private Real Estate Investment Trust No. 136, which in turn issued beneficiary certificates to S Bisen Co., Ltd. (“S Bisen”), MSGADI Co., Ltd. (“MSGADI”) and S Gasan Co., Ltd (“S Gasan”). SK Broadband entered into a balance settlement agreement in the amount of Won 70 billion with S Bisen and MSGADI in 2017, as well as a separate balance settlement agreement with S Gasan in the amount of Won 200 billion in 2018, each in connection with such beneficiary certificates. Both agreements expire in November 2022, until which point in time SK Broadband is obligated to guarantee a certain rate of return to the counterparties.
In addition, in 2019, SK Broadband entered into a lease agreement with Hana Alternative Investment Specialized Investment Private Real Estate Investment Trust No. 62 (“Hana REIT”), which engages in real estate development and leasing, in order to develop an internet data center. In connection with such real estate development, Hana REIT raised funds by issuing beneficiary certificates to S Gumi Co., Ltd. and S Ori Co., Ltd. (together, the “S Parties”). SK Broadband entered into a balance settlement agreement in the amount of Won 64 billion with the S Parties in connection with such beneficiary certificates. Such agreement expires in September 2024, until which point in time SK Broadband is obligated to guarantee a certain rate of return to the S Parties.
31
C. | Treatment of Derivative Instruments on the Balance Sheet |
As of June 30, 2020, fair values of derivative instruments held by the Company are included in the consolidated financial statements as current derivate financial assets, derivative financial assets and derivative financial liabilities, which are part of its current assets, non-current assets and non-current liabilities, respectively, as follows:
(Unit: in millions of Won and thousands of USD) | ||||||||||||||
Classification |
Hedged item |
Fair value | ||||||||||||
Cash flow hedge | Trading purposes | Total | ||||||||||||
Cross currency swap (non-current assets) |
Fixed rate foreign currency denominated bonds (face value of USD 400,000) | 86,430 | — | 86,430 | ||||||||||
Fixed rate foreign currency denominated bonds (face value of USD 500,000) | 87,389 | — | 87,389 | |||||||||||
Fixed rate foreign currency denominated loan (face value of USD 28,732) | 1,849 | — | 1,849 | |||||||||||
Fixed rate foreign currency denominated bonds (face value of USD 300,000) | 36,640 | — | 36,640 | |||||||||||
Balance settlement agreements |
Others | — | 5,924 | 5,924 | ||||||||||
Total non-current derivative financial assets |
218,232 | |||||||||||||
Put option contracts (current assets) |
Others | — | 14,696 | 14,696 | ||||||||||
Total current derivative financial assets |
14,696 | |||||||||||||
Interest rate swap and cross currency interest rate swap (non-current liabilities) |
Floating rate foreign currency denominated bonds (face value of USD 300,000) | (15,090 | ) | — | (15,090 | ) | ||||||||
Floating rate Korean Won denominated loan (face value of 21,437) | (151 | ) | — | (151 | ) | |||||||||
Floating rate Korean Won denominated loan (face value of 34,375) | (546 | ) | — | (546 | ) | |||||||||
Floating rate Korean Won denominated loan (face value of 46,875) | (855 | ) | — | (855 | ) | |||||||||
Total derivative financial liabilities |
(16,642 | ) |
7. Major Contracts
[SK Telecom]
None.
[SK Broadband]
(Unit: in millions of Won) | ||||||||
Counterparty |
Contract Contents |
Date of Contract |
Contract Amount |
Notes | ||||
SK D&D Co., Ltd. | Sale of land and building in Seocho-dong | May 16, 2018 | 40,306 | Sale of idle assets to improve financial structure | ||||
Sejin Jin (Individual) | Sale of Deogyang Bunyang Guksa | October 10, 2019 | 788 | Sale of idle assets for non-business use |
32
8. R&D Investments
Set forth below are the Company’s R&D expenditures.
(Unit: in millions of Won except percentages) | ||||||||||||||||||
Category |
For the six months ended June 30, 2020 |
For the year ended December 31, 2019 |
For the year ended December 31, 2018 |
Remarks | ||||||||||||||
Raw material |
99 | 633 | 760 | — | ||||||||||||||
Labor |
86,439 | 125,248 | 131,792 | — | ||||||||||||||
Depreciation |
88,648 | 161,655 | 155,093 | — | ||||||||||||||
Commissioned service |
23,296 | 65,794 | 78,323 | — | ||||||||||||||
Others |
19,573 | 52,167 | 47,511 | — | ||||||||||||||
Total R&D costs |
218,055 | 405,497 | 413,480 | — | ||||||||||||||
Accounting |
Sales and administrative expenses | 215,205 | 391,327 | 387,675 | — | |||||||||||||
Development expenses (Intangible assets) | 2,850 | 14,170 | 25,805 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
R&D cost / sales amount ratio |
2.41 | % | 2.29 | % | 2.45 | % | — | |||||||||||
|
|
|
|
|
|
|
|
9. Other information relating to investment decisions
A. | Trademark Policies |
The Company manages its corporate brand and other product brands in a comprehensive way to protect and increase their value. The Company operates an intranet system called “Comm.ON” in order to implement consistent communication with consumers across various areas including branding, design, marketing and public relations, and systematically manages the development, registration and licensing of brands through such system.
B. | Business-related Intellectual Property |
[SK Telecom]
As of June 30, 2020, the Company held 2,968 Korean-registered patents and 1,197 foreign-registered patents. The Company holds 706 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 June 30, 2020, SK Broadband held 354 Korean-registered patents and 142 foreign-registered patents (including those held jointly with other companies). It also holds 319 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “B” representing its brand. The designed alphabet “B” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to continual change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.
[SK Planet]
As of June 30, 2020, SK Planet held 1,613 registered patents, 91 registered design marks, 780 registered trademarks and 4 copyrights (in each case including those held jointly with other companies) in Korea. It also holds various other intellectual property rights in other countries, including 266 U.S.-registered patents, 131 Chinese-registered patents, 79 Japanese-registered patents, 89 E.U.-registered patents (in each case including those held jointly with other companies) and 168 foreign registered trademarks.
33
[Eleven Street]
As of June 30, 2020, Eleven Street held 89 registered patents, 12 registered design marks, 589 registered trademarks and 5 copyrights (in each case including those held jointly with other companies) in Korea. It also holds various other intellectual property rights in other countries, including 30 U.S.-registered patents (including those held jointly with other companies).
C. | Business-related Pollutants and Environmental Protection |
[SK Telecom]
The Company does not directly engage in any manufacturing and therefore does not undertake any industrial processes that emit pollutants into the air or industrial processes in which hazardous materials are used.
[SK Broadband]
SK Broadband does not directly engage in any manufacturing processes that emit environmental pollutants, and more than 99% of its greenhouse gas emissions is indirect emissions from its use of external electricity. SK Broadband was selected as a business subject to allocation of emission permits as part of Korea’s greenhouse gas emissions trading scheme that commenced in 2015, and it actively fulfills its obligations and consistently achieves the targets set by the government. In addition, SK Broadband continues to invest in environment-friendly facilities for its data centers and improve the stability and efficiency of its services.
34
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 June 30, 2020, December 31, 2019 and December 31, 2018 and for the six months ended June 30, 2020 and 2019 and the years ended December 31, 2019 and 2018. The Company’s unaudited consolidated financial statements as of June 30, 2020 and December 31, 2019 and for the six months ended June 30, 2020 and 2019, which are prepared in accordance with K-IFRS, are attached hereto.
(Unit: in millions of Won except number of companies) | ||||||||||||
As of June 30, 2020 |
As of December 31, 2019 |
As of December 31, 2018 |
||||||||||
Assets |
||||||||||||
Current Assets |
8,261,328 | 8,102,294 | 7,958,839 | |||||||||
• Cash and Cash Equivalents |
1,496,903 | 1,270,824 | 1,506,699 | |||||||||
• Accounts Receivable – Trade, net |
2,244,884 | 2,230,979 | 2,008,640 | |||||||||
• Accounts Receivable – Other, net |
837,373 | 905,436 | 937,837 | |||||||||
• Others |
3,682,168 | 3,695,055 | 3,505,663 | |||||||||
Non-Current Assets |
37,695,822 | 36,509,326 | 34,410,272 | |||||||||
• Long-Term Investment Securities |
1,109,269 | 857,215 | 664,726 | |||||||||
• Investments in Associates and Joint Ventures |
13,874,353 | 13,385,264 | 12,811,771 | |||||||||
• Property and Equipment, net |
12,544,240 | 12,334,280 | 10,718,354 | |||||||||
• Intangible Assets, net |
4,968,547 | 4,866,092 | 5,513,510 | |||||||||
• Goodwill |
3,112,809 | 2,949,530 | 2,938,563 | |||||||||
• Others |
2,086,604 | 2,116,945 | 1,763,348 | |||||||||
|
|
|
|
|
|
|||||||
Total Assets |
45,957,150 | 44,611,620 | 42,369,111 | |||||||||
|
|
|
|
|
|
|||||||
Liabilities |
||||||||||||
Current Liabilities |
7,435,399 | 7,787,722 | 6,847,557 | |||||||||
Non-Current Liabilities |
14,505,028 | 14,000,362 | 13,172,304 | |||||||||
|
|
|
|
|
|
|||||||
Total Liabilities |
21,940,427 | 21,788,084 | 20,019,861 | |||||||||
|
|
|
|
|
|
|||||||
Equity |
||||||||||||
Equity Attributable to Owners of the Parent Company |
23,496,662 | 22,956,829 | 22,470,822 | |||||||||
Share Capital |
44,639 | 44,639 | 44,639 | |||||||||
Capital Surplus (Deficit) and Other Capital Adjustments |
1,218,524 | 1,006,481 | 655,084 | |||||||||
Retained Earnings |
22,284,645 | 22,235,285 | 22,144,541 | |||||||||
Reserves |
(51,146 | ) | (329,576 | ) | (373,442 | ) | ||||||
Non-controlling Interests |
520,061 | (133,293 | ) | (121,572 | ) | |||||||
Total Equity |
24,016,723 | 22,823,536 | 22,349,250 | |||||||||
|
|
|
|
|
|
|||||||
Total Liabilities and Equity |
45,957,150 | 44,611,620 | 42,369,111 | |||||||||
|
|
|
|
|
|
|||||||
Number of Companies Consolidated |
49 | 48 | 44 |
(Unit: in millions of Won except per share data) | ||||||||||||||||
For the six months ended June 30, 2020 |
For the six months ended June 30, 2019 |
For the year ended December 31, 2019 |
For the year ended December 31, 2018 |
|||||||||||||
Operating Revenue |
9,053,209 | 8,771,935 | 17,743,702 | 16,873,960 | ||||||||||||
Operating Profit |
661,512 | 645,402 | 1,109,980 | 1,201,760 | ||||||||||||
Profit Before Income Tax |
918,266 | 821,027 | 1,162,655 | 3,975,966 | ||||||||||||
Profit for the Period |
739,001 | 632,687 | 861,942 | 3,131,988 | ||||||||||||
Profit for the Period Attributable to Owners of the Parent Company |
736,650 | 642,586 | 889,907 | 3,127,887 | ||||||||||||
Profit for the Period Attributable to Non-controlling Interests |
2,351 | (9,899 | ) | (27,965 | ) | 4,101 | ||||||||||
Basic and Diluted Earnings Per Share (Won) |
9,971 | 8,838 | 12,144 | 44,066 |
35
B. | Summary Financial Information (Separate) |
Below is the summary separate financial information of the Company as of June 30, 2020, December 31, 2019 and December 31, 2018 and for the six months ended June 30, 2020 and 2019 and the years ended December 31, 2019 and 2018. The Company’s unaudited separate financial statements as of June 30, 2020 and December 31, 2019 and for the six months ended June 30, 2020 and 2019, which are prepared in accordance with K-IFRS, are attached hereto.
(Unit: in millions of Won) | ||||||||||||
As of June 30, 2020 |
As of December 31, 2019 |
As of December 31, 2018 |
||||||||||
Assets |
||||||||||||
Current Assets |
4,754,972 | 5,011,363 | 4,679,378 | |||||||||
• Cash and Cash Equivalents |
379,055 | 497,282 | 877,823 | |||||||||
• Accounts Receivable – Trade, net |
1,503,023 | 1,479,971 | 1,354,260 | |||||||||
• Accounts Receivable – Other, net |
400,599 | 507,680 | 518,451 | |||||||||
• Others |
2,472,295 | 2,526,430 | 1,928,844 | |||||||||
Non-Current Assets |
25,983,780 | 25,828,004 | 24,168,645 | |||||||||
• Long-Term Investment Securities |
743,827 | 510,633 | 410,672 | |||||||||
• Investments in Subsidiaries and Associates |
10,800,207 | 10,578,158 | 10,188,914 | |||||||||
• Property and Equipment, net |
8,424,982 | 8,264,888 | 6,943,490 | |||||||||
• Intangible Assets, net |
3,175,727 | 3,461,152 | 4,010,864 | |||||||||
• Goodwill |
1,306,236 | 1,306,236 | 1,306,236 | |||||||||
• Others |
1,532,801 | 1,706,937 | 1,308,469 | |||||||||
|
|
|
|
|
|
|||||||
Total Assets |
30,738,752 | 30,839,367 | 28,848,023 | |||||||||
|
|
|
|
|
|
|||||||
Liabilities |
||||||||||||
Current Liabilities |
4,560,494 | 5,057,478 | 4,178,068 | |||||||||
Non-Current Liabilities |
8,705,316 | 8,392,150 | 7,782,468 | |||||||||
|
|
|
|
|
|
|||||||
Total Liabilities |
13,265,810 | 13,449,628 | 11,960,536 | |||||||||
|
|
|
|
|
|
|||||||
Equity |
||||||||||||
Share Capital |
44,639 | 44,639 | 44,639 | |||||||||
Capital Surplus and Other Capital Adjustments |
715,722 | 715,619 | 415,324 | |||||||||
Retained Earnings |
16,576,694 | 16,678,787 | 16,467,789 | |||||||||
Reserves |
135,887 | (49,306 | ) | (40,265 | ) | |||||||
Total Equity |
17,472,942 | 17,389,739 | 16,887,487 | |||||||||
|
|
|
|
|
|
|||||||
Total Liabilities and Equity |
30,738,752 | 30,839,367 | 28,848,023 | |||||||||
|
|
|
|
|
|
(Unit: in millions of Won except per share data) | ||||||||||||||||
For the six months ended June 30, 2020 |
For the six months ended June 30, 2019 |
For the year ended December 31, 2019 |
For the year ended December 31, 2018 |
|||||||||||||
Operating Revenue |
5,862,677 | 5,659,925 | 11,416,215 | 11,705,639 | ||||||||||||
Operating Profit |
528,204 | 580,960 | 950,109 | 1,307,494 | ||||||||||||
Profit Before Income Tax |
708,545 | 979,210 | 1,185,490 | 1,221,244 | ||||||||||||
Profit for the Period |
574,742 | 806,007 | 980,338 | 933,902 | ||||||||||||
Basic and Diluted Earnings Per Share (Won) |
7,758 | 11,112 | 13,399 | 13,000 |
36
2. Other Matters Related to Financial Information
A. | Restatement of the Financial Statements |
Not applicable.
B. | Loss Allowance |
(1) | Loss Allowance of Trade and Other Receivables |
(Unit: in millions of Won) | ||||||||||||
For the six months ended June 30, 2020 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade |
2,531,534 | 269,538 | 11 | % | ||||||||
Loans |
161,096 | 48,529 | 30 | % | ||||||||
Accounts receivable – other |
1,136,411 | 46,668 | 4 | % | ||||||||
Accrued income |
4,392 | 165 | 4 | % | ||||||||
Guarantee deposits |
302,422 | 300 | 0 | % | ||||||||
|
|
|
|
|
|
|||||||
Total |
4,135,855 | 365,200 | 9 | % | ||||||||
|
|
|
|
|
|
|||||||
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2019 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade |
2,497,396 | 249,501 | 10 | % | ||||||||
Loans |
147,937 | 48,054 | 32 | % | ||||||||
Accounts receivable – other |
1,298,477 | 48,379 | 4 | % | ||||||||
Accrued income |
3,977 | 166 | 4 | % | ||||||||
Guarantee deposits |
310,074 | 299 | 0 | % | ||||||||
|
|
|
|
|
|
|||||||
Total |
4,257,861 | 346,399 | 8 | % | ||||||||
|
|
|
|
|
|
|||||||
(Unit: in millions of Won) | ||||||||||||
For the year ended December 31, 2018 | ||||||||||||
Gross amount | Loss Allowance | Percentage | ||||||||||
Accounts receivable – trade |
2,280,090 | 260,157 | 11 | % | ||||||||
Loans |
135,503 | 47,375 | 35 | % | ||||||||
Accounts receivable – other |
1,280,236 | 68,346 | 5 | % | ||||||||
Accrued income |
6,232 | 166 | 3 | % | ||||||||
Guarantee deposits |
315,854 | — | — | |||||||||
|
|
|
|
|
|
|||||||
Total |
4,017,915 | 376,045 | 9 | % | ||||||||
|
|
|
|
|
|
(2) | Movements in Loss Allowance of Trade and Other Receivables |
(Unit: in millions of Won) | ||||||||||||
For the six months ended June 30, 2020 |
For the year ended December 31, 2019 |
For the year ended December 31, 2018 |
||||||||||
Beginning balance |
346,399 | 376,045 | 362,171 | |||||||||
Effect of change in accounting policy |
— | — | 13,049 | |||||||||
Increase of loss allowance |
32,406 | 28,841 | 45,051 | |||||||||
Reversal of loss allowance |
— | — | — | |||||||||
Write-offs |
(21,770 | ) | (46,616 | ) | (65,762 | ) | ||||||
Other |
6,286 | 17,650 | 21,536 | |||||||||
|
|
|
|
|
|
|||||||
Ending balance |
365,200 | 346,399 | 376,045 | |||||||||
|
|
|
|
|
|
37
(3) | Policies for Loss Allowance |
The Company establishes loss allowances based on the likelihood of recoverability of trade and other receivables based on their aging at the end of the period and past customer default experience for the past three years. With respect to trade receivables relating to wireless telecommunications services, the Company considers the likelihood of recovery based on past customer default experience and the length of default in connection with the type of default (e.g., whether the customer’s service has been terminated or is continued). For such trade receivables that have been overdue for more than two years after the customer’s service has been terminated, the Company records an allowance of 100% of such receivables. For such trade receivables that have been overdue for less than two years after the customer’s service has been terminated or relates to a customer that is continuing his service, the Company records an allowance of a certain percentage of such receivable. Consistent with customary practice, the Company writes off trade and other receivables for which the prescription period has passed or that are determined to be impossible or economically too costly to collect, including receivables that are less than Won 200,000 and more than six months overdue and receivables that have been determined to be the subject of identity theft.
(4) | Aging of Accounts Receivable |
(Unit: in millions of Won) | ||||||||||||||||||||
As of June 30, 2020 | ||||||||||||||||||||
Six months or less |
From six months to one year |
From one year to three years |
More than three years |
Total | ||||||||||||||||
Accounts receivable – general |
2,248,565 | 69,472 | 137,155 | 76,342 | 2,531,533 | |||||||||||||||
Percentage |
89 | % | 3 | % | 5 | % | 3 | % | 100 | % |
C. | Inventories |
(1) | Detailed Categories of Inventories |
(Unit: in millions of Won) | ||||||||||||
Account Category |
For the six months ended June 30, 2020 |
For the year ended December 31, 2019 |
For the year ended December 31, 2018 |
|||||||||
Merchandise |
192,269 | 147,928 | 259,524 | |||||||||
Goods in transit |
— | — | — | |||||||||
Other inventories |
12,080 | 14,954 | 28,529 | |||||||||
Total |
204,349 | 162,882 | 288,053 | |||||||||
Percentage of inventories to total assets |
0.44 | % | 0.37 | % | 0.68 | % | ||||||
Inventory turnover |
6.73 | 7.79 | 6.41 |
(2) | Reporting of Inventories |
The Company holds handsets, ICT equipment for offline sales, etc. in inventory. The Company conducts physical due diligence of its inventories with its auditors at the end of each year.
D. | Fair Value Measurement |
See note 2 of the notes to the Company’s unaudited consolidated financial statements as of June 30, 2020 and December 31, 2019 and for the six months ended June 30, 2020 and 2019, for more information.
38
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 61-2 |
Dec. 27, 2011 | Dec. 27, 2021 | 190,000 | Dec. 19, 2011 | Hana Financial Investment Co., Ltd. |
Maintenance of Financial Ratio |
Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens |
Key Term | The total amount of secured debt not to exceed 50% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets |
Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure |
Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate |
Compliance Status | Submitted on April 20, 2020 |
Name |
Issue Date | Maturity Date | Principal Amount (millions of Won) |
Date of Fiscal Agency Agreement |
Fiscal Agent | |||||||
Unsecured Bond – Series 62-2 |
Aug. 28, 2012 | Aug. 28, 2022 | 140,000 | Aug. 22, 2012 | Meritz Securities Co., Ltd. | |||||||
Unsecured Bond – Series 62-3 |
Aug. 28, 2012 | Aug. 28, 2032 | 90,000 | Aug. 22, 2012 | Meritz Securities Co., Ltd. |
Maintenance of Financial Ratio |
Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens |
Key Term | The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets |
Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure |
Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate |
Compliance Status | Submitted on April 20, 2020 |
39
Name |
Issue Date | Maturity Date | Principal Amount (millions of Won) |
Date of Fiscal Agency Agreement |
Fiscal Agent | |||||||
Unsecured Bond – Series 63-1 |
April 23, 2013 | April 23, 2023 | 230,000 | April 17, 2013 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 63-2 |
April 23, 2013 | April 23, 2033 | 130,000 | April 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 65-2 |
Oct. 28, 2014 | Oct. 28, 2021 | 150,000 | Oct. 16, 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 66-1 |
Feb. 26, 2015 | Feb. 26, 2022 | 100,000 | Feb. 11, 2015 | 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 69-2 |
March 4, 2016 | March 4, 2021 | 100,000 | Feb. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 69-3 |
March 4, 2016 | March 4, 2026 | 90,000 | Feb. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 69-4 |
March 4, 2016 | March 4, 2036 | 80,000 | Feb. 22, 2016 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio |
Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens |
Key Term | The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets |
Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure |
Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate |
Compliance Status | Submitted on April 20, 2020 |
Name |
Issue Date | Maturity Date | Principal Amount (millions of Won) |
Date of Fiscal Agency Agreement |
Fiscal Agent | |||||||
Unsecured Bond – Series 70-2 |
June 3, 2016 | June 3, 2021 | 50,000 | May 24, 2016 | Korea Securities Finance Corp. | |||||||
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 71-1 |
April 25, 2017 | April 25, 2020 | 60,000 | April 13, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 71-2 |
April 25, 2017 | April 25, 2022 | 120,000 | April 13, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 71-3 |
April 25, 2017 | April 25, 2027 | 100,000 | April 13, 2017 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 71-4 |
April 25, 2017 | April 25, 2032 | 90,000 | April 13, 2017 | Korea Securities Finance Corp. |
40
Maintenance of Financial Ratio |
Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens |
Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets |
Key Term | Disposal of assets per fiscal year not to exceed Won 5 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure |
Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate |
Compliance Status | Submitted on April 20, 2020 |
Name |
Issue Date | Maturity Date | Principal Amount (millions of Won) |
Date of Fiscal Agency Agreement |
Fiscal Agent | |||||||
Unsecured Bond – Series 72-1 | Nov. 10, 2017 | Nov. 10, 2020 | 100,000 | Oct. 31, 2017 | Korea Securities Finance Corp. | |||||||
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 73-1 | Feb. 20, 2018 | Feb. 20, 2021 | 110,000 | Feb. 6. 2018 | 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 74-1 | Sept. 17, 2018 | Sept. 17, 2021 | 100,000 | Sept. 5, 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 75-1 | March 6, 2019 | March 6, 2022 | 180,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 75-2 | March 6, 2019 | March 6, 2024 | 120,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 75-3 | March 6, 2019 | March 6, 2029 | 50,000 | Feb. 21, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 75-4 | March 6, 2019 | March 6, 2039 | 50,000 | Feb. 21, 2019 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 50% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction of cross-shareholding Exclusion from corporate group | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 20, 2020 |
41
Name |
Issue Date | Maturity Date | Principal Amount (millions of Won) |
Date of Fiscal Agency Agreement |
Fiscal Agent | |||||||
Unsecured Bond – Series 76-1 | July 29, 2019 | July 29, 2022 | 120,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 76-2 | July 29, 2019 | July 29, 2024 | 60,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 76-3 | July 29, 2019 | July 29, 2029 | 120,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 76-4 | July 29, 2019 | July 29, 2039 | 50,000 | July 17, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 76-5 | July 29, 2019 | July 29, 2049 | 50,000 | July 17, 2019 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 300% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 50% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction of cross-shareholding Exclusion from corporate group | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 20, 2020 |
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 | 90,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 77-2 | Oct. 22, 2019 | Oct. 22, 2024 | 50,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 77-3 | Oct. 22, 2019 | Oct. 22, 2029 | 30,000 | Oct. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 77-4 | Oct. 22, 2019 | Oct. 22, 2039 | 30,000 | 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 April 20, 2020 |
42
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 | To be submitted after the release of the 2020 business report |
[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 41 | July 15, 2015 | July 15, 2020 | 140,000 | July 3, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 42 | Oct. 6, 2015 | Oct. 6, 2020 | 130,000 | Sept. 22, 2015 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 43-2 | Oct. 5, 2016 | Oct. 5, 2021 | 120,000 | Sept. 22, 2016 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 44 | Feb. 3, 2017 | Feb. 3, 2022 | 150,000 | Jan. 20, 2017 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed Won 2 trillion | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | — | ||
Compliance Status | — | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 27, 2020 |
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* | Unsecured Bond – Series 41 has been repaid after the reporting period. |
Name |
Issue Date | Maturity Date | Principal Amount (millions of Won) |
Date of Fiscal Agency Agreement |
Fiscal Agent | |||||||
Unsecured Bond – Series 45-1 | Oct. 11, 2017 | Oct. 11, 2020 | 30,000 | Sept. 20, 2017 | Korea Securities Finance Corp. | |||||||
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 April 27, 2020 |
Name |
Issue Date | Maturity Date | Principal Amount (millions of Won) |
Date of Fiscal Agency Agreement |
Fiscal Agent | |||||||
Unsecured Bond – Series 46-1 | Feb. 1, 2018 | Feb. 1, 2021 | 70,000 | Jan. 19, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 46-2 | Feb. 1, 2018 | Feb. 1, 2023 | 80,000 | Jan. 19, 2018 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 47-1 | March 26, 2019 | March 26, 2022 | 50,000 | March 14, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 47-2 | March 26, 2019 | March 26, 2024 | 160,000 | March 14, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 48-1 | Sept. 24, 2019 | Sept. 23, 2022 | 80,000 | Sept. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 48-2 | Sept. 24, 2019 | Sept. 24, 2024 | 100,000 | Sept. 10, 2019 | Korea Securities Finance Corp. | |||||||
Unsecured Bond – Series 48-3 | Sept. 24, 2019 | Sept. 23, 2026 | 50,000 | Sept. 10, 2019 | Korea Securities Finance Corp. |
Maintenance of Financial Ratio | Key Term | Debt ratio no greater than 400% | ||
Compliance Status | Compliant | |||
Restriction on Liens | Key Term | The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year | ||
Compliance Status | Compliant | |||
Restriction on Disposition of Assets | Key Term | Disposal of assets per fiscal year not to exceed 70% of total assets | ||
Compliance Status | Compliant | |||
Restriction on Changes of Ownership Structure | Key Term | Restriction on changes of ownership structure | ||
Compliance Status | Compliant | |||
Submission of Compliance Certificate | Compliance Status | Submitted on April 27, 2020 |
44
* | Beginning with Series 47, the basis for the maintenance of financial ratio has changed to a consolidated basis. |
Name |
Issue Date | Maturity Date | Principal Amount (millions of Won) |
Date of Fiscal Agency Agreement |
Fiscal Agent | |||||||
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. |
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 | To be submitted after the finalization of the financial statements for the first half of 2020 |
IV. | MANAGEMENT’S DISCUSSION AND ANALYSIS |
Omitted in quarterly and semi-annual reports in accordance with Korean disclosure rules.
V. | AUDITOR’S OPINION |
1. Independent Auditors and Audit Opinions
A. | Independent Auditor and Audit Opinion (Consolidated) |
Period |
Independent auditor |
Audit opinion | Emphasis of Matter |
Critical Audit | ||||
Six months ended June 30, 2020 | KPMG Samjong Accounting Corp. | — | — | — | ||||
Year ended December 31, 2019 | KPMG Samjong Accounting Corp. | Unqualified | N/A | Revenue recognition; assessment of impairment of cash-generating unit of security services | ||||
Year ended December 31, 2018 | KPMG Samjong Accounting Corp. | Unqualified | N/A | Revenue recognition; recognition of incremental costs of obtaining contracts |
45
B. | Audit Services Contracts with Independent Auditors |
(Unit: in millions of Won except number of hours) | ||||||||||||||||||||
Audit Contract | Actual Performance | |||||||||||||||||||
Period |
Auditors |
Contents |
Fee | Total number of hours |
Fee | Total number of hours |
||||||||||||||
Six months ended June 30, 2020 | KPMG Samjong Accounting Corp. | Quarterly review | 2,360 | 23,600 | 650 | 5,525 | ||||||||||||||
Separate financial statements audit | ||||||||||||||||||||
Consolidated financial statements audit | ||||||||||||||||||||
English financial statements review and other audit task | ||||||||||||||||||||
Internal accounting system audit | ||||||||||||||||||||
Year ended December 31, 2019 | KPMG Samjong Accounting Corp. | Quarterly review | 1,860 | 23,040 | 1,860 | 23,040 | ||||||||||||||
Separate financial statements audit | ||||||||||||||||||||
Consolidated financial statements audit | ||||||||||||||||||||
English financial statements review and other audit task | ||||||||||||||||||||
Year ended December 31, 2018 | KPMG Samjong Accounting Corp. | Semi-annual review | 1,700 | 22,058 | 1,700 | 22,058 | ||||||||||||||
Quarterly review | ||||||||||||||||||||
Separate financial statements audit | ||||||||||||||||||||
Consolidated financial statements audit | ||||||||||||||||||||
English financial statements review and other audit task |
C. | Non-Audit Services Contracts with Independent Auditors |
(Unit: in millions of Won) | ||||||||
Period |
Contract date |
Service provided |
Service duration |
Fee | ||||
Six months ended June 30, 2020 |
— | — | — | — | ||||
Year ended December 31, 2019 |
February 8, 2019 | Consulting for publication of 2018 integrated annual report | February 8, 2019 – June 30, 2019 | 120 | ||||
April 26, 2019 | Confirmation of financial information | April 26, 2019 – April 29, 2019 | 3 | |||||
Year ended December 31, 2018 |
September 20, 2018 | Confirmation of financial information | September 20, 2018 – September 21, 2018 | 2 | ||||
March 5, 2018 | Issuance of comfort letters | March 5, 2018 – April 26, 2018 | 110 |
46
D. | Discussions between Audit Committee and Independent Auditors |
Date |
Attendance |
Method | Key Matters Discussed | |||
February 3, 2020 | Audit Committee: 4 Independent Auditor: 2 |
Written | Report on the progress of internal accounting management system audit | |||
February 19, 2020 | Audit Committee: 4 Independent Auditor: 2 |
In-person | Report on critical audit matters and results of audit of financial statements; report on the results of internal accounting management system audit | |||
April 22, 2020 | Audit Committee: 4 Independent Auditor: 1 |
In-person | Report on 2019 Public Company Accounting Oversight Board audit results; report on 2020 audit plan and selection of critical audit matters | |||
June 10, 2020 | Audit Committee: 4 Independent Auditor: 3 |
In-person | Report on evaluation of 2019 independent auditor services | |||
July 20, 2020 | Audit Committee: 4 Independent Auditor: 1 |
In-person | Report on independent auditor’s 2020 semi-annual review |
VI. | CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS |
1. Board of Directors
A. | Overview of the Composition of the Board of Directors |
The Board of Directors is composed of eight members: five independent directors, two inside directors and one non-executive director. Within the Board of Directors, there are five committees: Independent Director Nomination Committee, Audit Committee, Compensation Committee, CapEx Review Committee and Corporate Citizenship Committee.
(As of June 30, 2020) | ||||||
Total number
of |
Inside directors |
Non-executive director |
Independent directors | |||
8 | Jung Ho Park, Young Sang Ryu | Dae Sik Cho | Yong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn, Youngmin Yoon, Junmo Kim |
At the 36th General Meeting of Shareholders held on March 26, 2020, Yong-Hak Kim was newly elected as an independent director and a member of the audit committee and Junmo Kim was newly elected as an independent director.
Yong-Hak Kim, as a highly respected sociologist with knowledge and virtue that can contribute to the Company’s proactive pursuit of social value, was elected as the chairman of the Board of Directors by the directors pursuant to Article 4(2) of the regulations of the Board of Directors.
47
B. | Significant Activities of the Board of Directors |
Meeting |
Date |
Agenda |
Approval | |||
431st (the 1st meeting of 2020) |
January 16, 2020 | • Management plan for 2020 |
Approved as proposed | |||
432nd (the 2nd meeting of 2020) |
February 6, 2020 | • Financial statements as of and for the year ended December 31, 2019 |
Approved as proposed | |||
• Delegation of funding through long-term borrowings |
Approved as proposed | |||||
• Annual business report as of and for the year ended December 31, 2019 |
Approved as proposed | |||||
• Participation in capital increase by SK’s investment company in Southeast Asia |
Approved as proposed | |||||
• Donation to the Korean Fencing Association |
Approved as proposed | |||||
• Donation for the creation of social values |
Approved as proposed | |||||
• Report of internal accounting management |
— | |||||
• Report for the period after the fourth quarter of 2019 |
— | |||||
433rd (the 3rd meeting of 2020) |
February 20, 2020 | • Plan for the 36th General Meeting of Shareholders |
Approved as proposed | |||
• Results on internal accounting management |
— | |||||
434th (the 4th meeting of 2020) |
March 26, 2020 | • Election of the chairman of the Board of Directors |
Approved as proposed | |||
• Election of the representative director |
Approved as proposed | |||||
• Election of committee members |
Approved as proposed | |||||
• Transactions with SK Holdings in the second quarter of 2020 |
Approved as proposed | |||||
435th (the 5th meeting of 2020) |
April 23, 2020 | • Payment of operating costs of SUPEX Council in 2020 |
Approved as proposed | |||
• Report for the period after the first quarter of 2020 |
— | |||||
436th (the 6th meeting of 2020) |
May 28, 2020 | • Participation in capital increase of SK Telecom TMT Investment Corp., an overseas subsidiary, for investment in NANO-X IMAGING Ltd. |
Approved as proposed | |||
• Participation in capital increase of ID Quantique SA, an overseas subsidiary |
Approved as proposed | |||||
437th (the 7th meeting of 2020) |
June 25, 2020 | • Transactions with SK Holdings in the third quarter of 2020 |
Approved as proposed | |||
438th (the 8th meeting of 2020) |
July 21, 2020 | • Interim dividends |
Approved as proposed | |||
• Report on settlement of accounts for first half of 2020 |
— | |||||
• Report for the period after the second quarter of 2020 |
— |
* | The line items that do not show approval are for reporting purposes only. |
C. | Committees within Board of Directors |
(1) | Committee structure (as of June 30, 2020) |
(a) | Independent Director Nomination Committee |
Total number |
Members |
Task | ||||
Inside Directors |
Independent Directors | |||||
3 |
Jung Ho Park | Seok-Dong Kim, Jung Ho Ahn | Nomination of independent directors |
* | Under the Korean Commercial Code, a majority of the members of the Independent Director Nomination Committee must be independent directors. |
(b) | Compensation Review Committee |
Total number |
Members | Task | ||||
Inside Directors | Independent Directors | |||||
3 |
— | Yong-Hak Kim, Seok-Dong Kim, Junmo Kim | Review CEO remuneration system and amount |
* | The Compensation Review Committee is a committee established by the resolution of the Board of Directors. |
(c) | Capex Review Committee |
Total number |
Members | Task | ||||
Inside Directors | Independent Directors | |||||
6 |
Young Sang Ryu | Yong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn, Youngmin Yoon, Junmo Kim | Review major investment plans and changes thereto |
* | The Capex Review Committee is a committee established by the resolution of the Board of Directors. |
48
(d) | Corporate Citizenship Committee |
Total number |
Members | Task | ||||
Inside Directors | Independent Directors | |||||
3 | — | Jung Ho Ahn, Youngmin Yoon, Junmo Kim | Review guidelines on corporate social responsibility (“CSR”) programs, etc. |
* | The Corporate Citizenship Committee is a committee established by the resolution of the Board of Directors. |
(e) | Audit Committee |
Total number |
Members | Task | ||||
Inside Directors | Independent Directors | |||||
4 | — | Seok-Dong Kim, Yong-Hak Kim, Youngmin Yoon, Jung Ho Ahn | Review financial statements and supervise independent audit process, etc. |
* | The Audit Committee is a committee established under the provisions of the Articles of Incorporation and the Korean Commercial Code. |
2. Audit System
The Company’s Audit Committee consists of four independent directors, Seok-Dong Kim (chairman of the Audit Committee and financial and accounting expert), Yong-Hak Kim, Youngmin Yoon and Jung Ho Ahn.
Major activities of the Audit Committee as of June 30, 2020 are set forth below.
Meeting |
Date |
Agenda |
Approval | |||
The 1st meeting of 2020 |
February 5, 2020 | • Evaluation of internal accounting management system operation |
— | |||
• Review of business and audit results for 2019 and business and audit plans for 2020 |
— | |||||
• Evaluation of internal monitoring controls based on the opinion of the members of the Audit Committee |
Approved as proposed | |||||
The 2nd meeting of 2020 |
February 19, 2020 | • Report on results of audit of fiscal year 2019 |
— | |||
• Report on audit of 2019 internal accounting management system |
— | |||||
• Evaluation of internal accounting management system operation |
Approved as proposed | |||||
• Report on contract for customer appreciation gifts to fixed-line telephone customers for 2020 |
Approved as proposed | |||||
The 3rd meeting of 2020 |
February 20, 2020 | • Agenda and document review for the 36th General Meeting of Shareholders |
Approved as proposed | |||
• Auditor’s report for fiscal year 2019 |
Approved as proposed | |||||
The 4th meeting of 2020 |
March 25, 2020 | • Contract for maintenance services of optical cables in 2020 |
Approved as proposed | |||
• Contract for maintenance services of transmission equipment in 2020 |
Approved as proposed | |||||
The 5th meeting of 2020 |
April 22, 2020 | • Election of the chairman of the Audit Committee |
Approved as proposed | |||
• Approval of external auditor services for fiscal year 2020 |
Approved as proposed | |||||
• Audit plan for fiscal year 2020 |
— | |||||
The 6th meeting of 2020 |
May 27, 2020 | • Establishment of regulations for appointment of independent auditors |
Approved as proposed | |||
• Report on evaluation of independent auditor services for fiscal year 2019 |
— | |||||
The 7th meeting of 2020 |
July 20, 2020 | • Report on results of semi-annual review by independent auditors of fiscal year 2020 |
— |
* | The line items that do not show approval are for reporting purposes only. |
3. Shareholders’ Exercise of Voting Rights
A. | Voting System and Exercise of Minority Shareholders’ Rights |
Pursuant to the Articles of Incorporation as shown below, the cumulative voting system was first introduced in the general meeting of shareholders held in 2003.
Articles of Incorporation |
Description | |
Article 32(3) (Election of Directors) | Cumulative voting under Article 382-2 of the Korean Commercial Code will not be applied for the election of directors. | |
Article 4 of the 12th Supplement to the Articles of Incorporation (Interim Regulation) | Article 32(3) of the Articles of Incorporation shall remain effective until the day immediately preceding the date of the general meeting of shareholders held in 2003. |
49
During the 34th general meeting of shareholders held on March 21, 2018, the Company adopted the electronic voting method. Pursuant to Article 368-4 of the Korean Commercial Code, the Company entrusted the Korea Securities Depository with the role of administering the electronic voting system, allowing shareholders to exercise their voting rights through electronic voting without attending the general meeting of shareholders.
Written voting system is not applicable. Minority shareholder rights were not exercised during the relevant period.
VII. | SHAREHOLDERS |
1. Shareholdings of the Largest Shareholder and Related Persons
A. | Shareholdings of the Largest Shareholder and Related Persons |
(As of June 30, 2020) | (Unit: in shares and percentages) | |||||||||||||||||||
Number of shares owned and ownership ratio | ||||||||||||||||||||
Beginning of Period | End of Period | |||||||||||||||||||
Name |
Relationship | Type of share | Number of shares |
Ownership ratio |
Number of shares |
Ownership ratio |
||||||||||||||
SK Holdings Co., Ltd. |
Largest Shareholder | Common share | 21,624,120 | 26.78 | 21,624,120 | 26.78 | ||||||||||||||
Tae Won Chey |
Officer of affiliated company |
Common share | 100 | 0.00 | 100 | 0.00 | ||||||||||||||
Dong Hyun Jang |
Officer of affiliated company |
Common share | 251 | 0.00 | 251 | 0.00 | ||||||||||||||
Jung Ho Park |
Officer of the Company |
Common share | 1,000 | 0.00 | 2,500 | 0.00 | ||||||||||||||
Young Sang Ryu |
Officer of the Company |
Common share | — | 0.00 | 500 | 0.00 | ||||||||||||||
Total |
Common share | 21,625,471 | 26.78 | 21,627,471 | 26.78 |
B. | Overview of the Largest Shareholder |
As of June 30, 2020, the Company’s largest shareholder was SK Holdings. SK Holdings was established on April 13, 1991 and was made public on the securities market on November 11, 2009 under the identification code “034730.” SK Holdings is located at 26, Jong-ro, Jongno-gu, Seoul, Korea. SK Holdings’ telephone number is +82-2-2121-5114 and its website is www.sk.co.kr.
50
C. | Changes in Shareholdings of the Largest Shareholder and Related Persons |
Changes in shareholdings of the largest shareholder are as follows:
(As of June 30, 2020) | (Unit: in shares and percentages) | |||||||||
Largest |
Date of the change in the |
Shares Held* | Holding Ratio |
Remarks | ||||||
SK Holdings | March 24, 2017 | 20,364,870 | 25.22 | Retirement of Myung Hyun Cho, SK Broadband’s independent director (ownership of 60 shares of the Company) | ||||||
March 28, 2017 | 20,365,370 | 25.22 | Jung Ho Park, CEO of the Company, purchased 500 shares. | |||||||
March 30, 2017 | 20,365,870 | 25.22 | Jung Ho Park, CEO of the Company, purchased 500 additional shares. | |||||||
July 7, 2017 | 20,364,803 | 25.22 | Shin Won Chey, SKC’s Chairman, disposed of 1,067 shares. | |||||||
December 27, 2018 | 21,625,471 | 26.78 | SK Holdings’ interest in SK Infosec was transferred to the Company in exchange for the Company’s issuance of treasury shares to SK Holdings. | |||||||
February 17, 2020 | 21,627,471 | 26.78 | Jung Ho Park, CEO of the Company, purchased 1,500 additional shares; Young Sang Ryu, inside director of the Company, purchased 500 shares. |
2. Distribution of Shares
A. | Shareholders with Ownership of 5% or Greater |
(As of June 30, 2020) | (Unit: in shares and percentages) | |||||||||
Name (title) |
Common share | |||||||||
Number of shares | Ownership ratio | Remarks | ||||||||
SK Holdings |
21,624,120 | 26.78 | % | — | ||||||
National Pension Service |
9,502,565 | 11.77 | % | — | ||||||
SK Telecom |
7,609,263 | 9.42 | % | Treasury shares | ||||||
Citibank ADR |
7,626,509 | 9.45 | % | — | ||||||
Shareholdings under the Employee Stock Ownership Program |
— | — | — |
B. | Minority Shareholders |
(As of June 30, 2020) | (Unit: in shares and percentages) | |||||||||||||||||||||||
Shareholders | Ownership | |||||||||||||||||||||||
Classification |
Number of minority shareholders |
Total number of shareholders |
Ratio (%) | Number of shares owned by minority shareholders |
Total number of shares issued |
Ratio (%) | ||||||||||||||||||
Minority shareholders* |
133,073 | 133,079 | 99.9 | % | 31,598,151 | 80,745,711 | 39.1 | % |
* | Shareholders who hold less than 1% of total shares issued. |
51
3. Share Price and Trading Volume in the Last Six Months
A. | Domestic Securities Market |
(Unit: in Won and shares) | ||||||||||||||||||||||||||
Types |
June 2020 | May 2020 | April 2020 | March 2020 | February 2020 | January 2020 | ||||||||||||||||||||
Common stock |
Highest | 230,000 | 216,000 | 215,500 | 225,500 | 229,000 | 238,500 | |||||||||||||||||||
Lowest | 201,000 | 204,000 | 175,000 | 165,500 | 212,500 | 229,000 | ||||||||||||||||||||
Average | 213,250 | 209,000 | 198,700 | 189,110 | 223,066 | 233,354 | ||||||||||||||||||||
Daily transaction volume |
Highest | 461,453 | 466,946 | 549,624 | 993,798 | 400,126 | 534,218 | |||||||||||||||||||
Lowest | 208,905 | 170,965 | 195,673 | 207,340 | 102,123 | 90,895 | ||||||||||||||||||||
Monthly transaction volume |
6,988,459 | 5,186,311 | 7,141,342 | 6,385,443 | 4,582,386 | 4,609,540 |
B. | Foreign Securities Market (New York Stock Exchange) |
(Unit : in US$ and ADRs) | ||||||||||||||||||||||||||
Types |
June 2020 | May 2020 | April 2020 | March 2020 | February 2020 | January 2020 | ||||||||||||||||||||
Depositary receipt |
Highest | 20.76 | 19.25 | 19.34 | 20.82 | 21.46 | 22.93 | |||||||||||||||||||
Lowest | 18.31 | 18.41 | 15.57 | 14.46 | 19.21 | 21.21 | ||||||||||||||||||||
Average | 19.40 | 18.74 | 18.04 | 17.63 | 20.64 | 22.39 | ||||||||||||||||||||
Daily transaction volume |
Highest | 1,207,916 | 926,362 | 864,362 | 941,336 | 834,301 | 603,712 | |||||||||||||||||||
Lowest | 247,522 | 182,737 | 287,220 | 380,332 | 213,560 | 154,270 | ||||||||||||||||||||
Monthly transaction volume |
10,424,277 | 7,557,776 | 9,736,261 | 13,290,850 | 8,913,058 | 7,559,532 |
VIII. | EMPLOYEES AND DIRECTORS |
1. Officers and Employees
A. | Employees |
(As of June 30, 2020) | (Unit: in persons and millions of Won) | |||||||||||||||||||||||||||||||||
Business segment |
Gender |
Number of employees | Average length of service (years) |
Aggregate wage for the year of 2020 |
Average wage per person |
|||||||||||||||||||||||||||||
Employees without a fixed term of employment |
Employees with a fixed term of employment |
Total | ||||||||||||||||||||||||||||||||
Total | Part-time employees |
Total | Part-time employees |
|||||||||||||||||||||||||||||||
— |
Male | 4,386 | — | 78 | — | 4,464 | 13.0 | 354,271 | 79 | |||||||||||||||||||||||||
— |
Female | 885 | — | 174 | — | 1,059 | 8.1 | 53,192 | 51 | |||||||||||||||||||||||||
Total |
5,271 | — | 252 | — | 5,523 | 12.0 | 407,463 | 74 |
B. | Compensation of Unregistered Officers |
(As of June 30, 2020) | (Unit: in persons and millions of Won) | |||
Number of Unregistered Officers |
Aggregate wage for the year of 2020 |
Average wage per person | ||
101 |
39,178 | 388 |
52
2. Compensation of Directors
A. | Amount Approved at the Shareholders’ Meeting |
(As of June 30, 2020) | (Unit: in millions of Won) | |||
Classification |
Number of Directors | Aggregate Amount Approved | ||
Directors |
8 | 12,000 |
B. | Amount Paid |
B-1. Total Amount
(As of June 30, 2020) | (Unit: in millions of Won) | |||||||
Number of Directors |
Aggregate Amount Paid | Average Amount Paid Per Director | Remarks | |||||
8 |
5,521 | 690 | — |
B-2. Amount by Classification
(As of June 30, 2020) | (Unit: in millions of Won) | |||||||||||||||
Classification |
Number of Directors | Aggregate Amount Paid | Average Amount Paid Per Director |
Remarks | ||||||||||||
Inside Directors |
3 | 5,311 | 1,770 | — | ||||||||||||
Independent Directors (Excluding Audit Committee Members) |
1 | 42 | 42 | — | ||||||||||||
Audit Committee Members |
4 | 168 | 42 | — | ||||||||||||
Auditor |
— | — | — | — |
3. Individual Compensation of Directors and Officers
A. | Remuneration for Individual Directors |
(As of June 30, 2020) | (Unit: in millions of Won) | |||||||
Name |
Position |
Total remuneration | Payment not included in
total | |||||
Jung Ho Park |
Representative Director/President | 4,420 | Stock options for 177,610 common shares (66,504 granted in 2017 and 111,106 granted in 2020) | |||||
Young Sang Ryu |
Head of MNO Business | 890 | Stock options for 5,445 common shares (1,358 granted in 2018, 1,734 granted in 2019 and 2,353 granted in 2020) |
53
* | See “VIII.4. Stock Options Granted and Exercised” below for details on the number of stock options, exercise price and exercise period. |
Composition of Total Remuneration
Name |
Composition | |
Jung Ho Park* |
Total remuneration: Won 4,420 million • Salary: Won 850 million • Bonus: Won 3,570 million | |
Young Sang Ryu |
Total remuneration: Won 890 million • Salary: Won 270 million • Bonus: Won 613 million • Other earned income: Won 7 million |
* | Due to Mr. Park’s concurrent position as the representative director of SK Broadband during part of 2019, his remuneration for the period of his appointment as SK Broadband’s representative director (from March 27, 2019 to June 30, 2019) was allocated between and paid by SK Telecom and SK Broadband according to the policies agreed upon between the two companies. |
B. | Remuneration for the Five Highest-Paid Officers (among those Paid over |
(Unit: in millions of Won) | ||||||||
Name |
Position |
Total remuneration | Payment not included in
total | |||||
Jung Ho Park |
President | 4,420 | 177,610 stock options (66,504 granted in 2017 and 111,106 granted in 2020) | |||||
Jin Woo So |
Committee Chairman | 1,763 | — | |||||
Yoon Kim |
Head of T3K | 1,289 | 1,874 stock options (granted in 2020) | |||||
Yong-Seop Yum |
Head of Institute | 953 | — | |||||
Chan Kyu Noh |
Officer | 935 | — |
Composition of Total Remuneration
Name |
Composition | |
Jung Ho Park |
See “VIII.3.A. Remuneration for Individual Directors” above. | |
Jin Woo So |
Total remuneration: Won 1,763 million • Salary: Won 600 million • Bonus: Won 1,163 million | |
Yoon Kim |
Total remuneration: Won 1,289 million • Salary: Won 215 million • Bonus: Won 1,074 million | |
Yong-Seop Yum |
Total remuneration: Won 953 million • Salary: Won 275 million • Bonus: Won 678 million | |
Chan Kyu Noh |
Total remuneration: Won 935 million • Salary: Won 170 million • Bonus: Won 731 million • Other earned income: Won 34 million |
54
4. Stock Options Granted and Exercised
A. | Stock Options Granted to Directors and Auditors |
(As of June 30, 2020) | ||||||||||||
Classification |
Number of Directors | Fair Value of Stock Options (millions of Won) |
Remarks | |||||||||
Inside Directors |
3 | 92 | — | |||||||||
Independent Directors (Excluding Audit Committee Members) |
1 | — | — | |||||||||
Audit Committee Members |
4 | — | — | |||||||||
Total |
8 | 92 | — |
B. | Stock Options Granted and Exercised |
(As of June 30, 2020) | (Unit: in Won and shares) | |||||||||||||||||||||||||||||||||
Changes during Reporting Period |
Total Changes | Unexercised as of End of Reporting Period |
||||||||||||||||||||||||||||||||
Grantee |
Relationship with the Company |
Date of Grant |
Method of Grant |
Initially |
Exercised | Canceled | Exercised | Canceled | Exercise Period | Exercise Price |
||||||||||||||||||||||||
Jung Ho Park | Inside Director | March 24, 2017 | Issuance of treasury stock, cash settlement | 22,168 | — | — | — | — | 22,168 | March 25, 2019 – March 24, 2022 |
246,750 | |||||||||||||||||||||||
Jung Ho Park | Inside Director | March 24, 2017 | Issuance of treasury stock, cash settlement | 22,168 | — | — | — | — | 22,168 | March 25, 2020 – March 24, 2023 |
266,490 | |||||||||||||||||||||||
Jung Ho Park | Inside Director | March 24, 2017 | Issuance of treasury stock, cash settlement | 22,168 | — | — | — | — | 22,168 | Mach 25, 2021 – March 24, 2024 |
287,810 | |||||||||||||||||||||||
Jung Ho Park | Inside Director | March 26, 2020 | Issuance of treasury stock, cash settlement | 111,106 | — | — | — | — | 111,106 | March 27, 2023 – March 26, 2027 |
192,260 | |||||||||||||||||||||||
Young Sang Ryu | Inside Director | February 20, 2018 |
Issuance of treasury stock, cash settlement | 1,358 | — | — | — | — | 1,358 | February 21, 2020 – February 20, 2023 |
254,120 | |||||||||||||||||||||||
Young Sang Ryu | Inside Director | March 26, 2019 | Issuance of treasury stock, cash settlement | 1,734 | — | — | — | — | 1,734 | March 27, 2021 – March 26, 2024 |
254,310 | |||||||||||||||||||||||
Young Sang Ryu | Inside Director | March, 26, 2020 | Issuance of treasury stock, cash settlement | 2,353 | — | — | — | — | 2,353 | March 27, 2023 – March 26, 2027 |
192,260 |
55
(As of June 30, 2020) | (Unit: in Won and shares) | |||||||||||||||||||||||||||||||||
Changes during Reporting Period |
Total Changes | Unexercised as of End of Reporting Period |
||||||||||||||||||||||||||||||||
Grantee |
Relationship with the Company |
Date of Grant |
Method of Grant |
Initially |
Exercised | Canceled | Exercised | Canceled | Exercise Period | Exercise Price |
||||||||||||||||||||||||
Jong Ryeol Kang | Unregistered Officer |
March 26, 2020 | Issuance of treasury stock, cash settlement | 2,048 | — | — | — | — | 2,048 | March 27, 2023 – March 26, 2027 |
192,260 | |||||||||||||||||||||||
Hyoung Il Ha | Unregistered Officer |
February 22, 2019 |
Issuance of treasury stock, cash settlement | 1,564 | — | — | — | — | 1,564 | February 23, 2021 – February 22, 2024 |
265,260 | |||||||||||||||||||||||
Hyoung Il Ha | Unregistered Officer |
March 26, 2020 | Issuance of treasury stock, cash settlement | 1,961 | — | — | — | — | 1,961 | March 27, 2023 – March 26, 2027 |
192,260 | |||||||||||||||||||||||
Yoon Kim | Unregistered Officer |
March 26, 2020 | Issuance of treasury stock, cash settlement | 1,874 | — | — | — | — | 1,874 | March 27, 2023 – March 26, 2027 |
192,260 | |||||||||||||||||||||||
Seok Joon Huh | Unregistered Officer |
March 26, 2020 | Issuance of treasury stock, cash settlement | 1,852 | — | — | — | — | 1,852 | March 27, 2023 – March 26, 2027 |
192,260 | |||||||||||||||||||||||
Poong Young Yoon | Unregistered Officer |
February 22, 2019 |
Issuance of treasury stock, cash settlement | 1,244 | — | — | — | — | 1,244 | February 23, 2021 – February 22, 2024 |
265,260 | |||||||||||||||||||||||
Poong Young Yoon | Unregistered Officer |
March 26, 2020 | Issuance of treasury stock, cash settlement | 1,743 | — | — | — | — | 1,743 | March 27, 2023 – March 26, 2027 |
192,260 | |||||||||||||||||||||||
Seong Ho Ha | Unregistered Officer |
February 22, 2019 | Issuance of treasury stock, cash settlement | 1,369 | — | — | — | — | 1,369 | February 23, 2021 – February 22, 2024 |
265,260 | |||||||||||||||||||||||
Seong Ho Ha | Unregistered Officer |
March 26, 2020 | Issuance of treasury stock, cash settlement | 1,656 | — | — | — | — | 1,656 | March 27, 2023 – March 26, 2027 |
192,260 | |||||||||||||||||||||||
Dong Hwan Cho | Unregistered Officer |
March 26, 2020 | Issuance of treasury stock, cash settlement | 1,525 | — | — | — | — | 1,525 | March 27, 2023 – March 26, 2027 |
192,260 | |||||||||||||||||||||||
HyunA Lee | Unregistered Officer |
March 26, 2020 | Issuance of treasury stock, cash settlement | 1,525 | — | — | — | — | 1,525 | March 27, 2023 – March 26, 2027 |
192,260 |
56
IX. | RELATED PARTY TRANSACTIONS |
1. Line of Credit Extended to the Largest Shareholder and Related Parties
(As of June 30, 2020) | (Unit: in millions of Won) | |||||||||||||||||||||||||||||
Name (Corporate name) |
Relationship | Account category | Change details | Accrued interest |
Remarks | |||||||||||||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||||||||||||||||
SK Wyverns |
Affiliate | Long-term and short-term loans |
204 | — | — | 204 | — | — |
2. Transfer of Assets to/from the Largest Shareholder and Related Parties and Other Transactions
Purchase and Dispositions of Investments
(As of June 30, 2020) | (Unit: in millions of Won) | |||||||||||||||||||||||||
Name (Corporate name) |
Relationship | Purchase and Dispositions of Investments | Remarks | |||||||||||||||||||||||
Type of Investment |
Transaction Details | |||||||||||||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||||||||||||
SK Telecom TMT Investment Corp. |
Overseas Affiliate | Shares | 33,834 | 24,290 | — | 58,124 | Capital increase | |||||||||||||||||||
SE ASIA INVESTMENT PTE. LTD. |
Overseas Affiliate | Shares | 224,470 | 119,770 | — | 344,240 | Capital increase |
Purchase and Disposition of Securities
- On January 3, 2020, in order to achieve growth in the T-commerce business and enhance synergies with the Company’s ICT businesses, SK Telecom completed its acquisition of a 100% interest in SK Stoa (3,631,355 shares), with a book value of Won 40 billion, from SK Broadband.
Transfer of Assets
(Unit: in millions of Won) | ||||||||||||||||||||||
Counterparty |
Relationship with Counterparty |
Details of Transfer | ||||||||||||||||||||
Type | Date of Transaction | Purpose | Subject of Transfer |
Transaction Amount | ||||||||||||||||||
Purchase | Sale | |||||||||||||||||||||
SK Innovation Co., Ltd. |
Affiliate | Sale | February 18, 2020 | Transfer of assets |
Golf membership (Lakeside) | — | 573 | |||||||||||||||
SK Innovation Co., Ltd. |
Affiliate | Sale | June 24, 2020 | Transfer of assets |
Equipment and construction supplies for Susong Tower | 1,093 | 413 | |||||||||||||||
Total |
1,093 | 986 |
* | In accordance with applicable disclosure requirements, transactions of less than Won 100 million are omitted. |
57
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, 2020 – June 30, 2020 |
|
Marketing fees, etc. | 625,525 |
4. Related Party Transactions
See note 31 of the notes to the Company’s unaudited consolidated financial statements attached hereto for more information regarding related party transactions.
5. Other Related Party Transactions (excluding Transactions with the Largest Shareholder and Related Parties listed above)
A. Provisional Payment and Loans (including loans on marketable securities)
(As of June 30, 2020) | (Unit: in millions of Won) | |||||||||||||||||||||||||||
Name (Corporate name) |
Relationship | Account category | Change details | Accrued interest |
Remarks | |||||||||||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||||||||||||||
Baekmajang and others |
Agency | Long-term and short-term loans |
65,681 | 65,629 | 55,206 | 76,104 | — | — | ||||||||||||||||||||
Daehan Kanggun BCN Inc. |
Investee | Long-term loans | 22,148 | — | — | 22,148 | — | — |
58
X. | OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS |
1. Developments in the Items Mentioned in Prior Reports on Important Business Matters
A. | Summary Minutes of the General Meeting of Shareholders |
Date |
Agenda |
Resolution | ||
34th Fiscal Year Meeting of Shareholders (March 21, 2018) |
1. Approval of the financial statements for the year ended December 31, 2017 2. Award of stock options 3. Election of directors • Election of an inside director • Election of an independent director 4. Election of an independent director as Audit Committee member 5. Approval of remuneration limit for directors |
Approved (Cash dividend, Won 9,000 per share)
Approved
Approved (Young Sang Ryu) Approved (Youngmin Yoon) Approved (Youngmin Yoon)
Approved (Won 12 billion) | ||
35th Fiscal Year Meeting of Shareholders (March 26, 2019) |
1. Approval of the financial statements for the year ended December 31, 2018 2. Amendments to Articles of Incorporation 3. Approval of award of stock options 4. Award of stock options 5. Election of an independent director 6. Election of an independent director as Audit Committee member 7. Approval of remuneration limit for directors |
Approved (Cash dividend, Won 9,000 per share)
Approved Approved Approved Approved (Seok-Dong Kim) Approved (Seok-Dong Kim)
Approved (Won 12 billion) | ||
36th Fiscal Year Meeting of Shareholders (March 26, 2020) |
1. Approval of the financial statements for the year ended December 31, 2019 2. Amendments to Articles of Incorporation 3. Award of stock options 4. Election of directors • Election of an inside director • Election of a non-executive director • Election of an independent director • Election of an independent director • Election of an independent director 5. Election of an independent director as Audit Committee member • Election of an independent director as Audit Committee member • Election of an independent director as Audit Committee member 6. Approval of remuneration limit for directors 7. Amendment of remuneration policy for executives |
Approved (Cash dividend, Won 9,000 per share)
Approved Approved
Approved (Jung Ho Park) Approved (Dae Sik Cho) Approved (Yong-Hak Kim) Approved (Junmo Kim) Approved (Jung Ho Ahn)
Approved (Yong-Hak Kim)
Approved (Jung Ho Ahn)
Approved (Won 12 billion) Approved |
2. Contingent Liabilities
A. | Legal Proceedings |
[SK Telecom]
As of June 30, 2020, 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.
59
A lawsuit brought by Nonghyup Bank against SK Planet, a subsidiary of the Company, regarding the validity of a credit card partnership agreement has been resolved by the parties through mediation in 2018. Pursuant to the results of the mediation, the partnership agreement between SK Planet and Nonghyup Bank will stay in effect until April 2021, and SK Planet will be responsible for settlement of fees related to customer transactions until September 2021, which is the last expiration date of the cards issued. SK Planet has determined that the partnership agreement and related agreements meet the definition of an onerous contract under K-IFRS 1037 and recognized its best estimate of the payment amount necessary to discharge its present obligations as of the end of the reporting period as current and non-current provisions in the amount of Won 29,610 million and Won 3,828 million, respectively.
[SK Broadband]
As of June 30, 2020, there were 27 pending lawsuits against SK Broadband (aggregate amount of claims of Won 15,792 million), and provisions in the amount of Won 11,333 million in connection with such lawsuits were recognized.
[SK Planet]
As of June 30, 2020, there were two pending lawsuits against SK Planet (aggregate amount of claims of Won 250 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.
[Eleven Street]
As of June 30, 2020, there were four pending lawsuits against Eleven Street (aggregate amount of claims of Won 268 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.
[Life & Security Holdings]
As of June 30, 2020, there were 22 pending lawsuits against Life & Security Holdings (aggregate amount of claims of Won 1,974 million), and provisions in the amount of Won 842 million in connection with such lawsuits were recognized.
[Incross]
As of June 30, 2020, there was one pending lawsuit against Incross, and the management cannot reasonably predict the outcome of such proceeding.
[SK Telink]
As of June 30, 2020, there were three pending lawsuits against SK Telink (aggregate amount of claims of Won 210 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.
B. | Other Contingent Liabilities |
[SK Telecom]
None.
[SK Broadband]
As of June 30, 2020, SK Broadband has entered into revolving credit facilities with a limit of Won 221.9 billion with four financial institutions including Hana Bank in relation to its loans.
60
In connection with public offerings of notes, SK Broadband is subject to certain restrictions with respect to its debt ratio, third party payment guarantees and other limitations on liens.
SK Broadband has provided “geun” mortgage amounting to Won 4,220 million on certain of its buildings, including Seodaemun 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 June 30, 2020, Seoul Guarantee Insurance Company has provided a performance guarantee of Won 31,714 million to SK Broadband in connection with the performance of certain contracts and the repair of any defects.
[SK Planet]
As of June 30, 2020, SK Planet has entered into revolving credit facilities of up to Won 17 billion with Shinhan Bank and KEB Hana Bank.
As of June 30, 2020, Seoul Guarantee Insurance Company and KEB Hana Bank have provided guarantees of Won 3,573 million in total to SK Planet in connection with the performance of certain contracts and curing of defects.
[ADT CAPS]
As of June 30, 2020, ADT CAPS has entered into the following agreements with financial institutions, including loan agreements:
(Unit: in millions of Won) | ||||||||||
Financial Institution |
Type of Loan | Line of Credit | Amount Borrowed | |||||||
KEB Hana Bank |
Revolving credit | 5,000 | 5,000 | |||||||
KEB Hana Bank |
Revolving credit | 58,000 | 27,000 | |||||||
Shinhan Bank |
Revolving credit | 15,000 | 15,000 |
As of June 30, 2020, ADT CAPS 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 |
Defect performance guarantee, etc. | 21,549 | ||||
Seoul Guarantee Insurance Company |
Fidelity guarantee | 45,930 |
As of June 30, 2020, ADT CAPS has entered into an accounts receivable-backed loan agreement with a credit limit of Won 58,000 million (of which ADT Caps has borrowed Won 47,174 million) and a letter of credit of Won 2,000 million with KEB Hana Bank in order to make purchase payments. In addition, ADT CAPS has entered into an accounts receivable-backed loan agreement with a credit limit of Won 25,000 million (of which ADT Caps has borrowed Won 4,387 million) with Kookmin Bank.
ADT CAPS has provided its shares as collateral for a long-term loan (face value of Won 1,900 billion) of Life & Security Holdings.
[Dreamus Company]
As of June 30, 2020, Dreamus Company does not have any legal proceedings pending.
As of June 30, 2020, Seoul Guarantee Insurance Company has provided a guarantee of Won 206 million in connection with the performance, prepayment and curing of defects under certain contracts related to product development, and Dreamus Company has provided certain guarantees of Won 755 million.
61
Dreamus Company has entered into agreements with certain domestic and foreign companies for the implementation of designs and technologies in connection with product manufacturing, pursuant to which it is paying certain fees for the revenues generated from applicable products and the use of patents. The aggregate amount of such fees paid in the first quarter of 2020 and the fourth quarter of 2019 were Won 881 million and Won 2,079 million, respectively, which were included in its cost of sales and selling and administrative expenses.
[SK Infosec]
SK Infosec has issued a blank note to SK Holdings as collateral in connection with a contract performance guarantee.
[Onestore]
As of June 30, 2020, details of the major payment guarantees received by Onestore from third parties are as follows:
(Unit: in millions of Won) | ||||
Guarantor |
Guarantee Details | Guaranteed Amount | ||
KEB Hana Bank |
Miscellaneous Won payment guarantee | 100 | ||
Seoul Guarantee Insurance Company |
E-commerce (payment method) guarantee |
145 |
[Incross]
As of June 30, 2020, Incross has pledged the following assets:
(Unit: in millions of Won) | ||||||||
Pledged Assets |
Agreement Details | Amount | Pledgee | |||||
Short-term financial instruments |
Guarantee of contract performance |
6,900 | NAVER Corporation | |||||
6,919 | Kakao Corp. | |||||||
250 | Smart Media Representative Co., Ltd. | |||||||
20 | Brand Blue | |||||||
1,500 | SK Broadband | |||||||
955 | KT | |||||||
748 | Kakao Games Corp. | |||||||
1,610 | LG U+ | |||||||
Total |
18,902 |
As of June 30, 2020, Incross has entered into the following loan or transaction limit agreements on a consolidated basis:
(Unit: in millions of Won) | ||||
Counterparty |
Agreement Details | Amount | ||
KEB Hana Bank |
Loan for general funds | 2,000 | ||
Woori Bank |
Loan for general funds | 2,000 | ||
Industrial Bank of Korea |
Loan for general funds | 4,100 | ||
Total |
8,100 |
As of June 30, 2020, Seoul Guarantee Insurance Company has provided a guarantee of Won 356 million (Won 230 million as of December 31, 2019) in connection with the guarantee of contract performance related to Incross’ operations.
Pursuant to Article 530-3(1) of the Korean Commercial Code, Incross’ SP business was spun off into a newly established company pursuant to a special resolution of its general shareholders’ meeting on March 28, 2014, and pursuant to Article 530-9(1) of the Korean Commercial Code, Incross and the new spun-off company are jointly liable for the repayment of debt incurred prior to the spin-off.
62
[M&Service]
As of June 30, 2020, M&Service has entered into the following agreements with financial institutions, including loan agreements:
(Unit: in millions of Won) | ||||||||||
Financial Institution |
Type of Loan | Line of Credit | Amount Borrowed | |||||||
Shinhan Bank |
Payment guarantee | 1,000 | 100 | |||||||
KEB Hana Bank |
Revolving credit | 5,000 | — | |||||||
Korea Development Bank |
Revolving credit | 5,000 | — |
3. Status of Sanctions, etc.
[SK Telecom]
Date |
Authority |
Subject of |
Sanction |
Reason and the Relevant |
Status of |
Company’s | ||||||
Jan. 24, 2018 | KCC | SK Telecom | Decision of 5th KCC Meeting of 2018 • Correctional order • Fine of Won 21.1 billion |
Payment of subsidies exceeding 115% limit by dealers; payment of discriminatory subsidies by dealers; inducement of such payments (Articles 4-5, 3-1(1) and 9-3 of the MDDIA) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; provided notice of plan for implementation of correctional order to marketing personnel; revised standard agreement and reinforced supervision | ||||||
Jan. 24, 2018 | KCC | SK Telecom | Decision of 5th KCC Meeting of 2018 • Correctional order • Fine of Won 223.4 million |
Payment of excessive subsidies contradictory with disclosure for recruitment of corporate customers (Article 4-4 of the MDDIA) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; provided notice of plan for implementation of correctional order to marketing personnel; provided training and reinforced supervision of corporate business | ||||||
Jan. 24, 2018 | KCC | SK Telecom | Decision of 5th KCC Meeting of 2018 • Correctional order • Fine of Won 27 million |
Payment of subsidies exceeding 115% limit by Samsung Electronics; payment of discriminatory subsidies by Samsung Electronics; inducement of such payments (Articles 4-5, 3-1(1) and 9-3 of the MDDIA) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; provided notice of plan for implementation of correctional order to marketing personnel; provided training and reinforced supervision |
63
Date |
Authority |
Subject of |
Sanction |
Reason and the Relevant |
Status of |
Company’s Measures | ||||||
Sept. 2, 2018 | Korea Fair Trade Commission | SK Telecom, former director | Sept. 12, 2018 decision by Seoul Central District Court • SK Telecom: Fine of Won 50 million • Former director: Sentence of 6 months of imprisonment (2 years of probation) |
Abuse of bargaining power in transferring visiting salespeople against the intent of the head of the sales office that contracted with such salespeople (Articles 70, 67-2 and 23-1(4) of the Monopoly Regulation and Fair Trade Act; Article 30 of the Criminal Code) | Decision confirmed; fine paid | Provided training (twice a year); implemented compliance program for employees and executives | ||||||
Mar. 20, 2019 | KCC | SK Telecom | Decision of 14th KCC Meeting of 2019 • Correctional order • Fine of Won 975 million |
Payment of subsidies exceeding 115% limit by dealers; payment of discriminatory subsidies by dealers; inducement of such payments in connection with operation of online business channels (Articles 4-5, 3-1(1) and 9-3 of the MDDIA) | Decision confirmed; fine paid; correctional order implemented | Immediately ceased such activities; implemented compliance monitoring of online sales guidelines; revised online request system | ||||||
June 26, 2019 | KCC | SK Telecom | Decision of 31st KCC Meeting of 2019 • Correctional order • Fine of Won 231 million |
Refusal or delay of termination of user contract without just cause (Article 50-1(5) of the Telecommunications Business Act; Article 42-1(5) of the Enforcement Decree) | Decision confirmed; payment of fine and implementation of correctional order completed | Addressed issues discovered during investigation, such as outbound contact with customers regarding termination without customer consent | ||||||
July 9, 2019 | KCC | SK Telecom | Decision of 33rd KCC Meeting of 2019 • Correctional order • Fine of Won 1.5 million |
Failure to maintain subsidies without change for a minimum period of seven days (Article 4-3 of the MDDIA) | Decision confirmed; report on implementation of correctional order and payment of fine completed | Implemented improvements to work procedures (announce subsidies separately from public announcements on official website in case of notice of subsidies during pre-order period) | ||||||
June 4, 2020 | KCC | SK Telecom | Decision of 33rd KCC Meeting of 2020 • Correctional order • Fine of Won 4 million |
Obtaining consent from users for collection of personal location information through new contracts for mobile phones with material omissions instead of applicable terms of use for location information business (Article 18-1 of the Location Information Act and Article 22 of Enforcement Decree) | Decision confirmed; payment of fine and implementation of correctional order completed | Provided training to persons responsible for location information management, including representatives, and personnel handling location information | ||||||
July 8, 2020 | KCC | SK Telecom | Decision of 40th KCC Meeting of 2020 • Correctional order and submission of report • Fine of Won 22.3 billion |
Payment of subsidies exceeding 115% limit by dealers; payment of unreasonably discriminatory subsidies based on subscription type and rate plan; selection of certain dealers and instruction to and inducement of such subsidies by such dealers (Articles 3-1, 4-5 and 9-3 of the MDDIA) | Decision confirmed, payment of fine and submission of correctional order implementation plan pending | Immediately ceased such activities; promoted measures to prevent recurrence, such as operation of voluntary consultative body regarding illegal online postings, standardization of incentive instructions/forms, establishment of record management system, development of monitoring activities of online retailers and expansion of the electronic subscription system |
64
[SK Broadband]
Subject |
Date |
Reason |
Sanction |
Relevant Law |
Status of |
Company’s Measures | ||||||
SK Broadband | October 12, 2018 | Failure to explain or disclose or misrepresentation of important matters to users such as rates, contract conditions or rate discounts | Correctional order (corrective measures for violation of the Telecommunications Business Act related to representative phone number card payment services) | Article 50-1 Paragraph 5(2) of the Telecommunications Business Act and Article 42-1 of its Enforcement Decree | Made an official announcement about having received the correctional order and paid the fine | Implement the correctional order and pay the fine | ||||||
December 21, 2018 | Failure to prepare and submit the Telecommunications Business Report for the year ended December 31, 2017 in compliance with the requirements under the Regulations on Accounting and Reporting of Telecommunications Businesses and the Accounting Classification Standards of Telecommunications Businesses, as such report contained errors in the classification of assets, income and expenses | Correctional order to amend its business report for the year ended December 31, 2017 to correct errors and submit it to the MSIT; fine of Won 164 million | Article 49 of the Telecommunications Business Act | Submitted the amended business report and paid the fine | Improve work procedures to prevent errors in the future | |||||||
February 25, 2019 | Failure to accurately report the number of high-speed Internet subscribers. | Correctional order (for violation of the Telecommunications Business Act related to a misrepresentation of statistics) and fine of Won 2.8 million | Article 88-1, Article 92-1 and Article 104-5(17) of the Telecommunications Business Act | Submitted plans for implementation of correctional order, including improvement of relevant business procedures | Implement the correctional order and pay the fine | |||||||
March 15, 2019 | Failure to establish service rejection procedures against spammers. | Fine of Won 4.8 million for breach of restrictions on rendering information transmission services | Articles 50-4 and 76 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. and Article 74 of its Enforcement Decree | Implemented improvements to advertisement transmission related activities and paid the fine (April 2018) | Implement procedures for denying services to spammers |
65
Subject |
Date |
Reason |
Sanction |
Relevant Law |
Status of |
Company’s Measures | ||||||
June 26, 2019 | Delaying, rejecting or restricting termination of user contracts without just cause | Correctional order (corrective measures for damaging users’ interests by restricting termination of high-speed Internet and bundled services) | Article 50-1(5) of the Telecommunications Business Act and Article 42-1(5) of its Enforcement Decree | Made an official announcement about having received the correctional order, improved operating procedures and paid the fine (Won 165 million). | Implement the correctional order and pay the fine | |||||||
July 29, 2019 | Substantially restricting competition in a bidding process for a public sector-only network project by agreeing on the winning bidder, bidding participants and the bidding price in advance (SK Broadband was the first to voluntarily report the act of collusion and was granted exemption from applicable sanctions) | Correctional order (for unjustly restricting competition while participating in a bid for a public sector-only circuit project of public agencies) and fine of Won 32.7 million (SK Broadband was ultimately exempted from both the correctional order and the fine) | Article 19-1(3), Article 19-1(8) and Article 22-2(1)(2) of the Monopoly Regulation and Fair Trade Act, and Article 33 and Article 35-1 of its Enforcement Decree | Not applicable due to exemption | Conduct legal education regarding collusive bidding (July 1, 2019 to July 19, 2019) and establish measures to prevent recurrence, including an internal reporting channel related to collusion and a fast-track system for legal advice on related matters | |||||||
September 30, 2019 | Engaging in collusive bidding in public sector-only network project auctions from 2015 to 2017 | Prohibition from bidding in public sector auctions for three months | Article 76-1 of the Enforcement Decree of the Act on Contracts to which the State is a Party | Administrative proceedings withdrawn; three-month prohibition in effect beginning April 17, 2020 |
66
Subject |
Date |
Reason |
Sanction |
Relevant Law |
Status of |
Company’s Measures | ||||||
November 29, 2019 | Substantially restricting competition in an auction for selection of a mobile messaging service provider by agreeing on the winning bidder in advance, and either intentionally participating or restraining from participating in the bid so that such agreed-upon bidder can win the bid (SK Broadband was the second to voluntarily report the act of collusion and was granted a reduction in fine from Won 301 million to Won 188 million) | Correctional order (for unjustly restricting competition while participating in a bid to be selected as a mobile messaging service provider for the Public Procurement Service) and fine of Won 188 million | Article 19-1(8), Article 21, Article 22, Article 22-2(1)(2), Article 55-3 of the Monopoly Regulation and Fair Trade Act and Article 9, Article 33, Article 35-1, Article 61 and Appendix 2 of its Enforcement Decree | Paid the fine | ||||||||
January 13, 2020 | Correctional order to prevent the post-merger entity from engaging in activities that may restrict competition in the pay TV market | Correctional order (prohibiting acts of restricting competition, such as unilaterally raising prices, reducing the number of channels and inducing switch to high-priced products, based on post-merger market share) | Articles 7(1) and 16(1) of the Monopoly Regulation and Fair Trade Act | Submitted implementation plans (approved by Korea Fair Trade Commission) | Implement correctional order | |||||||
January 15, 2020 | Failure to prepare and submit the Telecommunications Business Report for the year ended December 31, 2018 in compliance with the requirements under the Regulations on Accounting and Reporting of Telecommunications Businesses and the Accounting Classification Standards of Telecommunications Businesses, as such report contained errors in the classification of assets, income and expenses | Correctional order to amend its business report for the year ended December 31, 2018 to correct errors and submit it to the MSIT and fine of Won 79 million | Article 49 of the Telecommunications Business Act | Submitted the amended business report on February 3, 2020 and paid the fine on February 7, 2020 | Improve work procedures to prevent errors in the future | |||||||
Tbroad (merged entities) | January 19, 2018 | Failure to meet digital investment objectives and violation of approval renewal conditions | Correctional order | Article 99-1 of the Broadcast Act | Submitted correctional measures and implementation plan | Compliance with correctional order | ||||||
November 26, 2018 | Violation of prohibited acts of broadcasting channel blocking | Correctional order and fine of Won 151.7 million | Article 85-2 and Article 109 of the Broadcast Act | Implemented correctional measures and paid the fine | Compliance with correctional order |
67
Subject |
Date |
Reason |
Sanction |
Relevant Law |
Status of |
Company’s Measures | ||||||
December 24, 2018 | Review of 2017 fiscal year sales report | Correctional order and fine of Won 7.5 million | Article 49-1, Article 92-1 and Article 53-2 of the Telecommunications Business Act | Implemented correctional measures and paid the fine | Compliance with correctional order | |||||||
December 27, 2018 | Violation of permitted scope of sponsorship notice in program production | Fine of Won 5 million | Article 74-1 of the Broadcast Act | Paid the fine | — | |||||||
January 23, 2019 | Failure to satisfy approval renewal conditions, including implementation of 2017 network investment plan | Correctional order | Article 99-1 of the Broadcast Act | Submitted correctional measures and implementation plan | Compliance with correctional order | |||||||
June 13, 2019 | Provision of unfair benefits to related parties of Taekwang Group affiliates | Prosecution | Article 23-2 of the Monopoly Regulation and Fair Trade Act | Criminal investigation pending | Expected to be disposed as no right of arraignment due to merger | |||||||
August 28, 2019 | Provision of unfair benefits to related parties of Taekwang Group affiliates | Correctional order and fine (Tbroad: Won 177 million; Tbroad Dongdaemun: Won 4 million; Tbroad Nowon: Won 1 million; KDMC: Won 2 million) | Article 23-2 of the Monopoly Regulation and Fair Trade Act | Paid the fine | Administrative proceedings pending | |||||||
December 9, 2019 | Failure to satisfy approval renewal condition (implementation of 2018 plan) | Correctional order | Article 99-1 of the Broadcast Act | Submitted corrective action and implementation plan | Compliance with correctional order | |||||||
December 9, 2019 | Violation of disclosure rules regarding corporate group status of five Taekwang group companies | Fine of Won 8 million | Articles 11-4 and 69-2(1) of the Monopoly Regulation and Fair Trade Act | Paid the fine | — | |||||||
May 1, 2020 | Failure to submit monthly broadcasting results | Fine of Won 6 million | Articles 83 and 16 of the Broadcast Act | Paid the fine | — | |||||||
Home & Service | January 19, 2018 | Delaying the reporting of matters related to changes in employees’ insurance eligibility | Fine of Won 500,000 | Article 15 of the Employment Insurance Act | Paid the fine | Implement measures to improve reporting procedures | ||||||
March 12, 2018 | Delaying the reporting of details of industrial accidents | Fine of Won 5.04 million | Article 10-2 of the Industrial Safety and Health Act | Paid the fine | Improve management of industrial accidents |
68
Subject |
Date |
Reason |
Sanction |
Relevant Law |
Status of |
Company’s Measures | ||||||
April 30, 2018 | Failure to establish an industrial safety and health committee and provide training related to employee safety and health in the first quarter of 2018 | Correctional order (to establish an industrial safety and health committee and provide training related to employee safety and health) | Articles 19-1 and 31-1 of the Industrial Safety and Health Act | Paid the fine, resolved to establish an industrial safety and health committee on May 16, 2018 and conducted additional offline and online training programs | Implement the correctional order |
[SK Planet]
(1) | Violation of the Foreign Exchange Transactions Act |
• | Date: April 27, 2018 |
• | Sanction: SK Planet paid a fine of Won 10 million for failing to pre-register its Payment Gateway business, as required by a change in applicable law. |
• | Reason and the Relevant Law: Violated Article 8-1 of the Foreign Exchange Transactions Act. |
• | Company’s Measures: Engage in close monitoring to avoid future recurrences of violation. |
[SK Telink]
(1) | Violation of the Telecommunications Business Act |
• | Date: October 12, 2018 |
• | Sanction: SK Telink received a correctional order and a fine of Won 55.4 million. |
• | Reason and the Relevant Law: Violated Article 50-1, Paragraph 5 of the Telecommunications Business Act and Article 42-1 of the related Enforcement Decree by failing to explain or notify of the availability of a similar service that is relatively cheaper before entering into “representative number service” (a fixed-line telephone credit card payment service) contracts with VAN operators after October 2012. |
• | Status of Implementation: Ceased the prohibited practice, disclosed the receipt of the correctional order in the press (December 2018) and paid the fine (December 2018). |
• | Company’s Measures: Improve operating procedures to prevent its recurrence. |
69
4. Use of Direct Financing
A. | Use of Proceeds from Public Offerings |
[SK Telecom]
(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 | Working capital | 360,000 | Working capital |
360,000 | — | |||||||||||||
Corporate bond |
78th | January 14, 2020 | Repayment of debt |
60,000 | Repayment of debt |
60,000 | — | |||||||||||||
Corporate bond |
77th | October 22, 2019 | Working capital | 400,000 | Working capital |
400,000 | — | |||||||||||||
Corporate bond |
76th | July 29, 2019 | Working capital | 70,000 | Working capital |
70,000 | — | |||||||||||||
Corporate bond |
76th | July 29, 2019 | Repayment of debt |
330,000 | Repayment of debt |
330,000 | — | |||||||||||||
Corporate bond |
75th | March 6, 2019 | Frequency usage right payments |
400,000 | Frequency usage right payments |
400,000 | — | |||||||||||||
Corporate bond |
74th | September 17, 2018 | Frequency usage right payments |
220,000 | Frequency usage right payments |
220,000 | — | |||||||||||||
Corporate bond |
74th | September 17, 2018 | Repayment of debt |
80,000 | Repayment of debt |
80,000 | — | |||||||||||||
Corporate bond |
73rd | February 20, 2018 | Working capital | 300,000 | Working capital |
300,000 | — | |||||||||||||
Corporate bond |
73rd | February 20, 2018 | Repayment of debt |
200,000 | Repayment of debt |
200,000 | — | |||||||||||||
Corporate bond |
72nd | November 10, 2017 | Working capital | 20,000 | Working capital |
20,000 | — | |||||||||||||
Corporate bond |
72nd | November 10, 2017 | Repayment of debt |
260,000 | Repayment of debt |
260,000 | — | |||||||||||||
Corporate bond |
71st | April 25, 2017 | Working capital | 30,000 | Working capital |
30,000 | — | |||||||||||||
Corporate bond |
71st | April 25, 2017 | Repayment of debt |
340,000 | Repayment of debt |
340,000 | — |
[SK Broadband]
(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 46-1 |
February 1, 2018 |
Repayment of debt (150,000) |
70,000 | Repayment of debt (150,000) |
150,000 | — | |||||||||||||
Corporate bond |
Series 46-2 |
February 1, 2018 |
80,000 | — |
70
(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 47-1 |
March 26, 2018 |
Repayment of debt (210,000) |
50,000 | Repayment of debt (210,000) |
210,000 | — | |||||||||||||
Corporate bond |
Series 47-2 |
March 26, 2018 |
160,000 | — | ||||||||||||||||
Corporate bond |
Series 48-1 |
September 24, 2019 |
Repayment of debt (186,200) |
80,000 | Repayment of debt (186,200) |
230,000 | — | |||||||||||||
Corporate bond |
Series 48-2 |
September 24, 2019 |
100,000 | |||||||||||||||||
Corporate bond |
Series 48-3 |
September 24, 2019 |
Working capital (43,800) |
50,000 | Working Capital (43,800) |
— | — | |||||||||||||
Corporate bond |
Series 49-1 |
June 11, 2020 | -Repayment of debt (159,200) -Working |
100,000 | -Repayment of debt (159,200) -Working |
183,100 | |
Payment of working capital in installments; unused funds to be paid after depositing with a financial institution |
| |||||||||||
Corporate bond |
Series 49-2 |
June 11, 2020 | 100,000 |
* | Commercial papers and foreign bonds that do not require securities reports in Korea have been omitted. |
B. | Use of Proceeds from Private Offerings |
[Dreamus Company]
(As of June 30, 2020) | (Unit: in millions of Won) | |||||||||||||||||
Classification |
Payment Date | Planned Use of Proceeds | Actual Use of Proceeds | Reasons for Difference |
||||||||||||||
Use | Amount | Use | Amount | |||||||||||||||
Capital increase through third-party allotment (No. 2) |
December 23, 2014 | Facility and operating funds |
25,000 | Expansion of R&D, marketing, facility investment and high- quality music infrastructure regarding Astell & Kern |
25,000 | — | ||||||||||||
Convertible bonds (No. 2) |
December 23, 2014 | Facility and operating funds |
5,000 | Expansion of R&D, marketing, facility investment and high- quality music infrastructure regarding Astell & Kern |
5,000 | — | ||||||||||||
Capital increase through third-party allotment (No. 3) |
August 29, 2017 | Expansion of new businesses |
65,000 | Acquisition of equity interest in Life Design Company Inc.; acquisition of supply and distribution rights of music records/digital contents; acquisition of equity interest and investment in Groovers |
65,000 | — |
71
(As of June 30, 2020) | (Unit: in millions of Won) | |||||||||||||||||
Classification |
Payment Date | Planned Use of Proceeds | Actual Use of Proceeds | Reasons for Difference |
||||||||||||||
Use | Amount | Use | Amount | |||||||||||||||
Capital increase through third-party allotment (No. 4) |
August 10, 2018 | Strengthening of contents business and establishment of infrastructure related to music industry |
70,000 | Operating expenses for music business and investment in contents |
70,000 | — |
C. | Material Events Subsequent to the Reporting Period |
The Company declared interim dividends by resolution of its board of directors on July 21, 2020 as follows:
Amount of interim dividends |
Won 1,000 per share in cash (Total dividend amount Won 73,136 million) | |
Market price dividend yield |
0.5% | |
Record date |
June 30, 2020 | |
Payment date |
To be paid on or before August 21, 2020 pursuant to Article 464-2(1) of the Korean Commercial Code |
72
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SK Telecom Co., Ltd. | ||
(Registrant) |
By: | /s/ Jeong Hwan Choi |
(Signature) | ||
Name: | Jeong Hwan Choi | |
Title: | Senior Vice President |
Date: September 14, 2020
SK TELECOM CO., LTD. AND SUBSIDIARIES
Condensed Consolidated Interim Financial Statements
(Unaudited)
June 30, 2020 and 2019
(With Independent Auditors’ Review Report Thereon)
Independent Auditors’ Review Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
SK Telecom Co., Ltd.:
Reviewed financial statements
We have reviewed the accompanying condensed consolidated interim financial statements of SK Telecom Co., Ltd. and its subsidiaries (the “Group”), which comprise the condensed consolidated statement of financial position as of June 30, 2020, the condensed consolidated statements of income and comprehensive income for the three and six-month periods ended June 30, 2020 and 2019, the condensed consolidated statements of changes in equity and cash flows for the six-month periods ended June 30, 2020 and 2019, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s responsibility
Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034, Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of condensed consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ review responsibility
Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews.
We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared fairly, in all material respects, in accordance with K-IFRS No.1034, Interim Financial Reporting.
Other matters
The consolidated statement of financial position of the Group as of December 31, 2019, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 10, 2020, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2019, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.
The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.
KPMG Samjong Accounting Corp.
Seoul, Korea
August 13, 2020
This report is effective as of August 13, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
2
SK TELECOM CO., LTD. (the “Parent Company”) AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF JUNE 30, 2020, AND DECEMBER 31, 2019, AND
FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND 2019
The accompanying condensed consolidated interim financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Parent Company.
Park, Jung-Ho
Chief Executive Officer
SK TELECOM CO., LTD.
3
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Financial Position
As of June 30, 2020 and December 31, 2019
(In millions of won) | Note | June 30, 2020 | December 31, 2019 | |||||||||||||
Assets |
||||||||||||||||
Current Assets: |
||||||||||||||||
Cash and cash equivalents |
29,30 | 1,496,903 | 1,270,824 | |||||||||||||
Short-term financial instruments |
29,30 | 900,547 | 830,647 | |||||||||||||
Short-term investment securities |
9,29,30 | 80,882 | 166,666 | |||||||||||||
Accounts receivable—trade, net |
5,29,30,31 | 2,244,884 | 2,230,979 | |||||||||||||
Short-term loans, net |
5,29,30,31 | 78,928 | 66,123 | |||||||||||||
Accounts receivable—other, net |
5,29,30,31,32 | 837,373 | 905,436 | |||||||||||||
Contract assets |
7,30 | 104,383 | 127,499 | |||||||||||||
Prepaid expenses |
6 | 2,123,974 | 2,030,550 | |||||||||||||
Prepaid income taxes |
27 | 1,025 | 63,748 | |||||||||||||
Derivative financial assets |
19,29,30 | 14,696 | 26,253 | |||||||||||||
Inventories, net |
8 | 204,349 | 162,882 | |||||||||||||
Advanced payments and others |
5,29,30,31 | 173,384 | 220,687 | |||||||||||||
|
|
|
|
|||||||||||||
8,261,328 | 8,102,294 | |||||||||||||||
|
|
|
|
|||||||||||||
Non-Current Assets: |
||||||||||||||||
Long-term financial instruments |
29,30 | 91,850 | 990 | |||||||||||||
Long-term investment securities |
9,29,30 | 1,109,269 | 857,215 | |||||||||||||
Investments in associates and joint ventures |
11 | 13,874,353 | 13,385,264 | |||||||||||||
Property and equipment, net |
12,13,31,32 | 12,544,240 | 12,334,280 | |||||||||||||
Goodwill |
10 | 3,112,809 | 2,949,530 | |||||||||||||
Intangible assets, net |
14 | 4,968,547 | 4,866,092 | |||||||||||||
Long-term contract assets |
7,30 | 44,891 | 64,359 | |||||||||||||
Long-term loans, net |
5,29,30,31 | 33,639 | 33,760 | |||||||||||||
Long-term accounts receivable—other |
5,29,30,31,32 | 252,370 | 344,662 | |||||||||||||
Long-term prepaid expenses |
6 | 1,124,305 | 1,241,429 | |||||||||||||
Guarantee deposits |
5,29,30,31 | 172,958 | 164,734 | |||||||||||||
Long-term derivative financial assets |
19,29,30 | 218,232 | 124,707 | |||||||||||||
Deferred tax assets |
27 | 115,987 | 109,057 | |||||||||||||
Defined benefit assets |
18 | — | 1,125 | |||||||||||||
Other non-current assets |
5,29,30 | 32,372 | 32,122 | |||||||||||||
|
|
|
|
|||||||||||||
37,695,822 | 36,509,326 | |||||||||||||||
|
|
|
|
|||||||||||||
45,957,150 | 44,611,620 | |||||||||||||||
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
4
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Financial Position, Continued
As of June 30, 2020 and December 31, 2019
(In millions of won) | Note | June 30, 2020 | December 31, 2019 | |||||||||||||
Liabilities and Shareholders’ Equity |
||||||||||||||||
Current Liabilities: |
||||||||||||||||
Accounts payable—trade |
29,30,31 | 370,929 | 438,297 | |||||||||||||
Accounts payable—other |
29,30,31 | 2,374,726 | 2,521,474 | |||||||||||||
Withholdings |
29,30,31 | 1,277,971 | 1,350,244 | |||||||||||||
Contract liabilities |
7 | 195,596 | 191,225 | |||||||||||||
Accrued expenses |
29,30 | 1,346,288 | 1,425,251 | |||||||||||||
Income tax payable |
27 | 156,198 | 5,450 | |||||||||||||
Provisions |
17,32 | 95,624 | 89,446 | |||||||||||||
Short-term borrowings |
15,29,30 | 105,000 | 20,603 | |||||||||||||
Current installments of long-term debt, net |
15,29,30 | 780,526 | 1,017,327 | |||||||||||||
Current installments of long-term payables—other |
16,29,30 | 422,284 | 423,839 | |||||||||||||
Lease liabilities |
29,30,31 | 304,115 | 304,247 | |||||||||||||
Other current liabilities |
6,142 | 319 | ||||||||||||||
|
|
|
|
|||||||||||||
7,435,399 | 7,787,722 | |||||||||||||||
|
|
|
|
|||||||||||||
Non-Current Liabilities: |
||||||||||||||||
Debentures, excluding current installments, net |
15,29,30 | 7,960,213 | 7,253,894 | |||||||||||||
Long-term borrowings, excluding current installments, net |
15,29,30,32 | 1,951,694 | 1,972,149 | |||||||||||||
Long-term payables—other |
16,29,30 | 1,137,932 | 1,550,167 | |||||||||||||
Long-term lease liabilities |
29,30,31 | 362,456 | 408,493 | |||||||||||||
Long-term contract liabilities |
7 | 32,336 | 32,231 | |||||||||||||
Defined benefit liabilities |
18 | 268,553 | 172,258 | |||||||||||||
Long-term derivative financial liabilities |
19,29,30 | 16,642 | 1,043 | |||||||||||||
Long-term provisions |
17,32 | 45,024 | 53,783 | |||||||||||||
Deferred tax liabilities |
27 | 2,634,816 | 2,466,295 | |||||||||||||
Other non-current liabilities |
29,30 | 95,362 | 90,049 | |||||||||||||
|
|
|
|
|||||||||||||
14,505,028 | 14,000,362 | |||||||||||||||
|
|
|
|
|||||||||||||
Total Liabilities |
21,940,427 | 21,788,084 | ||||||||||||||
|
|
|
|
|||||||||||||
Shareholders’ Equity: |
||||||||||||||||
Share capital |
1,20 | 44,639 | 44,639 | |||||||||||||
Capital surplus and others |
20,21 | 1,218,524 | 1,006,481 | |||||||||||||
Retained earnings |
22 | 22,284,645 | 22,235,285 | |||||||||||||
Reserves |
23 | (51,146 | ) | (329,576 | ) | |||||||||||
|
|
|
|
|||||||||||||
Equity attributable to owners of the Parent Company |
23,496,662 | 22,956,829 | ||||||||||||||
Non-controlling interests |
520,061 | (133,293 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Total Shareholders’ Equity |
24,016,723 | 22,823,536 | ||||||||||||||
|
|
|
|
|||||||||||||
45,957,150 | 44,611,620 | |||||||||||||||
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
5
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Income
For the three and six-month periods ended June 30, 2020 and 2019
(In millions of won) | 2020 | 2019 | ||||||||||||||||||||||
Note | Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
||||||||||||||||||||
Operating revenue: |
4,31 | |||||||||||||||||||||||
Revenue |
4,602,813 | 9,053,209 | 4,437,029 | 8,771,935 | ||||||||||||||||||||
Operating expenses: |
31 | |||||||||||||||||||||||
Labor |
735,707 | 1,478,476 | 699,323 | 1,390,280 | ||||||||||||||||||||
Commissions |
6 | 1,333,897 | 2,631,865 | 1,256,343 | 2,530,069 | |||||||||||||||||||
Depreciation and amortization |
4 | 985,275 | 1,960,672 | 930,351 | 1,821,501 | |||||||||||||||||||
Network interconnection |
207,327 | 402,297 | 187,744 | 377,111 | ||||||||||||||||||||
Leased lines |
68,985 | 135,902 | 66,223 | 137,021 | ||||||||||||||||||||
Advertising |
93,300 | 167,254 | 104,706 | 190,516 | ||||||||||||||||||||
Rent |
50,072 | 102,427 | 58,999 | 117,416 | ||||||||||||||||||||
Cost of goods sold |
8 | 362,824 | 711,795 | 440,124 | 817,364 | |||||||||||||||||||
Others |
24 | 405,950 | 801,009 | 370,386 | 745,255 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
4,243,337 | 8,391,697 | 4,114,199 | 8,126,533 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating profit |
4 | 359,476 | 661,512 | 322,830 | 645,402 | |||||||||||||||||||
Finance income |
4,26 | 32,905 | 68,408 | 27,089 | 64,657 | |||||||||||||||||||
Finance costs |
4,26 | (100,485 | ) | (206,901 | ) | (107,520 | ) | (213,027 | ) | |||||||||||||||
Gain relating to investments in associates and joint ventures, net |
4,11 | 267,004 | 407,899 | 136,076 | 359,421 | |||||||||||||||||||
Other non-operating income |
4,25 | 28,681 | 45,406 | 8,553 | 16,488 | |||||||||||||||||||
Other non-operating expenses |
4,25 | (39,310 | ) | (58,058 | ) | (33,809 | ) | (51,914 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Profit before income tax |
4 | 548,271 | 918,266 | 353,219 | 821,027 | |||||||||||||||||||
Income tax expense |
27 | 116,117 | 179,265 | 94,163 | 188,340 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Profit for the period |
432,154 | 739,001 | 259,056 | 632,687 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Attributable to: |
||||||||||||||||||||||||
Owners of the Parent Company |
427,210 | 736,650 | 263,397 | 642,586 | ||||||||||||||||||||
Non-controlling interests |
4,944 | 2,351 | (4,341 | ) | (9,899 | ) | ||||||||||||||||||
Earnings per share: |
28 | |||||||||||||||||||||||
Basic and diluted earnings per share (in won) |
5,790 | 9,971 | 3,613 | 8,838 |
See accompanying notes to the condensed consolidated interim financial statements.
6
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Comprehensive Income
For the three and six-month periods ended June 30, 2020 and 2019
(In millions of won) | 2020 | 2019 | ||||||||||||||||||||||
Note | Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30, |
||||||||||||||||||||
Profit for the period |
432,154 | 739,001 | 259,056 | 632,687 | ||||||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: |
||||||||||||||||||||||||
Remeasurement of defined benefit liabilities |
18 | 1,469 | (21,581 | ) | (1,182 | ) | (10,749 | ) | ||||||||||||||||
Net change in other comprehensive loss of investments in associates and joint ventures |
11,23 | (971 | ) | (1,962 | ) | (1,153 | ) | (2,416 | ) | |||||||||||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income |
23 | 202,636 | 182,367 | (9,229 | ) | (6,206 | ) | |||||||||||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: |
||||||||||||||||||||||||
Net change in other comprehensive income (loss) of investments in associates and joint ventures |
11,23 | (47,018 | ) | 63,760 | 6,492 | 73,610 | ||||||||||||||||||
Net change in unrealized fair value of derivatives |
23 | 13,857 | 18,438 | 16,518 | 29,143 | |||||||||||||||||||
Foreign currency translation differences for foreign operations |
23 | (1,980 | ) | 16,682 | 7,198 | 11,188 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Other comprehensive income for the period, net of taxes |
167,993 | 257,704 | 18,644 | 94,570 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total comprehensive income |
600,147 | 996,705 | 277,700 | 727,257 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total comprehensive income (loss) attributable to: |
||||||||||||||||||||||||
Owners of the Parent Company |
594,192 | 993,401 | 281,418 | 736,562 | ||||||||||||||||||||
Non-controlling interests |
5,955 | 3,304 | (3,718 | ) | (9,305 | ) |
See accompanying notes to the condensed consolidated interim financial statements.
7
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Changes in Equity
For the six-month periods ended June 30, 2020 and 2019
(In millions of won) | ||||||||||||||||||||||||||||||||||||
Controlling interests | Non-controlling interests |
Total equity | ||||||||||||||||||||||||||||||||||
Note | Share capital | Capital surplus and others |
Retained earnings |
Reserves | Sub-total | |||||||||||||||||||||||||||||||
Balance, December 31, 2018 |
44,639 | 655,084 | 22,144,541 | (373,442 | ) | 22,470,822 | (121,572 | ) | 22,349,250 | |||||||||||||||||||||||||||
Impact of adopting K-IFRS No. 1116 |
— | — | (24,956 | ) | — | (24,956 | ) | (503 | ) | (25,459 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance, January 1, 2019 |
44,639 | 655,084 | 22,119,585 | (373,442 | ) | 22,445,866 | (122,075 | ) | 22,323,791 | |||||||||||||||||||||||||||
Total comprehensive income: |
||||||||||||||||||||||||||||||||||||
Profit (loss) for the period |
— | — | 642,586 | — | 642,586 | (9,899 | ) | 632,687 | ||||||||||||||||||||||||||||
Other comprehensive income (loss) |
11,18,23 | — | — | 17,726 | 76,250 | 93,976 | 594 | 94,570 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
— | — | 660,312 | 76,250 | 736,562 | (9,305 | ) | 727,257 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Transactions with owners: |
||||||||||||||||||||||||||||||||||||
Annual dividends |
— | — | (646,828 | ) | — | (646,828 | ) | — | (646,828 | ) | ||||||||||||||||||||||||||
Share option |
21 | — | 157 | — | — | 157 | 279 | 436 | ||||||||||||||||||||||||||||
Interest on hybrid bonds |
— | — | (7,383 | ) | — | (7,383 | ) | — | (7,383 | ) | ||||||||||||||||||||||||||
Changes in ownership in subsidiaries |
— | (239 | ) | — | — | (239 | ) | 32,767 | 32,528 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
— | (82 | ) | (654,211 | ) | — | (654,293 | ) | 33,046 | (621,247 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance, June 30, 2019 |
44,639 | 655,002 | 22,125,686 | (297,192 | ) | 22,528,135 | (98,334 | ) | 22,429,801 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance, January 1, 2020 |
44,639 | 1,006,481 | 22,235,285 | (329,576 | ) | 22,956,829 | (133,293 | ) | 22,823,536 | |||||||||||||||||||||||||||
Total comprehensive income: |
||||||||||||||||||||||||||||||||||||
Profit (loss) for the period |
— | — | 736,650 | — | 736,650 | 2,351 | 739,001 | |||||||||||||||||||||||||||||
Other comprehensive income (loss) |
11,18,23 | — | — | (21,679 | ) | 278,430 | 256,751 | 953 | 257,704 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
— | — | 714,971 | 278,430 | 993,401 | 3,304 | 996,705 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Transactions with owners: |
||||||||||||||||||||||||||||||||||||
Annual dividends |
— | — | (658,228 | ) | — | (658,228 | ) | (5,765 | ) | (663,993 | ) | |||||||||||||||||||||||||
Share option |
21 | — | 103 | — | — | 103 | 754 | 857 | ||||||||||||||||||||||||||||
Interest on hybrid bonds |
— | — | (7,383 | ) | — | (7,383 | ) | — | (7,383 | ) | ||||||||||||||||||||||||||
Changes in ownership in subsidiaries |
— | 211,940 | — | — | 211,940 | 655,061 | 867,001 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
— | 212,043 | (665,611 | ) | — | (453,568 | ) | 650,050 | 196,482 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance, June 30, 2020 |
44,639 | 1,218,524 | 22,284,645 | (51,146 | ) | 23,496,662 | 520,061 | 24,016,723 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
8
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Cash Flows
For the six-month periods ended June 30, 2020 and 2019
(In millions of won) | Note | June 30, 2020 |
June 30, 2019 |
|||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Cash generated from operating activities: |
||||||||||||||||
Profit for the period |
739,001 | 632,687 | ||||||||||||||
Adjustments for income and expenses |
33 | 2,133,367 | 2,020,232 | |||||||||||||
Changes in assets and liabilities related to operating activities |
33 | (22,621 | ) | (550,027 | ) | |||||||||||
|
|
|
|
|||||||||||||
2,849,747 | 2,102,892 | |||||||||||||||
Interest received |
19,422 | 23,873 | ||||||||||||||
Dividends received |
165,645 | 229,074 | ||||||||||||||
Interest paid |
(175,736 | ) | (191,361 | ) | ||||||||||||
Income tax refunded(paid) |
25,650 | (164,621 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Net cash provided by operating activities |
2,884,728 | 1,999,857 | ||||||||||||||
|
|
|
|
|||||||||||||
Cash flows from investing activities: |
||||||||||||||||
Cash inflows from investing activities: |
||||||||||||||||
Decrease in short-term financial instruments, net |
— | 336,375 | ||||||||||||||
Decrease in short-term investment securities, net |
86,468 | 116,485 | ||||||||||||||
Collection of short-term loans |
58,047 | 54,073 | ||||||||||||||
Decrease in long-term financial instruments |
99 | — | ||||||||||||||
Proceeds from disposals of long-term investment securities |
7,721 | 229,798 | ||||||||||||||
Proceeds from disposals of investments in associates and joint ventures |
2,715 | 81 | ||||||||||||||
Proceeds from disposals of property and equipment |
4,860 | 5,260 | ||||||||||||||
Proceeds from disposals of intangible assets |
4,165 | 3,893 | ||||||||||||||
Collection of long-term loans |
1,550 | 942 | ||||||||||||||
Decrease in deposits |
10,618 | 6,354 | ||||||||||||||
Proceeds from settlement of derivatives |
359 | 288 | ||||||||||||||
Collection of lease receivables |
— | 13,733 | ||||||||||||||
Proceeds from disposals of subsidiaries |
— | 9,301 | ||||||||||||||
Cash inflow from business combinations, net |
115,834 | 4,944 | ||||||||||||||
|
|
|
|
|||||||||||||
292,436 | 781,527 | |||||||||||||||
Cash outflows for investing activities: |
||||||||||||||||
Increase in short-term financial instruments, net |
(69,981 | ) | — | |||||||||||||
Increase in short-term loans |
(68,936 | ) | (68,021 | ) | ||||||||||||
Increase in long-term loans |
(3,483 | ) | (4,800 | ) | ||||||||||||
Increase in long-term financial instruments |
(90,959 | ) | — | |||||||||||||
Acquisitions of long-term investment securities |
(5,461 | ) | (62,405 | ) | ||||||||||||
Acquisitions of investments in associates and joint ventures |
(151,357 | ) | (138,124 | ) | ||||||||||||
Acquisitions of property and equipment |
(1,695,883 | ) | (1,341,042 | ) | ||||||||||||
Acquisitions of intangible assets |
(69,604 | ) | (24,379 | ) | ||||||||||||
Increase in deposits |
(6,145 | ) | (5,399 | ) | ||||||||||||
Cash outflow for business combinations, net |
— | (36,900 | ) | |||||||||||||
|
|
|
|
|||||||||||||
(2,161,809 | ) | (1,681,070 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Net cash used in investing activities |
(1,869,373 | ) | (899,543 | ) | ||||||||||||
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
9
SK TELECOM CO., LTD. and Subsidiaries
Condensed Consolidated Interim Statements of Cash Flows, Continued
For the six-month periods ended June 30, 2020 and 2019
(In millions of won) | Note | June 30, 2020 | June 30, 2019 | |||||||||||||
Cash flows from financing activities: |
||||||||||||||||
Cash inflows from financing activities: |
||||||||||||||||
Proceeds from short-term borrowings, net |
84,375 | — | ||||||||||||||
Proceeds from issuance of debentures |
972,863 | 607,427 | ||||||||||||||
Proceeds from long-term borrowings |
1,250 | — | ||||||||||||||
Cash inflows from settlement of derivatives |
41,182 | 11,931 | ||||||||||||||
Transactions with non-controlling shareholders |
1,349 | 3,933 | ||||||||||||||
|
|
|
|
|||||||||||||
1,101,019 | 623,291 | |||||||||||||||
Cash outflows for financing activities: |
||||||||||||||||
Repayments of short-term borrowings, net |
— | (30,466 | ) | |||||||||||||
Repayments of long-term payable – other |
(426,950 | ) | (426,696 | ) | ||||||||||||
Repayments of debentures |
(584,590 | ) | (430,000 | ) | ||||||||||||
Repayments of long-term borrowings |
(25,295 | ) | (26,983 | ) | ||||||||||||
Payments of dividends |
(658,228 | ) | (646,828 | ) | ||||||||||||
Payments of interest on hybrid bonds |
(7,383 | ) | (7,383 | ) | ||||||||||||
Repayments of lease liabilities |
(186,314 | ) | (182,235 | ) | ||||||||||||
Transactions with non-controlling shareholders |
(9,418 | ) | (26,136 | ) | ||||||||||||
|
|
|
|
|||||||||||||
(1,898,178 | ) | (1,776,727 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Net cash used in financing activities |
(797,159 | ) | (1,153,436 | ) | ||||||||||||
|
|
|
|
|||||||||||||
Net increase (decrease) in cash and cash equivalents |
218,196 | (53,122 | ) | |||||||||||||
Cash and cash equivalents at beginning of the period |
1,270,824 | 1,506,699 | ||||||||||||||
Effects of exchange rate changes on cash and cash equivalents |
7,883 | (1,981 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Cash and cash equivalents at end of the period |
1,496,903 | 1,451,596 | ||||||||||||||
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements.
10
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
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 June 30, 2020, the Parent Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) |
|||||||
SK Holdings Co., Ltd. |
21,624,120 | 26.78 | ||||||
National Pension Service |
9,502,565 | 11.77 | ||||||
Institutional investors and other shareholders |
40,743,143 | 50.46 | ||||||
Kakao Co., Ltd. |
1,266,620 | 1.57 | ||||||
Treasury shares |
7,609,263 | 9.42 | ||||||
|
|
|
|
|||||
80,745,711 | 100.00 | |||||||
|
|
|
|
These condensed consolidated interim financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). SK Holdings Co., Ltd. is the ultimate controlling entity of the Parent Company.
11
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
1. | Reporting Entity, Continued |
(2) | List of subsidiaries |
The list of subsidiaries as of June 30, 2020 and December 31, 2019 is as follows:
Ownership (%)(*1) |
||||||||||||||
Subsidiary |
Location | Primary business |
June. 30, 2020 |
Dec. 31, 2019 |
||||||||||
Subsidiaries |
SK Telink Co., Ltd. | Korea | Telecommunications 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.(*2) | Korea | Telecommunications services | 74.3 | 100.0 | ||||||||||
PS&Marketing Corporation | Korea | Communications device retail business | 100.0 | 100.0 | ||||||||||
SERVICE ACE Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SERVICE TOP Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SK O&S Co., Ltd. | Korea | Base station maintenance service | 100.0 | 100.0 | ||||||||||
SK Telecom China Holdings Co., Ltd. | China | Investment (holdings company) | 100.0 | 100.0 | ||||||||||
SK Global Healthcare Business Group, Ltd. | Hong Kong | Investment | 100.0 | 100.0 | ||||||||||
YTK Investment Ltd. | Cayman Islands |
Investment association | 100.0 | 100.0 | ||||||||||
Atlas Investment | Cayman Islands |
Investment association | 100.0 | 100.0 | ||||||||||
SKT Americas, Inc. | USA | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
One Store Co., Ltd.(*3) | Korea | Telecommunications services | 52.1 | 52.7 | ||||||||||
SK Planet Co., Ltd. | Korea | Telecommunications services, system software development and supply services |
98.7 | 98.7 | ||||||||||
Eleven Street Co., Ltd.(*4) | Korea | E-commerce | 80.3 | 80.3 | ||||||||||
DREAMUS COMPANY | Korea | Manufacturing digital audio players |
51.4 | 51.4 | ||||||||||
SK Infosec Co., Ltd. | Korea | Information security service | 100.0 | 100.0 | ||||||||||
Life & Security Holdings Co., Ltd. | Korea | Investment (holdings company) | 55.0 | 55.0 | ||||||||||
Quantum Innovation Fund I | Korea | Investment | 59.9 | 59.9 | ||||||||||
SK Telecom Japan Inc. | Japan | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
id Quantique SA | Switzerland | Quantum information and |
66.8 | 66.8 | ||||||||||
SK Telecom TMT Investment Corp. | USA | Investment | 100.0 | 100.0 | ||||||||||
FSK L&S Co., Ltd. | Korea | Freight and logistics consulting business | 60.0 | 60.0 | ||||||||||
Incross Co., Ltd. | Korea | Media representative business | 34.6 | 34.6 | ||||||||||
Happy Hanool Co., Ltd. | Korea | Service | 100.0 | 100.0 | ||||||||||
SK stoa Co., Ltd.(*5) | Korea | Other telecommunications retail business | 100.0 | — | ||||||||||
Broadband Nowon Co., Ltd.(*6) | Korea | Cable broadcasting services | 55.0 | — |
12
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of June 30, 2020 and December 31, 2019 is as follows, Continued:
Ownership (%)(*1) |
||||||||||||||
Subsidiary |
Location | Primary business |
June. 30, 2020 |
Dec. 31, 2019 |
||||||||||
Subsidiaries owned by |
SK m&service Co., Ltd. | Korea | Database and Internet website service | 100.0 | 100.0 | |||||||||
SK Planet Global Holdings Pte. Ltd. | Singapore | Investment (holdings company) | 100.0 | 100.0 | ||||||||||
SKP America LLC. | USA | Digital contents sourcing service | 100.0 | 100.0 | ||||||||||
K-net Culture and Contents Venture Fund | Korea | Capital investing in startups | 59.0 | 59.0 | ||||||||||
Subsidiaries owned by DREAMUS COMPANY |
iriver Enterprise Ltd. | Hong Kong | Management of Chinese subsidiaries | 100.0 | 100.0 | |||||||||
iriver China Co., Ltd. | China | Sales and manufacturing of MP3 and 4 | 100.0 | 100.0 | ||||||||||
Dongguan iriver Electronics Co., Ltd. | China | Sales and manufacturing of e-book devices | 100.0 | 100.0 | ||||||||||
LIFE DESIGN COMPANY Inc. | Japan | Sales of goods in Japan | 100.0 | 100.0 | ||||||||||
Subsidiary owned by |
SKinfosec Information Technology(Wuxi) |
China | System software development and |
100.0 | 100.0 | |||||||||
Subsidiaries owned by Life & Security Holdings Co., Ltd. |
ADT CAPS Co., Ltd. | Korea | Unmanned security | 100.0 | 100.0 | |||||||||
CAPSTEC Co., Ltd. | Korea | Manned security | 100.0 | 100.0 | ||||||||||
ADT SECURITY Co., Ltd.(*6) | Korea | Sales and trade of anti-theft devices |
— | 100.0 | ||||||||||
Subsidiary owned by |
SK TELINK VIETNAM Co., Ltd. | Vietnam | Communications device retail business | 100.0 | 100.0 | |||||||||
Subsidiaries owned by |
Home & Service Co., Ltd. | Korea | Operation of information and |
100.0 | 100.0 | |||||||||
SK stoa Co., Ltd.(*5) | Korea | Other telecommunications retail business | — | 100.0 | ||||||||||
Subsidiary owned by |
SK Planet Japan, K. K. | Japan | Digital contents sourcing service | 79.8 | 79.8 | |||||||||
Subsidiary owned by |
Id Quantique LLC | Korea | Quantum information and communications |
100.0 | 100.0 | |||||||||
Subsidiaries owned by |
FSK L&S(Shanghai) Co., Ltd. | China | Logistics business | 66.0 | 66.0 | |||||||||
FSK L&S(Hungary) Co., Ltd. | Hungary | Logistics business | 100.0 | 100.0 | ||||||||||
FSK L&S VIETNAM COMPANY |
Vietnam | Logistics business | 100.0 | — | ||||||||||
Subsidiaries owned by |
Infra Communications Co., Ltd. | Korea | Service operation | 100.0 | 100.0 | |||||||||
Mindknock Co., Ltd. | Korea | Software development | 100.0 | 100.0 | ||||||||||
Others(*7) |
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 |
13
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of June 30, 2020 and December 31, 2019 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) | On April 30, 2020, SK Broadband Co., Ltd. merged with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. to strengthen competitiveness and enhance synergy as a broad media company. The Parent Company’s ownership interest of SK Broadband Co., Ltd. changed as SK Broadband Co., Ltd. issued new shares to the shareholders of the merged companies as the consideration for the merger. |
(*3) | The ownership interest changed as third-party share option of One Store Co., Ltd. was exercised during the six-month period ended June 30, 2020. |
(*4) | 80.3% of the shares issued by Eleven Street Co., Ltd. are owned by the Parent Company and 18.2% of redeemable
convertible preferred shares with voting rights are owned by non-controlling shareholder. For the year ended December 31, 2019, Eleven Street Co., Ltd. acquired 1.5% of its outstanding shares from SK
Planet Co., Ltd., which is currently held as treasury shares as of June 30, 2020. The Parent Company is obliged to guarantee dividend of at least 1% per annum of the preferred share’s issue price to the investor by the date on which Eleven
Street Co., Ltd. is publicly listed or at the end of qualifying listing period, whichever occurs first. The present value of obligatory dividends amounting to |
(*5) | The Parent Company acquired 3,631,355 shares (100%) of SK stoa Co., Ltd. from SK Broadband Co., Ltd., a
subsidiary of the Parent Company, at |
(*6) | Details of changes in the consolidation scope for the six-month period ended June 30, 2020 are presented in note 1-(4). |
(*7) | Others are owned together by Atlas Investment and another subsidiary of the Parent Company. |
14
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries |
1) | Condensed financial information of the significant subsidiaries as of and for the six-month period ended June 30, 2020 is as follows: |
(In millions of won) | ||||||||||||||||||||||||
As of June 30, 2020 | For the six-month period ended June 30, 2020 |
|||||||||||||||||||||||
Subsidiary |
Total assets | Total liabilities |
Total equity |
Revenue | Profit (loss) |
|||||||||||||||||||
SK Telink Co., Ltd.(*1) |
171,288 | 62,792 | 108,496 | 179,389 | 10,017 | |||||||||||||||||||
Eleven Street Co., Ltd. |
944,133 | 474,517 | 469,616 | 257,589 | 960 | |||||||||||||||||||
SK m&service Co., Ltd. |
113,435 | 60,045 | 53,390 | 104,307 | 2,906 | |||||||||||||||||||
SK Broadband Co., Ltd. |
5,629,254 | 3,064,665 | 2,564,589 | 1,741,112 | 67,838 | |||||||||||||||||||
K-net Culture and Contents Venture Fund |
151,490 | 21,163 | 130,327 | — | (3 | ) | ||||||||||||||||||
PS&Marketing Corporation |
437,681 | 228,707 | 208,974 | 650,336 | (5,061 | ) | ||||||||||||||||||
SERVICE ACE Co., Ltd. |
100,550 | 75,210 | 25,340 | 105,472 | 2,590 | |||||||||||||||||||
SERVICE TOP Co., Ltd. |
72,822 | 54,881 | 17,941 | 100,298 | 1,865 | |||||||||||||||||||
SK O&S Co., Ltd. |
87,008 | 53,649 | 33,359 | 122,260 | (47 | ) | ||||||||||||||||||
SK Planet Co., Ltd. |
544,117 | 223,035 | 321,082 | 126,640 | 3,681 | |||||||||||||||||||
DREAMUS COMPANY(*2) |
186,711 | 72,176 | 114,535 | 107,602 | (4,444 | ) | ||||||||||||||||||
Life & Security Holdings Co., Ltd.(*3) |
2,663,331 | 2,373,579 | 289,752 | 474,400 | (303 | ) | ||||||||||||||||||
SK Infosec Co., Ltd.(*4) |
149,563 | 65,529 | 84,034 | 136,714 | 9,037 | |||||||||||||||||||
One Store Co., Ltd. |
241,547 | 94,344 | 147,203 | 80,132 | 3,090 | |||||||||||||||||||
Home & Service Co., Ltd. |
128,454 | 91,237 | 37,217 | 196,120 | 1,618 | |||||||||||||||||||
SK stoa Co., Ltd. |
78,000 | 57,580 | 20,420 | 125,301 | 8,992 | |||||||||||||||||||
FSK L&S Co., Ltd.(*5) |
54,665 | 25,003 | 29,662 | 88,475 | 1,593 | |||||||||||||||||||
Incross Co., Ltd.(*6) |
132,461 | 65,883 | 66,578 | 16,200 | 4,455 |
(*1) | The condensed financial information of SK Telink Co., Ltd. is consolidated financial information including SK TELINK VIETNAM Co., Ltd. |
(*2) | The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY. |
(*3) | The condensed financial information of Life & Security Holdings Co., Ltd. is consolidated financial information including ADT CAPS CO., Ltd. and another subsidiary of Life & Security Holdings Co., Ltd. |
(*4) | The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SK infosec Information Technology (Wuxi) Co., Ltd. |
(*5) | The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and two other subsidiaries of FSK L&S Co., Ltd. |
(*6) | The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary of Incross Co., Ltd. |
15
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries, Continued |
2) | Condensed financial information of the significant subsidiaries as of and for the year ended December 31, 2019 is as follows: |
(In millions of won) | ||||||||||||||||||||||||
As of December 31, 2019 | For the year ended December 31, 2019 |
|||||||||||||||||||||||
Subsidiary |
Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||||||
SK Telink Co., Ltd.(*1) |
265,725 | 77,378 | 188,347 | 363,627 | 3,010 | |||||||||||||||||||
Eleven Street Co., Ltd. |
923,424 | 446,432 | 476,992 | 530,489 | (5,077 | ) | ||||||||||||||||||
SK m&service Co., Ltd. |
109,699 | 58,605 | 51,094 | 218,848 | 2,448 | |||||||||||||||||||
SK Broadband Co., Ltd. |
4,447,549 | 2,811,417 | 1,636,132 | 3,178,805 | 48,583 | |||||||||||||||||||
K-net Culture and Contents Venture Fund |
151,493 | 21,163 | 130,330 | — | (294 | ) | ||||||||||||||||||
PS&Marketing Corporation |
439,947 | 225,942 | 214,005 | 1,684,576 | 96 | |||||||||||||||||||
SERVICE ACE Co., Ltd. |
80,844 | 55,133 | 25,711 | 206,080 | 3,906 | |||||||||||||||||||
SERVICE TOP Co., Ltd. |
66,932 | 50,060 | 16,872 | 193,377 | 2,230 | |||||||||||||||||||
SK O&S Co., Ltd. |
96,446 | 62,086 | 34,360 | 281,634 | 1,724 | |||||||||||||||||||
SK Planet Co., Ltd. |
595,838 | 278,438 | 317,400 | 275,544 | 1,214 | |||||||||||||||||||
DREAMUS COMPANY(*2) |
171,586 | 53,669 | 117,917 | 196,961 | (48,006 | ) | ||||||||||||||||||
Life & Security Holdings Co., Ltd.(*3) |
2,639,781 | 2,330,920 | 308,861 | 913,301 | 12,703 | |||||||||||||||||||
SK Infosec Co., Ltd.(*4) |
158,424 | 61,644 | 96,780 | 270,423 | 18,520 | |||||||||||||||||||
One Store Co., Ltd. |
236,329 | 93,625 | 142,704 | 135,116 | (5,415 | ) | ||||||||||||||||||
Home & Service Co., Ltd. |
113,176 | 76,192 | 36,984 | 351,154 | (267 | ) | ||||||||||||||||||
SK stoa Co., Ltd. |
70,754 | 59,207 | 11,547 | 196,063 | 875 | |||||||||||||||||||
FSK L&S Co., Ltd.(*5) |
47,550 | 19,651 | 27,899 | 130,872 | 306 | |||||||||||||||||||
Incross Co., Ltd.(*6) |
144,263 | 78,519 | 65,744 | 19,787 | 5,756 |
(*1) | The condensed financial information of SK Telink Co., Ltd. is consolidated financial information including SK TELINK VIETNAM Co., Ltd. |
(*2) | The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY. |
(*3) | The condensed financial information of Life & Security Holdings Co., Ltd. is consolidated financial information including ADT CAPS Co., Ltd. and two other subsidiaries of Life & Security Holdings Co., Ltd. |
(*4) | The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SK infosec Information Technology (Wuxi) Co., Ltd. |
(*5) | The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and another subsidiary of FSK L&S Co., Ltd. |
(*6) | The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary of Incross Co., Ltd. from the date of acquisition to December 31, 2019. |
16
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
1. | Reporting Entity, Continued |
(4) | Changes in subsidiaries |
1) | The list of subsidiaries that were newly included in consolidation for the six-month period ended June 30, 2020 is as follows: |
Subsidiary |
Reason | |
Broadband Nowon Co., Ltd. |
Acquired by the Parent Company | |
FSK L&S VIETNAM COMPANY LIMITED |
Established by FSK L&S Co., Ltd. |
2) | The list of subsidiary that was excluded from consolidation for the six-month period ended June 30, 2020 is as follows: |
Subsidiary |
Reason | |
ADT SECURITY Co., Ltd. |
Merged into ADT CAPS Co., Ltd. |
17
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the six-month period ended June 30, 2020 and as of and for the year ended December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
DREAMUS COMPANY |
One Store Co., Ltd. |
Eleven Street Co., Ltd. |
Life & Security Holdings Co., Ltd. |
Incross Co., Ltd. | SK Broadband Co., Ltd. |
|||||||||||||||||||||||
Ownership of non-controlling interests (%) |
48.6 | 47.9 | 18.2 | 45.0 | 55.1 | 24.9 | ||||||||||||||||||||||
As of June 30, 2020 | ||||||||||||||||||||||||||||
Current assets |
156,156 | 215,653 | 724,113 | 135,586 | 119,091 | 1,278,922 | ||||||||||||||||||||||
Non-current assets |
30,555 | 25,894 | 220,020 | 2,527,745 | 13,370 | 4,350,332 | ||||||||||||||||||||||
Current liabilities |
(67,995 | ) | (88,968 | ) | (449,121 | ) | (311,269 | ) | (62,811 | ) | (1,318,601 | ) | ||||||||||||||||
Non-current liabilities |
(4,181 | ) | (5,376 | ) | (25,396 | ) | (2,062,310 | ) | (3,072 | ) | (1,746,064 | ) | ||||||||||||||||
Net assets |
114,535 | 147,203 | 469,616 | 289,752 | 66,578 | 2,564,589 | ||||||||||||||||||||||
Fair value adjustment and others |
— | — | (14,067 | ) | (1,222,915 | ) | — | — | ||||||||||||||||||||
Net assets on the consolidated financial statements |
114,535 | 147,203 | 455,549 | (933,163 | ) | 66,578 | 2,564,589 | |||||||||||||||||||||
Carrying amount of non-controlling interests |
56,182 | 70,779 | 84,186 | (419,923 | ) | 41,015 | 644,481 | |||||||||||||||||||||
For the six-month period ended June 30, 2020 | ||||||||||||||||||||||||||||
Revenue |
107,602 | 80,132 | 257,589 | 474,400 | 16,200 | 1,741,112 | ||||||||||||||||||||||
Profit (loss) for the period |
(4,444 | ) | 3,090 | 960 | (303 | ) | 4,455 | 67,838 | ||||||||||||||||||||
Depreciation of the fair value adjustment and others |
— | — | (261 | ) | (8,958 | ) | — | — | ||||||||||||||||||||
Profit (loss) for the period on the consolidated financial statements |
(4,444 | ) | 3,090 | 699 | (9,261 | ) | 4,455 | 67,838 | ||||||||||||||||||||
Total comprehensive income (loss) |
(3,795 | ) | 3,124 | (2,636 | ) | (9,261 | ) | 4,189 | 68,805 | |||||||||||||||||||
Profit (loss) attributable to non-controlling interests |
(1,983 | ) | 1,481 | 129 | (4,168 | ) | 2,736 | 6,418 | ||||||||||||||||||||
Net cash provided by operating activities |
11,997 | 11,490 | 26,970 | 112,554 | 10,879 | 474,003 | ||||||||||||||||||||||
Net cash provided by (used in) investing activities |
(1,590 | ) | 82,195 | (99,098 | ) | (118,198 | ) | (524 | ) | (189,006 | ) | |||||||||||||||||
Net cash provided by (used in) financing activities |
(1,188 | ) | 778 | (11,445 | ) | 7,928 | (3,998 | ) | 26,970 | |||||||||||||||||||
Effects of exchange rate changes on cash and cash equivalents |
836 | 3 | 13 | — | — | — | ||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents |
10,055 | 94,466 | (83,560 | ) | 2,284 | 6,357 | 311,967 | |||||||||||||||||||||
Dividends declared to non-controlling interests |
— | — | 5,000 | 12,796 | — | — |
18
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the six-month period ended June 30, 2020 and as of and for the year ended December 31, 2019 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||
DREAMUS COMPANY |
One Store Co., Ltd. |
Eleven Street Co., Ltd. |
Life & Security Holdings Co., Ltd. |
Incross Co., Ltd. | ||||||||||||||||||||
Ownership of non-controlling interests (%) |
48.6 | 47.3 | 18.2 | 45.0 | 65.4 | |||||||||||||||||||
As of December 31, 2019 | ||||||||||||||||||||||||
Current assets |
136,269 | 208,527 | 779,568 | 126,437 | 133,741 | |||||||||||||||||||
Non-current assets |
35,317 | 27,802 | 143,856 | 2,513,344 | 10,522 | |||||||||||||||||||
Current liabilities |
(49,776 | ) | (88,842 | ) | (420,022 | ) | (279,403 | ) | (77,530 | ) | ||||||||||||||
Non-current liabilities |
(3,893 | ) | (4,783 | ) | (26,410 | ) | (2,051,517 | ) | (989 | ) | ||||||||||||||
Net assets |
117,917 | 142,704 | 476,992 | 308,861 | 65,744 | |||||||||||||||||||
Fair value adjustment and others |
— | — | (18,805 | ) | (1,219,701 | ) | — | |||||||||||||||||
Net assets on the consolidated financial statements |
117,917 | 142,704 | 458,187 | (910,840 | ) | 65,744 | ||||||||||||||||||
Carrying amount of non-controlling interests |
57,175 | 67,742 | 84,673 | (409,878 | ) | 41,074 | ||||||||||||||||||
For the year ended December 31, 2019 | ||||||||||||||||||||||||
Revenue |
196,961 | 135,116 | 530,489 | 913,301 | 19,787 | |||||||||||||||||||
Profit (loss) for the year |
(48,006 | ) | (5,415 | ) | (5,077 | ) | 12,703 | 5,756 | ||||||||||||||||
Depreciation of the fair value adjustment and others |
— | — | (614 | ) | (14,913 | ) | — | |||||||||||||||||
Profit (loss) for the year on the consolidated financial statements |
(48,006 | ) | (5,415 | ) | (5,691 | ) | (2,210 | ) | 5,756 | |||||||||||||||
Total comprehensive income (loss) |
(47,971 | ) | (5,856 | ) | (13,590 | ) | (5,413 | ) | 5,396 | |||||||||||||||
Profit (loss) attributable to non-controlling interests |
(23,281 | ) | (2,256 | ) | (1,064 | ) | (978 | ) | 3,630 | |||||||||||||||
Net cash provided by (used in) operating activities |
(1,387 | ) | 14,426 | 7,980 | 238,378 | (9,331 | ) | |||||||||||||||||
Net cash provided by (used in) investing activities |
(2,596 | ) | (87,275 | ) | 102,366 | (194,472 | ) | 5,053 | ||||||||||||||||
Net cash provided by (used in) financing activities |
(2,965 | ) | 96,189 | (72,686 | ) | (51,129 | ) | (4,644 | ) | |||||||||||||||
Effects of exchange rate changes on cash and cash equivalents |
197 | 2 | 35 | — | — | |||||||||||||||||||
Net increase (decrease) in cash and cash equivalents |
(6,751 | ) | 23,342 | 37,695 | (7,223 | ) | (8,922 | ) | ||||||||||||||||
Dividends paid to non-controlling interests |
— | — | 17,500 | 28,786 | — |
19
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
2. | Basis of Preparation |
(1) | Statement of compliance |
These condensed consolidated interim financial statements were prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034, Interim Financial Reporting, as part of the period covered by the Group’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since December 31, 2019. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.
(2) | Use of estimates and judgments |
1) Critical judgments, assumptions and estimation uncertainties
The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2019.
Meanwhile, the spread of COVID-19 pandemic is having a significant impact on domestic and foreign economies, and its duration and severity are highly uncertain and unpredictable. As of the end of the reporting period, the Group’s management cannot reasonably estimate the impact of COVID-19 pandemic on the Group’s operations and financial results.
20
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
2. | Basis of Preparation, Continued |
(2) | Use of estimates and judgments, Continued |
2) Fair value measurement
A number of the Group’s accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities. The Group has established policies and processes with respect to the measurement of fair values, including Level 3 fair values, and the measurement of fair value is reviewed and is directly reported to the finance executives.
The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Group assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
• | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
• | Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Information about assumptions used for fair value measurements are included in note 30.
21
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
3. | Significant Accounting Policies |
The significant accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2019.
4. | Operating Segments |
The Group’s operating segments have been identified to be each business unit, by which the Group provides independent services and merchandise. The Group’s reportable segments are cellular services, which include cellular voice service, wireless data service and wireless internet services; fixed-line telecommunications services, which include telephone services, internet services and leased line services; security services, which include unmanned security services, manned security services and system software development; commerce services, the open marketplace platform; and all other businesses, which include the Group’s internet portal services and other immaterial operations, each of which does not meet the quantitative threshold to be considered as a reportable segment and are presented collectively as others.
(1) | Segment information for the six-month periods ended June 30, 2020 and 2019 is as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
Cellular services |
Fixed-line Telecomm- unications services |
Security services |
Commerce services |
Others | Sub-total | Adjustments | Total | |||||||||||||||||||||||||||||
Total revenue |
6,841,043 | 2,118,040 | 611,115 | 382,890 | 551,769 | 10,504,857 | (1,451,648 | ) | 9,053,209 | |||||||||||||||||||||||||||
Inter-segment revenue |
776,064 | 508,686 | 35,607 | 6,978 | 124,313 | 1,451,648 | (1,451,648 | ) | — | |||||||||||||||||||||||||||
External revenue |
6,064,979 | 1,609,354 | 575,508 | 375,912 | 427,456 | 9,053,209 | — | 9,053,209 | ||||||||||||||||||||||||||||
Depreciation and amortization |
1,397,947 | 399,878 | 115,735 | 16,924 | 30,188 | 1,960,672 | — | 1,960,672 | ||||||||||||||||||||||||||||
Operating profit (loss) |
524,797 | 100,325 | 54,727 | 2,486 | (20,823 | ) | 661,512 | — | 661,512 | |||||||||||||||||||||||||||
Finance income and costs, net |
(138,493 | ) | ||||||||||||||||||||||||||||||||||
Gain relating to investments in associates and joint ventures, net |
407,899 | |||||||||||||||||||||||||||||||||||
Other non-operating income and expenses, net |
(12,652 | ) | ||||||||||||||||||||||||||||||||||
Profit before income tax |
918,266 |
22
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
4. | Operating Segments, Continued |
(1) | Segment information for the six-month periods ended June 30, 2020 and 2019 is as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||
Cellular services |
Fixed-line telecomm- unications services(*) |
Security services(*) |
Commerce services(*) |
Others(*) | Sub-total | Adjustments | Total | |||||||||||||||||||||||||||||
Total revenue |
6,717,679 | 1,962,339 | 568,651 | 392,809 | 504,194 | 10,145,672 | (1,373,737 | ) | 8,771,935 | |||||||||||||||||||||||||||
Inter-segment revenue |
727,866 | 489,836 | 30,172 | 7,194 | 118,669 | 1,373,737 | (1,373,737 | ) | — | |||||||||||||||||||||||||||
External revenue |
|
5,989,813 | 1,472,503 | 538,479 | 385,615 | 385,525 | 8,771,935 | — | 8,771,935 | |||||||||||||||||||||||||||
Depreciation and amortization |
|
1,298,643 | 364,917 | 94,617 | 17,851 | 45,473 | 1,821,501 | — | 1,821,501 | |||||||||||||||||||||||||||
Operating profit (loss) |
|
591,482 | 28,456 | 62,567 | 1,701 | (38,804 | ) | 645,402 | — | 645,402 | ||||||||||||||||||||||||||
Finance income and costs, net |
|
(148,370 | ) | |||||||||||||||||||||||||||||||||
Gain relating to investments in associates and joint ventures, net |
|
359,421 | ||||||||||||||||||||||||||||||||||
Other non-operating income and expenses, net |
|
(35,426 | ) | |||||||||||||||||||||||||||||||||
Profit before income tax |
|
821,027 |
(*) | During the year ended December 31, 2019, due to the change in the categorization of information reviewed by the chief operating decision maker in 2019, the Group reclassified SK stoa Co., Ltd. from Fixed-line telecommunications Service segment to Commerce Services segment. In addition, operating segment for Life & Security Holdings Co., Ltd. and SK Infosec Co., Ltd. was separately presented as a reportable segment (Security Services) and no longer included in Others segment. Segment information for the six-month period ended June 30, 2019, was restated to conform to the 2019 reclassifications. |
Since there are no intersegment sales of inventory or depreciable assets, there is no unrealized intersegment profit to be eliminated on consolidation. The Group principally operates its businesses in Korea, and the revenue amounts earned outside of Korea are immaterial. Therefore, no entity-wide geographical information is presented.
No single customer contributed 10% or more to the Group’s total revenue for the six-month periods ended June 30, 2020 and 2019.
23
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
4. | Operating Segments, Continued |
(2) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows: |
(In millions of won) | For the six-month period ended | |||||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||||
Goods and Services transferred at a point in time: |
| |||||||||||||
Cellular revenue |
Goods(*1) | 423,503 | 555,330 | |||||||||||
Fixed-line telecommunication revenue |
Goods | 49,937 | 79,766 | |||||||||||
Commerce services revenue |
Goods | 32,093 | 29,721 | |||||||||||
Commerce | 104,556 | 68,934 | ||||||||||||
Security services revenue |
Goods | 27,424 | 35,371 | |||||||||||
Other revenue |
Goods | 27,576 | 30,464 | |||||||||||
Products | 15,412 | 14,038 | ||||||||||||
Others(*2) | 250,785 | 240,703 | ||||||||||||
|
|
|
|
|||||||||||
931,286 | 1,054,327 | |||||||||||||
|
|
|
|
|||||||||||
Goods and Services transferred over time: |
| |||||||||||||
Cellular revenue |
Wireless service(*3) | 4,873,830 | 4,755,303 | |||||||||||
Cellular interconnection | 253,256 | 249,104 | ||||||||||||
Others(*4) | 514,390 | 430,076 | ||||||||||||
Fixed-line telecommunication revenue |
Fixed-line service | 100,402 | 72,881 | |||||||||||
Cellular interconnection | 42,475 | 46,451 | ||||||||||||
Internet protocol television(*5) | 730,694 | 630,334 | ||||||||||||
International calls | 77,639 | 67,542 | ||||||||||||
Internet service and miscellaneous(*6) | 608,207 | 575,529 | ||||||||||||
Commerce services revenue |
Commerce service | 239,263 | 286,960 | |||||||||||
Security services revenue |
Service(*7) | 548,084 | 503,108 | |||||||||||
Other revenue |
Miscellaneous(*2) | 133,683 | 100,320 | |||||||||||
|
|
|
|
|||||||||||
8,121,923 | 7,717,608 | |||||||||||||
|
|
|
|
|||||||||||
9,053,209 | 8,771,935 | |||||||||||||
|
|
|
|
(*1) | Cellular revenue includes revenue from sales of handsets and other electronic accessories. |
(*2) | Miscellaneous other revenue includes revenue from considerations received for the development and maintenance of system software and digital contents platform services. |
(*3) | Wireless service revenue includes revenue from wireless voice and data transmission services principally derived from usage charges to wireless subscribers. |
(*4) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
(*5) | IPTV service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers. |
(*6) | Internet service revenue includes revenue from the high-speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services. |
(*7) | Service revenue includes revenue from rendering security services. |
24
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
5. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | June 30, 2020 | |||||||||||||||
Gross amount |
Loss allowance | Carrying amount |
||||||||||||||
Current assets: |
||||||||||||||||
Accounts receivable – trade |
2,514,392 | (269,508 | ) | 2,244,884 | ||||||||||||
Short-term loans |
79,620 | (692 | ) | 78,928 | ||||||||||||
Accounts receivable – other(*) |
884,041 | (46,668 | ) | 837,373 | ||||||||||||
Accrued income |
4,392 | (165 | ) | 4,227 | ||||||||||||
Guarantee deposits (Other current assets) |
129,164 | — | 129,164 | |||||||||||||
|
|
|
|
|
|
|||||||||||
3,611,609 | (317,033 | ) | 3,294,576 | |||||||||||||
Non-current assets: |
||||||||||||||||
Long-term loans |
81,476 | (47,837 | ) | 33,639 | ||||||||||||
Long-term accounts receivable – other(*) |
252,370 | — | 252,370 | |||||||||||||
Guarantee deposits |
173,258 | (300 | ) | 172,958 | ||||||||||||
Long-term accounts receivable – trade (Other non-current assets) |
17,142 | (30 | ) | 17,112 | ||||||||||||
|
|
|
|
|
|
|||||||||||
524,246 | (48,167 | ) | 476,079 | |||||||||||||
|
|
|
|
|
|
|||||||||||
4,135,855 | (365,200 | ) | 3,770,655 | |||||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of June 30, 2020 include
|
(In millions of won) | December 31, 2019 | |||||||||||||||
Gross amount |
Loss allowance | Carrying amount |
||||||||||||||
Current assets: |
||||||||||||||||
Accounts receivable – trade |
2,480,419 | (249,440 | ) | 2,230,979 | ||||||||||||
Short-term loans |
66,706 | (583 | ) | 66,123 | ||||||||||||
Accounts receivable – other(*) |
953,815 | (48,379 | ) | 905,436 | ||||||||||||
Accrued income |
3,977 | (166 | ) | 3,811 | ||||||||||||
Guarantee deposits (Other current assets) |
145,041 | — | 145,041 | |||||||||||||
|
|
|
|
|
|
|||||||||||
3,649,958 | (298,568 | ) | 3,351,390 | |||||||||||||
Non-current assets: |
||||||||||||||||
Long-term loans |
81,231 | (47,471 | ) | 33,760 | ||||||||||||
Long-term accounts receivable – other(*) |
344,662 | — | 344,662 | |||||||||||||
Guarantee deposits |
165,033 | (299 | ) | 164,734 | ||||||||||||
Long-term accounts receivable – trade (Other non-current assets) |
16,977 | (61 | ) | 16,916 | ||||||||||||
|
|
|
|
|
|
|||||||||||
607,903 | (47,831 | ) | 560,072 | |||||||||||||
|
|
|
|
|
|
|||||||||||
4,257,861 | (346,399 | ) | 3,911,462 | |||||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2019, include
|
25
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
5. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on trade and other receivables measured at amortized cost for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
January 1, 2020 | Impairment | Write-offs(*) | Collection of receivables previously written-off |
Business combination |
June 30, 2020 | |||||||||||||||||||||||
Accounts receivable – trade |
249,501 | 30,230 | (17,330 | ) | 5,258 | 1,879 | 269,538 | |||||||||||||||||||||
Accounts receivable – other |
96,898 | 2,176 | (4,440 | ) | 1,028 | — | 95,662 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
346,399 | 32,406 | (21,770 | ) | 6,286 | 1,879 | 365,200 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||||||
January 1, 2019 | Impairment | Write-offs(*) | Collection of receivables previously written- off |
Business combination |
June 30, 2019 | |||||||||||||||||||||||
Accounts receivable – trade |
260,157 | 15,253 | (35,679 | ) | 5,493 | 1,487 | 246,711 | |||||||||||||||||||||
Accounts receivable – other |
115,887 | 2,095 | (21,724 | ) | 6,481 | 535 | 103,274 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
376,044 | 17,348 | (57,403 | ) | 11,974 | 2,022 | 349,985 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | The Group writes off the trade and other receivables that are determined to be uncollectable due to reasons such as termination of operations or bankruptcy. |
(3) | The Group applies the practical expedient that allows the Group to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Group uses its historical credit loss experience over the past three years and classifies the accounts receivable – trade by their credit risk characteristics and days overdue. |
As the Group is a wireless and fixed-line telecommunications service provider, the Group’s financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises. |
Receivables related to other revenue mainly consist of receivables from corporate customers. The Group transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Group is not exposed to significant credit concentration risk as the Group regularly assesses their credit risk by monitoring their credit rating. While the contract assets are under the impairment requirements, no significant credit risk has been identified. |
26
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
6. | Prepaid Expenses |
The Group pays commissions to its retail stores and authorized dealers for wireless and fixed-line telecommunications services. The Group capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Group expects to maintain its customers.
(1) | Details of prepaid expenses as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
June 30, 2020 |
December 31, 2019 | |||||||||||
Current assets: |
| |||||||||||
Incremental costs of obtaining contracts |
1,972,621 | 1,897,233 | ||||||||||
Others |
151,353 | 133,317 | ||||||||||
|
|
|
|
|||||||||
2,123,974 | 2,030,550 | |||||||||||
|
|
|
|
|||||||||
Non-current assets: |
| |||||||||||
Incremental costs of obtaining contracts |
1,037,539 | 1,152,748 | ||||||||||
Others |
86,766 | 88,681 | ||||||||||
|
|
|
|
|||||||||
1,124,305 | 1,241,429 | |||||||||||
|
|
|
|
(2) | Incremental costs of obtaining contracts |
The amortization and impairment losses in connection with incremental costs of obtaining contracts recognized during the six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Amortization and impairment losses recognized |
599,193 | 1,202,204 | 512,230 | 1,034,612 |
27
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
7. | Contract Assets and Liabilities |
In case of providing both wireless telecommunications services and sales of handsets, the Group allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Group recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.
(1) | Details of contract assets and liabilities as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Contract assets: |
||||||||||||
Allocation of consideration between performance obligations |
149,274 | 191,858 | ||||||||||
Contract liabilities: |
||||||||||||
Wireless service contracts |
19,355 | 20,393 | ||||||||||
Customer loyalty programs |
18,491 | 21,945 | ||||||||||
Fixed-line service contracts |
81,331 | 65,315 | ||||||||||
Security services |
32,910 | 32,026 | ||||||||||
Others |
75,845 | 83,777 | ||||||||||
|
|
|
|
|||||||||
227,932 | 223,456 | |||||||||||
|
|
|
|
(2) | The amount of revenue recognized for the six-month period ended
June 30, 2020 related to the contract liabilities carried forward from the prior period is |
8. | Inventories |
(1) | Details of inventories as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||
Acquisition cost |
Write-down | Carrying amount |
Acquisition cost |
Write-down | Carrying amount |
|||||||||||||||||||||||
Merchandise |
201,874 | (9,605 | ) | 192,269 | 162,485 | (14,557 | ) | 147,928 | ||||||||||||||||||||
Finished goods |
3,897 | (1,946 | ) | 1,951 | 4,264 | (2,265 | ) | 1,999 | ||||||||||||||||||||
Work in process |
2,850 | (729 | ) | 2,121 | 2,674 | (539 | ) | 2,135 | ||||||||||||||||||||
Raw materials |
12,376 | (7,507 | ) | 4,869 | 12,369 | (7,967 | ) | 4,402 | ||||||||||||||||||||
Supplies |
3,139 | — | 3,139 | 7,112 | (694 | ) | 6,418 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
224,136 | (19,787 | ) | 204,349 | 188,904 | (26,022 | ) | 162,882 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(2) | Inventories recognized as operating expenses for the six-month periods
ended June 30, 2020 and 2019 are |
28
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
9. | Investment Securities |
(1) | Details of short-term investment securities as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||||
Category |
June 30, 2020 | December 31, 2019 | ||||||||||||
Beneficiary certificates |
FVTPL | 80,882 | 166,666 |
(2) | Details of long-term investment securities as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||||
Category |
June 30, 2020 | December 31, 2019 | ||||||||||||
Equity instruments |
FVOCI(*) | 967,438 | 710,272 | |||||||||||
FVTPL | 3,532 | 1,011 | ||||||||||||
|
|
|
|
|||||||||||
970,970 | 711,283 | |||||||||||||
Debt instruments |
FVOCI | 2,389 | 4,627 | |||||||||||
FVTPL | 135,910 | 141,305 | ||||||||||||
|
|
|
|
|||||||||||
138,299 | 145,932 | |||||||||||||
|
|
|
|
|||||||||||
1,109,269 | 857,215 | |||||||||||||
|
|
|
|
(*) | The Group designated |
29
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
10. | Business Combination |
(1) | 2020 |
1) | Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd. |
On April 30, 2020, SK Broadband Co., Ltd., a subsidiary of the Parent Company, merged with Tbroad Co., Ltd., Tbroad Dongdaemun
Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. in order to strengthen the competitiveness and enhance the synergy as a comprehensive media company. The consideration transferred was measured at the fair value of the shares
transferred based on the merger ratio set on April 30, 2020. The Group recognized the difference between the fair value of net assets acquired and the consideration paid amounting to W163,180 million as goodwill.
(i) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||||||
Amounts | ||||||||
I. Consideration transferred: |
||||||||
Shares of SK Broadband Co., Ltd. |
862,147 | |||||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
||||||||
Cash and cash equivalents |
110,644 | |||||||
Short-term financial instruments |
6 | |||||||
Accounts receivable – trade and other |
66,241 | |||||||
Contract assets |
50,357 | |||||||
Long-term investment securities |
6,239 | |||||||
Investments in associates and joint ventures |
13,637 | |||||||
Property and equipment, net |
245,654 | |||||||
Intangible assets, net |
424,267 | |||||||
Other assets |
3,261 | |||||||
Accounts payable – trade and other |
(105,179 | ) | ||||||
Contract liabilities |
(1,674 | ) | ||||||
Income tax payable |
(11,896 | ) | ||||||
Provisions |
(2,755 | ) | ||||||
Defined benefit liabilities |
(30 | ) | ||||||
Deferred tax liabilities |
(84,150 | ) | ||||||
Other liabilities |
(15,655 | ) | ||||||
|
|
|||||||
698,967 | ||||||||
|
|
|||||||
III. Goodwill(I-II) |
163,180 | |||||||
|
|
The fair value of certain identifiable assets and liabilities was determined at provisional amounts because valuation by external valuation firm has not been completed.
30
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
10. | Business Combination, Continued |
(1) | 2020, Continued |
2) | Acquisition of Broadband Nowon Co.,Ltd. by the Parent Company |
The Parent Company has obtained control by acquiring 627,000 shares(55%) of Tbroad Nowon Broadcasting Co., Ltd., and Tbroad Nowon Broadcasting
Co., Ltd. changed its name to Broadband Nowon Co., Ltd. The consideration transferred was W10,421 million in cash and the difference between the fair value of net assets acquired and the consideration paid amounting to
W733 million was recognized as other non-operating income. Subsequent to the acquisition, Broadband Nowon Co., Ltd. recognized revenue of W1,419 million, and net
profit of W139 million.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name |
Broadband Nowon Co., Ltd. | |
Location |
21, 81gil, Dobong-ro, Gangbuk-gu, Seoul, Korea | |
CEO |
Yoo, Chang-Wan | |
Industry |
Cable broadcasting services |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||||||
Amounts | ||||||||
I. Consideration transferred: |
||||||||
Cash and cash equivalents |
10,421 | |||||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
||||||||
Cash and cash equivalents |
18,106 | |||||||
Accounts receivable – trade and other |
1,122 | |||||||
Property and equipment, net |
1,784 | |||||||
Intangible assets, net |
360 | |||||||
Other assets |
595 | |||||||
Accounts payable – trade and other |
(1,351 | ) | ||||||
Other liabilities |
(336 | ) | ||||||
|
|
|||||||
20,280 | ||||||||
III. Non-controlling interests: |
||||||||
Non-controlling interests |
9,126 | |||||||
|
|
|||||||
IV. Gain on bargain purchase(I - II+III) |
(733 | ) | ||||||
|
|
31
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
10. | Business Combination, Continued |
(2) | 2019 |
The Parent Company acquired 2,786,455 shares of Incross Co., Ltd. at W53,722 million in cash during the year ended
December 31, 2019 in order to expand digital advertising business through the integration of the Group’s technological capabilities. Although the Parent Company owns less than 50% of the investee, the management has determined that the
Parent Company controls Incross Co., Ltd. considering the level of dispersion of remaining voting rights and voting patterns at previous shareholders’ meetings, and the fact that the Parent Company has a right to appoint the majority of the
members of board of directors by the virtue of an agreement with the investee’s other shareholders. Incross Co., Ltd. reported W19,787 million of revenue and W5,756 million of profit since the Group
obtained control.
1) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name |
Incross Co., Ltd. | |
Location |
5th floor, 1925, Nambusunhwan-ro, Gwanak-gu, Seoul, Korea | |
CEO |
Lee, Jae woon | |
Industry |
Media representative business |
2) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||||||
Amount | ||||||||
I. Considerations transferred: |
||||||||
Cash and cash equivalents |
||||||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
||||||||
Cash and cash equivalent |
17,400 | |||||||
Short-term financial instruments |
24,941 | |||||||
Accounts receivable – trade and other |
67,259 | |||||||
Property and equipment, net |
2,411 | |||||||
Intangible assets, net |
2,709 | |||||||
Other assets |
9,254 | |||||||
Accounts payable – trade and other |
(57,309 | ) | ||||||
Other liabilities |
(1,984 | ) | ||||||
|
|
|||||||
64,681 | ||||||||
III. Non-controlling interests: |
||||||||
Non-controlling interests |
40,592 | |||||||
|
|
|||||||
IV. Goodwill(I - II+III) |
||||||||
|
|
32
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Investments in Associates and Joint Ventures |
(1) | Investments in associates and joint ventures accounted for using the equity method as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||
Country | Ownership (%) |
Carrying amount |
Ownership (%) |
Carrying amount |
||||||||||||||||||||||
Investments in associates: |
||||||||||||||||||||||||||
SK China Company Ltd. |
China | 27.3 | 583,055 | 27.3 | 568,459 | |||||||||||||||||||||
Korea IT Fund(*1) |
Korea | 63.3 | 300,988 | 63.3 | 311,552 | |||||||||||||||||||||
KEB HanaCard Co., Ltd.(*2) |
Korea | 15.0 | 302,168 | 15.0 | 294,756 | |||||||||||||||||||||
SK Telecom CS T1 Co., Ltd.(*1) |
Korea | 54.9 | 56,910 | 54.9 | 60,305 | |||||||||||||||||||||
NanoEnTek, Inc.(*3) |
Korea | 28.4 | 42,827 | 28.6 | 42,127 | |||||||||||||||||||||
UniSK |
China | 49.0 | 15,254 | 49.0 | 14,342 | |||||||||||||||||||||
SK Technology Innovation Company |
Cayman Islands |
49.0 | 45,838 | 49.0 | 43,997 | |||||||||||||||||||||
SK MENA Investment B.V. |
Netherlands | 32.1 | 15,501 | 32.1 | 14,904 | |||||||||||||||||||||
SK hynix Inc. |
Korea | 20.1 | 11,728,891 | 20.1 | 11,425,325 | |||||||||||||||||||||
SK Latin America Investment S.A. |
Spain | 32.1 | 14,066 | 32.1 | 13,698 | |||||||||||||||||||||
Grab Geo Holdings PTE. LTD. |
Singapore | 30.0 | 31,072 | 30.0 | 31,269 | |||||||||||||||||||||
SK South East Asia Investment Pte. Ltd.(*4) |
Singapore | 20.0 | 361,057 | 20.0 | 250,034 | |||||||||||||||||||||
Pacific Telecom Inc.(*2) |
USA | 15.0 | 41,293 | 15.0 | 40,016 | |||||||||||||||||||||
S.M. Culture & Contents Co., Ltd. |
Korea | 23.4 | 63,186 | 23.4 | 63,469 | |||||||||||||||||||||
Content Wavve Co., Ltd. |
Korea | 30.0 | 79,829 | 30.0 | 83,640 | |||||||||||||||||||||
Hello Nature Co., Ltd.(*5) |
Korea | 49.9 | 16,595 | 49.9 | 13,620 | |||||||||||||||||||||
Digital Games International Pte. Ltd.(*6) |
Korea | 33.3 | 8,810 | — | — | |||||||||||||||||||||
Invites Healthcare Co., Ltd.(*7) |
Korea | 50.0 | 28,000 | — | — | |||||||||||||||||||||
Nam Incheon Broadcasting Co., Ltd.(*8) |
Korea | 27.3 | 10,463 | — | — | |||||||||||||||||||||
NANO-X IMAGING LTD.(*2,9) |
Israel | 6.6 | 15,609 | — | — | |||||||||||||||||||||
Home Choice Corp.(*2,8) |
Korea | 17.8 | 3,396 | — | — | |||||||||||||||||||||
12CM JAPAN and others(*4) |
— | — | 61,370 | — | 65,343 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
13,826,178 | 13,336,856 | |||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
Investments in joint ventures: |
||||||||||||||||||||||||||
Dogus Planet, Inc.(*10) |
Turkey | 50.0 | 20,193 | 50.0 | 15,921 | |||||||||||||||||||||
Finnq Co., Ltd.(*10) |
Korea | 49.0 | 18,019 | 49.0 | 22,880 | |||||||||||||||||||||
NEXTGEN BROADCAST SERVICES CO., LLC(*10) |
USA | 50.0 | 8,256 | 50.0 | 7,961 | |||||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC(*10) |
USA | 50.0 | 1,707 | 50.0 | 1,646 | |||||||||||||||||||||
48,175 | 48,408 | |||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||
13,874,353 | 13,385,264 | |||||||||||||||||||||||||
|
|
|
|
33
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Investments in Associates and Joint Ventures, Continued |
(1) | Investments in associates and joint ventures accounted for using the equity method as of June 30, 2020 and December 31, 2019 are as follows, Continued: |
(*1) | Investments in Korea IT Fund and SK Telecom CS T1 Co., Ltd. were classified as investment in associates as the Group does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | These investments were classified as investments in associates as the Group can exercise significant influence through its right to appoint the members of the board of directors even though the Group has less than 20% of equity interests. |
(*3) | The ownership interest changed as third-party share option was exercised and convertible bonds were converted during the six-month period ended June 30, 2020. |
(*4) | The Group additionally contributed |
(*5) | The Group additionally contributed |
(*6) | The Group newly invested |
(*7) | The Group transferred the entire shares of Health Connect Co., Ltd. and assets related to the digital disease
management business for the six-month period ended June 30, 2020. The Group acquired 279,999 shares of common stock and 140,000 shares of convertible preferred stock of Invites Healthcare Co., Ltd. in
consideration of this transfer and recognized |
(*8) | The Group acquired the shares of Nam Incheon Broadcasting Co., Ltd and Home Choice Corp. from the merger with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. |
(*9) | The Group obtained significant influence by contributing |
(*10) | These investments were classified as investments in joint ventures as the Group has a joint control pursuant to the agreement with the other shareholders. |
(2) | The market value of investments in listed associates as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||
Market price per share (in won) |
Number of shares |
Market value |
Market price per share (in won) |
Number of shares |
Market value |
|||||||||||||||||||||||
NanoEnTek, Inc. |
7,600,649 | 83,987 | 5,620 | 7,600,649 | 42,716 | |||||||||||||||||||||||
SK hynix Inc. |
85,100 | 146,100,000 | 12,433,110 | 94,100 | 146,100,000 | 13,748,010 | ||||||||||||||||||||||
S.M. Culture & Contents Co., Ltd. |
1,500 | 22,033,898 | 33,051 | 1,530 | 22,033,898 | 33,712 |
34
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Investments in Associates and Joint Ventures, Continued |
(3) | The condensed financial information of significant associates as of and for the six-month period ended June 30, 2020 and as of and for the year ended December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
SK hynix Inc. | KEB HanaCard Co., Ltd. |
Korea IT Fund |
SK China Company Ltd. |
SK South East Asia Investment Pte. Ltd. |
||||||||||||||||||||
As of June 30, 2020 | ||||||||||||||||||||||||
Current assets |
17,362,825 | 8,330,173 | 95,780 | 380,250 | 885,058 | |||||||||||||||||||
Non-current assets |
51,896,471 | 182,003 | 379,464 | 1,753,402 | 1,818,602 | |||||||||||||||||||
Current liabilities |
9,595,473 | 985,054 | — | 56,374 | 1,751 | |||||||||||||||||||
Non-current liabilities |
10,260,948 | 5,841,166 | — | 240,246 | — | |||||||||||||||||||
For the six-month period ended June 30, 2020 |
||||||||||||||||||||||||
Revenue |
15,805,426 | 604,713 | 28,354 | 41,644 | — | |||||||||||||||||||
Profit (loss) for the period |
1,911,044 | 65,291 | 18,557 | (536 | ) | (64,069 | ) | |||||||||||||||||
Other comprehensive income (loss) |
226,623 | (8,491 | ) | (7,515 | ) | (16,200 | ) | 10,809 | ||||||||||||||||
Total comprehensive income (loss) |
2,137,667 | 56,800 | 11,042 | (16,736 | ) | (53,260 | ) | |||||||||||||||||
(In millions of won) |
||||||||||||||||||||||||
SK hynix Inc. | KEB HanaCard Co., Ltd. |
Korea IT Fund |
SK China Company Ltd. |
SK South East Asia Investment Pte. Ltd. |
||||||||||||||||||||
As of December 31, 2019 | ||||||||||||||||||||||||
Current assets |
14,457,602 | 7,974,407 | 113,233 | 615,028 | 81,065 | |||||||||||||||||||
Non-current assets |
50,331,892 | 207,284 | 378,691 | 1,442,748 | 1,797,239 | |||||||||||||||||||
Current liabilities |
7,874,033 | 1,015,657 | — | 59,395 | 94 | |||||||||||||||||||
Non-current liabilities |
8,972,266 | 5,537,850 | — | 215,354 | — | |||||||||||||||||||
For the year ended December 31, 2019 |
||||||||||||||||||||||||
Revenue |
26,990,733 | 1,236,678 | 70,565 | 116,269 | — | |||||||||||||||||||
Profit for the year |
2,016,391 | 56,281 | 53,867 | 23,474 | 1,190 | |||||||||||||||||||
Other comprehensive income (loss) |
94,023 | (4,458 | ) | 6,132 | (15,093 | ) | 97,508 | |||||||||||||||||
Total comprehensive income |
2,110,414 | 51,823 | 59,999 | 8,381 | 98,698 |
35
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Investments in Associates and Joint Ventures, Continued |
(4) | The condensed financial information of significant joint ventures as of and for the six-month period ended June 30, 2020 and as of and for the year ended December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||||||
As of June 30, 2020 | ||||||||||||
Current assets |
74,391 | 35,313 | ||||||||||
Cash and cash equivalents |
18,179 | 20,591 | ||||||||||
Non-current assets |
25,781 | 9,791 | ||||||||||
Current liabilities |
59,100 | 7,780 | ||||||||||
Accounts payable, other payables and provision |
36,882 | 5,191 | ||||||||||
Non-current liabilities |
687 | 718 | ||||||||||
For the six-month period ended June 30, 2020 | ||||||||||||
Revenue |
97,690 | 1,474 | ||||||||||
Depreciation and amortization |
(2,510 | ) | (2,164 | ) | ||||||||
Interest income |
585 | 12 | ||||||||||
Interest expense |
— | (27 | ) | |||||||||
Profit (loss) for the period |
12,578 | (9,884 | ) | |||||||||
Total comprehensive income (loss) |
8,589 | (9,884 | ) |
(In millions of won) | ||||||||||||
Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||||||
As of December 31, 2019 | ||||||||||||
Current assets |
59,632 | 42,995 | ||||||||||
Cash and cash equivalents |
13,422 | 40,619 | ||||||||||
Non-current assets |
25,247 | 11,389 | ||||||||||
Current liabilities |
52,238 | 6,756 | ||||||||||
Accounts payable, other payables and provision |
35,459 | 5,062 | ||||||||||
Non-current liabilities |
800 | 1,099 | ||||||||||
For the year ended December 31, 2019 |
||||||||||||
Revenue |
136,777 | 1,968 | ||||||||||
Depreciation and amortization |
(5,487 | ) | (4,769 | ) | ||||||||
Interest income |
1,455 | 12 | ||||||||||
Interest expense |
(92 | ) | (198 | ) | ||||||||
Profit (loss) for the year |
9,294 | (17,079 | ) | |||||||||
Total comprehensive income (loss) |
9,294 | (17,361 | ) |
36
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Investments in Associates and Joint Ventures, Continued |
(5) | Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||||||
Net assets | Ownership interests (%) |
Net assets attributable to the ownership interests |
Cost-book value differentials |
Carrying amount | ||||||||||||||||||||
SK hynix Inc.(*1,2) |
49,378,366 | 20.1 | 10,547,018 | 1,181,873 | 11,728,891 | |||||||||||||||||||
KEB HanaCard Co., Ltd. |
1,685,956 | 15.0 | 252,893 | 49,275 | 302,168 | |||||||||||||||||||
Korea IT Fund |
475,244 | 63.3 | 300,988 | — | 300,988 | |||||||||||||||||||
SK China Company Ltd.(*1) |
1,827,139 | 27.3 | 498,283 | 84,772 | 583,055 | |||||||||||||||||||
SK South East Asia Investment Pte. Ltd.(*1) |
1,805,284 | 20.0 | 361,057 | — | 361,057 |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Net assets | Ownership interests (%) |
Net assets attributable to the ownership interests |
Cost-book value differentials |
Carrying amount | ||||||||||||||||||||
SK hynix Inc.(*1,2) |
47,928,415 | 20.1 | 10,237,314 | 1,188,011 | 11,425,325 | |||||||||||||||||||
KEB HanaCard Co., Ltd. |
1,628,184 | 15.0 | 244,228 | 50,528 | 294,756 | |||||||||||||||||||
Korea IT Fund |
491,924 | 63.3 | 311,552 | — | 311,552 | |||||||||||||||||||
SK China Company Ltd.(*1) |
1,772,419 | 27.3 | 483,360 | 85,099 | 568,459 | |||||||||||||||||||
SK South East Asia Investment Pte. Ltd.(*1) |
1,250,168 | 20.0 | 250,034 | — | 250,034 |
(*1) | Net assets of these entities represent net assets excluding those attributable to their non-controlling interests. |
(*2) | The ownership interest is based on the number of shares owned by the Parent Company divided by the total shares issued by the investee company. The Group applied the equity method using the effective ownership interest which is based on the number of shares owned by the Parent Company and the investee’s total shares outstanding. The effective ownership interest applied for the equity method is 21.36%. |
37
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended June 30, 2020 | |||||||||||||||||||||||||||||||
Beginning balance |
Acquisition and Disposal |
Share of profits (losses) |
Other comprehensive income (loss) |
Other increase (decrease) |
Business Combination |
Ending balance |
||||||||||||||||||||||||||
Investments in associates: |
||||||||||||||||||||||||||||||||
SK China Company Ltd. |
568,459 | — | (1,719 | ) | 16,315 | — | — | 583,055 | ||||||||||||||||||||||||
Korea IT Fund(*1) |
311,552 | — | 11,752 | (4,759 | ) | (17,557 | ) | — | 300,988 | |||||||||||||||||||||||
KEB HanaCard Co., Ltd. |
294,756 | — | 8,540 | (1,128 | ) | — | — | 302,168 | ||||||||||||||||||||||||
SK Telecom CS T1 Co., Ltd. |
60,305 | — | (3,415 | ) | 20 | — | — | 56,910 | ||||||||||||||||||||||||
NanoEnTek, Inc. |
42,127 | 112 | 616 | (28 | ) | — | — | 42,827 | ||||||||||||||||||||||||
UniSK |
14,342 | — | 479 | 433 | — | — | 15,254 | |||||||||||||||||||||||||
SK Technology Innovation Company |
43,997 | — | 53 | 1,788 | — | — | 45,838 | |||||||||||||||||||||||||
SK MENA Investment B.V. |
14,904 | — | 2 | 595 | — | — | 15,501 | |||||||||||||||||||||||||
SK hynix Inc.(*1) |
11,425,325 | — | 401,260 | 48,406 | (146,100 | ) | — | 11,728,891 | ||||||||||||||||||||||||
SK Latin America Investment S.A. |
13,698 | — | (28 | ) | 396 | — | — | 14,066 | ||||||||||||||||||||||||
Grab Geo Holdings PTE. LTD. |
31,269 | — | (271 | ) | 74 | — | — | 31,072 | ||||||||||||||||||||||||
SK South East Asia Investment Pte. Ltd. |
250,034 | 119,770 | (10,909 | ) | 2,162 | — | — | 361,057 | ||||||||||||||||||||||||
Pacific Telecom Inc.(*1) |
40,016 | — | 1,209 | 1,047 | (979 | ) | — | 41,293 | ||||||||||||||||||||||||
S.M. Culture & Contents Co., Ltd. |
63,469 | — | (164 | ) | (119 | ) | — | — | 63,186 | |||||||||||||||||||||||
Contents Wavve Co., Ltd. |
83,640 | — | (3,811 | ) | — | — | — | 79,829 | ||||||||||||||||||||||||
Hello Nature Co., Ltd.(*2) |
13,620 | 9,980 | (6,510 | ) | (61 | ) | (434 | ) | — | 16,595 | ||||||||||||||||||||||
Digital Games International Pte. Ltd. |
— | 8,810 | — | — | — | — | 8,810 | |||||||||||||||||||||||||
Invites Healthcare Co., Ltd. |
— | 28,000 | — | — | — | — | 28,000 | |||||||||||||||||||||||||
Nam Incheon Broadcasting Co.,Ltd. |
— | — | 237 | — | — | 10,226 | 10,463 | |||||||||||||||||||||||||
NANO-XIMAGING LTD.(*3) |
— | 12,071 | — | — | 3,538 | — | 15,609 | |||||||||||||||||||||||||
Home Choice Corp. |
— | — | (15 | ) | — | — | 3,411 | 3,396 | ||||||||||||||||||||||||
12CM JAPAN and others(*4) |
65,343 | (3,102 | ) | 159 | (1,463 | ) | 433 | — | 61,370 | |||||||||||||||||||||||
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13,336,856 | 175,641 | 397,465 | 63,678 | (161,099 | ) | 13,637 | 13,826,178 | |||||||||||||||||||||||||
Investments in joint ventures: |
||||||||||||||||||||||||||||||||
Dogus Planet, Inc. |
15,921 | — | 6,227 | (1,955 | ) | — | — | 20,193 | ||||||||||||||||||||||||
Finnq Co., Ltd. |
22,880 | — | (4,861 | ) | — | — | — | 18,019 | ||||||||||||||||||||||||
NEXTGEN BROADCAST SERVICES CO., LLC |
7,961 | — | — | — | 295 | — | 8,256 | |||||||||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC |
1,646 | — | — | — | 61 | — | 1,707 | |||||||||||||||||||||||||
48,408 | — | 1,366 | (1,955 | ) | 356 | — | 48,175 | |||||||||||||||||||||||||
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13,385,264 | 175,641 | 398,831 | 61,723 | (160,743 | ) | 13,637 | 13,874,353 | |||||||||||||||||||||||||
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38
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the six-month periods ended June 30, 2020 and 2019 are as follows, Continued: |
(*1) | Dividends declared by the associates are deducted from the carrying amount during the six-month period ended June 30, 2020. |
(*2) | The Group recognized |
(*3) | As the Group obtained significant influence, |
(*4) | The disposal for the six-month period ended June 30, 2020 includes
|
39
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the six-month periods ended June 30, 2020 and 2019 are as follows, Continued: |
(In millions of won) | For the six-month period ended June 30, 2019 | |||||||||||||||||||||||||||
Beginning balance |
Acquisition and Disposal |
Share of profits (losses) |
Other compre- hensive income (loss) |
Other increase (decrease) |
Ending balance |
|||||||||||||||||||||||
Investments in associates: |
||||||||||||||||||||||||||||
SK China Company Ltd. |
551,548 | — | (15 | ) | 15,800 | — | 567,333 | |||||||||||||||||||||
Korea IT Fund(*1) |
281,684 | — | 10,101 | 1,705 | (8,132 | ) | 285,358 | |||||||||||||||||||||
KEB HanaCard Co., Ltd. |
288,457 | — | 4,244 | 82 | — | 292,783 | ||||||||||||||||||||||
NanoEnTek, Inc. |
40,974 | — | 410 | (32 | ) | — | 41,352 | |||||||||||||||||||||
UniSK |
13,486 | — | 252 | 528 | — | 14,266 | ||||||||||||||||||||||
SK Technology Innovation Company |
42,469 | — | 67 | 1,471 | — | 44,007 | ||||||||||||||||||||||
SK MENA Investment B.V. |
14,420 | — | 7 | 490 | — | 14,917 | ||||||||||||||||||||||
SK hynix Inc.(*1) |
11,208,315 | — | 342,999 | 51,557 | (219,151 | ) | 11,383,720 | |||||||||||||||||||||
SK Latin America Investment S.A. |
13,313 | — | 43 | 367 | — | 13,723 | ||||||||||||||||||||||
Grab Geo Holdings PTE. LTD. |
— | 30,518 | — | — | — | 30,518 | ||||||||||||||||||||||
SK South East Asia Investment Pte. Ltd. |
111,000 | 113,470 | — | — | — | 224,470 | ||||||||||||||||||||||
Pacific Telecom Inc. |
37,075 | — | 1,035 | 300 | — | 38,410 | ||||||||||||||||||||||
SK Telecom Smart City Management Co., Ltd. |
11,176 | — | — | 518 | — | 11,694 | ||||||||||||||||||||||
S.M. Culture & Contents Co., Ltd. |
63,801 | — | (263 | ) | (483 | ) | — | 63,055 | ||||||||||||||||||||
Hello Nature Co., Ltd. |
28,549 | — | (2,941 | ) | (16 | ) | — | 25,592 | ||||||||||||||||||||
Health Connect Co., Ltd. and others(*2) |
85,346 | 7,178 | (674 | ) | 1,711 | (16,110 | ) | 77,451 | ||||||||||||||||||||
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12,791,613 | 151,166 | 355,265 | 73,998 | (243,393 | ) | 13,128,649 | ||||||||||||||||||||||
Investments in joint ventures: |
||||||||||||||||||||||||||||
Dogus Planet, Inc. |
12,487 | (81 | ) | 2,918 | (508 | ) | — | 14,816 | ||||||||||||||||||||
Finnq Co., Ltd. |
7,671 | — | (4,215 | ) | (3 | ) | — | 3,453 | ||||||||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC |
— | 8,022 | — | — | 76 | 8,098 | ||||||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC |
— | 1,719 | — | — | 16 | 1,735 | ||||||||||||||||||||||
Celcom Planet(*3) |
— | 6,055 | (6,055 | ) | — | — | — | |||||||||||||||||||||
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20,158 | 15,715 | (7,352 | ) | (511 | ) | 92 | 28,102 | |||||||||||||||||||||
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12,811,771 | 166,881 | 347,913 | 73,487 | (243,301 | ) | 13,156,751 | ||||||||||||||||||||||
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40
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the six-month periods ended June 30, 2020 and 2019 are as follows, Continued: |
(*1) | Dividends declared by the associates are deducted from the carrying amount during the six-month period ended June 30, 2019. |
(*2) | The acquisition for the six-month period ended June 30, 2019
includes |
(*3) | Investment in Celcom Planet was disposed during the six-month period ended June 30, 2019. |
(7) | The Group discontinued the application of equity method to the following investees due to their carrying amounts being reduced to zero. The details of cumulative unrecognized equity method losses as of June 30, 2020 are as follows: |
(In millions of won) | Unrecognized loss | Unrecognized change in equity | ||||||||||||||||||
For the six-month period ended June 30, 2020 |
Cumulative loss |
For the six-month period ended June 30, 2020 |
Cumulative loss |
|||||||||||||||||
Wave City Development Co., Ltd. |
(1,412 | ) | 2,958 | — | — | |||||||||||||||
Daehan Kanggun BcN Co., Ltd. and others |
— | 10,652 | — | (138 | ) | |||||||||||||||
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(1,412 | ) | 13,610 | — | (138 | ) | |||||||||||||||
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41
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
12. | Property and Equipment |
Changes in property and equipment for the six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2020 | ||||||||||||||||||||||||||||||||
Beginning balance |
Acquisition | Disposal | Transfer | Depreciation | Business combina- tion |
Ending balance |
||||||||||||||||||||||||||
Land |
981,389 | 435 | (37 | ) | 19,296 | — | 40,292 | 1,041,375 | ||||||||||||||||||||||||
Buildings |
867,408 | 1,158 | (179 | ) | 16,405 | (27,399 | ) | 17,030 | 874,423 | |||||||||||||||||||||||
Structures |
347,069 | 504 | (27 | ) | 2,856 | (18,435 | ) | 37 | 332,004 | |||||||||||||||||||||||
Machinery |
7,941,211 | 177,694 | (8,021 | ) | 996,261 | (1,202,461 | ) | 171,959 | 8,076,643 | |||||||||||||||||||||||
Other |
732,299 | 545,106 | (1,942 | ) | (440,740 | ) | (102,844 | ) | 4,682 | 736,561 | ||||||||||||||||||||||
Right-of-use assets |
709,396 | 263,503 | (146,973 | ) | — | (194,369 | ) | 8,385 | 639,942 | |||||||||||||||||||||||
Construction in progress |
755,508 | 806,361 | (11,933 | ) | (711,697 | ) | — | 5,053 | 843,292 | |||||||||||||||||||||||
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12,334,280 | 1,794,761 | (169,112 | ) | (117,619 | ) | (1,545,508 | ) | 247,438 | 12,544,240 | |||||||||||||||||||||||
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(In millions of won) | ||||||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||
Beginning balance |
Impact of adopting K-IFRS No. 1116 |
Acquisition | Disposal | Transfer | Depreciation | Impair- ment |
Changes in consoli- dation |
Ending balance |
||||||||||||||||||||||||||||||||
Land |
938,344 | — | 968 | — | 27,153 | — | — | 569 | 967,034 | |||||||||||||||||||||||||||||||
Buildings |
863,294 | — | 1,221 | (447 | ) | 25,760 | (26,786 | ) | — | 658 | 863,700 | |||||||||||||||||||||||||||||
Structures |
356,039 | — | 1,554 | — | 2,803 | (17,885 | ) | — | — | 342,511 | ||||||||||||||||||||||||||||||
Machinery |
7,146,724 | — | 247,490 | (10,299 | ) | 1,107,434 | (1,128,260 | ) | — | — | 7,363,089 | |||||||||||||||||||||||||||||
Other |
848,596 | (934 | ) | 640,150 | (1,289 | ) | (730,670 | ) | (99,713 | ) | (140 | ) | 214 | 656,214 | ||||||||||||||||||||||||||
Right-of-use |
— | 653,695 | 245,746 | (88,752 | ) | — | (164,494 | ) | — | 1,080 | 647,275 | |||||||||||||||||||||||||||||
Construction |
565,357 | — | 390,879 | (9,617 | ) | (488,354 | ) | — | — | — | 458,265 | |||||||||||||||||||||||||||||
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10,718,354 | 652,761 | 1,528,008 | (110,404 | ) | (55,874 | ) | (1,437,138 | ) | (140 | ) | 2,521 | 11,298,088 | ||||||||||||||||||||||||||||
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13. | Lease |
(1) Details of the right-of-use assets as of June 30, 2020 and December 31, 2019 are as follows:
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Land, buildings and structures |
523,764 | 584,523 | ||||||||||
Others |
116,178 | 124,873 | ||||||||||
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639,942 | 709,396 | |||||||||||
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42
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
13. | Lease, Continued |
(2) | Details of amounts recognized in the condensed consolidated interim statements of income for the six-month periods ended June 30, 2020 and 2019 as a lessee are as follows: |
(In millions of won) | ||||||||||||
For the six-month period ended | ||||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Depreciation of right-of-use assets: |
||||||||||||
Land, buildings and structures |
154,744 | 124,868 | ||||||||||
Others |
39,625 | 39,626 | ||||||||||
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194,369 | 164,494 | |||||||||||
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Interest expense on lease liabilities |
6,675 | 7,423 | ||||||||||
Expenses related to short-term leases |
52,644 | 83,566 | ||||||||||
Expenses related to leases of low-value assets except for short-term leases |
1,615 | 1,772 |
(3) | Total cash outflows due to lease payments for the six-month period
ended June 30, 2020 amounts to |
(4) | In December 2019, International Financial Reporting Interpretations Committee(‘IFRIC’) issued its final agenda decision that the concept of penalty that should be considered in determining the enforceable period under IFRS 16, Leases, shall be determined considering broader economics of the contract, and not only contractual termination payments. Further, a lease is no longer enforceable when each of the parties has the right to terminate the lease without permission from the other party with no more than an insignificant penalty. |
As of June 30, 2020, the Group assess the lease term based on the assumption that the right to extent or terminate the lease is no longer enforceable if a lease contract requires the counterparty’s consent to be extended. Applying the above mentioned IFRIC interpretation may change the judgement on enforceable period for certain of the Group’s lease contracts.
The Group are currently analyzing the impact of IFRIC’s interpretation on its financial statements and plans to apply the impact as changes in accounting policies when the analysis is completed.
43
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
14. Intangible Assets
(1) | Changes in intangible assets for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Impairment | Business Combina- tion |
Ending balance |
|||||||||||||||||||||||||||||
Frequency |
2,647,501 | — | — | — | (260,990 | ) | (12,388 | ) | — | 2,374,123 | ||||||||||||||||||||||||||
Land usage rights |
7,349 | 100 | (2 | ) | — | (1,746 | ) | — | — | 5,701 | ||||||||||||||||||||||||||
Industrial rights |
66,824 | 593 | (80 | ) | 8,230 | (2,456 | ) | — | — | 73,111 | ||||||||||||||||||||||||||
Development costs |
11,146 | 430 | (18 | ) | 1,856 | (2,290 | ) | — | — | 11,124 | ||||||||||||||||||||||||||
Facility usage rights |
25,832 | 818 | — | 274 | (3,100 | ) | — | — | 23,824 | |||||||||||||||||||||||||||
Customer relations |
591,371 | 1,385 | (137 | ) | 25 | (21,051 | ) | — | 374,771 | 946,364 | ||||||||||||||||||||||||||
Club memberships(*2) |
80,410 | 4,125 | (2,351 | ) | — | — | (30 | ) | 49,845 | 131,999 | ||||||||||||||||||||||||||
Brands(*2) |
374,096 | — | — | — | — | — | — | 374,096 | ||||||||||||||||||||||||||||
Other(*3) |
1,061,563 | 61,509 | (2,645 | ) | 121,488 | (213,439 | ) | (282 | ) | 11 | 1,028,205 | |||||||||||||||||||||||||
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4,866,092 | 68,960 | (5,233 | ) | 131,873 | (505,072 | ) | (12,700 | ) | 424,627 | 4,968,547 | ||||||||||||||||||||||||||
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(In millions of won) | ||||||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||||||
Beginning balance |
Impact of adopting K-IFRS No. 1116 |
Acquisition | Disposal | Transfer | Amortization | Impairment | Changes in consolidation |
Ending balance |
||||||||||||||||||||||||||||||||
Frequency usage rights |
3,139,978 | — | — | — | — | (231,488 | ) | — | — | 2,908,490 | ||||||||||||||||||||||||||||||
Land usage rights |
10,511 | — | 1,246 | (389 | ) | — | (2,720 | ) | — | — | 8,648 | |||||||||||||||||||||||||||||
Industrial rights |
83,627 | — | 1,021 | (526 | ) | 1,826 | (2,358 | ) | — | (14,467 | ) | 69,123 | ||||||||||||||||||||||||||||
Development costs |
8,990 | — | 1,240 | — | 1,542 | (2,694 | ) | (661 | ) | 4,790 | 13,207 | |||||||||||||||||||||||||||||
Facility usagerights |
31,027 | — | 823 | (10 | ) | 172 | (3,819 | ) | — | — | 28,193 | |||||||||||||||||||||||||||||
Customer relations |
625,091 | — | 128 | (143 | ) | — | (16,889 | ) | — | — | 608,187 | |||||||||||||||||||||||||||||
Club memberships(*2) |
80,475 | — | 1,599 | (831 | ) | (1,199 | ) | — | (63 | ) | 1,188 | 81,169 | ||||||||||||||||||||||||||||
Brands(*2) |
374,096 | — | — | — | — | — | — | — | 374,096 | |||||||||||||||||||||||||||||||
Other(*3) |
1,159,715 | (2,274 | ) | 16,991 | (2,211 | ) | 71,089 | (206,713 | ) | (473 | ) | (9,869 | ) | 1,026,255 | ||||||||||||||||||||||||||
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|||||||||||||||||||||||
5,513,510 | (2,274 | ) | 23,048 | (4,110 | ) | 73,430 | (466,681 | ) | (1,197 | ) | (18,358 | ) | 5,117,368 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*1) | As Ministry of Science and Information and Communication Technology(ICT) approved the termination of 2G service, the Parent Company recognized an impairment loss for the portion of 800MHz Frequency usage rights used for 2G service during the six-month period ended June 30, 2020. |
(*2) | Club memberships and Brands are classified as intangible assets with indefinite useful lives and are not amortized. |
(*3) | Other intangible assets primarily consist of computer software and others. |
44
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
14. | Intangible Assets, Continued |
(2) | Details of frequency usage rights as of June 30, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||
Amount | Description | Commencement of amortization |
Completion of amortization |
|||||||||||||||||
800 MHz license |
28,157 | CDMA and LTE service | Jul. 2011 | Jun. 2021 | ||||||||||||||||
1.8 GHz license |
188,430 | LTE service | Sept. 2013 | Dec. 2021 | ||||||||||||||||
2.6 GHz license |
789,220 | LTE service | Sept. 2016 | Dec. 2026 | ||||||||||||||||
2.1 GHz license |
151,940 | W-CDMA and LTE service | Dec. 2016 | Dec. 2021 | ||||||||||||||||
3.5 GHz license(*) |
1,013,693 | 5G service | Apr. 2019 | Nov. 2028 | ||||||||||||||||
28 GHz license(*) |
202,683 | 5G service | — | Nov. 2023 | ||||||||||||||||
|
|
|||||||||||||||||||
2,374,123 | ||||||||||||||||||||
|
|
(*) | The Group participated in the frequency license allocation auction hosted by Ministry of Science and
Information and Communication Technology(ICT) and was assigned the 3.5 GHz and 28 GHz bands of frequency licenses during the year ended December 31, 2018. The considerations payable for the bands of frequency are
|
15. | Borrowings and Debentures |
(1) | Short-term borrowings as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won, thousands of other currencies) | ||||||||||||||||||
Lender | Annual interest rate (%) |
June 30, 2020 |
December 31, 2019 |
|||||||||||||||
Short-term borrowings |
KB Kookmin Bank | 2.90 | 8,000 | — | ||||||||||||||
Citibank | 2.45 | 50,000 | — | |||||||||||||||
KEB Hana Bank(*1) | 6M CD + 2.06 | 27,000 | — | |||||||||||||||
Shinhan Bank(*2) | 6M financial I (bank) + 1.60 | 15,000 | 15,000 | |||||||||||||||
KEB Hana Bank(*3) | 3M CD + 1.59 | 5,000 | — | |||||||||||||||
KEB Hana Bank(*3) | 3M CD + 1.75 | — | 5,000 | |||||||||||||||
Woori Bank | 7.50 | — | |
603 (VND 12,068,234 |
) | |||||||||||||
|
|
|
|
|||||||||||||||
105,000 | 20,603 | |||||||||||||||||
|
|
|
|
(*1) | As of June 30, 2020, 6M CD rate is 0.74%. |
(*2) | As of June 30, 2020, 6M financial I (bank) rate is 0.71%. |
(*3) | As of June 30, 2020, 3M CD rate is 0.72%. |
45
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
15. | Borrowings and Debentures, Continued |
(2) | Changes in long-term borrowings for the six-month period ended June 30, 2020 are as follows: |
(In millions of won, thousands of other currencies) | ||||||||||||||||||||
Lender | Annual interest rate (%) |
Maturity | Book value | |||||||||||||||||
Current |
50,388 | |||||||||||||||||||
Non-current |
1,972,149 | |||||||||||||||||||
|
|
|||||||||||||||||||
As of January 1, 2020 |
2,022,537 | |||||||||||||||||||
|
|
|||||||||||||||||||
New long-term borrowings: |
|
|||||||||||||||||||
UBS | 0.00 | Mar. 28, 2025 | |
597 (CHF 500 |
) | |||||||||||||||
FAE | 0.00 | May. 7, 2025 | |
653 (CHF 500 |
) | |||||||||||||||
|
|
|||||||||||||||||||
1,250 | ||||||||||||||||||||
Repayments of long-term borrowings: |
||||||||||||||||||||
Korea Development Bank(*1) | 3M CD + 0.61 | Dec. 20, 2021 | (6,125 | ) | ||||||||||||||||
Korea Development Bank(*1) | 3M CD + 0.71 | Dec. 21, 2022 | (6,250 | ) | ||||||||||||||||
Credit Agricole CIB(*1) | 3M CD + 0.82 | Dec. 14, 2023 | (6,250 | ) | ||||||||||||||||
Export Kreditnamnden | 1.70 | Apr. 29, 2022 | (6,670 | ) | ||||||||||||||||
|
|
|||||||||||||||||||
(25,295 | ) | |||||||||||||||||||
|
|
|||||||||||||||||||
Other changes(*2) |
4,104 | |||||||||||||||||||
|
|
|||||||||||||||||||
Current(*3) |
50,902 | |||||||||||||||||||
Non-current(*3) |
1,951,694 | |||||||||||||||||||
|
|
|||||||||||||||||||
As of June 30, 2020 |
2,002,596 | |||||||||||||||||||
|
|
(*1) | As of June 30, 2020, 3M CD rate is 0.72%. |
(*2) | Other changes include the effects on foreign currency translation of long-term borrowings and changes in present value discount on long-term borrowings for the six-month period ended June 30, 2020. |
(*3) |
|
46
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
15. | Borrowings and Debentures, Continued |
(3) | Changes in debentures for the six-month period ended June 30, 2020 are as follows: |
(In millions of won, thousands of U.S. dollars) | ||||||||||||||||||
Purpose | Annual interest rate (%) |
Maturity | Face value | Book value | ||||||||||||||
Current |
967,340 | 966,939 | ||||||||||||||||
Non-current |
7,281,874 | 7,253,894 | ||||||||||||||||
|
|
|
|
|||||||||||||||
As of January 1, 2020 |
8,249,214 | 8,220,833 | ||||||||||||||||
Debentures newly issued: |
| |||||||||||||||||
Unsecured |
Operating and refinancing fund |
1.64 | Jan. 13, 2023 | 170,000 | 169,368 | |||||||||||||
Operating fund | 1.75 | Jan. 14, 2025 | 130,000 | 129,515 | ||||||||||||||
1.83 | Jan. 14, 2030 | 50,000 | 49,811 | |||||||||||||||
1.87 | Jan. 14, 2040 | 70,000 | 69,737 | |||||||||||||||
Floating-rate notes(*1) |
3M LIBOR + 0.91 | Jun. 4, 2025 | |
357,420 (USD 300,000 |
) |
|
355,296 (USD 300,000 |
) | ||||||||||
Unsecured corporate bonds(*2) |
Refinancing fund | 1.48 | Jun 9, 2023 | 100,000 | 99,562 | |||||||||||||
Operating and refinancing fund |
1.64 | Jun 11, 2025 | 100,000 | 99,574 | ||||||||||||||
Private placement |
Operating fund | — | Oct 1, 2023 | 6,168 | 5,783 | |||||||||||||
|
|
|
|
|||||||||||||||
983,588 | 978,646 | |||||||||||||||||
|
|
|
|
|||||||||||||||
Debentures repaid: |
| |||||||||||||||||
Floating-rate notes |
Operating fund | 3M LIBOR + 0.88 | Mar. 7, 2020 | |
(364,590 (USD 300,000 |
) ) |
|
(364,590 (USD 300,000 |
) ) | |||||||||
Unsecured |
2.49 | Jan. 14, 2020 | (160,000 | ) | (160,000 | ) | ||||||||||||
Unsecured |
Refinancing fund | 1.93 | Apr. 25, 2020 | (60,000 | ) | (60,000 | ) | |||||||||||
|
|
|
|
|||||||||||||||
(584,590 | ) | (584,590 | ) | |||||||||||||||
|
|
|
|
|||||||||||||||
Other changes(*4) |
71,520 | 74,948 | ||||||||||||||||
|
|
|
|
|||||||||||||||
Current(*5) |
730,000 | 729,624 | ||||||||||||||||
Non-current(*5) |
7,989,732 | 7,960,213 | ||||||||||||||||
|
|
|
|
|||||||||||||||
As of June 30, 2020 |
8,719,732 | 8,689,837 | ||||||||||||||||
|
|
|
|
47
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
15. | Borrowings and Debentures, Continued |
(3) | Changes in debentures for the six-month period ended June 30, 2020 are as follows, Continued: |
(*1) | As of June 30, 2020, 3M LIBOR rate is 0.30%. |
(*2) | Unsecured corporate bonds were issued by SK Broadband Co., Ltd., a subsidiary of the Parent Company. |
(*3) | Private placement corporate bonds were issued by Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company. |
(*4) | Other changes include the effects on foreign currency translation of debentures and changes in present value discount on debentures for the six-month period ended June 30, 2020. |
(*5) |
|
16. | Long-Term Payables – Other |
(1) | Long-term payables – other as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Payables related to acquisition of frequency usage rights |
1,133,538 | 1,544,699 | ||||||||||
Other |
4,394 | 5,468 | ||||||||||
|
|
|
|
|||||||||
1,137,932 | 1,550,167 | |||||||||||
|
|
|
|
(2) | As of June 30, 2020 and December 31, 2019, details of long-term payables – other which consist of payables related to the acquisition of frequency usage rights are as follows (see note 14): |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Long-term payables – other |
1,626,040 | 2,051,389 | ||||||||||
Present value discount on long-term payables – other |
(70,218 | ) | (82,851 | ) | ||||||||
Current installments of long-term payables – other |
(422,284 | ) | (423,839 | ) | ||||||||
|
|
|
|
|||||||||
Carrying amount at period end |
1,133,538 | 1,544,699 | ||||||||||
|
|
|
|
(3) | The principal amount of the long-term payables – other repaid for the
six-month period ended June 30, 2020 is |
(In millions of won) | ||||||||
Amount | ||||||||
Less than 1 year |
425,349 | |||||||
1~3 years |
444,480 | |||||||
3~5 years |
382,290 | |||||||
More than 5 years |
373,921 | |||||||
|
|
|||||||
1,626,040 | ||||||||
|
|
48
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
17. | Provisions |
Changes in provisions for the six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2020 | As of June 30, 2020 | |||||||||||||||||||||||||||||||||||||||
Beginning balance |
Increase | Utilization | Reversal | Other | Business combination |
Ending balance |
Current | Non-current | ||||||||||||||||||||||||||||||||
Provision for restoration |
80,587 | 5,660 | (2,583 | ) | (1,129 | ) | 7 | 626 | 83,168 | 54,965 | 28,203 | |||||||||||||||||||||||||||||
Emission allowance |
5,257 | 4,572 | — | — | — | — | 9,829 | 9,829 | — | |||||||||||||||||||||||||||||||
Other provisions(*) |
57,385 | 4,908 | (16,772 | ) | — | 1 | 2,129 | 47,651 | 30,830 | 16,821 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
143,229 | 15,140 | (19,355) | (1,129) | 8 | 2,755 | 140,648 | 95,624 | 45,024 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
(In millions of won) | ||||||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2019 | As of June 30, 2019 | |||||||||||||||||||||||||||||||||||||||
Beginning balance |
Increase | Utilization | Reversal | Other | Business combination |
Ending balance |
Current | Non-current | ||||||||||||||||||||||||||||||||
Provision for restoration |
77,741 | 1,899 | (2,000 | ) | (915 | ) | 67 | 40 | 76,832 | 45,528 | 31,304 | |||||||||||||||||||||||||||||
Emission allowance |
2,238 | 2,208 | — | — | — | — | 4,446 | 4,446 | — | |||||||||||||||||||||||||||||||
Other provisions(*) |
107,229 | 422 | (19,178 | ) | (61 | ) | (11,288 | ) | — | 77,124 | 37,995 | 39,129 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
187,208 | 4,529 | (21,178) | (976) | (11,221) | 40 | 158,402 | 87,969 | 70,433 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
18. | Defined Benefit Liabilities (Assets) |
(1) | Details of defined benefit liabilities (assets) as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Present value of defined benefit obligations |
1,232,035 | 1,136,787 | ||||||||||
Fair value of plan assets |
(963,482 | ) | (965,654 | ) | ||||||||
|
|
|
|
|||||||||
Defined benefit assets(*) |
— | (1,125 | ) | |||||||||
|
|
|
|
|||||||||
Defined benefit liabilities |
268,553 | 172,258 | ||||||||||
|
|
|
|
(*) | Since Group entities neither have legally enforceable right nor intention to settle the defined benefit obligations of Group entities with defined benefit assets of other Group entities, defined benefit assets of Group entities have been separately presented from defined benefit liabilities. |
49
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
18. | Defined Benefit Liabilities (Assets), Continued |
(2) | Changes in defined benefit obligations for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||
June 30, 2020 | June 30, 2019 | |||||||||
Beginning balance |
1,136,787 | 926,302 | ||||||||
Business combination |
515 | 3,653 | ||||||||
Current service cost |
96,841 | 85,485 | ||||||||
Past service cost |
815 | — | ||||||||
Interest cost |
11,675 | 10,472 | ||||||||
Remeasurement |
||||||||||
- Adjustment based on experience |
24,622 | 10,992 | ||||||||
Benefit paid |
(40,164 | ) | (46,225 | ) | ||||||
Others |
944 | 3,791 | ||||||||
|
|
|
|
|||||||
Ending balance |
1,232,035 | 994,470 | ||||||||
|
|
|
|
(3) | Changes in plan assets for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Beginning balance |
965,654 | 816,699 | ||||||||||
Business combination |
485 | 3,207 | ||||||||||
Interest income |
10,451 | 9,846 | ||||||||||
Remeasurement |
(921 | ) | (806 | ) | ||||||||
Contributions |
32,772 | 42,617 | ||||||||||
Benefit paid |
(46,415 | ) | (53,589 | ) | ||||||||
Others |
1,456 | 1,203 | ||||||||||
|
|
|
|
|||||||||
Ending balance |
963,482 | 819,177 | ||||||||||
|
|
|
|
(4) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the condensed consolidated interim statements of income) and capitalized into construction-in-progress, for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Current service cost |
96,841 | 85,485 | ||||||||||
Past service cost |
815 | — | ||||||||||
Net interest cost |
1,224 | 626 | ||||||||||
|
|
|
|
|||||||||
98,880 | 86,111 | |||||||||||
|
|
|
|
50
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
19. | Derivative Instruments |
(1) | Changes in derivative contracts for the six-month period ended June 30, 2020 are as follows: |
(In thousands of other currencies) | ||||||||||||
Hedged items | Hedging instruments | |||||||||||
Date | Item | Risk type | Contract type | Financial institution |
Duration of contract | |||||||
Expired |
Mar. 7, 2013 | U.S. dollar-denominated bonds’ face value of USD 300,000 |
Currency risk and Interest rate risk |
Floating-to-fixed cross-currency interest rate swap |
DBS bank | Mar. 7, 2013~ Mar. 7, 2020 | ||||||
Contracted |
Mar. 4, 2020 | U.S. dollar-denominated bonds’ face value of USD 300,000 |
Currency risk and Interest rate risk |
Floating-to-fixed cross-currency interest rate swap |
Citibank | Mar. 4, 2020~ Jun. 4, 2025 |
(2) | Details that Eleven Street Co., Ltd., a subsidiary of Parent Company, has entered into put options with buyers for all or part of 1,157,042 common shares of Korea Center Co., Ltd. which is held by the Group are as follows: |
Number of shares |
Exercise period |
Exercise price | ||
1,157,042 | Jan. 1, 2021~Jun. 30, 2021 | Applied to 106% of 23,767 won |
Granting condition | ||||
Eleven Street Co., Ltd. is granted put options for selling all or part of target stocks to the buyers when there is no situation in which the weighted average price of the same day trading volume in the KOSDAQ market of
the common stock of the target company exceeds |
20. | Share Capital and Capital Surplus and Others |
(1) | The Parent Company’s outstanding share capital consists entirely of common shares with a par value of
|
(In millions of won, except for share data) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Number of authorized shares |
220,000,000 | 220,000,000 | ||||||||||
Number of issued shares |
80,745,711 | 80,745,711 | ||||||||||
Share capital: |
||||||||||||
Common share |
44,639 | 44,639 | ||||||||||
Capital surplus and others: |
||||||||||||
Paid-in surplus |
2,915,887 | 2,915,887 | ||||||||||
Treasury shares |
(1,696,997 | ) | (1,696,997 | ) | ||||||||
Hybrid bonds(*1) |
398,759 | 398,759 | ||||||||||
Share option(note 21) |
1,405 | 1,302 | ||||||||||
Others(*2) |
(400,530 | ) | (612,470 | ) | ||||||||
|
|
|
|
|||||||||
1,218,524 | 1,006,481 | |||||||||||
|
|
|
|
51
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
20. | Share Capital and Capital Surplus and Others, Continued |
(1) | The Parent Company’s outstanding share capital consists entirely of common shares with a par value of
|
(*1) | As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Group classified the hybrid bonds as equity. When in liquidation or bankruptcy, these hybrid bonds are senior only to common stocks. |
(*2) | Others primarily consist of the excess of the consideration paid by the Group over the carrying amount of net assets acquired from entities under common control. |
(2) | There were no changes in share capital for the six-month periods ended June 30, 2020 and 2019 and details of shares outstanding as of June 30, 2020 and 2019 are as follows: |
(In shares) | June 30, 2020 | June 30, 2019 | ||||||||||||||||||||||
Issued shares |
Treasury shares |
Outstanding shares |
Issued shares |
Treasury shares |
Outstanding shares |
|||||||||||||||||||
Shares outstanding |
80,745,711 | 7,609,263 | 73,136,448 | 80,745,711 | 8,875,883 | 71,869,828 |
52
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
21. | Share Option |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows: |
Parent Company | ||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | ||||||||
Grant date |
March 24, 2017 | February 20, 2018 |
February 22, 2019 |
March 26, 2019 |
March 26, 2020 | |||||||||
Types of shares to be issued |
Registered common shares | |||||||||||||
Grant method |
Reissue of treasury shares | Reissue of treasury shares, cash settlement | ||||||||||||
Number of shares (in shares) |
22,168 | 22,168 | 22,168 | 1,358 | 4,177 | 1,734 | 127,643 | |||||||
Exercise price (in won) |
246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | |||||||
Exercise period |
Mar. 25, 2019 ~ Mar. 24, 2022 |
Mar. 25, 2020 ~ Mar. 24, 2023 |
Mar. 25, 2021 ~ Mar. 24, 2024 |
Feb. 21, 2020 ~ Feb. 20, 2023 |
Feb. 23, 2021 ~ Feb. 22, 2024 |
Mar. 27, 2021 ~ Mar. 26, 2024 |
Mar. 27, 2023 ~ Mar. 26, 2027 | |||||||
Vesting conditions |
2 years’ service from the grant date |
3 years’ service from |
4 years’ service from the grant date |
2 years’ service from |
2 years’ service from |
2 years’ service from the grant date |
3 years’ service from the grant date |
One Store Co., Ltd. | DREAMUS COMPANY | |||||||
1-1 | 1-2 | 1-3 | ||||||
Grant date |
April 27, 2018 | March 28, 2019 | March 28, 2019 | March 28, 2019 | ||||
Types of shares to be issued |
Common shares of One Store Co., Ltd. |
Common shares of DREAMUS COMPANY | ||||||
Grant method |
Issuance of new shares | Issuance of new shares, reissue of treasury shares, cash settlement | ||||||
Number of shares (in shares)(*) |
712,150 | 386,680 | 386,672 | 386,648 | ||||
Exercise price (in won) |
5,390 | 9,160 | 9,160 | 9,160 | ||||
Exercise period |
Apr. 28, 2020~ Apr. 27, 2024 |
Mar. 29, 2021~ Mar. 28, 2024 |
Mar. 29, 2022~ Mar. 28, 2025 |
Mar. 29, 2023~ Mar. 28, 2026 | ||||
Vesting conditions |
2 years’ service from the grant date |
(a) 2 years’ service from the grant date |
(a) 3 years’ service from the grant date |
(a) 4 years’ service from the grant date | ||||
(b) Average stock price for the exercise period is more than 150% of the exercise price |
(b) Average stock price for the exercise period is more than 150% of the exercise price |
(b) Average stock price for the exercise period is more than 150% of the exercise price |
53
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
21. | Share Option, Continued |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows, Continued: |
Incross Co., Ltd. | ||||||||||||||||||||||
3 | 4 | 5 | 6 | 7 | 8 | |||||||||||||||||
Grant date |
March 30, 2016 | March 7, 2017 | March 7, 2018 | March 7, 2019 | October 15, 2019 | March 10, 2020 | ||||||||||||||||
Types of shares to be issued |
Common shares of Incross Co., Ltd. | |||||||||||||||||||||
Grant method |
Issuance of new shares, reissue of treasury shares, cash settlement | |||||||||||||||||||||
Number of shares (in shares)(*) |
14,750 | 29,625 | 9,900 | 6,600 | 59,225 | 19,800 | ||||||||||||||||
Exercise price (in won) |
10,571 | 17,485 | 25,861 | 16,895 | 22,073 | 26,291 | ||||||||||||||||
Exercise period |
Mar. 30, 2019~ | Mar. 7, 2020~ | Mar. 7, 2021~ | Mar. 7, 2022~ | Oct. 15, 2022~ | Mar. 10, 2023~ | ||||||||||||||||
Mar. 30, 2022 | Mar. 6, 2023 | Mar. 6, 2024 | Mar. 6, 2025 | Oct. 14, 2025 | Mar. 10, 2026 | |||||||||||||||||
Vesting conditions |
3 years’ service from the grant date |
|
3 years’ service from the grant date |
|
|
3 years’ service from the grant date |
|
|
3 years’ service from the grant date |
|
|
3 years’ service from the grant date |
|
|
3 years’ service from the grant date |
|
Life & Security Holdings Co., Ltd. | FSK L&S Co., Ltd. | |||||||||
1-1 | 1-2 | 1-3 | 1-4 | |||||||
Grant date |
August 22, 2019 | May 31, 2019 | ||||||||
Types of shares to be issued |
Common shares of Life & Security Holdings Co., Ltd. | Common shares of FSK L&S Co., Ltd. | ||||||||
Grant method |
Cash settlement | Issuance of new shares | ||||||||
Number of shares (in shares) |
3,506 | 3,163 | 6,260 | 6,245 | 43,955 | |||||
Exercise price (in won) |
949,940 | 949,940 | 1,025,935 | 1,108,010 | 10,000 | |||||
Exercise period |
1st exercise: Applied to 50% of the granted shares and exercisable 6 months after the listing(June 30, 2023) of Life & Security Holdings Co., Ltd. | June 30, 2022~ May 31, 2025 | ||||||||
2nd exercise: Applied to 25% of the granted shares and exercisable 12 months after the listing(June 30, 2023) of Life & Security Holdings Co., Ltd. | ||||||||||
3rd exercise: Applied to 25% of the granted shares and exercisable 18 months after the listing(June 30, 2023) of Life & Security Holdings Co., Ltd. | ||||||||||
Vesting conditions |
Service provided until December 31, 2019 |
Service provided until December 31, 2020 |
Service provided until December 31, 2020 |
Service provided until December 31, 2021 |
3 years’ service from the grant date |
(*) | Some of stock options granted by One Store Co., Ltd. and DREAMUS COMPANY that have not met the vesting conditions have been forfeited, and some of the stock options granted by One Store Co., Ltd. and Incross Co., Ltd. have been exercised during the six-month period ended June 30, 2020. |
(2) | Share compensation expense recognized for the six-month period ended June 30, 2020 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | ||||||||
Share compensation expense | ||||||||
As of December 31, 2019 |
3,276 | |||||||
For the six-month period ended June 30, 2020 |
1,600 | |||||||
In subsequent periods |
3,045 | |||||||
|
|
|||||||
7,921 | ||||||||
|
|
54
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
21. | Share Option, Continued |
(3) | The Group used the binomial option-pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows: |
(In won) | Parent Company | |||||||||||||||||||||||||||
Series | ||||||||||||||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | ||||||||||||||||||||||
Risk-free interest rate |
1.86 | % | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | ||||||||||||||
Estimated option’s life |
5 years | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | |||||||||||||||||||||
Share price (Closing price on the preceding day) |
262,500 | 262,500 | 262,500 | 243,500 | 259,000 | 253,000 | 174,500 | |||||||||||||||||||||
Expected volatility |
13.38 | % | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | ||||||||||||||
Expected dividends |
3.80 | % | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | ||||||||||||||
Exercise price |
246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | |||||||||||||||||||||
Per-share fair value of the option |
27,015 | 20,240 | 15,480 | 23,988 | 8,600 | 8,111 | 962 |
(in won) | One Store Co., Ltd. | DREAMUS COMPANY | ||||||||||||||
1-1 | 1-2 | 1-3 | ||||||||||||||
Risk-free interest rate |
2.58 | % | 1.73 | % | 1.77 | % | 1.82 | % | ||||||||
Estimated option’s life |
6 years | — | — | — | ||||||||||||
Share price (Closing price on the preceding day) |
4,925 | 8,950 | 8,950 | 8,950 | ||||||||||||
Expected volatility |
9.25 | % | 32.34 | % | 32.34 | % | 32.34 | % | ||||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
Exercise price |
5,390 | 9,160 | 9,160 | 9,160 | ||||||||||||
Per-share fair value of the option |
566 | 1,976 | 2,189 | 2,356 |
(In won) | Incross Co., Ltd. | FSK L&S Co., Ltd. |
||||||||||||||||||||||||||
3 | 4 | 5 | 6 | 7 | 8 | |||||||||||||||||||||||
Risk-free interest rate |
2.09 | % | 1.35 | % | 1.50 | % | 1.76 | % | 1.41 | % | 1.16 | % | 1.64 | % | ||||||||||||||
Estimated option’s life |
6 years | 6 years | 6 years | 6 years | 6 years | 6 years | — | |||||||||||||||||||||
Share price (Closing price on the preceding day) |
17,993 | 43,843 | 27,300 | 17,000 | 22,050 | 22,350 | 10,455 | |||||||||||||||||||||
Expected volatility |
20.67 | % | 18.67 | % | 21.28 | % | 25.58 | % | 42.37 | % | 41.69 | % | 16.20 | % | ||||||||||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||||
Exercise price |
10,571 | 17,485 | 25,861 | 16,895 | 22,073 | 26,291 | 10,000 | |||||||||||||||||||||
Per-share fair value of the option |
1,965 | 9,423 | 7,277 | 4,887 | 9,209 | 7,813 | 1,420 |
55
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
21. | Share Option, Continued |
(3) | The Group used the binomial option-pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows, Continued: |
(In won) | Life & Security Holdings Co., Ltd. | |||||||||||
1-1, 1-2 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate |
1.47 | % | 1.47 | % | 1.47 | % | ||||||
Estimated option’s life |
4 years | 4.5 years | 5 years | |||||||||
Share price |
964,084 | 964,084 | 964,084 | |||||||||
Expected volatility |
25.84 | % | 26.76 | % | 26.79 | % | ||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price |
949,940 | 949,940 | 949,940 | |||||||||
Per-share fair value of the option |
144,513 | 145,878 | 162,219 | |||||||||
(In won) | Life & Security Holdings Co., Ltd. | |||||||||||
1-3 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate |
1.47 | % | 1.47 | % | 1.47 | % | ||||||
Estimated option’s life |
4 years | 4.5 years | 5 years | |||||||||
Share price |
964,084 | 964,084 | 964,084 | |||||||||
Expected volatility |
25.84 | % | 26.76 | % | 26.79 | % | ||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price |
1,025,935 | 1,025,935 | 1,025,935 | |||||||||
Per-share fair value of the option |
123,004 | 125,792 | 141,861 | |||||||||
(In won) | Life & Security Holdings Co., Ltd. | |||||||||||
1-4 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate |
1.47 | % | 1.47 | % | 1.47 | % | ||||||
Estimated option’s life |
4 years | 4.5 years | 5 years | |||||||||
Share price |
964,084 | 964,084 | 964,084 | |||||||||
Expected volatility |
25.84 | % | 26.76 | % | 26.79 | % | ||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price |
1,108,010 | 1,108,010 | 1,108,010 | |||||||||
Per-share fair value of the option |
101,207 | 105,797 | 120,924 |
As One Store Co., Ltd., FSK L&S Co., Ltd., and Life & Security Holdings Co., Ltd., the subsidiaries of the Parent Company, are unlisted, the share price is calculated using the discounted cash flow model.
56
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
22. | Retained Earnings |
Retained earnings as of June 30, 2020 and December 31, 2019 are as follows:
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Appropriated: |
||||||||||||
Legal reserve |
22,320 | 22,320 | ||||||||||
Reserve for business expansion |
11,631,138 | 11,531,138 | ||||||||||
Reserve for technology development |
4,365,300 | 4,265,300 | ||||||||||
|
|
|
|
|||||||||
16,018,758 | 15,818,758 | |||||||||||
Unappropriated |
6,265,887 | 6,416,527 | ||||||||||
|
|
|
|
|||||||||
22,284,645 | 22,235,285 | |||||||||||
|
|
|
|
23. | Reserves |
(1) | Details of reserves, net of taxes, as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Valuation gain (loss) on FVOCI |
135,965 | (47,086 | ) | |||||||||
Other comprehensive loss of investments in associates and joint ventures |
(216,334 | ) | (278,142 | ) | ||||||||
Valuation gain (loss) on derivatives |
16,970 | (920 | ) | |||||||||
Foreign currency translation differences for foreign operations |
12,253 | (3,428 | ) | |||||||||
|
|
|
|
|||||||||
(51,146 | ) | (329,576 | ) | |||||||||
|
|
|
|
(2) | Changes in reserves for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
Valuation gain (loss) on financial assets at FVOCI |
Other comprehensive income (loss) of investments in associates and joint ventures |
Valuation gain (loss) on derivatives |
Foreign currency translation differences for foreign operations |
Total | ||||||||||||||||||||
Balance at January 1, 2019 |
(124 | ) | (334,637 | ) | (41,601 | ) | 2,920 | (373,442 | ) | |||||||||||||||
Changes, net of taxes |
(34,695 | ) | 71,210 | 29,143 | 10,592 | 76,250 | ||||||||||||||||||
Balance at June 30, 2019 |
(34,819 | ) | (263,427 | ) | (12,458 | ) | 13,512 | (297,192 | ) | |||||||||||||||
Balance at January 1, 2020 |
(47,086 | ) | (278,142 | ) | (920 | ) | (3,428 | ) | (329,576 | ) | ||||||||||||||
Changes, net of taxes |
183,051 | 61,808 | 17,890 | 15,681 | 278,430 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at June 30, 2020 |
135,965 | (216,334 | ) | 16,970 | 12,253 | (51,146 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
57
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
24. | Other Operating Expenses |
Details of other operating expenses for the three and six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Communication |
11,279 | 21,871 | 10,945 | 20,875 | ||||||||||||||||
Utilities |
75,152 | 161,545 | 70,246 | 147,265 | ||||||||||||||||
Taxes and dues |
18,078 | 26,449 | 16,600 | 26,758 | ||||||||||||||||
Repair |
97,792 | 178,322 | 92,172 | 181,310 | ||||||||||||||||
Research and development |
104,890 | 215,205 | 96,232 | 195,988 | ||||||||||||||||
Training |
6,413 | 14,645 | 6,905 | 15,801 | ||||||||||||||||
Bad debt for accounts receivable – trade |
12,912 | 30,230 | 5,264 | 15,253 | ||||||||||||||||
Travel |
2,681 | 7,862 | 6,826 | 14,886 | ||||||||||||||||
Supplies and others |
76,753 | 144,880 | 65,196 | 127,119 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
405,950 | 801,009 | 370,386 | 745,255 | |||||||||||||||||
|
|
|
|
|
|
|
|
25. | Other Non-Operating Income and Expenses |
Details of other non-operating income and expenses for the three and six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Other non-operating Income: |
||||||||||||||||||||
Gain on disposal of property and equipment and intangible assets |
2,744 | 4,399 | 4,589 | 7,493 | ||||||||||||||||
Gain on business transfer |
— | 12,451 | — | — | ||||||||||||||||
Others |
25,937 | 28,556 | 3,964 | 8,995 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
28,681 | 45,406 | 8,553 | 16,488 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other non-operating Expenses: |
||||||||||||||||||||
Loss on impairment of property and equipment and intangible assets |
12,700 | 12,700 | 1,274 | 1,337 | ||||||||||||||||
Loss on disposal of property and equipment and intangible assets |
16,872 | 25,587 | 16,491 | 26,028 | ||||||||||||||||
Donations |
4,156 | 10,608 | 9,806 | 12,456 | ||||||||||||||||
Bad debt for accounts receivable – other |
1,385 | 2,176 | 994 | 2,095 | ||||||||||||||||
Loss on impairment of investment assets |
— | — | 1,090 | 1,398 | ||||||||||||||||
Others |
4,197 | 6,987 | 4,154 | 8,600 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
39,310 | 58,058 | 33,809 | 51,914 | |||||||||||||||||
|
|
|
|
|
|
|
|
58
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
26. Finance Income and Costs
(1) | Details of finance income and costs for the three and six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Finance Income: |
||||||||||||||||||||
Interest income |
11,515 | 24,443 | 14,048 | 29,095 | ||||||||||||||||
Gain on sale of accounts receivable – other |
2,834 | 7,513 | 4,045 | 11,987 | ||||||||||||||||
Dividends |
276 | 1,008 | — | 9,924 | ||||||||||||||||
Gain on foreign currency transactions |
3,227 | 5,319 | 3,971 | 5,645 | ||||||||||||||||
Gain on foreign currency translations |
— | 7,093 | 2,613 | 5,013 | ||||||||||||||||
Gain on valuation of derivatives |
14,696 | 14,696 | 19 | 465 | ||||||||||||||||
Gain on settlement of derivatives |
52 | 7,589 | 389 | 389 | ||||||||||||||||
Gain relating to financial assets at FVTPL |
305 | 747 | 1,739 | 2,083 | ||||||||||||||||
Gain relating to financial liabilities at FVTPL |
— | — | 265 | 56 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
32,905 | 68,408 | 27,089 | 64,657 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Finance Costs: |
||||||||||||||||||||
Interest expenses |
94,407 | 192,436 | 99,520 | 201,774 | ||||||||||||||||
Loss on sale of accounts receivable – other |
— | — | 561 | 561 | ||||||||||||||||
Loss on foreign currency transactions |
3,124 | 5,374 | 4,012 | 5,625 | ||||||||||||||||
Loss on foreign currency translations |
2,491 | 6,018 | 2,883 | 4,340 | ||||||||||||||||
Loss on disposal of long-term investment securities |
101 | 101 | — | — | ||||||||||||||||
Loss on settlement of derivatives |
313 | 2,179 | 317 | 317 | ||||||||||||||||
Loss relating to financial assets at FVTPL |
49 | 793 | 227 | 367 | ||||||||||||||||
Loss relating to financial liabilities at FVTPL |
— | — | — | 43 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
100,485 | 206,901 | 107,520 | 213,027 | |||||||||||||||||
|
|
|
|
|
|
|
|
(2) | Details of interest income included in finance income for the three and six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Interest income on cash equivalents and short-term financial instruments |
6,261 | 12,638 | 7,326 | 15,149 | ||||||||||||||||
Interest income on loans and others |
5,254 | 11,805 | 6,722 | 13,946 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
11,515 | 24,443 | 14,048 | 29,095 | |||||||||||||||||
|
|
|
|
|
|
|
|
59
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
26. | Finance Income and Costs, Continued |
(3) | Details of interest expenses included in finance costs for the three and six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Interest expenses on borrowings |
27,212 | 53,017 | 26,234 | 51,628 | ||||||||||||||||
Interest expenses on debentures |
56,193 | 113,090 | 56,044 | 111,876 | ||||||||||||||||
Others |
11,002 | 26,329 | 17,242 | 38,270 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
94,407 | 192,436 | 99,520 | 201,774 | |||||||||||||||||
|
|
|
|
|
|
|
|
(4) | Details of impairment losses for financial assets for the three and six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Accounts receivable – trade |
12,912 | 30,230 | 5,264 | 15,253 | ||||||||||||||||
Other receivables |
1,385 | 2,176 | 994 | 2,095 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
14,297 | 32,406 | 6,258 | 17,348 | |||||||||||||||||
|
|
|
|
|
|
|
|
27. | Income Tax Expense |
Income tax expense was calculated by considering current tax expense, adjusted to changes in estimates related to prior periods, and deferred tax expense due to origination and reversal of temporary differences.
28. | Earnings per Share |
(1) | Basic earnings per share |
1) | Basic earnings per share for the three and six-month periods ended June 30, 2020 and 2019 are calculated as follows: |
(In millions of won, except for share data) | 2020 | 2019 | ||||||||||||||||||
Three- month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Profit attributable to owners of the Parent Company |
427,210 | 736,650 | 263,397 | 642,586 | ||||||||||||||||
Interest on hybrid bonds |
(3,691 | ) | (7,383 | ) | (3,691 | ) | (7,383 | ) | ||||||||||||
Profit for the period on common shares |
423,519 | 729,267 | 259,706 | 635,203 | ||||||||||||||||
Weighted average number of common shares outstanding |
73,136,448 | 73,136,448 | 71,869,828 | 71,869,828 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Basic earnings per share (in won) |
5,790 | 9,971 | 3,613 | 8,838 | ||||||||||||||||
|
|
|
|
|
|
|
|
60
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
28. | Earnings per Share, Continued |
(1) | Basic earnings per share, Continued |
2) | The weighted average number of common shares outstanding for the three and six-month periods ended June 30, 2020 and 2019 are calculated as follows: |
(In shares) | Number of common shares |
Weighted number of common shares |
||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||
Issued shares at January 1, 2020 |
80,745,711 | 80,745,711 | 80,745,711 | |||||||||
Treasury shares at January 1, 2020 |
(7,609,263 | ) | (7,609,263 | ) | (7,609,263 | ) | ||||||
|
|
|
|
|
|
|||||||
Weighted average number of common shares outstanding at June 30, 2020 |
73,136,448 | 73,136,448 | 73,136,448 | |||||||||
|
|
|
|
|
|
(In shares) | Number of common shares |
Weighted number of common shares |
||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||
Issued shares at January 1, 2019 |
80,745,711 | 80,745,711 | 80,745,711 | |||||||||
Treasury shares at January 1, 2019 |
(8,875,883 | ) | (8,875,883 | ) | (8,875,883 | ) | ||||||
|
|
|
|
|
|
|||||||
Weighted average number of common shares outstanding at June 30, 2019 |
71,869,828 | 71,869,828 | 71,869,828 | |||||||||
|
|
|
|
|
|
(2) | Diluted earnings per share |
For the six-month periods ended June 30, 2020 and 2019, diluted earnings per share are the same as basic earnings per share as there are no dilutive potential common shares.
29. | Categories of Financial Instruments |
(1) | Financial assets by category as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | June 30, 2020 | |||||||||||||||||||||||||||
Financial assets at FVTPL |
Equity instruments at FVOCI |
Debt instruments at FVOCI |
Financial assets at amortized cost |
Derivatives hedging instrument |
Total | |||||||||||||||||||||||
Cash and cash equivalents |
— | — | — | 1,496,903 | — | 1,496,903 | ||||||||||||||||||||||
Financial instruments |
— | — | — | 992,397 | — | 992,397 | ||||||||||||||||||||||
Short-term investment securities |
80,882 | — | — | — | — | 80,882 | ||||||||||||||||||||||
Long-term investment securities(*) |
139,442 | 967,438 | 2,389 | — | — | 1,109,269 | ||||||||||||||||||||||
Accounts receivable—trade |
— | — | — | 2,261,996 | — | 2,261,996 | ||||||||||||||||||||||
Loans and other receivables |
386,177 | — | — | 1,122,482 | — | 1,508,659 | ||||||||||||||||||||||
Derivative financial assets |
20,620 | — | — | — | 212,308 | 232,928 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
627,121 | 967,438 | 2,389 | 5,873,778 | 212,308 | 7,683,034 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | The Group designated |
61
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Categories of Financial Instruments, Continued |
(1) | Financial assets by category as of June 30, 2020 and December 31, 2019 are as follows, Continued: |
(In millions of won) | December 31, 2019 | |||||||||||||||||||||||||||
Financial assets at FVTPL |
Equity instruments at FVOCI |
Debt instruments at FVOCI |
Financial assets at amortized cost |
Derivatives hedging instrument |
Total | |||||||||||||||||||||||
Cash and cash equivalents |
— | — | — | 1,270,824 | — | 1,270,824 | ||||||||||||||||||||||
Financial instruments |
— | — | — | 831,637 | — | 831,637 | ||||||||||||||||||||||
Short-term investment securities |
166,666 | — | — | — | — | 166,666 | ||||||||||||||||||||||
Long-term investment securities(*) |
142,316 | 710,272 | 4,627 | — | — | 857,215 | ||||||||||||||||||||||
Accounts receivable – trade |
— | — | — | 2,247,895 | — | 2,247,895 | ||||||||||||||||||||||
Loans and other receivables |
532,225 | — | — | 1,131,342 | — | 1,663,567 | ||||||||||||||||||||||
Derivative financial assets |
6,074 | — | — | — | 144,886 | 150,960 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
847,281 | 710,272 | 4,627 | 5,481,698 | 144,886 | 7,188,764 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | The Group designated |
(2) | Financial liabilities by category as of June 30, 2020, and December 31, 2019, are as follows: |
(In millions of won) | ||||||||||||||||
June 30, 2020 | ||||||||||||||||
Financial liabilities at amortized cost |
Derivatives hedging instrument |
Total | ||||||||||||||
Accounts payable – trade |
370,929 | — | 370,929 | |||||||||||||
Derivative financial liabilities |
— | 16,642 | 16,642 | |||||||||||||
Borrowings |
2,107,596 | — | 2,107,596 | |||||||||||||
Debentures |
8,689,837 | — | 8,689,837 | |||||||||||||
Lease liabilities(*) |
666,571 | — | 666,571 | |||||||||||||
Accounts payable – other and others |
5,849,471 | — | 5,849,471 | |||||||||||||
|
|
|
|
|
|
|||||||||||
17,684,404 | 16,642 | 17,701,046 | ||||||||||||||
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||
December 31, 2019 | ||||||||||||||||
Financial liabilities at amortized cost |
Derivatives hedging instrument |
Total | ||||||||||||||
Accounts payable – trade |
438,297 | — | 438,297 | |||||||||||||
Derivative financial liabilities |
— | 1,043 | 1,043 | |||||||||||||
Borrowings |
2,043,140 | — | 2,043,140 | |||||||||||||
Debentures |
8,220,833 | — | 8,220,833 | |||||||||||||
Lease liabilities(*) |
712,740 | — | 712,740 | |||||||||||||
Accounts payable – other and others |
6,563,030 | — | 6,563,030 | |||||||||||||
|
|
|
|
|
|
|||||||||||
17,978,040 | 1,043 | 17,979,083 | ||||||||||||||
|
|
|
|
|
|
(*) | Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities. |
62
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
30. | Financial Risk Management |
(1) | Financial risk management |
The Group is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates and interest rates. The Group implements a risk management system to monitor and manage these specific risks.
The Group’s financial assets consist of cash and cash equivalents, financial instruments, investment securities and accounts receivable – trade and others, etc. Financial liabilities consist of accounts payable – trade and other, borrowings, debentures, lease liabilities and others.
1) | Market risk |
(i) | Currency risk |
The Group incurs exchange position due to revenue and expenses from its global operations. Major foreign currencies where the currency risk occurs are USD, JPY and EUR. The Group determines the currency risk management policy after considering the nature of business and the presence of methods that mitigate the currency risk for each Group entities. Currency risk occurs on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of each Group entity. The Group manages currency risk arising from business transactions by using currency forwards, etc.
Monetary assets and liabilities denominated in foreign currencies as of June 30, 2020 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||||||||||
Assets | Liabilities |
|
||||||||||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||||||||||
USD |
102,823 | 1,543,576 | ||||||||||||||||||||||
EUR |
5,379 | 7,262 | 3,212 | 4,336 | ||||||||||||||||||||
JPY |
823,046 | 9,186 | 28,766 | 321 | ||||||||||||||||||||
CHF |
5,000 | 6,311 | 1,000 | 1,262 | ||||||||||||||||||||
Others |
— | 2,188 | — | 7 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
148,406 | 1,859,298 | |||||||||||||||||||||||
|
|
|
|
In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.
As of June 30, 2020, a hypothetical change in exchange rates by 10% would have increased (decreased) the Group’s income before income tax as follows:
(In millions of won) | ||||||||||||
If increased by 10% | If decreased by 10% | |||||||||||
USD |
8,558 | (8,558 | ) | |||||||||
EUR |
292 | (292 | ) | |||||||||
JPY |
886 | (886 | ) | |||||||||
CHF |
505 | (505 | ) | |||||||||
Others |
218 | (218 | ) | |||||||||
|
|
|
|
|||||||||
(10,459 | ) | |||||||||||
|
|
|
|
63
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
30. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk |
The interest rate risk of the Group arises from borrowings, debenture, and long-term payables – other. Since the Group’s interest-bearing assets are mostly fixed-interest bearing assets, the Group’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.
The Group performs various analysis to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Group takes various measures, such as refinancing, renewal, alternative financing and hedging.
As of June 30,
2020, the floating-rate borrowings and bonds of the Group are W140,375 million and W360,210 million, respectively, and the Group has entered into interest rate swap agreements for most of floating rate
borrowings and debentures to hedge interest rate risk. If the interest rate increases (decreases) 1% with all other variables held constant, income before income taxes for the six-month period ended
June 30, 2020, would change by W235 million in relation to the floating-rate borrowings that are exposed to interest rate risk.
As of June 30, 2020, the floating-rate long-term payables – other are W1,626,040 million. If the interest rate
increases (decreases) 1% with all other variables held constant, income before income taxes for the six-month period ended June 30, 2020 would change by W8,130 million in relation to
the floating-rate long-term payables – other that are exposed to interest rate risk.
2) | Credit risk |
The maximum credit exposure as of June 30, 2020 and December 31, 2019 are as follows:
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Cash and cash equivalents |
1,496,658 | 1,270,572 | ||||||||||
Financial instruments |
992,397 | 831,637 | ||||||||||
Investment securities |
11,310 | 13,548 | ||||||||||
Accounts receivable – trade |
2,261,996 | 2,247,895 | ||||||||||
Contract assets |
149,274 | 191,858 | ||||||||||
Loans and other receivables |
1,508,659 | 1,663,567 | ||||||||||
Derivative financial assets |
232,928 | 150,960 | ||||||||||
|
|
|
|
|||||||||
6,653,222 | 6,370,037 | |||||||||||
|
|
|
|
64
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
30. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk, Continued |
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Group evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors. Based on such information, the Group establishes credit limits for each customer or counterparty.
The Group establishes loss allowance in respect of accounts receivable – trade and contract assets. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Also, the Group’s credit risk can arise from transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Group has a policy to deal only with financial institutions with high credit ratings. The amount of maximum exposure to credit risk of the Group is the carrying amount of financial assets as of June 30, 2020.
3) | Liquidity risk |
The Group’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalent balances and have enough liquidity through various committed credit lines. The Group maintains enough liquidity within credit lines through active operating activities.
Contractual maturities of financial liabilities as of June 30, 2020 are as follows:
(In millions of won) | ||||||||||||||||||||||||
Carrying amount |
Contractual cash flows |
Less than 1 year |
1 – 5 years | More than 5 years |
||||||||||||||||||||
Accounts payable – trade |
370,929 | 370,929 | 370,929 | — | — | |||||||||||||||||||
Borrowings(*) |
2,107,596 | 2,433,014 | 238,737 | 2,194,277 | — | |||||||||||||||||||
Debentures(*) |
8,689,837 | 9,940,640 | 953,645 | 5,943,452 | 3,043,543 | |||||||||||||||||||
Lease liabilities |
666,571 | 695,209 | 312,352 | 325,065 | 57,792 | |||||||||||||||||||
Accounts payable – other and others(*) |
5,849,471 | 6,028,777 | 4,757,241 | 895,283 | 376,253 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
17,684,404 | 19,468,569 | 6,632,904 | 9,358,077 | 3,477,588 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
(*) | Includes interest payables. |
The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
65
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
30. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
3) | Liquidity risk, Continued |
As of June 30, 2020, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:
(In millions of won) | ||||||||||||||||||||||||
Carrying amount |
Contractual cash flows |
Less than 1 year |
1 – 5 years |
More than 5 years |
||||||||||||||||||||
Assets |
212,308 | 216,054 | 27,490 | 152,523 | 36,041 | |||||||||||||||||||
Liabilities |
(16,642 | ) | (16,738 | ) | (1,576 | ) | (15,162 | ) | — | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
195,666 | 199,316 | 25,914 | 137,361 | 36,041 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
(2) | Capital management |
The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Group is the same as that for the year ended December 31, 2019.
The Group monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity; both from the condensed consolidated interim financial statements.
Debt-equity ratio as of June 30, 2020 and December 31, 2019 are as follows:
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Total liabilities |
21,940,427 | 21,788,084 | ||||||||||
Total equity |
24,016,723 | 22,823,536 | ||||||||||
Debt-equity ratios |
91.35 | % | 95.46 | % |
66
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
30. | Financial Risk Management, Continued |
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | June 30, 2020 | |||||||||||||||||||||||
Carrying amount |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Financial assets that are measured at fair value: |
||||||||||||||||||||||||
FVTPL |
627,121 | — | 469,059 | 158,062 | 627,121 | |||||||||||||||||||
Derivatives hedging instruments |
212,308 | — | 212,308 | — | 212,308 | |||||||||||||||||||
FVOCI |
969,827 | 636,794 | — | 333,033 | 969,827 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
1,809,256 | 636,794 | 681,367 | 491,095 | 1,809,256 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Financial liabilities that are measured at fair value: |
||||||||||||||||||||||||
Derivatives hedging instruments |
16,642 | — | 16,642 | — | 16,642 | |||||||||||||||||||
Financial liabilities that are not measured at fair value: |
||||||||||||||||||||||||
Borrowings |
2,107,596 | — | 2,290,423 | — | 2,290,423 | |||||||||||||||||||
Debentures |
8,689,837 | — | 9,297,162 | — | 9,297,162 | |||||||||||||||||||
Long-term payables – other |
1,560,216 | — | 1,580,086 | — | 1,580,086 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
12,357,649 | — | 13,167,671 | — | 13,167,671 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
(In millions of won) | December 31, 2019 | |||||||||||||||||||||||
Carrying amount |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Financial assets that are measured at fair value: |
||||||||||||||||||||||||
FVTPL |
847,281 | — | 668,891 | 178,390 | 847,281 | |||||||||||||||||||
Derivatives hedging instruments |
144,886 | — | 144,886 | — | 144,886 | |||||||||||||||||||
FVOCI |
714,899 | 407,651 | — | 307,248 | 714,899 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
1,707,066 | 407,651 | 813,777 | 485,638 | 1,707,066 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Financial liabilities that are measured at fair value: |
||||||||||||||||||||||||
Derivatives hedging instruments |
1,043 | — | 1,043 | — | 1,043 | |||||||||||||||||||
Financial liabilities that are not measured at fair value: |
||||||||||||||||||||||||
Borrowings |
2,043,140 | — | 2,191,037 | — | 2,191,037 | |||||||||||||||||||
Debentures |
8,220,833 | — | 8,714,408 | — | 8,714,408 | |||||||||||||||||||
Long-term payables – other |
1,974,006 | — | 2,008,493 | — | 2,008,493 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
12,237,979 | — | 12,913,938 | — | 12,913,938 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
67
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
30. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
1) | Fair value and carrying amount of financial assets and liabilities based on fair value hierarchy as of June 30, 2020 and December 31, 2019, are as follows, Continued: |
The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.
Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI) is measured based on the bid price at the end of the reporting date.
The Group uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used for such valuation methods include swap rate, interest rate and risk premium, and the Group performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
Interest rates used by the Group for the fair value measurement as of June 30, 2020 are as follows:
Interest rate | ||||
Derivative instruments |
0.26% ~ 1.84 | % | ||
Borrowings and debentures |
1.10% ~ 2.00 | % | ||
Long-term payables – other |
1.06% ~ 1.61 | % |
2) | There have been no transfers between Level 2 and Level 1 for the six-month period ended June 30, 2020. The changes of financial assets classified as Level 3 for the six-month period ended June 30, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
Balance at January 1, 2020 |
Profit (loss) for the period |
OCI | Acquisition | Disposal | Transfer | Business combination |
Balance at June 30, 2020 |
|||||||||||||||||||||||||||||
FVTPL |
178,390 | 13,965 | 1,370 | 4,099 | (37,776 | ) | (2,002 | ) | 16 | 158,062 | ||||||||||||||||||||||||||
FVOCI |
307,248 | (101 | ) | 22,290 | 1,362 | (368 | ) | (3,621 | ) | 6,223 | 333,033 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
485,638 | 13,864 | 23,660 | 5,461 | (38,144 | ) | (5,623 | ) | 6,239 | 491,095 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
30. | Financial Risk Management, Continued |
(4) | Enforceable master netting agreement or similar agreement |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of June 30, 2020 and December 31, 2019 are as follows
(In millions of won) | June 30, 2020 | |||||||||||||||
Gross financial instruments recognized |
Amount offset | Net financial instruments presented on the condensed consolidated interim statement of financial position |
||||||||||||||
Financial assets: |
||||||||||||||||
Accounts receivable – trade and others |
181,526 | (99,844 | ) | 81,682 | ||||||||||||
Financial liabilities: |
||||||||||||||||
Accounts payable – other and others |
158,332 | (99,844 | ) | 58,488 | ||||||||||||
(In millions of won) | December 31, 2019 | |||||||||||||||
Gross financial instruments recognized |
Amount offset | Net financial instruments presented on the consolidated statement of financial position |
||||||||||||||
Financial assets: |
||||||||||||||||
Accounts receivable – trade and others |
102,241 | (100,895 | ) | 1,346 | ||||||||||||
Financial liabilities: |
||||||||||||||||
Accounts payable – other and others |
100,895 | (100,895 | ) | — |
31. | Transactions with Related Parties |
(1) | List of related parties |
Relationship |
Company | |
Ultimate Controlling Entity |
SK Holdings Co., Ltd. | |
Joint ventures |
Dogus Planet, Inc. and 3 others | |
Associates |
SK hynix Inc. and 47 others | |
Others |
The Ultimate Controlling Entity’s subsidiaries and associates, etc. |
As of June 30, 2020, the Group is included to SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act. All of the other entities included in SK Group are considered related parties of the Group.
69
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
31. | Transactions with Related Parties, Continued |
(2) | Compensation for the key management |
The Parent Company considers registered directors (3 executive and 5 non-executive directors) who have substantial role and responsibility in planning, operations and relevant controls of the business as key management. The compensation given to such key management for the three and six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Salaries |
672 | 5,521 | 547 | 4,875 | ||||||||||||||||
Defined benefits plan expenses |
175 | 3,108 | 142 | 953 | ||||||||||||||||
Share option |
61 | 93 | 64 | 194 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
908 | 8,722 | 753 | 6,022 | |||||||||||||||||
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|
Compensation for the key management includes salaries, non-monetary salaries and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.
70
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
31. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||
For the period ended June 30, 2020 | ||||||||||||||||||||||||||||||
Operating revenue and others |
Operating expense and others(*1) |
Acquisition of property and equipment |
||||||||||||||||||||||||||||
Scope |
Company |
Three-month | Six-month | Three-month | Six-month | Three-month | Six-month | |||||||||||||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd.(*2) | 9,754 | 18,805 | 82,052 | 373,666 | 16,332 | 18,476 | |||||||||||||||||||||||
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Associates |
F&U Credit information Co., Ltd. | 595 | 1,072 | 13,496 | 25,908 | — | — | |||||||||||||||||||||||
SK hynix Inc.(*3) | 19,283 | 178,862 | 100 | 161 | — | — | ||||||||||||||||||||||||
KEB HanaCard Co., Ltd. | 257 | 408 | 768 | 1,555 | — | — | ||||||||||||||||||||||||
SK Wyverns Co., Ltd. | 321 | 637 | 2,634 | 12,063 | — | — | ||||||||||||||||||||||||
Contents Wavve Co., Ltd. | 18 | 161 | 15,308 | 25,144 | — | — | ||||||||||||||||||||||||
Others(*4) | 30,699 | 43,185 | 2,836 | 4,855 | — | — | ||||||||||||||||||||||||
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51,173 | 224,325 | 35,142 | 69,686 | — | — | |||||||||||||||||||||||||
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Others |
SK Engineering & Construction Co., Ltd. | 3,477 | 8,072 | 100 | 101 | — | — | |||||||||||||||||||||||
SK Innovation Co., Ltd. | 10,177 | 21,225 | 3,308 | 7,448 | — | — | ||||||||||||||||||||||||
SK Networks Co., Ltd.(*5) | 3,250 | 6,925 | 222,689 | 492,001 | 6 | 12 | ||||||||||||||||||||||||
SK Networks Service Co., Ltd. | 2,070 | 3,307 | 17,345 | 34,864 | 455 | 558 | ||||||||||||||||||||||||
SK Telesys Co., Ltd. | 99 | 197 | 2,575 | 5,141 | 9,591 | 10,249 | ||||||||||||||||||||||||
SK TNS Co., Ltd. | 577 | 633 | 2,960 | 11,219 | 173,951 | 194,591 | ||||||||||||||||||||||||
SK Energy Co., Ltd. | 4,550 | 6,654 | 157 | 231 | — | — | ||||||||||||||||||||||||
SK hynix Semiconductor (China) Ltd. | 13,887 | 25,921 | — | — | — | — | ||||||||||||||||||||||||
SK Battery Hungary Kft. | 7,647 | 12,402 | — | — | — | — | ||||||||||||||||||||||||
SK Global Chemical Co., Ltd. | 6,809 | 12,146 | 8 | 8 | — | — | ||||||||||||||||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. |
5,060 | 7,756 | — | 8 | — | — | ||||||||||||||||||||||||
Others | 21,730 | 40,960 | 29,720 | 58,239 | 17,475 | 23,723 | ||||||||||||||||||||||||
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|||||||||||||||||||
79,333 | 146,198 | 278,862 | 609,260 | 201,478 | 229,133 | |||||||||||||||||||||||||
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|||||||||||||||||||
140,260 | 389,328 | 396,056 | 1,052,612 | 217,810 | 247,609 | |||||||||||||||||||||||||
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|
|
|
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|
|
|
(*1) | Operating expense and others include lease payments by the Group. |
(*2) | Operating expense and others include |
(*3) | Operating revenue and others include |
(*4) | Operating revenue and others include |
(*5) | Operating expenses and others include costs for handset purchases amounting to
|
71
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
31. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and six-month periods ended June 30, 2020 and 2019 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||||||||
For the period ended June 30, 2019 | ||||||||||||||||||||||||||||||
Operating revenue and others |
Operating expense and others(*1) |
Acquisition of property and equipment |
||||||||||||||||||||||||||||
Scope |
Company |
Three-month | Six-month | Three-month | Six-month | Three-month | Six-month | |||||||||||||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd.(*2) | 9,181 | 16,803 | 95,678 | 390,258 | 6,991 | 10,708 | |||||||||||||||||||||||
|
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|
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|||||||||||||||||||
Associates |
F&U Credit information Co., Ltd. | 606 | 1,214 | 12,526 | 26,092 | — | — | |||||||||||||||||||||||
SK hynix Inc.(*3) | 10,287 | 241,148 | 217 | 369 | — | — | ||||||||||||||||||||||||
KEB HanaCard Co., Ltd. | 181 | 594 | 673 | 1,066 | — | — | ||||||||||||||||||||||||
SK Wyverns Co., Ltd. | 318 | 635 | 228 | 15,253 | — | — | ||||||||||||||||||||||||
Others(*4) | 8,205 | 8,330 | 3,141 | 6,260 | — | 37 | ||||||||||||||||||||||||
|
|
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|
|
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|
|
|
|||||||||||||||||||
19,597 | 251,921 | 16,785 | 49,040 | — | 37 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Others |
SK Engineering & Construction Co., Ltd. | 3,514 | 5,063 | 238 | 478 | 2,600 | 5,000 | |||||||||||||||||||||||
SK Innovation Co., Ltd. | 6,318 | 11,409 | 38 | 393 | — | — | ||||||||||||||||||||||||
SK Networks Co., Ltd.(*5) | 15,255 | 18,719 | 225,497 | 472,356 | — | 443 | ||||||||||||||||||||||||
SK Networks Service Co., Ltd. | 311 | 530 | 16,287 | 33,768 | 20 | 26 | ||||||||||||||||||||||||
SK Telesys Co., Ltd. | 104 | 236 | 2,470 | 4,557 | 13,342 | 15,413 | ||||||||||||||||||||||||
SK TNS Co., Ltd. | 59 | 117 | 11,496 | 11,902 | 147,155 | 162,336 | ||||||||||||||||||||||||
SK Energy Co., Ltd. | 5,097 | 8,189 | 252 | 351 | — | — | ||||||||||||||||||||||||
SK hynix Semiconductor (China) Ltd. | 22,873 | 45,445 | — | — | — | — | ||||||||||||||||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. |
3,419 | 6,395 | 31 | 69 | — | — | ||||||||||||||||||||||||
Others | 21,184 | 38,758 | 15,378 | 31,332 | 18,538 | 20,663 | ||||||||||||||||||||||||
|
|
|
|
|
|
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|
|
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|
|
|||||||||||||||||||
78,134 | 134,861 | 271,687 | 555,206 | 181,655 | 203,881 | |||||||||||||||||||||||||
|
|
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|
|
|
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|||||||||||||||||||
106,912 | 403,585 | 384,150 | 994,504 | 188,646 | 214,626 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*1) | Operating expense and others include lease payments by the Group. |
(*2) | Operating expense and others include |
(*3) | Operating revenue and others include |
(*4) | Operating revenue and others include |
(*5) | Operating expenses and others include costs for handset purchases amounting to
|
72
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
31. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | June 30, 2020 | |||||||||||||||||
Receivables | Payables | |||||||||||||||||
Scope |
Company |
Loans | Accounts receivable – trade, etc. |
Accounts payable – other, etc. |
||||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd. | — | 6,726 | 40,229 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Associates |
F&U Credit information Co., Ltd. | — | 14 | 5,191 | ||||||||||||||
SK hynix Inc. | — | 13,503 | 63 | |||||||||||||||
Wave City Development Co., Ltd. | — | 31,523 | — | |||||||||||||||
Daehan Kanggun BcN Co., Ltd.(*) | 22,147 | 4,738 | — | |||||||||||||||
KEB HanaCard Co., Ltd. | — | 919 | 103,838 | |||||||||||||||
Contents Wavve Co., Ltd. | — | 126 | 1,765 | |||||||||||||||
Others | 204 | 3,300 | 121 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
22,351 | 54,123 | 110,978 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
Others |
SK Engineering & Construction Co., Ltd. | — | 2,358 | 110 | ||||||||||||||
SK Innovation Co., Ltd. | — | 7,711 | 21,214 | |||||||||||||||
SK Networks Co., Ltd. | — | 2,226 | 65,043 | |||||||||||||||
SK Networks Services Co., Ltd. | — | 826 | 13,192 | |||||||||||||||
SK Telesys Co., Ltd. | — | 31 | 11,498 | |||||||||||||||
SK TNS Co., Ltd. | — | 9 | 183,052 | |||||||||||||||
SK Energy Co., Ltd. | — | 1,877 | 2,533 | |||||||||||||||
SK hystec Co., Ltd. | — | 954 | 73 | |||||||||||||||
SK hynix Semiconductor (China) Ltd. | — | 6,020 | — | |||||||||||||||
SK Battery Hungary Kft. | — | 2,999 | — | |||||||||||||||
SK Global Chemical Co., Ltd. | — | 2,287 | — | |||||||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. |
— | 1,912 | 23 | |||||||||||||||
Others | — | 11,943 | 31,748 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
— | 41,153 | 328,486 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
22,351 | 102,002 | 479,693 | ||||||||||||||||
|
|
|
|
|
|
(*) | As of June 30, 2020, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
73
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
31. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of June 30, 2020 and December 31, 2019 are as follows, Continued: |
(In millions of won) | December 31, 2019 | |||||||||||||||||
Receivables | Payables | |||||||||||||||||
Scope |
Company |
Loans | Accounts receivable – trade etc. |
Accounts payable – other etc. |
||||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd. | — | 7,941 | 87,519 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Associates |
F&U Credit information Co., Ltd. | — | 2 | 4,869 | ||||||||||||||
SK hynix Inc. | — | 21,510 | 48 | |||||||||||||||
Wave City Development Co., Ltd. | — | 31,523 | — | |||||||||||||||
Daehan Kanggun BcN Co., Ltd.(*) | 22,147 | 5,359 | — | |||||||||||||||
KEB HanaCard Co., Ltd. | — | 1,025 | 9,474 | |||||||||||||||
Others | 204 | 2,490 | 2,262 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
22,351 | 61,909 | 16,653 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
Others |
SK Engineering & Construction Co., Ltd. | — | 4,422 | 97 | ||||||||||||||
SK Innovation Co., Ltd. | — | 7,496 | 22,673 | |||||||||||||||
SK Networks Co., Ltd. | — | 3,469 | 85,421 | |||||||||||||||
SK Networks Services Co., Ltd. | — | — | 10,820 | |||||||||||||||
SK Telesys Co., Ltd. | — | 30 | 16,319 | |||||||||||||||
SK TNS Co., Ltd. | — | 14 | 200,703 | |||||||||||||||
SK Energy Co., Ltd. | — | 2,757 | 1,886 | |||||||||||||||
SK hystec Co., Ltd. | — | 848 | 687 | |||||||||||||||
SK hynix Semiconductor (China) Ltd. | — | 8,556 | — | |||||||||||||||
SK Battery Hungary Kft. | — | 1,249 | — | |||||||||||||||
SK Global Chemical Co., Ltd. | — | 1,265 | — | |||||||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. |
— | 1,738 | 62 | |||||||||||||||
Others | — | 18,277 | 40,011 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
— | 50,121 | 378,679 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
22,351 | 119,971 | 482,851 | ||||||||||||||||
|
|
|
|
|
|
(*) | As of December 31, 2019, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
(5) | SK Infosec Co., Ltd., a subsidiary of the Parent Company, provided a blank note to SK Holdings Co., Ltd. with regards to performance guarantee. |
(6) | SK Telink Co., Ltd., a subsidiary of the Parent Company, is holding a blank note provided by SK Holdings Co., Ltd. with regards to a performance guarantee. |
(7) | The details of additional investments and disposal of associates and joint ventures for the six-month period ended June 30, 2020 are described in note 11. |
74
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
32. | Commitments and Contingencies |
(1) | Collateral assets and commitments |
SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount of
W3,968 million as of June 30, 2020.
In addition, Life & Security Holdings Co., Ltd., a subsidiary of
the Parent Company, has pledged its shares of ADT CAPS Co., Ltd., CAPSTEC Co., Ltd. for the long-term borrowings with a face value of W1,900,000 million as of June 30, 2020, and W18,902 million of
short-term financial instruments held by Incross Co., Ltd., a subsidiary of the Parent Company, are pledged for the purpose with regards to performance guarantee.
(2) | Legal claims and litigations |
As of June 30, 2020, the Group is involved in various legal claims and litigations. Provision recognized in relation to these claims and litigations is immaterial. In connection with those legal claims and litigations for which no provision was recognized, management does not believe the Group has a present obligation, nor is it expected that any of these claims or litigations will have a significant impact on the Group’s financial position or operating results in the event an outflow of resources is ultimately necessary.
Meanwhile, the pending litigation over the validity of partnership contract that SK Planet Co., Ltd., a subsidiary of the Parent Company, was
involved as the defendant (Plaintiff: Nonghyup Bank) was settled by the agreement between the parties for the year ended December 31, 2018. As a result of the settlement, the credit card business partnership between the SK Planet Co., Ltd. and
Nonghyup Bank will be maintained until April 2021, and the SK Planet Co., Ltd. is obligated to pay the commission fees based on the customers’ credit card usage until September 2021, the expiration date of the credit cards. The Group determined
that the contract and the subsidiary agreements meet the definition of an onerous contract according to K-IFRS No.1037, for which the Group recognized provisions with the best estimate of the expenditure
required to settle the present obligation at the end of the reporting period. In this regard, W29,610 million and W3,828 million are recognized as current provisions and
non-current provisions, respectively, as of June of 30, 2020.
(3) | Accounts receivable from sale of handsets |
The sales agents of the Parent Company sell handsets to the Parent Company’s subscribers on an installment basis. The Parent Company entered into comprehensive agreements to purchase accounts receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special purpose companies which were established with the purpose of liquidating receivables, respectively.
The accounts receivable from sale of handsets amounting to
W464,225 million as of June 30, 2020, which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.
75
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
33. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Interest income |
(24,443 | ) | (29,095 | ) | ||||||||
Dividends |
(1,008 | ) | (9,924 | ) | ||||||||
Gain on foreign currency translations |
(7,093 | ) | (5,013 | ) | ||||||||
Gain on valuation of derivatives |
(14,696 | ) | (465 | ) | ||||||||
Gain on settlement of derivatives |
(7,589 | ) | (389 | ) | ||||||||
Gain on sale of accounts receivable – other |
(7,513 | ) | (11,987 | ) | ||||||||
Gain relating to investments in associates and joint ventures, net |
(407,899 | ) | (359,421 | ) | ||||||||
Gain on disposal of property and equipment and intangible assets |
(4,399 | ) | (7,493 | ) | ||||||||
Gain on business transfer |
(12,451 | ) | — | |||||||||
Gain relating to financial assets at FVTPL |
(747 | ) | (2,083 | ) | ||||||||
Gain relating to financial liabilities at FVTPL |
— | (56 | ) | |||||||||
Other income |
(2,467 | ) | (157 | ) | ||||||||
Interest expense |
192,436 | 201,774 | ||||||||||
Loss on foreign currency translations |
6,018 | 4,340 | ||||||||||
Loss on disposal of long-term investment securities |
101 | — | ||||||||||
Loss on sale of accounts receivable – other |
— | 561 | ||||||||||
Income tax expense |
179,265 | 188,340 | ||||||||||
Expense related to defined benefit plan |
98,880 | 86,111 | ||||||||||
Share option |
1,600 | 436 | ||||||||||
Depreciation and amortization |
2,050,580 | 1,903,819 | ||||||||||
Bad debt for account receivables – trade |
30,230 | 15,253 | ||||||||||
Loss on disposal of property and equipment and intangible assets |
25,587 | 26,028 | ||||||||||
Impairment loss on property and equipment and intangible assets |
12,700 | 1,337 | ||||||||||
Bad debt for accounts receivable – other |
2,176 | 2,095 | ||||||||||
Loss on settlement of derivatives |
2,179 | 317 | ||||||||||
Loss relating to financial assets at FVTPL |
793 | 367 | ||||||||||
Loss relating to financial liabilities at FVTPL |
— | 43 | ||||||||||
Loss on impairment of investment assets |
— | 1,398 | ||||||||||
Other expenses |
21,127 | 14,096 | ||||||||||
|
|
|
|
|||||||||
2,133,367 | 2,020,232 | |||||||||||
|
|
|
|
76
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Condensed Consolidated Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
33. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Accounts receivable – trade |
(42,738 | ) | (133,548 | ) | ||||||||
Accounts receivable – other |
85,870 | 88,102 | ||||||||||
Advance payments |
(6,502 | ) | (23,145 | ) | ||||||||
Prepaid expenses |
67,675 | (125,452 | ) | |||||||||
Inventories |
(36,670 | ) | (9,683 | ) | ||||||||
Long-term accounts receivable – other |
112,175 | (16,518 | ) | |||||||||
Contract assets |
47,183 | (18,180 | ) | |||||||||
Guarantee deposits |
11,450 | 11,298 | ||||||||||
Accounts payable – trade |
(13,166 | ) | (79,452 | ) | ||||||||
Accounts payable – other |
(4,192 | ) | 1,340 | |||||||||
Withholdings |
(96,671 | ) | (169,220 | ) | ||||||||
Contract liabilities |
3,391 | 6,537 | ||||||||||
Deposits received |
(809 | ) | 49 | |||||||||
Accrued expenses |
(142,076 | ) | (65,365 | ) | ||||||||
Provisions |
(13,599 | ) | (18,657 | ) | ||||||||
Long-term provisions |
(2,792 | ) | (2,215 | ) | ||||||||
Plan assets |
13,643 | 10,972 | ||||||||||
Retirement benefit payment |
(40,164 | ) | (46,225 | ) | ||||||||
Others |
35,371 | 39,335 | ||||||||||
|
|
|
|
|||||||||
(22,621 | ) | (550,027 | ) | |||||||||
|
|
|
|
(3) | Significant non-cash transactions for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets |
(165,269 | ) | (57,036 | ) | ||||||||
Increase of right-of-use assets |
263,503 | 242,670 | ||||||||||
Contribution in kind for investments |
4,702 | 19,039 |
34. | Subsequent Events |
(1) | The board of directors of the Parent Company resolved to pay the interim dividend at the board meeting on July 21, 2020, and the details are as follows: |
Interim dividend amount | ||
Dividend rate | 0.5% | |
Dividend date | June 30, 2020 | |
Date of distribution | According to Article 464 Commercial Act 2-1, the Group is to distribute dividends by August 21, 2020. |
77
SK TELECOM CO., LTD.
Condensed Separate Interim Financial Statements
(Unaudited)
June 30, 2020 and 2019
(With Independent Auditors’ Review Report Thereon)
Independent Auditors’ Review Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
SK Telecom Co., Ltd.:
Reviewed financial statements
We have reviewed the accompanying condensed separate interim financial statements of SK Telecom Co., Ltd. (the “Company”), which comprise the condensed separate statement of financial position as of June 30, 2020, the condensed separate statements of income and comprehensive income for the three and six-month periods ended June 30, 2020 and 2019, the condensed separate statements of changes in equity and cash flows for the six-month periods ended June 30, 2020 and 2019, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s responsibility
Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034, Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of condensed separate interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ review responsibility
Our responsibility is to issue a report on these condensed separate interim financial statements based on our reviews.
We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared fairly, in all material respects, in accordance with K-IFRS No.1034, Interim Financial Reporting.
Other matters
The separate statement of financial position of the Company as of December 31, 2019, and the related separate statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 10, 2020, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2019, presented for comparative purposes, is consistent, in all material respects, with the audited separate financial statements from which it has been derived.
The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.
KPMG Samjong Accounting Corp.
Seoul, Korea
August 13, 2020
This report is effective as of August 13, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any. |
2
SK TELECOM CO., LTD. (the “Company”)
CONDENSED SEPARATE INTERIM FINANCIAL STATEMENTS
AS OF JUNE 30, 2020, AND DECEMBER 31, 2019, AND
FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND 2019
The accompanying condensed separate interim financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Company.
Park, Jung-ho
Chief Executive Officer
SK TELECOM CO., LTD.
3
Condensed Separate Interim Statements of Financial Position
As of June 30, 2020 and December 31, 2019
(In millions of won) | ||||||||||||||
Note | June 30, 2020 | December 31, 2019 | ||||||||||||
Assets |
||||||||||||||
Current Assets: |
||||||||||||||
Cash and cash equivalents |
27,28 | 497,282 | ||||||||||||
Short-term financial instruments |
27,28 | 259,000 | 234,000 | |||||||||||
Short-term investment securities |
7,27,28 | 31,873 | 31,920 | |||||||||||
Accounts receivable – trade, net |
4,27,28,29 | 1,503,023 | 1,479,971 | |||||||||||
Short-term loans, net |
4,27,28,29 | 68,518 | 57,751 | |||||||||||
Accounts receivable – other, net |
4,27,28,29,30 | 400,599 | 507,680 | |||||||||||
Contract assets |
6,28 | 8,193 | 7,173 | |||||||||||
Prepaid expenses |
5 | 2,017,239 | 1,970,982 | |||||||||||
Guarantee deposits |
4,27,28,29 | 66,900 | 73,345 | |||||||||||
Prepaid income taxes |
25 | — | 70,528 | |||||||||||
Derivative financial assets |
16,27,28 | — | 26,253 | |||||||||||
Inventories, net |
5,453 | 11,125 | ||||||||||||
Advance payments and others |
4,27,28 | 15,119 | 43,353 | |||||||||||
|
|
|
|
|||||||||||
4,754,972 | 5,011,363 | |||||||||||||
|
|
|
|
|||||||||||
Non-Current Assets: |
||||||||||||||
Long-term financial instruments |
27,28 | 354 | 382 | |||||||||||
Long-term investment securities |
7,27,28 | 743,827 | 510,633 | |||||||||||
Investments in subsidiaries, associates and joint ventures |
8 | 10,800,207 | 10,578,158 | |||||||||||
Property and equipment, net |
9,10,29 | 8,424,982 | 8,264,888 | |||||||||||
Goodwill |
1,306,236 | 1,306,236 | ||||||||||||
Intangible assets, net |
11 | 3,175,727 | 3,461,152 | |||||||||||
Long-term loans, net |
4,27,28,29 | 7,026 | 7,474 | |||||||||||
Long-term accounts receivable – other |
4,27,28,30 | 241,503 | 332,220 | |||||||||||
Long-term contract assets |
6,28 | 25,366 | 23,724 | |||||||||||
Long-term prepaid expenses |
5 | 975,082 | 1,134,749 | |||||||||||
Guarantee deposits |
4,27,28,29 | 107,453 | 108,141 | |||||||||||
Long-term derivative financial assets |
16,27,28 | 175,668 | 99,998 | |||||||||||
Other non-current assets |
349 | 249 | ||||||||||||
|
|
|
|
|||||||||||
25,983,780 | 25,828,004 | |||||||||||||
|
|
|
|
|||||||||||
30,839,367 | ||||||||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
4
SK TELECOM CO., LTD.
Condensed Separate Interim Statements of Financial Position, Continued
As of June 30, 2020 and December 31, 2019
(In millions of won) | ||||||||||||||
Note | June 30, 2020 | December 31, 2019 | ||||||||||||
Liabilities and Shareholders’ Equity |
|
|||||||||||||
Current Liabilities: |
||||||||||||||
Accounts payable – other |
27,28,29 | 2,266,958 | ||||||||||||
Contract liabilities |
6 | 76,310 | 88,257 | |||||||||||
Withholdings |
27,28 | 569,887 | 685,822 | |||||||||||
Accrued expenses |
27,28 | 670,976 | 793,669 | |||||||||||
Income tax payable |
25 | 118,473 | — | |||||||||||
Provisions |
14 | 56,498 | 50,912 | |||||||||||
Current installments of long-term debt, net |
12,27,28 | 373,427 | 520,292 | |||||||||||
Lease liabilities |
27,28,29 | 210,627 | 207,710 | |||||||||||
Current installments of long-term payables – other |
13,27,28 | 422,284 | 423,839 | |||||||||||
Other current liabilities |
27,28 | 5,431 | 20,019 | |||||||||||
|
|
|
|
|||||||||||
4,560,494 | 5,057,478 | |||||||||||||
|
|
|
|
|||||||||||
Non-Current Liabilities: |
||||||||||||||
Debentures, excluding current installments, net |
12,27,28 | 6,458,371 | 5,900,829 | |||||||||||
Long-term borrowings, excluding current installments, net |
12,27,28 | 13,671 | 19,777 | |||||||||||
Long-term payables – other |
13,27,28 | 1,133,538 | 1,544,699 | |||||||||||
Long-term contract liabilities |
6 | 10,746 | 11,342 | |||||||||||
Long-term derivative financial liabilities |
16,27,28 | 15,090 | — | |||||||||||
Long-term lease liabilities |
27,28,29 | 237,033 | 203,179 | |||||||||||
Long-term provisions |
14 | 16,202 | 16,359 | |||||||||||
Deferred tax liabilities |
25 | 709,433 | 644,754 | |||||||||||
Defined benefit liabilities |
15 | 63,908 | 25,093 | |||||||||||
Other non-current liabilities |
27,28 | 47,324 | 26,118 | |||||||||||
|
|
|
|
|||||||||||
8,705,316 | 8,392,150 | |||||||||||||
|
|
|
|
|||||||||||
Total Liabilities |
13,265,810 | 13,449,628 | ||||||||||||
|
|
|
|
|||||||||||
Shareholders’ Equity: |
||||||||||||||
Share capital |
1,17 | 44,639 | 44,639 | |||||||||||
Capital surplus and others |
17,18 | 715,722 | 715,619 | |||||||||||
Retained earnings |
19 | 16,576,694 | 16,678,787 | |||||||||||
Reserves |
20 | 135,887 | (49,306 | ) | ||||||||||
|
|
|
|
|||||||||||
Total Shareholders’ Equity |
17,472,942 | 17,389,739 | ||||||||||||
|
|
|
|
|||||||||||
30,738,752 | 30,839,367 | |||||||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
5
Condensed Separate Interim Statements of Income
For the three and six-month periods ended June 30, 2020 and 2019
(In millions of won) | ||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Note | Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
||||||||||||||||||||
Operating revenue: |
21,29 | |||||||||||||||||||||||
Revenue |
2,939,832 | 5,862,677 | 2,847,717 | 5,659,925 | ||||||||||||||||||||
Operating expenses: |
29 | |||||||||||||||||||||||
Labor |
193,517 | 398,044 | 193,985 | 384,047 | ||||||||||||||||||||
Commission |
5 | 1,153,420 | 2,293,903 | 1,088,968 | 2,165,476 | |||||||||||||||||||
Depreciation and amortization |
696,990 | 1,394,308 | 661,089 | 1,287,013 | ||||||||||||||||||||
Network interconnection |
149,101 | 293,195 | 141,786 | 282,146 | ||||||||||||||||||||
Leased lines |
52,969 | 106,136 | 51,453 | 103,614 | ||||||||||||||||||||
Advertising |
22,937 | 39,362 | 36,590 | 57,649 | ||||||||||||||||||||
Rent |
50,075 | 100,378 | 57,493 | 112,664 | ||||||||||||||||||||
Cost of goods sold |
102,756 | 210,092 | 113,623 | 221,190 | ||||||||||||||||||||
Others |
22 | 247,739 | 499,055 | 227,505 | 465,166 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
2,669,504 | 5,334,473 | 2,572,492 | 5,078,965 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating profit |
270,328 | 528,204 | 275,225 | 580,960 | ||||||||||||||||||||
Finance income |
24 | 29,713 | 317,258 | 24,667 | 548,528 | |||||||||||||||||||
Finance costs |
24 | (63,076 | ) | (129,131 | ) | (67,594 | ) | (133,055 | ) | |||||||||||||||
Other non-operating income |
23 | 23,838 | 38,039 | 3,777 | 7,469 | |||||||||||||||||||
Other non-operating expenses |
23 | (26,308 | ) | (38,968 | ) | (18,497 | ) | (24,692 | ) | |||||||||||||||
Loss relating to investments in subsidiaries, associates and joint ventures, net |
8 | (14,498 | ) | (6,857 | ) | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Profit before income tax |
219,997 | 708,545 | 217,578 | 979,210 | ||||||||||||||||||||
Income tax expense |
25 | 51,348 | 133,803 | 55,564 | 173,203 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Profit for the period |
168,649 | 574,742 | 162,014 | 806,007 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Earnings per share: |
26 | |||||||||||||||||||||||
Basic and diluted earnings per share(in won) |
2,255 | 7,758 | 2,203 | 11,112 |
See accompanying notes to the condensed separate interim financial statements.
6
Condensed Separate Interim Statements of Comprehensive Income
For the three and six-month periods ended June 30, 2020 and 2019
(In millions of won) | ||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||
Note | Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
||||||||||||||||||
Profit for the period |
168,649 | 574,742 | 162,014 | 806,007 | ||||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: |
||||||||||||||||||||||
Remeasurement of defined benefit liabilities |
15 | 2,909 | (11,224 | ) | 666 | (1,491 | ) | |||||||||||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income |
20 | 184,838 | 171,194 | (8,823 | ) | (7,258 | ) | |||||||||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: |
||||||||||||||||||||||
Net change in unrealized fair value of derivatives |
20 | 10,728 | 13,999 | 12,000 | 21,617 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Other comprehensive income for the period, net of taxes |
198,475 | 173,969 | 3,843 | 12,868 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income |
367,124 | 748,711 | 165,857 | 818,875 | ||||||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
7
Condensed Separate Interim Statements of Changes in Equity
For the six-month periods ended June 30, 2020 and 2019
(In millions of won) | Share capital |
Capital surplus and others | Retained earnings |
Reserves | ||||||||||||||||||||||||||||||||||||||||||||
Note | Paid-in surplus |
Treasury shares |
Hybrid bonds |
Share option |
Other | Sub-total | Total equity |
|||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2018 |
44,639 | 2,915,887 | (1,979,475 | ) | 398,759 | 1,007 | (920,854 | ) | 415,324 | 16,467,789 | (40,265 | ) | 16,887,487 | |||||||||||||||||||||||||||||||||||
Impact of adopting K-IFRS No. 1116 |
— | — | — | — | — | — | — | (25,999 | ) | — | (25,999 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Balance, January 1, 2019 |
44,639 | 2,915,887 | (1,979,475 | ) | 398,759 | 1,007 | (920,854 | ) | 415,324 | 16,441,790 | (40,265 | ) | 16,861,488 | |||||||||||||||||||||||||||||||||||
Total comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||
Profit for the period |
— | — | — | — | — | — | — | 806,007 | — | 806,007 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
15,16,20 | — | — | — | — | — | — | — | 28,582 | (15,714 | ) | 12,868 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 834,589 | (15,714 | ) | 818,875 | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Transactions with owners: |
||||||||||||||||||||||||||||||||||||||||||||||||
Annual dividends |
— | — | — | — | — | — | — | (646,828 | ) | — | (646,828 | ) | ||||||||||||||||||||||||||||||||||||
Share option |
18 | — | — | — | — | 157 | — | 157 | — | — | 157 | |||||||||||||||||||||||||||||||||||||
Interest on hybrid bonds |
— | — | — | — | — | — | — | (7,383 | ) | — | (7,383 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
— | — | — | — | 157 | — | 157 | (654,211 | ) | — | (654,054 | ) | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Balance, June 30, 2019 |
44,639 | 2,915,887 | (1,979,475 | ) | 398,759 | 1,164 | (920,854 | ) | 415,481 | 16,622,168 | (55,979 | ) | 17,026,309 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Balance, January 1, 2020 |
44,639 | 2,915,887 | (1,696,997 | ) | 398,759 | 1,302 | (903,332 | ) | 715,619 | 16,678,787 | (49,306 | ) | 17,389,739 | |||||||||||||||||||||||||||||||||||
Total comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||
Profit for the period |
— | — | — | — | — | — | — | 574,742 | — | 574,742 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
15,16,20 | — | — | — | — | — | — | — | (11,224 | ) | 185,193 | 173,969 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 563,518 | 185,193 | 748,711 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Transactions with owners: |
||||||||||||||||||||||||||||||||||||||||||||||||
Annual dividends |
— | — | — | — | — | — | — | (658,228 | ) | — | (658,228 | ) | ||||||||||||||||||||||||||||||||||||
Share option |
18 | — | — | — | — | 103 | — | 103 | — | — | 103 | |||||||||||||||||||||||||||||||||||||
Interest on hybrid bonds |
— | — | — | — | — | — | — | (7,383 | ) | — | (7,383 | ) | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
— | — | — | — | 103 | — | 103 | (665,611 | ) | — | (665,508 | ) | |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Balance, June 30, 2020 |
44,639 | 2,915,887 | (1,696,997 | ) | 398,759 | 1,405 | (903,332 | ) | 715,722 | 16,576,694 | 135,887 | 17,472,942 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
8
Condensed Separate Interim Statements of Cash Flows
For the six-month periods ended June 30, 2020 and 2019
(In millions of won) | Note | June 30, 2020 | June 30, 2019 | |||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Cash generated from operating activities: |
||||||||||||||||
Profit for the period |
574,742 | 806,007 | ||||||||||||||
Adjustments for income and expenses |
31 | 1,504,932 | 1,157,854 | |||||||||||||
Changes in assets and liabilities related to operating activities |
31 | (33,071 | ) | (308,800 | ) | |||||||||||
|
|
|
|
|||||||||||||
2,046,603 | 1,655,061 | |||||||||||||||
Interest received |
9,171 | 10,947 | ||||||||||||||
Dividends received |
284,666 | 506,050 | ||||||||||||||
Interest paid |
(109,631 | ) | (125,583 | ) | ||||||||||||
Income tax refund(paid) |
44,273 | (164,157 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Net cash provided by operating activities |
2,275,082 | 1,882,318 | ||||||||||||||
|
|
|
|
|||||||||||||
Cash flows from investing activities: |
||||||||||||||||
Cash inflows from investing activities: |
||||||||||||||||
Collection of short-term loans |
54,650 | 51,453 | ||||||||||||||
Decrease in long-term financial instrument, net |
28 | — | ||||||||||||||
Proceeds from disposals of long-term investment securities |
200 | 221,646 | ||||||||||||||
Proceeds from disposals of investments in subsidiaries, associates and joint ventures |
659 | — | ||||||||||||||
Proceeds from disposals of property and equipment |
1,315 | 3,017 | ||||||||||||||
Proceeds from disposals of intangible assets |
1,946 | 2,348 | ||||||||||||||
Collection of lease receivables |
— | 6,954 | ||||||||||||||
|
|
|
|
|||||||||||||
58,798 | 285,418 | |||||||||||||||
Cash outflows for investing activities: |
||||||||||||||||
Increase in short-term financial instruments, net |
(25,000 | ) | (40,000 | ) | ||||||||||||
Increase in short-term loans |
(65,176 | ) | (66,515 | ) | ||||||||||||
Acquisitions of long-term investment securities |
(327 | ) | (13,804 | ) | ||||||||||||
Acquisitions of investments in subsidiaries, associates and joint ventures |
(212,105 | ) | (237,262 | ) | ||||||||||||
Acquisitions of property and equipment |
(1,269,114 | ) | (969,820 | ) | ||||||||||||
Acquisitions of intangible assets |
(45,851 | ) | (8,864 | ) | ||||||||||||
|
|
|
|
|||||||||||||
(1,617,573 | ) | (1,336,265 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Net cash used in investing activities |
(1,558,775 | ) | (1,050,847 | ) | ||||||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
9
SK TELECOM CO., LTD.
Condensed Separate Interim Statements of Cash Flows, Continued
For the six-month periods ended June 30, 2020 and 2019
(In millions of won) | Note | June 30, 2020 | June 30, 2019 | |||||||||||||
Cash flows from financing activities: |
||||||||||||||||
Cash inflows from financing activities: |
||||||||||||||||
Proceeds from issuance of debentures |
773,727 | 398,345 | ||||||||||||||
Cash inflows from settlement of derivatives |
41,182 | 11,931 | ||||||||||||||
|
|
|
|
|||||||||||||
814,909 | 410,276 | |||||||||||||||
Cash outflows for financing activities: |
||||||||||||||||
Repayments of long-term borrowings |
(6,670 | ) | (6,441 | ) | ||||||||||||
Repayments of long-term payables – other |
(425,349 | ) | (425,349 | ) | ||||||||||||
Repayments of debentures |
(424,590 | ) | (220,000 | ) | ||||||||||||
Payments of cash dividends |
(658,228 | ) | (646,828 | ) | ||||||||||||
Payments of interest on hybrid bonds |
(7,383 | ) | (7,383 | ) | ||||||||||||
Repayments of lease liabilities |
(126,934 | ) | (135,177 | ) | ||||||||||||
|
|
|
|
|||||||||||||
(1,649,154 | ) | (1,441,178 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Net cash used in financing activities |
(834,245 | ) | (1,030,902 | ) | ||||||||||||
|
|
|
|
|||||||||||||
Net decrease in cash and cash equivalents |
(117,938 | ) | (199,431 | ) | ||||||||||||
Cash and cash equivalents at beginning of the period |
497,282 | 877,823 | ||||||||||||||
Effects of exchange rate changes on cash and cash equivalents |
(289 | ) | — | |||||||||||||
|
|
|
|
|||||||||||||
Cash and cash equivalents at end of the period |
379,055 | 678,392 | ||||||||||||||
|
|
|
|
See accompanying notes to the condensed separate interim financial statements.
10
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
1. | Reporting Entity |
SK Telecom Co., Ltd. (“the Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The Company mainly provides wireless telecommunications services in Korea. The head office of the Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.
The Company’s common shares and depositary receipts(“DRs”) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of June 30, 2020, the Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) |
|||||||
SK Holdings Co., Ltd. |
21,624,120 | 26.78 | ||||||
National Pension Service |
9,502,565 | 11.77 | ||||||
Institutional investors and other shareholders |
40,743,143 | 50.46 | ||||||
Kakao Co., Ltd. |
1,266,620 | 1.57 | ||||||
Treasury shares |
7,609,263 | 9.42 | ||||||
|
|
|
|
|||||
80,745,711 | 100.00 | |||||||
|
|
|
|
2. | Basis of Preparation |
(1) | Statement of compliance |
These condensed separate interim financial statements were prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034, Interim Financial Reporting, as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since December 31, 2019. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.
These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No. 1027, Separate Financial Statements, presented by a parent, an investor with joint control of or significant influence over an investee, in which the investments are accounted for at cost.
(2) | Use of estimates and judgments |
1) Critical judgments, assumptions and estimation uncertainties
The preparation of the condensed separate interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the separate financial statements as of and for the year ended December 31, 2019.
11
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
2. | Basis of Preparation, Continued |
(2) | Use of estimates and judgments, Continued |
1) Critical judgments, assumptions and estimation uncertainties, Continued
Meanwhile, the spread of COVID-19 pandemic is having a significant impact on domestic and foreign economies, and its duration and severity are highly uncertain and unpredictable. As of the end of the reporting period, the Company’s management cannot reasonably estimate the impact of COVID-19 pandemic on the Company’s operations and financial results.
2) Fair value measurement
A number of the Company’s accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities. The Company has established policies and processes with respect to the measurement of fair values, including Level 3 fair values, and the measurement of fair value is reviewed and is directly reported to the finance executives.
The Company regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Company assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
✓ | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
✓ | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
✓ | Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Information about assumptions used for fair value measurements are included in note 28.
3. | Significant Accounting Policies |
The significant accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2019.
12
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
4. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | June 30, 2020 | |||||||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||||||
Current assets: |
||||||||||||||||
Accounts receivable – trade |
1,614,164 | (111,141 | ) | 1,503,023 | ||||||||||||
Short-term loans |
69,210 | (692 | ) | 68,518 | ||||||||||||
Accounts receivable – other(*) |
435,234 | (34,635 | ) | 400,599 | ||||||||||||
Guarantee deposits |
66,900 | — | 66,900 | |||||||||||||
Accrued income |
259 | — | 259 | |||||||||||||
|
|
|
|
|
|
|||||||||||
2,185,767 | (146,468 | ) | 2,039,299 | |||||||||||||
Non-current assets: |
||||||||||||||||
Long-term loans |
48,132 | (41,106 | ) | 7,026 | ||||||||||||
Long-term accounts receivable – other(*) |
241,503 | — | 241,503 | |||||||||||||
Guarantee deposits |
107,453 | — | 107,453 | |||||||||||||
|
|
|
|
|
|
|||||||||||
397,088 | (41,106 | ) | 355,982 | |||||||||||||
|
|
|
|
|
|
|||||||||||
2,582,855 | (187,574 | ) | 2,395,281 | |||||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of June 30, 2020 include
|
(In millions of won) | December 31, 2019 | |||||||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||||||
Current assets: |
||||||||||||||||
Accounts receivable – trade |
1,583,727 | (103,756 | ) | 1,479,971 | ||||||||||||
Short-term loans |
58,334 | (583 | ) | 57,751 | ||||||||||||
Accounts receivable – other(*) |
542,444 | (34,764 | ) | 507,680 | ||||||||||||
Guarantee deposits |
73,345 | — | 73,345 | |||||||||||||
Accrued income |
336 | — | 336 | |||||||||||||
|
|
|
|
|
|
|||||||||||
2,258,186 | (139,103 | ) | 2,119,083 | |||||||||||||
Non-current assets: |
||||||||||||||||
Long-term loans |
48,585 | (41,111 | ) | 7,474 | ||||||||||||
Long-term accounts receivable – other(*) |
332,220 | — | 332,220 | |||||||||||||
Guarantee deposits |
108,141 | — | 108,141 | |||||||||||||
|
|
|
|
|
|
|||||||||||
488,946 | (41,111 | ) | 447,835 | |||||||||||||
|
|
|
|
|
|
|||||||||||
2,747,132 | (180,214 | ) | 2,566,918 | |||||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2019 include
|
13
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
4. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on trade and other receivables measured at amortized cost for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
January 1, 2020 | Impairment | Write-offs(*) | Collection of receivables previously written- off |
June 30, 2020 |
||||||||||||||||||||
Accounts receivable – trade |
103,756 | 15,310 | (12,833 | ) | 4,908 | 111,141 | ||||||||||||||||||
Accounts receivable – other |
76,458 | 1,822 | (2,775 | ) | 928 | 76,433 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
180,214 | 17,132 | (15,608 | ) | 5,836 | 187,574 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
January 1, 2019 | Impairment | Write-offs(*) | Collection of receivables previously written- off |
June 30, 2019 |
||||||||||||||||||||
Accounts receivable – trade |
119,842 | 3,023 | (18,142 | ) | 4,705 | 109,428 | ||||||||||||||||||
Accounts receivable – other |
92,084 | 1,648 | (18,430 | ) | 5,745 | 81,047 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
211,926 | 4,671 | (36,572 | ) | 10,450 | 190,475 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Company writes off the trade and other receivables that are determined to be uncollectable due to reasons such as termination of operations or bankruptcy. |
(3) | The Company applies the practical expedient that allows the Company to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Company uses its historical credit loss experience over the past three years and classifies the accounts receivable – trade by their credit risk characteristics and days overdue. |
As the Company is a wireless telecommunications service provider, the Company’s financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
Receivables related to other revenue mainly consist of receivables from corporate customers. The Company transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Company is not exposed to significant credit concentration risk as the Company regularly assesses their credit risk by monitoring their credit rating. While the contract assets are under the impairment requirements, no significant credit risk has been identified.
14
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
5. | Prepaid Expenses |
The Company pays commissions to its retail stores and authorized dealers for wireless telecommunications services and for each service contract and installation contract secured. The Company capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Company expects to maintain its customers.
(1) | Details of prepaid expenses as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Current assets: |
| |||||||||||
Incremental costs of obtaining contracts |
1,960,008 | 1,920,023 | ||||||||||
Others |
57,231 | 50,959 | ||||||||||
|
|
|
|
|||||||||
2,017,239 | 1,970,982 | |||||||||||
|
|
|
|
|||||||||
Non-current assets: |
| |||||||||||
Incremental costs of obtaining contracts |
954,364 | 1,112,595 | ||||||||||
Others |
20,718 | 22,154 | ||||||||||
|
|
|
|
|||||||||
975,082 | 1,134,749 | |||||||||||
|
|
|
|
(2) | Incremental costs of obtaining contracts |
The amortization in connection with incremental costs of obtaining contracts recognized for the three and six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Amortization recognized as commissions |
601,909 | 1,201,435 | 520,193 | 1,025,507 |
15
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
6. | Contract Assets and Liabilities |
In case of providing both wireless telecommunication services and sales of handsets, the Company allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Company recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.
(1) | Details of contract assets and liabilities as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) |
| |||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Contract assets: |
||||||||||||
Allocation of consideration between performance obligations |
30,897 | |||||||||||
Contract liabilities: |
||||||||||||
Wireless service contracts |
19,355 | 20,393 | ||||||||||
Customer loyalty programs |
18,491 | 21,945 | ||||||||||
Others |
49,210 | 57,261 | ||||||||||
|
|
|
|
|||||||||
99,599 | ||||||||||||
|
|
|
|
(2) | The amount of revenue recognized for the six-month period ended
June 30, 2020 related to the contract liabilities carried forward from the prior period is |
7. | Investment Securities |
(1) | Details of short-term investment securities as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) |
| |||||||||||||||
Category | June 30, 2020 | December 31, 2019 | ||||||||||||||
Beneficiary certificates |
FVTPL | 31,920 |
(2) | Details of long-term investment securities as of June 30, 2020, and December 31, 2019, are as follows: |
(In millions of won) |
| |||||||||||||||
Category | June 30, 2020 | December 31, 2019 | ||||||||||||||
Equity instruments |
FVOCI | (*) | 435,210 | |||||||||||||
Debt instruments |
FVTPL | 75,381 | 75,423 | |||||||||||||
|
|
|
|
|||||||||||||
510,633 | ||||||||||||||||
|
|
|
|
(*) | The Company designated |
16
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
8. | Investments in Subsidiaries, Associates and Joint Ventures |
(1) | Investments in subsidiaries, associates and joint ventures as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) |
| |||||||||||
June 30, 2020 |
December 31, 2019 | |||||||||||
Investments in subsidiaries |
5,408,974 | |||||||||||
Investments in associates and joint ventures |
5,322,176 | 5,169,184 | ||||||||||
|
|
|
|
|||||||||
10,578,158 | ||||||||||||
|
|
|
|
(2) | Details of investments in subsidiaries as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won, except for share data) |
| |||||||||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||||||||||
Number of shares |
Ownership (%) |
Carrying amount |
Carrying amount |
|||||||||||||||||
SK Telink Co., Ltd. |
1,432,627 | 100.0 | 243,988 | |||||||||||||||||
SK Broadband Co., Ltd.(*1) |
298,460,212 | 74.3 | 1,872,573 | 1,870,582 | ||||||||||||||||
SK Communications Co., Ltd. |
43,427,530 | 100.0 | 41,939 | 41,939 | ||||||||||||||||
PS&Marketing Corporation |
66,000,000 | 100.0 | 313,934 | 313,934 | ||||||||||||||||
SERVICE ACE Co., Ltd. |
4,385,400 | 100.0 | 21,927 | 21,927 | ||||||||||||||||
SK Planet Co., Ltd. |
69,593,562 | 98.7 | 404,833 | 404,833 | ||||||||||||||||
Eleven Street Co., Ltd. |
8,224,709 | 80.3 | 1,049,403 | 1,049,403 | ||||||||||||||||
DREAMUS COMPANY |
29,246,387 | 51.4 | 156,781 | 156,781 | ||||||||||||||||
SK Telecom China Holdings Co., Ltd. |
— | 100.0 | 48,096 | 48,096 | ||||||||||||||||
Life & Security Holdings Co., Ltd. |
740,895 | 55.0 | 703,394 | 703,394 | ||||||||||||||||
SKT Americas, Inc.(*2) |
122 | 100.0 | 31,203 | 45,701 | ||||||||||||||||
Atlas Investment(*3) |
— | 100.0 | 136,651 | 130,200 | ||||||||||||||||
One Store Co., Ltd.(*4) |
10,409,600 | 52.1 | 82,186 | 82,186 | ||||||||||||||||
id Quantique SA |
69,157,505 | 66.8 | 94,119 | 94,119 | ||||||||||||||||
SK Infosec Co., Ltd. |
12,636,024 | 100.0 | 44,410 | 44,410 | ||||||||||||||||
SK Telecom TMT Investment Corp.(*5) |
50,000 | 100.0 | 58,124 | 33,834 | ||||||||||||||||
FSK L&S Co., Ltd. |
2,415,750 | 60.0 | 17,757 | 17,757 | ||||||||||||||||
Incross Co., Ltd.(*6) |
2,786,455 | 34.6 | 53,722 | 53,722 | ||||||||||||||||
SK stoa Co., Ltd.(*7) |
3,631,355 | 100.0 | 40,029 | — | ||||||||||||||||
Broadband Nowon Co., Ltd.(*8) |
627,000 | 55.0 | 10,421 | — | ||||||||||||||||
SK O&S Co., Ltd. and others |
— | — | 52,541 | 52,168 | ||||||||||||||||
|
|
|
|
|||||||||||||||||
5,408,974 | ||||||||||||||||||||
|
|
|
|
17
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(2) | Details of investments in subsidiaries as of June 30, 2020 and December 31, 2019 are as follows, Continued: |
(*1) | On April 30, 2020, SK Broadband Co., Ltd. merged with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. to strengthen competitiveness and enhance synergy as a comprehensive media company. The Company’s ownership interest of SK Broadband Co., Ltd. changed as SK Broadband Co., Ltd. issued new shares to the shareholders of the merged companies as the consideration for the merger. |
(*2) | The Company recognized |
(*3) | The Company contributed |
(*4) | The ownership interest changed as third-party share option of One Store Co., Ltd. was exercised during the six-month period ended June 30, 2020. |
(*5) | The Company contributed |
(*6) | Although the Company owns less than 50% of the investee, the management has determined that the Company controls Incross Co., Ltd. considering the level of dispersion of remaining voting rights and voting patterns at previous shareholders’ meetings, and the fact that the Company has a right to appoint the majority of the members of the board of directors by the virtue of an agreement with the investee’s other shareholders. |
(*7) | The Company acquired 3,631,355 shares (100%) of SK stoa Co., Ltd. from SK Broadband. Co., Ltd. at
|
(*8) | The Company has obtained control over Tbroad Nowon Broadcasting Co., Ltd. by acquiring 627,000 shares (55%) for
|
18
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(3) | Details of investments in associates and joint ventures as of June 30, 2020 and December 31, 2019, are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||||||||||
Number of shares |
Ownership (%) |
Carrying amount |
Carrying amount |
|||||||||||||||||
Investments in associates: |
||||||||||||||||||||
SK China Company Ltd. |
10,928,921 | 27.3 | 601,192 | |||||||||||||||||
Korea IT Fund(*1) |
190 | 63.3 | 220,957 | 220,957 | ||||||||||||||||
KEB HanaCard Co., Ltd.(*2) |
39,902,323 | 15.0 | 253,739 | 253,739 | ||||||||||||||||
NanoEnTek, Inc.(*3) |
7,600,649 | 28.4 | 51,138 | 51,138 | ||||||||||||||||
SK Technology Innovation Company |
14,700 | 49.0 | 45,864 | 45,864 | ||||||||||||||||
SK hynix Inc. |
146,100,000 | 20.1 | 3,374,725 | 3,374,725 | ||||||||||||||||
S.M. Culture & Contents Co., Ltd. |
22,033,898 | 23.4 | 65,341 | 65,341 | ||||||||||||||||
SK South East Asia Investment Pte. Ltd.(*4) |
300,000,000 | 20.0 | 344,240 | 224,470 | ||||||||||||||||
Pacific Telecom Inc.(*2) |
1,734,109 | 15.0 | 36,487 | 36,487 | ||||||||||||||||
Grab Geo Holdings PTE. LTD. |
300 | 30.0 | 30,517 | 30,517 | ||||||||||||||||
Content Wavve Co., Ltd. |
1,306,286 | 30.0 | 90,858 | 90,858 | ||||||||||||||||
SK Telecom CS T1 Co., Ltd.(*1) |
50,000 | 54.9 | 60,305 | 60,305 | ||||||||||||||||
Digital Games International Pte. Ltd.(*5) |
10,000,000 | 33.3 | 8,810 | — | ||||||||||||||||
Invites Healthcare Co., Ltd.(*6) |
419,999 | 50.0 | 28,000 | — | ||||||||||||||||
12CM JAPAN and others(*6) |
— | — | 84,574 | 88,162 | ||||||||||||||||
|
|
|
|
|||||||||||||||||
5,296,747 | 5,143,755 | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
Investment in a joint ventures: |
||||||||||||||||||||
Finnq Co., Ltd.(*7) |
6,370,000 | 49.0 | 25,429 | 25,429 | ||||||||||||||||
|
|
|
|
|||||||||||||||||
5,169,184 | ||||||||||||||||||||
|
|
|
|
19
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(3) | Details of investments in associates and joint ventures as of June 30, 2020 and December 31, 2019, are as follows, Continued: |
(*1) | Investments in Korea IT Fund and SK Telecom CS T1 Co., Ltd. were classified as investment in associates as the Company does not have control over the investee under the contractual agreement. |
(*2) | These investments were classified as investments in associates as the Company can exercise significant influence through its right to appoint the members of the board of directors even though the Company has less than 20% of equity interests. |
(*3) | The ownership interest changed as third-party share option was exercised and convertible bonds were converted during the six-month period ended June 30, 2020. |
(*4) | The Company additionally contributed |
(*5) | The Company newly invested |
(*6) | The Company transferred the entire shares of Health Connect Co., Ltd. and assets related to the digital disease
management business during the six-month period ended June 30, 2020. The Company acquired 279,999 shares of common stock and 140,000 shares of convertible preferred stock of Invites Healthcare Co., Ltd.
in consideration of the transfer and recognized |
(*7) | This investment was classified as investment in a joint venture as the Company has joint control pursuant to the agreement with the other shareholders. |
20
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
8. | Investments in Subsidiaries, Associates and Joint Ventures, Continued |
(4) | The market value of investments in listed subsidiaries as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||
Market price per share (in won) |
Number of shares |
Market value |
Market price per share (in won) |
Number of shares |
Market value |
|||||||||||||||||||||||
DREAMUS COMPANY |
29,246,387 | 147,402 | 5,970 | 29,246,387 | 174,601 | |||||||||||||||||||||||
Incross Co., Ltd. |
33,850 | 2,786,455 | 94,322 | 25,150 | 2,786,455 | 70,079 |
(5) | The market value of investments in listed associates as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||
Market price per share (in won) |
Number of shares |
Market value |
Market price per share (in won) |
Number of shares |
Market value |
|||||||||||||||||||||||
NanoEnTek, Inc. |
7,600,649 | 83,987 | 5,620 | 7,600,649 | 42,716 | |||||||||||||||||||||||
SK hynix Inc. |
85,100 | 146,100,000 | 12,433,110 | 94,100 | 146,100,000 | 13,748,010 | ||||||||||||||||||||||
S.M.Culture & Contents Co., Ltd. |
1,500 | 22,033,898 | 33,051 | 1,530 | 22,033,898 | 33,712 |
21
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
9. | Property and Equipment |
Changes in property and equipment for the six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) |
| |||||||||||||||||||||||||||
For the six-month period ended June 30, 2020 | ||||||||||||||||||||||||||||
Beginning balance |
Acquisition | Disposal | Transfer | Depreciation | Ending balance |
|||||||||||||||||||||||
Land |
81 | (37 | ) | 19,295 | — | 637,351 | ||||||||||||||||||||||
Buildings |
600,625 | 143 | (9 | ) | 16,448 | (20,712 | ) | 596,495 | ||||||||||||||||||||
Structures |
346,734 | 501 | (27 | ) | 2,856 | (18,429 | ) | 331,635 | ||||||||||||||||||||
Machinery |
5,091,483 | 43,192 | (4,082 | ) | 881,253 | (825,301 | ) | 5,186,545 | ||||||||||||||||||||
Right-of-use assets |
434,555 | 237,344 | (75,835 | ) | — | (150,321 | ) | 445,743 | ||||||||||||||||||||
Other |
500,887 | 482,282 | (829 | ) | (444,558 | ) | (47,016 | ) | 490,766 | |||||||||||||||||||
Construction in progress |
672,592 | 629,101 | (3,531 | ) | (561,715 | ) | — | 736,447 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
1,392,644 | (84,350 | ) | (86,421 | ) | (1,061,779 | ) | 8,424,982 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) |
||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2019 | ||||||||||||||||||||||||||||||||
Beginning balance |
Impact of adopting K-IFRS No. 1116 |
Acquisition | Disposal | Transfer | Depreciation | Ending balance |
||||||||||||||||||||||||||
Land |
— | 968 | — | 27,196 | — | 572,583 | ||||||||||||||||||||||||||
Buildings |
537,000 | — | 877 | (433 | ) | 25,223 | (19,083 | ) | 543,584 | |||||||||||||||||||||||
Structures |
355,739 | — | 1,554 | — | 2,803 | (17,879 | ) | 342,217 | ||||||||||||||||||||||||
Machinery |
4,382,375 | — | 61,308 | (2,120 | ) | 1,020,969 | (775,192 | ) | 4,687,340 | |||||||||||||||||||||||
Right-of-use assets |
— | 433,074 | 196,589 | (67,796 | ) | — | (125,874 | ) | 435,993 | |||||||||||||||||||||||
Other |
617,837 | — | 588,770 | (793 | ) | (731,030 | ) | (48,930 | ) | 425,854 | ||||||||||||||||||||||
Construction in progress |
506,120 | — | 253,463 | (744 | ) | (383,218 | ) | — | 375,621 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
433,074 | 1,103,529 | (71,886 | ) | (38,057 | ) | (986,958 | ) | 7,383,192 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
10. | Lease |
(1) | Details of the right-of-use assets as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Land, buildings and structures |
363,196 | |||||||||||
Others |
84,079 | 71,359 | ||||||||||
|
|
|
|
|||||||||
434,555 | ||||||||||||
|
|
|
|
(2) | Details of amounts recognized in the condensed separate interim statements of income for the six-month periods ended June 30, 2020 and 2019 as a lessee are as follows: |
(In millions of won) | ||||||||||||
For the six-month period ended | ||||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Depreciation of right-of-use assets: |
||||||||||||
Land, buildings and structures |
99,321 | |||||||||||
Others |
25,360 | 26,553 | ||||||||||
|
|
|
|
|||||||||
150,321 | 125,874 | |||||||||||
|
|
|
|
|||||||||
Interest expense on lease liabilities |
3,403 | 3,893 | ||||||||||
Expenses related to short-term leases |
21,674 | 44,373 | ||||||||||
Expenses related to leases of low-value assets except for short-term leases |
12 | 18 |
(3) | The total cash outflows due to lease payments for the six-month period
ended June 30, 2020 amounts to |
(4) | In December 2019, International Financial Reporting Interpretations Committee(‘IFRIC’) issued its final agenda decision that the concept of penalty that should be considered in determining the enforceable period under IFRS 16, Leases, shall be determined considering broader economics of the contract, and not only contractual termination payments. Further, a lease is no longer enforceable when each of the parties has the right to terminate the lease without permission from the other party with no more than an insignificant penalty. |
As of June 30, 2020, the Company assess the lease term based on the assumption that the right to extent or terminate the lease is no longer enforceable if a lease contract requires the counterparty’s consent to be extended. Applying the above mentioned IFRIC interpretation may change the judgement on enforceable period for certain of the Company’s lease contracts.
The Company are currently analyzing the impact of IFRIC’s interpretation on its financial statements and plans to apply the impact as changes in accounting policies when the evaluation is completed.
23
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Intangible Assets |
(1) | Changes in intangible assets for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2020 | ||||||||||||||||||||||||||||||||
Beginning balance |
Acquisition | Disposal | Transfer | Amortization | Impairment | Ending balance |
||||||||||||||||||||||||||
Frequency usage rights(*1) |
— | — | — | (260,990 | ) | (12,388 | ) | 2,374,123 | ||||||||||||||||||||||||
Land usage rights |
5,708 | 99 | — | — | (1,067 | ) | — | 4,740 | ||||||||||||||||||||||||
Industrial rights |
12,054 | 240 | (45 | ) | — | (1,314 | ) | — | 10,935 | |||||||||||||||||||||||
Facility usage rights |
15,524 | 766 | — | 280 | (1,318 | ) | — | 15,252 | ||||||||||||||||||||||||
Club memberships(*2) |
47,611 | 123 | (1,179 | ) | — | — | — | 46,555 | ||||||||||||||||||||||||
Other(*3) |
732,754 | 44,623 | (2,562 | ) | 102,575 | (153,268 | ) | — | 724,122 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
45,851 | (3,786 | ) | 102,855 | (417,957 | ) | (12,388 | ) | 3,175,727 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||||||||||||||||||||||
For the six-month period ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||
Beginning balance |
Impact of adopting K-IFRS No. 1116 |
Acquisition | Disposal | Transfer | Amortization | Impairment | Ending balance |
|||||||||||||||||||||||||||||
Frequency usage rights |
— | — | — | — | (231,488 | ) | — | 2,908,490 | ||||||||||||||||||||||||||||
Land usage rights |
6,498 | — | 1,248 | — | — | (1,578 | ) | — | 6,168 | |||||||||||||||||||||||||||
Industrial rights |
15,300 | — | 755 | (219 | ) | — | (1,452 | ) | — | 14,384 | ||||||||||||||||||||||||||
Facility usage rights |
16,008 | — | 824 | (10 | ) | 171 | (1,378 | ) | — | 15,615 | ||||||||||||||||||||||||||
Club memberships(*2) |
47,411 | — | 1,089 | (230 | ) | — | — | (63 | ) | 48,207 | ||||||||||||||||||||||||||
Other(*3) |
785,669 | (2,274 | ) | 4,948 | (1,995 | ) | 54,425 | (141,706 | ) | — | 699,067 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
(2,274 | ) | 8,864 | (2,454 | ) | 54,596 | (377,602 | ) | (63 | ) | 3,691,931 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*1) | As Ministry of Science and Information and Communication Technology(ICT) approved the termination of 2G service, the Company recognized an impairment loss for the portion of 800MHz Frequency usage rights used for 2G service during the six-month period ended June 30, 2020. |
(*2) | Club memberships are classified as intangible assets with indefinite useful lives and are not amortized. |
(*3) | Other intangible assets primarily consist of computer software and others. |
24
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
11. | Intangible Assets, Continued |
(2) | Details of frequency usage rights as of June 30, 2020 are as follows: |
(In millions of won) | ||||||||||||||
Amount | Description |
Commencement |
Completion of | |||||||||||
800 MHz license |
28,157 | CDMA and LTE service | Jul. 2011 | Jun. 2021 | ||||||||||
1.8 GHz license |
188,430 | LTE service | Sept. 2013 | Dec. 2021 | ||||||||||
2.6 GHz license |
789,220 | LTE service | Sept. 2016 | Dec. 2026 | ||||||||||
2.1 GHz license |
151,940 | W-CDMA and LTE service | Dec. 2016 | Dec. 2021 | ||||||||||
3.5 GHz license(*) |
1,013,693 | 5G service | Apr. 2019 | Nov. 2028 | ||||||||||
28 GHz license(*) |
202,683 | 5G service | — | Nov. 2023 | ||||||||||
|
|
|||||||||||||
2,374,123 | ||||||||||||||
|
|
(*) | The Company participated in the frequency license allocation auction hosted by Ministry of Science and
Information and Communication Technology(ICT) and was assigned the 3.5 GHz and 28 GHz bands of frequency licenses during the year ended December 31, 2018. The considerations payable for the bands of frequency are
|
12. | Borrowings and Debentures |
(1) | Changes in long-term borrowings for the six-month periods ended June 30, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||
Lender | Annual interest rate (%) |
Maturity | Carrying amount |
|||||||||||||||||
Current |
13,157 | |||||||||||||||||||
Non-current |
19,777 | |||||||||||||||||||
|
|
|||||||||||||||||||
As of January 1, 2020 |
32,934 | |||||||||||||||||||
|
|
|||||||||||||||||||
Borrowings repaid |
Export Kreditnamnden | 1.70 | Apr. 29, 2022 | (6,670 | ) | |||||||||||||||
Other changes(*1) |
1,094 | |||||||||||||||||||
Current(*2) |
13,687 | |||||||||||||||||||
Non-current(*2) |
13,671 | |||||||||||||||||||
|
|
|||||||||||||||||||
As of June 30, 2020 |
27,358 | |||||||||||||||||||
|
|
(*1) | Other changes include the effects on foreign currency translation of long-term borrowings and changes in present value discount on long-term borrowings for the six-month period ended June 30, 2020. |
(*2) |
|
25
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
12. | Borrowings and Debentures, Continued |
(2) | Changes in debentures for the six-month period ended June 30, 2020 are as follows: |
(In millions of won, thousands of U.S dollars) | ||||||||||||||||||||||||
Purpose | Annual interest rate (%) |
Maturity | Face value | Book value | ||||||||||||||||||||
Current |
507,340 | 507,135 | ||||||||||||||||||||||
Non-current |
5,922,020 | 5,900,829 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
As of January 1, 2020 |
|
6,429,360 | 6,407,964 | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Debentures newly issued: |
| |||||||||||||||||||||||
Unsecured corporate bonds |
|
Operating and refinancing fund |
|
1.64 | Jan. 13, 2023 | 170,000 | 169,368 | |||||||||||||||||
Operating fund | 1.75 | Jan. 14, 2025 | 130,000 | 129,515 | ||||||||||||||||||||
1.83 | Jan. 14, 2030 | 50,000 | 49,811 | |||||||||||||||||||||
1.87 | Jan. 14, 2040 | 70,000 | 69,737 | |||||||||||||||||||||
Floating rate notes(*1) |
Operating fund | 3M LIBOR +0.91 | Jun. 4, 2025 | 357,420 | 355,296 | |||||||||||||||||||
(USD 300,000 | ) | (USD 300,000 | ) | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
777,420 | 773,727 | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Debentures repaid: |
| |||||||||||||||||||||||
Floating rate notes |
Operating fund | 3M LIBOR +0.88 | Mar. 7, 2020 | (364,590 | ) | (364,590 | ) | |||||||||||||||||
(USD 300,000 | ) | (USD 300,000 | ) | |||||||||||||||||||||
Unsecured corporate bonds |
Refinancing fund | 1.93 | Apr. 25, 2020 | (60,000 | ) | (60,000 | ) | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
(424,590 | ) | (424,590 | ) | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Other changes(*2) |
|
58,650 | 61,010 | |||||||||||||||||||||
Current(*3) |
360,000 | 359,740 | ||||||||||||||||||||||
Non-current(*3) |
6,480,840 | 6,458,371 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
As of June 30, 2020 |
|
6,840,840 | 6,818,111 | |||||||||||||||||||||
|
|
|
|
(*1) | As of June 30, 2020, 3M LIBOR rate is 0.30%. |
(*2) | Other changes include the effects on foreign currency translation of debentures and changes in present value discount on debentures for the six-month period ended June 30, 2020. |
(*3) |
|
26
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
13. | Long-Term Payables – Other |
(1) | As of June 30, 2020 and December 31, 2019, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 11): |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Long-term payables – other |
1,626,040 | 2,051,389 | ||||||||||
Present value discount on long-term payables – other |
(70,218 | ) | (82,851 | ) | ||||||||
Current installments of long-term payables – other |
(422,284 | ) | (423,839 | ) | ||||||||
|
|
|
|
|||||||||
Carrying amount at period end |
1,133,538 | 1,544,699 | ||||||||||
|
|
|
|
(2) | Principal amount of long-term payables repaid for the six-month period
ended June 30, 2020 are |
(In millions of won) | ||||||||
Amount | ||||||||
Less than 1 year |
425,349 | |||||||
1 ~ 3 years |
444,480 | |||||||
3 ~ 5 years |
382,290 | |||||||
More than 5 years |
373,921 | |||||||
|
|
|||||||
1,626,040 | ||||||||
|
|
14. | Provisions |
Changes in provisions for the six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | For the six-month period ended June 30, 2020 | As of June 30, 2020 | ||||||||||||||||||||||||||||||
Beginning balance |
Increase | Utilization | Reversal | Ending balance |
Current | Non-current | ||||||||||||||||||||||||||
Provision for restoration |
62,015 | 1,745 | (303 | ) | (586 | ) | 62,871 | 46,669 | 16,202 | |||||||||||||||||||||||
Emission allowance |
5,256 | 4,573 | — | — | 9,829 | 9,829 | — | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
67,271 | 6,318 | (303 | ) | (586 | ) | 72,700 | 56,498 | 16,202 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
(In millions of won) | For the six-month period ended June 30, 2019 | As of June 30, 2019 | ||||||||||||||||||||||||||||||
Beginning balance |
Increase | Utilization | Reversal | Ending balance |
Current | Non-current | ||||||||||||||||||||||||||
Provision for restoration |
59,548 | 1,504 | (337 | ) | (418 | ) | 60,297 | 45,379 | 14,918 | |||||||||||||||||||||||
Emission allowance |
2,238 | 2,208 | — | — | 4,446 | 4,446 | — | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
61,786 | 3,712 | (337 | ) | (418 | ) | 64,743 | 49,825 | 14,918 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
15. | Defined Benefit Liabilities |
(1) | Details of defined benefit liabilities as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Present value of defined benefit obligations |
461,880 | 422,782 | ||||||||||
Fair value of plan assets |
(397,972 | ) | (397,689 | ) | ||||||||
|
|
|
|
|||||||||
63,908 | 25,093 | |||||||||||
|
|
|
|
(2) | Changes in defined benefit obligations for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Beginning balance |
422,782 | 332,044 | ||||||||||
Current service cost |
28,628 | 22,503 | ||||||||||
Past service cost |
815 | — | ||||||||||
Interest cost |
5,059 | 4,177 | ||||||||||
Remeasurement |
||||||||||||
- Adjustment based on experience |
14,656 | 1,543 | ||||||||||
Benefit paid |
(12,887 | ) | (10,077 | ) | ||||||||
Others |
2,827 | 3,491 | ||||||||||
|
|
|
|
|||||||||
Ending balance |
461,880 | 353,681 | ||||||||||
|
|
|
|
(3) | Changes in plan assets for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Beginning balance |
397,689 | 363,878 | ||||||||||
Interest income |
4,553 | 4,493 | ||||||||||
Remeasurement |
(120 | ) | (442 | ) | ||||||||
Contribution |
15,000 | 20,000 | ||||||||||
Benefit paid |
(21,419 | ) | (20,335 | ) | ||||||||
Others |
2,269 | (1,987 | ) | |||||||||
|
|
|
|
|||||||||
Ending balance |
397,972 | 365,607 | ||||||||||
|
|
|
|
(4) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the condensed separate interim statements of income) and capitalized into construction-in-progress, for the six-month periods ended June 30, 2020 and 2019 is as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Current service cost |
28,628 | 22,503 | ||||||||||
Past service cost |
815 | — | ||||||||||
Net interest cost (income) |
506 | (316 | ) | |||||||||
|
|
|
|
|||||||||
29,949 | 22,187 | |||||||||||
|
|
|
|
28
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
16. | Derivative Instruments |
Changes in derivative contracts for the six-month period ended June 30, 2020 are as follows:
(in thousands of other currencies) | ||||||||||||
Hedged items |
Hedging instruments | |||||||||||
Date |
Item |
Risk type |
Contract type |
Financial institution |
Duration of contract | |||||||
Expired |
Mar. 7, 2013 | U.S. dollar-denominated bonds’ face value of USD 300,000 | Currency risk and Interest rate risk | Floating-to-fixed cross-currency interest rate swap | DBS Bank | Mar. 7, 2013~ Mar. 7, 2020 | ||||||
Contracted |
Mar. 4, 2020 | U.S. dollar-denominated bonds’ face value of USD 300,000 | Currency risk and Interest rate risk | Floating-to-fixed cross-currency interest rate swap | Citibank | Mar. 4, 2020~ Jun. 4, 2025 |
17. | Share Capital and Capital Surplus and Others |
(1) | The Company’s outstanding share capital consists entirely of common shares with a par value of
|
(In millions of won, except for share data) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Number of authorized shares |
220,000,000 | 220,000,000 | ||||||||||
Number of issued shares |
80,745,711 | 80,745,711 | ||||||||||
Share capital: |
||||||||||||
Common share |
44,639 | 44,639 | ||||||||||
Capital surplus and others: |
||||||||||||
Paid-in surplus |
2,915,887 | 2,915,887 | ||||||||||
Treasury shares |
(1,696,997 | ) | (1,696,997 | ) | ||||||||
Hybrid bonds(*) |
398,759 | 398,759 | ||||||||||
Share option(Note 18) |
1,405 | 1,302 | ||||||||||
Others |
(903,332 | ) | (903,332 | ) | ||||||||
|
|
|
|
|||||||||
715,722 | 715,619 | |||||||||||
|
|
|
|
(*) | As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Company classified the hybrid bonds as equity. When in liquidation or bankruptcy, these hybrid bonds are senior only to common stocks. |
(2) | There were no changes in share capital for the six-month periods ended June 30, 2020 and 2019 and details of shares outstanding as of June 30, 2020 and 2019 are as follows: |
(In shares) | ||||||||||||||||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||||||||||||||
Issued shares |
Treasury shares |
Outstanding shares |
Issued shares |
Treasury shares |
Outstanding shares |
|||||||||||||||||||
Shares outstanding |
80,745,711 | 7,609,263 | 73,136,448 | 80,745,711 | 8,875,883 | 71,869,828 |
29
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
18. | Share Option |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows: |
Series | ||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | ||||||||
Grant date |
March 24, 2017 | February 20, 2018 |
February 22, 2019 |
March 26, 2019 |
March 26, 2020 | |||||||||
Types of shares to be issued |
Registered common shares | |||||||||||||
Grant method |
Reissue of treasury shares | Reissue of treasury shares, Cash settlement | ||||||||||||
Number of shares (in share) |
22,168 | 22,168 | 22,168 | 1,358 | 4,177 | 1,734 | 127,643 | |||||||
Exercise price (in won) |
246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | |||||||
Exercise period |
Mar. 25, 2019 | Mar. 25, 2020 | Mar. 25, 2021 | Feb. 21, 2020 | Feb. 23, 2021 | Mar. 27, 2021 | Mar. 27, 2023 | |||||||
~ | ~ | ~ | ~ | ~ | ~ | ~ | ||||||||
Mar. 24, 2022 | Mar. 24, 2023 | Mar. 24, 2024 | Feb. 20, 2023 | Feb. 22, 2024 | Mar. 26, 2024 | Mar. 26, 2027 | ||||||||
Vesting conditions |
2 years’ service from the grant date |
3 years’ service from the grant date |
4 years’ service from the grant date |
2 years’ service from the grant date |
2 years’ service from the grant date |
2 years’ service from the grant date |
3 years’ service from the grant date |
(2) | Share compensation expense recognized for the six-month period ended June 30, 2020 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | ||||||||
Share compensation expense | ||||||||
Accumulated compensation expenses as of December 31, 2019 |
1,302 | |||||||
For the six-month period ended June 30, 2020 |
103 | |||||||
In subsequent periods |
191 | |||||||
|
|
|||||||
1,596 | ||||||||
|
|
(3) | The Company used binomial option-pricing model in the measurement of the fair value of share options at the grant date and the inputs used in the model are as follows: |
(In won) | Series | |||||||||||||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | ||||||||||||||||||||||
Risk-free interest rate |
1.86 | % | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | ||||||||||||||
Estimated option’s life |
5 years | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | |||||||||||||||||||||
Share price |
262,500 | 262,500 | 262,500 | 243,500 | 259,000 | 253,000 | 174,500 | |||||||||||||||||||||
Expected volatility |
13.38 | % | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | ||||||||||||||
Expected dividends |
3.80 | % | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | ||||||||||||||
Exercise price |
246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | |||||||||||||||||||||
Per-share fair value of the option |
27,015 | 20,240 | 15,480 | 23,988 | 8,600 | 8,111 | 962 |
30
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
19. | Retained Earnings |
Retained earnings as of June 30, 2020 and December 31, 2019 are as follows:
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Appropriated: |
||||||||||||
Legal reserve |
22,320 | 22,320 | ||||||||||
Reserve for business expansion |
11,631,138 | 11,531,138 | ||||||||||
Reserve for technology development |
4,365,300 | 4,265,300 | ||||||||||
|
|
|
|
|||||||||
16,018,758 | 15,818,758 | |||||||||||
Unappropriated |
557,936 | 860,029 | ||||||||||
|
|
|
|
|||||||||
16,576,694 | 16,678,787 | |||||||||||
|
|
|
|
20. | Reserves |
(1) | Details of reserves, net of taxes, as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Valuation gain (loss) on FVOCI |
129,196 | (41,998 | ) | |||||||||
Valuation gain (loss) on derivatives |
6,691 | (7,308 | ) | |||||||||
|
|
|
|
|||||||||
135,887 | (49,306 | ) | ||||||||||
|
|
|
|
(2) | Changes in reserves for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||
Valuation gain (loss) on financial assets at FVOCI |
Valuation gain (loss) on derivatives |
Total | ||||||||||||||
Balance at January 1, 2019 |
2,047 | (42,312 | ) | (40,265 | ) | |||||||||||
Changes, net of taxes |
(37,331 | ) | 21,617 | (15,714 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||
Balance at June 30, 2019 |
(35,284 | ) | (20,695 | ) | (55,979 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Balance at January 1, 2020 |
(41,998 | ) | (7,308 | ) | (49,306 | ) | ||||||||||
Changes, net of taxes |
171,194 | 13,999 | 185,193 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Balance at June 30, 2020 |
129,196 | 6,691 | 135,887 | |||||||||||||
|
|
|
|
|
|
31
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
21. | Operating Revenue |
Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Company’s revenue and future cash flows is as follows:
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Products transferred at a point in time: |
||||||||||||||||||||
Product sales |
8,848 | 24,005 | 22,650 | 44,104 | ||||||||||||||||
Services transferred over time: |
||||||||||||||||||||
Wireless service revenue(*1) |
2,487,070 | 4,970,517 | 2,435,799 | 4,848,472 | ||||||||||||||||
Cellular interconnection revenue |
136,364 | 267,892 | 132,264 | 259,657 | ||||||||||||||||
Other(*2) |
307,550 | 600,263 | 257,004 | 507,692 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
2,930,984 | 5,838,672 | 2,825,067 | 5,615,821 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
2,939,832 | 5,862,677 | 2,847,717 | 5,659,925 | |||||||||||||||||
|
|
|
|
|
|
|
|
(*1) | Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through usage charges collected from the wireless subscribers. |
(*2) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
The Company has a right to consideration from a customer in an amount that corresponds directly with the value to the subscriber of the Company’s performance completed, thus, as a practical expedient, the Company recognizes revenue in the amount to which the Company has a right to invoice.
Most of the Company’s transactions are occurring in Korea as it principally operates its businesses in Korea.
22. | Other Operating Expenses |
Details of other operating expenses for the three and six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Communication |
7,705 | 15,352 | 7,689 | 14,908 | ||||||||||||||||
Utilities |
56,471 | 123,530 | 54,172 | 113,000 | ||||||||||||||||
Taxes and dues |
14,037 | 17,251 | 12,684 | 16,822 | ||||||||||||||||
Repair |
61,719 | 113,998 | 61,196 | 121,531 | ||||||||||||||||
Research and development |
89,369 | 183,386 | 78,382 | 161,285 | ||||||||||||||||
Training |
4,257 | 10,374 | 4,672 | 11,858 | ||||||||||||||||
Bad debt (reversal of loss allowance) for accounts receivable – trade |
6,081 | 15,310 | (1,304 | ) | 3,023 | |||||||||||||||
Others |
8,100 | 19,854 | 10,014 | 22,739 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
247,739 | 499,055 | 227,505 | 465,166 | |||||||||||||||||
|
|
|
|
|
|
|
|
32
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
23. | Other Non-Operating Income and Expenses |
Details of other non-operating income and expenses for the three and six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Other non-operating Income: |
||||||||||||||||||||
Gain on disposal of property and equipment and intangible assets |
1,280 | 2,356 | 1,831 | 2,699 | ||||||||||||||||
Gain on business transfer |
— | 12,451 | — | — | ||||||||||||||||
Others |
22,558 | 23,232 | 1,946 | 4,770 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
23,838 | 38,039 | 3,777 | 7,469 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Other non-operating Expenses: |
||||||||||||||||||||
Loss on disposal of property and equipment and intangible assets |
8,561 | 12,564 | 6,685 | 7,644 | ||||||||||||||||
Impairment loss on property and equipment and intangible assets |
12,388 | 12,388 | — | 63 | ||||||||||||||||
Donations |
3,956 | 10,133 | 7,376 | 9,893 | ||||||||||||||||
Bad debt for accounts receivable – other |
719 | 1,822 | 911 | 1,648 | ||||||||||||||||
Others |
684 | 2,061 | 3,525 | 5,444 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
26,308 | 38,968 | 18,497 | 24,692 | |||||||||||||||||
|
|
|
|
|
|
|
|
33
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
24. | Finance Income and Costs |
(1) | Details of finance income and costs for the three and six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Finance Income: |
||||||||||||||||||||
Interest income |
5,914 | 12,074 | 7,356 | 14,819 | ||||||||||||||||
Gain on sale of accounts receivable – other |
2,834 | 7,513 | 4,045 | 11,987 | ||||||||||||||||
Dividends |
18,814 | 284,666 | 8,131 | 514,181 | ||||||||||||||||
Gain on foreign currency transactions |
2,151 | 2,858 | 3,213 | 4,412 | ||||||||||||||||
Gain on foreign currency translations |
— | 2,767 | 1,086 | 1,910 | ||||||||||||||||
Gain on valuation of derivatives |
— | — | 19 | 465 | ||||||||||||||||
Gain on settlement of derivatives |
— | 7,380 | 389 | 389 | ||||||||||||||||
Gain relating to financial assets at FVTPL |
— | — | 163 | 309 | ||||||||||||||||
Gain relating to financial liabilities at FVTPL |
— | — | 265 | 56 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
29,713 | 317,258 | 24,667 | 548,528 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Finance Costs: |
||||||||||||||||||||
Interest expense |
58,571 | 120,265 | 61,678 | 125,883 | ||||||||||||||||
Loss on foreign currency transactions |
2,641 | 3,526 | 3,038 | 3,972 | ||||||||||||||||
Loss on foreign currency translations |
1,508 | 2,945 | 1,776 | 1,915 | ||||||||||||||||
Loss on sale of accounts receivable – other |
— | — | 560 | 560 | ||||||||||||||||
Loss on settlement of derivatives |
313 | 2,179 | 317 | 317 | ||||||||||||||||
Loss relating to financial assets at FVTPL |
43 | 216 | 225 | 365 | ||||||||||||||||
Loss relating to financial liabilities at FVTPL |
— | — | — | 43 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
63,076 | 129,131 | 67,594 | 133,055 | |||||||||||||||||
|
|
|
|
|
|
|
|
(2) | Details of interest income included in finance income for the three and six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Interest income on cash equivalents and short-term financial instruments |
1,860 | 3,704 | 2,748 | 5,592 | ||||||||||||||||
Interest income on loans and others |
4,054 | 8,370 | 4,608 | 9,227 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
5,914 | 12,074 | 7,356 | 14,819 | |||||||||||||||||
|
|
|
|
|
|
|
|
34
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
24. | Finance Income and Costs, Continued |
(3) | Details of interest expense included in finance costs for the three and six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Interest expense on borrowings |
5,425 | 1,810 | 2,903 | |||||||||||||||||
Interest expense on debentures |
46,195 | 93,149 | 45,128 | 89,323 | ||||||||||||||||
Others |
8,833 | 21,691 | 14,740 | 33,657 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
120,265 | 61,678 | 125,883 | ||||||||||||||||||
|
|
|
|
|
|
|
|
(4) | Details of impairment losses (reversal of impairment losses) for financial assets for the three and six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Accounts receivable – trade |
15,310 | (1,304 | ) | 3,023 | ||||||||||||||||
Other receivables |
719 | 1,822 | 911 | 1,648 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
17,132 | (393 | ) | 4,671 | |||||||||||||||||
|
|
|
|
|
|
|
|
25. | Income Tax Expense |
Income tax expense was calculated by considering current tax expense, adjusted to changes in estimates related to prior periods, and deferred tax expense due to origination and reversal of temporary differences.
35
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
26. | Earnings per Share |
(1) | Basic earnings per share |
1) | Basic earnings per share for the three and six-month periods ended June 30, 2020 and 2019 are calculated as follows: |
(In millions of won, except for share data) | 2020 | 2019 | ||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Profit for the period |
574,742 | 162,014 | 806,007 | |||||||||||||||||
Interest on hybrid bonds |
(3,691 | ) | (7,383 | ) | (3,691 | ) | (7,383 | ) | ||||||||||||
Profit for the period on common shares |
164,958 | 567,359 | 158,323 | 798,624 | ||||||||||||||||
Weighted average number of common shares outstanding |
73,136,448 | 73,136,448 | 71,869,828 | 71,869,828 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Basic earnings per share (in won) |
7,758 | 2,203 | 11,112 | |||||||||||||||||
|
|
|
|
|
|
|
|
2) | The weighted average number of common shares outstanding for the three and six-month periods ended June 30, 2020 and 2019 are calculated as follows: |
(In shares) | Weighted average number of common shares |
|||||||||||
Number of common shares |
Three-month period ended June 30 |
Six-month period ended June 30 |
||||||||||
Issued shares at January 1, 2020 |
80,745,711 | 80,745,711 | 80,745,711 | |||||||||
Effect of treasury shares |
(7,609,263 | ) | (7,609,263 | ) | (7,609,263 | ) | ||||||
|
|
|
|
|
|
|||||||
73,136,448 | 73,136,448 | 73,136,448 | ||||||||||
|
|
|
|
|
|
(In shares) | Weighted average number of common shares |
|||||||||||
Number of common shares |
Three-month period ended June 30 |
Six-month period ended June 30 |
||||||||||
Issued shares at January 1, 2019 |
80,745,711 | 80,745,711 | 80,745,711 | |||||||||
Effect of treasury shares |
(8,875,883 | ) | (8,875,883 | ) | (8,875,883 | ) | ||||||
|
|
|
|
|
|
|||||||
71,869,828 | 71,869,828 | 71,869,828 | ||||||||||
|
|
|
|
|
|
(2) | Diluted earnings per share |
For the six-month periods ended June 30, 2020 and 2019, diluted earnings per share are the same as basic earnings per share as there are no dilutive potential common shares.
36
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
27. | Categories of Financial Instruments |
(1) | Financial assets by category as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||||||
Financial assets at FVTPL |
Equity instruments at FVOCI |
Financial assets at amortized cost |
Derivatives hedging instrument |
Total | ||||||||||||||||||||
Cash and cash equivalents |
— | 379,055 | — | 379,055 | ||||||||||||||||||||
Financial instruments |
— | — | 259,354 | — | 259,354 | |||||||||||||||||||
Short-term investment securities |
31,873 | — | — | — | 31,873 | |||||||||||||||||||
Long-term investment securities(*) |
75,381 | 668,446 | — | — | 743,827 | |||||||||||||||||||
Accounts receivable – trade |
— | — | 1,503,023 | — | 1,503,023 | |||||||||||||||||||
Loans and other receivables |
386,177 | — | 506,081 | — | 892,258 | |||||||||||||||||||
Derivative financial assets |
— | — | — | 175,668 | 175,668 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
668,446 | 2,647,513 | 175,668 | 3,985,058 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Company designated |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Financial assets at FVTPL |
Equity instruments at FVOCI |
Financial assets at amortized cost |
Derivatives hedging instrument |
Total | ||||||||||||||||||||
Cash and cash equivalents |
— | — | 497,282 | — | 497,282 | |||||||||||||||||||
Financial instruments |
— | — | 234,382 | — | 234,382 | |||||||||||||||||||
Short-term investment securities |
31,920 | — | — | — | 31,920 | |||||||||||||||||||
Long-term investment securities(*) |
75,423 | 435,210 | — | — | 510,633 | |||||||||||||||||||
Accounts receivable – trade |
— | — | 1,479,971 | — | 1,479,971 | |||||||||||||||||||
Loans and other receivables |
532,225 | — | 554,722 | — | 1,086,947 | |||||||||||||||||||
Derivative financial assets |
— | — | — | 126,251 | 126,251 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
639,568 | 435,210 | 2,766,357 | 126,251 | 3,967,386 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The Company designated |
37
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
27. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | ||||||||||||||||
June 30, 2020 | ||||||||||||||||
Financial liabilities at amortized cost |
Derivatives hedging instrument |
Total | ||||||||||||||
Derivative financial liabilities |
— | 15,090 | 15,090 | |||||||||||||
Borrowings |
27,358 | — | 27,358 | |||||||||||||
Debentures |
6,818,111 | — | 6,818,111 | |||||||||||||
Lease liabilities(*) |
447,660 | — | 447,660 | |||||||||||||
Accounts payable – other and others |
4,521,480 | — | 4,521,480 | |||||||||||||
|
|
|
|
|
|
|||||||||||
11,814,609 | 15,090 | 11,829,699 | ||||||||||||||
|
|
|
|
|
|
(In millions of won) | ||||||||
December 31, 2019 | ||||||||
Financial liabilities at amortized cost | ||||||||
Borrowings |
32,934 | |||||||
Debentures |
6,407,964 | |||||||
Lease liabilities(*) |
410,889 | |||||||
Accounts payable – other and others |
5,337,980 | |||||||
|
|
|||||||
12,189,767 | ||||||||
|
|
(*) | Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities. |
38
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
28. | Financial Risk Management |
(1) | Financial risk management |
The Company is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates and interest rates. The Company implements a risk management system to monitor and manage these specific risks.
The Company’s financial assets consist of cash and cash equivalents, financial instruments, investment securities, accounts receivable – trade and others, etc. Financial liabilities consist of accounts payable – other, borrowings, debentures, lease liabilities and others.
1) | Market risk |
(i) | Currency risk |
The Company is exposed to currency risk mainly on exchange fluctuations on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Company.
Monetary assets and liabilities denominated in foreign currencies as of June 30, 2020 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||||||||||
Assets | Liabilities | |||||||||||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||||||||||
USD |
45,097 | 54,148 | 1,217,249 | 1,461,551 | ||||||||||||||||||||
EUR |
1,327 | 1,791 | 29 | 39 | ||||||||||||||||||||
JPY |
14,698 | 164 | 122 | 1 | ||||||||||||||||||||
CHF |
5,000 | 6,311 | — | — | ||||||||||||||||||||
Others |
— | 165 | — | — | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
62,579 | 1,461,591 | |||||||||||||||||||||||
|
|
|
|
In addition, the Company has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.
As of June 30, 2020, a hypothetical change in exchange rates by 10% would have increased (decreased) the Company’s income before income taxes as follows:
(In millions of won) | ||||||||||||
If increased by 10% | If decreased by 10% | |||||||||||
USD |
5,070 | (5,070 | ) | |||||||||
EUR |
175 | (175 | ) | |||||||||
JPY |
16 | (16 | ) | |||||||||
CHF |
631 | (631 | ) | |||||||||
Others |
17 | (17 | ) | |||||||||
|
|
|
|
|||||||||
5,909 | (5,909 | ) | ||||||||||
|
|
|
|
39
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
28. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) Market risk, Continued
(ii) Interest rate risk
The interest rate risk of the Company arises from borrowings, debentures and long-term payables – other. Since the Company’s interest-bearing assets are mostly fixed-interest bearing assets, the Company’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.
The Company performs various analyses to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Company takes various measures, such as refinancing, renewal, alternative financing and hedging.
As of June 30,
2020, floating-rate debentures amount to W360,210 million, and the Company has entered into interest rate swaps to hedge interest rate risk related to the floating-rate debentures. Therefore, income before income taxes for the six-month period ended June 30, 2020 would not have been affected by the changes in interest rates of floating-rate debentures.
As of June 30, 2020, the floating-rate long-term payables – other are W1,626,040 million. If the interest rate
increases (decreases) 1% with all other variables held constant, income before income taxes for the six-month period ended June 30, 2020, would change by W8,130 million in relation
to the floating-rate long-term payables – other that are exposed to interest rate risk.
40
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
28. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) Credit risk
The maximum credit exposure as of June 30, 2020 and December 31, 2019 are as follows:
(In millions of won) | ||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||
Cash and cash equivalents |
379,020 | 497,240 | ||||||||||
Financial instruments |
259,354 | 234,382 | ||||||||||
Investment securities |
900 | 900 | ||||||||||
Accounts receivable – trade |
1,503,023 | 1,479,971 | ||||||||||
Contract assets |
33,559 | 30,897 | ||||||||||
Loans and other receivables |
892,258 | 1,086,947 | ||||||||||
Derivative financial assets |
175,668 | 126,251 | ||||||||||
|
|
|
|
|||||||||
3,243,782 | 3,456,588 | |||||||||||
|
|
|
|
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Company evaluates the creditworthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors. Based on such information, the Company establishes credit limits for each customer or counterparty.
The Company establishes loss allowance in respect of accounts receivable – trade and other. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Also, the Company’s credit risk can arise from transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Company has a policy to deal only with financial institutions with high credit ratings.
The amount of maximum exposure to credit risk of the Company is the carrying amount of financial assets as of June 30, 2020.
41
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
28. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
3) Liquidity risk
The Company’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalent balances and have enough liquidity through various committed credit lines. The Company maintains enough liquidity within credit lines through active operating activities.
Contractual maturities of financial liabilities as of June 30, 2020 are as follows:
(In millions of won) | ||||||||||||||||||||||||
Carrying amount |
Contractual cash flows |
Less than 1 year |
1 – 5 years |
More than 5 years |
||||||||||||||||||||
Borrowings(*) |
27,358 | 28,418 | 14,372 | 14,046 | — | |||||||||||||||||||
Debentures(*) |
6,818,111 | 7,962,654 | 548,654 | 4,421,617 | 2,992,383 | |||||||||||||||||||
Lease liabilities |
447,660 | 466,328 | 214,563 | 229,850 | 21,915 | |||||||||||||||||||
Accounts payable – other and others(*) |
4,521,480 | 4,612,485 | 3,368,168 | 868,064 | 376,253 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
11,814,609 | 13,069,885 | 4,145,757 | 5,533,577 | 3,390,551 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | Includes interest payables. |
The Company does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
As of June 30, 2020, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:
(In millions of won) | ||||||||||||||||||||||||
Carrying amount |
Contractual cash flows |
Less than 1 year |
1 – 5 years |
More than 5 years |
||||||||||||||||||||
Assets |
175,668 | 178,471 | 21,210 | 121,220 | 36,041 | |||||||||||||||||||
Liabilities |
(15,090 | ) | (15,186 | ) | (1,576 | ) | (13,610 | ) | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
160,578 | 163,285 | 19,634 | 107,610 | 36,041 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
42
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
28. | Financial Risk Management, Continued |
(2) | Capital management |
The Company manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Company is the same as that for the year ended December 31, 2019.
The Company monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity; both are from the condensed separate interim financial statements.
Debt-equity ratio as of June 30, 2020 and December 31, 2019 are as follows:
(In millions of won) | ||||||||||||
June 30, 2020 |
December 31, 2019 |
|||||||||||
Total liabilities |
13,265,810 | 13,449,628 | ||||||||||
Total equity |
17,472,942 | 17,389,739 | ||||||||||
Debt-equity ratios |
75.92 | % | 77.34 | % |
43
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
28. | Financial Risk Management, Continued |
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of June 30, 2020 and December 31, 2019 are as follows: |
(In millions of won) | June 30, 2020 | |||||||||||||||||||||||
Carrying amount |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Financial assets that are measured at fair value: |
||||||||||||||||||||||||
FVTPL |
493,431 | — | 418,050 | 75,381 | 493,431 | |||||||||||||||||||
Derivative hedging instruments |
175,668 | — | 175,668 | — | 175,668 | |||||||||||||||||||
FVOCI |
668,446 | 618,234 | — | 50,212 | 668,446 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
1,337,545 | 618,234 | 593,718 | 125,593 | 1,337,545 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Financial liabilities that are measured at fair value: |
||||||||||||||||||||||||
Derivative hedging instruments |
15,090 | — | 15,090 | — | 15,090 | |||||||||||||||||||
Financial liabilities that are not measured at fair value: |
||||||||||||||||||||||||
Borrowings |
27,358 | — | 28,324 | — | 28,324 | |||||||||||||||||||
Debentures |
6,818,111 | — | 7,364,782 | — | 7,364,782 | |||||||||||||||||||
Long-term payables – other |
1,555,822 | — | 1,575,693 | — | 1,575,693 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
8,401,291 | — | 8,968,799 | — | 8,968,799 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of won) | December 31, 2019 | |||||||||||||||||||||||
Carrying amount |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Financial assets that are measured at fair value: |
||||||||||||||||||||||||
FVTPL |
639,568 | — | 564,145 | 75,423 | 639,568 | |||||||||||||||||||
Derivative hedging instrument |
126,251 | — | 126,251 | — | 126,251 | |||||||||||||||||||
FVOCI |
435,210 | 384,721 | — | 50,489 | 435,210 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
1,201,029 | 384,721 | 690,396 | 125,912 | 1,201,029 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Financial liabilities that are not measured at fair value: |
||||||||||||||||||||||||
Borrowings |
32,934 | — | 33,755 | — | 33,755 | |||||||||||||||||||
Debentures |
6,407,964 | — | 6,848,312 | — | 6,848,312 | |||||||||||||||||||
Long-term payables – other |
1,968,538 | — | 2,003,025 | — | 2,003,025 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
8,409,436 | — | 8,885,092 | — | 8,885,092 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
44
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
28. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of June 30, 2020 and December 31, 2019 are as follows, Continued: |
The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.
Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI) is measured based on the bid price at the end of the reporting date.
The Company uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used for such valuation methods include swap rate, interest rate and risk premium, and the Company performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
Interest rates used by the Company for the fair value measurement as of June 30, 2020 are as follows:
Interest rate | ||||
Derivative instruments |
0.26% ~ 1.84% | |||
Borrowings and debentures |
1.10% ~ 1.46% | |||
Long-term payables – other |
1.06% ~ 1.61% |
2) | There have been no transfers between Level 2 and Level 1 for the six-month period ended June 30, 2020. The changes of financial assets classified as Level 3 for the six-month period ended June 30, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
Balance at January 1, 2020 |
Valuation | Acquisition | Disposal | Balance at June 30, 2020 |
||||||||||||||||||||
FVTPL |
75,423 | (169 | ) | 327 | (200 | ) | 75,381 | |||||||||||||||||
FVOCI |
50,489 | — | — | (277 | ) | 50,212 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
125,912 | (169 | ) | 327 | (477 | ) | 125,593 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
45
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
28. | Financial Risk Management, Continued |
(4) | Enforceable master netting agreement or similar agreement |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of June 30, 2020 and December 31, 2019 are as follows:
(In millions of won) | ||||||||||||||||
June 30, 2020 | ||||||||||||||||
Gross financial instruments recognized |
Amount offset | Net financial instruments presented on the condensed separate interim statement of financial position |
||||||||||||||
Financial assets: |
||||||||||||||||
Accounts receivable – trade and others |
80,084 | (80,084 | ) | — | ||||||||||||
|
|
|
|
|
|
|||||||||||
Financial liabilities: |
||||||||||||||||
Accounts payable –other and others |
80,808 | (80,084 | ) | 724 | ||||||||||||
|
|
|
|
|
|
(In millions of won) | ||||||||||||||||
December 31, 2019 | ||||||||||||||||
Gross financial instruments recognized |
Amount offset | Net financial instruments presented on the separate statement of financial position |
||||||||||||||
Financial assets: |
||||||||||||||||
Accounts receivable – trade and others |
77,958 | (77,958 | ) | — | ||||||||||||
|
|
|
|
|
|
|||||||||||
Financial liabilities: |
||||||||||||||||
Accounts payable – other and others |
78,133 | (77,958 | ) | 175 | ||||||||||||
|
|
|
|
|
|
46
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Transactions with Related Parties |
(1) | List of related parties |
Relationship |
Company | |
Ultimate Controlling Entity |
SK Holdings Co., Ltd. | |
Subsidiaries |
SK Planet Co., Ltd. and 48 others(*) | |
Joint ventures |
Dogus Planet, Inc. and 3 others | |
Associates |
SK hynix Inc. and 47 others | |
Others |
The Ultimate Controlling Entity’s other subsidiaries and associates |
(*) | As of June 30, 2020, subsidiaries of the Company are as follows: |
Subsidiary |
Ownership |
Primary business | ||||
Subsidiaries owned by the Company |
SK Telink Co., Ltd. | 100.0 | Telecommunication and Mobile Virtual Network Operator service | |||
SK Communications Co., Ltd. | 100.0 | Internet website services | ||||
SK Broadband Co., Ltd.(*2) | 74.3 | Telecommunication services | ||||
PS&Marketing Corporation | 100.0 | Communications device retail business | ||||
SERVICE ACE Co., Ltd. | 100.0 | Call center management service | ||||
SERVICE TOP Co., Ltd. | 100.0 | Call center management service | ||||
SK O&S Co., Ltd. | 100.0 | Base station maintenance service | ||||
SK Telecom China Holdings Co., Ltd. | 100.0 | Investment(Holdings company) | ||||
SK Global Healthcare Business Group., Ltd. | 100.0 | Investment | ||||
YTK Investment Ltd. | 100.0 | Investment association | ||||
Atlas Investment | 100.0 | Investment association | ||||
SKT Americas, Inc. | 100.0 | Information gathering and consulting | ||||
One Store Co., Ltd. | 52.1 | Telecommunication services | ||||
SK Planet Co., Ltd. | 98.7 | Telecommunication services, system software development and supply services | ||||
Eleven Street Co., Ltd. | 80.3 | E-commerce | ||||
DREAMUS COMPANY | 51.4 | Manufacturing digital audio players and other portable media devices | ||||
SK Infosec Co., Ltd. | 100.0 | Information security service | ||||
Life & Security Holdings Co., Ltd. | 55.0 | Investment(Holdings company) | ||||
Quantum Innovation Fund I | 59.9 | Investment | ||||
SK Telecom Japan Inc. | 100.0 | Information gathering and consulting | ||||
id Quantique SA | 66.8 | Quantum information and communications service | ||||
SK Telecom TMT Investment Corp. | 100.0 | Investment | ||||
FSK L&S Co., Ltd. | 60.0 | Freight and logistics consulting business | ||||
Incross Co., Ltd. | 34.6 | Media representative business | ||||
Happy Hanool Co., Ltd. | 100.0 | Service | ||||
SK stoa Co., Ltd.(*3) | 100.0 | Other telecommunication retail business | ||||
Broadband Nowon Co., Ltd.(*4) | 55.0 | Cable broadcasting services | ||||
Subsidiaries owned by SK Planet Co., Ltd. |
SK m&service Co., Ltd. | 100.0 | Database and internet website service | |||
SK Planet Global Holdings Pte. Ltd. | 100.0 | Investment(Holdings company) | ||||
SKP America LLC. | 100.0 | Digital contents sourcing service | ||||
K-net Culture and Contents Venture Fund | 59.0 | Capital investing in startups | ||||
Subsidiaries owned by DREAMUS COMPANY |
iriver Enterprise Ltd. | 100.0 | Management of Chinese subsidiaries | |||
iriver China Co., Ltd. | 100.0 | Sales and manufacturing of MP3 and 4 | ||||
Dongguan iriver Electronics Co., Ltd. | 100.0 | Sales and Manufacturing of e-book devices | ||||
LIFE DESIGN COMPANY Inc. | 100.0 | Sales of goods in Japan |
47
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Transactions with Related Parties, Continued |
(1) | List of related parties, Continued |
Subsidiary |
Ownership |
Primary business | ||||
Subsidiary owned by SK Infosec Co., Ltd. |
SKinfosec Information Technology(Wuxi) Co., Ltd. | 100.0 | System software development and supply services | |||
Subsidiaries owned by Life & Security Holdings Co., Ltd. |
ADT CAPS Co., Ltd. | 100.0 | Unmanned security | |||
CAPSTEC Co., Ltd. | 100.0 | Manned security | ||||
Subsidiary owned by SK Telink Co., Ltd. |
SK TELINK VIETNAM Co., Ltd. | 100.0 | Communications device retail business | |||
Subsidiary owned by SK Broadband Co., Ltd. |
Home & Service Co., Ltd. | 100.0 | Operation of information and communication facility | |||
Subsidiary owned by id Quantique SA |
Id Quantique LLC | 100.0 | Quantum information and communications service | |||
Subsidiaries owned by FSK L&S Co., Ltd. |
FSK L&S(Shanghai) Co., Ltd. | 66.0 | Logistics business | |||
FSK L&S(Hungary) Co., Ltd. | 100.0 | Logistics business | ||||
FSK L&S VIETNAM COMPANY LIMITED(*5) | 100.0 | Logistics business | ||||
Subsidiaries owned by Incross Co., Ltd. |
Infra Communications Co., Ltd. | 100.0 | Service operation | |||
Mindknock Co., Ltd. | 100.0 | Software development | ||||
Subsidiary owned by SK Telecom Japan Inc. |
SK Planet Japan, K. K. | 79.8 | Digital Contents sourcing service | |||
Others(*6) |
SK Telecom Innovation Fund, L.P | 100.0 | Investment | |||
SK Telecom China Fund I L.P. | 100.0 | Investment |
48
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Transactions with Related Parties, Continued |
(1) | List of related parties, Continued |
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Company or subsidiaries of the Company. |
(*2) | On April 30, 2020, SK Broadband Co., Ltd. merged with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. to strengthen competitiveness and enhance synergy as a comprehensive media company. The Company’s ownership interest of SK Broadband Co., Ltd. changed as SK Broadband Co., Ltd. issued new shares to the shareholders of the merged companies as the consideration for the merger. |
(*3) | The Company acquired 3,631,355 shares (100%) of SK stoa Co., Ltd. from SK Broadband. Co., Ltd. at
|
(*4) | The Company has obtained control over Tbroad Nowon Broadcasting Co., Ltd. by acquiring 627,000 shares (55%) for
|
(*5) | FSK L&S Co., Ltd. newly established FSK L&S VIETNAM COMPANY LIMITED as its subsidiary for the six-month period ended June 30, 2020. |
(*6) | Others are owned by Atlas Investment and another subsidiary of the Company. |
As of June 30, 2020, the Company is included in SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act. All of the other entities included in SK Group are considered related parties of the Company.
(2) | Compensation to the key management |
The Company considers registered directors (3 executive and 5 non-executive directors) who have substantial role and responsibility in planning, operations and relevant controls of the business as key management. The compensation given to such key management for the three and six-month periods ended June 30, 2020 and 2019 are as follows:
(In millions of won) | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
Three-month period ended June 30 |
Six-month period ended June 30 |
Three-month period ended June 30 |
Six-month period ended June 30 |
|||||||||||||||||
Salaries |
672 | 5,521 | 547 | 4,875 | ||||||||||||||||
Defined benefits plan expenses |
175 | 3,108 | 142 | 953 | ||||||||||||||||
Share option |
61 | 93 | 64 | 194 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
908 | 8,722 | 753 | 6,022 | |||||||||||||||||
|
|
|
|
|
|
|
|
Compensation for the key management includes salaries, non-monetary salaries and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.
49
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and six-month periods ended June 30, 2020 and 2019, are as follows: |
(In millions of won) | For the six-month period ended June 30, 2020 | |||||||||||||||||||||||||||||
Operating revenue and others |
Operating expense and others (*1) |
Acquisition of property and equipment |
||||||||||||||||||||||||||||
Scope |
Company |
Three- month |
Six-month | Three- month |
Six-month | Three- month |
Six-month | |||||||||||||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd.(*2) | 3,592 | 7,419 | 64,888 | 334,187 | 3,886 | 4,537 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Subsidiaries |
SK Broadband Co., Ltd. | 30,065 | 60,108 | 131,244 | 262,056 | 794 | 794 | |||||||||||||||||||||||
PS&Marketing Corporation(*3) | 3,584 | 7,080 | 309,714 | 618,445 | — | — | ||||||||||||||||||||||||
SK O&S Co., Ltd. | 1,084 | 2,087 | 54,759 | 107,454 | 12,790 | 14,248 | ||||||||||||||||||||||||
SK Planet Co., Ltd. | 1,423 | 2,038 | 18,877 | 39,596 | 2,532 | 2,776 | ||||||||||||||||||||||||
SK Telink Co., Ltd.(*4) | 13,448 | 115,899 | 8,356 | 14,876 | — | 2 | ||||||||||||||||||||||||
SERVICE ACE Co., Ltd.(*5) | 2,659 | 6,545 | 34,666 | 70,415 | — | — | ||||||||||||||||||||||||
SERVICE TOP Co., Ltd. | 2,265 | 4,538 | 36,722 | 74,397 | — | — | ||||||||||||||||||||||||
Eleven Street Co., Ltd. | 791 | 1,914 | 3,622 | 5,971 | — | — | ||||||||||||||||||||||||
Life & Security Holdings Co., Ltd.(*6) | 3,619 | 13,810 | 759 | 782 | 449 | 583 | ||||||||||||||||||||||||
One Store Co., Ltd. | 3,505 | 7,308 | 70 | 132 | — | — | ||||||||||||||||||||||||
SK Infosec Co., Ltd.(*7) | 78 | 20,150 | 8,230 | 15,673 | 1,845 | 1,887 | ||||||||||||||||||||||||
DREAMUS COMPANY | 577 | 968 | 16,659 | 31,168 | — | — | ||||||||||||||||||||||||
Others | 1,481 | 3,636 | 8,319 | 17,085 | 1,420 | 1,719 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
64,579 | 246,081 | 631,997 | 1,258,050 | 19,830 | 22,009 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Associates |
F&U Credit information Co., Ltd. | 204 | 428 | 11,624 | 22,754 | — | — | |||||||||||||||||||||||
SK hynix Inc. (*8) | 10,956 | 165,084 | 77 | 114 | — | — | ||||||||||||||||||||||||
KEB HanaCard Co., Ltd. | 257 | 408 | 768 | 1,555 | — | — | ||||||||||||||||||||||||
SK Wyverns Co., Ltd. | 299 | 597 | 2,634 | 12,038 | — | — | ||||||||||||||||||||||||
Content Wavve Co., Ltd. | 1 | 10 | 15,308 | 25,144 | — | — | ||||||||||||||||||||||||
Others(*9) | 25,461 | 32,195 | 2,813 | 4,800 | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
37,178 | 198,722 | 33,224 | 66,405 | — | — | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Others |
SK Engineering & Construction Co., Ltd. | 1,853 | 4,157 | 100 | 101 | — | — | |||||||||||||||||||||||
SK Innovation Co., Ltd. | 3,330 | 6,910 | 2,765 | 6,100 | — | — | ||||||||||||||||||||||||
SK Networks Co., Ltd. | 517 | 1,064 | 2,514 | 6,401 | — | — | ||||||||||||||||||||||||
SK Networks Service Co., Ltd. | 249 | 386 | 9,761 | 19,627 | 424 | 427 | ||||||||||||||||||||||||
SK Telesys Co., Ltd. | 62 | 123 | 87 | 307 | 7,541 | 8,049 | ||||||||||||||||||||||||
SK TNS Co., Ltd. | 49 | 100 | 8,778 | 10,758 | 129,853 | 141,736 | ||||||||||||||||||||||||
SK Energy Co., Ltd. | 856 | 1,769 | 141 | 148 | — | — | ||||||||||||||||||||||||
SKC Infra Service Co., Ltd. | 7 | 15 | 1,889 | 3,828 | — | — | ||||||||||||||||||||||||
SK ENS Co., Ltd. | 569 | 1,139 | 53 | 53 | — | — | ||||||||||||||||||||||||
UbiNS Co., Ltd. | — | — | 301 | 444 | 5,215 | 6,598 | ||||||||||||||||||||||||
Others | 3,407 | 6,459 | 2,339 | 3,987 | 3,094 | 3,094 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
10,899 | 22,122 | 28,728 | 51,754 | 146,127 | 159,904 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
116,248 | 474,344 | 758,837 | 1,710,396 | 169,843 | 186,450 | |||||||||||||||||||||||||
|
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|
|
|
|
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|
|
50
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and six-month periods ended June 30, 2020 and 2019 are as follows, Continued: |
(*1) | Operating expense and others include lease payments by the Company. |
(*2) | Operating expense and others include |
(*3) | Operating expense and others include |
(*4) | Operating revenue and others include |
(*5) | Operating revenue and others include |
(*6) | Operating revenue and others include |
(*7) | Operating revenue and others include |
(*8) | Operating revenue and others include |
(*9) | Operating revenue and others include |
51
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and six-month periods ended June 30, 2020 and 2019 are as follows, Continued: |
(In millions of won) | For the period ended June 30, 2019 | |||||||||||||||||||||||||||||
Operating revenue and others |
Operating expense and others(*1) |
Acquisition of property and equipment |
||||||||||||||||||||||||||||
Scope |
Company |
Three- month |
Six-month | Three-month | Six-month | Three-month | Six-month | |||||||||||||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd.(*2) | 3,154 | 4,706 | 71,317 | 337,362 | 4,455 | 5,726 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Subsidiaries |
SK Broadband Co., Ltd. | 27,875 | 53,582 | 136,500 | 263,928 | 3,760 | 3,760 | |||||||||||||||||||||||
PS&Marketing Corporation(*3) | 2,964 | 6,365 | 383,423 | 715,278 | 242 | 242 | ||||||||||||||||||||||||
SK O&S Co., Ltd. | 1,196 | 2,354 | 55,961 | 109,275 | 7,508 | 7,508 | ||||||||||||||||||||||||
SK Planet Co., Ltd. | 1,307 | 1,570 | 22,415 | 44,839 | 4,213 | 6,512 | ||||||||||||||||||||||||
SK Telink Co., Ltd.(*4) | 12,313 | 224,263 | 7,027 | 12,496 | — | — | ||||||||||||||||||||||||
SERVICE ACE Co., Ltd.(*5) | 1,972 | 11,412 | 32,560 | 64,572 | — | — | ||||||||||||||||||||||||
SERVICE TOP Co., Ltd.(*6) | 2,168 | 13,163 | 35,135 | 65,712 | — | — | ||||||||||||||||||||||||
Eleven Street Co., Ltd. | 1,072 | 5,523 | 1,262 | 3,068 | — | — | ||||||||||||||||||||||||
Others(*7) | 7,975 | 76,083 | 30,147 | 53,992 | 822 | 1,513 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
58,842 | 394,315 | 704,430 | 1,333,160 | 16,545 | 19,535 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Associates |
F&U Credit information Co., Ltd. |
285 | 584 | 10,345 | 21,775 | — | — | |||||||||||||||||||||||
SK hynix Inc.(*8) | 4,985 | 232,398 | 119 | 176 | — | — | ||||||||||||||||||||||||
KEB HanaCard Co., Ltd. | 181 | 594 | 673 | 1,066 | — | — | ||||||||||||||||||||||||
SK Wyverns Co., Ltd. | 296 | 590 | — | 15,000 | — | — | ||||||||||||||||||||||||
Others(*9) | 8,131 | 8,131 | 3,092 | 6,160 | — | 37 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
13,878 | 242,297 | 14,229 | 44,177 | — | 37 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Others |
SK Engineering & Construction Co., Ltd. | 720 | 1,237 | — | — | 2,600 | 5,000 | |||||||||||||||||||||||
SK Innovation Co., Ltd. | 2,696 | 5,240 | 38 | 393 | — | — | ||||||||||||||||||||||||
SK Networks Co., Ltd. | 1,372 | 1,971 | 1,635 | 7,816 | — | 443 | ||||||||||||||||||||||||
SK Networks Service Co., Ltd. | 182 | 347 | 8,989 | 19,282 | 10 | 10 | ||||||||||||||||||||||||
SK Telesys Co., Ltd. | 57 | 101 | 290 | 443 | 7,137 | 7,294 | ||||||||||||||||||||||||
SK TNS Co., Ltd. | 47 | 101 | 10,904 | 11,035 | 113,316 | 114,055 | ||||||||||||||||||||||||
SK Energy Co., Ltd | 588 | 1,130 | 145 | 150 | — | — | ||||||||||||||||||||||||
SKC Infra Services Co., Ltd | 7 | 14 | 2,190 | 4,209 | 186 | 186 | ||||||||||||||||||||||||
SK E&S Co., Ltd. | 471 | 966 | 101 | 101 | — | — | ||||||||||||||||||||||||
Others | 2,743 | 4,996 | 1,496 | 2,848 | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
8,883 | 16,103 | 25,788 | 46,277 | 123,249 | 126,988 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
84,757 | 657,421 | 815,764 | 1,760,976 | 144,249 | 152,286 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
52
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the three and six-month periods ended June 30, 2020 and 2019 are as follows, Continued: |
(*1) | Operating expense and others include lease payments by the Company. |
(*2) | Operating expense and others include |
(*3) | Operating expense and others include |
(*4) | Operating revenue and others include |
(*5) | Operating revenue and others include |
(*6) | Operating revenue and others include |
(*7) | Operating revenue and others include |
(*8) | Operating revenue and others include |
(*9) | Operating revenue and others include |
53
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of June 30, 2020, and December 31, 2019 are as follows: |
(In millions of won) | June 30, 2020 | |||||||||||||||||
Receivables | Payables | |||||||||||||||||
Scope |
Company |
Loans | Accounts receivable – trade, etc. |
Accounts payable – other, etc. |
||||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd. | — | 2,005 | 28,626 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Subsidiaries |
SK Broadband Co., Ltd. | — | 10,884 | 71,515 | ||||||||||||||
PS&Marketing Corporation | — | 1,433 | 62,001 | |||||||||||||||
SK O&S Co., Ltd. | — | 228 | 42,032 | |||||||||||||||
SK Planet Co., Ltd. | — | 881 | 13,888 | |||||||||||||||
SK Telink Co., Ltd. | — | 10,094 | 5,374 | |||||||||||||||
SERVICE ACE Co., Ltd. | — | 201 | 22,804 | |||||||||||||||
SERVICE TOP Co., Ltd. | — | 38 | 21,438 | |||||||||||||||
Eleven Street Co., Ltd. | — | 346 | 2,526 | |||||||||||||||
One Store Co., Ltd. | — | 267 | 23,856 | |||||||||||||||
SK m&service Co., Ltd. | — | 659 | 5,710 | |||||||||||||||
SK Infosec Co., Ltd. | — | 81 | 7,357 | |||||||||||||||
SK Communications Co., Ltd. | — | 61 | 11,112 | |||||||||||||||
Others | — | 2,706 | 8,950 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
— | 27,879 | 298,563 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
Associates |
F&U Credit information Co., Ltd. | — | 13 | 4,509 | ||||||||||||||
SK hynix Inc. | — | 6,478 | 63 | |||||||||||||||
Wave City Development Co., Ltd. | — | 31,523 | — | |||||||||||||||
Daehan Kanggun BcN Co., Ltd.(*) | 22,147 | 4,738 | — | |||||||||||||||
KEB HanaCard Co., Ltd. | — | 919 | 103,820 | |||||||||||||||
Others | 204 | 334 | 1,880 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
22,351 | 44,005 | 110,272 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
Other |
SK Engineering and Construction Co., Ltd. | — | 1,728 | 110 | ||||||||||||||
SK Innovation Co., Ltd. | — | 4,088 | 20,697 | |||||||||||||||
SK Networks Co., Ltd. | — | 444 | 6,521 | |||||||||||||||
SK Networks services Co., Ltd. | — | 11 | 7,922 | |||||||||||||||
SK Telesys Co., Ltd. | — | 31 | 8,739 | |||||||||||||||
SK TNS Co., Ltd. | — | 8 | 172,673 | |||||||||||||||
SK Energy Co., Ltd | — | 348 | 238 | |||||||||||||||
Others | — | 2,871 | 9,321 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
— | 9,529 | 226,221 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
22,351 | 83,418 | 663,682 | ||||||||||||||||
|
|
|
|
|
|
(*) | As of June 30, 2020, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
54
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
29. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of June 30, 2020 and December 31, 2019 are as follows, Continued: |
(In millions of won) | December 31, 2019 | |||||||||||||||||
Receivables | Payables | |||||||||||||||||
Scope |
Company |
Loans | Accounts receivable – trade, etc. |
Accounts payable – other, etc. |
||||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd. | — | 1,869 | 53,280 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Subsidiaries |
SK Broadband Co., Ltd. | — | 9,812 | 54,368 | ||||||||||||||
PS&Marketing Corporation | — | 122 | 67,029 | |||||||||||||||
SK O&S Co., Ltd. | — | 15 | 54,902 | |||||||||||||||
SK Planet Co., Ltd. | — | 949 | 100,412 | |||||||||||||||
SK Telink Co., Ltd. | — | 10,591 | 2,709 | |||||||||||||||
SERVICE ACE Co., Ltd. | — | 348 | 25,035 | |||||||||||||||
SERVICE TOP Co., Ltd. | — | 15 | 26,837 | |||||||||||||||
Eleven Street Co., Ltd. | — | 131 | 4,730 | |||||||||||||||
One Store Co., Ltd. | — | 263 | 27,409 | |||||||||||||||
SK m&service Co., Ltd. | — | 3,220 | 8,006 | |||||||||||||||
SK Infosec Co., Ltd. | — | 24 | 8,136 | |||||||||||||||
SK Communications Co., Ltd. | — | 31 | 11,574 | |||||||||||||||
Others | — | 1,062 | 10,252 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
— | 26,583 | 401,399 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
Associates |
F&U Credit information Co., Ltd. | — | — | 4,742 | ||||||||||||||
SK hynix Inc. | — | 5,602 | 48 | |||||||||||||||
Wave City Development Co., Ltd. | — | 31,523 | — | |||||||||||||||
Daehan Kanggun BcN Co., Ltd.(*) | 22,147 | 5,359 | — | |||||||||||||||
KEB HanaCard Co., Ltd. | — | 1,025 | 9,474 | |||||||||||||||
Others | 204 | 25 | 2,261 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
22,351 | 43,534 | 16,525 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
Other |
SK Engineering and Construction Co., Ltd. | — | 3,527 | 97 | ||||||||||||||
SK Innovation Co., Ltd. | — | 5,542 | 22,492 | |||||||||||||||
SK Networks Co., Ltd. | — | 333 | 20,430 | |||||||||||||||
SK Networks Services Co., Ltd. | — | — | 7,739 | |||||||||||||||
SK Telesys Co., Ltd. | — | 26 | 3,573 | |||||||||||||||
SK TNS Co., Ltd. | — | 9 | 193,946 | |||||||||||||||
SK Energy Co., Ltd | — | 215 | 149 | |||||||||||||||
UbiNS Co., Ltd. | — | — | 16,741 | |||||||||||||||
Others | — | 1,690 | 8,813 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
— | 11,342 | 273,980 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||
22,351 | 83,328 | 745,184 | ||||||||||||||||
|
|
|
|
|
|
(*) | As of December 31, 2019, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
(5) | The details of additional investments and disposal of subsidiaries and associates for the six-month period ended June 30, 2020 are described in note 8. |
55
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
30. | Commitments and Contingencies |
(1) | Accounts receivables from sale of handsets |
The sales agents of the Company sell handsets to the Company’s subscribers on an installment basis. The Company entered into comprehensive agreements to purchase accounts receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special-purpose companies which were established with the purpose of liquidating receivables, respectively.
The accounts receivable from sale of handsets amounting to W464,225 million as of June
30, 2020, which the Company purchased according to the relevant comprehensive agreement, are recognized as accounts receivable – other and long-term accounts receivable – other.
(2) | Legal claims and litigations |
As of June 30, 2020, the Company is involved in various legal claims and litigations. Provision recognized in relation to these claims and litigations is immaterial. In connection with those legal claims and litigations for which no provision was recognized, management does not believe the Company has a present obligation, nor is it expected that any of these claims or litigations will have a significant impact on the Company’s financial position or operating results in the event an outflow of resources is ultimately necessary.
56
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
31. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Gain on foreign currency translations |
(2,767 | ) | (1,910 | ) | ||||||||
Interest income |
(12,074 | ) | (14,819 | ) | ||||||||
Dividends |
(284,666 | ) | (514,181 | ) | ||||||||
Gain relating to financial assets at FVTPL |
— | (309 | ) | |||||||||
Gain relating to financial liabilities at FVTPL |
— | (56 | ) | |||||||||
Gain on disposal of property and equipment and intangible assets |
(2,356 | ) | (2,699 | ) | ||||||||
Gain on business transfer |
(12,451 | ) | — | |||||||||
Gain on valuation of derivatives |
— | (465 | ) | |||||||||
Gain on settlement of derivatives |
(7,380 | ) | (389 | ) | ||||||||
Gain on sale of accounts receivable – other |
(7,513 | ) | (11,987 | ) | ||||||||
Other income |
(550 | ) | (105 | ) | ||||||||
Loss on foreign currency translations |
2,945 | 1,915 | ||||||||||
Bad debt for accounts receivable – trade |
15,310 | 3,023 | ||||||||||
Bad debt for accounts receivable – other |
1,822 | 1,648 | ||||||||||
Loss relating to financial assets at FVTPL |
216 | 365 | ||||||||||
Loss relating to financial liabilities at FVTPL |
— | 43 | ||||||||||
Depreciation and amortization |
1,479,736 | 1,364,560 | ||||||||||
Loss on disposal of property and equipment and intangible assets |
12,564 | 7,644 | ||||||||||
Impairment loss on property and equipment and intangible assets |
12,388 | 63 | ||||||||||
Interest expense |
120,265 | 125,883 | ||||||||||
Loss on settlement of derivatives |
2,179 | 317 | ||||||||||
Loss relating to investments in subsidiaries and associates |
6,857 | — | ||||||||||
Loss on sale of accounts receivable – other |
— | 560 | ||||||||||
Expense related to defined benefit plan |
29,949 | 22,187 | ||||||||||
Share option |
103 | 157 | ||||||||||
Income tax expense |
133,803 | 173,203 | ||||||||||
Other expenses |
16,552 | 3,206 | ||||||||||
|
|
|
|
|||||||||
1,504,932 | 1,157,854 | |||||||||||
|
|
|
|
57
SK TELECOM CO., LTD.
Notes to the Condensed Separate Interim Financial Statements
For the six-month periods ended June 30, 2020 and 2019
31. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended | |||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Accounts receivable – trade |
(38,338 | ) | (93,675 | ) | ||||||||
Accounts receivable – other |
121,991 | 68,429 | ||||||||||
Advance payments |
(2,974 | ) | (11,477 | ) | ||||||||
Prepaid expenses |
(46,257 | ) | (38,234 | ) | ||||||||
Inventories |
5,672 | (1,384 | ) | |||||||||
Long-term accounts receivable – other |
95,913 | (16,518 | ) | |||||||||
Long-term prepaid expenses |
157,727 | (80,958 | ) | |||||||||
Guarantee deposits |
9,549 | (1,169 | ) | |||||||||
Contract assets |
(2,662 | ) | (2,873 | ) | ||||||||
Accounts payable – other |
(98,305 | ) | 8,640 | |||||||||
Withholdings |
(115,935 | ) | (109,613 | ) | ||||||||
Deposits received |
1,916 | (372 | ) | |||||||||
Accrued expenses |
(128,108 | ) | (37,581 | ) | ||||||||
Provisions |
(303 | ) | (337 | ) | ||||||||
Plan assets |
6,419 | 335 | ||||||||||
Retirement benefit payment |
(12,887 | ) | (10,077 | ) | ||||||||
Contract liabilities |
(12,543 | ) | 9,773 | |||||||||
Others |
26,054 | 8,291 | ||||||||||
|
|
|
|
|||||||||
(33,071 | ) | (308,800 | ) | |||||||||
|
|
|
|
(3) | Significant non-cash transactions for the six-month periods ended June 30, 2020 and 2019 are as follows: |
(In millions of won) | For the six-month period ended |
|||||||||||
June 30, 2020 | June 30, 2019 | |||||||||||
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets |
(113,814 | ) | (59,804 | ) | ||||||||
Increase of right-of-use assets |
237,344 | 193,513 | ||||||||||
Contribution in kind for investments |
4,702 | 19,039 |
32. | Subsequent Events |
The board of directors of the Company resolved to pay the interim dividend at the board meeting on July 21, 2020, and the details are as follows:
Interim dividend amount |
||
Dividend rate |
0.5% | |
Dividend date |
June 30, 2020 | |
Date of distribution |
According to Article 464 Commercial Act 2-1, the Company is to distribute dividends by August 21, 2020. |
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