6-K 1 d126026d6k.htm FORM 6-K Form 6-K

 

 

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

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF FEBRUARY 2021

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):  ☐

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):  ☐

 

 

 


RESOLUTION TO CALL

THE ANNUAL GENERAL MEETING OF SHAREHOLDERS

The board of directors (the “Board”) of SK Telecom Co., Ltd. (“SK Telecom” or the “Company”) has resolved to call the annual general meeting of shareholders, to be held at the following time and place and the agenda of which shall be as follows:

 

1. Date / Time    March 25, 2021 (Thursday), 10:00 am (Seoul time)
2. Place    SUPEX Hall, 4th Floor, SK T-Tower, 65, Eulji-ro, Jung-gu, Seoul, Korea
3. Agenda   

1. Approval of Financial Statements for the 37th Fiscal Year (2020)

 

2. Amendments to the Articles of Incorporation

 

3. Grant of Stock Options

 

4. Appointment of an Executive Director (Ryu, Young Sang)

 

5. Appointment of an Independent Non-executive Director to Serve as an Audit Committee Member (Yoon, Young Min)

 

6. Approval of the Ceiling Amount of Remuneration for Directors

4. Date of the resolution by the Board    February 25, 2021
- Attendance of independent non-executive directors    Present:    5
   Absent:    0
5. Other important matters relating to an investment decision    - The place and time of the annual general meeting of shareholders may be subject to change by a decision of the Company’s representative director in case of an emergency, including due to COVID-19.


Documents relating to the Annual General Meeting of Shareholders

 

1.

Approval of Financial Statements for the 37th Fiscal Year (2020)

 

   

Consolidated Financial Statements: See Appendix 1

 

   

Separate Financial Statements: See Appendix 2

The audit report from the independent auditors on the financial statements for the 37th fiscal year prepared in accordance with Korean International Financial Reporting Standards as adopted by the Korean Accounting Standards Board will be uploaded to SK Telecom’s website (http://www.sktelecom.com/en/ g Investor Relations g IR Library g Audit Report) and will be made available on the U.S. Securities and Exchange Commission’s website (https://www.sec.gov) in early to mid March of 2021.


2.

Amendments to the Articles of Incorporation

The proposed amendments are as follows:

 

Current

  

Proposed Amendment

  

Remarks

<Newly established>   

1-2. Corporate Governance Charter

 

The Company shall constitute a Corporate Governance Charter encompassing its purpose and plans to develop its continued efforts to establish transparent and sound corporate governance (newly established on March 25, 2021).

   To stipulate Company’s purpose and plans to establish transparent and sound corporate governance, and institute a ground for the constitution of the Corporate Governance Charter in the Articles of Incorporation.

Article 17-3. Electronic Registration of Rights Indicated in Bonds and Subscription Warrants

 

Instead of issuing the bond certificates and subscription warrants, the Company electronically registers in the electronic register of the electronic registry the rights that shall be indicated in the bonds and subscription warrants (newly established on March 26, 2019).

  

17-3. Electronic Registration of Rights Indicated in Bonds and Subscription Warrants

 

Instead of issuing the bond certificates and subscription warrants, the Company electronically registers in the electronic register of the electronic registry the rights that shall be indicated in the bonds and subscription warrants; provided that the Company is not required to electronically register the rights to be indicated on bonds if electronic register of such rights are not mandatory under relevant laws and regulations (newly established on March 26, 2019, amended on March 25, 2021).

   To add an exception for bonds that are not required to be electronically registered and prevent confusion over the application of the electronic register system.

Article 33. Term of office of Directors

 

The term of office of the Directors (including Representative Director) shall be until the close of the 3rd Ordinary General Meeting of Shareholders convened after he/she office (amended on March 16, 2001).

  

Article 33. Term of office of Directors

 

(1) The term of office of the Directors (including Representative Director) shall be until the close of the 3rd Ordinary General Meeting of Shareholders convened after he/she office (amended on March 16, 2001, amended on March 25, 2021).

 

(2) The total term of outside Directors shall not exceed 6 years, and, when including the service at affiliates, 9 years (newly established on March 25, 2021).

   To revise this Article in accordance with the amendment of the Enforcement Decree of the Commercial Act regarding the term limit of outside directors.


Article 34. Appointment of Directors in case of Vacancy

 

(1) If a Director falls under one of the following items, his/her position is deemed to be vacant (amended on March 17, 2000):

 

1. When dead;

 

2. When adjudicated insolvent;

 

3. When declared incapacitated person or quasi- incapacitated person; and

 

4. When sentenced to a punishment heavier than imprisonment without prison labor.

  

Article 34. Appointment of Directors in case of Vacancy

 

(1) If a Director falls under one of the following items, his/her position is deemed to be vacant (amended on March 17, 2000, amended on March 25, 2021):

 

1. When dead;

 

2. When adjudicated insolvent;

 

3. When adjudicate on the commencement of adult guardianship or limited guardianship; or

 

4. When sentenced to a punishment heavier than imprisonment without prison labor.

   To revise this Article in accordance with the amendment of the Civil Act abolishing the element of (quasi-) incapacitation and implementing a guardianship system.

Article 54-2. Interim Dividends

 

(1) The Company may pay dividends in cash to the Shareholders registered in the Register of Shareholders as of June 30, by resolution of the Board of Directors, one time during each fiscal year (established on March 12, 2004).

 

(2) All other matters relevant to the Interim Dividends under Paragraph (1), including the limitation amount of the Interim Dividends and/or the payment time of the Interim Dividends, shall comply with the relevant laws and regulations, including the Commercial Act (amended on March 23, 2012).

 

(3) In case of the payment of the Interim Dividends, the rate of the Interim Dividends to common shares shall also apply to the Interim Dividends to preferred shares under Article 8 (established on March 12, 2004).

 

(4) The provisions of Article 10 Paragraph (2) and Article 54 Paragraph (4) shall apply mutatis mutandis to this Article (established on March 12, 2004).

  

Article 54-2. Interim Dividends

 

(deleted on March 25, 2021)

   To substitute the interim dividend system with a quarterly dividend system under Financial Investment Services and Capital Markets Act.


<Newly established>   

Article 54-3. Quarterly Dividends

 

(1) Dividends of profits may be paid by the Company in cash on the last day of the third, sixth, and ninth month from the beginning of each fiscal year (the “record date for quarterly dividend”) by a resolution of Board of Directors.

 

(2) Quarterly dividends under Paragraph (1) shall be paid to the shareholders entered in and the pledgees registered with the Register of Shareholders as of the record date for quarterly dividend.

 

(3) All other matters relevant to the quarterly dividends to be paid under Paragraph (1), including the limitation on amount and the time of payment, shall comply with relevant laws and regulations, including Financial Investment Services and Capital Markets Act.

 

(4) The provision of Article 54 Paragraph (4) shall apply mutatis mutandis to the quarterly dividend to be paid under Paragraph (1) (established on March 25, 2021).

 

   To substitute the interim dividend system with a quarterly dividend system under Financial Investment Services and Capital Markets Act.
<Newly established>   

Addendum No. 29 (as of March 25, 2021)

 

Article 1. Date of Effectiveness

 

These Articles of Incorporation shall take effect as of March 25, 2021.

  


3.

Grant of Stock Options

 

  A.

Purpose of Grant of Stock Options

In order to maximize the value of the Company by aligning the interests of its management and shareholders, the Company proposes to grant stock options to members of its management to encourage their pursuit of enhancing the long-term value of the Company.

 

  B.

Recipients of Stock Options

 

Name

  

Position

  

Number of shares issuable

 
  

Type of shares

   Number of shares  

Ryu, Young Sang

   Executive Director and President of Mobile Network Operations Division   

Registered common shares

     5,990  

Kang, Jong Ryeol

  

Head of ICT Infra Center

  

Registered common shares

     2,350  

Yoon, Poong Young

  

Head of Corporate Center 1

  

Registered common shares

     3,360  

Ha, Hyung Il

  

Head of Corporate Center 2

  

Registered common shares

     3,760  

Cho, Dong Hwan

  

Head of Cloud Transformation Center

  

Registered common shares

     1,770  

Kim, Yoon

  

Head of T3K

  

Registered common shares

     2,110  

Lee, HyunA

  

Head of AI&CO

  

Registered common shares

     2,880  

Ha, Seong Ho

  

Head of Corporate Relations Center

  

Registered common shares

     1,920  

Shin, Sang Kyu

  

Head of Corporate Culture Center

  

Registered common shares

     1,530  

Huh, Seok Joon

  

Head of Private Placement Group

  

Registered common shares

     2,260  

Song, Jae Seung

  

Head of Corp Development Group

  

Registered common shares

     2,650  

Han, Myung Jin

  

Head of Subscription Service CO

  

Registered common shares

     1,450  

Ryu, Byung Hoon

  

Head of Business Strategy Group

  

Registered common shares

     1,250  

Total:

  

Registered common shares

     33,280  

 

  C.

Conditions of Stock Options to be Granted

 

   

Method of grant: allotment of treasury shares, cash settlement

 

   

Type and number of shares issuable: 33,280 registered common shares

 

   

Grant date: March 25, 2021

 

   

Exercise period: March 26, 2023—March 25, 2026

 

   

Exercise price: arithmetic mean of the volume weighted average closing prices of the two-month, one-month and one-week periods prior to the grant date

 

   

Other conditions

 

  o

The stock options granted as described above will be cancelled if the recipient does not remain employed by the Company for at least two years from the grant date.

 

  o

If the exercise price of the stock options is lower than the market price of common shares at the time of exercise, cash settlement of the difference is possible.


  o

The exercise price and the number of stock options may be adjusted pursuant to the relevant stock option grant agreement or by resolution of the Board in the event of a change in the stock value due to the reasons of any capital increase, stock dividend, capital transfer of reserves, stock split, merger or spin-off after the grant date.

 

  o

Other terms of the grant of stock options shall be governed by applicable law, the Company’s articles of incorporation and the stock option grant agreement.

 

  D.

Summary of Remaining Stock Options and Grant, Exercise and Expiration of Stock Options

 

   

Summary of remaining stock options as of the date of this report

 

Total number of

shares issued

  

Shares authorized

for grant

   Type of shares
authorized for
grant
   Number of shares
authorized for
grant
   Remaining number
of shares
authorized for
grant

80,745,711

   15% of the total number of shares issued    Common shares    12,111,856    11,910,440

 

   

Grant, exercise and expiration of stock options granted in the last three fiscal years

 

Year

  

Grant date

   Number of
recipients
    

Type of shares

   Number
of shares
issuable
     Number of
shares issued
upon
exercise
     Number of
expired
stock
options
     Remaining
number of shares
issuable
 
2018   

February 20

     3     

Common shares

     5,707        —          4,349        1,358  
2019   

February 22

     4     

Common shares

     5,477        —          1,300        4,177  
2019   

March 26

     1     

Common shares

     1,734        —          —          1,734  
2020   

March 26

     10     

Common shares

     127,643        —          —          127,643  
   Total      18    Common shares      140,561        —          5,649        134,912  

 

*

Recipients who were granted stock options multiple times were counted each time of grant. Includes recipients of stock options that have expired.


4.

Appointment of an Executive Director (Ryu, Young Sang)

 

  A.

Candidate’s Name, Date of Birth, Independence, Recommender and Relationship with the Company’s Largest Shareholder

 

Name of

Candidate

  

Date of Birth

  

Candidate for

independent non-

executive director

  

Relationship with
largest shareholder

  

Recommended by

Ryu, Young Sang    May 15, 1970       Executive director of affiliate (SK Telecom)    Board

Total: 1 candidate

 

  B.

Candidate’s Main Profession, Business Experience and Transactions with the Company in the Past Three Years

 

Name of

Candidate

  Main Profession   Business Experience    Transactions with
the Company in
the Past Three
Years
 
  Period  

Contents

Ryu, Young Sang

  Executive
Director and
President of Mobile
Network
Operations
Division
  2019 - Present  

Executive Director and President of Mobile Network Operations Division

 

     None  
  2017 - 2018  

Head of Corporate Center, SK Telecom

 

  2015 - 2016  

Head of Corporate Development Office, SK C&C Co., Ltd.

 

  2014   Head of Business Development Office, SK Telecom

 

  C.

Candidate’s Taxes in Arrears, Management of Insolvent Companies and Statutory Reasons for Disqualification

 

Name of

Candidate

  

Taxes in Arrears

  

Management of Insolvent Companies

  

Statutory Reasons for
Disqualification

Ryu, Young Sang    None    None    None

 

  D.

Reasons for Recommendation of Candidate by the Board

 

   

Ryu, Young Sang

 

   

Mr. Ryu has played a leading role in discovering new businesses and developing new growth engines for the Company as the former Head of the Company’s Project Management Office and Business Development Office. He has exceptional capability in developing and executing business strategies.

 

   

In particular, as the current President of the Company’s MNO Division, he is able to provide professional insight into the management issues of the Company. The Board believes Mr. Ryu to be an ideal candidate who will contribute to establishing a stable foundation for profit generation and maximizing shareholder interest through sustainable growth and enhancement of corporate value, and it recommends him as a candidate for executive director.


5.

Appointment of an Independent Non-executive Director to Serve as an Audit Committee Member (Yoon, Young Min)

 

  A.

Candidate’s Name, Date of Birth, Independence, Recommender and Relationship with the Company’s Largest Shareholder

 

Name of

Candidate

  

Date of Birth

  

Candidate for

independent non-

executive director

  

Relationship with
largest shareholder

  

Recommended by

Yoon, Young Min    December 19, 1963    Yes    Independent non-executive director of affiliate (SK Telecom)    Independent Director Nomination Committee

Total: 1 candidate

 

  B.

Candidate’s Main Profession, Business Experience and Transactions with the Company in the Past Three Years

 

Name of

Candidate

   Main Profession    Business Experience    Transactions with
the Company in
the Past Three
Years
 
   Period   

Contents

Yoon, Young Min

   Professor, School
of Media and
Communication,
Korea University
   2006 - Present   

Professor, School of Media and

Communication, Korea University

 

     None  
   2017 - 2018   

Dean of School of Media and Communication and Graduate School of Journalism & Mass Communication, Korea University

 

   2015 - 2016   

Vice-Chairwoman, Korean Academic Society for Public Relations; Advisor, Ministry of Land, Infrastructure and Transport

 

   2013 - 2014    Advisor, Korea Media Rating Board

 

  C.

Candidate’s Taxes in Arrears, Management of Insolvent Companies and Statutory Reasons for Disqualification

 

Name of

Candidate

  

Taxes in Arrears

  

Management of Insolvent
Companies

  

Statutory Reasons for
Disqualification

Yoon, Young Min    None    None    None

 

  D.

Expected Contributions of Candidate for Independent Non-executive Director

 

   

Yoon, Young Min

 

   

Ms. Yoon previously served as Dean of School of Media and Communication and Graduate School of Journalism & Mass Communication, Korea University, and currently serves as Professor at the School of Media and Communication, Korea University. She will enhance the diversity of the Board and effectively serve as an Independent Director based on her expert knowledge in areas of communications and media, including Korean mass media and advertising, and extensive experience in advising governmental organizations on media policy issues.

 

   

Ms. Yoon has served as an independent director of the Company for the past three years and accumulated knowledge and experience in the information and communication technology businesses. She will use such knowledge and experience to represent the shareholders’ and societal interests, contribute to the resolution of major management issues and provide advice to the Company’s management for its long-term growth and enhancement of corporate value.


   

Ms. Yoon will perform the duties of an independent non-executive director based on professionalism and independence, and shall be disqualified from her position if she fails to meet the qualification requirements pursuant to Articles 382-3, Article 542-8 of the Korean Commercial Code (the “KCC”) and Article 34 of the Enforcement Decree of the KCC.

 

  E.

Reasons for Recommendation of Candidate by the Board

 

   

Yoon, Young Min (as Candidate for Independent Director)

 

   

As an expert in areas of communications and media, including Korean mass media and advertising, Ms. Yoon has extensive experience and capabilities in advising governmental organizations on media policy issues.

 

   

As an outside expert with professional knowledge and insight in the rapidly-changing domestic and overseas media industries, Ms. Yoon is recommended as a candidate for an independent director based on her expected contribution to the growth of the Company’s next-generation media business.

 

   

Furthermore, during her term as an independent director of the Company in the past three years, she has actively voiced her views and provided expert advice at Board meetings and contributed to the functioning and development of the Board, and she is expected to continue to contribute greatly to the development of the Board after her reelection based on her expertise and professionalism.

 

   

Yoon, Young Min (as Candidate for Audit Committee Member)

 

   

Ms. Yoon is an expert in the area of media, which is one of the pillars of next-generation growth for the Company, and possesses objectivity based on her wide experience in advising governmental organizations.

 

   

The Board recommends Mr. Yoon as a candidate for a member of the audit committee as it believes that Ms. Yoon will contribute to the protection of shareholder rights by enhancing the Company’s management transparency and strengthening the independence and expertise of the audit committee.

 

   

In addition, the Board believes that Ms. Yoon will perform the activities of the audit committee based on her deep understanding of, and experience in, the Company’s management issues as an independent director and audit committee member of the Company for the past three years.


6.

Approval of the Ceiling Amount of Remuneration for Directors

 

  A.

Number of Directors and Total Amount or Maximum Authorized Amount of Remuneration for Directors

 

     Fiscal year 2021    Fiscal year 2020

Number of directors

   8    8

Number of independent non-executive directors

   5    5

Total amount of remuneration paid to directors

      Won 10,029,407,125

Total amount or maximum authorized amount of remuneration for directors

   Won 12,000,000,000    Won 12,000,000,000


Appendix 1. Consolidated Financial Statements

SK TELECOM CO., LTD. (the “Parent Company”) AND SUBSIDIARIES

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020 AND 2019, AND

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Financial Position

As of December 31, 2020, 2019 and January 1, 2019

 

(In millions of won)    Note      December 31, 2020      December 31, 2019      January 1, 2019  

Assets

           

Current Assets:

           

Cash and cash equivalents

     36,37      W 1,369,653        1,270,824        1,506,699  

Short-term financial instruments

     6,36,37,39        1,426,952        830,647        1,045,676  

Short-term investment securities

     11,36,37        150,392        166,666        195,080  

Accounts receivable – trade, net

     7,36,37,38        2,188,893        2,230,979        2,008,640  

Short-term loans, net

     7,36,37,38        97,464        66,123        59,094  

Accounts receivable – other, net

     3,7,36,37,38,39        982,296        907,320        950,978  

Contract assets

     9,37        100,606        127,499        90,072  

Prepaid expenses

     3,8        2,128,349        2,018,690        1,687,271  

Prepaid income taxes

     33        1,984        63,748        1,216  

Derivative financial assets

     22,36,37,40        8,704        26,253        13  

Inventories, net

     10        171,443        162,882        288,053  

Advance payments and other

     3,7,36,37        148,350        216,876        52,131  
     

 

 

    

 

 

    

 

 

 
        8,775,086        8,088,507        7,884,423  
     

 

 

    

 

 

    

 

 

 

Non-Current Assets:

           

Long-term financial instruments

     6,36,37        893        990        1,221  

Long-term investment securities

     11,36,37        1,648,837        857,215        664,726  

Investments in associates and joint ventures

     13        14,354,113        13,385,264        12,811,771  

Property and equipment, net

     3,14,38,39        13,377,077        12,933,460        11,587,498  

Goodwill

     12,16        3,357,524        2,949,530        2,938,563  

Intangible assets, net

     17        4,436,194        4,866,092        5,511,235  

Long-term contract assets

     9,37        47,675        64,359        43,821  

Long-term loans, net

     7,36,37,38        40,233        33,760        29,034  

Long-term accounts receivable - other

     3,7,36,37,38,39        332,803        351,663        288,211  

Long-term prepaid expenses

     3,8        1,063,711        1,239,865        887,359  

Guarantee deposits

     7,36,37,38        172,474        164,652        311,342  

Long-term derivative financial assets

     22,36,37,40        155,991        124,707        55,444  

Deferred tax assets

     33        105,088        109,057        92,465  

Defined benefit assets

     21        3,557        1,125        31,926  

Other non-current assets

     7,36,37        35,701        32,122        26,527  
     

 

 

    

 

 

    

 

 

 
        39,131,871        37,113,861        35,281,143  
     

 

 

    

 

 

    

 

 

 
      W 47,906,957        45,202,368        43,165,566  
     

 

 

    

 

 

    

 

 

 

See accompanying notes to the consolidated financial statements.

 

1


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Financial Position, Continued

As of December 31, 2020, 2019 and January 1, 2019

 

(In millions of won)    Note      December 31, 2020      December 31, 2019     January 1, 2019  

Liabilities and Shareholders’ Equity

          

Current Liabilities:

          

Accounts payable – trade

     36,37,38      W 372,909        438,297       381,302  

Accounts payable – other

     36,37,38        2,484,466        2,521,474       1,913,813  

Withholdings

     3,36,37,38        1,410,239        1,350,244       1,353,663  

Contract liabilities

     9        229,892        191,225       140,711  

Accrued expenses

     3,36,37        1,554,889        1,424,833       1,297,829  

Income tax payable

     33        219,766        5,450       182,343  

Short-term derivative financial liabilities

     22,36,37,40        77        —         —    

Provisions

     3,20,39        69,363        86,320       80,535  

Short-term borrowings

     18,36,37,40        109,998        20,603       80,000  

Current installments of long-term debt, net

     18,36,37,40        939,237        1,017,327       984,272  

Current installments of long-term payables – other

     19,36,37,40        424,600        423,839       424,243  

Lease liabilities

     3,36,37,38,40        359,936        371,742       276,240  

Other current liabilities

     36,37        2,595        319       —    
     

 

 

    

 

 

   

 

 

 
        8,177,967        7,851,673       7,114,951  
     

 

 

    

 

 

   

 

 

 

Non-Current Liabilities:

          

Debentures, excluding current installments, net

     18,36,37,40        7,690,169        7,253,894       6,572,211  

Long-term borrowings, excluding current installments, net

     18,36,37,39,40        1,979,261        1,972,149       2,015,365  

Long-term payables - other

     19,36,37,40        1,142,354        1,550,167       1,968,784  

Long-term accrued expenses

     36,37        6,379        8,995       —    

Long-term lease liabilities

     3,36,37,38,40        1,076,841        919,265       542,606  

Long-term contract liabilities

     9        30,704        32,231       43,102  

Defined benefit liabilities

     21        154,944        172,258       141,529  

Long-term derivative financial liabilities

     22,36,37,40        375,083        1,043       4,184  

Long-term provisions

     3,20,39        81,514        78,841       126,992  

Deferred tax liabilities

     3,33        2,709,075        2,463,861       2,258,552  

Other non-current liabilities

     3,36,37,38        86,423        81,057       58,122  
     

 

 

    

 

 

   

 

 

 
        15,332,747        14,533,761       13,731,447  
     

 

 

    

 

 

   

 

 

 

Total Liabilities

        23,510,714        22,385,434       20,846,398  
     

 

 

    

 

 

   

 

 

 

Shareholders’ Equity:

          

Share capital

     1,23        44,639        44,639       44,639  

Capital surplus and others

     12,23,24,25,26        677,203        1,006,481       655,084  

Retained earnings

     3,27        22,981,913        22,228,683       22,114,962  

Reserves

     28        40,139        (329,576     (373,442

Equity attributable to owners of the Parent Company

        23,743,894        22,950,227       22,441,243  

Non-controlling interests

        652,349        (133,293     (122,075
     

 

 

    

 

 

   

 

 

 

Total Shareholders’ Equity

        24,396,243        22,816,934       22,319,168  
     

 

 

    

 

 

   

 

 

 
      W 47,906,957        45,202,368       43,165,566  
     

 

 

    

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

2


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Income

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Operating revenue:

     3,5,38       

Revenue

      W 18,624,651       17,740,716  
     

 

 

   

 

 

 

Operating expenses:

     3,38       

Labor

        3,006,172       2,822,673  

Commissions

     8        5,347,086       5,002,066  

Depreciation and amortization

     5        3,991,083       3,856,662  

Network interconnection

        770,712       752,334  

Leased lines

        294,722       263,367  

Advertising

        431,679       434,561  

Rent

        173,294       154,843  

Cost of goods sold

        1,608,470       1,833,362  

Others

     30        1,652,109       1,512,671  
     

 

 

   

 

 

 
        17,275,327       16,632,539  
     

 

 

   

 

 

 

Operating profit

     5        1,349,324       1,108,177  

Finance income

     3,5,32        241,196       142,155  

Finance costs

     3,5,32        (497,193     (437,955

Gain relating to investments in subsidiaries, associates and joint ventures, net

     5,13        1,028,403       449,543  

Other non-operating income

     3,5,31        99,051       102,731  

Other non-operating expenses

     3,5,31        (343,741     (203,650
     

 

 

   

 

 

 

Profit before income tax

     5        1,877,040       1,161,001  

Income tax expense

     3,33        376,502       300,268  
     

 

 

   

 

 

 

Profit for the year

        1,500,538       860,733  
     

 

 

   

 

 

 

Attributable to:

       

Owners of the Parent Company

      W 1,504,352       888,698  

Non-controlling interests

        (3,814     (27,965

Earnings per share

     3,34       

Basic earnings per share (in won)

      W 20,463       12,127  

Diluted earnings per share (in won)

        20,459       12,127  
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

3


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Profit for the period

      W 1,500,537       860,733  

Other comprehensive income (loss):

       

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

       

Remeasurement of defined benefit liabilities

     21        (2,637     (72,605

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

     13,28        271       (19,269

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

     28,32        579,678       (17,943

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

     13,28        (114,478     75,763  

Net change in unrealized fair value of derivatives

     22,28,32        19,138       40,681  

Foreign currency translation differences for foreign operations

     28        (20,150     (5,618
     

 

 

   

 

 

 

Other comprehensive income for the period, net of taxes

        461,822       1,009  
     

 

 

   

 

 

 

Total comprehensive income

      W 1,962,360       861,742  
     

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

       

Owners of the Parent Company

      W 1,869,075       891,051  

Non-controlling interests

        93,285       (29,309

See accompanying notes to the consolidated financial statements.

 

4


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Changes in Equity

For the years ended December 31, 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, January 1, 2019(As reported)

      W 44,639        655,084       22,120,355       (373,442     22,446,636       (122,075     22,324,561  

Changes in accounting policies

     3        —          —         (5,393     —         (5,393     —         (5,393
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2019(Restated)

        44,639        655,084       22,114,962       (373,442     22,441,243       (122,075     22,319,168  

Total comprehensive income (loss):

                  

Profit (loss) for the period

        —          —         888,698       —         888,698       (27,965     860,733  

Other comprehensive income

     13,21,22,28,32        —          —         (41,513     43,866       2,353       (1,344     1,009  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          —         847,185       43,866       891,051       (29,309     861,742  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                  

Annual dividends

     35        —          —         (646,828     —         (646,828     (21,150     (667,978

Interim dividends

     35        —          —         (71,870     —         (71,870     (8,650     (80,520

Share option

     26        —          295       —         —         295       764       1,059  

Interest on hybrid bonds

     25        —          —         (14,766     —         (14,766     —         (14,766

Treasury shares sold

     24        —          300,000       —         —         300,000       —         300,000  

Changes in ownership in subsidiaries

     12        —          51,102       —         —         51,102       47,127       98,229  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          351,397       (733,464     —         (382,067     18,091       (363,976
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2019

      W 44,639        1,006,481       22,228,683       (329,576     22,950,227       (133,293     22,816,934  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2020

      W 44,639        1,006,481       22,228,683       (329,576     22,950,227       (133,293     22,816,934  

Total comprehensive income:

                  

Profit for the period

        —          —         1,504,352       —         1,504,352       (3,814     1,500,538  

Other comprehensive income (loss)

     13,21,22,28,32        —          —         (4,992     369,715       364,723       97,099       461,822  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          —         1,499,360       369,715       1,869,075       93,285       1,962,360  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                  

Annual dividends

     35        —          —         (658,228     —         (658,228     (5,771     (663,999

Interim dividends

     35        —          —         (73,136     —         (73,136     —         (73,136

Share option

     26        —          179       —         —         179       1,256       1,435  

Interest on hybrid bonds

     25        —          —         (14,766     —         (14,766     —         (14,766

Acquisition of treasury shares

     24        —          (426,664     —         —         (426,664     —         (426,664

Changes in ownership in subsidiaries

     12        —          97,207       —         —         97,207       696,872       794,079  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          (329,278     (746,130     —         (1,075,408     692,357       (383,051
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2020

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

5


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Cash flows from operating activities:

       

Cash generated from operating activities:

       

Profit for the period

      W 1,500,538       860,733  

Adjustments for income and expenses

     40        4,256,654       4,435,039  

Changes in assets and liabilities related to operating activities

     40        302,458       (856,130
     

 

 

   

 

 

 
        6,059,650       4,439,642  

Interest received

        41,832       56,392  

Dividends received

        166,019       241,117  

Interest paid

        (397,351     (360,439

Income tax paid

        (48,274     (341,728
     

 

 

   

 

 

 

Net cash provided by operating activities

        5,821,876       4,034,984  
     

 

 

   

 

 

 

Cash flows from investing activities:

       

Cash inflows from investing activities:

       

Decrease in short-term financial instruments, net

        —         253,971  

Decrease in short-term investment securities, net

        17,684       29,503  

Collection of short-term loans

        77,114       113,345  

Decrease in long-term financial instruments

        99       231  

Proceeds from disposals of long-term investment securities

        46,065       234,683  

Proceeds from disposals of investments in associates and joint ventures

        2,715       220  

Proceeds from disposals of property and equipment

        102,526       18,478  

Proceeds from disposals of intangible assets

        39,654       7,327  

Collection of long-term loans

        4,608       4,435  

Decrease in deposits

        16,244       9,180  

Proceeds from settlement of derivatives

        845       601  

Collection of lease receivables

        —         27,712  

Proceeds from disposals of subsidiaries

        165       4,802  

Cash inflow from business combinations, net

        115,834       5,016  

Cash inflow from transfers of business, net

        5,395       45,658  
     

 

 

   

 

 

 
        428,948       755,162  

Cash outflows for investing activities:

       

Increase in short-term financial instruments, net

        (596,025     —    

Increase in short-term loans

        (103,604     (116,320

Increase in long-term loans

        (11,044     (11,541

Increase in long-term financial instruments

        (2     —    

Acquisitions of long-term investment securities

        (95,474     (383,976

Acquisitions of investments in associates and joint ventures

        (170,292     (264,015

Acquisitions of property and equipment

        (3,557,800     (3,375,883

Acquisitions of intangible assets

        (129,976     (141,010

Increase in deposits

        (12,175     (6,164

Cash outflow for business combinations, net

        (2,958     (36,910

Cash outflow for liquidation of subsidiaries

        —         (927
     

 

 

   

 

 

 
        (4,679,350     (4,336,746
     

 

 

   

 

 

 

Net cash used in investing activities

      W (4,250,402     (3,581,584
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

6


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Cash flows from financing activities:

       

Cash inflows from financing activities:

       

Proceeds from short-term borrowings, net

      W 76,375       —    

Proceeds from issuance of debentures

        1,420,962       1,633,444  

Proceeds from long-term borrowings

        1,947,848       —    

Cash inflows from settlement of derivatives

        36,691       12,426  

Proceeds from disposal of treasury shares

        —         300,000  

Transactions with non-controlling shareholders

        17,766       101,398  
     

 

 

   

 

 

 
        3,499,642       2,047,268  

Cash outflows for financing activities:

       

Repayments of short-term borrowings, net

        —         (59,860

Repayments of long-term payables – other

        (428,100     (428,153

Repayments of debentures

        (975,500     (940,000

Repayments of long-term borrowings

        (1,950,874     (89,882

Payments of dividends

        (742,136     (718,698

Payments of interest on hybrid bonds

        (14,766     (14,766

Repayments of lease liabilities

        (412,666     (443,238

Acquisition of treasury shares

        (426,664     —    

Transactions with non-controlling shareholders

        (6,515     (39,345
     

 

 

   

 

 

 
        (4,957,221     (2,733,942
     

 

 

   

 

 

 

Net cash used in financing activities

        (1,457,579     (686,674
     

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

        113,895       (233,274

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

        (15,066     (2,601
     

 

 

   

 

 

 

Cash and cash equivalents at end of the period

      W 1,369,653       1,270,824  
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

7


1.

Reporting Entity

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 December 31, 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

     8,853,906        10.97  

Institutional investors and other shareholders

     39,582,507        49.02  

Kakao Co., Ltd.

     1,266,620        1.57  

Treasury shares

     9,418,558        11.66  
  

 

 

    

 

 

 
     80,745,711        100.00  
  

 

 

    

 

 

 

These consolidated 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.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (2)

List of subsidiaries

The list of subsidiaries as of December 31, 2020 and December 31, 2019 is as follows:

 

               Ownership (%)(*1)  

Subsidiary

   Location   

Primary business

   Dec. 31,
2020
     Dec. 31,
2019
 

Subsidiaries owned by the Parent Company

   SK Telink Co., Ltd.    Korea   

Telecommunication and

Mobile Virtual Network Operator service

     100.0        100.0  
   SK Communications Co., Ltd.    Korea    Internet website services      100.0        100.0  
   SK Broadband Co., Ltd.(*2)    Korea    Telecommunication 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    Telecommunication services      52.1        52.7  
   SK Planet Co., Ltd.    Korea    Telecommunication 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

and other portable media devices

     51.4        51.4  
   SK Infosec Co., Ltd.(*5)    Korea    Information security service      62.6        100.0  
   Life & Security Holdings Co., Ltd.(*5,8)    Korea    Investment (Holdings company)      —          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(*6)    Switzerland   

Quantum information and

communications service

     68.1        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.(*7)    Korea    Other telecommunication retail business      100.0        —    
   Broadband Nowon Co., Ltd.(*8)    Korea    Cable broadcasting services      55.0        —    
   TMAP MOBILITY Co., Ltd.(*8)    Korea    Mobility business      100.0        —    


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (2)

List of subsidiaries, Continued

The list of subsidiaries as of December 31, 2020 and December 31, 2019 is as follows, Continued:

 

                    Ownership (%)(*1)  
    

Subsidiary

   Location   

Primary business

   Dec. 31,
2020
     Dec. 31,
2019
 

Subsidiaries owned by SK Planet Co., Ltd.

   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 SK Infosec Co., Ltd.

  

SKinfosec Information Technology(Wuxi)

Co., Ltd.

   China   

System software development and

supply services

     100.0        100.0  
   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.(*8)    Korea   

Sales and trade of anti-theft devices

and surveillance devices

     —          100.0  

Subsidiary owned by SK Telink Co., Ltd.

   SK TELINK VIETNAM Co., Ltd.(*8)    Vietnam    Communications device retail business      —          100.0  

Subsidiaries owned by SK Broadband Co., Ltd.

   Home & Service Co., Ltd.    Korea   

Operation of information and

communication facility

     100.0        100.0  
   SK stoa Co., Ltd.(*7)    Korea    Other telecommunication retail business      —          100.0  

Subsidiary owned by Quantum Innovation Fund I

   Pan Asia Semiconductor Materials LLC (*8, 9)    Korea    Investment      66.4        —    

Subsidiary owned by SK Telecom Japan Inc.

   SK Planet Japan, K. K.    Japan    Digital contents sourcing service      79.8        79.8  

Subsidiary owned by id Quantique SA

   Id Quantique LLC    Korea   

Quantum information and communications

service

     100.0        100.0  

Subsidiaries owned by FSK L&S Co., Ltd.

   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

LIMITED(*8)

   Vietnam    Logistics business      100.0        —    

Subsidiaries owned by Incross Co., Ltd.

   Infra Communications Co., Ltd.    Korea    Service operation      100.0        100.0  
   Mindknock Co., Ltd.    Korea    Software development      100.0        100.0  

Others(*10)

   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  


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (2)

List of subsidiaries, Continued

The list of subsidiaries as of December 31, 2020 and 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 comprehensive media company. The Parent Company’s ownership interest of SK Broadband Co., Ltd. has changed as SK Broadband Co., Ltd. issued new shares to the shareholders of the merged companies as the consideration for the merger. The Parent Company has entered into an equity agreement with the shareholders of the merged company and recognized W320,984 million of derivative liabilities for drag-along right of the shareholders of the merged company and share option held by the Parent Company during the year ended December 31, 2020. (Note 22)

 

  (*3)

The ownership interest has changed as third-party share option of One Store Co., Ltd. was exercised during the year ended December 31, 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 December 31, 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 W14,297 million are recognized as financial liabilities as of December 31, 2020.

 

  (*5)

SK Infosec Co., Ltd. merged with Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company, to improve management efficiency on December 30, 2020 with the Group acquiring 34,200,560 shares of SK Infosec Co., Ltd. based on the merger set on December 30, 2020. As a result of merger, the Group’s ownership interest of SK Infosec Co,, Ltd. has changed from 100% to 62.6%.

 

  (*6)

The Parent Company participated in a third-party allotment offering and acquired 4,166,667 shares on July 23, 2020.

 

  (*7)

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 W40,029 million in cash during the year ended December 31, 2020.

  (*8)

Details of changes in the consolidation scope for year ended December 31, 2020 are presented in note 1-(4).

 

  (*9)

Pan Asia Semiconductor Materials LLC increased its capital by a third-party allotment, which has changed the Group’s ownership interest for the year ended December 31, 2020.

 

  (*10)

Others are owned together by Atlas Investment and another subsidiary of the Parent Company.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (3)

Condensed financial information of subsidiaries

Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2020 is as follows:

 

(In millions of won)  
     As of December 31, 2020      2020  

Subsidiary

   Total assets      Total liabilities      Total equity      Revenue      Profit (loss)  

SK Telink Co., Ltd.

   W 176,872        60,702        116,170        351,334        17,947  

Eleven Street Co., Ltd.

     999,225        542,534        456,691        545,556        (29,623

SK m&service Co., Ltd.

     129,738        74,962        54,776        214,949        2,759  

SK Broadband Co., Ltd.

     5,765,808        3,119,489        2,646,319        3,713,021        150,694  

K-net Culture and Contents Venture Fund

     377,683        65,896        311,787        —          (44,737

PS&Marketing Corporation

     470,521        257,809        212,712        1,427,218        (847

SERVICE ACE Co., Ltd.

     96,258        71,890        24,368        206,612        2,905  

SERVICE TOP Co., Ltd.

     67,885        49,972        17,913        193,867        2,592  

SK O&S Co., Ltd.

     88,633        54,021        34,651        278,948        778  

SK Planet Co., Ltd.

     536,981        214,846        322,135        276,462        1,305  

DREAMUS COMPANY(*1)

     172,304        75,971        96,333        226,329        (22,176

SK Infosec Co., Ltd.(*2)

     2,927,396        2,550,936        376,460        1,332,363        14,227  

One Store Co., Ltd.

     243,442        99,943        143,499        155,218        1,952  

Home & Service Co., Ltd.

     124,197        88,740        35,457        397,754        (20

SK stoa Co., Ltd.

     107,982        79,339        28,643        268,693        17,154  

FSK L&S Co., Ltd.(*3)

     65,932        35,007        30,925        205,623        3,022  

Incross Co., Ltd.(*4)

     179,308        104,778        74,530        39,440        12,307  

 

(*1)

The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY.

(*2)

The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SK Infosec Information Technology (Wuxi) Co., Ltd. and two other subsidiaries of SK Infosec Co., Ltd. and including profit and loss which Life Security & Holdings Co., Ltd. recognized before the merger.

(*3)

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.

(*4)

The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary of Incross Co., Ltd.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (3)

Condensed financial information of subsidiaries, Continued

 

Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2019 is as follows:

 

(In millions of won)  
     As of December 31, 2019      2019  

Subsidiary

   Total assets      Total liabilities      Total equity      Revenue      Profit (loss)  

SK Telink Co., Ltd.(*1)

   W 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.

     4,565,732        2,930,482        1,636,250        3,229,478        47,701  

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  

SERVICEACE 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.

     122,919        86,096        36,823        351,154        (427

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 from the effective date of acquisition to December 31, 2019.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (3)

Condensed financial information of subsidiaries, Continued

 

Condensed financial information of significant subsidiaries as of January 1, 2019 is as follows:

 

(In millions of won)  
     As of January 1, 2019  

Subsidiary

   Total assets      Total
liabilities
     Total equity  

SK Telink Co., Ltd.(*1)

   W 493,972        107,565        386,407  

Eleven Street Co., Ltd.

     1,045,946        495,907        550,039  

SK m&service Co., Ltd.

     97,924        48,182        49,742  

SK Broadband Co., Ltd.

     4,657,113        3,072,891        1,584,222  

K-net Culture and Contents Venture Fund

     147,691        20,873        126,818  

PS&Marketing Corporation

     432,699        216,624        216,075  

SERVICEACE Co., Ltd.

     76,770        45,229        31,541  

SERVICE TOP Co., Ltd.

     74,452        49,400        25,052  

SK O&S Co., Ltd.

     81,773        42,257        39,516  

SK Planet Co., Ltd.

     753,630        436,501        317,129  

DREAMUS COMPANY(*2)

     204,479        44,620        159,859  

Life & Security Holdings Co., Ltd.(*3)

     2,611,838        2,261,456        350,382  

SK Infosec Co., Ltd. (*4)

     183,896        54,301        129,595  

One Store Co., Ltd.

     116,716        65,890        50,826  

Home & Service Co., Ltd.

     112,937        71,119        41,818  

SK stoa Co., Ltd.

     41,305        37,560        3,745  

 

(*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 six 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)

SK Infosec Co., Ltd. was acquired by the Parent Company and newly included in consolidation as of December 27, 2018.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (4)

Changes in subsidiaries

The list of subsidiaries that were newly included in consolidation during the year ended December 31, 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.
Pan Asia Semiconductor Materials LLC    Established by Quantum Innovation Fund I
TMAP MOBILITY Co., Ltd.    Spin-off from the Parent Company

The list of subsidiaries that were excluded from consolidation during the year ended December 31, 2020 is as follows:

 

Subsidiary

  

Reason

ADT SECURITY Co., Ltd.    Merged into ADT CAPS Co., Ltd.
SK TELINK VIETNAM Co., Ltd.    Disposed
Life & Security Holdings Co., Ltd.    Merged into SK Infosec., Ltd.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

(5) The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2020 and 2019 are as follows:

 

(In millions of won)                                     
     DREAMUS
COMPANY
    One Store
Co., Ltd.
    Eleven Street
Co., Ltd.
    SK Infosec
Co., Ltd.(*)
    Incross
Co., Ltd.
    SK
Broadband
Co., Ltd.
 

Ownership of non-controlling interests (%)

     48.6       47.4       18.2       37.4       55.2       24.9  
     As of December 31, 2020  

Current assets

   W 146,138       215,672       896,828       306,520       165,668       1,180,149  

Non-current assets

     26,166       27,770       102,397       2,620,876       13,640       4,585,659  

Current liabilities

     (72,091     (96,139     (508,427     (417,194     (101,065     (1,279,132

Non-current liabilities

     (3,880     (3,804     (34,107     (2,133,742     (3,713     (1,840,357

Net assets

     96,333       143,499       456,691       376,460       74,530       2,646,319  

Fair value adjustment and others

     —         —         (14,297     (1,227,442     —         —    

Net assets on the consolidated financial statements

     96,333       143,499       442,394       (850,982     74,530       2,646,319  

Carrying amount of non-controlling interests

     47,452       68,573       81,754       (318,267     46,010       665,020  
     2020  

Revenue

   W 226,329       155,218       545,556       1,332,363       39,440       3,713,021  

Profit (loss) for the period

     (22,176     1,952       (29,623     14,227       12,307       150,694  

Depreciation of the fair value adjustment and others

     —         —         (492     (19,229            

Profit (loss) for the period on the consolidated financial statements

     (22,176     1,952       (30,115     (5,002     12,307       150,694  

Total comprehensive income (loss)

     (21,848     2,278       (23,037     (3,758     12,091       151,417  

Profit (loss) attributable to non-controlling interests

     (4,218     1,118       (5,565     (12,432     7,568       27,240  

Net cash provided by operating activities

   W 15,223       38,006       65,499       248,524       24,629       1,035,474  

Net cash provided by (used in) investing activities

     (2,471     (62,816     (71,644     (229,130     (2,284     (844,454

Net cash provided by (used in) financing activities

     (2,329     (2,499     (18,059     11,134       (4,278     (93,259

Effects of exchange rate changes on cash and cash equivalents

     (2,053     —         (385     (554     —         —    

Net increase (decrease) in cash and cash equivalents

     8,370       (27,309     (24,589     29,974       18,067       97,761  

Dividends paid to non-controlling interests

   W —         —         5,000       20,028       —         —    

 

(*)

The condensed financial information of SK Infosec Co., Ltd. includes profit and loss, cash flows which Life Security & Holdings Co., Ltd. recognized before the merger.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (5)

The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2020 and 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

   W 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

   W 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

   W (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

   W —         —         17,500       28,786       —    


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

2.

Basis of Preparation

These consolidated financial statements were prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audits of Stock Companies in the Republic of Korea.

The consolidated financial statements for the year ended as of December 31, 2020 comprise the Group and the Group’s investments in associates and joint ventures.

The consolidated financial statements were authorized for issuance by the Board of Directors on February 2, 2021, which will be submitted for approval at the shareholders’ meeting to be held on March 25, 2021.

 

  (1)

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statement of financial position:

 

   

derivative financial instruments measured at fair value;

 

   

financial instruments measured at fair value through profit or loss (“FVTPL”);

 

   

financial instruments measured at fair value through other comprehensive income (“FVOCI”);

 

   

assets for defined benefit plans recognized at the net of the fair value of plan assets less the total present value of defined benefit obligations.

 

  (2)

Functional and presentation currency

Financial statements of Group entities within the Group are prepared in functional currency of each group entity, which is the currency of the primary economic environment in which each entity operates. Consolidated financial statements of the Group are presented in Korean won, which is the Parent Company’s functional and presentation currency.

 

  (3)

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

1) Critical judgments

Information about critical judgments in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in notes for the following areas: consolidation (whether the Group has de facto control over an investee) and classification of lease.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

2.

Basis of Preparation, Continued

 

  (3)

Use of estimates and judgments, Continued

 

2) Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: loss allowance (notes 7 and 37), estimated useful lives of costs to obtain a contract (notes 8), property and equipment and intangible assets (notes 4 (7), (9), 14 and 17), impairment of goodwill (notes 4 (11) and 16), recognition of provision (notes 4 (17) and 20), measurement of defined benefit liabilities (notes 4 (16) and 21), and recognition of deferred tax assets (liabilities) (notes 4 (24) and 33).

3) 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 an established policies and processes with respect to the measurement of fair values including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.

The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Group assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

   

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

   

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

 

   

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

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 37.

 

3.

Changes in accounting policies

The Group has initially adopted the amendments to the ’Definition of a Business’(K-IFRS No. 1103, Business Combination) and ‘Interest Rate Benchmark Reform’(K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument- Recognition and Measurement, K-IFRS No. 1107, Financial Instruments- Disclosures and K-IFRS No. 1116, Leases) from January 1, 2020. A number of other amended standards are effective from January 1, 2020, but they do not have a material effect on the Group’s consolidated financial statements.

The Group has adopted this amendments to determine the acquisition of aggregate assets for business combination or business whose acquisition date is after January 1, 2020. Details of the accounting policies are summarized in Note 4 (2).

The Group applied the interest rate benchmark reform amendments retrospectively to hedging relationships that existed at January 1, 2020, or were designated thereafter and that are directly affected by interest rate benchmark reform. These amendments also apply to the gain or loss accumulated policies are disclosed in Note 4 (6). See also Note 37 for related disclosures about risks and hedge accounting.

The Group has changed its accounting policy by adopting an accounting treatment based on agenda decision for ‘Lease Term and Useful Life of Leasehold Improvements’ issued by International Financial Reporting Interpretations Committee(‘IFRIC’) on 16 December 2019.

In determining lease term, the Group considers the terms if it is reasonably certain that the lessee will exercise right to terminate the lease during the non-cancellable period of the lease within the period for which the contract is enforceable. The Group considers a penalty by terminating the lease when assessing the likelihood of exercising option to extend the lease. The Group has retrospectively applied the changes in its accounting policies in accordance with K-IFRS No. 1008 Accounting Policies, Changes in Accounting Estimates and Errors and restated its comparative financial statements.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

3.

Changes in accounting policies, Continued

 

The following table explains the impacts of the change in accounting policy on the Group’s consolidated financial statements.

 

  (1)

Statements of financial position

 

(In millions of won)                                        
     As of December 31, 2019      As of January 1, 2019  
     As reported      Adjustments     Restated      As reported(*)      Adjustments     Restated  

Assets

 

Accounts receivable – other, net

   W 1,250,098        5,074       1,255,172        1,243,245        (10,122     1,233,123  

Prepaid expenses and others

     3,619,034        (13,507     3,605,527        2,944,245        (39,010     2,905,235  

Property and equipment, net

     12,334,280        599,180       12,933,460        11,371,690        215,808       11,587,498  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   W 17,203,412        590,747       17,794,159        15,559,180        166,676       15,725,856  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities

 

Accrued expenses

   W 1,434,246        (418     1,433,828        1,299,217        (1,388     1,297,829  

Provisions

     143,229        21,932       165,161        187,208        20,319       207,527  

Lease liabilities

     712,738        578,269       1,291,007        663,826        155,020       818,846  

Deferred tax liabilities

     2,466,295        (2,434     2,463,861        2,260,434        (1,882     2,258,552  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   W 4,756,508        597,349       5,353,857        4,410,685        172,069       4,582,754  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Shareholder’s Equity

 

Retained earnings

   W 22,535,285        (6,602     22,228,683        22,120,355        (5,393     22,114,962  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   W 22,535,285        (6,602     22,228,683        22,120,355        (5,393     22,114,962  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

(*)

Instruction of K-IFRS No. 1116 has reflected.

 

  (2)

Statements of income

 

     2019  
     As reported      Adjustments     Restated  

Operating revenue:

   W 17,743,702        (2,986     17,740,716  

Operating expenses:

     16,633,722        (1,183     16,632,539  

Operating profit

     1,109,980        (1,803     1,108,177  

Finance income

     141,977        178       142,155  

Finance costs

     429,758        8,197       437,955  

Other non-operating income

     103,140        (409     102,731  

Other non-operating expenses

     212,227        (8,577     203,650  

Gain relating to investments in subsidiaries, associates and joint ventures, net

     449,543        —         449,543  

Profit(loss) before income tax

     1,162,655        (1,654     1,161,001  

Income tax expense

     300,713        (445     300,268  

Profit (loss) for the year

     861,942        (1,209     860,733  

Basic earnings per share (in won)

     12,144        (17     12,127  

Diluted earnings per share (in won)

     12,144        (17     12,127  


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

3.

Changes in Accounting Policies, Continued

 

  (3)

Statements changes in equity

The statements of changes in equity have been restated as the statements of financial position and statements of income.

 

  (4)

Consolidated statements of cash flows

 

     2019  
     As reported     Adjustments     Restated  

Cash flows from operating activities

   W 3,986,082       48,902       4,034,984  

Cash flows from investing activities

     (3,582,523     939       (3,581,584

Cash flows from financing activities

     (636,834     (49,840     (686,674

 

4.

Significant Accounting Policies

The significant accounting policies applied by the Group in the preparation of its consolidated financial statements in accordance with K-IFRS are included below. The significant accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2019, except for the changes in accounting policies described in Note 3.

 

  (1)

Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The Group’s operating segments have been determined to be each business unit, for which the Group generates separately identifiable financial information that is regularly reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group has five reportable segments as described in Note 5. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (2)

Basis of consolidation

1) Business combination

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.

Consideration transferred is generally measured at fair value, identical to the measurement of identifiable net assets acquired at fair value. The difference between the acquired company’s fair value and the consideration transferred is accounted for goodwill. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received excluding costs to issue debt or equity securities recognized based on K-IFRS No. 1032 and 1109.

Consideration transferred does not include the amount settled in relation to the pre-existing relationship and the amount settled in relation to the pre-existing relationship is generally recognized through profit or loss.

Contingent consideration is measured at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. If contingent consideration is not classified as equity, the Group subsequently recognizes changes in fair value of contingent consideration through profit or loss.

2) Non-controlling interests

Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Changes in a Controlling Company’s ownership interest in a subsidiary that do not result in the Controlling Company losing control of the subsidiary are accounted for as equity transactions.

3) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of an investee begins from the date the Group obtains control of the investee and cease when the Group loses control of the investee.

4) Loss of control

If the Group loses control of a subsidiary, the Group derecognizes the assets and liabilities of the former subsidiary from the consolidated statement of financial position and recognizes gain or loss associated with the loss of control attributable to the former controlling interest. Any investment retained in the former subsidiary is recognized at its fair value when control is lost.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (2)

Basis of consolidation, Continued

 

5) Interest in investees accounted for using the equity method

Interest in investees accounted for using the equity method composed of interest in associates and joint ventures. An associate is an entity in which the Group has significant influence, but not control, over the entity’s financial and operating policies. A joint venture is a joint arrangement whereby the Group that has joint control of the arrangement has rights to the net assets of the arrangement.

The investment in an associate and a joint venture is initially recognized at cost including transaction costs and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and changes in equity of the associate or the joint venture after the date of acquisition.

6) Intra-group transactions

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group’s share of unrealized gain incurred from transactions with investees accounted for using the equity method are eliminated and unrealized loss are eliminated using the same basis if there are no evidence of asset impairments.

7) Business combinations under common control

SK Holdings Co., Ltd. is the ultimate controlling entity of the Group. The assets and liabilities acquired under business combination under common control are recognized at the carrying amounts in the ultimate controlling shareholder’s consolidated financial statements. The difference between consideration and carrying amount of net assets acquired is added to or subtracted from capital surplus and others.

 

  (3)

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.

 

  (4)

Inventories

Inventories are stated at the acquisition cost using the average method. During the period, a perpetual inventory system is used to track inventory quantities, which is adjusted to the physical inventory counts performed at the period end. When the net realizable value of inventories is less than the acquisition cost, the carrying amount is reduced to the net realizable value, and any difference is charged to current operations as operating expenses.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (5)

Non-derivative financial assets

1) Recognition and initial measurement

Accounts receivable - trade and debt investments issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless an accounts receivable - trade without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. An accounts receivable - trade without a significant financing component is initially measured at the transaction price.

2) Classification and subsequent measurement

On initial recognition, a financial asset is classified as measured at:

 

   

FVTPL

 

   

FVOCI – equity investment

 

   

FVOCI – debt investment

 

   

Financial assets at amortized cost

A financial asset is classified based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

   

it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

 

   

its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (5)

Non-derivative financial assets, Continued

2) Classification and subsequent measurement, Continued

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

   

it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

   

its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (“OCI”). This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

The following accounting polices apply to the subsequent measurement of financial assets.

 

Financial assets at FVTPL    These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
Financial assets at amortized cost    These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investments at FVOCI    These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVOCI    These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (5)

Non-derivative financial assets, Continued

 

3) Impairment

The Group estimates the expected credit losses (ECL) for the debt instruments that are measured at amortized cost and FVOCI based on the forward-looking data. The impairment approach is decided based on the assessment of significant increase in credit risk. However, the Group applies a practical expedient and recognizes impairment losses equal to lifetime ECLs for Accounts receivables – trade and lease receivables from the initial recognition.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

At each reporting date, the Group assesses whether financial assets measured at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Loss allowance on financial assets measured at amortized cost is deducted from the carrying amount of the respective assets, while loss allowance on debt instruments at FVOCI is recognized in OCI, instead of reducing the carrying amount of the assets.

4) Derecognition

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expires, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

The Group enters into transactions whereby it transfers assets recognized in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

5) Offsetting

Financial assets and financial liabilities are offset, and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to offset the recognized amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

A financial asset and a financial liability are offset only when the right of set-off is not contingent on future event and legally enforceable even on the event of default, insolvency or bankruptcy.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (6)

Derivative financial instruments, including hedge accounting

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of each reporting period, and changes therein are accounted for as described below.

1) Hedge accounting

The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designates derivatives as hedging instruments to hedge the cash flow risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.

Hedge is directly affected by interest rate benchmark reform

For the purpose of evaluating whether there is an economic relationship between the hedged item(s) and the hedging instrument(s), the Group assumes that the benchmark interest rate is not altered as a result of interest rate benchmark reform.

For a cash flow hedge of a forecast transaction, the Group assumes that the benchmark interest rate will not be altered as a result of interest rate benchmark reform for the purpose of assessing whether the forecast transaction is highly probable and presents an expose to variations in cash flows that could ultimately affect profit and loss. In determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur, the Group assumes that the interest rate benchmark cash flows designated as a hedge will not be altered as a result of interest benchmark reform.

The Group will cease to apply the specific policy for assessing the economic relationship between the hedged item and the hedging instrument to a hedged item or hedging instrument

 

   

When the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the respective item of instrument

 

   

When the hedging relationship is discontinued


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

For its highly probable assessment of the hedged item, the Group will no longer apply the specific policy when the uncertainty arising from interest rate benchmark reform about the timing and the amount of the interest rate benchmark-based future cash flows of the hedged item is no longer present, or when the hedging relationship is discontinued.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (6)

Derivative financial instruments, including hedge accounting, Continued

1) Hedge accounting, Continued

 

Cash flow hedge

When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

2) Other derivative financial instruments

Other derivative financial instrument not designated as a hedging instrument are measured at fair value, and the changes in fair value of the derivative financial instrument is recognized immediately in profit or loss.

 

  (7)

Property and equipment

Property and equipment are initially measured at cost. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Property and equipment, subsequently, are carried at cost less accumulated depreciation and accumulated impairment losses.

Subsequent costs are recognized in the carrying amount of property and equipment at cost or, if appropriate, as a separate item if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

Property and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. A component that is significant compared to the total cost of property and equipment is depreciated over its separate useful life.

Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized as other non-operating income (loss).

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (7)

Property and equipment, Continued

 

The estimated useful lives of the Group’s property and equipment are as follows:

 

     Useful lives (years)

Buildings and structures

   15 ~ 40

Machinery

   3 ~ 15

Other property and equipment

   2 ~ 10

Depreciation methods, useful lives, and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.

 

  (8)

Borrowing costs

The Group capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets are not qualifying assets, and assets that are ready for their intended use or sale when acquired are not qualifying assets either.

To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Group capitalizes during a period do not exceed the amount of borrowing costs incurred during that period.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

  (9)

Intangible assets

Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.

Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, club memberships are expected to be available for use as there are no foreseeable limits to the periods. These intangible assets including brand are determined as having indefinite useful lives and not amortized.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (9)

Intangible assets, Continued

 

The estimated useful lives of the Group’s intangible assets are as follows:

 

     Useful lives (years)

Frequency usage rights

   5 ~ 10

Land usage rights

   5

Industrial rights

   5, 10

Development costs

   3 ~ 5

Facility usage rights

   10, 20

Customer relations

   3 ~ 20

Other

   3 ~ 20

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes, if appropriate, are accounted for as changes in accounting estimates.

Expenditures on research activities are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be reliably measured, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.

 

  (10)

Government grants

Government grants are not recognized unless there is reasonable assurance that the Group will comply with the grant’s conditions and that the grant will be received.

1) Grants related to assets

Government grants whose primary condition is that the Group purchases, constructs, or otherwise acquires a long-term asset are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduction to depreciation expense.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

2) Grants related to income

Government grants which are intended to compensate the Group for expenses incurred are deducted from the related expenses.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (11)

Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets other than assets arising from The carrying amounts of the Company’s non-financial assets other than assets arising from contract assets recognized in accounting for contract with a customer, assets recognized from the costs to obtain or fulfil a contract with a customer, employee benefits, inventories, deferred tax assets, and non-current assets held for sale are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amounts to their carrying amounts.

The Group estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, the Group estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.

An impairment loss is recognized in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount.

Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergy arising from the business acquired. Any impairment identified at the CGU level will first reduce the carrying value of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (12)

Leases

A contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

1) As a lessee

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at of before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease ability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease ability comprise the following:

 

   

Fixed payments, including in-substance fixed payments

 

   

Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date

 

   

Amounts expected to be payable under a residual value guarantee

 

   

The exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments is an optional renewal period of the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension of termination option of if there is a revised in-substance fixed lease payment.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (12)

Leases, Continued

1) As a lessee, Continued

 

When the lease ability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in ‘property, plant and equipment’ and lease abilities in ‘loans and borrowings’ in the statement of financial position.

The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognizes the lease payments associated with lease as an expense on a straight-line basis over the lease term.

2) As a lessor

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operation lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Group is an intermediate lessor, is accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, then the Group applies IFRS 15 to allocate the consideration in the contract.

The Group applies derecognition and impairment requirements in K-IFRS No. 1109 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.

The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (13)

Non-current assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sales rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assets (or disposal groups) must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amounts and fair value less cost to sell. The Group recognizes an impairment loss for any initial or subsequent write-down of assets (or disposal groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized in accordance with K-IFRS No. 1036, Impairment of Assets.

A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).

 

  (14)

Non-derivative financial liabilities

The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement. The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liability.

1) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, these liabilities are measured at fair value. The amount of change in fair value of financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income, and the remaining amount of change in the fair value of the liability shall be presented in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issue of the financial liability are recognized in profit or loss as incurred.

2) Other financial liabilities

Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the issue of the financial liability. Subsequent to initial recognition, other financial liabilities are measured at amortized cost and the interest expenses are recognized using the effective interest method.

3) Derecognition of financial liability

The Group extinguishes a financial liability only when the contractual obligation is fulfilled, canceled or expires. The Group recognizes new financial liabilities at fair value based on new contracts and eliminates existing liabilities when the contractual terms of the financial liabilities change and the cash flows change substantially.

When a financial liability is derecognized, the difference between the carrying amount and the consideration paid (including any transferred non-cash assets or liabilities assumed) is recognized in profit or loss.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (15)

Employee benefits

1) Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

2) Other long-term employee benefits

Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render related services. The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.

3) Retirement benefits: defined contribution plans

When an employee has rendered a service to the Group during a period, the Group recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Group recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4) Retirement benefits: defined benefit plans

At of the end of reporting period, defined benefits liabilities relating to defined benefit plans are recognized at present value of defined benefit obligations net of fair value of plan assets.

The calculation is performed annually by an independent actuary using the projected unit credit method. When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Group recognizes an asset, to the extent of the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.

Remeasurements of the net defined benefit liability (asset), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the beginning of the annual reporting period and considers changes in net defined benefit liability (asset) from contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are recognized through profit or loss.

When the plan amendment or curtailment occurs, gains or losses on amendment or curtailment in benefits for the past service provided are recognized through profit or loss. The Group recognizes a gain or loss on a settlement when the settlement of defined benefit plan occurs.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (15)

Employee benefits, Continued

 

5) Termination benefits

The Group recognizes a liability and expense for termination benefits at the earlier of the period when the Group can no longer withdraw the offer of those benefits and the period when the Group recognizes costs for a restructuring that involves the payment of termination benefits. If benefits are payable more than 12 months after the reporting period, they are discounted to their present value.

 

  (16)

Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. If the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.

If some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

A provision is used only for expenditures for which the provision was originally recognized.

 

  (17)

Transactions in foreign currencies

1) Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (17)

Transactions in foreign currencies, Continued

 

2) Foreign operations

If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:

The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the closing rate at the reporting date.

When a foreign operation is disposed, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.

 

  (18)

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.

When the Group repurchases its own shares, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The gains or losses from the purchase, disposal, reissue, or retirement of treasury shares are directly recognized in equity being as transaction with owners

 

  (19)

Hybrid bond

The Group recognizes a financial instrument issued by the Group as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.

 

  (20)

Share-based Payment

For equity-settled share-based payment transaction, if the fair value of the goods or services received cannot be reliably estimated, the Group measures the value indirectly by reference to the fair value of the equity instruments granted. The related expense with a corresponding increase in capital surplus and others is recognized over the vesting period of the awards.

The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

 

  (21)

Revenue

1) Identification of performance obligations in contracts with customers

The Group identifies the distinct services or goods as performance obligations in contracts with customers such as (1) wireless telecommunications services and (2) selling other goods and services and (3) providing other goods and services. In the case of providing both wireless telecommunications service and selling a handset together to one customer, the Group allocates considerations from the customer between the separate performance obligations for handset sale and wireless telecommunications service. The handset sale revenue is recognized when handset is delivered, and the wireless telecommunications service revenue is recognized over the period of the contract term as stated in the subscription contract.

2) Allocation of the transaction price to each performance obligation

The Group allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Group uses “adjusted market assessment approach” for estimating the stand-alone selling price of a good or service. As an exception, the Group uses “Expected cost plus a margin approach” for insignificant transactions.

3) Incremental costs of obtaining a contract

The Group pays commissions to its direct retail stores and authorized dealers in connection with acquiring service contracts. The commissions paid to these parties constituted a significant portion of the Group’s operating expenses. These commissions would not have been paid if there have been no binding contracts with subscribers and, therefore, the Group capitalizes certain costs associated with the commissions paid to obtain new customer contracts and amortize them over the expected contract periods with customers

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4) Customer loyalty programs

The Group provides customer loyalty points to customers based on the usage of the service to which the Group allocates a portion of consideration received as a performance obligation distinct from wireless telecommunications services. The amount allocated to the loyalty program is deferred and is recognized as revenue when loyalty points are redeemed. The deferred revenue is included in contract liabilities.

5) Consideration payable to a customer

Based on the subscription contract, a customer who uses the Group’s wireless telecommunication services may receive a partial discount for purchasing goods or services from a designated third party. The Group pays a portion of the price discounts that the customer receives to the third party which is the consideration payable to a customer.

The Company accounts for the amounts payable to the third party as a reduction of the wireless telecommunication service revenue.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (22)

Finance income and finance costs     

Finance income comprises interest income on funds invested (including financial assets measured at fair value), dividend income, gains on disposal of financial assets at FVTPL, changes in fair value of financial instruments at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss when the right to receive the dividend is established.

Finance costs comprise interest expense on borrowings, changes in fair value of financial instruments at FVTPL, and losses on hedging instruments that are recognized in profit or loss. Interest expense on borrowings and debentures are recognized as it accrues in profit or loss using the effective interest rate method.

 

  (23)

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except for transactions or events directly recognized in other comprehensive income or equity.

The Group pays income tax in accordance with the tax-consolidation system when the Parent Company and its subsidiaries are economically unified.

1) Current tax

In accordance with the tax-consolidation system, the Parent Company calculates current taxes for the Parent Company and its wholly owned domestic subsidiaries and recognizes the income tax payable as current tax liabilities of the Parent Company.

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and includes interests and fines related to income taxes paid or payable. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.

2) Deferred tax

Deferred tax is recognized using the asset-liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Group recognizes a deferred tax liability for all taxable temporary differences, except for the difference associated with investments in subsidiaries and associates that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes a deferred tax asset for all deductible temporary differences to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (23)

Income taxes, Continued

2) Deferred tax, Continued

 

A deferred tax asset is recognized for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. Future taxable profit is dependent on the reversal of taxable temporary differences. If there are insufficient taxable temporary differences to recognize the deferred tax asset, the business plan of the Group and the reversal of existing temporary differences are considered in determining the future taxable profit.

The Group reviews the carrying amount of a deferred tax asset at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if the Group has a legally enforceable right to offset the amount recognized and intends to settle the current tax liabilities and assets on a net basis. Income tax expense in relation to dividend payments is recognized when liabilities relating to the dividend payments are recognized.

3) Uncertainty over income tax treatments

The Group assesses the uncertainty over income tax treatments according to K-IFRS 1012. If the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Group reflect the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:

 

   

The most likely amount - the single most likely amount in a range of possible outcomes.

 

   

the expected value - the sum of the probability-weighted amounts in a range of possible outcomes.

 

  (24)

Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees, if any.

 


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (25)

Standards issued but not yet effective

The following new standards are effective for annual periods beginning after January 1, 2020 and earlier application is permitted; however, the Group has not adopted the following new standards early in preparing the accompanying consolidated financial statements.

Interest Rate Benchmark Reform - Phase 2 (Amendments to K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument - Recognition and Measurement, K-IFRS No. 1107, Financial Instruments- Disclosures, K-IFRS No. 1104, Insurance Contracts and K-IFRS No. 1116, Leases)

The amendments address issued that might affect financial reporting as a result of the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief from certain requirements in K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument- Recognition and Measurement, K-IFRS No. 1107, Financial Instruments- Disclosures, K-IFRS No. 1104 Insurance Contracts and K-IFRS No. 1116, Leases relating to changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease abilities and hedge accounting.    

The amendment will require an entity to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by interest rate benchmark reform by updating the effective interest rate of the financial asset or financial liability.


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (25)

Standards issued but not yet effective, Continued

 

As of December 31, 2020, the Group has W326,400 million sterling LIBOR secured bank loans that will be subject to interest rate benchmark reform. The Group expects that the interest rate benchmark for these loans will be changed to SONIA in 2021 and that no significant modification gain or loss will arise as a result of applying the amendments to these changes.

The amendments provide exceptions to the hedge accounting requirement in the following areas.    

 

   

Allows amendment of the designation of a hedging relationship to reflect changes that are required by the reform.

 

   

When a hedged item in a cash flow hedge is amended to reflect the changes that are required by the reform, the amount accumulated in the cash flow hedge reserve will be deemed to be based on the alternative benchmark rate on which the hedged future cash flows are determined.

 

   

When a group of items is designated as a hedged item and an item in the group is amended to reflect the changes that are required by the reform, the hedged items are allocated to sub-groups based on the benchmark rates being hedged.

 

   

If an entity reasonably expects that an alternative benchmark rate will be separately identifiable within a period of 24 months, it is not prohibited from designating the rate as a non-contractually specified risk component if it is not separately identifiable at the design at the designation date.

As of December 31, 2020, the Group has cash flow hedges of sterling LIBOR risk. The Group expects that indexation of the hedged items and hedging instruments to sterling LIBOR will be replaced with SONIA in 2021. Whenever the replacement occurs, the Group expects to apply the amendments related to hedge accounting. However, there is uncertainty about when and how replacement may occur. When the change occurs to the hedged item or the hedging instrument, the Group will remeasure the cumulative change in fair value of the interest rate swap, respectively, based on SONIA. Hedging relationships may experience hedge ineffectiveness if there is a timing or other mismatch between the transition of the hedged item and that of the hedging instrument to SONIA. The Group does not expect that amount accumulated in the cash flow hedge reserve will be immediately reclassified to profit or loss because of IBOR transition.

The amendments will require the Group to disclose additional information about the entity’s exposure to risks arising from interest rate benchmark reform and related risk management activities.

The Group plans to apply the amendments from January 1, 2021. Application will not impact amounts reported for 2020 or prior periods.

The following new and amended standards are not expected to have a significant impact on the Group’s consolidated financial statements.

 

   

Covid-19-Related Rent Concessions (Amendments to K-IFRS No. 1116, Leases)


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

   

Proceeds before Intended Use (Amendments to K-IFRS No. 1016, Property, Plant and Equipment)

 

   

References to Conceptual Framework in K-IFRS Standards (Amendments to K-IFRS No. 1103, Business Combination)

 

   

Classification of Liabilities as Current or Non-current (Amendments to K-IFRS No. 1001, Presentation of Financial Statements)

 

   

K-IFRS No. 1117 Insurance Contracts and amendments to K-IFRS No. 1117 Insurance Contracts


 

Appendix 2. Separate Financial Statements

SK TELECOM CO., LTD. (the “Company”)

SEPARATE FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, AND DECEMBER 31, 2019, AND

FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019


SK TELECOM CO., LTD.

Separate Statements of Financial Position

As of December 31, 2020 and 2019, and January 1, 2019

 

(In millions of won)                            
     Note      December 31,
2020
     December 31,
2019
     January 1,
2019
 

Assets

           

Current Assets:

           

Cash and cash equivalents

     34,35      W 329,208        497,282        877,823  

Short-term financial instruments

     5,34,35        516,000        234,000        99,000  

Short-term investment securities

     9,34,35        31,854        31,920        47,849  

Accounts receivable - trade, net

     6,34,35,36        1,503,552        1,479,971        1,354,260  

Short-term loans, net

     6,34,35,36        89,280        57,751        54,336  

Accounts receivable - other, net

     3,6,34,35,36,37        434,713        506,642        524,236  

Contract assets

     8,35        8,388        7,173        1,689  

Prepaid expenses

     3,7        2,052,515        1,959,122        1,607,162  

Guarantee deposits

     6,34,35,36        51,069        73,345        —    

Inventories, net

        —          70,528        —    

Prepaid income taxes

     31        8,704        26,253        —    

Derivative financial assets

     19,34,35,38        5,181        11,125        22,079  

Advanced payments and others

     6,34,35        16,651        43,353        15,657  
     

 

 

    

 

 

    

 

 

 
        5,047,115        4,998,465        4,604,091  
     

 

 

    

 

 

    

 

 

 

Non-Current Assets:

           

Long-term financial instruments

     5,34,35        354        382        382  

Long-term investment securities

     9,34,35        983,688        510,633        410,672  

Investments in subsidiaries, associates and joint ventures

     10,39        11,357,504        10,578,158        10,188,914  

Property and equipment, net

     3,11,12,36        9,157,548        9,052,709        7,705,308  

Goodwill

     13        1,306,236        1,306,236        1,306,236  

Intangible assets, net

     14        2,665,083        3,461,152        4,008,590  

Long-term loans, net

     6,34,35,36        6,518        7,474        7,236  

Long-term accounts receivable - other

     3,6,34,35,37        348,335        335,574        284,324  

Long-term contract assets

     8,35        22,844        23,724        5,842  

Long-term prepaid expenses

     3,7        903,961        1,134,737        745,268  

Guarantee deposits

     6,34,35,36        110,555        108,141        184,887  

Long-term derivative financial assets

     19,34,35,38        76,461        99,998        50,805  

Defined benefit assets

     18        —          —          31,834  

Other non-current assets

        249        249        249  
     

 

 

    

 

 

    

 

 

 
        26,939,336        26,619,167        24,930,547  
     

 

 

    

 

 

    

 

 

 
      W 31,986,451        31,617,632        29,534,638  
     

 

 

    

 

 

    

 

 

 

See accompanying notes to the separate financial statements.


SK TELECOM CO., LTD.

Separate Statements of Financial Position, Continued

As of December 31, 2020 and 2019, and January 1, 2019

 

(In millions of won)                           
     Note      December 31,
2020
     December 31,
2019
    January 1,
2019
 

Liabilities and Shareholders’ Equity

 

       

Current Liabilities:

          

Accounts payable - other

     34,35,36      W 1,955,472        2,266,958       1,622,744  

Contract liabilities

     8        83,216        88,257       46,075  

Withholdings

     34,35        659,181        685,822       696,790  

Accrued expenses

     3,34,35        724,992        793,252       664,286  

Income tax payable

     31        154,144        —         162,609  

Provisions

     3,17        43,437        47,786       41,845  

Current installments of long-term debt, net

     15,34,35,38        712,105        520,292       512,377  

Lease liabilities

     3,34,35,36,38        313,422        319,519       253,822  

Current installments of long-term payables - other

     16,34,35,38        424,600        423,839       423,884  

Other current liabilities

     34,35        5,835        20,019       —    
     

 

 

    

 

 

   

 

 

 
        5,076,404        5,165,744       4,424,432  
     

 

 

    

 

 

   

 

 

 

Non-Current Liabilities:

          

Debentures, excluding current installments, net

     15,34,35,38        6,175,576        5,900,829       5,222,865  

Long-term borrowings, excluding current installments, net

     15,34,35,38        6,167        19,777       31,764  

Long-term payables - other

     16,34,35,38        1,141,723        1,544,699       1,939,082  

Long-term contract liabilities

     8        8,110        11,342       8,358  

Long-term derivative financial liabilities

     19,34,35,38        362,002        —         1,107  

Long-term lease liabilities

     3,34,35,36,38        999,776        856,385       455,224  

Long-term provisions

     3,17        55,953        41,145       39,426  

Deferred tax liabilities

     3,31        756,873        642,601       512,438  

Defined benefit liabilities

     18        7,421        25,093       —    

Other non-current liabilities

     34,35        46,588        26,118       43,077  
     

 

 

    

 

 

   

 

 

 
        9,560,189        9,067,989       8,253,341  
     

 

 

    

 

 

   

 

 

 

Total Liabilities

        14,636,593        14,233,733       12,677,773  
     

 

 

    

 

 

   

 

 

 

Shareholders’ Equity:

          

Share capital

     1,20        44,639        44,639       44,639  

Capital surplus and others

     20,21,22,23        289,134        715,619       415,324  

Retained earnings

     3,24,25        16,684,640        16,672,947       16,437,167  

Reserves

     26        331,445        (49,306     (40,265
     

 

 

    

 

 

   

 

 

 

Total Shareholders’ Equity

        17,349,858        17,383,899       16,856,865  
     

 

 

    

 

 

   

 

 

 
      W 31,986,451        31,617,632       29,534,638  
     

 

 

    

 

 

   

 

 

 

See accompanying notes to the separate financial statements.


SK TELECOM CO., LTD.

Separate Statements of Income

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Operating revenue:

     26,35       

Revenue

      W 11,746,630       11,421,342  
     

 

 

   

 

 

 

Operating expenses:

     35       

Labor

        804,982       783,124  

Commissions

     3,7        4,647,773       4,419,845  

Depreciation and amortization

     3        2,841,755       2,776,140  

Network interconnection

        555,846       565,084  

Leased lines

        215,878       213,673  

Advertising

        114,794       154,124  

Rent

     3        121,032       123,517  

Cost of goods sold

        436,013       479,605  

Others

     27        985,490       954,427  
     

 

 

   

 

 

 
        10,723,563       10,469,539  
     

 

 

   

 

 

 

Operating profit

        1,023,067       951,803  

Finance income

     29        377,947       615,571  

Finance costs

     3,29        (256,737     (280,247

Other non-operating income

     28        82,673       76,928  

Other non-operating expenses

     28        (273,655     (110,627

Loss on investments in subsidiaries, associates and joint ventures, net

     10        (11,840     (68,550
     

 

 

   

 

 

 

Profit before income tax

        941,455       1,184,878  

Income tax expense

     30        182,663       204,987  
     

 

 

   

 

 

 

Profit for the year

      W 758,792       979,891  
     

 

 

   

 

 

 

Earnings per share:

     31       

Basic earnings per share (in won)

      W 10,221       13,393  

Diluted earnings per share (in won)

        10,219       13,393  

See accompanying notes to the separate financial statements.


SK TELECOM CO., LTD.

Separate Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Profit for the year

      W 758,792       979,891  

Other comprehensive income (loss):

       

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

       

Remeasurement of defined benefit liabilities

     18        (2,325     (40,720

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

     26,30        366,600       (13,972

Items that are or may be reclassified subsequently to profit or loss, net of taxes:

       

Net change in unrealized fair value of derivatives

     19,26,30        15,507       35,004  
     

 

 

   

 

 

 

Other comprehensive loss for the year, net of taxes

 

     379,782       (19,688
     

 

 

   

 

 

 

Total comprehensive income

      W 1,138,574       960,203  
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.


SK TELECOM CO., LTD.

Separate Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

 

(In millions of won)               Capital surplus and others     Retained
earnings
    Reserves        
    Note     Share capital     Paid-in surplus     Treasury
shares
    Hybrid
bonds
    Share
option
    Other     Sub-total     Total
equity
 

Balance, Januray 1, 2019 (As reported)

    W 44,639       2,915,887       (1,979,475     398,759       1,007       (920,854     415,324       16,442,560       (40,265     16,862,258  

Changes in Accounting Policies

    3       —         —         —         —         —         —         —         (5,393     —         (5,393
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, Januray 1, 2019 (Restated)

    W 44,639       2,915,887       (1,979,475     398,759       1,007       (920,854     415,324       16,437,167       (40,265     16,856,865  

Total comprehensive Income (loss):

                     

Profit for the period

      —         —         —         —         —         —         —         979,891       —         979,891  

Other comprehensive income (loss)

    18,19,26,30       —         —         —         —         —         —         —         (10,647     (9,041     (19,688
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      —         —         —         —         —         —         —         969,244       (9,041     960,203  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                     

Annual dividends

    33       —         —         —         —         —         —         —         (646,828     —         (646,828

Interim dividends

    33       —         —         —         —         —         —         —         (71,870     —         (71,870

Share option

    23       —         —         —         —         295       —         295       —         —         295  

Interest on hybrid bonds

    22       —         —         —         —         —         —         —         (14,766     —         (14,766

Treasury shares sold

    21       —         —         282,478       —         —         17,522       300,000       —         —         300,000  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      —         —         282,478       —         295       17,522       300,295       (733,464     —         (433,169
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2019

    W 44,639       2,915,887       (1,696,997     398,759       1,302       (903,332     715,619       16,672,947       (49,306     17,383,899  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2020

    W 44,639       2,915,887       (1,696,997     398,759       1,302       (903,332     715,619       16,672,947       (49,306     17,383,899  

Total comprehensive Income (loss):

                     

Profit for the period

      —         —         —         —         —         —         —         758,792       —         758,792  

Other comprehensive income (loss)

    18,19,26,30       —         —         —         —         —         —         —         (969     380,751       379,782  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      —         —         —         —         —         —         —         757,823       380,751       1,138,574  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                     

Annual dividends

    33       —         —         —         —         —         —         —         (658,228     —         (658,228

Interim dividends

    33       —         —         —         —         —         —         —         (73,136     —         (73,136

Share option

    23       —         —         —         —         179       —         179       —         —         179  

Interest on hybrid bonds

    22       —         —         —         —         —         —         —         (14,766     —         (14,766

Acquisition of treasury shares

    21       —         —         (426,664     —         —         —         (426,664     —         —         (426,664
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      —         —         (426,664     —         179       —         (426,485     (746,130     —         (1,172,615
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2020

    W 44,639       2,915,887       (2,123,661     398,759       1,481       (903,332     289,134       16,684,640       331,445       17,349,858  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the separate financial statements.


SK TELECOM CO., LTD.

Separate Statements of Cash Flows

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Cash flows from operating activities:

       

Cash generated from operating activities:

       

Profit for the year

      W 758,792       979,891  

Adjustments for income and expenses

     38        3,361,118       2,898,842  

Changes in assets and liabilities related to operating activities

     38        169,589       (703,093
     

 

 

   

 

 

 
        4,289,499       3,175,640  

Interest received

        20,283       28,388  

Dividends received

        285,040       525,045  

Interest paid

        (212,921     (226,652

Income tax paid

        5,908       (311,680
     

 

 

   

 

 

 

Net cash provided by operating activities

        4,387,809       3,190,741  
     

 

 

   

 

 

 

Cash flows from investing activities:

       

Cash inflows from investing activities:

       

Decrease in short-term investment securities, net

        —         16,217  

Collection of short-term loans

        69,754       107,996  

Decrease in long-term financial instruments

        28       —    

Proceeds from disposals of long-term investment securities

        790       223,619  

Proceeds from disposal of investments in subsidiaries, associates and joint ventures

        659       —    

Proceeds from disposal of property and equipment

        89,922       10,767  

Proceeds from disposal of intangible assets

        4,475       3,843  

Collection of lease receivables

        —         6,881  
     

 

 

   

 

 

 

Sub-total

        165,628       369,323  

Cash outflows for investing activities:

       

Increase in short-term financial instruments, net

        (282,000     (135,000

Increase in short-term loans

        (100,739     (111,686

Acquisition of long-term investment securities

        (827     (321,124

Acquisition of investments in subsidiaries, associates and joint ventures

        (277,465     (379,821

Acquisition of property and equipment

        (2,480,297     (2,304,512

Acquisition of intangible assets

        (81,352     (109,853

Cash outflow for spin-off

        (121,100     —    
     

 

 

   

 

 

 

Sub-total

        (3,343,780     (3,361,996
     

 

 

   

 

 

 

Net cash used in investing activities

 

   W (3,178,152     (2,992,673
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.


SK TELECOM CO., LTD.

Separate Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Cash flows from financing activities:

       

Cash inflows from financing activities:

       

Proceeds from issuance of debentures

      W 1,062,500       1,195,274  

Cash inflows from settlement of derivatives

        36,691       12,426  

Proceeds from disposal of treasury shares

        —         300,000  
     

 

 

   

 

 

 

Sub-total

        1,099,191       1,507,700  

Cash outflows for financing activities:

       

Repayments of long-term borrowings

        (13,624     (12,882

Repayments of long-term payables - other

        (425,349     (425,349

Repayments of debentures

        (515,500     (550,000

Payments of cash dividends

        (731,364     (718,698

Payments of interest on hybrid bonds

        (14,766     (14,766

Repayments of lease liabilities

        (349,656