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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF SEPTEMBER 2010
COMMISSION FILE NUMBER 333-04906

 
SK Telecom Co., Ltd.
(Translation of registrant’s name into English)
11, Euljiro2-ga, Jung-gu
Seoul 100-999, Korea
(Address of principal executive offices)
 
     (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 o     Form 40-F o
     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): o
     Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
     Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
     Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
     Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.           Yes o      No þ
     If “Yes” is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b): 82-                     
 
 

 


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SEMI-ANNUAL REPORT
(From January 1, 2010 to June 30, 2010)
THIS IS A SUMMARY OF THE SEMI-ANNUAL BUSINESS REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION.
IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS.
UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A NON-CONSOLIDATED BASIS IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN KOREA, OR KOREAN GAAP, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

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Contents
     
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     Attachment: Korean GAAP Non-consolidated Financial Statements

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I. COMPANY OVERVIEW
1. Company Overview
A. Corporate Legal Business Name: SK Telecom Co., Ltd. (The “Company”)
B. Date of Incorporation: March 29, 1984
C. Location of Headquarters
(1) Address: 11 Euljiro 2-ga, Jung-gu, Seoul, Korea
(2) Phone: +82-2-6100-2114
(3) Website: http://www.sktelecom.com
D. Corporate Purpose of the Company
Business Objectives
1.   Information and communication business
 
2.   Handset sales and lease business
 
3.   New media business
 
4.   Advertisement business
 
5.   Communication sales business
 
6.   Real estate business(development, maintenance, leasing, etc.) and chattel leasing business
 
7.   Research and technology development related to Clause 1 through 4
 
8.   Overseas business and trading business related to Clause 1 through 4
 
9.   Manufacturing and distribution business related to Clause 1 through 4
 
10.   Tourism
 
11.   Electronic financial business
 
12.   Motion picture business (Production, Importation, Distribution, Screening)
 
13.   Lifetime education and lifetime educational facilities management
 
14.   Electric related construction business
 
15.   Information and communication related work business
 
16.   Ubiquitous city construction and service business
 
17.   Any business or undertaking incidental or conducive to the attainment of the objects above

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     E. Credit Ratings
(1) Corporate Bonds
                 
            Credit rating entity    
Credit rating date   Subject of rating   Credit rating   (Credit rating range)   Rating classification
May 29, 2007
  Corporate bond   AAA   Korea Ratings   Regular rating
June 14, 2007
  Corporate bond   AAA   Korea Information Services, Inc.   Regular rating
June 27, 2007
  Corporate bond   AAA   Korea Investors Service, Inc.   Regular rating
November 5, 2007
  Corporate bond   AAA   Korea Ratings   Current rating
November 5, 2007
  Corporate bond   AAA   Korea Information Services, Inc.   Current rating
November 5, 2007
  Corporate bond   AAA   Korea Investors Service, Inc.   Current rating
February 20, 2008
  Corporate bond   AAA   Korea Ratings   Current rating
February 21, 2008
  Corporate bond   AAA   Korea Investors Service, Inc.   Current rating
February 21, 2008
  Corporate bond   AAA   Korea Information Services, Inc.   Current rating
June 3, 2008
  Corporate bond   AAA   Korea Ratings   Regular rating
June 17, 2008
  Corporate bond   AAA   Korea Investors Service, Inc.   Regular rating
June 30, 2008
  Corporate bond   AAA   Korea Information Services, Inc.   Regular rating
October 20, 2008
  Corporate bond   AAA   Korea Ratings   Current rating
October 20, 2008
  Corporate bond   AAA   Korea Investors Service, Inc.   Current rating
October 20, 2008
  Corporate bond   AAA   Korea Information Services, Inc.   Current rating
January 13, 2009
  Corporate bond   AAA   Korea Ratings   Current rating
January 13, 2009
  Corporate bond   AAA   Korea Investors Service, Inc.   Current rating
January 13, 2009
  Corporate bond   AAA   Korea Information Services, Inc.   Current rating
February 23, 2009
  Corporate bond   AAA   Korea Ratings   Current rating
February 23, 2009
  Corporate bond   AAA   Korea Investors Service, Inc.   Current rating
February 23, 2009
  Corporate bond   AAA   Korea Information Services, Inc.   Current rating
June 24, 2009
  Corporate bond   AAA   Korea Information Services, Inc.   Regular rating
June 26, 2009
  Corporate bond   AAA   Korea Ratings   Regular rating
June 30, 2009
  Corporate bond   AAA   Korea Investors Service, Inc.   Regular rating
June 22, 2010
  Corporate bond   AAA   Korea Ratings   Regular rating
June 29, 2010
  Corporate bond   AAA   Korea Investors Service, Inc.   Regular rating
June 29, 2010
  Corporate bond   AAA   NICE Investors Service Co, Ltd.   Regular rating
 
*   Rating definition: “AAA” — The certainty of principal and interest payment is at the highest level with extremely low investment risk, and is stable in that there is no influence of any environmental change under reasonable expectation conditions.

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(2) Commercial Paper (“CP”)
                 
            Credit rating entity    
Credit rating date   Subject of rating   Credit rating   (Credit rating range)   Rating classification
May 29, 2007
  CP   A1   Korea Ratings   Current rating
June 14, 2007
  CP   A1   Korea Information Services, Inc.   Current rating
June 27, 2007
  CP   A1   Korea Investors Service, Inc.   Current rating
November 5, 2007
  CP   A1   Korea Ratings   Regular rating
November 5, 2007
  CP   A1   Korea Information Services, Inc.   Regular rating
November 5, 2007
  CP   A1   Korea Investors Service, Inc.   Regular rating
June 3, 2008
  CP   A1   Korea Ratings   Current rating
June 16, 2008
  CP   A1   Korea Information Services, Inc.   Current rating
June 17, 2008
  CP   A1   Korea Investors Service, Inc.   Current rating
October 20, 2008
  CP   A1   Korea Ratings   Regular rating
October 20, 2008
  CP   A1   Korea Investors Service, Inc.   Regular rating
October 20, 2008
  CP   A1   Korea Information Services, Inc.   Regular rating
June 24, 2009
  CP   A1   Korea Information Services, Inc.   Current rating
June 26, 2009
  CP   A1   Korea Ratings   Current rating
June 30, 2009
  CP   A1   Korea Investors Service, Inc.   Current rating
December 15, 2009
  CP   A1   Korea Ratings   Regular rating
December 30, 2009
  CP   A1   Korea Investors Service, Inc.   Regular rating
December 30, 2009
  CP   A1   Korea Information Services, Inc.   Regular rating
June 22, 2010
  CP   A1   Korea Ratings   Current rating
June 29, 2010
  CP   A1   Korea Investors Service, Inc.   Current rating
June 29, 2010
  CP   A1   NICE Investors Service Co, Ltd.   Current rating
 
*   Rating definition: “A1” — Timely repayment capability is at the highest level with extremely low investment risk, and is stable in that there is no influence of any environmental change under reasonable expectation conditions.

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(3) International Credit Ratings
                 
        Credit rating   Credit rating company    
Date of credit rating   Subject of rating   of securities   (Credit rating range)   Rating type
July 9, 2007
  Global Bonds   A   Fitch (England)   Current rating
July 9, 2007
  Global Bonds   A2   Moody’s (U.S.A.)   Current rating
July 9, 2007
  Global Bonds   A   S&P (U.S.A.)   Current rating
April 7, 2009
  Offshore Convertible Bonds   A   Fitch (England)   Current rating
April 7, 2009
  Offshore Convertible Bonds   A2   Moody’s (U.S.A.)   Current rating
April 7, 2009
  Offshore Convertible Bonds   A   S&P (U.S.A.)   Current rating
2. Company History
     A. Location of Headquarters
- 22 Dohwa-dong, Mapo-gu, Seoul (July 11, 1988)
- 16-49 Hangang-ro 3-ga, Yongsan-gu, Seoul (November 19, 1991)
- 267 Namdaemun-ro 5-ga, Jung-gu, Seoul (June 14, 1995)
- 99 Seorin-dong, Jongro-gu, Seoul (December 20, 1999)
- 11 Euljiro 2-ga, Jung-gu, Seoul (December 13, 2004)
     B. Significant Changes in Management
At the 26th General Shareholders’ Meeting held on March 12, 2010, Cho, Ki Haeng was elected as an inside director, Chung, Jay Young was elected as a member of the audit committee and Shim, Dal Sup was re-elected as an independent director while Sung Min Ha resigned from the Board on March 12.
     C. Other Important Matters related to Management Activities
(1) Interim Dividends
In accordance with the resolution of the Board of Directors on July 22, 2010, the Company decided to distribute interim dividends.
- Amount of interim dividends: Cash dividends of 1,000 Won per share (Total amount of interim dividend: 72,344,999 thousand Won)

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- Market dividend rate: 0.61%
- Record date: June 30, 2010
- Dividend payment date: Within 20 days from the date of the resolution of the Board of Directors.
(2) Acquisition of Treasury Stock
In accordance with the resolution of the Board of Directors on July 22, 2010, the Company decided to buy back the shares of the Company (estimated total purchase price: 201,875,000 thousand Won, estimated purchase price per share: 161,500 Won) for the purpose of stabilizing stock price and enhancing shareholder value. The Company will acquire its shares from July 23, 2010 through October 22, 2010 and actual purchase price may be changed subject to the fluctuation of stock price in the future.
     3. Total Number of Shares
     A. Total number of shares
                                 
(As of June 30, 2010)                           (Unit: shares)
    Share type        
Classification   Common shares         Total     Remarks  
I. Total number of authorized shares
    220,000,000             220,000,000        
II. Total number of shares issued to date
    89,278,946             89,278,946        
III. Total number of shares retired to date
    8,533,235             8,533,235        
a. reduction of capital
                       
b. retirement with profit
    8,533,235             8,533,235        
c. redemption of redeemable shares
                       
d. others
                       
IV. Total number of shares (II-III)
    80,745,711             80,745,711        
V. Number of treasury shares
    8,400,712             8,400,712        
VI. Number of shares outstanding (IV-V)
    72,344,999             72,344,999        
On July 22, 2010, the Company publicly disclosed its decision to acquire shares of treasury stock. The Company plans to acquire 1,250,000 shares of its common stock on KRX from July 23, 2010 through October 22, 2010. As of August 15, 2010, the Company accumulatively acquired 338,000 shares of its common stock.

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     B. Treasury Stock
(1) Acquisitions and Dispositions of Treasury Stocks
                                                                 
(As of June 30, 2010)                                                     (Unit: Shares)
                    At the                             At the        
                    beginning of     Changes     end of        
Acquisition methods     Type of shares     period     Acquired (+)     Disposed (-)     Retired (-)     period     Remarks  
Direct acquisition   pursuant to Article 165-2 of the Financial Investment Services and Capital Markets Act of Korea (“FSCMA”)   Common shares       4,436,028                         4,436,028        
 
          Preferred shares                                      
 
  based on reasons other than those stipulated in Article 165-2 of the FSCMA   Common shares       77,974                         77,974          
 
          Preferred shares                                      
Sub-total
          Common shares       4,514,002 *                       4,514,002 *      
 
          Preferred shares                                      
Indirect acquisition through trust and other agreements
  Common shares       3,886,710                         3,886,710        
 
          Preferred shares                                      
Total
          Common shares       8,400,712                         8,400,712        
 
          Preferred shares                                      
 
*   Among 4,514,002 shares directly acquired by the Company, 1,999,997 shares were deposited with the Korea Securities Depository as of March 31, 2010 for issuance upon conversion of the overseas convertible bonds.
On July 22, 2010, the Company publicly disclosed its decision to acquire shares of treasury stock. The Company plans to acquire 1,250,000 shares of its common stock on KRX from July 23, 2010 through October 22, 2010. As of August 15, 2010, the Company accumulatively acquired 338,000 shares of its common stock.

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  (2)   Retirement of Treasury Stock
     
     
    (Unit: in millions of Won, Shares)
                                                 
                            Monetary        
                            Amount        
                    Quantity   Retired        
    Retirement           Retired   (in millions of   Acquisition Period    
Retired Date   Purpose   Type of Share   (shares)   Won)   of Retired Shares   Remarks
January 9, 2009
  Stabilization of Share Price   Common                        
Total
          Common                        
 
          Preferred                        
  (3)   Execution of Trust Agreements relating to Treasury Stocks, Etc.
                                                                         
                (Amounts: in millions of Won)
    At Start of Period   Executed (+)   Cancelled (-)   At End of Period    
            No. of           No. of           No. of           No. of        
Category   Amount   Transactions   Amount   Transactions   Amount   Transactions   Amount   Transactions   Remark
Specified Money Trust
    982,000       4                               982,000       4     1. Extension Date: Oct. 26, 2007 Extension Amount: Won 631,200
2. Extension Date: October 29, 2007 Extension Amount: Won 350,800
Trust Contracts with Asset Management Companies
                                                       
Acquisition Contracts with Investment Companies
                                                       
 
                                                                       
Total
    982,000       4                               982,000       4        

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4. Status of Voting Rights
     
(As of June 30, 2010)   (Unit: shares)
                         
Classification   Number of shares   Remarks
Total shares (A)
  Common share     80,745,711        
 
  Preferred share              
Number of shares without voting rights (B)
  Common share     8,400,712     Treasury shares
 
  Preferred share              
Shares with restricted voting rights under the Korean law (C)
                 
Shares with reestablished voting rights (D)
                 
The number of shares with exercisable voting right s (E = A – B – C + D)
  Common share     72,344,999        
 
  Preferred share              
5. Dividends and Others
A. Dividends
  (1)   Distribution of cash dividends was approved during the 23rd General Meeting of Shareholders held on March 9, 2007.
 
  -   Distribution of cash dividends per share of Won 7,000 (exclusive of an interim dividend of Won 1,000) was approved.
 
  (2)   Distribution of interim dividends of Won 1,000 was approved during the 283rd Board of Directors’ Meeting on July 27, 2007.
 
  (3)   Distribution of cash dividends was approved during the 24th General Meeting of Shareholders held on March 14, 2008.
 
  -   Distribution of cash dividends per share Won 8,400 (exclusive of an interim dividend of Won 1,000) was approved.
 
  (4)   Distribution of interim dividends of Won 1,000 was approved during the 295th Board of Directors’ Meeting on July 18, 2008.
 
  (5)   Distribution of cash dividends was approved during the 25th General Meeting of Shareholders held on March 13, 2009.
 
  -   Distribution of cash dividends per share of Won 8,400 (exclusive of an interim dividend of Won 1,000) was approved.
 
  (6)   Distribution of interim dividends of Won 1,000 was approved during the 305th Board of Directors’ Meeting on July 23, 2009.

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  (7)   Distribution of cash dividends was approved during the 26th General Meeting of Shareholders held on March 12, 2010.
 
  -   Distribution of cash dividends per share of Won 8,400 (exclusive of an interim dividend of Won 1,000) was approved.
 
  (8)   Distribution of interim dividends of Won 1,000 was approved during the 318th Board of Directors’ Meeting on July 22, 2010.
B. Dividends for the Last 3 Fiscal Years
(Unit: in millions of Won, except per share value)
                         
    As of and for   As of and for   As of and for
    the six months   the year ended   the year ended
    ended June 30,   December 31,   December 31,
Classification   2010   2009   2008
Par value per share (Won)
    500       500       500  
Net income
    685,726       1,288,340       1,277,658  
Net income per share (Won)
    9,479       17,808       17,559  
Total cash dividend
    72,345       680,043       681,996  
Total stock dividends
                 
Percentage of cash dividend to available income (%)
    10.6       52.8       53.4  
Cash dividend yield ratio (%)
                       
Common share
    0.61       5.6       4.5  
Preferred share
                 
Stock dividend yield ratio (%)
                       
Common share
                 
Preferred share
                 
Cash dividend per share (Won)
                       
Common share
    1,000       9,400       9,400  
Preferred share
                 
Stock dividend per share (share)
                       
Common share
                 
Preferred share
                 
 
*   Total cash dividend of Won 681,996 million for the year ended December 31, 2008 includes the total interim dividend amount of Won 72,793 million, and the cash dividend amount per share of Won 9,400 includes the interim cash dividend amount of Won 1,000.
 
*   Total cash dividend of Won 680,043 million for the year ended December 31, 2009 includes the total interim dividend amount of Won 72,345 million, and the cash dividend amount per share of Won 9,400 includes the interim cash dividend amount of Won 1,000.

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II. BUSINESS
1. Business Overview
A. Industry Characteristics
As of June 30, 2010, the number of domestic mobile phone subscribers reached 49.61 million and, with more than 100% penetration rate, the Korean mobile communication market can be considered to have reached its maturation stage. However, the penetration rate is expected to increase further due to increased use of mobile phones by corporate users resulting from the rapid growth of smart phone markets, as well as the increasing popularity of high-tech mobile devices based on wireless data services such as tablet PC.
The Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology evidenced by the world’s first commercialization of CDMA2000 1x, CDMA 1x EV-DO, and the development of highly advanced handsets, including various smart phones, that enable the provision of convergence services for multimedia contents, mobile commerce, telematics, satellite Digital Multimedia Broadcasting (“DMB”), digital home services, connected workforce services and other related services. In addition, through HSPA+ network to be commercialized within this year and the LTE network to be introduced from the next year, the “industry productivity enhancement” (“IPE”) business directly resulting in the enhancement of productivity, such as the corporate “connected workforce” business, is expected to grow rapidly.
B. Growth Potential
                                             
(Unit: 1,000 persons)  
        As of June     As of December 31,  
Classification   30, 2010     2009     2008     2007     2006  
Number of subscribers
  SK Telecom     25,146       24,270       23,032       21,968       20,271  
 
  Others (KT, LGT)     24,462       23,675       22,575       21,529       19,926  
 
                                 
 
  Total     49,609       47,944       45,607       43,497       40,197  
 
                                 
(Source: Korea Communications Commission website)
C. Domestic and Overseas Market Conditions
The Korean mobile communication market includes the entire population of Korea with mobile communication service needs, and almost every Korean is considered a potential user. Although

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demand has primarily been in the domestic market, as the business territory expands to overseas market, the size of overseas sales is expected to grow in the near future. In addition, sales revenue related to data services is expected to increase due to the increasing popularity of smart phones and wireless Internet. Business-to-business segment that creates added values by adding additional solutions and applications is also growing. Seasonal and economic fluctuations have much less impact on the Korean mobile communication market compared to other industries.
Historical market share of the Company:
                                 
(Unit: %)
    As of   As of December 31,
Classification   June 30, 2010   2009   2008   2007
Mobile communication services
    50.7       50.6       50.5       50.5  
Comparative market share:
                         
(As of June 30, 2010)           (Unit: %)
Classification   SK Telecom   KT   LG Uplus
Market share
    50.7       31.4       17.9  
(Source: Korea Communications Commission website)
D. Business Overview and Competitive Strengths
The Company’s revenue in the first half of 2010 amounted to Won 6,106.8 billion, an increase of Won 162.5 billion compared to the first half of 2009. This increase in revenue was meaningful since it was achieved despite a number of negative factors, including the charging of voice calls on a per-second basis from March 2010 and the reduction of sign-up fees by 28% from December 2009. Operating income in the first half of 2010 amounted to Won 1,062.5 billion, which was lower than the same period of 2009, due among others to the increase in marketing and depreciation expenses. In the first half of 2010, however, the Company achieved meaningful business performance such as securing 25 million subscribers in May 2010 for the first time. Net income in the first half of 2010 amounted to Won 685.7 billion, an increase of Won 57.3 billion from the same period of 2009.
In June 2010, the Company met the guideline set by the Korea Communications Commission that limits marketing expenses of mobile communication business operators to 22% of their revenue. The Company will comply with the guideline going forward, which will help stabilize the competition in the mobile service markets, while maintaining its competitive advantage based on fundamental

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strengths deriving from handsets, price plans, networks and contents. In addition, the “Galaxy S” handset introduced in the end of June 2010 has acquired over 500,000 subscribers in 33 days from its debut, due to the Company’s marketing superiority, and broke all historical record of Korea handset sales, which reconfirmed the competitive edge of the Company in the field of smart phones. Wide penetration of smart phones has led to the vitalization of the Company’s T-Store, which has grown rapidly in the numbers of subscribers, contents and downloads, enhancing the Company’s competitiveness in the wireless data market.
As of June 30, 2010, the Company reached a subscriber number of approximately 25,150,000 and a 50.7% market share of the wireless market in Korea in terms of the number of subscribers. The Company plans to establish its leadership among users of smart phones by introducing various mobile platforms and streamlining the subscription process and pricing structures to enable subscribers to easily access their mobile content from multiple devices. The Company also plans to maintain its leadership in wireless Internet market by providing innovative user interface for content access and through investment in data networks, network sharing and support of the content production.
In 2010, the Company intends to continue its efforts to seek growth in business-to-business markets, such as “industry productivity enhancement” (“IPE”) business in domestic and foreign markets. As IPE business creates added values by adding additional solutions and applications to the existing infrastructure, it is more cost effective compared to traditional business-to-business model. The Company’s business-to-business sales in the first half of 2010 increased meaningfully from the same period of 2009.
The Company will also continue its efforts to become a global leader in information and communication technology. It plans to actively respond to secular changes such as the growing popularity of smart phones and wireless Internet, as well as gaining competitive strengths in the IPE business. In particular, the Company intends to pursue opportunities to grow the wireless broadband and IPE businesses in Korea and abroad. In case of overseas businesses, the Company will maintain its disciplined approach under its “Start Small Scale Fast” principle.
2. Major Products & Services
A. Updates on Major Products and Services

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                (Unit: in millions of Won, %)    
                    Sales amount
Business fields   Sales type   Item   Specific Usage   Major trademarks   (ratio)
Information and communication
  Services   Mobile communication   Mobile Phone   NATE, T store and others   5,917,684(96.9%)   
    Others     Others   189,134(3.1%)   
B. Price Fluctuation Trend of Major Products and Services
Previously, based on the Company’s Basic Plan for monthly subscription, the basic service fee was Won 13,000 per month and the usage fee was Won 20 per 10 seconds and based on the Company’s Standard Plan, basic service fee was Won 12,000 per month and the usage fee was Won 18 per 10 seconds. As of June 30, 2010, based on the Company’s Standard Plan, basic service fee is Won 12,000 per month and the usage fee is Won 1.8 per 1 second.
3. Investment Status
A. Investment in Progress
                                     
                            (Unit: in 100 millions of Won)
                            Amount    
        Investment   Subject of       Total   already   Future
Business field   Classification   period   investment   Investment effect   investments   invested   investment
 Network/Common
  Upgrade/New
installation
    2010     Network, systems and others   Capacity increase and quality improvement; systems improvement   To be determined     3,736     To be determined
Total
                    To be determined     3,736     To be determined

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B. Future Investment Plan
                                 
            (Unit: in 100 millions of Won)
    Expected investment amount   Expected investment for each year    
Business field   Asset type   Amount   2010   2011   2012   Investment effect
Network/Common
  Network, systems and others     18,500       18,500     To be determined   To be determined   Upgrades to the existing services and provision of new services
Total
        18,500       18,500     To be determined   To be determined   Upgrades to the existing services and provision of new services
4. Revenues    
                                     
                (Unit: in millions of Won)
                First Half        
Business field   Sales type   Item   2010   2009   2008
Information and communication
  Services   Mobile communication   Export                  
 
          Domestic     5,917,684       11,820,202       11,492,832  
 
          Subtotal     5,917,684       11,820,202       11,492,832  
 
    Others   Export     422       2,339       5,855  
 
          Domestic     188,712       278,643       175,975  
 
          Subtotal     189,134       280,982       181,830  
Total
          Export     422       2,339       5,855  
 
          Domestic     6,106,396       12,098,845       11,668,807  
 
          Total     6,106,818       12,101,184       11,674,662  
5. Derivative Transactions
In order to hedge risks related to fluctuations in currency exchange rates and interest rates, the Company enters into currency swap contracts and interest rate swap contracts. The gain or loss generated from the derivatives contracts is recognized as the gains/losses for the current period or other comprehensive income/loss, in accordance with Korean GAAP. Fair value of the Company’s derivatives is calculated using the Company’s valuation models. In accordance with the derivatives contracts, the Company’s estimated gain/loss on the date of expiration is zero.
A. Currency Swap
(1) Purpose of Contracts: Hedging of risks related to fluctuations in currency exchange rates and interest rates

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(2) Contract Terms
- Currency swap contract applying cash flow risk hedge accounting
The Company has entered into a currency swap contract with three banks including Citibank in order to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds (face amounts totaling US$300,000,000) issued on April 1, 2004. As of June 30, 2010, in connection with the unsettled foreign currency swap contract to which the cash flow risk hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to Won 5,004,645,000 (excluding tax effect totaling Won 1,952,601,000 and foreign exchange translation loss arising from unguaranteed U.S. dollar denominated bonds totaling Won 18,347,695,000) was accounted for as accumulated other comprehensive loss.
In addition, the Company has entered into a currency and interest rate swap contract with Credit Agricole Corporate & Investment Bank to hedge the foreign currency risk and the interest rate risk of U.S. dollar denominated floating rate long-term borrowings with face amounts totaling US$100,000,000 borrowed on October 10, 2006. As of June 30, 2010, in connection with this unsettled currency and interest rate swap contract, an accumulated loss on valuation of derivatives amounting to Won 5,019,112,000 (excluding tax effect totaling Won 973,790,000 and foreign exchange translation loss arising from U.S. dollar denominated long-term borrowings totaling Won 26,230 million) was accounted for as accumulated other comprehensive loss.
In addition, the Company has entered into a currency and interest rate swap contract with two banks including HSBC in order to hedge the foreign currency risk and the interest rate risk of unguaranteed Japanese yen dominated bonds (56-2) with face amounts totaling JPY 12,500,000,000 issued on November 13, 2007. As of June 30, 2010, in connection with this unsettled currency and interest rate swap contracts, an accumulated loss on valuation of derivatives amounting to Won 175,585,000 (excluding tax effect totaling Won 1,576,167,000 and foreign exchange translation loss arising from unguaranteed Japanese yen denominated bonds totaling Won 66,516,501,000) was accounted for as accumulated other comprehensive loss.
In addition, the Company has entered into a currency and interest rate swap contract with two banks including DBS in order to hedge the foreign currency risk and interest rate risk of U.S. dollar denominated floating rate bonds with face amounts totaling US$150,000,000 issued on November 20, 2008. As of June 30, 2010, in connection with this unsettled currency and interest rate swap contract, an accumulated gain on valuation of derivatives amounting to Won 4,557,249,000 (excluding tax effect totaling Won 1,454,952,000 and foreign exchange translation gain arising from U.S. dollar

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denominated bonds totaling Won 35,560,853,000) was accounted for as accumulated other comprehensive gain.
In addition, the Company has entered into a currency and interest rate swap contract with Mizuho Corporate Bank in order to hedge the foreign currency risk and the interest rate risk of unguaranteed Japanese yen dominated bonds (59-2) with face amounts totaling JPY 3,000,000,000 issued on January 22, 2009. As of June 30, 2010, in connection with this unsettled currency and interest rate swap contract, an accumulated gain on valuation of derivatives amounting to Won 1,912,486,000 (excluding tax effect totaling Won 539,419,000 and foreign exchange translation gain arising from unguaranteed Japanese yen denominated bonds totaling Won 5,195,228,000) was accounted for as accumulated other comprehensive gain.
In addition, the Company has entered into a currency and interest rate swap contract with The Bank of Tokyo-Mitsubishi in order to hedge the foreign currency risk and the interest rate risk of unguaranteed Japanese yen dominated bonds (60-2) with face amounts totaling JPY 5,000,000,000 issued on March 5, 2009. As of June 30, 2010, in connection with this unsettled currency and interest rate swap contract, an accumulated gain on valuation of derivatives amounting to Won 308,727,000 (excluding tax effect totaling Won 87,077,000 and foreign exchange translation gain arising from unguaranteed Japanese yen denominated bonds totaling Won 10,384,862,000) was accounted for as accumulated other comprehensive gain.
In addition, the Company has entered into a currency swap contract with six banks including Morgan Stanley to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds (with face amounts totaling US$400,000,000) issued on July 20, 2007, and has applied cash flow risk hedge accounting to this foreign currency swap contract starting from May 12, 2010. Accordingly, as of June 30, 2010, in connection with this unsettled foreign currency swap contract, an accumulated gain on valuation of currency swap of Won 10,830,444,000 that has accrued since May 12, 2010 (excluding tax effect totaling Won 3,054,740,000 and foreign exchange translation loss arising from unguaranteed U.S. dollar denominated bonds totaling Won 26,142,424,000) was accounted for as accumulated other comprehensive gain. Meanwhile, a loss on valuation of currency swap of Won 17,527,578,000 incurred prior to the date of applying cash flow risk hedge accounting in the first half of 2010 and a loss on valuation of currency swap of Won 64,533,708,000 for the first half of 2009, respectively, were charged to current operations.
B. Interest Rate Swap
(1) Purpose of Contracts: Hedging of risks related to fluctuations in interest rates

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(2) Contract Terms
- Interest rate swap contract to which the cash flow risk hedge accounting is applied:
The Company has entered into an interest rate swap contract with three banks including Nonghyup Bank in order to hedge the interest rate risk of long-term borrowings (totaling Won 500 billion) borrowed between July 28, 2008 and August 13, 2008. As of June 30, 2010, in connection with unsettled interest rate swap contract to which the cash flow risk hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to Won 10,575,915,000 (excluding tax effect totaling Won 2,982,950,000) was accounted for as accumulated other comprehensive loss.
- Interest rate swap contract to which the hedge accounting is not applied
The Company has entered into an interest rate swap contract with two banks including DBS in order to hedge the interest rate risk of floating rate foreign currency bonds with face amounts totaling US$220,000,000 issued on April 29, 2009. In connection with this unsettled interest rate swap contract, losses on valuation of interest rate swap of Won 2,816,075,000 and Won 2,897,336,000 for the six months ended June 30, 2010 and June 30, 2009, respectively, were charged to current operations.
C. Currency Forward
(1) Purpose of Contracts: Hedging of risks related to fluctuations in currency exchange rates
(2) Contract Terms
- Currency forward contract to which the hedge accounting is not applied
The Company has entered into a currency forward contract with DBS in order to hedge the foreign currency risk of foreign currency account receivable totaling MYR 323,000,000 that the Company expected to collect on August 2, 2010. In connection with this unsettled currency forward contract, a loss on valuation of currency forward of Won 721,471,000 for the six months ended June 30, 2010 was charged to current operations.

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6. Major Contracts
                     
            Completion   Contract   Contract Amount
Category   Vendor   Start Date   Date   Title   (Won 100M)
Construction
  SK E&C   January 1, 2010   December 31, 2010   2010 Cell Site Facility Construction (Seoul Area)   694
 
  SK E&C   January 1, 2010   December 31, 2010   2010 RF Relay Facility Construction (Seoul Area)   420
 
  SK E&C   May 7, 2010   December 31, 2010   2010 N/W Facility
Construction (Daegu SORO)
  151
 
                   
Service
  SK C&C   January 1, 2010   December 31, 2010   2010 IT SM Contract   2,010
 
  TU Media, Ltd.   January 1, 2010   December 31, 2010   2010 Satellite DMB Collaboration Contract   916
 
  SK Marketing & Company   January 1, 2010   December 31, 2010   2010 Membership
Collaboration Program
  691
 
                   
Product/ Equipment
  SK Telesys   March 12, 2010   December 24, 2010   2010 1st Optical Relay
Facility Investment
  314
 
  SK Telesys   March 12, 2010   December 24, 2011   2010 1st RF Relay
Facility Investment
  297
 
  Samsung Electronics   May 31, 2010   September 20, 2010   2010 2nd Main Equipment
W 5/6FA UHPA Samsung
  222
 
                   
 
                   
 
      Subtotal           5,715
 
                   
 
*   Selected among contracts exceeding Won 15 billion.
7. R&D Investments
(Unit: in millions of Won)
                                 
            For the year   For the year    
    For the six   ended   ended    
    months ended   December   December    
Category   June 30, 2010   31, 2009   31, 2008   Remarks
Raw material
    12       55       89        
Labor
    25,170       47,183       38,063        
Depreciation
    69,102       134,201       138,512        
Commissioned service
    28,121       69,750       85,837        
Others
    19,028       39,593       34,540        
Total R&D costs
    141,434       290,782       297,040        
Accounting            Sales and administrative expenses
    140,471       288,997       293,443        
Development expenses (Intangible assets)
    963       1,785       3,597        
 
                               
R&D cost / sales amount ratio
(Total R&D costs / Current sales amount×100)
    2.32 %     2.40 %     2.54 %        
 
                               

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8. Other information relating to investment decisions
A. Trademark Policies
The Company manages its corporate brand and other product brands such as “T” in a comprehensive way to protect and increase their value.
The Company’s ‘Brand Management Council’ in charge of overseeing its systematic corporate branding operates full time to execute decisions involving major brands and operates ‘Brandnet’, an intranet system to manage corporate brands which provides solutions including licensing of the brands and downloading of the Company logos.
B. Business-related Intellectual Properties
The Company owns intellectual property rights to the design of alphabet “T”. The rights are based on domestic trademark laws and the Company has proprietary and exclusive use of the trademark for 10 years and the rights are renewable. The designed alphabet “T” is registered in all business categories for trademarks (total of 45) and is being used as the primary brand of the Company.

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III. FINANCIAL INFORMATION
1. Summary Financial Information (Non-consolidated)
(Unit: in millions of Won)
                                         
    As of and for the six    
  months ended   As of and for the year ended December 31,
Classification / Fiscal Year   June 30, 2010   2009   2008   2007   2006
 
Current assets
    5,294,568       4,983,052       3,990,503       4,094,059       4,189,325  
Quick assets
    5,279,244       4,960,396       3,976,576       4,075,378       4,172,887  
Inventory
    15,324       22,656       13,927       18,681       16,438  
Non-current assets
    13,863,549       14,314,581       14,626,992       14,038,451       11,624,728  
Investments
    5,059,707       5,107,653       5,668,127       5,940,045       3,547,942  
Property and Equipment
    4,825,880       5,196,521       4,698,214       4,594,413       4,418,112  
Intangible assets
    2,491,155       2,665,936       2,941,592       3,174,942       3,405,158  
Other non-current assets
    1,486,807       1,344,471       1,319,059       329,051       253,516  
 
Total assets
    19,158,117       19,297,633       18,617,495       18,132,510       15,814,053  
 
Current liabilities
    3,807,231       3,294,633       3,412,490       2,484,548       2,985,620  
Non-current liabilities
    4,155,234       4,761,550       4,475,998       4,221,016       3,522,006  
 
Total liabilities
    7,962,466       8,056,183       7,888,488       6,705,564       6,507,626  
 
Capital
    44,639       44,639       44,639       44,639       44,639  
Capital surplus
    3,032,916       3,032,009       2,957,095       2,954,829       2,962,699  
Capital adjustment
    (-)2,709,256       (-)2,708,407       (-)2,147,530       (-)2,072,486       (-)2,019,568  
Other Cumulative Profit and Loss
    790,034       913,919       373,784       1,594,099       473,904  
Retained earnings
    10,037,318       9,959,290       9,501,018       8,905,865       7,844,753  
 
Total stockholders’ equity
    11,195,652       11,241,450       10,729,007       11,426,946       9,306,427  
 
Sales
    6,106,818       12,101,184       11,674,662       11,285,900       10,650,952  
Operating Income (or Loss)
    1,062,532       2,179,337       2,059,896       2,171,543       2,584,370  
Income (or Loss) from continuing operation
    685,726       1,288,340       1,277,658       1,642,451       1,446,598  
Current Period’s Net Income (or Loss)
    685,726       1,288,340       1,277,658       1,642,451       1,446,598  
(Unit: Won)
                                         
    For the six months    
  ended   For the year ended December 31,
Classification / Fiscal Year   June 30, 2010   2009   2008   2007   2006
Earnings per share
    9,479       17,808       17,559       22,607       19,734  
Diluted earnings per share
    9,336       17,599       17,395       22,289       19,458  

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2. Summary Financial Information (Consolidated)
(Unit: in millions of Won)
                                         
    As of and for the year ended December 31,
Classification / Fiscal Year   2009   2008   2007   2006   2005
 
Current assets
    6,370,631       5,422,447       4,813,072       4,663,962       4,598,580  
Quick assets
    6,250,741       5,387,473       4,766,020       4,644,184       4,590,796  
Inventory
    119,890       34,974       47,052       19,778       7,784  
Non-current assets
    16,835,625       17,051,224       14,235,863       11,576,006       10,106,193  
Investments
    3,059,902       4,025,429       5,446,711       3,236,783       1,989,934  
Property and Equipment
    8,165,879       7,437,689       4,969,353       4,507,335       4,663,369  
Intangible assets
    3,992,325       3,978,145       3,433,962       3,518,411       3,452,889  
Other non-current assets
    1,617,519       1,609,961       385,836       313,477        
 
Total assets
    23,206,256       22,473,671       19,048,935       16,239,968       14,704,772  
 
Current liabilities
    4,894,936       4,628,821       3,016,874       3,208,416       2,863,373  
Non-current liabilities
    5,966,695       6,020,410       4,344,428       3,548,464       3,513,860  
 
Total liabilities
    10,861,631       10,649,231       7,361,302       6,756,880       6,377,233  
 
Capital
    44,639       44,639       44,639       44,639       44,639  
Capital surplus
    3,031,947       2,958,854       2,956,106       2,950,327       2,954,840  
Capital adjustment
    -2,746,885       (-)2,159,389       (-)2,072,723       (-)2,019,567       (-)2,048,515  
Other Cumulative Profit/Loss
    915,306       356,192       1,591,258       490,010        
Retained earnings
    9,909,752       9,448,185       8,914,970       7,847,434       7,267,649  
 
Total stockholders’ equity
    12,344,625       11,824,440       19,048,935       9,483,088       8,327,540  
 
Sales
    14,555,465       13,995,924       11,863,357       11,027,977       10,721,820  
Operating Profit (or Loss)
    1,878,544       1,751,227       2,101,955       2,621,132       2,670,616  
Profit (or Loss) from continuing operation before tax
    1,400,498       1,260,366       2,285,765       2,021,578       2,561,567  
Current Period’s Net Profit
    1,055,606       972,338       1,562,265       1,449,552       1,868,307  
Net income attributable to majority interests
    1,247,182       1,215,719       1,648,876       1,451,491       1,872,978  
Number of Consolidated Companies
    29       35       26       18       17  
 
*   See the attached Korean GAAP Consolidated Financial Statements.

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IV. AUDITOR’S OPINION
1. Auditor
         
Six months ended   Year ended December 31,
June 30, 2010   2009   2008
Deloitte Anjin LLC
  Deloitte Anjin LLC   Deloitte Anjin LLC
2. Audit Opinion
         
Term   Auditor’s opinion   Issues noted
Six months ended June 30, 2010    
Year ended December 31, 2009   Unqualified  
Year ended December 31, 2008   Unqualified  
3. Remuneration for Independent Auditors for the Past Three Fiscal Years
A. Audit Contracts
(Unit: in thousands of Won)
                 
Term   Auditors   Contents   Fee   Total hours
Year ended December 31, 2010
  Deloitte Anjin LLC   Semi-annual review        
 
      Quarterly review        
 
      Non-consolidated financial statements audit   1,470,000   16,135
 
      Consolidated financial statements audit        
 
      IFRS-based financial statements review        
 
               
Year ended December 31, 2009
  Deloitte Anjin LLC   Semi-annual review        
 
      Quarterly review        
 
      Non-consolidated financial statements audit   1,308,356   13,982
 
      Consolidated financial statements audit        
 
               
Year ended December 31, 2008
  Deloitte Anjin LLC   Semi-annual review        
 
      Quarterly review        
 
      Non-consolidated financial statements audit   1,310,097   13,346
 
      Consolidated financial statements audit        

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B. Non-Audit Services Contract with External Auditors
(Unit: in thousands of Won)
                                 
                    Service        
Term   Contract date   Service provided   duration   Fee
Year ended December 31, 2009
  May 13, 2009   Tax consulting   30 days     40,000  
 
  May 22, 2009   Tax consulting   10 days     10,000  
 
  May 22, 2009   Tax adjustment for fiscal year 2008   20 days     34,000  
 
  May 22, 2009   Review of deferred corporate income tax for 1Q and 2Q   10 days     14,000  
 
  September 14, 2009   Review of quarterly tax adjustments   5 days     7,000  
 
  September 14, 2009   Tax consulting   20 days     20,000  
 
  December 28, 2009   Review of quarterly tax adjustments   5 days     7,000  
 
  December 28, 2009   Tax consulting   10 days     12,000  
 
                               
Year ended December 31, 2008
  November 20, 2007   Set up services for agency tax manual   60 days     48,000  
 
  March 3, 2008   Tax adjustment for fiscal year 2007   10 days     33,000  
 
  May 15, 2008   Tax consulting   5 days     7,500  
 
  June 24, 2008   Foreign tax consulting re indirect taxes   4 days     6,000  
 
  August 13, 2008   Tax consulting   10 days     9,400  
 
  November 1, 2008   Tax consulting   4 days     5,000  
 
  November 19, 2008   Tax consulting   10 days     10,800  
 
  November 19, 2008   Review of deferred corporate income tax for 1Q and 2Q   10 days     18,000  
 
  December 24, 2008   Review of deferred corporate income tax for 3Q   3 days     6,000  
 
  December 24, 2008   Tax consulting   3 days     3,600  
 
  December 24, 2008   Tax consulting   3 days     3,000  
 
                               
Year ended December 31, 2007
  March 30, 2007   Tax adjustment for fiscal year 2006   10 days     30,000  
 
  September 28, 2007   Tax consulting for denial of deductions for corporate income tax   1 day     2,000  
 
  September 28, 2007   Review of deferred corporate income tax for 1Q and 2Q   6 days     10,000  
 
  September 28, 2007   Tax consulting   5 days     9,000  
 
  December 31, 2007   Review of deferred corporate income tax for 3Q   2 days     5,000  
 
  December 31, 2007   Tax consulting   3 days     3,000  

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V. MANAGEMENT DISCUSSION AND ANALYSIS
Not required in quarterly and half year reports under the Korean disclosure rules.
VI. CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS AND AFFILIATED COMPANIES
1. Board of Directors
A. Overview of Board of Directors Composition
The Company’s Board of Directors is comprised of eight members: five independent directors and three inside directors. Within the Board, there are five Committees: Independent Director Nomination Committee, Audit Committee, Compensation Committee, CapEx Review Committee, and Corporate Citizenship Committee.
B. (1) Significant Activities of the Board of Directors
             
Meeting   Date   Agenda   Approval
312nd (the first meeting of 2010)
  January
27, 2010
 
-   Financial Statements as of and for the year ended December 31, 2009.
-   Annual Business Report as of and for the year ended December 31, 2009
-   Report for Internal Accounting Management System
-   Report for Subsequent Events following 4Q 2009
  Approved as proposed
Approved as proposed
 
           
313rd (the second meeting of 2010)
  February 
11, 2010
 
-   Convocation of the 26th Annual General Meeting of Shareholders
-   Result of Internal Accounting Management System Evaluation
  Approved as proposed
 
           
314th (the third meeting of 2010)
  March
12, 2010
 
-   Appointment of Committee Members
-   Fund Management Transaction with Affiliated Financial Company (SK Securities)
-   Establishment of SPC and Limited Partnership Agreement between SPC and Offshore Private Equity Fund
  Approved as proposed
Approved as proposed

Approved as proposed

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Meeting   Date   Agenda   Approval
315th (the fourth meeting of 2010)
  April
26, 2010
 
-    Establishment of SKT Customer Contact Channel Subsidiary
-    Establishment of SKT Cell Site Maintenance Subsidiary
-    Business Plan for Joint Venture with Disney
-    Acquisition of Additional WCDMA Frequency
-    Extension of KIF (Korea IT Fund) Maturity
-    Partial Disposition of Shares of IHQ, Inc.
-    Report for Subsequent Events following 1Q 2010
  Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
Approved as proposed
 
           
316th (the fifth meeting of 2010)
  May 26, 2010  
-    Investment in Packet One Networks
-    Investment in Harbinger Global Wireless (HGW)
  Approved as proposed
Approved as proposed
 
           
317th (the sixth meeting of 2010)
  June 24, 2010  
-    Fund Management Transaction with Affiliated Financial Company (SK Securities)
-    Additional investment in network equipment in 2010
  Approved as proposed

Approved as proposed
 
           
318th (the seventh meeting of 2010)
  July 22, 2010  
-    Proposal for Interim Dividend
-    Proposal for acquisition of treasury stock
-    Financial performance during 1H 2010
-    Report for Subsequent Events following 2Q 2010
-    Performance review of compliance program for 1H 2010 and planning for 2H 2010
  Approved as proposed
Approved as proposed
 
*   The line items that do not show approval are for reporting purpose only.
(2) Independent Directors’ Activities at the Board of Directors’ Meetings
             
        Independent    
Meetings   Dates   Directors Attended   Description
The first meeting of 2010
  January 27, 2010   5 / 5  
The second meeting of 2010
  February 11, 2010   5 / 5  
The third meeting of 2010
  March 12, 2010   5 / 5  
The fourth meeting of 2010
  April 26, 2010   5 / 5  
The fifth meeting of 2010
  May 26, 2010   4 / 5  
The sixth meeting of 2010
  June 24, 2010   5 / 5  
The seventh meeting of 2010
  July 22. 2010   5 / 5  

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C. Committees within Board of Directors
     (1) Committee Structure
          a) Independent Director Nomination Committee
(As of August 16, 2010)
             
Number of   Members    
Persons   Inside Directors   Independent Directors   Remarks
4
  Man Won Jung, Ki Haeng Cho   Rak Yong Uhm, Jae Ho Cho  
 
*   The Independent Director Nomination Committee is a committee established under the provisions of the Articles of Incorporation and Korean Commercial Code.
          b) Audit Committee
(As of August 16, 2010)
             
Number of   Members    
Persons   Inside Directors   Independent Directors   Remarks
4
    Dal Sup Shim, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho  
 
*   The Audit Committee is a committee established under the provisions of the Articles of Incorporation and Korean Commercial Code.
          c) Compensation Review Committee
(As of August 16, 2010)
         
Number of   Members
Persons   Inside Directors   Independent Directors
5
    Dal Sup Shim, Rak Yong Uhm, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho
 
*   The Compensation Review Committee is a committee established by the resolution of the Board of Directors.
          d) Capex Review Committee
(As of August 16, 2010)
             
Number of   Members    
Persons   Inside Directors   Independent Directors   Remarks
4
  Ki Haeng Cho   Dal Sup Shim, Rak Yong Uhm, Jay Young Chung  

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*   The Capex Review Committee is a committee established by the resolution of the Board of Directors.
  e)   Corporate Citizenship Committee
(As of August 16, 2010)
             
Number of   Members    
Persons   Inside Directors   Independent Directors   Remarks
4
  Ki Haeng Cho   Rak Yong Uhm, Hyun Chin Lim,
Jay Young Chung
 
 
*   The Corporate Citizenship Committee is a committee established by the resolution of the Board of Directors.
(2)   Activities of the Committees of the Board of Directors (As of August 16, 2010)
                     
                Independent Directors
                Rak Yong    
                Uhm   Jae Ho Cho
    Date of           (Attendance:   (Attendance:
Committee Name   Activity   Agenda   Approval   100%)   100%)
                Vote
Independent
Director Nomination
Committee
  February 11, 2010   26th General Meeting of Shareholders: Proposal to nominate an Independent Director Dal Sup Shim   Approved as Proposed   For   For
 
                   
 
  April 26, 2010   Election of Chairman of Committee — Man Won Jung   Approved as Proposed   For   For
                         
                Independent Directors
                Dal Sup   Rak Yong   Jay Yung
                Shim   Uhm   Chung
    Date of           (Attendance:   (Attendance:   (Attendance:
Committee Name   Activity   Agenda   Approval   100%)   100%)   100%)
                Vote
CapEx Committee
  February 10, 2010   Business plan and pending agenda for major investment        
 
                       
 
  March 11, 2010   Business plan and pending agenda for major investment        
 
                       
 
  April 26, 2010   Election of Chairman of Committee — Rak Yong Uhm   Approved as proposed   For   For   For
 
*   Agendas filled in with hyphens are for reporting purpose only

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                Independent Directors
                    Rak   Hyun   Jay    
                Dal Sup   Yong   Chin   Yung   Jae Ho
                Shim   Uhm   Lim   Chung   Cho
    Date of           (Attendance:   (Attendance:   (Attendance:   (Attendance:   (Attendance:
Committee Name   Activity   Agenda   Approval   100%)   100%)   100%)   100%)   100%)
                Vote
Compensation Review
Committee
  April 26, 2010   Election of Chairman of Committee — Hyun Chin Lim   Approved as proposed   For   For   For   For   For
 
                               
 
  July 21, 2010   Committee administration            
                         
                Independent Directors
                Rak Yong   Hyun Chin   Jay Yung
                Uhm   Lim   Chung
Committee   Date of           (Attendance:   (Attendance:   (Attendance:
Name   Activity   Agenda   Approval   100%)   67%)   100%)
                Vote
Corporate
Citizenship
Committee
  March 12, 2010   Environment
Friendly Business
Plan
       
 
      Result of Social Contribution Expenditures        
 
      Result and Plan for Win-Win Business Strategy        
 
                       
 
  April 23, 2010   Election of Chairman of Committee — Jay Young Chung   Approved as proposed   For   Absence   For
 
      Status of Customer Protection        
 
      2010 Ethical
Management Plan
       
 
                       
 
  July 21, 2010   Preparation of Greenhouse Gas Inventory        
 
      Operating System for
Sustainability Index
       
 
*   Agendas filled in with hyphens are for reporting purpose only

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D.   Directors’ Independence
On February 11, 2010, in the notice of the annual General Meeting of Shareholders, background information on Cho, Ki Haeng, a candidate for inside director, and Shim, Dal Sup and Chung, Jay Young, candidates for independent directors, was publicly disclosed. There was no other nomination by shareholders. For the election of independent directors, the Company has established the Independent Director Nomination Committee, which is currently in operation. In the meeting of the Independent Director Nomination Committee held on February 11, 2010, the Committee nominated the independent director candidates.
-   The Independent Director Nomination Committee. (As of August 16, 2010)
         
Name   Independent Director   Remarks
Man Won Jung
  No    
Ki Haeng Cho
  No  
o    During the 314th meeting of the Board of the Directors held on March 12, 2010, the Independent Director Nomination Committee was established.
Rak Yong Uhm
  Yes  
o    Director Sung Min Ha submitted his resignation on March 12, 2010.
Jae Ho Cho
  Yes  
o    Director Ki Haeng Cho was elected on March 12, 2010.
2. Audit System
The Company’s Audit Committee consists of four independent directors, Dal Sup Shim, Hyun Chin Lim, Jae Ho Cho and Jay Yung Chung.
Major activities of the Audit Committee are as follows.
                 
Meeting   Date   Agenda   Approval   Remarks
The first
     
o    2nd half 2009 Management Audit Results
     
meeting of 2010
  January 26, 2010  
o    Evaluation of Internal Accounting Controls based on the Opinion of the Members of the Audit Committee
  Approved as proposed    
 
     
o    Reports on Internal Accounting Management System
     
 
               
The second
     
o    Reports on 2009 Korean GAAP Audit
     
meeting of 2010
  February 10, 2010  
o    Report on Review of 2009 Internal Accounting Management System
     
 
     
o    Evaluation of Internal Accounting Management System Operation
  Approved as proposed    
 
     
o    Auditor’s Report for Fiscal Year 2009
  Approved as proposed    
 
               
The third
     
o    2Q 2010 Transactions with SK C&C Co., Ltd.
  Approved as proposed    
meeting of 2010
  March 11, 2010  
o    Construction of Mobile Phone Facilities for 2010
  Approved as proposed    
 
     
o    Construction of Network Facilities
  Approved as proposed    
 
     
o    Purchase of Mobile Phone Relay Devices for 2010
  Approved as proposed    
 
     
o    Resale of Fixed-line Telephone Services of SK Broadband
  Approved as proposed    
 
     
o    Plan for Fund Management Transaction with Affiliated Company (SK Securities)
     
 
     
o    2010 Management Audit Plan
     

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Meeting   Date   Agenda   Approval   Remarks
The fourth
     
o    Election of the Chairman of Audit Committee
  Approved as proposed    
meeting of 2010
  April 26, 2010  
o    Approval of Entire Auditor Services for 2010
  Approved as proposed    
 
     
o    Audit Plan for 2010
     
 
     
o    Auditor Fees for 2010
  Approved as proposed    
 
               
The fifth
     
o    Purchase of Mobile Phone Relay Devices for 2010
  Approved as proposed    
meeting of 2010
  May 26, 2010  
o    Construction of Mobile Phone Facilities for 2010
  Approved as proposed    
 
     
o    Construction of Transmission Network Facilities for 2010
  Approved as proposed    
 
     
o    Outsourcing Mobile NATE business
  Approved as proposed    
 
               
The sixth
     
o    3Q 2010 Transactions with SK C&C Co., Ltd
  Approved as proposed    
meeting of 2010
  June 23, 2010  
o    Consulting Service regarding Customer Contact Channel
  Approved as proposed    
 
     
o    Base Station Maintenance Service
  Approved as proposed    
 
     
o    Fund Management Transaction with Affiliated Company (SK Securities)
  Approved as proposed    
 
     
o    Reports on 2009 US GAAP Audit
     
 
               
The seventh
     
o    1st half 2010 Financial Results
     
meeting of 2010
  July 21, 2010  
o    Report on Review on the 1st half of 2010 Korean GAAP
     
 
*   The line items that do not show approval are for reporting purpose only.
3. Shareholders’ Exercises of Voting Rights
A. Voting System and Exercise of Minority Shareholders’ Rights
Pursuant to the Articles of Incorporation as shown below, the cumulative voting system was first introduced in the General Meeting of Shareholders in 2003.
     
Articles of Incorporation   Description
Article 32 (3) (Election of Directors)
  Cumulative voting under Article 382-2 of the Korean Commercial Code will not be applied for the election of directors.
 
   
Article 4 of the 12th Supplement to the Articles of Incorporation (Interim Regulation)
  Article 32 (3) of the Articles of Incorporation shall remain effective until the day immediately preceding the date of the general shareholders’ meeting of 2003.
Also, neither written or electronic voting system nor minority shareholder rights is applicable.

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4. Affiliated Companies
A. Capital Investments between Affiliated Companies
     
(As of July 1, 2010)   * Based on common shares
                                                                                         
    Invested companies
    SK   SK   SK   SK   SK           SK   SK   SK   SK   SK
Investing company   Corporation   Energy   Telecom   Networks   Chemicals   SKC   C&C   E&C   Shipping   E&S   Gas
SK Corporation
            33.4 %     23.2 %     39.1 %             42.5 %             40.0 %     89.8 %     67.5 %     45.5 %
SK Energy
                                                                                       
SK Telecom
                                                    9.0 %                                
SK Networks
                                                                                       
SK Chemicals
                                                            18.0 %                        
SKC
                                                                    10.2 %                
SK C&C
    31.8 %                                                                     32.5 %        
SK E&C
                                                                                       
SK E&S
                                                                                       
SK Gas
                                                                                       
SK Marketing & Company
                                                                                       
SK D&D
                                                                                       
SK Communications
                                                                                       
SK Broadband
                                                                                       
SK Lubricant
                                                                                       
SK Securities
                                                                                       
SK Petrochemical
                                                                                       
Entec
                                                                                       
Total affiliated companies
    31.8 %     33.4 %     23.2 %     39.1 %     0.0 %     42.5 %     9.0 %     58.0 %     100.0 %     100.0 %     45.5 %
                                                                                 
    Invested companies
    SK           SK Marketing                   YN   Daehan   SK   SK   SK
Investing company   Securities   K-Power   & Company   DOPCO   CCES   Energy   City Gas   Sci-tech   NJC   Telink
SK Corporation
            100.0 %                                                                
SK Energy
                    50.0 %     38.3 %                                                
SK Telecom
                    50.0 %                                                     90.8 %
SK Networks
    22.7 %                     4.6 %                                                
SK Chemicals
                                                            50.0 %     60.0 %        
SKC
    7.7 %                                                                        
SK C&C
                                                                               
SK E&C
                                                                               
SK E&S
                                    100.0 %     100.0 %     47.6 %                        
SK Gas
                                                                               
SK Marketing & Company
                                                                               
SK D&D
                                                                               
SK Communications
                                                                               
SK Broadband
                                                                               
SK Lubricant
                                                                               
SK Securities
                                                                               
SK Petrochemical
                                                                               
Entec
                                                                               
Total affiliated companies
    30.4 %     100.0 %     100.0 %     42.9 %     100.0 %     100.0 %     47.6 %     50.0 %     60.0 %     90.8 %

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    Invested companies
    Jeonnam   Gangwon           M &   Chungnam   SK           MRO           Encar
Investing company   City Gas   City Gas   JBES   Service   City Gas   Wyverns   Infosec   Korea   SK Telesys   network
SK Corporation
                                                                               
SK Energy
                                                                            87.5 %
SK Telecom
                                            100.0 %                                
SK Networks
                                                            51.0 %                
SK Chemicals
                                                                               
SKC
                                                                    77.1 %        
SK C&C
                                                    100.0 %                        
SK E&C
                                                                               
SK E&S
    100.0 %     100.0 %     100.0 %             100.0 %                                        
SK Gas
                                                                               
SK Marketing & Company
                            100.0 %                                                
SK D&D
                                                                               
SK Communications
                                                                               
SK Broadband
                                                                               
SK Lubricant
                                                                               
SK Securities
                                                                               
SK Petrochemical
                                                                               
Entec
                                                                               
Total affiliated companies
    100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     51.0 %     77.1 %     87.5 %
                                                                                 
    Invested companies
            TU   SK           Loen           SK   SK Mobile   SKC    
Investing company   Paxnet   Media   D&D   Natruck   Entertainment   Independence   Petrochemical   Energy   Media   IHQ
SK Corporation
                                                                               
SK Energy
                            33.7 %                     100.0 %     100.0 %                
SK Telecom
    59.7 %     44.2 %                     63.5 %                                     37.1 %
SK Networks
                                                                               
SK Chemicals
                                                                               
SKC
                                                                    100.0 %        
SK C&C
                                            67.8 %                                
SK E&C
                    45.0 %                                                        
SK E&S
                                                                               
SK Gas
                                                                               
SK Marketing & Company
                                                                               
SK D&D
                                                                               
SK Communications
                                                                               
SK Broadband
                                                                               
SK Lubricant
                                                                               
SK Securities
                                                                               
SK Petrochemical
                                                                               
Entec
                                                                               
Total affiliated companies
    59.7 %     44.2 %     45.0 %     33.7 %     63.5 %     67.8 %     100.0 %     100.0 %     100.0 %     37.1 %

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    Invested companies
                                                                                    SKC
    NTREEV   SK   SK   SK           SKC Air   SKN   Nuri   Commerce           Solmics
Investing company   Soft   I-Media   Communications   Lubricant   I Platform   Gas   Service   Solution   Planet   RealVest   Co., Ltd.
SK Corporation
                                                                                       
SK Energy
                            100.0 %                                                        
SK Telecom
    63.7 %             64.8 %                                             100.0 %                
SK Networks
                                    66.7 %             85.0 %                                
SK Chemicals
                                                                                       
SKC
                                            80.0 %                                     48.7 %
SK C&C
                                                            46.3 %                        
SK E&C
                                                                            100.0 %        
SK E&S
                                                                                       
SK Gas
                                                                                       
SK Marketing & Company
                                                                                       
SK D&D
                                                                                       
SK Communications
            100.0 %                                                                        
SK Broadband
                                                                                       
SK Lubricant
                                                                                       
SK Securities
                                                                                       
SK Petrochemical
                                                                                       
Entec
                                                                                       
Total affiliated companies
    63.7 %     100.0 %     64.8 %     100.0 %     66.7 %     80.0 %     85.0 %     46.3 %     100.0 %     100.0 %     48.7 %
                                                                                         
    Invested companies
                                                                            Namwon    
                                                PyongTaek                   Sarang    
    Sumray   SK   Broadband   Broadband   Broadband           Energy   Pana Blu   WS   Electric    
Investing company   Corporation   Broadband   Media   D&M   CS   UB Care   Service   Co., Ltd.   Commerce   Power   Incyto
SK Corporation
                                                                                       
SK Energy
                                                                                       
SK Telecom
            50.6 %                                                                        
SK Networks
                                                                    100.0 %                
SK Chemicals
                                            44.0 %                                        
SKC
    53.7 %                                                                             100.0 %
SK C&C
                                                                                       
SK E&C
                                                                                       
SK E&S
                                                    100.0 %                                
SK Gas
                                                            80.4 %                        
SK Marketing & Company
                                                                                       
SK D&D
                                                                            100.0 %        
SK Communications
                                                                                       
SK Broadband
                    100.0 %     100.0 %     100.0 %                                                
SK Lubricant
                                                                                       
SK Securities
                                                                                       
SK Petrochemical
                                                                                       
Entec
                                                                                       
Total affiliated companies
    53.7 %     50.6 %     100.0 %     100.0 %     100.0 %     44.0 %     100.0 %     80.4 %     100.0 %     100.0 %     100.0 %
                                                                                 
    Invested companies
    Jeju United   Daejeon   MKS           PS &                           Gwangju   Korea Sleep
Investing company   FC   Pure Water   Guarantee   Zicos   Marketing   SK Forest   Green Bio   SK Seentec   Pure Water   Network
SK Corporation
                                                                               
SK Energy
    100.0 %                                                                        
SK Telecom
                                    100.0 %                                        
SK Networks
                                                                               
SK Chemicals
                                                            100.0 %             43.2 %
SKC
                                                                               
SK C&C
                                                                               
SK E&C
            32.0 %                             100.0 %                     31.7 %        
SK E&S
                                                                               
SK Gas
                                                    69.0 %                        
SK Marketing & Company
                                                                               
SK D&D
                    100.0 %                                                        

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    Invested companies
    Jeju United   Daejeon   MKS           PS &                           Gwangju   Korea Sleep
Investing company   FC   Pure Water   Guarantee   Zicos   Marketing   SK Forest   Green Bio   SK Seentec   Pure Water   Network
SK Communications
                                                                               
SK Broadband
                                                                               
SK Lubricant
                            100.0 %                                                
SK Securities
                                                                               
SK Petrochemical
                                                                            10.7 %
Entec
                                                                               
Total affiliated companies
    100.0 %     32.0 %     100.0 %     100.0 %     100.0 %     100.0 %     69.0 %     100.0 %     31.7 %     53.9 %
                                                                                 
    Invested companies
                            Television                                                
            Yeosu Expo           Media                                                
Investing company   Entec   Environment   SKW   Korea                                                
SK Corporation
                                                                               
SK Energy
                                                                               
SK Telecom
                            49.0 %                                                
SK Networks
                                                                               
SK Chemicals
    25.0 %                                                                        
SKC
                    60.0 %                                                        
SK C&C
                                                                               
SK E&C
    25.0 %                                                                        
SK E&S
                                                                               
SK Gas
                                                                               
SK Marketing & Company
                                                                               
SK D&D
                                                                               
SK Communications
                                                                               
SK Broadband
                                                                               
SK Lubricant
                                                                               
SK Securities
                                                                               
SK Petrochemical
                                                                               
Entec
            58.7 %                                                                
Total affiliated companies
    50.0 %     58.7 %     60.0 %     49.0 %                                                

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VII. SHAREHOLDERS INFORMATION
1. Shareholdings of the Largest Shareholder and Related Persons
A. Shareholdings of the Largest Shareholder and Related Persons
     
(As of June 30, 2010)   (Unit: Shares, %)
                                         
            Number of shares owned and ownership ratio
            Beginning of Period   End of Period
            Number of   Ownership   Number of   Ownership
Name   Relationship   Type of share   shares   ratio   shares   ratio
SK Corporation
  Largest Shareholder   Common share     18,748,452       23.22       18,748,452       23.22  
Tae Won Chey
  Officer of affiliated company   Common share     100       0.00       100       0.00  
Shin Won Chey
  Officer of affiliated company   Common share     500       0.00       500       0.00  
Shin Bae Kim
  Officer of affiliated company   Common share     1,270       0.00       1,270       0.00  
Man Won Jung
  Officer of affiliated company   Common share     4,000       0.00       5,500       0.01  
Sung Min Ha
  Officer of affiliated company   Common share     738       0.00       738       0.00  
Bang Hyung Lee
  Officer of affiliated company   Common share     200       0.00       200       0.00  
Total
    Common share     18,755,260       23.23       18,756,760       23.23  
On July 20, 2010, Man Won Jung, the CEO of the Company, purchased additional 100 common shares, increasing his total shareholding to 5,600 common shares.
B. Overview of the Largest Shareholder
SK Corporation is a holding company and as of June 30, 2010, has nine subsidiaries: SK Energy Co., Ltd., SK Telecom Co., Ltd., SK Networks Co., Ltd., SK E&C Co., Ltd., SK E&S Co., Ltd., K-Power Co., Ltd., SK Shipping Co., Ltd., SKC Co., Ltd. and SK Gas Co., Ltd. SK Corporation also operates a life science business division within its holding company to nurture the division for future growth.
Details of SK Corporation’s subsidiaries are as follows:
                         
Affiliates   Share Holdings   Book Value   Industry   Description
SK Energy Co., Ltd.
    33.40 %     4,068,131     Energy   Publicly Listed
SK Telecom Co., Ltd.
    23.22 %     2,799,156     Telecommunication   Publicly Listed
SK Networks Co., Ltd.
    39.12 %     1,194,173     Trading, Energy Sale   Publicly Listed

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Affiliates   Share Holdings   Book Value   Industry   Description
SK E&S Co., Ltd.
    67.55 %     421,899     Gas Company Holdings   Privately Held
SK E&C Co., Ltd.
    40.02 %     399,858     Construction   Privately Held
SK Shipping Co., Ltd.
    89.80 %     337,730     Ocean Freight   Privately Held
K-Power Co., Ltd.
    100.00 %     505,798     Power Generation   Privately Held
SKC Co., Ltd.
    42.50 %     271,614     Synthetic Resin Manufacturing   Publicly Listed
SK Gas Co., Ltd.
    45.53 %     235,428     Gas   Publicly Listed
 
*   The above share holdings are based on common stock holdings as of June 30, 2010.
SK Corporation is a publicly listed company and is required to submit a report of its significant business activities in accordance with Article 161 of the Financial Investment Services and Capital Markets Act. Also as a holding company, SK Corporation is required to report key management activities of its subsidiaries in accordance with Article 8 of KOSPI Market Disclosure Regulation. The rule is applicable to subsidiaries whose book value of the holding company’s shareholding exceeds 10% of its total assets based on the financial statements as of December 31, 2009. SK Energy Co., Ltd., SK Telecom Co., Ltd. and SK Networks Co., Ltd. are three such subsidiaries.
2. Changes in shareholdings of the Largest Shareholder
Changes in shareholdings of the largest shareholder are as follows.
(Unit: Shares, %)
                         
    Date of the change in the            
    largest shareholder/            
Largest   Date of change in   Shares        
Shareholder   shareholding   Held   Holding Ratio   Remarks
SK Corporation
  March 7, 2008     18,751,260       23.09     Purchased 1,085,325 shares from SK Networks on March 7, 2008
 
  March 13, 2009     18,751,360       23.22     At the 25th General Meeting of Shareholders, elected the CEO, Man Won Jung (who owned 100 shares of the Company stock)
 
  December 30, 2009     18,755,260       23.23     Man Won Jung, the CEO, purchased 3,900 shares.
 
  May 26, 2010     18,756,760       23.23     Man Won Jung, the CEO, purchased 1,500 shares
On July 20, 2010, Man Won Jung, the CEO of the Company, purchased additional 100 common shares, increasing his total shareholding to 5,600 common shares.
 
*   Shares held are the sum of shares held by SK Corporation and its related parties.

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3. Distribution of Shares
A. Shareholders with ownership of 5% or more
     
(As of June 30, 2010)   (Unit: shares, %)
                                                     
        Common share   Preferred share   Sub-total
        Number of   Ownership   Number of   Ownership   Number of   Ownership
Rank   Name (title)   shares   ratio   shares   ratio   shares   ratio
1  
Citibank ADR
    24,321,893       30.12                   24,321,893       30.12  
2  
SK Corporation
    18,748,452       23.22                   18,748,452       23.22  
3  
SK Telecom
    8,400,712       10.40                   8,400,712       10.40  
   
Total
    51,471,077       63.74                   51,471,077       63.74  
On July 22, 2010, the Company publicly disclosed its decision to acquire shares of treasury stock. The Company plans to acquire 1,250,000 shares of its common stock on KRX from July 23, 2010 through October 22, 2010. As of August 15, 2010, the Company accumulatively acquired 338,000 shares of its common stock.
B. Shareholdings under the Employee Stock Ownership Program
As the relevant law requires an immediate transfer of the shares directly purchased by the employees to the account of the individual purchasers, the Company transfers and holds the employees’ stocks in separate individual accounts within the program once the number of shares for each individual member is determined.
     
(As of June 30, 2010)   (Unit: Shares)
                         
    Account       Balance at the   Balance at the end
Classification   classification   Type of share   beginning of period   of period
8th
  Employee Stock Ownership Program Member Account   Common shares     350,268       346,322  
 
 
  Total         350,268       346,322  
C. Shareholder Distribution

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(As of June 30, 2010)
                                         
    Number of   Ratio   Number of   Ratio    
Classification   shareholders   (%)   shares   (%)   Remarks
Total minority shareholders
    43,030       99.98       24,746,975       30.64        
Minority shareholders (corporate)
    877       2.04       6,342,398       7.85        
Minority shareholders (individual)
    42,153       97.94       18,404,577       22.79        
Minority shareholders
(Largest Shareholder and Related Persons)
                             
Major shareholders
                             
Total other shareholders
    9       0.02       55,998,736       69.35        
Other shareholders (corporate)
    6       0.01       12,110,715       15.00        
Other shareholders (individual)
    2       0.01       25,139,569       31.13        
Other shareholders
(Largest Shareholder and Related Persons)
    1       0.00       18,748,452       23.22        
Total
    43,039       100       80,745,711       100        

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     4. Share Price and Trading Volume in the Last Six Months
     A. Domestic Securities Market
(Unit: Won, shares)
                                                     
        June   May   April   March   February   January
Types   2010   2010   2010   2010   2010   2010
Common stock
  Highest     169,500       173,500       178,000       181,000       179,500       188,000  
 
  Lowest     160,500       158,500       171,500       170,500       172,500       168,500  
Monthly transaction volume
    4,026,382       3,964,993       4,547,803       5,930,499       4,069,784       8,158,161  
     B. Overseas Securities Market
     
New York Stock Exchange   (Unit: US$, ADR)
                                                     
        June   May   April   March   February   January
Types   2010   2010   2010   2010   2010   2010
Depository
  Highest     16.24       18.44       18.51       17.78       17.33       18.33  
Receipt
  Lowest     14.73       15.27       17.45       16.66       16.32       16.48  
Monthly transaction volume
    35,760,628       31,223,014       26,691,304       31,245,982       25,609,380       29,907,572  
VIII. EMPLOYEES
     
(As of June 30, 2010)   (Unit: persons, in millions of Won)
                                                                 
    Number of employees                
    Office                           Average   Aggregate   Average    
    managerial   Production                   service   wage for   wage per    
Classification   positions   positions   Others   Total   year   2010 1H   person   Remarks
Male
    3,844                   3,844       12.1       129,976       34        
Female
    619                   619       10.0       16,693       26        
Total
    4,463                   4,463       11.8       146,669       33        

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IX. TRANSACTIONS WITH PARTIES WITH INTERESTS
     1. Loans to the Largest Shareholder and Related Persons
     
(As of June 30, 2010)   (Unit: in millions of Won)
                                                         
Name                    
(Corporate       Account   Change details   Accrued    
name)   Relationship   category   Beginning   Increase   Decrease   Ending   interest   Remarks
SK Wyverns
  Affiliated
company
  Long-term and
short-term loans
    2,982                   2,982       133        
(Unit: in millions of Won)
                                                 
        Investment and Disposal Details    
Name           Transaction Details    
(Corporate       Types of   Beginning                   End of    
Name)   Relationship   Investment   of Period   Increase   Decrease   Period   Remarks
PS&Marketing
  Affiliated company   Common Shares     150,000       80,000             230,000        
SKT Americas, Inc.
  Affiliated company   Common Shares     30,457       28,036             58,493        
SK Telecom China Holdings Co., Ltd.
  Affiliated company       29,595       4,656             34,251        
Service Ace
  Affiliated company   Common Shares     0       21,927             21,927        
Service Top
  Affiliated company   Common Shares     0       14,281             14,281        
Network O&S
  Affiliated company   Common Shares     0       15,000             15,000        
YTK Investment Ltd.
  Affiliated company       0       28,000             28,000        
 
  Total         210,052       191,900             401,952        

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2. Transfer of Assets to/from the Largest Shareholder
A. Transfer of Assets
(Units: in millions of Won)
                                         
        Details    
                    Amount        
                    Transferred   Amount    
Name                   From   Transferred    
(Corporate   Relation-   Transferred   Purpose of   Date of   Largest   to Largest    
Name)   Ship   Objects   Transfer   Transfer   Shareholder   Shareholder   Remarks
Encar Network Co., Ltd.
  Affiliated Company   Automobiles   Sale of automobiles not in use   February 25, 2010           236        
SK Telesys
  Affiliated Company   2G devices not in use   Sale of devices not in use   March 31, 2010           381        
PS & Marketing Co., Ltd.
  Affiliated Company   Network asset   Sale of asset not in use   March 31, 2010           83        
SK Broadband
  Affiliated Company   Used asset   Sale of asset not in use   April 23, 2010           18        
Encar Network Co., Ltd.
  Affiliated Company   Automobiles   Sale of automobiles not in use   May 19, 2010           101        
SK Telesys
  Affiliated Company   2G devices not in use   Sale of devices not in use   June 30, 2010           54        
SK Networks
  Affiliated Company   Handset devices not in use   Sale of asset not in use   June 23, 2010           144        
Total
          1,017        
B. Transfer of Business
(Units: in millions of Won)
                             
        Details    
                    Amount   Amount    
Name                   Transferred   Transferred    
(Corporate   Relation   Transferred   Purpose of   Date of   From Largest   to Largest    
Name)   -ship   Objects   Transfer   Transfer   Shareholder   Shareholder   Remarks
             
Total
     

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3. Transactions with Parties with Interests (excluding the Largest Shareholder and Related Persons)
A. Provisional Payment and Loans (including loans on marketable securities)
     
Agents   (Unit: in millions of Won)
                                                         
Name                    
(Corporate       Account   Change details   Accrued    
name)   Relationship   category   Beginning   Increase   Decrease   Ending   interest   Remarks
Hong Eun and others
  Agency   Long-term and short-term loans     73,490       137,454       122,314       88,630              
     
Overseas Investment Companies   (Unit: in millions of Won)
                                                         
Name                    
(Corporate       Account   Change details   Accrued    
name)   Relationship   category   Beginning   Increase   Decrease   Ending   interest   Remarks
Daehan Kanggun BcN Co., Ltd.
  Overseas Investment company   Long-term loans           17,592             17,592              
B. Equity Investments
(Unit: in millions of Won)
                                                 
        Investment and Disposition Details    
            Transaction Details    
Name (Corporate           Beginning                   End of    
Name)   Relation-ship   Category   of Period   Increase   Decrease   Period   Remarks
HanaSK Card Co., Ltd.
  Investee under equity method   Common shares           402,476             402,476        
SK Telecom Smart City Management Co., Ltd.
  Investee under equity method   Common shares           1,709             1,709        
SK Fans Co., Ltd.
  Investee under equity method   Common shares           1,125             1,125        
Translink Capital L.L.C.
  Investee   Common shares           233             233        

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        Investment and Disposition Details    
            Transaction Details    
Name (Corporate           Beginning                   End of    
Name)   Relation-ship   Category   of Period   Increase   Decrease   Period   Remarks
Skylake Global Incubest Fund #1
  Investee   Common shares -     1,679       25             1,704        
Sprint Nextel Corp.
  Investee   Common shares     75,363             38,621       36,742        
Infinity Telecom
  Investee   Common shares           240             240        
Job Creating PEF (#1)
  Investee   Common shares           1             1        
Total
    77,042       405,809       38,621       444,230        
X. OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS
1. Developments in the Items mentioned in prior Reports on Important Business Matters
A. Status and Progress of Major Management Events
             
Date of            
Disclosure   Title   Report   Reports status
October 26, 2001
  Resolution on trust agreement for the acquisition of treasury shares and others   1. Signatories: Shinhan Bank, Hana Bank, Chohung Bank, Korea Exchange Bank
2. Contract amount: Won 1,300 billion
3. Purpose: to increase shareholder value
 
1.   On December 24, 2003, cash surplus amount from the existing trust agreement was partially reduced (Won 318 billion).
2.   On September 24, 2004, the Board of Directors extended the term of the specified monetary trust agreement for 3 years.
3.   On October 16, 2007, the Board of Directors extended the term of the specified monetary trust agreement for 3 years.
4.   As of December 31, 2008, the balance of specified monetary trust for treasury shares was Won 982 billion.
B. Summary Minutes of the General Meeting of Shareholders
         
Date   Agenda   Resolution
23rd Fiscal Year Meeting of Shareholders (March 9, 2007)
 
1.   Approval of the financial statements for the year ended December 31, 2006
2.   Remuneration limit for Directors
3.   Election of Directors
-   Election of inside directors
-   Election of independent directors as Audit Committee members
  Approved (Cash dividend, Won 7,000 per share)
Approved (Won 12 billion)

Approved (Jung Nam Cho, Sung Min Ha)
Approved (Dal Sup Shim)

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Date   Agenda   Resolution
24th Fiscal Year Meeting of Shareholders (March 14, 2008)
 
1.   Approval of the Financial Statements for the year ended December 31, 2007
2.   Amendment to Articles of Incorporation
3.   Approval of Remuneration Limit for Directors
4.   Election of Directors
-   Election of inside directors
-   Election of independent directors
-   Election of independent directors as Audit Committee member
  Approved (Cash dividend, Won 8,400 per share)

Approved
Approved (Won 12 billion)

Approved (Shin Bae Kim, Young Ho Park)
Approved (Rak Yong Uhm, Jay Young Chung)
Approved (Jae Ho Cho)
 
       
25th Fiscal Year Meeting of Shareholders (March 13, 2009)
 
1.   Approval of the financial statements for the year ended December 31, 2008
2.   Approval of Remuneration Limit for Directors
3.   Amendment to Company Regulation on Executive Compensation
4.   Election of Directors
-   Election of inside directors
-   Election of independent directors
-   Election of independent directors as Audit Committee member
  Approved (Cash dividend, Won 8,400 per share)

Approved (Won 12 billion)
Approved

Approved (Jae Won Chey, Man Won Jung)
Approved (Hyun Chin Lim)
Approved (Hyun Chin Lim)
 
       
26th Fiscal Year Meeting of Shareholders (March 12, 2010)
 
1. Approval of the financial statements for the year ended December 31, 2009
2.   Amendment to Articles of Incorporation
3.   Approval of Remuneration Limit for Directors
4.   Election of Directors
-   Election of inside directors
-   Election of independent directors
-   Election of independent directors as Audit Committee member
  Approved (Cash dividend, Won 8,400 per share)

Approved
Approved (Won 12 billion)

Approved (Ki Haeng Cho)
Approved (Dal Sup Shim)
Approved (Dal Sup Shim, Jay Young Chung)
2. Contingent Liabilities
A. Material Legal Proceedings
- Not applicable
B. Other Matters
The Company has no other blank bills, mortgage bills, assumption of debt agreement or other contingent liabilities.

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3. Status of sanctions, etc.
A. Status of sanctions
The Company was sanctioned with a fine of Won 50 million on December 30, 2008 for a violation of Telecommunications Law involving its mismanagement of privacy policy. The Company continues to improve related system security and is implementing system enhancements, such as introduction of scanning devices, to avoid unnecessary keeping of applications at the distributor level.
Due to the Company’s ineffective measures taken with respect to phone numbers that are used for sending illegal unsolicited bulk messages, the Korea Communications Commission, on April 23, 2009, ordered the Company to improve its work procedures. The Company completed the upgrade of the related computer system to prevent illegal messages on October 10, 2009.
On September 2, 2009, the Korea Communications Commission ordered the Company to improve its work procedures in a case relating to the obstruction of subscribers’ utilization of wireless internet services. The Company completed the improvement of the procedures in consultation with the Korea Communications Commission by December 8, 2009.
On October 13, 2009, the Korea Communications Commission imposed on the Company a fine of Won 140 million and a newspaper notice order in a case relating to the subscription for mobile telephone services using national identification numbers of the deceased and the Company’s failure to verify the required documents. The Company implemented the improved work procedures to strengthen identification process at the time of subscription for mobile telephone services in January 2010.
In addition, on January 21, 2009, the Company was sanctioned for unfair business practices with a fine of Won 1,268 million by the Fair Trade Commission of Korea along with a correctional order of its policy of restricting certain rate plan subscribers from using third party portal contents. The Company has paid the fine and has taken efforts to educate applicable divisions of the issue and to improve the level of the voluntary compliance program to comply with fair trade laws to prevent a repeat of the same violation.
Also on February 3, 2009, the Company received a correctional order and a fine of Won 500 million from the Fair Trade Commission of Korea involving an unfair trade interference practice including refusal of applications for subscription for certain PDA phones distributed by third party manufacturers. The Company filed a suit at the Seoul High Court, which found in favor of the

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Company and cancelled the Fair Trade Commission’s correctional order and fine. The Fair Trade Commission of Korea filed an appeal from the judgment on May 26, 2010 and the suit is currently pending at the Supreme Court of Korea.
On April 8, 2010, the Company received a correctional order from the Fair Trade Commission of Korea for a violation of the Act on Fair Labeling and Advertising relating to 11th Street (the Company’s online shopping mall). In response thereto, the Company has been taking efforts to prevent a repetitive violation including thorough pre-review of the advertisement and marketing activities of 11th Street and appropriate education for relevant employees.

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SK TELECOM CO., LTD.
NON-CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED JUNE 30, 2010 AND 2009
AND INDEPENDENT ACCOUNTANTS’
REVIEW REPORT

 


Table of Contents

Independent Accountants’ Review Report
English Translation of a Report Originally Issued in Korean
To the Stockholders and Board of Directors of
SK Telecom Co., Ltd.
We have reviewed the accompanying non-consolidated statement of financial position of SK Telecom Co., Ltd. (the “Company”) as of June 30, 2010, the related non-consolidated statements of income for the three months and six months ended June 30, 2010 and 2009, and non-consolidated statements of changes in stockholders’ equity and cash flows for the six months ended June 30, 2010 and 2009, all expressed in Korean won. These non-consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these non-consolidated financial statements based on our reviews.
We conducted our reviews in accordance with standards for review of interim financial statements in the Republic of Korea. Those standards require that we plan and perform the review to obtain moderate assurance as to whether the non-consolidated financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data, and this provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.
Based on our reviews, nothing has come to our attention that causes us to believe that the non-consolidated financial statements referred to above are not presented fairly, in all material respects, in conformity with accounting principles generally accepted in the Republic of Korea.
We have previously audited, in accordance with auditing standards generally accepted in the Republic of Korea, the non-consolidated statement of financial position of the Company as of December 31, 2009, and the related non-consolidated statements of income, appropriations of retained earnings, changes in stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated February 17, 2010, we expressed an unqualified opinion on those non-consolidated financial statements. The accompanying non-consolidated statement of financial position as of December 31, 2009, which is comparatively presented, does not differ in material respects from such audited non-consolidated statement of financial position.
Our reviews also comprehended the translation of the Korean won amounts into U.S. dollar amounts and nothing has come to our attention that causes us to believe that such translation has not been made in conformity with the basis stated in Note 2. Such U.S. dollar amounts are presented solely for the convenience of readers of financial statements.

 


Table of Contents

Accounting principles and review standards and their application in practice vary among countries. The accompanying financial statements are not intended to present the financial position, results of operations, changes in stockholders’ equity and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying non-consolidated financial statements are for use by those knowledgeable about Korean accounting procedures and review standards and their application in practice.
August 5, 2010
Notice to Readers
This report is effective as of August 5, 2010, the accountants’ review report date. Certain subsequent events or circumstances may have occurred between the accountants’ review report date and the time the accountants’ review report is read. Such events or circumstances could significantly affect the accompanying financial statements and may result in modification to the accountants’ review report.

 


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SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
JUNE 30, 2010 AND DECEMBER 31, 2009
                                 
    Korean won     Translation into U.S.
dollars (Note 2)
 
    June 30,     December 31,     June 30,     December 31,  
ASSETS   2010     2009     2010     2009  
    (In millions)     (In thousands)  
CURRENT ASSETS:
                               
Cash and cash equivalents (Note 14)
  W 292,307     W 420,576     $ 239,429     $ 344,494  
Short-term financial instruments (Note 14)
    337,666       178,057       276,583       145,847  
Short-term investment securities (Note 3)
    339,044       370,182       277,711       303,217  
Accounts receivable — trade, net of allowance for doubtful accounts of W149,067 million as of June 30, 2010 and W142,702 million as of December 31, 2009 (Note 15)
    1,354,136       1,557,514       1,109,175       1,275,762  
Short-term loans, net of allowance for doubtful accounts of W1,184 million as of June 30, 2010 and W933 million as of December 31, 2009 (Notes 5 and 15)
    91,042       66,888       74,573       54,788  
Accounts receivable — other, net of allowance for doubtful accounts of W29,472 million and present value of W1,010 million as of June 30, 2010 and W26,059 million and W8,478 as of December 31, 2009 (Note 15)
    2,468,915       2,032,757       2,022,292       1,665,034  
Inventories
    15,324       22,656       12,552       18,558  
Prepaid expenses
    124,527       112,762       102,000       92,364  
Current deferred income tax assets, net (Note 11)
    236,470       194,825       193,693       159,581  
Currency swap (Note 17)
    11,390             9,330        
Accrued income and other
    23,747       26,835       19,450       21,980  
 
                       
 
                               
Total Current Assets
    5,294,568       4,983,052       4,336,788       4,081,625  
 
                       
 
                               
NON-CURRENT ASSETS:
                               
Property and equipment, net (Notes 6 and 15)
    4,825,880       5,196,521       3,952,885       4,256,478  
Intangible assets, net (Note 7)
    2,491,155       2,665,936       2,040,509       2,183,672  
Long-term financial instruments (Note 14)
    19       6,519       16       5,340  
Long-term investment securities (Note 3)
    1,809,669       2,420,262       1,482,302       1,982,440  
Equity securities accounted for using the equity method (Notes 4)
    3,250,019       2,680,872       2,662,095       2,195,906  
Long-term loans, net of allowance for doubtful accounts of W24,251 million as of June 30, 2010 and W24,250 million as of December 31, 2009 (Notes 5 and 15)
    64,287       64,216       52,658       52,599  
Long-term accounts receivable — other
    866,463       761,647       709,721       623,866  
Guarantee deposits (Note 15)
    179,710       172,021       147,201       140,903  
Long-term currency swap (Note 17)
    254,835       223,173       208,736       182,801  
Long-term deposits and other
    121,512       123,414       99,530       101,089  
 
                       
 
                               
Total Non-current Assets
    13,863,549       14,314,581       11,355,653       11,725,094  
 
                       
 
                               
TOTAL ASSETS
  W 19,158,117     W 19,297,633     $ 15,692,441     $ 15,806,719  
 
                       
(Continued)

 


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SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)
JUNE 30, 2010 AND DECEMBER 31, 2009
                                 
    Korean won     Translation into U.S.
dollars (Note 2)
 
    June 30,     December 31,     June 30,     December 31,  
LIABILITIES AND STOCKHOLDERS’ EQUITY   2010     2009     2010     2009  
    (In millions)     (In thousands)  
 
                               
CURRENT LIABILITIES:
                               
Accounts payable (Note 15)
  W 1,045,934     W 1,136,475     $ 856,726     $ 930,888  
Income tax payable
    276,133       381,940       226,181       312,848  
Accrued expenses (Note 16)
    1,004,231       934,372       822,567       765,345  
Withholdings
    434,839       250,656       356,177       205,313  
Current portion of long-term debt, net (Notes 8 and 9)
    960,275       513,277       786,563       420,426  
Current portion of subscription deposits
    5,827       6,804       4,773       5,573  
Currency swap (Note 17)
    29,549       35,145       24,204       28,787  
Currency forward (Note 17)
    721             591        
Interest swap (Note 17)
          1,173             961  
Advanced receipts and other
    49,722       34,791       40,726       28,498  
 
                       
 
                               
Total Current Liabilities
    3,807,231       3,294,633       3,118,508       2,698,639  
 
                       
 
                               
NON-CURRENT LIABILITIES:
                               
Bonds payable, net (Note 8)
    3,060,341       3,349,216       2,506,730       2,743,348  
Long-term borrowings (Note 9)
    621,030       816,760       508,687       669,009  
Subscription deposits
    6,213       5,480       5,088       4,489  
Long-term payables — other, net of present value discount of W2,979 million as of June 30, 2010 and W5,837 million as of December 31, 2009
    50,121       164,163       41,054       134,466  
Accrued severance indemnities, net
    38,875       25,155       31,843       20,604  
Non-current deferred income tax liabilities, net (Note 11)
    146,221       210,859       119,770       172,715  
Long-term currency swap (Note 17)
    12,732       18,281       10,429       14,974  
Long-term interest swap (Note 17)
    19,747       16,215       16,175       13,282  
Guarantee deposits received and other (Notes 15 and 16)
    199,954       155,421       163,782       127,305  
 
                       
 
                               
Total Non-current Liabilities
    4,155,234       4,761,550       3,403,558       3,900,192  
 
                       
 
                               
Total Liabilities
    7,962,465       8,056,183       6,522,066       6,598,831  
 
                       
 
                               
STOCKHOLDERS’ EQUITY:
                               
Capital stock (Notes 1 and 10)
    44,639       44,639       36,564       36,564  
Capital surplus (Notes 4, 8 and 10)
    3,032,916       3,032,009       2,484,266       2,483,523  
Capital adjustments:
                               
Treasury stock (Note 1)
    (1,992,083 )     (1,992,083 )     (1,631,718 )     (1,631,718 )
Loss on disposal of treasury stock
    (716 )     (716 )     (586 )     (586 )
Equity method in capital adjustments (Note 4)
    (53,474 )     (52,626 )     (43,801 )     (43,106 )
Other capital adjustments
    (662,983 )     (662,983 )     (543,050 )     (543,050 )
Accumulated other comprehensive income (loss) (Note 12):
                               
Unrealized gain on valuation of long-term investment securities, net (Note 3)
    860,640       1,003,145       704,951       821,678  
Equity in other comprehensive loss of affiliates, net (Note 4)
    (67,439 )     (84,809 )     (55,239 )     (69,467 )
Gain on valuation of currency swap, net (Note 17)
    7,410       6,516       6,070       5,336  
Loss on valuation of interest swap, net (Note 17)
    (10,576 )     (10,932 )     (8,664 )     (8,955 )
Retained earnings:
                               
Appropriated
    9,350,386       8,890,053       7,658,915       7,281,855  
Unappropriated
    686,932       1,069,237       562,667       875,814  
 
                       
 
                               
Total Stockholders’ Equity
    11,195,652       11,241,450       9,170,375       9,207,888  
 
                       
 
                               
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  W 19,158,117     W 19,297,633     $ 15,692,441     $ 15,806,719  
 
                       
See accompanying notes to non-consolidated financial statements.

 


Table of Contents

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
                                                                 
    Korean won     Translation into U.S. dollars (Note 2)  
    2010     2009     2010     2009  
    Three months     Six months     Three months     Six months     Three months     Six months     Three months     Six months  
    ended June 30     ended June 30     ended June 30     ended June 30     ended June 30     ended June 30     ended June 30     ended June 30  
    (In millions except for per share data)     (In thousands except for per share data)  
 
                                                               
OPERATING REVENUE (Note 15)
  W 3,088,572     W 6,106,818     W 3,067,899     W 5,944,360     $ 2,529,854     $ 5,002,103     $ 2,512,921     $ 4,869,034  
 
                                               
 
                                                               
OPERATING EXPENSES:
                                                               
Labor cost
    (95,786 )     (295,901 )     (81,597 )     (271,048 )     (78,458 )     (242,373 )     (66,836 )     (222,016 )
Commissions paid (Note 15)
    (1,230,690 )     (2,442,592 )     (1,279,186 )     (2,280,673 )     (1,008,060 )     (2,000,731 )     (1,047,783 )     (1,868,103 )
Depreciation and amortization (Notes 6 and 7)
    (470,602 )     (928,383 )     (426,941 )     (827,657 )     (385,471 )     (760,440 )     (349,708 )     (677,935 )
Network interconnection
    (267,777 )     (530,758 )     (267,725 )     (523,781 )     (219,337 )     (434,745 )     (219,294 )     (429,030 )
Leased line
    (45,528 )     (91,570 )     (93,225 )     (191,315 )     (37,292 )     (75,005 )     (76,361 )     (156,706 )
Advertising
    (79,570 )     (122,472 )     (62,604 )     (106,681 )     (65,176 )     (100,317 )     (51,279 )     (87,383 )
Research and development
    (54,627 )     (115,973 )     (55,023 )     (114,394 )     (44,745 )     (94,994 )     (45,069 )     (93,700 )
Rent
    (70,739 )     (143,723 )     (66,182 )     (129,942 )     (57,942 )     (117,724 )     (54,210 )     (106,436 )
Frequency usage
    (40,285 )     (79,672 )     (38,956 )     (78,136 )     (32,998 )     (65,259 )     (31,909 )     (64,001 )
Repair
    (40,866 )     (77,288 )     (35,189 )     (64,090 )     (33,473 )     (63,307 )     (28,823 )     (52,496 )
Cost of goods sold
    (16,352 )     (31,938 )     (8,887 )     (16,195 )     (13,394 )     (26,160 )     (7,279 )     (13,265 )
Other
    (93,688 )     (184,016 )     (98,984 )     (223,041 )     (76,740 )     (150,727 )     (81,079 )     (182,693 )
 
                                               
 
                                                               
Sub-total
    (2,506,510 )     (5,044,286 )     (2,514,499 )     (4,826,953 )     (2,053,086 )     (4,131,782 )     (2,059,630 )     (3,953,764 )
 
                                               
 
                                                               
OPERATING INCOME
    582,062       1,062,532       553,400       1,117,407       476,768       870,321       453,291       915,270  
 
                                               
 
                                                               
OTHER INCOME (Note 18):
                                                               
Interest income (Note 3)
    46,408       91,653       35,053       77,573       38,013       75,073       28,712       63,540  
Foreign exchange and translation gains (Note 2)
    1,891       12,748       47,863       64,964       1,549       10,442       39,205       53,212  
Equity in earnings of affiliates (Note 4)
    25,328       40,790       14,536       25,733       20,746       33,411       11,906       21,078  
Gain on valuation of short-term investment securities (Note 3)
                1,966       7,810                   1,610       6,397  
Gain on disposal of property and equipment and intangible assets
    1,196       7,140       153       445       980       5,848       125       365  
Gain on valuation of derivatives (Note 17)
                110,196       1,014                   90,262       831  
Other
    4,751       38,384       14,290       89,273       3,891       31,441       11,705       73,123  
 
                                               
 
                                                               
Sub-total
    79,574       190,715       224,057       266,812       65,179       156,215       183,525       218,546  
 
                                               
(Continued)

 


Table of Contents

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
                                                                 
    Korean won     Translation into U.S. dollars (Note 2)  
    2010     2009     2010     2009  
    Three months     Six months     Three months     Six months     Three months     Six months     Three months     Six months  
    ended June 30     ended June 30     ended June 30     ended June 30     ended June 30     ended June 30     ended June 30     ended June 30  
    (In millions except for per share data)     (In thousands except for per share data)  
 
                                                               
OTHER EXPENSES (Note 15):
                                                               
Interest and discounts
    (W70,279 )     (W140,908 )     (W76,431 )     (W147,755 )     ($57,566 )     ($115,418 )     ($62,605 )     ($121,026 )
Donations
    (20,477 )     (52,477 )     (10,272 )     (22,693 )     (16,773 )     (42,984 )     (8,414 )     (18,588 )
Foreign exchange and translation loss (Note 2)
    (24,749 )     (13,517 )     (133,852 )     (61,056 )     (20,272 )     (11,071 )     (109,638 )     (50,011 )
Loss on valuation of short-term investment securities (Note 3)
    (2,560 )     (5,999 )                 (2,097 )     (4,914 )            
Equity in losses of affiliates (Note 4)
    (29,451 )     (78,250 )     (50,759 )     (98,755 )     (24,123 )     (64,095 )     (41,577 )     (80,890 )
Loss on disposal of account receivable — other
                (28,711 )     (28,711 )                 (23,517 )     (23,517 )
Loss on disposal of property, equipment and intangible assets
    (1,412 )     (3,717 )     (16,021 )     (16,181 )     (1,157 )     (3,045 )     (13,123 )     (13,254 )
Loss on valuation of derivatives (Note 17)
    (989 )     (21,065 )     (35,116 )     (138,623 )     (810 )     (17,254 )     (28,764 )     (113,546 )
External research and development cost
    (14,059 )     (24,497 )     (13,913 )     (27,818 )     (11,516 )     (20,066 )     (11,396 )     (22,786 )
Other
    (4,274 )     (10,478 )     (7,572 )     (14,520 )     (3,500 )     (8,582 )     (6,202 )     (11,894 )
 
                                               
 
                                                               
Sub-total
    (168,250 )     (350,908 )     (372,647 )     (556,112 )     (137,814 )     (287,429 )     (305,236 )     (455,512 )
 
                                               
 
                                                               
INCOME BEFORE INCOME TAX
    493,386       902,339       404,810       828,107       404,133       739,107       331,580       678,304  
 
                                                               
PROVISION FOR INCOME TAX (Note 11)
    (129,415 )     (216,613 )     (93,167 )     (199,715 )     (106,004 )     (177,428 )     (76,313 )     (163,587 )
 
                                               
 
                                                               
NET INCOME
  W 363,971     W 685,726     W 311,643     W 628,392     $ 298,129     $ 561,679     $ 255,267     $ 514,717  
 
                                               
 
                                                               
NET INCOME PER SHARE
                                                               
(In Korean won and U.S. dollars) (Note 13)
  W 5,031     W 9,479     W 4,308     W 8,686     $ 4.121     $ 7.764     $ 3.529     $ 7.115  
 
                                               
 
                                                               
DILUTED NET INCOME PER SHARE
                                                               
(In Korean won and U.S. dollars) (Note 13)
  W 4,947     W 9,336     W 4,234     W 8,567     $ 4.052     $ 7,647     $ 3.468     $ 7.017  
 
                                               
See accompanying notes to non-consolidated financial statements.

 


Table of Contents

NON-CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
SK TELECOM CO., LTD.
                                                 
                            Accumulated                
                            other             Total  
    Common     Capital     Capital     comprehensive     Retained     stockholders’  
(In millions of Korean won)    stock     surplus     adjustments     income     earnings     equity  
Balance, January 1, 2009
  W 44,639     W 2,957,095       (W2,147,530 )   W 373,785     W 9,501,018     W 10,729,007  
Cash dividends
                            (609,203 )     (609,203 )
Net income
                            628,392       628,392  
Conversion right
          73,622                         73,622  
Treasury stock
                63,538             (92,477 )     (28,939 )
Loss on disposal of treasury stock
          (721 )     (716 )                 (1,437 )
Unrealized loss on valuation of long-term investment securities, net (Notes 3 and 12)
                      189,697             189,697  
Equity in other comprehensive income changes of affiliates, net (Notes 4 and 12)
          2,003       16,373       (16,101 )     (56,043 )     (53,768 )
Loss on valuation of currency swap, net (Notes 12 and 17)
                      (2,394 )           (2,394 )
Gain on valuation of interest swap, net (Notes 12 and 17)
                      7,424             7,424  
 
                                   
 
                                               
Balance, June 30, 2009
  W 44,639     W 3,031,999       (W2,068,335 )   W 552,411     W 9,371,687     W 10,932,401  
 
                                   
 
                                               
Balance, January 1, 2010
  W 44,639     W 3,032,009       (W2,708,408 )   W 913,920     W 9,959,290     W 11,241,450  
Cash dividends
                            (607,698 )     (607,698 )
Net income
                            685,726       685,726  
Unrealized loss on valuation of long-term investment securities, net (Notes 3 and 12)
                      (142,505 )           (142,505 )
Equity in other comprehensive income changes of affiliates, net (Notes 4 and 12)
          907       (848 )     17,370             17,429  
Loss on valuation of currency swap, net (Notes 12 and 17)
                      894             894  
Loss on valuation of interest swap, net (Notes 12 and 17)
                      356             356  
 
                                   
 
                                               
Balance, June 30, 2010
  W 44,639     W 3,032,916       (W2,709,256 )   W 790,035     W 10,037,318     W 11,195,652  
 
                                   
 
                                               
(Continued)
                                               

 


Table of Contents

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
                                                 
                            Accumulated                
                            other             Total  
    Common     Capital     Capital     comprehensive     Retained     stockholders’  
(In thousands of U.S. dollars)   stock     surplus     adjustments     income     earnings     equity  
Balance, January 1, 2009
  $ 36,564     $ 2,422,161       ($1,759,045 )   $ 306,168     $ 7,782,297     $ 8,788,145  
Cash dividends
                            (499,000 )     (499,000 )
Net income
                            514,717       514,717  
Conversion right
          60,304                           60,304  
Treasury stock
                52,044             (75,748 )     (23,704 )
Loss on disposal of treasury stock
          (591 )     (586 )                 (1,177 )
Unrealized loss on valuation of long-term investment securities, net (Notes 3)
                      155,381             155,381  
Equity in other comprehensive income changes of affiliates, net (Note 4)
          1,641       13,411       (13,188 )     (45,905 )     (44,041 )
Loss on valuation of currency swap, net (Notes 12 and 17)
                      (1,961 )           (1,961 )
Gain on valuation of interest swap, net (Notes 12 and 17)
                      6,081             6,081  
 
                                   
Balance, June 30, 2009
  $ 36,564     $ 2,483,515       ($1,694,176 )   $ 452,481     $ 7,676,361     $ 8,954,745  
 
                                   
Balance, January 1, 2010
  $ 36,564     $ 2,483,523       ($2,218,460 )   $ 748,592     $ 8,157,669     $ 9,207,888  
Cash dividends
                            (497,766 )     (497,766 )
Net income
                            561,679       561,679  
Unrealized loss on valuation of long-term investment securities, net (Notes 3 and 12)
                      (116,727 )           (116,727 )
Equity in other comprehensive income changes of affiliates, net (Notes 4 and 12)
          743       (695 )     14,228             14,276  
Loss on valuation of currency swap, net (Notes 12 and 17)
                      734             734  
Loss on valuation of interest swap, net (Notes 12 and 17)
                      291             291  
 
                                   
Balance, June 30, 2010
  $ 36,564     $ 2,484,266       ($2,219,155 )   $ 647,118     $ 8,221,582     $ 9,170,375  
 
                                   
See accompanying notes to non-consolidated financial statements.

 


Table of Contents

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
                                 
    Korean won     Translation into U.S.
dollars (Note 2)
 
    2010     2009     2010     2009  
            (In millions)             (In thousands)  
CASH FLOWS FROM OPERATING ACTIVITIES:
                               
Net income
  W 685,726     W 628,392     $ 561,679     $ 514,717  
 
                       
Expenses not involving cash payments:
                               
Provision for severance indemnities
    18,136       18,181       14,855       14,892  
Depreciation and amortization
    997,485       891,277       817,041       730,046  
Allowance for doubtful accounts
    32,607       76,933       26,708       63,016  
Foreign translation loss
    9,867       11,641       8,082       9,535  
Loss on valuation of short-term investment securities
    5,999             4,914        
Equity in losses of affiliates
    78,250       98,755       64,095       80,890  
Loss on disposal of property, equipment and intangible assets
    3,933       16,181       3,222       13,254  
Loss on valuation of derivatives
    21,065       115,337       17,254       94,473  
Amortization of discounts on bonds
    18,179       20,558       14,890       16,839  
Other
    1       5,606       2       4,592  
 
                       
 
                               
Sub-total
    1,185,522       1,254,469       971,063       1,027,537  
 
                       
Income not involving cash receipts:
                               
Foreign translation gain
    (9,609 )     (46,477 )     (7,871 )     (38,068 )
Equity in earnings of affiliates
    (40,790 )     (25,733 )     (33,411 )     (21,078 )
Gain on valuation of short-term investment securities
          (7,810 )           (6,397 )
Gain on disposal of property, equipment and intangible assets
    (7,140 )     (445 )     (5,848 )     (365 )
Gain on valuation of derivatives
          (1,014 )           (831 )
Other
    (13,966 )     (611 )     (11,440 )     (500 )
 
                       
 
                               
Sub-total
    (71,505 )     (82,090 )     (58,570 )     (67,239 )
 
                       
Changes in assets and liabilities related to operating activities:
                               
Accounts receivable — trade
    175,842       (89,251 )     144,032       -73,106  
Accounts receivable — other
    (441,106 )     (249,984 )     (361,311 )     (204,762 )
Inventories
    7,332       (4,851 )     6,006       (3,973 )
Prepaid expenses
    8,383       39,402       6,867       32,274  
Accrued income and other
    54,903       8,533       44,971       6,989  
Long-term accounts receivable — other
    (104,816 )     16,285       (85,855 )     13,339  
Accounts payable
    (91,040 )     13,389       (74,571 )     10,967  
Income tax payable
    (124,286 )     (105,782 )     (101,803 )     (86,646 )
Accrued expenses
    81,686       140,016       66,909       114,687  
Withholdings
    132,366       72,930       108,421       59,737  
Current portion of subscription deposits
    (977 )     (25 )     (800 )     (20 )
Advanced receipts and other
    14,931       5,814       12,230       4,762  
Deferred income taxes
    (54,608 )     (22,022 )     (44,729 )     (18,038 )
Severance indemnities payments
    (8,171 )     (15,407 )     (6,693 )     (12,620 )
Deposits for group severance indemnities and other deposits
    3,421       9,440       2,802       7,732  
Dividends received from affiliate
    9,513       6,817       7,792       5,584  
 
                       
 
                               
Sub-total
    (336,627 )     (174,696 )     (275,732 )     (143,094 )
 
                       
Net Cash Provided by Operating Activities
    1,463,116       1,626,075       1,198,440       1,331,921  
 
                       
 
(Continued)
                               

 


Table of Contents

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
                                 
    Korean won     Translation into U.S.
dollars (Note 2)
 
    2010     2009     2010     2009  
    (In millions)     (In thousands)  
CASH FLOWS FROM INVESTING ACTIVITIES:
                               
Cash inflows from investing activities:
                               
Proceeds from disposal of property and equipment
  W 16,320     W 1,492     $ 13,368     $ 1,222  
Proceeds from disposal of intangible assets
    4,173       65       3,418       53  
Disposal of short-term investment securities, net
    220,057       25,153       180,249       20,603  
Collection of short-term loans
    123,021       184,144       100,767       150,833  
Proceeds from sales of long-term investment securities
    252,657       1,865       206,952       1,528  
Proceeds from sales of equity securities accounted for using the equity method
          6,444             5,278  
Collection of long-term loans
    7,328       8,119       6,002       6,650  
Decrease in guarantee deposits
    18,223       12,360       14,926       10,124  
Decrease in other non-current assets
    8,776       27,594       7,189       22,602  
 
                       
Sub-total
    650,555       267,236       532,871       218,893  
 
                       
Cash outflows for investing activities:
                               
Acquisition of short-term financial instruments
    (153,110 )     (198,226 )     (125,413 )     (162,367 )
Acquisition of long-term investment securities, net
    (259 )     (125,538 )     (212 )     (102,828 )
Extension of short-term loans
    (137,454 )     (138,223 )     (112,589 )     (113,219 )
Acquisition of property and equipment
    (414,325 )     (647,652 )     (339,374 )     (530,493 )
Increase in intangible assets
    (6,426 )     (6,795 )     (5,264 )     (5,566 )
Acquisition of long-term financial instruments
          (6,500 )           (5,324 )
Acquisition of equity securities accounted for using the equity method
    (597,210 )     (168,301 )     (489,176 )     (137,856 )
Extension of long-term loans
    (17,592 )     (6,972 )     (14,410 )     (5,711 )
Increase in guarantee deposits and other
    (52,903 )     (87,026 )     (43,332 )     (71,282 )
 
                       
 
                               
Sub-total
    (1,379,279 )     (1,385,233 )     (1,129,770 )     (1,134,646 )
 
                       
Net Cash Used in Investing Activities
    (728,724 )     (1,117,997 )     (596,899 )     (915,753 )
 
                       
CASH FLOWS FROM FINANCING ACTIVITIES:
                               
Cash inflows from financing activities:
                               
Increase in guarantee deposits received and other
    38,520       5,830       31,552       4,775  
Proceeds from short-term borrowings
          100,000             81,910  
Issuance of bonds
          1,114,898             913,215  
Cash inflows from transaction of currency swap
          8,236             6,746  
Cash inflows from transaction of currency option
          1,014             831  
 
                         
 
                               
Sub-total
    38,520       1,229,978       31,552       1,007,477  
 
                         
Cash outflows for financing activities:
                               
Repayment of short-term borrowings
          (123,200 )           (100,913 )
Repayment of current portion of long-term debts
    (290,000 )     (715,672 )     (237,539 )     (586,208 )
Payment of dividends
    (607,667 )     (604,162 )     (497,741 )     (494,870 )
Decrease in other non-current liabilities
    (3,514 )     (1,206 )     (2,878 )     (988 )
Acquisition of treasury stock
          (28,938 )           (23,703 )
 
                       
 
                               
Sub-total
    (901,181 )     (1,473,178 )     (738,158 )     (1,206,682 )
 
                       
Net Cash Used in Financing Activities
    (862,661 )     (243,200 )     (706,606 )     (199,205 )
 
                       
NET INCREASE IN CASH AND CASH EQUIVALENTS
    (128,269 )     264,878       (105,065 )     216,963  
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD
    420,576       434,177       344,494       355,635  
 
                       
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD
  W 292,307     W 699,055     $ 239,429     $ 572,598  
 
                       
See accompanying notes to non-consolidated financial statements.

 


Table of Contents

SK TELECOM CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
1.   GENERAL
 
    SK Telecom Co., Ltd. (the “Company”) was incorporated in March 1984 under the laws of Korea to engage in providing nationwide cellular telephone communication services in the Republic of Korea. The Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange and the New York and London Stock Exchanges, respectively. As of June 30, 2010, the Company’s total issued shares are held by the following:
                 
            Percentage of
    Number of shares   total shares issued (%)
 
               
SK Group
    18,748,452       23.22  
POSCO Corp.
    2,341,569       2.90  
Institutional investors and other minority shareholders
    51,254,978       63.48  
Treasury stock
    8,400,712       10.40  
 
               
 
               
 
    80,745,711       100.00  
 
               
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    The accompanying non-consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the Republic of Korea (“Korean GAAP”) and with the accounting policies for annual financial statements for the year ended December 31, 2009.
 
    The Company maintains its official accounting records in Korean won and prepares statutory non-consolidated financial statements in Korean language (Hangul) in conformity with Korean GAAP. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with accounting principles generally accepted in other countries. Accordingly, these financial statements are intended for use by those who are informed about Korean accounting principles and practices. The accompanying financial statements have been condensed, restructured and translated into English with certain expanded descriptions from the Korean language financial statements. Certain information included in the Korean language financial statements, but not required for a fair presentation of the Company’s financial position, results of operations, changes in stockholders’ equity or cash flows, is not presented in the accompanying financial statements.
 
    The accompanying non-consolidated financial statements are stated in Korean won, the currency of the country in which the Company is incorporated and operates. The translation of Korean won amounts into U.S. dollar amounts is included solely for the convenience of readers of financial statements and has been made at the rate of W1,220.85 to US$1.00, the Noon Buying Rate in the City of New York for cable transfers in Korean won as certified for customs purposes by the Federal Reserve Bank of New York on the last business day of the period ended June 30, 2010. Such translations into U.S. dollars should not be construed as representations that the Korean won amounts could be converted into U.S. dollars at that, or any other rate.

 


Table of Contents

3.   INVESTMENT SECURITIES
  a. Short-term Investment Securities
      Short-term investment securities as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
                                 
                            December 31,  
    June 30, 2010     2009  
    Acquisition             Carrying     Fair value and  
    cost     Fair value     amount     carrying amount  
 
                               
Trading securities (Note)
  W 145,000     W 144,127     W 144,127     W 370,126  
Current portion of long-term investment securities
    192,798       194,917       194,917       56  
 
                       
Total
  W 337,798     W 339,044     W 339,044     W 370,182  
 
                       
(Note)   The Company’s trading securities as of June 30, 2010 are all beneficiary certificates, and the difference between the fair value and acquisition cost was recorded in other income (expenses) as gain (loss) on valuation of short-term investment securities
  b. Long-term Investment Securities
      Long-term investment securities as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
                 
    June 30, 2010     December 31, 2009  
 
               
Available-for-sale equity securities
  W 1,809,506     W 2,026,921  
Available-for-sale debt securities
    195,080       393,397  
 
           
 
               
Total
    2,004,586       2,420,318  
Less: current portion
    (194,917 )     (56 )
 
           
 
               
Long-term portion
  W 1,809,669     W 2,420,262  
 
           

 


Table of Contents

  b-(1). Available-for-sale Equity Securities
      Available-for-sale equity securities as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
                                                 
    June 30, 2010     Carrying amount  
    Number of     Percentage     Acquisition             June 30,     December  
    shares     (%)     cost     Fair value     2010     31, 2009  
(Investments in listed companies)
                                         
SK C&C Co., Ltd.
    4,500,000       9.0     W 150,495     W378,000  (Note a)   W 378,000     W 201,600  
Digital Chosunilbo Co., Ltd.
    2,890,630       7.8       5,781       6,547       6,547       6,995  
KRTnet Corporation
    234,150       4.4       1,171       1,564       1,564       1,573  
POSCO Corp.
    2,481,310       2.8       332,662       1,157,531       1,157,531       1,533,450  
nTels Co., Ltd.
    205,200       6.2       34       919       919       1,161  
Sprint Nextel
    8,467,646       0.3       36,743     43,457  (Note b)     43,457       74,215  
 
                                       
Sub-total
                    526,886       1,588,018       1,588,018       1,818,994  
 
                                       
 
                                               
(Investments in non-listed companies)
                                         
The Korea Economic Daily
    2,585,069       13.8       13,964     (Note c)     13,964       13,964  
Others
                    122,099     (Notes b, c & d)     5,841       5,601  
 
                                         
Sub-total
                    136,063               19,805       19,565  
 
                                         
 
                                               
(Investments in funds)
                                               
Global Opportunities Breakaway Fund
                    186,390     188,203  (Note e)     188,203       175,140  
Others
                    13,480     (Note c)     13,480       13,222  
 
                                         
Sub-total
                    199,870               201,683       188,362  
 
                                         
 
                                               
Total
                    862,819               1,809,506       2,026,921  
Less: current portion
                    (240 )             (240 )      
 
                                         
 
                                               
Long-term portion
                  W 862,579             W 1,809,266     W 2,026,921  
 
                                         
(Note a)     As the common stocks of SK C&C were listed on the Stock Market of Korea Exchange during the year ended December 31, 2009, the Company sold 10,500,000 shares through initial public offering and recorded the residual investment at its market value as of December 31, 2009. In addition, the Company recorded unrealized gain on valuation of investments of W207,763 million (net of tax effect W66,331 million) as of June 30, 2010.
 
(Note b)     The investment in common stock of Sprint Nextel and others were sold during the six months ended June 30, 2010 and the difference between the disposal price and acquisition cost was recorded as loss on disposal of long term investment securities.
 
(Note c)     As a reasonable estimate of fair value could not be made, the investment is stated at acquisition cost.
 
(Note d)     Due to the impairment of the investment of Mobinex Inc. and others, the Company recorded W6,246 million of impairment loss on investment securities for the year ended December 31, 2009.
 
(Note e)     For the year ended December 31, 2009, the Company entered into limited partnership agreement with overseas private fund. In accordance with the partnership agreement, the Company has contributed US$150 million out of total capital commitment of US$200 million. In addition, the difference between the fair value and acquisition cost of W1,414 million (net of tax effect of W399 million) was recorded as unrealized gain on valuation of long-term investment securities in other comprehensive income.

 


Table of Contents

  b-(2). Available-for-sale Debt Securities
      Available-for-sale debt securities as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
                                 
                    Carrying amount  
                    June     December  
    Maturity     Acquisition cost     30, 2010     31, 2009  
 
                               
Public bonds
  (Note a)   W 401     W 401     W 457  
Closed beneficiary certificates
  October 2011     59       2       8  
Bond-type beneficiary certificates
  June 2011     100,000       101,879       300,134  
Subordinated bonds (Note b)
            90,980       90,980       90,980  
Convertible bonds of Magic Tech Network Co., Ltd. (Note c)
  March 2011     1,818       1,818       1,818  
 
                         
 
                               
Total
            193,258       195,080       393,397  
Less current portion
            (192,798 )     (194,677 )     (56 )
 
                         
 
                               
Long-term available-for-sale debt securities
          W 460     W 403     W 393,341  
 
                         
      The interest income incurred from available-for-sale debt securities for the six months ended June 30, 2010 and 2009, and for the three months ended June 30, 2010 and 2009, were W7 million and W161 million, W3 million and W90 million, respectively.
(Note a)   The maturities of public bonds as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
                 
Maturity   June 30, 2010     December 31, 2009  
 
               
Within one year
  W     W 57  
After one year but within five years
    401       400  
 
           
 
               
 
  W 401     W 457  
 
           
(Note b)   The Company purchased subordinated bonds issued by a special purpose company as part of the asset-backed securitization of accounts receivable-other resulting from its mobile phone financing plan.
 
(Note c)   On September 3, 2009, the Company purchased convertible bonds of Magic Tech Network Co., Ltd. for US$1,458,065. Such convertible bonds have a conversion price of US$274.75 per share of common stock of Magic Tech Network Co., Ltd..

 


Table of Contents

  b-(3). Changes in Unrealized Gains (Losses) on Investments in Common Stock
      The changes in unrealized gains (losses) on investments in common stock for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                         
    For the six months ended June 30, 2010  
            Increase        
    Beginning balance     (decrease)     Ending balance  
Available-for-sales securities:
                       
Unrealized gain on valuation of long-term Investment securities
  W 1,301,359       (W189,946 )   W 1,111,413  
Unrealized loss on valuation of long-term Investment securities
    (12,520 )     12,463       (57 )
 
                 
 
                       
Sub-total
    1,288,839       (177,483 )     1,111,356  
Less tax effect
    (285,694 )     34,978       (250,716 )
 
                 
 
                       
Total
  W 1,003,145       (W142,505 )   W 860,640  
 
                 
                         
    For the six months ended June 30, 2009  
            Increase        
    Beginning balance     (decrease)     Ending balance  
Available-for-sales securities:
                       
Unrealized gain on valuation of long-term Investment securities
  W 941,096     W 100,169     W 1,041,265  
Unrealized loss on valuation of long-term Investment securities
    (401,945 )     142,712       (259,233 )
 
                 
 
                       
Sub-total
    539,151       242,881       782,032  
Less tax effect
    (125,881 )     (53,184 )     (179,065 )
 
                 
 
                       
Total
  W 413,270     W 189,697     W 602,967  
 
                 

 


Table of Contents

4.   EQUITY SECURITIES ACCOUNTED FOR USING THE EQUITY METHOD
 
    Equity securities accounted for using the equity method of accounting as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
                                                 
    June 30, 2010     Carrying Amount  
            Ownership                          
    Number     percentage     Acquisition     Net asset     June 30,     December  
    of shares     (%)     cost     value     2010     31, 2009  
 
                                               
SK Broadband Co., Ltd.
    149,638,354       50.6     W 1,450,804     W 680,802     W 1,194,669     W 1,242,247  
SK Communications Co., Ltd.
    28,029,945       64.7       175,441       141,823       152,606       148,831  
SK Telink Co., Ltd.
    943,997       90.8       5,296       141,841       141,841       133,029  
SK Marketing & Company Co., Ltd.
    5,000,000       50.0       190,000       113,579       113,579       112,531  
HanaSK Card Co., Ltd.
    57,647,058       49.0       402,476     326,827  (Note a)     396,360        
PS&Marketing Corporation
    30,000,000       100.0       230,000     202,341  (Note b)     202,341       133,934  
SK Wyverns Baseball Club Co., Ltd.
    199,997       100.0       1,000                    
Paxnet Co., Ltd.
    5,590,452       59.7       26,563       15,766       29,175       30,611  
F&U Credit Information Co., Ltd.
    300,000       50.0       2,410       3,935       4,375       4,481  
TU Media Corp.
    28,538,064       44.2       151,980       11,240       11,240       11,710  
IHQ, Inc.
    14,960,784       37.1       51,846     10,412  (Note c)     17,295       20,178  
Ntreev Soft Co., Ltd.
    2,064,970       63.7       33,196       9,470       9,470       7,708  
Commerce Planet Co., Ltd.
    29,396       100.0       8,251       360       360       139  
Loen Entertainment, Inc.
    16,054,812       63.5       57,874       46,049       46,049       40,234  
Harex Info Tech, Inc.
    225,000       21.2       3,375       62       62       62  
SK Mobile
          20.0       4,930       2,111       2,111       2,111  
SKT Vietnam PTE Ltd.
    180,476,700       73.3       191,273       24,540       24,540       26,264  
Skytel Co., Ltd.
    1,951,777       29.3       2,159       18,148       18,148       14,958  
SK China Company Ltd.
    94,960       29.7       6,159       5,004       3,919       3,919  
SK Telecom China Co., Ltd.
          100.0       7,340       9,443       9,443       9,443  
TR Entertainment
          42.2       10,953       2,317       6,754       7,560  
ULand Company Ltd.
    14,100,100       70.1       17,511       3,829       3,829       3,819  
SKT Americas, Inc.
    122       100.0       58,494     50,054  (Note b)     50,054       26,131  
SK Telecom China Holding Co., Ltd.
          100.0       34,251     29,617  (Note b)     29,617       23,396  
SK USA, Inc.
    49       49.0       3,184       5,498       5,498       5,498  
Helio, Inc.
    79,437       14.3       134       12       12       12  
Korea IT Fund
    190       63.3       190,000       227,972       227,972       220,957  
1st Music Investment Fund of SK-PVC
    1,385       69.3       6,925       4,695       4,695       4,695  
2nd Music Investment Fund of SK-PVC
    1,585       79.3       7,925       7,487       7,487       8,036  
SK-KTB Music Investment Fund
    14,850,000,000       74.2       14,850       14,894       14,894       13,538  
Stonebridge Cinema Fund
    120       45.6       12,000       8,193       8,193       8,255  
Michigan Global Cinema Fund
    40       36.4       4,000       3,585       3,585       3,651  
3rd Fund of Isu Entertainment
    25       31.3       2,500       1,635       1,635       1,635  
SK Telecom Advanced Tech & Service Center
          100.0       6,989       9,536       9,536       9,536  
Cyworld China Holdings
    10,500,000       53.8       10,272                    
Magic Tech Network Co., Ltd.
    4,500       30.0       8,494       941       4,649       5,267  
SK Telecom Global Investment B.V.
    18,000       100.0       39,319       42,504       42,504       41,013  
SKY Property Mgmt. Ltd.
    22,980       60.0       283,368       279,855       279,855       264,850  
Wave City Development Co. Ltd.
    382,000       19.1       1,967       1,532       1,532       1,532  

 


Table of Contents

                                                 
    June 30, 2010     Carrying Amount  
            Ownership                          
    Number     percentage     Acquisition     Net asset     June 30,     December  
    of shares     (%)     cost     value     2010     31, 2009  
Prmaxsoftware Tech. Co., Ltd.
          97.2       11,665       2,432       2,432       2,432  
Benex Digital Cultural Contents Fund
    50       19.9       5,000       4,694       4,694       4,912  
Benex Focus Limited
Partnership II
    200       66.7       20,000       19,509       19,509       19,782  
K-net Culture & Contents Venture Fund
    118       59.0       11,800       10,845       10,845       11,157  
Open Innovation Fund
    200       98.5       20,000       19,743       19,743       19,938  
UniSK
    49       49.0       3,475       4,247       4,247       4,247  
SK Beijing Industrial Development Co., Ltd.
    19,843,800       100.0       23,709       18,009       18,009       18,009  
Cyworld Japan
    375,000       30.0       3,141       66       66       66  
Cyworld Inc.
    2,850,000       30.0       2,672                    
Daehan Kanggun BcN Co., Ltd.
    1,461,486       29.0       7,307       7,262       7,262       7,272  
SK Telecom Europe Limited
    690,000       100.0       1,286     1,286 (Note d)     1,286       1,286  
SK Fans Co., Limited
          51.0       1,125     1,125 (Note e)     1,125        
SK Telecom Smart City Management Co., Ltd.
          60.0       1,709     1,709 (Note e)     1,709        
Service Ace Co., Ltd.
    4,385,400       100.0       21,927     21,927 (Note e)     21,927        
Service Top Co., Ltd.
    2,856,200       100.0       14,281     14,281 (Note e)     14,281        
Network O&S Co., Ltd.
    3,000,000       100.0       15,000     15,000 (Note e)     15,000        
YTK Investment Ltd.
          100.0       28,000     28,000 (Note e)     28,000        
 
                                         
 
                                               
 
                  W 3,907,606             W 3,250,019     W 2,680,872  
 
                                         
(Note a)   The Company acquired 57,647,058 shares of HanaSK Card Co., Ltd. during the six months ended June 30, 2010. As a result, the Company holds 49.0% ownership in HanaSK Card Co., Ltd.
 
(Note b)   During the six months ended June 30, 2010, the Company made an additional investment of W80,000 million, W4,656 million and W28,036 million in PS&Marketing Corporation, SK Telecom China Holdings Co., Ltd. and SKT Americas, Inc., respectively.
 
(Note c)   On July 15, 2010, the Company disposed of its 10,930,844 shares of IHQ, Inc for W1,700 per share.
 
(Note d)   As allowed under Korean GAAP, investments in equity securities of SK Telecom Europe Limited and others were stated at their acquisition cost instead of amount valued using the equity method of accounting, as changes in the Company’s portion of stockholders’ equity of such investees were not expected to be material.
 
(Note e)   During the six months ended June 30, 2010, the Company incorporated SK Fans Co., Limited, SK Telecom Smart City management Co., Ltd., Service Ace Co., Ltd., Service Top Co., Ltd., Network O&S Co., Ltd. and YTK Investment Ltd.

 


Table of Contents

    Details of the changes in investments in affiliates accounted for using the equity method for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                                                                                 
            For the six months ended June 30, 2010  
                                    Equity in                                    
                                    other com-             Equity                      
                            Equity in     prehen-             method in             Other        
            Beginning     Acquisi     earnings     sive     Capital     capital     Dividend     increase     Ending  
            balance     -tion     (losses)     income     Surplus     adjustments     received     (decrease)     balance  
 
                                                                               
SK Broadband Co., Ltd.
  (Note a)   W 1,242,247     W       (W44,953 )     (W2,761 )   W     W 136     W     W     W 1,194,669  
SK Communications Co., Ltd.
  (Note a)     148,831             3,661       (357 )     907       (436 )                 152,606  
SK Telink Co., Ltd.
  (Notes a and c)     133,029             16,148       27                   (7,363 )           141,841  
SK Marketing & Company Co., Ltd.
  (Note a)     112,531             1,095       (47 )                             113,579  
HanaSK Card Co., Ltd.
  (Note a)           402,476       (6,101 )     (15 )                             396,360  
PS&Marketing Corporation
  (Note a)     133,934       80,000       (11,593 )                                   202,341  
SK Wyverns Baseball Club Co., Ltd.
  (Note b)                 (221 )                             221        
Paxnet Co., Ltd.
  (Notes a and c     30,611             (357 )                       (1,079 )           29,175  
F&U Credit information Co., Ltd.
  (Note b)     4,481             (106 )                                   4,375  
TU Media Corp.
  (Note a)     11,710             (470 )                                   11,240  
IHQ, Inc.
  (Note a)     20,178             (2,867 )     (16 )                             17,295  
Ntreev Soft Co., Ltd.
  (Note a)     7,708             1,764       (2 )                             9,470  
Commerce Planet Co., Ltd.
  (Note b)     139             221                                     360  
Loen Entertainment, Inc.
  (Notes a and c     40,234             6,215       226                   (626 )           46,049  
Harex Info Tech, Inc.
  (Note b)     62                                                 62  
SK Mobile
  (Note b)     2,111                                                 2,111  
SKT Vietnam PTE Ltd.
  (Note a)     26,264             (818 )     (906 )                             24,540  
Skytel Co., Ltd.
  (Notes a and c)     14,958             1,862       1,772                   (444 )           18,148  
SK China Company Ltd.
  (Note b)     3,919                                                 3,919  
SK Telecom China Co., Ltd.
  (Note b)     9,443                                                 9,443  
TR Entertainment
  (Note b)     7,560             (806 )                                   6,754  
ULand Company Ltd.
  (Note a)     3,819             (138 )     148                               3,829  
SKT Americas, Inc.
  (Note a)     26,131       28,036       (7,497 )     3,384                               50,054  
SK Telecom China Holding Co., Ltd.
  (Note a)     23,396       4,656       2,493       (928 )                             29,617  
SK USA, Inc.
  (Note b)     5,498                                                 5,498  
Helio, Inc.
  (Note b)     12                                                 12  
Korea IT Fund
  (Note a)     220,957             6,061       954                               227,972  
1st Music Investment Fund of SK-PVC
  (Note b)     4,695                                                 4,695  
2nd Music Investment Fund of SK-PVC
  (Note b)     8,036             (549 )                                   7,487  
SK-KTB Music Investment Fund
  (Note a)     13,538             431       925                               14,894  
Stonebridge Cinema Fund
  (Note a)     8,255             (62 )                                   8,193  
Michigan Global Cinema Fund
  (Note b)     3,651             (66 )                                   3,585  
3rd Fund of Isu Entertainment
  (Note b)     1,635                                                 1,635  
SK Telecom Advanced Tech & Service Center
  (Note b)     9,536                                                 9,536  
Cyworld China Holdings
  (Note b)                 (11 )     11                                
Magic Tech Network Co., Ltd.
  (Note b)     5,267             (618 )                                   4,649  
SK Telecom Global Investment B.V.
  (Note a)     41,013             (8 )     1,499                               42,504  
SKY Property Mgmt. Ltd.
  (Note a)     264,850             838       14,167                               279,855  
Wave City Development Co. Ltd.
  (Note b)     1,532                                                 1,532  
Prmaxsoftware Tech. Co., Ltd.
  (Note b)     2,432                                                 2,432  
Benex Digital Cultural Contents Fund
  (Note b)     4,912             (218 )                                   4,694  
Benex Focus Limited Partnership II
  (Note a)     19,782             (273 )                                   19,509  

 


Table of Contents

                                                                                 
            For the six months ended June 30, 2010  
                                    Equity in                                    
                                    other com-             Equity                      
                            Equity in     prehen-             method in             Other        
            Beginning     Acquisi     earnings     sive     Capital     capital     Dividend     increase     Ending  
            balance     -tion     (losses)     income     Surplus     adjustments     received     (decrease)     balance  
 
                                                                               
K-net Culture & Contents Venture Fund
  (Note b)     11,157             (312 )                                   10,845  
Open Innovation Fund
  (Note a)     19,938             (195 )                                   19,743  
UniSK
  (Note b)     4,247                                                 4,247  
SK Beijing Industrial Development Co., Limited
  (Note b)     18,009                                                 18,009  
Cyworld Japan
  (Note b)     66                                                 66  
Cyworld Inc.
  (Note b)                                                      
Daehan Kanggun BcN Co., Ltd.
  (Note b)     7,272             (10 )                                   7,262  
SK Telecom Europe Limited
  (Note b)     1,286                                                 1,286  
SK Fans Co., Limited
  (Note b)           1,125                                           1,125  
SK Telecom Smart City Management Co., Ltd.
  (Note b)           1,709                                           1,709  
Service Ace Co., Ltd.
  (Note b)           21,927                                           21,927  
Service Top Co., Ltd.
  (Note b)           14,281                                           14,281  
Network O&S Co., Ltd.
  (Note b)           15,000                                           15,000  
YTK Investment, Ltd.
  (Note b)           28,000                                           28,000  
 
                                                           
Total
          W 2,680,872       597,210       (37,460 )     18,081       907       (300 )     (9,512 )     221     W 3,250,019  
 
                                                                         
Less: three months ended March 31, 2010
                    420,584       (33,338 )     (9,178 )     (62 )     679       (9,016 )     221          
 
                                                                 
Three months ended June 30, 2010
                  W 176,626       (W4,122 )   W 27,259     W 969       (W979 )     (W496 )   W          
 
                                                                 
(Note a)   Investments were recorded using the equity method of accounting based on unaudited and unreviewed financial statements as of and for the six months ended June 30, 2010. In order to verify the reliability of such unaudited and unreviewed financial statements, the Company has performed the following procedures and found no significant errors:
  i)   obtained the signature from the chief executive officer of the equity method investee asserting that the unaudited and unreviewed financial statements are accurate
 
  ii)   examined whether the major transactions specifically identified by the Company, and public disclosures, were appropriately reflected in the unaudited and unreviewed financial statements
 
  iii)   performed an analytical review on the unaudited and unreviewed financial statements
(Note b)   Investments in equity securities are carried using the equity method of accounting based on the financial statements as of December 31, 2009 as information as of June 30, 2010 was not available. The expected change in the Company’s portion of stockholders’ equity of the investee for the six months ended June 30, 2010 is immaterial.
 
(Note c)   The Company received dividends from SK Telink Co., Ltd., Paxnet Co., Ltd., Loen Entertainment, Inc., and Skytel Co., Ltd. and the corresponding amounts were deducted from the carrying amount of equity securities accounted for using the equity method.

 


Table of Contents

                                                                                         
            For the six months ended June 30, 2009  
                                    Equity in             Equity     Equity                      
                            Equity in     other com-             method in     method in             Other        
            Beginning     Acquisi     earnings     prehensive     Capital     retained     capital     Dividend     increase     Ending  
            balance     -tion     (losses)     income     surplus     earnings     adjustments     received     (decrease)     balance  
 
                                                                                       
SK Broadband Co., Ltd.
  (Note a)   W 1,146,736     W       (W36,415 )   W 662     W       (W56,043 )     (W4,999 )   W     W     W 1,049,941  
SK Communications Co., Ltd.
  (Note a)     147,392             (7,273 )     (18,629 )     2,039             18,202                   141,731  
SK Telink Co., Ltd.
  (Notes a and c)     112,358             13,353       270                         (6,325 )           119,656  
SK Marketing & Company Co., Ltd.
  (Note a)     101,345             7,082       (4,877 )                                   103,550  
PS&Marketing Corporation
  (Note a)           150,000       (9,628 )                                         140,372  
SK Wyverns Baseball Club Co., Ltd.
  (Note b)                 (1 )                                          
Paxnet Co., Ltd.
  (Notes a and c)     30,086             773       (281 )                 281       (492 )           30,367  
F&U Credit Information Co., Ltd.
  (Note b)     4,244             (87 )                                         4,157  
TU Media Corp.
  (Note a)     14,847             (2,254 )     36       (36 )                             12,593  
Aircross Co., Ltd.
  (Note d)     7,289                                                 (7,289 )      
IHQ, Inc.
  (Note a)     26,957             (3,819 )     (5,103 )                 5,970                   24,005  
Ntreev Soft Co., Ltd.
  (Note a)     9,575             (637 )     8                   49                   8,995  
Commerce Planet Co., Ltd.
  (Note b)     1,535             (428 )                                         1,107  
Loen Entertainment, Inc.
  (Note a)     35,895             421       2,989                   (322 )                 38,983  
Harex Info Tech, Inc.
  (Note b)     598             (177 )                                         421  
SK Mobile
  (Note b)     2,111                                                       2,111  
SKT Vietnam PTE Ltd.
  (Note a)     112,160             (13,683 )     2,675                                     101,152  
Skytel Co., Ltd.
  (Note a)     12,381             3,709       (1,355 )                                   14,735  
SK China Company Ltd.
  (Note b)     3,657             (176 )     (11 )                                   3,470  
SK Telecom China Co., Ltd.
  (Note b)     7,157             5       3,096                                     10,258  
TR Entertainment
  (Note a)     9,626             (932 )     65                                     8,759  
ULand Company Ltd.
  (Note a)     5,401             (935 )     105                                     4,571  
Virgin Mobile USA, Inc.
  (Note a)     62,096             (9,216 )     (154 )                                   52,726  
SKT Americas, Inc.
  (Note a)     36,126             (4,629 )     (77 )                                   31,420  
SK Telecom China Holding Co., Ltd.
  (Note a)     30,780       6,302       (3,518 )     521                                     34,085  
SK USA, Inc.
  (Note b)     5,041             182       26                                     5,249  
Helio, Inc.
  (Note b)     116                   (26 )                 26                   116  
Korea IT Fund
  (Note a)     210,725             (734 )     175                                     210,166  
1st Music Investment Fund of SK-PVC
  (Note b)     5,688             (1,181 )     153                                     4,660  
2nd Music Investment Fund of SK-PVC
  (Note b)     8,441             (547 )                                         7,894  
SK-KTB Music Investment Fund
  (Note a)     13,954             (600 )     133                   1                   13,488  
IMM Cinema Fund
  (Note a)     8,435             (194 )                                         8,241  
Michigan Global Cinema Fund
  (Note b)     3,577                                                       3,577  
3rd Fund of Isu Entertainment
  (Note b)     1,568                                                       1,568  
SK Telecom Advanced Tech & Service Center
  (Note b)     10,053             (194 )     (31 )                                   9,828  
Cyworld China Holdings
  (Note b)     2,117             179       (193 )                 (928 )                 1,175  
Magic Tech Network
  (Note b)     7,725             (618 )                                         7,107  
SK Telecom Global Investment B.V.
  (Note a)     31,866       7,030       17       (239 )                                   38,674  
SKY Property Mgmt. Ltd.
  (Note a)     287,405             (487 )     7,154                                     294,072  
Wave City Development Co. Ltd.
  (Note b)     1,908                                                       1,908  
Prmaxsoftware Tech. Co., Ltd.
  (Note b)     7,127             (345 )                                         6,782  
Benex Digital Cultural Contents Fund
  (Note b)     5,068                                                       5,068  
Benex Focus Limited Partnership II
  (Note a)     20,089             (46 )                                         20,043  
K-net Culture & Contents Venture Fund
  (Note b)     5,856                                                       5,856  
Open Innovation Fund
  (Note a)     20,044             11                                           20,055  
 
                                                                   
 
                                                                                       
Total
          W 2,577,155       163,332       (73,022 )     (12,908 )     2,003       (56,043 )     18,280       (6,817 )     (7,289 )   W 2,604,692  
 
                                                                                   
Less: three months ended March 31, 2009
                    7,030       (36,800 )     16,418       1,758       (56,043 )     17,921       (6,817 )     (7,289 )        
 
                                                                       
Three months ended June 30, 2009
                  W 156,302       (W36,222 )     (W29,326 )   W 245     W     W 359     W     W          
 
                                                                       

 


Table of Contents

(Note a)   Investments were recorded using the equity method of accounting based on unaudited and unreviewed financial statements as of and for the six months ended June 30, 2009. In order to examine the reliability of such unaudited and unreviewed financial statements, the Company has performed the following procedures and found no significant errors:
  i)   obtained the signature from the chief executive officer of the equity method investee asserting that the unaudited and unreviewed financial statements are accurate
 
  ii)   examined whether the major transactions specifically identified by the Company, and public disclosures, were appropriately reflected in the unaudited and unreviewed financial statements
 
  iii)   performed an analytical review on the unaudited and unreviewed financial statements
(Note b)   Investments in equity securities are carried using the equity method of accounting based on the financial statements as of December 31, 2008 as information as of June 30, 2009 was not available. The expected change in the Company’s portion of stockholders’ equity of the investee for the six months ended June 30, 2009 is immaterial.
 
(Note c)   The Company received dividends from SK Telink Co., Ltd. and Paxnet Co., Ltd., and the corresponding accounts were deducted from the carrying amount of equity method securities.
 
(note d)   Other decrease in investments in Aircross Co., Ltd. represents the collection of the Company’s investment resulting from the full liquidation of Aircross Co., Ltd.

 


Table of Contents

Details of changes in the differences between the acquisition cost and net asset value of equity method investees at the acquisition date for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                                 
    For the six months ended June 30, 2010  
    Beginning     Increase/             Ending  
    balance     (Decrease)     Amortization     balance  
SK Broadband Co., Ltd.
  W 534,955     W       (W21,088 )   W 513,867  
SK Communications Co., Ltd.
    11,229             (446 )     10,783  
HanaSK Card Co., Ltd.
          70,690       (1,157 )     69,533  
Paxnet Co., Ltd.
    13,946             (536 )     13,410  
F&U Credit information Co., Ltd.
    461             (21 )     440  
IHQ, Inc.
    8,260             (1,377 )     6,883  
Loen Entertainment, Inc.
    408             (408 )      
TR Entertainment
    5,243             (807 )     4,436  
Magic Tech Network Co., Ltd.
    4,326             (618 )     3,708  
Daehan Kanggun BcN Co., Ltd.
          9       (9 )      
 
                       
 
                               
Total
  W 578,828       70,699       (26,467 )   W 623,060  
 
                           
Less: three months ended March 31, 2010
            70,094       (13,634 )        
 
                           
Three months ended June 30, 2010
          W 605       (W12,833 )        
 
                           
                                 
    For the six months ended June 30, 2009  
    Beginning     Increase/             Ending  
    balance     (decrease)     Amortization     balance  
SK Broadband Co., Ltd.
  W 534,051     W       (W5,062 )   W 528,989  
SK Communications Co., Ltd.
    12,122             (446 )     11,676  
Paxnet Co., Ltd.
    15,018             (536 )     14,482  
F&U Credit Information Co., Ltd.
    503             (11 )     492  
IHQ, Inc.
    13,767             (2,753 )     11,014  
Ntreev Soft Co., Ltd.
    595             (297 )     298  
Loen Entertainment, Inc.
    1,223             (408 )     815  
Harex Info Tech, Inc.
    351             (176 )     175  
Skytel Co., Ltd.
    (1,387 )           1,387        
SK China Company Ltd.
    106             (106 )      
TR Entertainment
    6,856             (807 )     6,049  
Virgin mobile USA, Inc.
    125,930             (13,256 )     112,674  
Magic Tech Network
    5,562             (618 )     4,944  
Prmaxsoftware Tech. Co., Ltd.
    691             (345 )     346  
 
                       
 
                               
Total
  W 715,388             (23,434 )   W 691,954  
 
                           
Less: three months ended March 31, 2009
                  (4,019 )        
 
                           
Three months ended June 30, 2009
          W       (W19,415 )        
 
                           

 


Table of Contents

Details of changes in unrealized inter-company gains incurred from sales of assets for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                                 
    For the six months ended June 30, 2010  
    Beginning                     Ending  
    balance     Increase     Decrease     balance  
 
                               
SK Communications Co., Ltd.
  W 128     W       (W128 )   W  
SK China Company Ltd.
    1,086                   1,086  
 
                       
 
                               
Total
  W 1,214             (128 )   W 1,086  
 
                       
Less: three months ended March 31, 2010
                  (128 )        
Three months ended June 30, 2010
          W     W          
 
                           
                                 
    For the six months ended June 30, 2009  
    Beginning                     Ending  
Subsidiary   balance     Increase     Decrease     balance  
 
                               
SK Communications Co., Ltd.
  W 269     W       (W70 )   W 199  
SK China Company Ltd.
    1,086                   1,086  
 
                       
 
                               
Total
  W 1,355             (70 )   W 1,285  
 
                           
Less: three months ended March 31, 2009
                  (35 )        
 
                           
Three months ended June 30, 2009
          W       (W35 )        
 
                           
Details of market price of the equity securities accounted for using the equity method as of June 30, 2010 are as follows (In millions of Korean won, except for market price per share):
                         
    Market price   Number of    
    per share   shares owned by the    
    (In Korean won)   Company   Market price
SK Broadband Co., Ltd.
  W 6,010       149,638,354     W 899,327  
SK Communications Co., Ltd.
    20,100       28,029,945       563,402  
IHQ, Inc.
    875       14,960,784       13,091  
Loen Entertainment, Inc.
    5,300       16,054,812       85,091  

 


Table of Contents

The condensed financial information of the investees as of and for the six months ended June 30, 2010 is as follows (In millions of Korean won):
                                 
    Total   Total           Net
    assets   liabilities   Revenue   income (loss)
SK Broadband Co., Ltd.
  W 3,045,030     W 1,698,519     W 1,001,483       (W48,158 )
SK Communications Co., Ltd.
    302,477       83,153       112,288       4,353  
SK Telink Co., Ltd.
    233,362       77,096       156,810       20,061  
SK Marketing & Company Co., Ltd.
    645,337       418,179       189,652       8,529  
HanaSK Card Co., Ltd.
    2,283,037       1,616,043       219,729       243,318  
PS&Marketing Corporation
    364,797       162,456       320,509       (11,505 )
Paxnet Co., Ltd.
    38,793       12,401       16,800       249  
TU Media Corp.
    235,813       210,358       63,383       (1,289 )
IHQ, Inc.
    46,490       18,419       19,357       (2,212 )
Ntreev Soft Co., Ltd.
    29,362       14,495       11,151       2,991  
Loen Entertainment, Inc.
    116,506       43,963       68,531       11,131  
SKT Vietnam PTE Ltd.
    49,212       15,742       120       (864 )
Skytel Co., Ltd.
    69,667       7,821       15,007       7,036  
ULand Company Limited
    8,196       2,738       1,424       (197 )
SKT Americas, Inc
    52,751       2,697       9,216       (6,671 )
SK Telecom China Holdings Co., Ltd.
    33,382       3,765       11,961       1,103  
Korea IT Fund
    359,956             15,519       11,542  
SKT-KTB Music Investment Fund
    20,132       53       849       581  
Stonebridge Cinema Fund
    18,071       115       71       27  
SK Telecom Global Investment B.V.
    42,569       65       54       (8 )
SKY Property Mgmt. Ltd.
    581,952       115,527       19,921       1,628  
2nd Benex Focus investment Fund
    29,265       1       180       (409 )
K-net Culture & Contents Venture Fund
    18,386       4       110       (528 )
Open Innovation Fund
    20,039             198       (200 )
5.   LOANS TO EMPLOYEES
Short-term and long-term loans to employees as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
                                 
    June 30, 2010     December 31,  
    Short-term     Long-term     Total     2009  
 
                               
Loans to employees’ stock ownership Association (Note)
  W 12,033     W 38,642     W 50,675     W 58,198  
Loans to employees for housing and other
    17       2       19       45  
 
                       
 
                               
Total
  W 12,050     W 38,644     W 50,694     W 58,243  
 
                       
(Note)   The Company loaned the amount above to Employees’ Stock Ownership Association to help fund employees’ acquisition of the Company’s treasury stocks. The loan will be repaid over a period of five years, beginning on the second anniversary of each loan date and will expire on December 25, 2014.

 


Table of Contents

6.   PROPERTY AND EQUIPMENT
Property and equipment as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
                         
    Useful lives              
    (years)     June 30, 2010     December 31, 2009  
 
                       
Land
        W 409,916     W 416,732  
Buildings and structures
    30,15       1,575,145       1,577,119  
Machinery
    6       13,591,129       14,236,456  
Vehicles
    4       52,543       54,189  
Other
    4       1,091,037       1,004,183  
Construction in progress
          452,129       336,835  
 
                   
 
                       
 
            17,171,899       17,625,514  
Less: accumulated depreciation
            (12,346,019 )     (12,428,993 )
 
                   
 
                       
Property and equipment, net
          W 4,825,880     W 5,196,521  
 
                   
Details of change in property and equipment for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                                                 
    For the six months ended June 30, 2010  
    Beginning                                     Ending  
    balance     Acquisition     Disposal     Transfer     Depreciation     balance  
 
                                               
Land
  W 416,732     W 104       (W6,920 )   W     W     W 409,916  
Buildings and structures
    1,011,127       85       (1,231 )     228       (35,327 )     974,882  
Machinery
    3,101,103       6,361       (3,386 )     156,125       (655,040 )     2,605,163  
Vehicles
    34,249       174       (102 )           (1,980 )     32,341  
Other
    296,476       251,208       (1,119 )     (152,166 )     (42,950 )     351,449  
Construction in progress
    336,834       156,393       (58 )     (41,040 )           452,129  
 
                                   
 
                                               
Total
  W 5,196,521     W 414,325       (W12,816 )     (W36,853 )     (W735,297 )   W 4,825,880  
 
                                   
                                                 
    For the six months ended June 30, 2009  
    Beginning                                     Ending  
    balance     Acquisition     Disposal     Transfer     Depreciation     balance  
 
                                               
Land
  W 447,088     W 8,431       (W70 )   W 518     W     W 455,967  
Buildings and structures
    1,012,226       940             151       (28,241 )     985,076  
Machinery
    2,594,086       7,513       (1,629 )     408,653       (578,833 )     2,429,790  
Vehicles
    2,035       43       (41 )           (556 )     1,481  
Other
    361,205       500,215       (15,327 )     (479,935 )     (46,740 )     319,418  
Construction in progress
    281,574       130,510             14,302             426,386  
 
                                   
 
                                               
Total
  W 4,698,214     W 647,652       (W17,067 )     (W56,311 )     (W654,370 )   W 4,618,118  
 
                                   

 


Table of Contents

7.   INTANGIBLE ASSETS
 
    Intangible assets as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
                                                 
    June 30, 2010     December 31, 2009  
    Acquisition     Accumulated     Carrying     Acquisition     Accumulated     Carrying  
    cost     amortization     amounts     cost     amortization     amounts  
 
Goodwill
  W 2,340,495       (W1,096,814 )   W 1,243,681     W 2,340,495       (W1,032,073 )   W 1,308,422  
Frequency use rights
    1,385,120       (716,146 )     668,974       1,385,120       (657,880 )     727,240  
Software development costs
    192,040       (182,124 )     9,916       192,040       (179,512 )     12,528  
Computer software
    1,427,487       (913,577 )     513,910       1,370,128       (807,854 )     562,274  
Other
    151,944       (97,270 )     54,674       148,947       (93,475 )     55,472  
 
                                   
 
                                               
 
  W 5,497,086       (W3,005,931 )   W 2,491,155     W 5,436,730       (W2,770,794 )   W 2,665,936  
 
                                   
    Details of changes in intangible assets for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                                                 
    For the six months ended June 30, 2010  
    Beginning                                     Ending  
    balance     Increase     Decrease     Transfer     Amortization     balance  
 
                                               
Goodwill
  W 1,308,422     W     W     W       (W64,741 )   W 1,243,681  
Frequency use rights
    727,240                         (58,266 )     668,974  
Software development costs
    12,528                         (2,612 )     9,916  
Computer software
    562,274       3,273       (4,458 )     83,407       (130,586 )     513,910  
Other
    55,472       3,153       (12 )     2,044       (5,983 )     54,674  
 
                                   
 
                                               
Total
  W 2,665,936     W 6,426       (W4,470 )   W 85,451       (W262,188 )   W 2,491,155  
 
                                   
                                                 
    For the six months ended June 30, 2009  
    Beginning                                     Ending  
    balance     Increase     Decrease     Transfer     Amortization     balance  
 
Goodwill
  W 1,439,366     W     W     W       (W64,940 )   W 1,374,426  
Frequency use rights
    843,771                         (58,266 )     785,505  
Software development costs
    13,489                         (2,277 )     11,212  
Computer software
    588,254       1,804       (138 )     56,563       (106,180 )     540,303  
Other
    56,712       4,991       (87 )     50       (5,244 )     56,422  
 
                                   
 
                                               
Total
  W 2,941,592     W 6,795       (W225 )   W 56,613       (W236,907 )   W 2,767,868  
 
                                   

 


Table of Contents

    The book value as of June 30, 2010 and residual useful lives of major intangible assets are as follows (In millions of Korean won):
                         
    Amount     Description   Residual useful lives
Goodwill
  W 1,241,905     Goodwill related to acquisition
of Shinsegi Telecomm, Inc.
  9 years
and 9 months
IMT license
    629,207     Frequency use rights relating to
W-CDMA Service
  (Note a)
WiBro license
    35,512     WiBro Service   (Note b)
DMB license
    4,255     DMB Service   6 years
(Note a)     Amortization of the IMT license commenced when the Company started its commercial IMT 2000 service in December 2003, using the straight-line method over the estimated useful life (13 years) of the IMT license. License expires in December 2016.
 
    In addition, the Company purchased W-CDMA frequency use right for W102,432 million during May, 2010, which is recognized as construction in progress and will be amortized starting from its expected usable period in October 2010.
(Note b)     The Company purchased the WiBro license from MIC on March 30, 2005. The license period is seven years from the purchase date. Amortization of the WiBro license commenced when the Company started its commercial WiBro services on June 30, 2006 using the straight line basis over the remaining useful life.

 


Table of Contents

8.   BONDS PAYABLE
 
    Bonds payable as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won and thousands of Foreign Currency):
                               
    Maturity     Annual interest   June     December  
    Year     rate (%)   30, 2010     31, 2009  
 
                             
Domestic general bonds
  2010       4.0     W     W 140,000  
  2010       6.77       50,000       50,000  
  2011       3.0       200,000       200,000  
  2013       4.0       200,000       200,000  
  2013       6.92       250,000       250,000  
  2014       5.0       200,000       200,000  
  2015       5.0       200,000       200,000  
  2016       5.0       200,000       200,000  
  2016       5.54       40,000       40,000  
  2016       5.92       230,000       230,000  
  2018       5.0       200,000       200,000  
Dollar denominated bonds
(US$300,000)
  2011       4.25       363,090       350,280  
Dollar denominated bonds
(US$400,000)
  2027       6.63       484,120       467,040  
Yen denominated bonds
        3-month Euro Yen                
(JPY 12,500,000)
  2012     LIBOR rate +0.55 (Note a)     170,570       157,852  
Yen denominated bonds
        3-month Euro Yen                
(JPY 5,000,000)
  2012     TIBOR rate +2.5 (Note b)     68,228       63,141  
Yen denominated bonds
        3-month Euro Yen                
(JPY 3,000,000)
  2012     LIBOR rate +2.5 (Note a)     40,937       37,885  
Convertible bonds (US$332,528)
  2014       1.75       437,673       437,673  
Floating rate notes
        3-month                
(US$150,000,000)
  2010     LIBOR rate +3.05 (Note c)     181,545       175,140  
Floating rate notes
        3-month                
(U S$220,000,000)
  2012     LIBOR rate +3.15 (Note c)     266,266       256,872  
 
                         
 
                             
Total
                  3,782,429       3,855,883  
Less discounts on bonds
                  (55,149 )     (61,227 )
Less conversion right adjustments
                  (73,160 )     (81,235 )
 
                         
 
                             
Net
                  3,654,120       3,713,421  
Less portion due within one year
                  (593,779 )     (364,205 )
 
                         
 
                             
Long-term portion
                W 3,060,341     W 3,349,216  
 
                         
(Note a)     The 3-months Euro Yen LIBOR rate as of June 30, 2010 is 0.24%.
 
(Note b)     The 3-months Euro Yen TIBOR rate as of June 30, 2010 is 0.38%.
 
(Note c)     The 3-months LIBOR rate as of June 30, 2010 is 0.53%.
All of the above bonds will be paid in full at maturity.

 


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    On April 7, 2009, the Company issued convertible bonds with a maturity of five years in the principal amount of US$332,528,000 for US$326,397,463 with an initial conversion price of W221,370 per share of the Company’s common stock, which was greater than market value at the date of issuance. The Company may redeem the principal amount after 3 years from the issuance date if the market price exceeds 130% of the conversion price during a predetermined period. On the other hand, the bond holders may redeem their notes at 100% of the principal amount on April 7, 2012 (3 years from the issuance date). The conversion right may be exercised during the period from May 18, 2009 to March 24, 2014 and the number of common shares to be converted as of June 30, 2010 is 2,078,055 shares.
 
    Conversion of notes to common shares may be prohibited under the Telecommunications Law or other legal restrictions which restrains foreign governments, individuals and entities from owning more than 49% of the Company’s voting stock, if this 49% ownership limitation is violated due to the exercise of conversion rights. In this case, the Company will pay a bond holder as cash settlement determined at the average price of one day after a holder exercises its conversion right or the weighted average price for the following five or twenty business days. The Company intends to sell treasury shares held in trust by the Company that corresponds to the number of shares of common stock that would have been delivered in the absence of the 49% foreign shareholding restrictions. Unless either previously redeemed or converted, the notes are redeemable at 100% of the principal amount at maturity.
 
    During the six months ended June 30, 2010, no conversion was made.
9.    LONG-TERM BORROWINGS
    Long-term borrowings as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won and thousands of U.S. dollars):
                                         
            Final   Annual interest   June 30,     December 31,  
    Lender   maturity year   rate (%) (Note)   2010     2009  
 
                                       
Long-term floating rate discount bill
  Shinhan Bank   June 29, 2011   91 days CD yield + 0.25%   W 200,000     W 200,000  
Long-term floating rate borrowings
  KDB   July 28, 2011   91 days CD yield + 1.02%   W 100,000     W 100,000  
  Citibank   July 29, 2011   91 days CD yield + 1.20%   W 100,000     W 100,000  
  Nonghyup   July 30, 2011   91 days CD yield + 1.30%   W 100,000     W 100,000  
  Hana Bank   July 31, 2011   91 days CD yield + 1.50%   W 150,000     W 150,000  
  Nonghyup   August 12, 2011   91 days CD yield + 1.50%   W 50,000     W 50,000  
  Calyon Bank   October 10, 2013   6M LIBOR + 0.29%   US$ 50,000     US$ 50,000  
  DBS Bank   October 10, 2013   6M LIBOR + 0.29%   US$ 25,000     US$ 25,000  
  SMBC   October 10, 2013   6M LIBOR + 0.29%   US$ 25,000     US$ 25,000  
 
                                   
 
                                       
 
                          W 700,000     W 700,000  
Total
                          US$ 100,000     US$ 100,000  
 
                                   
Equivalent in Korean won
                          W 821,030     W 816,760  
Less current portion
                            (200,000 )      
 
                                   
Long-term borrowings
                          W 621,030     W 816,760  
 
                                   
(Note)     At June 30, 2010, the 91 days CD yield and the 6M LIBOR rate are 2.46% and 0.75%, respectively.

 


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10.   CAPITAL STOCK AND CAPITAL SURPLUS
    The Company’s capital stock consists entirely of common stock with a par value of W500. The number of authorized and issued shares as of June 30, 2010 and December 31, 2009 are as follows:
                 
    June 30, 2010   December 31, 2009
 
               
Authorized shares
    220,000,000       220,000,000  
Issued shares
    80,745,711       80,745,711  
Outstanding shares, net of treasury stock
    72,344,999       72,344,999  
    Significant changes in capital stock and capital surplus for the six months ended June 30, 2010 and for the year ended December 31, 2009 are as follows (In millions of Korean won except for share data):
                         
    Number of shares             Additional paid in  
    issued (Note)     Capital stock     capital  
 
                       
For the year ended December 31, 2009
    80,745,711     W 44,639     W 2,915,887  
 
                 
 
                       
For the six months ended June 30, 2010
    80,745,711     W 44,639     W 2,915,887  
 
                 
(Note)     During the year ended December 31, 2003, 2006 and 2009, the Company retired 7,002,235 shares, 1,083,000 shares and 448,000 shares, respectively, and reduced retained earnings before appropriations in accordance with Korean Commercial Laws. As a result, the total par value of outstanding capital stock does not agree to the capital balance of capital stock. In addition, there are no changes in capital stock for the six months ended June 30, 2010 and the year ended December 31, 2009.

 


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  11.   INCOME TAX
  a.   Details of income tax expense
      Income tax expense for the three months and the six months ended June 30, 2010 and 2009 consists of the following (In millions of Korean won):
                 
    For six months ended June 30,  
    2010     2009  
 
               
Current
  W 271,221     W 221,736  
Changes in net deferred tax liabilities (note a)
    (54,608 )     (22,021 )
 
           
 
               
Income tax expense
    216,613       199,715  
Less three months ended March 31
    (87,198 )     (106,548 )
 
           
 
               
Three months ended June 30
  W 129,415     W 93,167  
 
           
(Note a)   Changes in net deferred tax liabilities for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                 
    For six months ended June 30,  
    2010     2009  
 
               
Ending balance of net deferred tax liabilities (assets)
    (W90,250 )   W 307,549  
Beginning balance of net deferred tax liabilities
    (16,033 )     (257,939 )
Adjustment to the beginning net deferred tax liabilities based on tax return filed
    18,479       5,319  
Tax effect of temporary differences charged or credited directly to related components of stockholders’ equity
    33,196       (76,950 )
 
           
 
    (W54,608 )     (W22,021 )
 
           
  b.   An explanation of the relationship between income tax expense and accounting income before income tax expense for the six months ended June 30, 2010 and 2009 is as follows (In millions of Korean won):
                 
    For six months ended June 30,  
    2010     2009  
 
               
Income before income tax
  W 902,339     W 828,107  
Income tax expense at statutory income tax rate
(12.1% of taxable income less than W200 million and 24.2% of taxable income exceeding W200 million)
    218,342       200,377  
Differences (Note)
    (1,729 )     (662 )
 
           
 
               
Income tax expense
  W 216,613     W 199,715  
 
           
 
Effective tax rates
    24.01 %     24.12 %
 
           

 


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(Note)    The differences between income tax computed using the statutory corporate income tax rates and the recorded income tax for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                 
    For six months ended June 30,  
    2010     2009  
 
               
Permanent difference
  W 20,427     W 21,861  
Changes in deferred income tax assets (liabilities) recognized related to equity method investment securities
    2,991       19,008  
Tax credit for investment
    (20,086 )     (40,693 )
Other tax credits
    (1,549 )     (1,794 )
Sur tax on exempted income
    4,030       7,412  
Tax refund for prior periods
    (7,542 )     (6,456 )
 
           
 
               
 
    (W1,729 )     (W662 )
 
           

 


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  12.   COMPREHENSIVE INCOME
 
      Details of comprehensive income for the three months and six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
 
      For the six months ended June 30, 2010
                                 
    For the     For the  
    three months ended     six months ended  
    Profit and loss             Profit and loss        
    effect     Tax effect     effect     Tax effect  
 
                               
Net income
  W 363,971             W 685,726          
Other comprehensive income (loss):
                               
Unrealized loss on valuation of long-term investment securities, net
    (1,361 )     (W2,553 )     (142,505 )   W 34,978  
Equity in other comprehensive income of affiliates, net
    26,088       (1,172 )     17,370       (711 )
Loss on valuation of currency swap, net
    2,266       (635 )     894       (422 )
Loss on valuation of interest rate swap, net
    2,311       (683 )     356       (101 )
 
                       
Sub-total
    29,304       (W5,043 )     (123,885 )   W 33,744  
 
                       
 
                               
Comprehensive income
  W 393,275             W 561,841          
 
                           
 
      For the six months ended June 30, 2009
                                 
    For the     For the  
    three months ended     six months ended  
    Profit and loss             Profit and loss        
    effect     Tax effect     effect     Tax effect  
 
                               
Net income
  W 311,643             W 628,392          
Other comprehensive income (loss):
                               
Unrealized gain on valuation of long-term investment securities, net
    407,946       (W116,662 )     189,697       (W53,183 )
Equity in other comprehensive income of affiliates, net
    (23,077 )     6,249       (16,101 )     (3,192 )
Gain (loss) on valuation of currency swap, net
    18,987       (5,355 )     (2,394 )     675  
Loss on valuation of interest swap, net
    5,760       (1,625 )     7,424       (2,094 )
 
                       
Sub total
    409,616       (W117,393 )     178,626       (W57,794 )
 
                       
 
                               
Comprehensive income
  W 721,259             W 807,018          
 
                           

 


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13.   NET INCOME PER SHARE
The Company’s net income per share amounts for the three months and six months ended June 30, 2010 and 2009 is computed as follows (In millions of Korean won, except for per share income per share):
Net income per share
                                 
    For the     For the  
    three months ended     six months ended  
    June 30,     June 30,     June 30,     June 30,  
    2010     2009     2010     2009  
Net income
  W 363,971     W 311,643     W 685,726     W 628,392  
Weighted average number of common shares outstanding
    72,344,999       72,345,003       72,344,999       72,348,552  
 
                       
Net income per share
  W 5,031     W 4,308     W 9,479     W 8,686  
 
                       
Net income and ordinary income per share for the year ended December 31, 2009 is W17,808 and net income per share for the three months ended March 31, 2010 and 2009 is W4,448 and W4,378, respectively.
The weighted average numbers of common shares outstanding for the three months and six months ended June 30, 2010 and 2009 are calculated as follows:
                         
    Number of   Weighted   Weighted
    shares   number of days   number of shares
For the three months ended June 30, 2010
                       
Outstanding common stocks at January 1, 2010
    80,745,711       91 / 91       80,745,711  
Treasury stocks at January 1, 2010
    (8,400,712 )     91 / 91       (8,400,712 )
 
                       
Total
    72,344,999               72,344,999  
 
                       
For the six months ended June 30, 2010
                       
Outstanding common stocks at January 1, 2010
    80,745,711       181 / 181       80,745,711  
Treasury stocks at January 1, 2010
    (8,400,712 )     181 / 181       (8,400,712 )
 
                       
Total
    72,344,999               72,344,999  
 
                       
                         
    Number of   Weighted   Weighted
    shares   number of days   number of shares
For the three months ended June 30, 2009
                       
Outstanding common stocks at January 1, 2009
    81,193,711       91 / 91       81,193,711  
Treasury stocks at January 1, 2009
    (8,707,696 )     91 / 91       (8,707,696 )
Acquisition of treasury stock
    (141,012 )     91 / 91       (141,012 )
 
                       
Total
    72,345,003               72,345,003  
 
                       
For the six months ended June 30, 2009
                       
Outstanding common stocks at January 1, 2009
    81,193,711       181 / 181       81,193,711  
Treasury stocks at January 1, 2009
    (8,707,696 )     181 / 181       (8,707,696 )
Acquisition of treasury stock
    (141,012 )   (note)     (137,463 )
 
                       
Total
    72,345,003               72,348,552  
 
                       
(Note)   The Company acquired treasury stocks on various dates, and the weighted number of shares was calculated considering such various transaction dates:

 


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Diluted net income per share amounts for the three months and six months ended June 30, 2010 and 2009 is computed as follows (In millions of won, except for share data):
Diluted net income per share
                                 
    For the     For the  
    three months ended     six months ended  
    June 30,     June 30,     June 30,     June 30,  
    2010     2009     2010     2009  
 
                               
Adjusted net income
  W 368,218     W 317,733     W 694,842     W 637,294  
Adjusted weighted average number of common shares outstanding
    74,423,054       75,050,417       74,423,054       74,390,846  
 
                       
 
                               
Diluted net income per share
  W 4,947     W 4,234     W 9,336     W 8,567  
 
                       
Diluted net income per share for the year ended December 31, 2009 was W17,599 and diluted net income per share for the three months ended March 31, 2010 and 2009 is W4,389 and W4,335, respectively.
Adjusted net income per share and the adjusted weighted average number of common shares outstanding for the three months and six months ended June 30, 2010 and 2009 are calculated as follows:
                                 
    For the     For the  
    three months ended     six months ended  
    June 30,     June 30,     June 30,     June 30,  
    2010     2009     2010     2009  
Net income
  W 363,971     W 311,643     W 685,726     W 628,392  
Effect of convertible bonds (Note)
    4,247       6,090       9,116       8,902  
 
                       
Adjusted net income
  W 368,218     W 317,733     W 694,842     W 637,294  
 
                       
 
                               
Weighted average number of common shares outstanding
    72,344,999       72,345,003       72,344,999       72,348,552  
Effect of exchangeable bonds (Note)
    2,078,055       2,705,414       2,078,055       2,042,294  
 
                       
Adjusted weighted average number of common shares outstanding
    74,423,054       75,050,417       74,423,054       74,390,846  
 
                       
(Note)   The effect of exchangeable bonds increased net income related to interest expenses that would not have been incurred, and increase in the weighted average number of common shares outstanding related to common shares that would have been issued, assuming that the conversion of convertible bonds was made on the beginning of the period.
14.   RESTRICTED CASH AND CASH EQUIVALENTS
As of June 30, 2010, the Company has guarantee deposits restricted for checking accounts totaling W19 million and deposits restricted for a charitable trust for small businesses in

 


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cooperation with SK Group amounting to W50,000 million of which due date is June 2, 2011 and for the public amounting to W6,500 million of which due date is May 4, 2011.
15.   RELATED PARTY TRANSACTIONS
As of June 30, 2010 and December 31, 2010, the parent company and subsidiaries of the Company are as follows:
a. Holding company and subsidiaries
                 
        Ownership    
Type   Company   percentage (%)   Types of business
Ultimate parent company  
SK C&C Co., Ltd.
    31.8 (Note a)   Information technology and software production
Parent company  
SK Holdings Co., Ltd.
    23.2 (Note b)   Holding company
Subsidiary  
SK Broadband Co., Ltd.
    50.6     Internet website services and telecommunication service
 
SK Communications Co., Ltd.
    64.8     Internet website services
 
SK Telink Co., Ltd.
    90.8     Telecommunication service
 
PS&Marketing Corporation
    100.0     Retail
 
PAXNet Co., Ltd.
    59.7     Internet website services
 
F&U Credit Information Co., Ltd.
    50.0     Credit and collection services
 
TU Media Corp.
    44.2     Digital multimedia broadcasting service
 
IHQ, Inc.
    37.1     Entertainment management
 
Ntreev Soft Co., Ltd.
    63.7     Game software production
 
Commerce Planet Co., Ltd.
    100.0     Cosmetic wholesale
 
Loen Entertainment, Inc.
    63.5     Release of music disc
 
SKT Vietnam PTE Ltd.
    73.3     Telecommunication service
 
SKT Americas, Inc.
    100.0     Telecommunication service
 
SK Telecom China Holdings
    100.0     Equity investment (Holding company)
 
SK-KTB Music Investment Fund
    74.2     Investment association
 
Stonebridge Cinema Fund
    45.6     Investment association
 
SK Telecom Global Investment B.V.
    100.0     Equity investment
 
SKY Property Mgmt. Ltd.
    60.0     Equity investment
 
Benex Digital Cultural Contents Fund
    19.9     Investment association
 
2nd Benex Focus Investment Fund
    66.7     Investment association
 
K-net Culture & Contents Venture Fund
    59.0     Investment association
 
Open Innovation Fund
    98.5     Investment association
 
Service Ace Co., Ltd.
    100.0     Customer center management service
 
Service Top Co., Ltd.
    100.0     Customer center management service
 
Network O&S Co., Ltd.
    100.0     Base station maintenance service
 
YTK Investment, Ltd.
    100.0     Investment
 
SK I-Media Co., Ltd.
    100.0 (Note c)   Game software production
 
Broadband media Co., Ltd.
    100.0 (Note c)   Multimedia TV portal service
 
Broadband CS Co., Ltd.
    100.0 (Note c)   Customer Q&A and Service
 
Benex Movie Investment Fund
    46.6 (Note c)   Investment association
 
Shenzhen E-eye High Tech Co., Ltd.
    65.5 (Note c)   GPS manufacturing and selling
(Note a)   The ownership percentage represents ultimate parent Company’s ownership over the parent company
 
(Note b)   The ownership percentage represents parent company’s ownership over the Company.
 
(Note c)   The ownership percentage represents subsidiaries’ ownership over their subsidiaries, in which the Company has no direct investment.

 


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b. Transactions and balances with related companies
Significant related party transactions for the three months and six months ended June 30, 2010 and 2009, and account balances as of June 30, 2010 and December 31, 2009 are as follows (In millions of Korean won):
b-(1) Transactions
                                                 
    For three months ended June 30, 2010     For six months ended June 30, 2010  
    Purchases of     Commissions     Commissions     Purchases of     Commissions     Commissions  
    property and     paid and     earned and     property and     paid and     earned and  
    equipment     other expenses     other income     Equipment     Other expenses     other income  
 
                                               
Ultimate parent company:
                                               
SK C&C Co., Ltd.
  W 23,759     W 60,833     W 1,649     W 29,915     W 119,624     W 4,958  
 
                                               
Parent Company:
                                               
SK Holdings Co., Ltd.
    70       6,425       295       70       12,327       390  
 
                                               
Subsidiaries:
                                               
SK Broadband Co., Ltd.
          30,808       15,051             59,425       31,335  
SK Communications Co., Ltd.
    229       2,177       2,588       229       5,042       5,342  
SK Telink Co., Ltd.
          4,334       10,558             8,415       20,965  
PS&Marketing Corporation
    1       80,535       476       1       161,799       995  
F&U Credit Information Co., Ltd.
          12,228       551             20,562       1,091  
TU Media Corp.
          24,538       6,149             48,157       12,884  
Commerce Planet Co., Ltd.
    2,240       26,044       2,433       3,426       49,514       3,921  
Loen Entertainment, Inc
          9,239       792             16,838       1,858  
SKT Americas, Inc.
                            3,200        
SK Telecom China Holdings
                            5,270        
Others
          6,272       328             11,772       754  
 
                                               
Equity Method Investees:
                                               
SK Marketing & Company Co., Ltd.
    2,009       59,299       1,464       2,009       83,516       2,974  
SK Wyverns Baseball Club Co., Ltd.
          1,900       12             8,400       35  
Others
          2,410                   4,832        
 
                                               
Others:
                                               
SK Energy Co., Ltd.
          218       1,428             437       2,175  
SK Engineering & Construction Co., Ltd.
    27,735       1,119       494       27,735       1,119       3,856  
SK Networks Co., Ltd.
    506       117,925       4,913       524       238,533       8,636  
SK Networks Service Co., Ltd.
          8,866       70             11,377       135  
SK Telesys Co., Ltd.
    68,473       2,240       247       86,870       2,454       803  
MRO Korea Co., Ltd.
    2,406       632       11       3,882       1,254       24  
Others
    1,723       1,795       906       1,723       5,765       2,233  
 
                                   
 
                                               
Total
  W 129,151     W 459,837     W 50,415     W 156,384     W 879,632     W 105,364  
 
                                   

 


Table of Contents

                                                 
    For three months ended June 30, 2009     For six months ended June 30, 2009  
    Purchases of     Commissions     Commissions     Purchases of     Commissions     Commissions  
    property and     paid and     earned and     property and     paid and     earned and  
    equipment     other expenses     other income     equipment     Other expenses     other income  
 
                                               
Ultimate parent company:
                                               
SK C&C Co., Ltd.
  W 35,042     W 55,869     W 939     W 41,345     W 115,852     W 2,518  
 
                                               
Parent Company:
                                               
SK Holdings Co., Ltd.
          6,406       208             12,184       263  
 
                                               
Subsidiaries:
                                               
SK Broadband Co., Ltd.
          11,605       13,597             19,270       27,354  
SK Communications Co., Ltd.
          2,583       1,970             8,312       3,826  
SK Telink Co., Ltd.
          3,042       10,408             6,744       16,608  
PS&Marketing Corporation
          55,632       191             55,632       191  
F&U Credit Information Co., Ltd.
          12,335       334             23,241       662  
TU Media Corp.
    211       22,480       9,445       211       37,188       18,363  
Commerce Planet Co., Ltd.
    700       16,730       1,075       700       32,222       1,276  
Loen Entertainment, Inc
          8,232       1,336             15,183       2,399  
SKT Americas, Inc.
          4,447                   11,030        
SK Telecom China Holdings
          8,864                   17,179        
Others
          6,925       1,072             11,768       1,262  
 
                                               
Equity Method Investees:
                                               
SK Marketing & Company Co., Ltd.
          24,215       1,025             57,696       2,151  
SK Wyverns Baseball Club Co., Ltd.
          4,200       181             11,414       181  
Wave City Development Co. Ltd.
                21,280                   21,280  
Others
          2,384       693             5,364       889  
 
                                               
Others:
                                               
SK Energy Co., Ltd.
          231       1,135             545       1,658  
SK Engineering & Construction Co., Ltd.
    32,966       5,504       625       51,990       8,020       1,093  
SK Networks Co., Ltd.
    5,432       227,636       6,715       5,530       397,984       11,826  
SK Networks Service Co., Ltd.
          5,569                   11,287        
Innoace Co., Ltd.
    4,208       4,175       64       4,532       5,374       117  
SK Telesys Co., Ltd.
    62,354       1,955       432       75,803       2,291       489  
Others
    2,126       13,750       1,994       3,573       17,568       2,775  
 
                                   
 
                                               
Total
  W 143,039     W 504,769     W 74,719     W 183,684     W 883,348     W 117,181  
 
                                   

 


Table of Contents

b-(2) Account balances
                                                 
    As of June 30, 2010  
                                            Guarantee  
    Accounts     Short-term     Long-term     Guarantee     Accounts     deposits  
    receivable     loans     loans     deposits     payable     received  
 
                                               
Ultimate parent company:
                                               
SK C&C Co., Ltd.
  W 298     W     W     W     W 45,228     W 197  
 
                                               
Parent Company:
                                               
SK Holdings Co., Ltd.
    32                                
 
                                               
Subsidiaries:
                                               
SK Broadband Co., Ltd.
    244                   1,486       7,244       39,222  
SK Communications Co., Ltd.
    2,296                         2,276       5,524  
SK Telink Co., Ltd.
    2,317                         2,074       1,022  
PS&Marketing Corporation
    285                         50,379       5,877  
F&U Credit Information Co., Ltd.
    34                         5,646        
TU Media Corp.
    3,617                         9,759       2,417  
IHQ, Inc.
    355                         906        
Ntreev Soft Co., Ltd.
    73                         2,240        
Commerce Planet Co., Ltd.
    9,793                         10,405        
Loen Entertainment, Inc.
    439                         4,260        
SKT Vietnam PTE Ltd
    4,205                                
SK Telecom China Holdings
                            5,270        
Others
    93                         513       150  
 
                                               
Equity Method Investees:
                                               
SK Marketing & Company Co., Ltd.
    4,159                         33,224        
SK Wyverns Baseball Club Co., Ltd.
    5       575       2,407                    
Wave City Development Co. Ltd.
    38,412                                
Others
                            2,598        
 
                                               
Others:
                                               
SK Energy Co., Ltd.
    445                   96       18       23  
SK Engineering & Construction Co., Ltd.
    3,307                         16,886       82  
SK Networks Co., Ltd.
    2,195                   5,512       72,843       1,147  
SK Telesys Co., Ltd.
    126                         46,601        
MRO Korea, Co., Ltd.
    2                         1,173        
Others
    1,044                         5,875       49  
 
                                   
 
                                               
Total
  W 73,776     W 575     W 2,407     W 7,094     W 325,418     W 55,710  
 
                                   

 


Table of Contents

                                                 
    As of December 31, 2009  
                                            Guarantee  
    Accounts     Short-term     Long-term     Guarantee     Accounts     deposits  
    receivable     loans     loans     Deposits     payable     received  
 
                                               
Ultimate parent company:
                                               
SK C&C Co., Ltd.
  W 758     W     W     W     W 89,318     W  
 
                                               
Parent Company:
                                               
SK Holdings Co., Ltd.
    248                         1        
 
                                               
Subsidiaries:
                                               
SK Broadband Co., Ltd.
    2,356                   1,216       374       5,114  
SK Communications Co., Ltd.
    1,785                         12,738       5,524  
SK Telink Co., Ltd.
    797                         700       1,023  
PS&Marketing Co., Ltd.
    159                         32,400       5,084  
F&U Credit Information Co., Ltd.
    8                         3,617        
TU Media Corp.
    4,051                         114       2,709  
IHQ, Inc.
    51                                
Ntreev Soft Co., Ltd.
    3,988                         3,210        
Commerce Planet Co., Ltd.
    8,331                         10,258        
Loen Entertainment, Inc.
    272                         652        
SKT Vietnam PTE Ltd.
    3,835                                
SKT Americas, Inc.
                            5,567        
SK Telecom China Holdings
                            8,500        
Others
    7                         19       150  
 
                                               
Equity Method Investees:
                                               
SK Marketing & Company Co., Ltd.
    2,403                         25,921       249  
SK Wyverns Baseball Club Co., Ltd.
    59       575       2,407                    
Wave City Development Co. Ltd.
    38,412                                
Others
                            2,288        
 
                                               
Others:
                                               
SK Energy Co., Ltd.
    1,313                   96       66       23  
SK Engineering & Construction Co., Ltd.
    182                         991       82  
SK Networks Co., Ltd.
    890                   112       109,900       1,256  
SK Telesys Co., Ltd.
    236                         15,422        
SK Networks Co., Ltd. Walkerhill
    72                   5,400       3,246        
Others
    1,036                         5,425        
 
                                   
 
                                               
Total
  W 71,249     W 575     W 2,407     W 6,824     W 330,727     W 21,214  
 
                                   

 


Table of Contents

  c. Compensation for the key management
      The Company considers registered directors who have substantial roles and responsibility for planning, operating, and controlling of the business as key management, and the considerations given to the key management for the three months and six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                                                 
    For the three months ended     For the six months ended  
    June 30, 2010     June 30, 2010  
            Severance                     Severance        
Payee   Payroll     indemnities     Total     Payroll     indemnities     Total  
 
                                               
8 Registered directors (including outside directors)
  W 329     W 69     W 398     W 2,293     W 443     W 2,736  
 
                                   
                                                 
    For the three months ended     For the six months ended  
    June 30, 2009     June 30, 2009  
            Severance                     Severance        
Payee   Payroll     indemnities     Total     Payroll     indemnities     Total  
 
                                               
8 Registered directors (including outside directors)
  W 282     W 17     W 299     W 956     W 35     W 991  
 
                                   
16.   PROVISION
  a.   Provision for point program
 
      The Company, for its marketing purposes, grants Rainbow Points and Point Box Points (the “Points”) to its subscribers based on their usage of the Company’s services. Points’ provision is provided based on the historical usage experience and the Company’s marketing policy. Such provision is recorded as accrued expenses or other non-current liabilities in accordance with the expected points’ usage duration since balance sheet date.
 
      Details of change in the provisions for such mileage points for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                 
    For six months ended June 30  
    2010     2009  
 
               
Beginning balance
  W 18,856     W 24,889  
Increase
    5,064       7,248  
Decrease (used points)
    (4,435 )     (11,433 )
 
           
 
               
Ending balance
  W 19,485     W 20,704  
 
           

 


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      Points expire after 5 years. The expected year when unused points as of Jun 30, 2010 are expected to be used and the respective estimated monetary amount to be paid in a given year are as follows (In millions of Korean won):
                 
Expected usage   Estimated amount to be paid        
for the year ended June 30,   in nominal value (Note a)     Current value (Note b)  
 
               
2011
  W 9,328     W 8,880  
2012
    5,606       5,081  
2013
    3,369       2,907  
2014
    2,025       1,664  
2015
    1,218       953  
 
           
 
               
Ending balance
  W 21,546     W 19,485  
 
           
(Note a)     The above expected year of the usage and the current value of the estimated amount to be paid are estimated based on the historical usage experience.
  b.   Provision for handset subsidy
 
      The Company provides provision for handset subsidies to be provided to the subscribers who purchase handsets on an installment basis. Such provision is recorded as accrued expenses or non-current liabilities in accordance with the expected points when the subsidies are paid. Details of change in the provision for handset subsidies for the six months ended June 30, 2010 and 2009 are as follows (In millions of Korean won):
                 
    For six months ended June 30  
    2010     2009  
 
               
Beginning balance
  W 609,733     W 339,696  
Increase (provision)
    550,304       274,157  
Decrease (subsidy payment)
    (388,318 )     (167,099 )
 
           
 
               
Ending balance
  W 771,719     W 446,754  
 
           
    The estimated amount to be paid in a given year is as follows (In millions of Korean won):
                 
Expected payment   Estimated amount to be paid        
for the year ended June 30,   in nominal value     Present value  
 
               
2011
  W 682,370     W 668,362  
2012
    108,387       103,357  
 
           
 
               
Ending balance
  W 790,757     W 771,719  
 
           
17.   DERIVATIVE INSTRUMENTS
  a.   Currency swap contract to which the cash flow hedge accounting is applied
 
      The Company has entered into a fixed-to-fixed cross currency swap contract with Citibank, BNP Paribas and Credit Suisse First Boston International to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds with face amounts totaling US$300,000,000 at annual fixed interest rate of 4.25% issued on April 1, 2004. As of June 30, 2010, in connection with unsettled foreign currency swap contract to which the cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to W5,005 million (net of tax effect totaling W1,953 million and foreign exchange translation loss arising from unguaranteed U.S. dollar denominated bonds totaling W18,348 million) was

 


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      accounted for as accumulated other comprehensive loss.
 
      The Company has entered into a floating-to-fixed cross currency swap contract with Credit Agricole Corporate & Investment bank to hedge the foreign currency risk and the interest rate risk of U.S. dollar denominated long-term borrowings with face amounts totaling US$100,000,000 borrowed on October 10, 2006. As of June 30, 2010, in connection with unsettled cross currency interest rate swap contract to which the cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to W5,020 million (net of tax effect totaling W974 million and foreign exchange translation loss arising from U.S. dollar denominated long-term borrowings totaling W26,230 million) is accounted for as accumulated other comprehensive loss.
 
      The Company has entered into a floating-to-fixed cross currency swap contract with HSBC and SMBC Bank to hedge the foreign currency risk and the interest rate risk of unguaranteed Japanese yen denominated bonds with face amounts totaling JPY12,500,000,000 issued on November 13, 2007. As of June 30, 2010, in connection with unsettled cross currency interest rate swap contract to which the cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to W175 million (net of tax effect totaling W1,576 million and foreign exchange translation loss arising from unguaranteed Japanese yen denominated bonds totaling W66,516 million) is accounted for as accumulated other comprehensive income.
 
      The Company has entered into a floating-to-fixed cross currency swap contract with DBS and Credit Agricole Corporate & Investment bank to hedge the foreign currency risk and the interest rate risk of U.S. dollar denominated notes with face amounts totaling US$150,000,000 borrowed on November 20, 2008. As of June 30, 2010, in connection with unsettled cross currency interest rate swap contract to which the cash flow hedge accounting is applied, an accumulated gain on valuation of derivatives amounting to W4,557 million (net of tax effect totaling W1,455 million and foreign exchange translation gain arising from U.S. dollar denominated bonds totaling W35,561 million) is accounted for as accumulated other comprehensive income.
 
      The Company has entered into a floating-to-fixed cross currency swap contract with Mizuho Corporate Bank to hedge the foreign currency risk and the interest rate risk of unguaranteed Japanese yen denominated bonds with face amounts totaling JPY3,000,000,000 issued on January 22, 2009. As of June 30, 2010, in connection with unsettled cross currency interest rate swap contract to which the cash flow hedge accounting is applied, an accumulated gain on valuation of derivatives amounting to W1,913 million (net of tax effect totaling W539 million and foreign exchange translation gain arising from unguaranteed Japanese yen denominated bonds totaling W5,195 million) is accounted for as accumulated other comprehensive income.
 
      The Company has entered into a floating-to-fixed cross currency swap contract with Bank of Tokyo-Misuboshi Bank to hedge the foreign currency risk and the interest rate risk of unguaranteed Japanese yen denominated bonds with face amounts totaling JPY5,000,000,000 issued on March 5, 2009. As of June 30, 2010, in connection with unsettled cross currency interest rate swap contract to which the cash flow hedge accounting is applied, an accumulated gain on valuation of derivatives amounting to W309 million (net of tax effect totaling W87 million and foreign exchange translation gain arising from unguaranteed Japanese yen denominated bonds totaling W10,385 million) is accounted for as accumulated other comprehensive income.

 


Table of Contents

      The Company has entered into fixed-to-fixed cross currency swap contract with Morgan Stanley Bank and five other banks to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds with face amounts totaling US$400,000,000 issued on July 20, 2007 and entered into cash flow hedge accounting since May 12, 2010. In connection with unsettled foreign currency swap contract to which the hedge accounting is applied, an accumulated gain on valuation of derivatives amounting to W10,830 million (net of tax effect totaling W3,055 million and foreign exchange translation loss arising from U.S. dollar denominated bonds totaling W26,142 million) was accounted for as accumulated other comprehensive income. And the related loss on valuation of currency swap incurred before applying the hedge accounting of W17,528 million and W64,534 million for the six months ended June 30, 2010 and 2009, respectively, is charged to current operations.
 
  b.   Interest rate swap contract to which the cash flow hedge accounting is applied
 
      The Company has entered into a floating-to-fixed interest rate swap contract with Nonghyup Bank and other two banks to hedge the interest rate risk of long-term floating rate borrowings with face amounts totaling W500,000 million borrowed from July 28, 2008 to August 12, 2011. As of June 30, 2010, in connection with unsettled interest rate swap contract to which the cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to W10,576 million (net of tax effect totaling W2,983 million) was accounted for as accumulated other comprehensive loss.
 
  c.   Interest rate swap contract to which the hedge accounting is not applied
 
      The Company has entered into a floating-to-fixed interest rate swap contract with DBS and Calyon Bank the interest rate risk of floating rate U.S. dollar denominated bonds with face amounts totaling US$220,000,000 issued on April 29, 2009. In connection with unsettled interest rate swap contract to which the hedge accounting is not applied, loss on valuation of interest rate swap of W2,816 million and W2,897 million for the six months ended June 30, 2010 and 2009, respectively, was charged to current operations.
 
  d.   Currency forward contract to which the hedge accounting is not applied
 
      The Company has entered into the cross currency forward contract with DBS Bank to hedge the foreign currency risk of Ringgit Malaysia denominated account-receivable with face amounts totaling MYR 323,000,000. In connection with unsettled foreign currency forward contract to which the hedge accounting is not applied, loss on valuation of currency forward of W721 million for the six months ended June 30, 2010 was charged to current operations.

 


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      As of June 30, 2010, fair values of the above derivatives recorded in assets or liabilities and details of the derivative instruments as of June 30, 2010 are as follows (In thousands of U.S. dollars, Japanese yen, Ringgit Malaysia and millions of Korean won):
                                                 
                            Fair value  
                            Designated              
                    Duration     as cash     Not        
Type   Hedged item     Amount     of contract     flow hedge     designated     Total  
 
                                               
Non-current assets:
                                               
Fix-to-fixed cross currency swap
  U.S. dollar denominated Bonds   US$ 300,000     Mar. 23, 2004 ~ March. 31, 2011   W 11,390     W     W 11,390  
 
                                               
Non-current assets:
                                               
Floating-to-fixed cross currency interest rate swap
  U.S. dollar denominated long-term borrowings   US$ 100,000     Oct 10, 2006 ~ Oct 10, 2013     20,236             20,236  
Fix-to-fixed cross currency swap
  U.S. dollar denominated Bonds   US$ 400,000     Jul. 20, 2007 ~ Jul. 20, 2027     40,028       129,806       169,834  
Floating-to-fixed cross currency interest rate swap
  Japanese yen denominated bonds   JPY 12,500,000     Nov. 13, 2007 ~ Nov. 13, 2012     64,765             64,765  
 
                                         
 
                                               
Total assets
                          W 136,419     W 129,806     W 266,225  
 
                                         
 
                                               
Current liabilities:
                                               
Floating-to-fixed cross currency interest rate swap
  U.S. dollar denominated Bonds   US$ 150,000     Nov 20, 2008 ~ Nov 20, 2010   W 29,549     W     W 29,549  
Cross currency forward
  MYR denominated account receivable   MYR  323,000     Jun. 23, 2010 ~ Aug. 2, 2010           721       721  
 
                                               
Non-current liabilities:
                                               
Floating-to-fixed cross currency interest rate swap
  Japanese yen denominated bonds   JPY 3,000,000     Jan. 22, 2009 ~ Jan. 22, 2012     2,743             2,743  
Floating-to-fixed cross currency interest rate swap
  Japanese yen denominated bonds   JPY 5,000,000     Mar. 5, 2009 ~ Mar. 5, 2012     9,989             9,989  
Floating-to-fixed interest rate swap
  Long-term borrowings   W 500,000     July 28, 2008 ~ August 12, 2011     13,559             13,559  
Floating-to-fixed interest rate swap
  Long-term borrowings   US$ 220,000     April 29, 2009 ~ April 29, 2012           6,188       6,188  
 
                                         
 
                                               
Total liabilities
                          W 55,840     W 6,909     W 62,749  
 
                                         

 


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18.   RECLASSIFICATION IN THE PRIOR YEAR’S FINANCIAL STATEMENTS
 
    For the purpose of improving the quality of reporting, certain reclassification have been made in the prior year’s financial statements to conform to the classifications used in the current year. The reclassification of prior year’s financial statements had no impact on equity or net income.
 
19.   SUBSEQUENT EVENTS
  a.   Interim dividend
 
      On July 22, 2010, the board of directors of the Company resolved to pay interim cash dividends of W1,000 per share totaling W72,345 million. The ex-dividend date was June 30, 2010 and the interim dividends are expected to be paid within twenty days after the date of the board of directors’ resolution.
 
  b.   Acquisition of treasury stock
 
      In accordance with the resolution of board of directors dated July 22, 2010, the Company acquired 1,250,000 shares of treasury stocks for W201,875 million from July 23, 2010 through October 22, 2010.
20.   K-IFRS ADOPTION PLAN AND STATUS
 
    In accordance with IFRS adoption roadmap released by the Financial Supervisory Commission in March 2007, the Company is required to prepare financial statements under K-IFRS from fiscal year of 2011. In April 2008, the Company set up a task force for the adoption and hired an outside consulting firm to evaluate the impact that K-IFRS may have on the Company’s financial statements as well as to educate the relevant employees.
 
    At June 30, 2010, the Company is currently performing an analysis on the major GAAP differences between K-IFRS and the Company’s current accounting policies. It is also setting up an action plan to decide the Company’s accounting policies under K-IFRS and the changes in operating procedures to comply with K-IFRS.

 


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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  SK Telecom Co., Ltd.
(Registrant)
 
 
  By:   /s/ Tae Jin Park    
    (Signature)  
    Name:   Tae Jin Park   
    Title:   Senior Vice President   
 
Date: September 13, 2010