Edgar Filing: SK TELECOM CO LTD

Form 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF June 2013

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 x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

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 ¨ No x

If “Yes” is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b): 82-

QUARTERLY BUSINESS REPORT

(From January 1, 2013 to March 31, 2013)

THIS IS A SUMMARY OF THE QUARTERLY 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.

ALL REFERENCES TO THE “COMPANY,” “WE,” “US,” OR “OUR” SHALL MEAN SK TELECOM CO., LTD. AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS CONSOLIDATED SUBSIDIARIES. REFERENCES TO “SK TELECOM” SHALL MEAN SK TELECOM CO., LTD., BUT SHALL NOT INCLUDE ITS CONSOLIDATED SUBSIDIARIES.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED FOR USE IN KOREA (“K-IFRS”) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

I.	COMPANY OVERVIEW

1.	Company Overview

Starting in the first quarter of 2011, the Company prepares and reports its financial statements under K-IFRS. The transition date of the Company and its consolidated subsidiaries to K-IFRS is January 1, 2010 and the adoption date is January 1, 2011. The Company’s quarterly business report for the quarter ended March 31, 2013 includes the following consolidated subsidiaries:


Name	Date of Establishment	Principal Business	Total Assets as of Dec. 31, 2012 (millions of Won)		Material Subsidiary*
SK Telink Co., Ltd.	Apr. 9, 1998	Telecommunication services		241,977	Material
SK Communications Co., Ltd.	Sep. 19, 1996	Internet portal and other Internet information services		265,819	Material
Loen Entertainment, Inc.	Jul. 7, 1982	Music and audio publication		173,079	Material
Stonebridge Cinema Fund	Sep. 30, 2005	Investment partnership		10,965
Commerce Planet Co., Ltd.	Jul. 1, 1997	Information technology and computer services		34,007
SK Broadband Co., Ltd.	Sep. 26, 1997	Multimedia and IP TV services		3,035,657	Material
K-net Culture and Contents Venture Fund	Nov. 24, 2008	Investment partnership		43,779
Hwaitec Focus Investment Partnership 2	Dec. 12, 2008	Investment partnership		22,547
Open Innovation Fund	Dec. 22, 2008	Investment partnership		43,394
PS&Marketing Co., Ltd.	Apr. 3, 2009	Resale of telecommunication services		317,613	Material
Service Ace Co., Ltd.	Jul. 1, 2010	Call center operation and telemarketing services		48,956
Service Top Co., Ltd.	Jul 1, 2010	Call center operation and telemarketing services		43,332
Network O&S Co., Ltd.	Jul. 1, 2010	Wireless telecommunication services		165,818	Material
BNCP Co., Ltd.	Dec. 7, 2009	Software development		24,000
SK Planet Co., Ltd.	Oct. 5,2011	Platform service		1,647,965	Material
Madsmart, Inc.	Mar. 21, 2011	Software development and digital contents sourcing services		1,591
M&Service Co., Ltd.	Feb. 10, 2000	Information technology and marketing services		48,493
SK Planet Japan, K.K.	Mar. 14, 2012	Software development and digital contents sourcing services		47
SK Planet Global PTE, LTD.	Aug. 14, 2012	Software development and digital contents sourcing services		636
SK Planet America LLC	Dec. 27, 2012	Software development and digital contents sourcing services		6,669
SK Global Healthcare Business Group	Sep. 14, 2012	Investment		25,784
Technology Innovation Partners, L.P.	Jun. 24, 2011	Investment		34,120
SK Telecom China Fund I L.P.	Sep. 14, 2011	Investment		3,454
SK Telecom China Holdings Co., Ltd.	Jul. 12, 2007	Investment		35,233
Shenzhen E-eye High Tech Co., Ltd.	Apr. 1, 2000	Telematics services		18,915
SKT Vietnam PTE., Ltd.	Apr. 5, 2000	Wireless telecommunication services		38,331
SKT Americas, Inc.	Dec. 29, 1995	Management consulting and investment		36,378
YTK Investment Ltd.	Jul. 1, 2010	Investment		64,036	Material
Atlas Investment	Jun. 24, 2011	Investment		51,065	Material

*	Material Subsidiary means a subsidiary with total assets of Won 50 billion or more as of the end of the latest fiscal year.

A.	Corporate Legal Business Name: SK Telecom Co., Ltd.

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.	Major Businesses

(1)

Wireless Business

The Company provides wireless telecommunications services, characterized by its competitive strengths in handheld devices, affordable pricing, network coverage and an extensive contents library. Since the introduction of services employing LTE technology in July 2011, the telecommunications market for such services has grown as demand for fast data transfer speeds and differentiated services has increased. Having reached one million subscribers by January 2012 and over 10 million subscribers by April 2013, the Company has solidified its leadership position in LTE services as it has done with its 3G services. The Company is also improving the profitability of its wireless business through efficient capital expenditures and marketing and enhancement of marketing network and products. In the business-to-business area, the Company is strengthening its solutions business through the implementation of five main solution products: Smart Store, Smart Work, Smart Cloud, Green & Safety and M–Ad & Payment.

In addition, in order to strengthen our sales channels, the Company has been offering a variety of fixed-line and wireless telecommunication convergence products to its customers through PS&Marketing Co., Ltd. (“PS&Marketing”), one of its subsidiaries. Furthermore, Network O&S Co., Ltd., the Company’s subsidiary responsible for the operation of the Company’s 2G to 4G networks (including its CDMA, WCDMA and LTE networks), provides customers with quality network services and provides the Company with technological know-how in network operations.

(2)

Fixed-line Business

SK Broadband Co., Ltd. (“SK Broadband”) is engaged in providing telecommunications, broadcasting and new media services and various other services that are permitted to be carried out by SK Broadband under relevant regulations, as well as business activities that are directly or indirectly related to providing those services. With the adoption of K-IFRS in 2011, our broadband and fixed-line services segment also includes multimedia services and IP TV services.

(3)

Other Businesses

The Company is pursuing customer satisfaction by providing the best service and generating new values in diverse business such as digital contents, location-based services, media, mobile commerce, loyalty marketing and advertising.

In the digital contents business area, the Company provides high-quality digital contents in its leading mobile contents marketplace, T Store, which had more than 19.8 million subscribers as of March 31, 2013 and which the Company plans to expand globally. With respect to the Company’s commerce business, 11th Street, which continues to gain market share, is a platform service that connects various sellers and purchasers on-line. In the loyalty marketing business area, the Company provides an increasing number of products involving OK Cashbag points in order to attract new customers and retain existing customers. Since its inception in 1999, OK Cashbag, owned by SK Planet Co., Ltd. (“SK Planet”) continues to be Korea’s largest loyalty mileage program with 36 million members. In the location-based services business area, users of the Company’s T-Map Navigation service surpassed 16.9 million as of March 31, 2013. T-Map Navigation provides real time traffic information and various local information. Utilizing location-based service technology in other services, including leisure, logistics and travel services, the Company provides increased convenience and added value to customers. In the media business area, the Company provides “Hoppin” service that enables subscribers to access various multimedia contents through personal computers, mobile devices and other digital devices. In the advertising business area, the Company is engaged in advertisement production, promotion services and research and consulting services to substantively help businesses increase their value in a rapidly evolving business environment.

SK Communications Co., Ltd. (“SK Communications”) provides integrated portal services through NATE, social networking services through Cyworld and instant messaging services through NATE-ON. Key sources of revenue for SK Communications are display advertising, search engine-based advertising, and contents and other services. Display advertising consists of image, video and Flash-based multimedia advertising carried on NATE, Cyworld and NATE-ON and aims to give greater exposure to the advertiser’s brand name to the public. The increased effectiveness of on-line media as an advertising outlet has resulted in a greatly expanded advertiser base, and the increasing variety in the format of advertising has contributed to the growth of display advertising. Search engine-based advertising refers to the type of advertising that embeds advertisements within search results produced by searches of certain keywords on the NATE portal site. Search engine-based advertising has a certain appeal to small and medium-sized advertisers. Contents and other services include sales of on-line items to be used on Cyworld, contents sales and providing certain types of services. Revenues from contents and other services are generated through sales of on-line digital items through fixed-line Cyworld services and revenues generated by usage of mobile Cyworld services, which are shared with mobile phone service operators, as well as revenues from NATE-ON instant messaging, custom decorations for mobile phones, cartoon strips, fortunetelling, movies and other contents services. In addition, SK Planet receives revenue from its services agreement with the Company in connection with operation of WAP wireless NATE services.

The Company is also one of the leaders in the music services industry with the continued growth of MelOn, its online music service, and its investments in music distribution and production.

In order to find future growth engines and strengthen the Company’s competitiveness, the Company has made strategic investments in YTK Investment Ltd. and Atlas Investment, both investment fund companies.

See “II. Business Overview” for more information.

E.	Credit Ratings

(1)

Corporate Bonds


Credit rating date	Subject of rating	Credit rating	Credit rating entity (Credit rating range)	Rating classification
May 27, 2011	Corporate bond	AAA	Korea Ratings	Regular rating
June 13, 2011	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
June 23, 2011	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
December 12, 2011	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
December 13, 2011	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating
December 16, 2011	Corporate bond	AAA	Korea Ratings	Current rating
June 21, 2012	Corporate bond	AAA	Korea Ratings	Regular rating
June 22, 2012	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
June 29, 2012	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
August 10, 2012	Corporate bond	AAA	Korea Ratings	Current rating
August 14, 2012	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
August 14, 2012	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating
April 11, 2013	Corporate bond	AAA	Korea Ratings	Current rating
April 11, 2013	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
April 11, 2013	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating
April 11, 2013	Corporate bond	AAA	Korea Ratings	Regular rating
April 11, 2013	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
April 11, 2013	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 such that it will not be influenced by reasonably foreseeable changes in external factors.

(2)

Commercial Paper (“CP”)


Credit rating date	Subject of rating	Credit rating	Credit rating entity (Credit rating range)	Rating classification
May 27, 2011	CP	A1	Korea Ratings	Current rating
June 13, 2011	CP	A1	NICE Investors Service Co., Ltd.	Current rating
June 23, 2011	CP	A1	Korea Investors Service, Inc.	Current rating
December 12, 2011	CP	A1	Korea Investors Service, Inc.	Regular rating
December 13, 2011	CP	A1	NICE Investors Service Co., Ltd.	Regular rating
December 16, 2011	CP	A1	Korea Ratings	Regular rating
June 21, 2012	CP	A1	Korea Ratings	Current rating
June 22, 2012	CP	A1	Korea Investors Service, Inc.	Current rating
June 29, 2012	CP	A1	NICE Investors Service Co., Ltd.	Current rating
December 18, 2012	CP	A1	Korea Ratings.	Regular rating
December 14, 2012	CP	A1	Korea Investors Service, Inc.	Regular rating
December 18, 2012	CP	A1	NICE Investors Service Co., Ltd.	Regular rating
April 11, 2013	CP	A1	Korea Ratings	Current rating
April 11, 2013	CP	A1	Korea Investors Service, Inc.	Current rating
April 11, 2013	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 such that it will not be influenced by reasonably foreseeable changes in external factors.

(3)

International Credit Ratings


Date of credit rating	Subject of rating	Credit rating of securities	Credit rating company	Rating type
June 6, 2012	Bonds denominated in Swiss Franc	A-	Fitch Inc.	Current rating
June 4, 2012	Bonds denominated in Swiss Franc	A3	Moody’s Investors Service	Current rating
June 7, 2012	Bonds denominated in Swiss Franc	A-	Standard & Poor’s Rating Services	Current rating
October 24, 2012	Bonds denominated in U.S. dollars	A-	Fitch Inc.	Current rating
October 24, 2012	Bonds denominated in U.S. dollars	A3	Moody’s Investors Service	Current rating
October 24, 2012	Bonds denominated in U.S. dollars	A-	Standard & Poor’s Rating Services	Current rating

2.	Company History

March 2008: Purchased shares of SK Broadband Co., Ltd. (formerly Hanaro Telecom)

May 2009: Participated in the public share offering of SK Broadband Co., Ltd.

September 2009: Acquired leased line and related other business of SK Networks Co., Ltd.

February 2010: Purchased shares of Hana Card Co., Ltd.

October 2011: SK Planet Co., Ltd. was spun off from the Company.

February 2012: Purchased shares of SK hynix Inc. (formerly, Hynix Semiconductor Inc.)

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 Extraordinary General Meeting of Shareholders held on August 31, 2011, Jun Ho Kim was elected as an inside director and Jin Woo So resigned from the Company’s board of directors to transfer to an affiliate of the Company. At the 28th General Shareholders’ Meeting held on March 23, 2012, (1) Young Tae Kim and Dong Seob Jee were elected as inside directors, (2) Hyun Chin Lim was re-elected as an independent director, and (3) Hyun Chin Lim was re-elected as a member of the audit committee. At the 29th General Shareholders’ Meeting held on March 22, 2013, Dae Sik Cho was elected as an inside director and Dae Shick Oh was elected as an independent director and member of the audit committee of the Company’s board of directors.

C.	Change in Company Name

On March 23, 2012, SK hynix Inc., which became our subsidiary in February 2012, changed its name to SK hynix Inc. from Hynix Semiconductor Inc. in accordance with a resolution at its annual shareholders’ meeting.

D.	Mergers, Acquisitions and Restructuring

[SK Telecom]

(1)

Spin-off

In accordance with the resolution of the Company’s board of directors on July 19, 2011 and the resolution of the shareholders’ meeting on August 31, 2011, the Company spun off its platform business and established SK Planet Co., Ltd. effective as of October 1, 2011. The registration of the spin-off was completed on October 5, 2011. Set forth below are important details of the spin-off.


Description		Detail
Method of Spin-off		Simple vertical spin-off
Resulting Companies		SK Telecom Co., Ltd. (Surviving Company) SK Planet Co., Ltd. (Spin-off Company)
Effective Date		October 1, 2011

Set forth below is summary of financial position before and after the spin-off.


				(in millions of Won)

Description	Before the spin-off (As of September 30, 2011)		After the spin-off (As of October 1, 2011)
Description	SK Telecom Co., Ltd.		SK Telecom Co., Ltd.		SK Planet Co., Ltd.
Total Assets		19,400,114		19,084,651		1,545,537
Total Liabilities		7,673,828		7,358,365		315,463
Total Shareholders’ Equity		11,726,286		11,726,286		1,230,074

Schedule of spin-off


Category		Date
Board resolution on spin-off		July 19, 2011
Record Date for Determination of Shareholders for the Shareholders’ Meeting for Spin-off		August 4, 2011
Shareholders’ Meeting for Approval of Spin-off Plan		August 31, 2011
Date of Spin-off		October 1, 2011
Shareholders’ Meeting for Report of Spin-off and Inaugural Meeting of Shareholders		October 4, 2011
Registration of Spin-off		October 5, 2011

Others	Notice of closure of shareholders register Period of closure of shareholders register Public notice of shareholders’ meeting Dispatch of notice of shareholders’ meeting	July 20, 2011 August 5, 2011 ~ August 8, 2011 August 10, 2011 and August 12, 2011 August 12, 2011

•

Changes in shareholding, including majority shareholder

•

Not applicable because the spin-off is a simple vertical spin-off.

•

Appraisal rights of shareholders

•

Not applicable because the spin-off is a simple vertical spin-off.

•

Protection of creditors

•

In accordance with Article 530-1 Paragraph 1, both SK Telecom and SK Planet will be jointly and severally liable for the payment of all obligations of SK Telecom incurred prior to the spin-off.

•

Allocation of new shares

•

In accordance with Articles 530-2 through 530-12, the spin-off is a simple vertical spin-off and all shares of SK Planet were allocated to SK Telecom.

(2)

Acquisition of Shares of SK hynix Inc. (formerly, Hynix Semiconductor Inc.)

In accordance with the resolution of the Company’s board of directors on November 14, 2011, the Company purchased 146,100,000 shares of SK hynix Inc. (formerly, Hynix Semiconductor Inc.) (“SK Hynix”) (aggregate purchase price of Won 3,374,726 million) on February 14, 2012 in order to acquire control of SK Hynix. The Company has a 21.05% equity interest in SK Hynix after the purchase.

[SK Broadband]

(1)

Merger

On July 26, 2012, the board of directors of SK Broadband resolved to merge Broadband D&M Co., Ltd., its wholly-owned subsidiary, into SK Broadband after transferring Broadband D&M Co., Ltd.’s network maintenance business to Network O&S Co., Ltd. The merger was effective as of September 26, 2012. In connection with this merger, SK Broadband did not issue any new shares.

On October 25, 2012, the board of directors of SK Broadband resolved to merge Broadband CS Co., Ltd., its wholly-owned subsidiary, into SK Broadband after transferring Broadband CS Co., Ltd.’s customer service business to Service Ace Co., Ltd. The merger was effective as of December 26, 2012. In connection with this merger, SK Broadband did not issue any new shares.

On January 3, 2013, the board of directors of SK Broadband approved the merger of Broadband Media Co., Ltd., its wholly-owned subsidiary, into SK Broadband. The merger was effective as of March 22, 2013 and was recorded as of March 25, 2013. Please refer to the “Merger Completion Report” filed with the Financial Services Commission on March 25, 2013. In connection with this merger, SK Broadband did not issue any new shares.

[SK Planet]

(1)

Merger

On January 11, 2013, the Company acquired the remaining 50% equity stake in SK M&C Co., Ltd., a company providing e-commerce and advertising services, from SK Innovation Co., Ltd. and gained control of both SK M&C Co., Ltd. and its subsidiary, M&SERVICE Co., Ltd. The Company thereafter contributed the 100% equity stake to SK Planet and merged the company into SK Planet as of February 1, 2013. In connection with this merger, the merger ratio between SK Planet and SK M&C Co., Ltd. was 1.2927317:1 and SK Planet issued 12,927,317 of its common stock.

[SK Telink]

(1)

Merger

On July 22, 2010, the board of directors of SK Telink Co., Ltd. (“SK Telink”) approved the merger of TU Media Corp. into SK Telink effective as of November 1, 2010. In connection with this merger, SK Telink issued 256,763 shares of its common stock.

[SK Communications]

(1)

Disposition and acquisition of businesses

1. Disposition of publishing business division

On April 10, 2009, SK Communications sold its publishing business division to Etoos for Won 4,785 million in accordance with the resolution of its board of directors of March 5, 2009.

2. Acquisition of the “KUKU” division

On July 1, 2009, SK Communications purchased the “KUKU” division from SK I-Media Co., Ltd. for a purchase price of Won 1,157 million, in accordance with the June 25, 2009 resolution of its board of directors.

3. Disposition of the Spicus division

Pursuant to the July 23, 2009 resolution of its board of directors, SK Communications sold the Spicus division, its telephone English education division, to Spicus Inc., a subsidiary of Altos Ventures on August 1, 2009 for a purchase price of Won 1,493 million.

(2)

Disposition of shares

1. Disposition of shares of Etoos

SK Communications sold all of its shares in Etoos to Cheong Sol pursuant to a resolution of its board of directors of October 19, 2009 and, as consideration, received Won 50,000 million principal amount of convertible bonds. Pursuant to a resolution of its board of directors of July 23, 2010, SK Communications converted Won 25 billion principal amount, out of a total of Won 50 billion principal amount, of convertible bonds of Etoos into 701,000 shares of Etoos (15.58%). Pursuant to a resolution of its board of directors of January 13, 2012, SK Communications sold Won 20 billion principal amount, out of the remaining Won 25 billion principal amount, of convertible bonds of Etoos Education Co., Ltd. to Shinhan Private Equity Fund No. 2 at a price of Won 19 billion.

2. Disposition of shares of SK i-Media

Pursuant to a resolution of its board of directors of October 17, 2011, SK Communications sold all shares of SK i-Media Co., Ltd. held by it to LK Media Tech Co., Ltd. at a price of Won 1 million.

3. Disposition of shares of U-Land, an overseas entity

Pursuant to a resolution of its board of directors of December 21, 2011, SK Communications sold all of its 29.85% interest in U-Land, an overseas entity, to SK Planet at a price of Won 10 million.

4. Disposition of shares of Service-In

On November 19, 2012, SK Communications sold all of its shares (80,000 common shares) in Service-In Co., Ltd., its subsidiary, to the chief executive officer of Service-In Co., Ltd., pursuant to a resolution of its board of directors of October 31, 2012.

E.	Other Important Matters related to Management Activities

[SK Telecom]

(1)

Bank loans

On February 14, 2012, the Company borrowed Won 2.5 trillion in a syndicated loan from a syndicate of Korean banks including Kookmin Bank and Woori Bank in order to finance the purchase of SK Hynix shares. Won 2 trillion of the loan matures in three years and Won 0.5 trillion of the loan matures in one year.

[SK Broadband]

SK Broadband, a material consolidated subsidiary of ours, acquired subscriberships of regional cable and other service providers on several different occasions. Such acquisitions were intended to secure a stable subscriber base for our broadband Internet service and, at the same time, increase the service coverage area. Because such acquisitions were conducted on a relatively small scale and involved purchase of subscriberships, we did not believe such acquisitions rose to the level of purchasing an entire business line from another company or were likely to have a material impact on our business, and therefore we believed that such acquisitions did not require resolutions of our shareholders.

[SK Communications]

(1)

Leak of personal information

In July 2011, there was a leak of personal information of subscribers of NATE and Cyworld websites operated by SK Communications. As of March 31, 2013, twenty lawsuits were filed against SK Communications, alleging that the leak was caused by its poor management of subscribers’ personal information and seeking damages of approximately Won 5.5 billion. With respect to a few of the lawsuits, the relevant district courts have rendered judgments for the relevant plaintiffs’ claims in part and SK Communications has appealed such judgments to the applicable high courts, where the cases are currently pending. Other cases remain pending at various district courts in Korea.

[SK Telink]

On August 23, 2012, the board of directors of SK Telink resolved to discontinue operations of its satellite Digital Multimedia Broadcasting (“DMB”) services due to the decrease in satellite DMB subscribers and the continued burden of fixed costs.

3.	Total Number of Shares

A.	Total Number of Shares


(As of March 31, 2013)					(Unit: shares)

Classification	Share type					Remarks
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		11,050,712	—		11,050,712		—
VI. Number of shares outstanding (IV-V)		69,694,999	—		69,694,999		—

On July 20, 2011, the Company publicly disclosed its plan to repurchase treasury shares. The Company repurchased 1.4 million shares of treasury shares from July 25, 2011 to September 30, 2011 through the Korea Exchange. For more information on the repurchase of treasury shares, please see public disclosures made on July 20, 2011 and October 5, 2011.

B.	Treasury Shares

(1)

Acquisitions and Dispositions of Treasury Shares


(As of March 31, 2013)											(Unit: Shares)
Acquisition methods			Type of shares	At the beginning of period		Changes						At the end of period
Acquisition methods			Type of shares	At the beginning of period		Acquired (+)		Disposed (-)		Retired (-)		At the end of period
Acquisition pursuant to the Financial Investment Services and Capital Markets Act of Korea (“FSCMA”)	Direct acquisition	Direct acquisition from market	Common shares		7,086,028		—		—		—		7,086,028
		Direct acquisition from market	Preferred shares		—		—		—		—		—
		Direct over-the-counter acquisition	Common shares		—		—		—		—		—
		Direct over-the-counter acquisition	Preferred shares		—		—		—		—		—
		Tender offer	Common shares		—		—		—		—		—
		Tender offer	Preferred shares		—		—		—		—		—
		Sub-total	Common shares		7,086,028		—		—		—		7,086,028
		Sub-total	Preferred shares		—		—		—		—		—
	Acquisition through trust and other agreements	Held by trustee	Common shares		—		—		—		—		—
		Held by trustee	Preferred shares		—		—		—		—		—
		Held in actual stock	Common shares		3,886,710		—		—		—		3,886,710
		Held in actual stock	Preferred shares		—		—		—		—		—
		Sub-total	Common shares		3,886,710		—		—		—		3,886,710
		Sub-total	Preferred shares		—		—		—		—		—
Other acquisition			Common shares		77,974		—		—		—		77,974
Other acquisition			Preferred shares		—		—		—		—		—

Total			Common shares		11,050,712		—		—		—		11,050,712

			Preferred shares		—		—		—		—		—

*	Of the 11,050,712 shares acquired by the Company, 2,421,077 shares were deposited with the Korea Securities Depository as of March 31, 2013 for issuance upon conversion of the Company’s overseas convertible bonds.

4.	Status of Voting Rights


(As of March 31, 2013)			(Unit: shares)
Classification		Number of shares		Remarks
Total shares (A)	Common share		80,745,711		—
Total shares (A)	Preferred share		—		—
Number of shares without voting rights (B)	Common share		11,050,712		Treasury shares
Number of shares without voting rights (B)	Preferred share		—		—
Shares without voting rights pursuant to the Company’s articles of incorporation (C)	Common share		—		—
	Preferred share		—		—
Shares with restricted voting rights pursuant to Korean law (D)	Common share		—		—
	Preferred share		—		—
Shares with reestablished voting rights (E)	Common share		—		—
Shares with reestablished voting rights (E)	Preferred share		—		—
The number of shares with exercisable voting right s (F = A - B - C - D + E)	Common share		69,694,999		—
	Preferred share		—		—

5.	Dividends and Others

A.	Dividends

(1)

Distribution of cash dividends was approved during the 27th General Meeting of Shareholders held on March 11, 2011.

•

Distribution of cash dividends per share of Won 8,400 (exclusive of an interim dividend of Won 1,000) was approved.

(2)

Distribution of interim dividends of Won 1,000 was approved during the 330th Board of Directors’ Meeting on July 28, 2011.

(3)

Distribution of cash dividends was approved during the 28th General Meeting of Shareholders held on March 23, 2012.

•

Distribution of cash dividends per share of 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 344th Board of Directors’ Meeting on July 25, 2012.

(5)

Distribution of cash dividends was approved during the 29th General Meeting of Shareholders held on March 22, 2013.

•

Distribution of cash dividends per share of Won 8,400 (exclusive of an interim dividend of Won 1,000) was approved.

B.	Dividends for the Last 3 Fiscal Years


	(Unit: in millions of Won, except per share value)
Classification		As of and for the quarter ended March 31, 2013		As of and for the year ended December 31, 2012		As of and for the year ended December 31, 2011
Par value per share (Won)			500		500		500
Net income			302,178		1,242,767		1,694,363
Net income per share (Won)			4,336		17,832		24,002
Total cash dividend			—		655,133		656,533
Total stock dividends			—		—		—
Percentage of cash dividend to available income (%)			—		52.7		38.7
Cash dividend yield ratio (%)	Common share		—		6.2		6.6
Cash dividend yield ratio (%)	Preferred share		—		—		—
Stock dividend yield ratio (%)	Common share		—		—		—
Stock dividend yield ratio (%)	Preferred share		—		—		—
Cash dividend per share (Won)	Common share		—		9,400		9,400
Cash dividend per share (Won)	Preferred share		—		—		—
Stock dividend per share (share)	Common share		—		—		—
Stock dividend per share (share)	Preferred share		—		—		—

※	Prepared based on separate financial statements. Net income per share means basic net income per share.

*	The total cash dividend of Won 656,533 million for the year ended December 31, 2011 includes the total interim dividend amount of Won 71,095 million, and the cash dividend amount per share of Won 9,400 includes the interim cash dividend amount per share of Won 1,000.

*	The total cash dividend of Won 655,133 million for the year ended December 31, 2012 includes the total interim dividend amount of Won 69,695 million, and the cash dividend amount per share of Won 9,400 includes the interim cash dividend amount per share of Won 1,000.

II.

BUSINESS

Each company in the consolidated entity is a separate legal entity providing independent services and products. The business is primarily separated into (1) the wireless telecommunication business consisting of mobile phone, wireless data, information telecommunication, (2) the fixed-line telecommunication business consisting of PSTN, high speed Internet, data and network lease services, among others, and (3) other businesses consisting of platform services, Internet portal services and music streaming services, among others.

1.	Business Overview

Summary Business Description of Material Consolidated Subsidiaries


Classification	Company name	Description of business
Wireless	SK Telecom Co., Ltd.	Wireless voice and data telecommunications services via digital wireless networks
	PS&Marketing Co., Ltd.	Resale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels
	Network O&S Co., Ltd.	Network maintenance services such as the operation of the Company’s base stations and related transmission and power facilities
Fixed-line	SK Broadband Co., Ltd.	High-speed Internet, TV, telephone, commercial data and other fixed-line services and management of the transmission system for online digital contents Various media-related services, such as channel management, including video on demand, and mobile IPTV services
	SK Telink Co., Ltd.	International wireless direct-dial “00700” services, pre-paid international card calling services, voice services using Internet protocol and Mobile Virtual Network Operator (“MVNO”) services
Other business	SK Planet Co., Ltd.	Various platform services such as 11th Street, T Store, T-Map Navigation and Hoppin in the application, commerce and new media areas, among others
	SK Communications Co., Ltd.	Integrated portal services through NATE, social networking services through Cyworld and instant messaging services through NATE-ON
	Loen Entertainment, Inc.	Online music services, including operation of MelOn, a music portal, as well as production and sales of music albums
	YTK Investment Ltd.	Established to strategically invest in funds in order to find future growth opportunities and strengthen the Company’s competitiveness
	Atlas Investment

[Wireless Business]

A.	Industry Characteristics

As of March 31, 2013, the Korean mobile communication market can be considered to have reached its maturation stage with more than a 100% penetration rate. However, the Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology and the development of highly advanced LTE and 3G smartphones which enable the provision of convergence services for multimedia contents, mobile commerce, telematics, new media and other related services. In addition, through the HSPA+ network commercialized in October 2010 and the LTE network introduced in July 2011, B2B businesses, such as the corporate “connected workforce” business which can directly contribute to an enhancement in productivity, are expected to grow rapidly.

B.	Growth Potential


			(Unit: 1,000 persons)
Classification		As of March, 31, 2013		As of December 31,
Classification		As of March, 31, 2013		2012		2011		2010		2009
Number of subscribers	SK Telecom		27,030		26,961		26,553		25,750		24,270
	Others (KT, LGU+)		26,806		26,663		25,954		25,062		23,675

	Total		53,836		53,624		52,507		50,767		47,944

(Source: Korea Communications Commission website and each Korean telecommunications company’s respective earnings releases)

C.	Domestic and Overseas Market Conditions

The Korean mobile communication market includes the entire population of Korea with mobile communication service needs, and almost every Korean is considered a potential user. Sales revenue related to data services is expected to increase due to the increasing popularity of smartphones and wireless Internet. The importance of the business-to-business segment, which creates added value by selling and developing various solutions, 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: %)

Classification

As of March 31,
2013

As of December 31,

2012

2011

2010

2009

Mobile communication services

50.2

50.3

50.6

(Source: Korea Communications Commission website and each Korean telecommunications company’s respective earnings releases)

D.	Business Overview and Competitive Strengths

The Company is seeking to transform itself from a telecommunication service provider into a comprehensive information and communication technology (“ICT”) service provider. It has continued to expand the scope of its services and achieved strong growth in subscribers amid fierce competition and rate cuts. For the quarter ended March 31, 2013, the Company recorded Won 4.1 trillion in operating revenue and Won 410 billion in operating income on a consolidated basis and Won 3.1 trillion in revenue and Won 420 billion in operating income on a separate basis.

The number of subscribers as of March 31, 2013 was 27.03 million, an increase of approximately 68,000 from the previous quarter. In particular, the number of smartphone subscribers as of March 31, 2013 was 16.65 million, an increase of approximately 670,000 from the previous quarter, including 9.33 million LTE subscribers, solidifying the Company’s market leadership. The Company upgraded the quality of data services by providing commercial LTE services, enabling streaming of high-quality videos, high-definition voice services such as high-definition video conference calls and joyn.T, an all-IP next generation integrated communications service. The Company also plans to enhance customer satisfaction by improving network quality.

The Company has proved that it has superior network quality compared to its competitors according to the Korea Communications Commission quality evaluations. The Company has also proved to be the leader in Korea’s top three customer satisfaction indices: according to the National Customer Satisfaction Index, Korean Customer Satisfaction Index and Korean Standard Service Quality Index, the Company has continued to hold the leading position for 16 years, 15 years and 13 years, respectively.

SK Telink, a consolidated subsidiary of the Company, expanded its operations to the MVNO business based on its technical expertise and know-how obtained in its international telecommunications business and launched its MVNO service, 7Mobile, which is offered at reasonable rates and provides excellent quality. SK Telink is increasing its efforts to develop low-cost distribution channels and create niche markets through targeted marketing towards customers with lower average revenue per user. An MVNO leases the networks of a mobile network operator (“MNO”) and provides wireless telecommunication services under its own brand and fee structure, without owning telecommunication networks or frequencies.

Network O&S, a subsidiary of the Company responsible for the operation of the Company’s base stations and related transmission and power facilities, offers quality fixed-line and wireless products to customers, including mobile office products to business customers.

PS&Marketing, a subsidiary of the Company involved in wholesale, retail and online sales, offers fixed-line and wireless telecommunication products and services to meet the lifestyle needs of customers.

[Fixed-line Business]

A.	Industry Characteristics

Mergers among fixed-line operators and wireless operators have accelerated the convergence within the Korean telecommunications industry, creating a market structure in which groups with both fixed-line and wireless capabilities compete for greater market share to secure a more solid footing in the market by lowering rates, such as introducing plans with unlimited minutes for both inter- and intra-network calls. In addition, with the introduction of smartphones, tablet computers and other devices with enhanced mobility and the expansion of LTE service (including the planned launch of LTE-Advanced service in the second half of 2013), wireless Internet usage has become a norm. As subscribers to various bundled wireless and fixed-line products are continuing to increase, subscribers to IPTV services are rapidly increasing. The market for our corporate business is also growing with cloud computing, mobile offices and other new information and communications technologies being commercialized. The increased usage of smartphones and tablet computers has greatly increased the demand for wireless data transmissions, thereby further emphasizing the importance of fixed-line networks.

The number of subscribers of the Company’s IPTV services has reached over 6.7 million in four years since the Company launched this service and the Company continues to strengthen its position in the pay television market. In addition, with the increase in the number of smartphones, tablet PCs and other mobile devices, new services such as mobile IPTV and N-screen services are expected to grow significantly in the future.

B.	Growth Potential


	(Unit: 1,000 persons)
Classification		As of March 31, 2013		As of December 31,
Classification		As of March 31, 2013		2012		2011
Fixed-line Subscribers	High-speed Internet		18,333		18,254		17,860
	Fixed-line telephone		18,306		18,459		18,633
	IPTV (real-time)		6,799		6,310		3,591

(Source: Korea Communications Commission website and each Korean telecommunications company’s earnings releases)

C.	Cyclical Nature and Seasonality

High-speed Internet, fixed-line telephone and IPTV services are mature markets that are generally not sensitive to cyclical economic changes due to the easing of competition resulting from the decrease in differentiation between service providers and the nature of the respective services. We expect that the accelerated transition to digital TV services as a result of the termination of analog open air TV broadcasting, as well as the entrance of Google Inc. (“Google”) and Apple Inc. (“Apple”) into the television market and the introduction of smart TV products, will present opportunities by expanding the market size and increasing consumers’ interests. We are strengthening our competitiveness in the TV business by expanding the number of popular channels, such as kids channels and channels providing live broadcasts of MLB games, as well as strengthening mobile IPTV services using N-screen.

Historical market share of the Company:


(Unit: %)
Classification	As of March 31, 2013		As of December 31,
Classification	As of March 31, 2013		2012		2011
High-speed Internet (include resales)		24.2		24.1		23.5
Fixed-line telephone (include VOIP)		16.6		16.5		14.6
IPTV (real-time)		22.6		22.2		19.3

(Source: Korea Communications Commission website and each Korean telecommunications company’s earnings releases)

D.	Business Overview and Competitive Strengths

SK Broadband, which in 1999 became the first company in the world to commence commercial ADSL services, has strengthened its co-marketing efforts with SK Telecom. The co-marketing efforts and the enhanced competitiveness of the bundled products have resulted in an expanded subscriber base across all of our businesses, including broadband Internet, telephone and IPTV. In particular, we have positioned ourselves to focus on corporate customer services as one of the key strategic areas for mid- to long-term growth, and our efforts to exploit new information and communications technology-based businesses have led to revenue growth and strengthening of our competitiveness in the emerging business-to-business market.

SK Telink, a material consolidated subsidiary of the Company, provides international telecommunications service. SK Telink has been able to establish itself as a market leader as a result of its affordable pricing, proactive marketing and the quality of its services. It launched a mobile phone-based international calling service under the brand name “00700” in 1998, creating a new niche market within the long-distance telephony market that was otherwise dominated by existing service providers. In 2003, SK Telink was designated a common carrier for international calling services, which allowed us to expand our international calling services to fixed-line international calling services. SK Telink plans to strengthen its existing business, including international and long-distance calling services, value-added services for local calling and B2B services, while satisfying customers’ diverse needs for new services.

[Other Business]

A. Industry Characteristics

As the number of smartphones distributed in Korea exceeds 30 million, the growth in various mobile devices has spurred the rise of the service provider with a strong platform business as the leader in the ICT market. It is becoming increasingly important to enhance competitiveness by building a platform with large data capacity to handle the increase in data transmission.

A platform business acts as an intermediary by promoting interactions among various customer groups, thereby generating new values. It is important for a platform business to continually attract subscribers and users and to create an ecosystem with certain lock-in effects. A platform can exist in various forms, including as a technological standard (iOS, Android OS), a subscriber-based service platform (Facebook, Twitter) or a marketplace (Amazon, T Store). Platform businesses are evolving and expanding globally. It is becoming increasingly important to enhance competitiveness by creating a database that can register and analyze purchase patterns of customers across all areas and building a platform with large data capacity to utilize this database to provide differentiated services.

A platform business has strong growth potential due to its connectivity with related services and ease of global expansion. Apple became a world-leading smartphone producer based on its innovative design and the competitive strength of its App Store platform. Google has created a new ecosystem of long-tail advertising by attracting millions of third parties to its advertising platform, as well as showing strong growth in mobile markets with its competitive platform based on Android OS.

B. Growth Potential

The Company expects that the scope and value generated by the platform business, including application and content marketplaces and N-screen services, will increase, as smartphones and tablet computers become more popular and the bandwidth and speed of network infrastructure improve.

As the wireless network evolves to LTE, business opportunities for the platform business are growing, which include multimedia streaming, N-screen service based on cloud technology and high-definition location-based services. Since the platform business realizes profit by connecting with advertisements or commerce sites after building a critical mass of subscribers and traffic, the recent growth in the advertising and commerce markets is expected to present an opportunity for platform businesses. We expect that in the future, the importance of building a platform with large data capacity that is connected to various digital contents and commerce will increase.

C. Domestic and Overseas Market Conditions

(1)

Competition

•

Application Marketplace

The growth of application marketplaces, which started with Apple’s App Store, provides the platform business with new opportunities for revenue generation. The competitive paradigm is shifting from a competition among platform operators toward a competition among eco-systems that include application developers as well as platform operators.

•

Commerce Markets

The Company expects that on-line commerce markets will continue to grow due to the growth potential of the Internet shopping population and the strengthening of on-line business models by off-line operators. The Korean advertising market is expected to grow from Won 9.8 trillion in 2012 to Won 11.7 trillion in 2015. In particular, mobile advertising is expected to grow rapidly to Won 1.0 trillion in 2015, primarily due to the popularity of smartphones and convergence with location-based advertising.

•

Media Contents Market

Due to an increase in the number of devices owned by each user and an increase in network speed, each user can now enjoy music or video files anywhere and anytime by storing them in cloud servers, which is called N-screen service. Users can recommend music to other users through social networking services and this is expected to become a distribution model for digital media contents. Various service providers are competing in this market expecting a strong growth in the on-line and mobile video market.

Although Internet portal service providers provide more or less identical types of services, including search, social networking, email, news and other content services, for each type of service, a small number of service providers with specialized expertise are enjoying relatively large market shares. However, the portal services market has a relatively low entry barrier and there is increased competition from new entrants. In addition, the ease of access to services provided by competitive foreign providers is also adding to a highly competitive market environment.

(2)

Market Share

“CyWorld” service, our social networking website in Korea, had 26 million cumulative subscribers, 13 million net users and a page view of 500 million as of March 2013. Our “Nate-On” service had the largest market share of 73.6% in the instant messenger market in Korea with 8 million net users as of March 2013. Our “Nate” search portal service had a market share of 1.8% as of March 2013. (Source: Korean Click, Company data).

D. Business Overview and Competitive Strengths

SK Planet plans to expand its platform ecosystem focusing on its “Open & Collaboration” motto in operating its digital content marketplaces such as T Store and Hoppin, commerce marketplaces such as 11^th Street and Smart Wallet and location-based services such as T-Map Navigation, thereby ultimately increasing its enterprise value.

•

Digital Content Marketplace

T Store, launched in September 2009, reached 19.8 million subscribers and cumulative downloads of 1.24 billion as of March 2013, solidifying its leadership position in the Korean application market and plans to widen its services to tablets and navigation devices. The Company intends to further develop T Store into a global service platform by evolving it into a personalized gateway and mobile playground through expansion of the scope of serviceable devices, reinforcement of digital content offerings and enhancement of search services, among other things.

The Company’s “Hoppin” service, which provides N-screen media service enabling subscribers to enjoy video on demand through a number of N-screen compatible devices, including smartphones, tablets and PCs. Through continual service improvements and stable service provision, Hoppin has become the leading mobile video on demand service with over 300 million subscribers as of October 2012. The Company plans to market this service globally based on its experience in the Korean IT infrastructure environment.

•

Commerce (Open Market)

11th Street, an online marketplace, has continued its growth through effective marketing and customer satisfaction. Despite its later entry into the online commerce market (launched in 2008) which was already divided between Auction and G-Market, it is leading the domestic e-commerce market and is also firmly establishing its position as the leader in the mobile commerce market. Growth plans involving overseas joint ventures based on 11th Street’s business expertise have resulted in the successful launch of an open online commerce market in Turkey in partnership with Doğuş Group.

OK Cashbag is a point-based loyalty marketing program which has grown to become a global top-tier loyalty marketing program since its inception in 1999. Customers have access to increased benefits through accumulation of loyalty reward points and partner companies use OK Cashbag as a marketing resource. With 36 million subscribers, OK Cashbag maintains a leading position in the industry and plans to continue strengthening its position by providing customized services befitting customers’ needs and market conditions.

•

Location-based Service

T-Map Navigation provides map, local information, real-time traffic information and navigation services. With cumulative subscribers of 16.95 million as of March 31, 2013, T-Map Navigation is one of the leading location-based service platforms in Korea. The Company is broadening the range of its location-based services by also providing “infotainment” systems to commercial vehicle businesses as well as providing localized content on its products, such as region-specific information and advertisements. The Company plans to further develop the T-Map Navigation platform by initiating open application programming interface-based services, providing services to more diverse types of devices and providing local area-based services.

•

Media Platform

The Company’s media platform business started with its “Hoppin” service, which provides N-screen media service enabling subscribers to enjoy contents through a number of devices. Hoppin has expanded its services to more types of smartphones and tablets and has 3.73 million subscribers as of March 31, 2013. The Company plans to develop Hoppin service into a media platform acting as an intermediary of various N-screen services. It also plans to provide media platform services in overseas markets in stages.

•

Music Business

The Company’s online music site, MelOn, has continued to increase its sales and, for the past five years, has been recognized as having the largest market share and the highest brand recognition in the digital music sales market in Korea. As of March 31, 2013, the Company supports all major smartphone and tablet devices introduced in Korea. The Company is quickly and flexibly responding to the mobile environment by improving the usability of its mobile applications, proactively responding to the release of new devices and continuing to improve its service and maintain its stable operation. The Company has also established a multi-device environment in which users can use MelOn anywhere and anytime, by among other things supporting all five major web browsers, including Explorer, Google Chrome and Safari. The Company is leading the growth of the music industry while respecting the rights of copyright holders. Despite changes in licensing fee requirements, the Company is pioneering new business areas by creating new products and services to meet the needs of a wide range of customers and partnering with various companies. The Company plans to strengthen its leadership in the mobile market and increase the number of its subscribers by providing reliable service operations and continually improving service, offering relevant and special music related contents to its customers and engaging in diverse and differentiated marketing promotion activities.

※ Satellite DMB

The Company launched its Hanbyul satellite in 2004 and received government approval in December 30, 2004 to provide satellite DMB services. Broadcasting through satellite DMB commenced in May 2005 and satellite DMB services expanded nationwide thereafter. On August 23, 2012, the board of directors resolved to discontinue operation of its satellite DMB services due to the rapid decrease in satellite DMB subscribers and the continued burden of fixed costs.

2.	Major Products & Services

A.	Updates on Major Products and Services


(Unit: in millions of Won, %)
Business	Major companies	Item	Major trademarks	Consolidated Sales amount (ratio)
Wireless	SK Telecom Co., Ltd., PS&Marketing Co., Ltd., Service Ace Co., Ltd., Service Top Co. Ltd., Network O&S Co., Ltd.	Mobile Communication Service, Wireless Data Service, Information Telecommunication Service	T and others		3,265,014(79.4	%)
Fixed-line	SK Broadband Co., Ltd., SK Telink Co., Ltd.	Fixed-line Phone, High Speed Internet, Data and Network Lease Service	B tv , 00700 international call and others		580,628(14.1	%)
Other	SK Planet Co., Ltd, Commerce Planet Co., Ltd, SK Communications Co., Ltd., Loen Entertainment, Inc., YTK Investment Ltd., Atlas Investment	Internet Portal Service and Game Design	NATE, 11th Street, T Store, T-Map Navigation, MelOn, Cyworld and others		266,995(6.5	%)

Total					4,112,637(100	%)

B. Price Fluctuation Trend of Major Products and Services

[Wireless Business]

In the past, based on the Company’s basic monthly subscription plan, 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 monthly subscription plan, the basic service fee was Won 12,000 per month and the usage fee was Won 18 per 10 seconds. As of March 31, 2013, based on the Company’s standard monthly subscription plan, the basic service fee was Won 11,000 per month and the usage fee was Won 1.8 per 1 second.

[Fixed-line Business]

SK Broadband provides broadband Internet access service, telephony, TV, corporate data services and other services for both individual and corporate customers. As of March 31, 2013, broadband Internet and TV services comprised 50.0% of SK Broadband’s revenue, telephony service 24.1%, corporate data services 25.2% and other telecommunications services 0.7%.

3.	Investment Status

[Wireless Business]

A. Investment in Progress

(Unit: in 100 millions of Won)

Business

Classification

Investment
period

Subject of

investment

Investment effect

Expected
investment
amount

Amount
already
invested

Future

investment

Network/Common

Upgrade/

New installation

2013

Network, systems and others

Capacity increase and quality improvement; systems improvement

21,000

3,507

To be determined

Total

21,000

3,507

To be determined

B. Future Investment Plan

(Unit: in 100 millions of Won)

Business

Expected investment amount

Expected investment for each year

Investment effect

Asset type

Amount

2013

2014

2015

Network/Common

Network, systems and others

21,000

To be
determined

Upgrades to the existing services and provision of new services

Total

21,000

To be
determined

Upgrades to the existing services and provision of new services

[Fixed-line Business]

A. Investment in Progress

(Unit: in 100 millions of Won)

Business

Classification

Investment
period

Subject of
investment

Investment effect

Total
investments

Amount
already
invested

Future
investment

High-speed Internet

Upgrade/
New
installation

1st
quarter,
2013

Backbone
and
subscriber
network /
others

Expand subscriber networks and facilities

365

To be
determined

Telephone

Television

Corporate Data

Increase leased-line and integrated information system

184

Others

Expand networks

Total

365

4.	Revenues

(Unit: in millions of Won)


Business	Sales type	Item		For the quarter ended March 31, 2013		For the year ended December 31, 2012		For the year ended December 31, 2011
Wireless	Services	Mobile communication	Export		97		14,202		1,331
			Domestic		3,264,917		13,204,702		13,074,936
			Subtotal		3,265,014		13,218,904		13,076,267
Fixed-line	Services	Fixed-line, B2B data, High-speed Internet, TV	Export		6,240		29,883		28,070
			Domestic		574,388		2,163,978		2,103,879
			Subtotal		580,628		2,193,861		2,131,949
Other	Services	Display and Search ad., Content	Export		753		4,698		12,036
			Domestic		266,242		883,016		706,217
			Subtotal		266,995		887,714		718,253

Total			Export		7,090		48,783		41,437

			Domestic		4,105,547		16,251,696		15,885,032

			Total		4,112,637		16,300,479		15,926,469


(Unit: in millions of Won)
For the quarter ended March 31, 2013	Wireless		Fixed		Other		Sub total		Internal transaction		After consolidation
Total sales		3,551,807		714,873		435,747		4,702,427		-589,790		4,112,637
Internal sales		286,793		134,245		168,752		589,790		-589,790		0
External sales		3,265,014		580,628		266,995		4,112,637		0		4,112,637
Operating income (loss)		423,524		7,914		-20,805		410,633		0		410,633
Total assets		22,878,131		3,123,480		3,037,280		29,038,891		-3,630,049		25,408,843
Total liabilities		10,607,539		1,897,378		856,846		13,361,763		-320,620		13,041,143

5.	Derivative Transactions

(1) Currency swap contract applying cash flow risk hedge accounting

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 March 31, 2013, in connection with this unsettled cross currency interest rate swap contract to which cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to Won 2,802 million (net of tax effect totaling Won 394 million and foreign currency translation loss arising from U.S. dollar-denominated long-term borrowings totaling Won 16,410 million) was accounted for as accumulated other comprehensive loss.

In addition, the Company has entered into a fixed-to-fixed cross 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 hedge accounting to this cross currency swap contract starting from May 12, 2010. Accordingly, as of March 31, 2013, in connection with this unsettled cross currency swap contract, an accumulated loss on valuation of derivatives amounting to Won 37,356 million (net of tax effect totaling Won 11,926 million and foreign currency translation gain arising from these unguaranteed U.S. dollar-denominated bonds totaling Won 12,483 million) was accounted for as accumulated other comprehensive loss. In connection with this cross currency swap contract, a gain on valuation of the cross currency swap contract incurred before application of cash flow hedge accounting of Won 129,806 million was recognized.

The Company has entered into a floating-to-fixed cross currency swap contract with two banks, including DBS, to hedge the foreign currency risk and the interest rate risk of floating-rate U.S. dollar-denominated bonds with face amounts totaling US$250,000,000 issued on December 15, 2011. As of March 31, 2013, in connection with this unsettled cross currency interest rate swap contract, an accumulated gain on valuation of derivatives amounting to Won 5,767 million (net of tax effect totaling Won 1,841 million and foreign currency translation gain arising from these unguaranteed U.S. dollar-denominated bonds totaling Won 11,490 million) was accounted for as other comprehensive income.

In addition, the Company has entered into a floating-to-fixed cross currency swap contract with United Overseas Bank to hedge the foreign currency risk and the interest rate risk of its Singapore dollar-denominated bonds with face amounts totaling SGD 65,000,000 issued on December 15, 2011. As of March 31, 2013, in connection with this unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to Won 174 million (net of tax effect totaling Won 55 million and foreign currency translation loss arising from these Singapore dollar-denominated bonds totaling Won 791 million) was accounted for as accumulated other comprehensive loss.

The Company has entered into a fixed-to-fixed cross currency swap contract with six banks, including Citibank, to hedge the foreign currency risk of its Swiss Franc-denominated bonds with face amounts totaling CHF 300,000,000 issued on June 12, 2012. As of March 31, 2013, in connection with this unsettled cross currency swap contract, an accumulated loss on valuation of derivatives amounting to Won 8,912 million (net of tax effect totaling Won 2,845 million and foreign currency translation gain arising from its Swiss Franc-denominated bonds totaling Won 12,176 million) was accounted for as accumulated other comprehensive loss.

In addition, the Company has entered into a fixed-to-fixed cross currency swap contract with ten banks, including Barclays, to hedge the foreign currency risk of unguaranteed U.S. dollar-denominated bonds with face amounts totaling US$700,000,000 issued on November 1, 2012. As of March 31, 2013, in connection with this unsettled cross currency swap contract, an accumulated loss on valuation of derivatives amounting to Won 12,029 million (net of tax effect totaling Won 3,840 million and foreign currency translation gain arising from these unguaranteed U.S. dollar-denominated bonds totaling Won 14,883 million) was accounted for as accumulated other comprehensive loss.

The Company has entered into a fixed-to-fixed cross currency swap contract with four banks, including BNP Paribas, to hedge the foreign currency risk of unguaranteed Australian dollar-denominated bonds with face amounts totaling AUD 300,000,000 issued on January 17, 2013. As of March 31, 2013, in connection with this unsettled cross currency swap contract, an accumulated gain on valuation of derivatives amounting to Won 307 million (net of tax effect totaling Won 98 million and foreign currency translation loss arising from these unguaranteed Australian dollar-denominated bonds totaling Won 11,703 million) was accounted for as accumulated other comprehensive income.

In addition, the Company has entered into a floating-to-fixed cross currency swap contract with DBS to hedge the foreign currency risk and the interest rate risk of its U.S. dollar-denominated bonds with face amounts totaling US$300,000,000 issued on March 7, 2013. As of March 31, 2013, in connection with this unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to Won 4,077 million (net of tax effect totaling Won 1,302 million and foreign currency translation gain arising from these U.S. dollar-denominated bonds totaling Won 8,506 million) was accounted for as accumulated other comprehensive loss.

(2) The fair values of the derivative instruments described above as of March 31, 2013 are recognized as derivative assets or derivative liabilities under current assets, non-current assets or current liabilities on the Company’s balance sheet. Details are as follows:


(Unit: in thousands of Won)
Category	Subject of Risk Hedge	Contract Period	Fair Value of Derivative Instruments
Category	Subject of Risk Hedge	Contract Period	Designated as Hedging Instrument		Not Designated as Hedging Instrument		Total
Currency Swap (Current Asset)	U.S. dollar-denominated long-term borrowings (principal amount of US$100,000,000)	From Oct. 10, 2006 to Oct. 10, 2013		13,213,611		—		13,213,611
Currency Swap (Non-current Asset)	Unguaranteed U.S. dollar-denominated bonds (face amount of US$400,000,000)	From Jul. 20, 2007 to Jul. 20, 2027		68,040,599		—		68,040,599
	Floating-rate Singapore dollar-denominated bonds (face amount of SGD 65,000,000)	From Dec. 15, 2011 to Dec. 12, 2014		561,781		—		561,781
	Floating-rate Australian dollar-denominated bonds (face amount of AUD 300,000,000)	From Jan. 17, 2013 to Nov. 17, 2017		12,107,035		—		12,107,035
	Floating-rate U.S. dollar-denominated bonds (face amount of US$300,000,000)	From Mar. 7, 2013 to Mar. 7, 2020		3,127,450		—		3,127,450
Conversion Right (Current Asset)	Convertible bonds (Available-for-sale securities)(*) (face amount of Won 50,000,000,000)	From Sep. 1, 2009 to Aug. 31, 2014		—		463,759		463,759
Conversion Right (Non-current Asset)		From Sep. 1, 2009 to Aug. 31, 2014		—		225,385		225,385

Total derivative assets				97,050,476		689,144		97,739,620

Currency Swap (Non-current Liability)	Floating-rate U.S. dollar-denominated bonds (face amount of US$250,000,000)	From December 15, 2011 to December 12, 2014		3,881,838		—		3,881,838
	Floating-rate Swiss Franc-denominated bonds (face amount of CHF 300,000,000)	From June 12, 2012 to June 12, 2017		23,933,776		—		23,933,776
	Floating-rate U.S. dollar-denominated bonds (face amount of US$700,000,000)	From November 1, 2012 to May 1, 2018		986,514		—		986,514

Total derivative liabilities				28,802,128		—		28,802,128

(*)	The fair value of Won 689,144,000 of the conversion rights of the convertible bonds held by SK Communications, a subsidiary of the Company, was recognized as a derivative asset.

6.	Major Contracts

[SK Telecom]

Category

Vendor

Start Date

Completion
Date

Contract
Title

Contract Amount
(in 100 millions of
Won)

Service

SK Planet Co., Ltd.

February 25, 2013

December 31, 2013

B2B contents purchase contract for ‘Smart Safe’ and ‘Phone Safe 40’

206

Service

SK Planet Co., Ltd.

February 25, 2013

March 31, 2013

Contract for 2012 production of above-the-line advertisements (former SK M&C)

Real Estate

Individual

January 1, 2013

May 15, 2013

Purchase of regional centers (23 centers)

150

Subtotal

414

[SK Broadband]

SK Broadband enters into contracts to use telecommunications facilities, including the use of line conduits and interconnection among telecommunication service providers.


Counterparty	Contract Contents	Contract Period	Note
Telecommunication service providers	Interconnection among telecommunication service providers	—	Interconnection among telecommunication service providers
KEPCO	Provision of electric facilities	From Dec. 2012 to Dec. 2013	Use of electricity poles
Seoul City Railway	Use of telecommunication line conduits	From Jan. 2009 to Dec. 2012 (Renewal in progress)	Use of railway telecommunication conduit (Serviced areas to expand)
Seoul Metro	Use of telecommunication line conduits	From May 2010 to May 2013	Use of railway telecommunication conduit (Serviced areas to expand)
Busan Transportation Corporation	Use of telecommunication line conduits	From July 2009 to July 2013	Use of railway telecommunication conduit (Serviced areas to expand)
Gwangju City Railway	Use of telecommunication line conduits	From Sep. 2010 to Dec. 2012 (Renewal in progress)	Use of railway telecommunication conduit (For establishment of lines for corporate use)

[SK Planet]


Counterparty	Contract Contents	Contract Period	Amount
SK Communications	Operation of shopping business at Nate.com website	From Jul. 1, 2011 to Dec. 31, 2013	Variable depending on the NATE shopping revenues and other factors

[SK Communications]


Counterparty	Purpose	Contract Period	Contract Amount

Daum Communications	Cost-per-click Internet search advertisement	—	Amount determined based on the number of clicks

SK Construction Co., Ltd.	Construction of Pangyo Office Building	23 months	Won 61.9 billion

SK Planet Co., Ltd.	Operation of shopping business at nate.com website	From Jul. 1, 2011 to Dec. 31, 2013	Minimum guarantee of Won 18.4 billion for the period from Jul. 1, 2011 to Dec. 31, 2011; Amounts for 2012 and 2013 are to be determined depending on the NATE shopping revenues and other factors

Daum Communications	Business and service cooperation regarding search advertisement	—	Revenues are allocated in accordance with certain set percentages

※	SK Communications and Daum Communications have agreed not to publicly disclose the contract period with respect to the contract with Daum Communications.

※	On February 1, 2013, the board of directors of SK Communications resolved to sell the Pangyo office building (which is currently under construction) and certain land it owns to SK Planet for Won 74.9 billion. This amount is subject to the approval of the Gyeonggi Provincial Government.

7.	R&D Investments


(Unit: in millions of Won)
Category		For the quarter ended March 31, 2013			For the year ended December 31,						Remarks
Category		For the quarter ended March 31, 2013			2012			2011			Remarks
Raw material			5			42			45		—
Labor			28,222			59,050			48,656		—
Depreciation			41,332			163,295			149,850		—
Commissioned service			5,024			62,399			40,257		—
Others			10,836			61,546			57,118		—
Total R&D costs			85,419			346,332			295,927		—
Accounting	Sales and administrative expenses		81,597			304,557			289,979		—
Accounting	Development expenses (Intangible assets)		3,822			41,775			5,948		—
R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100)			2.08	%		2.12	%		1.85	%	—

8.	Other information relating to investment decisions

[SK Telecom]

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 Property

The Company holds 4,810 Korean-registered patents, 276 U.S.-registered patents, 178 Chinese-registered patents (all including patents held jointly with other companies) and more patents with other countries. The Company holds 825 Korean-registered trademarks and owns intellectual property rights to the design of the alphabet “T”. 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.

[SK Broadband]

SK Broadband holds 329 Korean-registered patents relating to high-speed Internet, telephone and IPTV service. In addition, SK Broadband has applied for a patent relating to two-way broadcasting system. SK Broadband also holds a number of trademarks and service marks relating to its service and brand.

[SK Planet]

As of March 31, 2013, SK Planet held 2,104 registered patents, 91 registered design marks, 1,066 registered trademarks and one copyright (including those held jointly with other companies) in Korea. It also holds 24 U.S.-registered patents, 35 Chinese-registered patents, 8 Japanese-registered patents, 15 E.U.-registered patents (all including patents held jointly with other companies) and 130 registered trademarks, along with a number of other intellectual property rights, in other countries.

[SK Communications]

As of March 31, 2013, SK Communications held 66 registered patents, 26 registered design rights and 700 registered trademarks in Korea.

C. Business-related Pollutants and Environmental Protection

The Company does not engage in any manufacturing and therefore does not undertake any industrial processes that emit pollutants into the air or industrial processes in which hazardous materials are used.

FINANCIAL INFORMATION

9.	Summary Financial Information (Consolidated)

A.	Summary Financial Information (Consolidated)


(Unit: in thousands of Won, except for number of companies)
	As of March 31, 2013			As of December 31, 2012			As of December 31, 2011			As of December 31, 2010
Current Assets		5,081,677,666			5,294,420,978			6,117,478,958			6,653,991,923
• Cash and Cash Equivalents		1,124,347,601			920,124,810			1,650,793,876			659,404,935
• Accounts Receivable - Trade, net		2,223,429,231			1,954,920,332			1,823,169,889			1,949,397,279
• Accounts Receivable - Other, net		697,238,852			582,098,398			908,836,454			2,531,847,155
• Others		1,036,661,982			1,837,277,438			1,734,678,739			1,513,342,554
Non-Current Assets		20,327,164,856			20,301,138,645			18,248,557,471			16,478,397,157
• Long-Term Investment Securities		990,700,266			953,712,512			1,537,945,216			1,680,582,091
• Investments in Associates		4,817,238,156			4,632,477,315			1,384,605,401			1,204,691,805
• Property and Equipment, net		9,577,989,426			9,712,718,716			9,030,998,201			8,153,412,683
• Intangible Assets, net		2,653,778,460			2,689,657,645			2,995,803,300			1,884,955,652
• Goodwill		1,736,161,410			1,744,483,009			1,749,932,878			1,736,649,137
• Others		551,297,138			568,089,448			1,549,272,475			1,818,105,789

Total Assets		25,408,842,522			25,595,559,623			24,366,036,429			23,132,389,080

Current Liabilities		6,287,108,304			6,174,895,434			6,673,589,809			6,202,170,452
Non-Current Liabilities		6,754,034,211			6,565,881,872			4,959,737,573			4,522,219,358

Total Liabilities		13,041,142,515			12,740,777,306			11,633,327,382			10,724,389,810

Equity Attributable to Owners of the Parent Company		11,585,120,552			11,854,777,781			11,661,880,863			11,329,990,900
Share Capital		44,639,473			44,639,473			44,639,473			44,639,473
Capital Deficit and Other Capital Adjustments		(351,978,100	)		(288,882,796	)		(285,347,419	)		(78,952,875	)
Retained Earnings		11,890,283,342			12,124,657,526			11,642,525,267			10,721,249,327
Reserves		2,175,837			(25,636,422	)		260,063,542			643,054,975
Non-controlling Interests		782,579,455			1,000,004,536			1,070,828,184			1,078,008,370

Total Equity		12,367,700,007			12,854,782,317			12,732,709,047			12,407,999,270

Number of Companies Consolidated		29			32			31			32


(Unit: in thousands of Won, except for per share amounts)
	For the quarter ended March 31, 2013			For the year ended December 31, 2012			For the year ended December 31, 2011			For the year ended December 31, 2010
Operating Revenue		4,112,636,562			16,300,479,280			15,926,468,674			15,489,373,747
Operating Income		410,632,572			1,760,171,449			2,295,613,330			2,555,781,816
Profit Before Income Tax		427,906,104			1,550,887,182			2,240,689,573			2,373,223,839
Profit for the Year		345,934,455			1,115,662,553			1,582,073,280			1,766,834,754
Profit for the Year Attributable to Owners of the Parent Company		354,154,598			1,151,704,905			1,612,889,086			1,841,612,790
Profit for the Year Attributable to Non-controlling Interests		(8,220,143	)		(36,042,352	)		(30,815,806	)		(74,778,036	)
Earnings Per Share (Won)		5,081			16,525			22,848			25,598
Diluted Earnings Per Share (Won)		5,081			16,141			22,223			24,942

B.	Changes to Accounting Standards Adopted During 2012

(1) Financial Instruments: Disclosures

The Company has applied the amendments to K-IFRS No. 1107, ‘Financial Instruments: Disclosures’ since January 1, 2012. The amendments require disclosing the nature of transferred assets, their carrying amount, and the description of risks and rewards for each class of transferred financial assets that are not derecognized in their entirety. If the Company derecognizes transferred financial assets but still retains their specific risks and rewards, the amendments require additional disclosures of their risks.

(2) Presentation of Financial Statements

The Company adopted the amendments pursuant to the amended K-IFRS No. 1001, ‘Presentation of Financial Statements’ starting with the year ended December 31, 2012. The Company’s operating income is calculated as operating revenue less operating expense. Operating expense represents expense incurred from the Company’s main operating activities and includes cost of products that have been resold and selling, general and administrative expenses.

C.	Changes to Accounting Standards Adopted During 2013

(1) Presentation of Financial Statements

The Company has applied the amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ since January 1, 2013, classified items within other comprehensive income by nature and presented “items that are not subsequently recycled through profit or loss” and “items that are subsequently reclassified if certain conditions are met” as a group.

(2) Consolidated Financial Statements

The Company has applied the amendments to K-IFRS No. 1110, ‘Consolidated Financial Statements’ since January 1, 2013. The standard introduces a single control model to determine whether an investee should be consolidated. Subsidiary is an entity that is controlled by a controlling entity or a subsidiary of a controlling company. A controlling entity or a subsidiary of a controlling company controls a subsidiary when the controlling entity or the subsidiary of the controlling company is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

(3) Joint Arrangements

The Company has applied the amendments to K-IFRS No. 1111, ‘Joint Arrangements’ since January 1, 2013. The standard classifies joint arrangements into two types - joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint ventures) have rights to the net assets of the arrangement. The standard requires a joint operator to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in relation to its interest in the arrangement in accordance with relevant IFRSs applicable to the particular assets, liabilities, revenues and expenses. The standard requires a joint venture to recognize an investment and to account for that investment using the equity method.

(4) Disclosure of Interests in Other Entities

The Company has applied the amendments to K-IFRS No. 1112, ‘Disclosure of Interests in Other Entities’ since January 1, 2013. The standard brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Company is currently assessing the disclosure requirements for interests in subsidiaries, interests in joint arrangements and associates and unconsolidated structured entities in comparison with the existing disclosures. The standard requires the disclosure of information about the nature, risks and financial effects of these interests.

(5) Employee Benefits

The Company has applied the amendments to K-IFRS No. 1019, ‘Employee Benefits’ since January 1, 2013. The standard requires recognition of actuarial gains and losses immediately in other comprehensive income and to calculate expected return on plan assets based on the rate used to discount the defined benefit obligation.

(6) Fair Value Measurement

The Company has applied the amendments to K-IFRS No. 1113, ‘Fair Value Measurement’ since January 1, 2013. The standard defines fair value and a single framework for fair value, and requires disclosures about fair value measurements.

D.	Impact of Changes in Accounting Policies

(1) Consolidated Financial Statements

In accordance with the transitional provision on K-IFRS No. 1110, the Company assessed control on investees as of January 1, 2013, the initial adoption date of the standard, and there have been no changes in subsidiaries upon adoption of the standard.

(2) Presentation of Financial Statements

The Company early adopted the amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ since the interim period ended September 30, 2012 and separately present its operating income as operating revenue less operating expense on the consolidated statement of income.

The Company retrospectively applied the amendment to K-IFRS No. 1001, for which the impact is as follows:


(In millions of won)
	For the three-month ended March 31, 2012
Operating income before adoption of the amendment	￦	465,182
Differences:
Other non-operating income
Fees revenues		(465	)
Gain on disposal of property and equipment and intangible assets		(1,010	)
Others		(8,467	)

		(9,942	)
Other non-operating expense
Impairment loss on property and equipment and intangible assets		3,429
Loss on disposal of property and equipment and intangible assets		1,994
Donations		12,908
Bad debt for accounts receivable - other		19,687
Others		6,036

		44,054

Operating income after adoption of the amendment	￦	499,294

10.

Summary Financial Information (Separate)

A.	Summary Financial Information (Separate)


(Unit: in thousands of Won)
	As of March 31, 2013			As of December 31, 2012			As of December 31, 2011			As of December 31, 2010
Current Assets		2,765,811,807			2,589,699,186			3,948,077,706			5,316,976,799
• Cash and Cash Equivalents		465,782,665			256,576,827			895,557,654			357,469,908
• Accounts Receivable - Trade, net		1,416,415,295			1,407,205,772			1,282,233,900			1,453,060,673
• Accounts Receivable - Other, net		454,931,116			383,048,424			774,221,266			2,499,969,010
• Others		428,682,731			542,868,163			996,064,886			1,006,477,208
Non-Current Assets		19,625,730,061			19,659,803,155			16,572,449,699			14,410,149,512
• Long-Term Investment Securities		700,382,280			733,893,220			1,312,437,834			1,517,029,011
• Investments in Associates		8,110,130,373			7,915,546,670			4,647,505,583			3,584,394,790
• Property and Equipment, net		7,043,807,359			7,119,090,098			6,260,168,675			5,469,747,495
• Intangible Assets, net		2,113,178,817			2,187,872,109			2,364,795,182			1,424,968,542
• Goodwill		1,306,236,299			1,306,236,299			1,306,236,299			1,308,422,097
• Others		351,994,933			397,164,759			681,306,126			1,105,587,577

Total Assets		22,391,541,868			22,249,502,341			20,520,527,405			19,727,126,311

Current Liabilities		4,591,585,660			4,343,086,486			4,467,005,877			4,561,013,611
Non-Current Liabilities		5,735,287,417			5,529,367,602			4,087,219,816			3,585,155,050

Total Liabilities		10,326,873,077			9,872,454,088			8,554,225,693			8,146,168,661

Share Capital		44,639,473			44,639,473			44,639,473			44,639,473
Capital Deficit and Other Capital Adjustments		(236,160,479	)		(236,160,479	)		(236,016,201	)		(24,643,471	)
Retained Earnings		12,128,372,484			12,413,981,340			11,837,184,788			10,824,355,758
Reserves		127,817,313			154,587,919			320,493,652			736,605,890

Total Equity		12,064,668,791			12,377,048,253			11,966,301,712			11,580,957,650


(Unit: in thousands of Won, except per share amounts)
	For the quarter ended March 31, 2013		For the year ended December 31, 2012		For the year ended December 31, 2011		For the year ended December 31, 2010
Operating Revenue		3,112,098,912		12,332,719,444		12,551,255,630		12,514,520,922
Operating Income		420,110,586		1,675,388,351		2,184,498,641		2,530,954,768
Profit Before Income Tax		380,176,417		1,546,719,635		2,274,421,558		2,503,637,367
Profit for the Year		302,177,572		1,242,767,480		1,694,363,093		1,947,007,919
Earnings Per Share (Won)		4,336		17,832		24,002		27,063
Diluted Earnings Per Share (Won)		4,336		17,406		23,343		26,366

B.	Changes to Accounting Standards Adopted During 2012

(1) Financial Instruments: Disclosures

(2) Presentation of financial statements

C.	Changes to Accounting Standards Adopted During 2013

(1) Presentation of Financial Statements

(2) Consolidated Financial Statements

(3) Joint Arrangements

The Company has applied the amendments to K-IFRS No. 1111, ‘Joint Arrangements’ since January 1, 2013. The standard classifies joint arrangements into two types - joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. The standard requires a joint operator to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in relation to its interest in the arrangement in accordance with relevant IFRSs applicable to the particular assets, liabilities, revenues and expenses. The standard requires a joint venturer to recognize an investment and to account for that investment using the equity method.

(4) Disclosure of Interests in Other Entities

(5) Employee Benefits

(6) Fair Value Measurement

D.	Impact of Changes in Accounting Policies

(1) Consolidated Financial Statements

(2) Presentation of Financial Statements

The Company retrospectively applied the amendment to K-IFRS No. 1001, for which the impact is as follows:


(In millions of won)
	For the three month ended March 31, 2012
Operating income before adoption of the amendment	￦	457,702
Differences:
Other non-operating income		—
Gain on disposal of property and equipment and intangible assets		231
Others		4,475

		(4,706	)
Other non-operating expense
Loss on disposal of property and equipment and intangible assets		762
Donations		12,270
Bad debt for accounts receivable – other		15,959
Others		678

		29,669

Operating income after adoption of the amendment	￦	482,665

11.

K-IFRS: Preparation, Impact to Financial Statements and Changes in the Accounting Principles Implemented

•

Transition to K-IFRS

The Company prepares its financial statements in accordance with K-IFRS starting from fiscal year 2011 which commenced on January 1, 2011. The Company’s financial statements in previous periods were prepared in accordance with Korean GAAP. The Company’s financial statements for fiscal year 2010, which are presented for comparison, were prepared in accordance with K-IFRS with January 1, 2010 as the transition date and pursuant to K-IFRS No. 1101, “First-time Adoption of Korean International Financial Reporting Standards.”

III.

AUDITOR’S OPINION

1.	Auditor (Consolidated)


Quarter ended March 31, 2013	Year ended December 31, 2012	Year ended December 31, 2011
KPMG Samjong Accounting Corp.	KPMG Samjong Accounting Corp.	Deloitte Anjin LLC

2.	Audit Opinion (Consolidated)


Period	Auditor’s opinion	Issues noted
Quarter ended March 31, 2013	-	-
Year ended December 31, 2012	Unqualified	-
Year ended December 31, 2011	Unqualified	-

3.	Auditor (Separate)


Quarter ended March 31, 2013	Year ended December 31, 2012	Year ended December 31, 2011
KPMG Samjong Accounting Corp.	KPMG Samjong Accounting Corp.	Deloitte Anjin LLC

4.	Audit Opinion (Separate)


Period	Auditor’s opinion	Issues noted
Quarter ended March 31, 2013	-	-
Year ended December 31, 2012	Unqualified	-
Year ended December 31, 2011	Unqualified	-

5.	Remuneration for Independent Auditors for the Past Three Fiscal Years

A.	Audit Contracts

(Unit: in thousands of Won / hour)

Fiscal Year

Auditors

Contents

Fee

Total
number of
hours
accumulated
for the fiscal
year

Year ended December 31, 2013

KPMG Samjong Accounting Corp.

Semi-annual review

1,250,000

17,796

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Year ended December 31, 2012

KPMG Samjong Accounting Corp.

Semi-annual review

1,220,000

19,583

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Year ended December 31, 2011

Deloitte Anjin LLC

Semi-annual review

1,364,000

14,033

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

B.	Non-Audit Services Contract with External Auditors

(Unit: in thousands of Won)

Period

Contract date

Service provided

Service
duration

Fee

Quarter ended March 31, 2013

N/A

Year ended December 31, 2012

N/A

Year ended December 31, 2011

April 11, 2011

Tax consulting

30 days

45,000

April 28, 2011

Tax consulting

30 days

45,000

6.	Change of Independent Auditors

Starting from 2012, the Company changed its independent auditors to KPMG Samjong Accounting Corp. from Deloitte Anjin LLC due to the expiration of the audit contract with Deloitte Anjin LLC.

IV.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Omitted in quarterly and half-year reports in accordance with Korean disclosure rules.

V.	CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS AND AFFILIATED COMPANIES

1.	Board of Directors

A.	Overview of the Composition of the Board of Directors

The Company’s board of directors (the “Board of Directors”) is composed 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.


(As of May 8, 2013)
The number of persons	Inside directors	Independent directors
8	Sung Min Ha, Dae Sik Cho, Dong Seob Jee	Rak Yong Uhm, Dae Shick Oh, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho

At the 29th General Shareholders’ Meeting held on March 22, 2013, Dae Sik Cho was elected as an inside director and Dae Shick Oh was elected as an independent director and a member of the audit committee.

B.	Significant Activities of the Board of Directors


Meeting	Date	Agenda	Approval
351th (the 1st meeting of 2013)	February 7, 2013	- Financial statement as of and for the year ended December 31, 2012	Approved as proposed
		- Annual business report as of and for the year ended December 31, 2012	Approved as proposed
		- Bond offering	Approved as proposed
		- Report of internal accounting management	-
		- Report for subsequent events following 4Q 2012	-
352th (the 2nd meeting of 2013)	February 21, 2013	- 2013 transaction of goods, services and assets with SK Planet	Approved as proposed
		- Convocation of the 29th annual general meeting of shareholders	Approved as proposed
		- Result of internal accounting management system evaluation	-
353th (the 3rd meeting of 2013)	March 22, 2013	- Election of chairman of the board of directors	Approved as proposed
		- Election of committee members	Approved as proposed
		- Financial transactions with affiliated company (SK Securities)	Approved as proposed
354th (the 4rd meeting of 2013)	April 25, 2013	- Sublease transaction of advisor offices	Approved as proposed
		- Budget and operation plans for 2013 SUPEX conferences	Approved as proposed
		- Report for the period after the first quarter of 2013	-

*	The line items that do not show approval are for reporting purposes only.

C.	Committees within Board of Directors

(1)

Committee Structure (As of May 8, 2013)

Compensation Review Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
5	-	Rak Yong Uhm, Dae Shick Oh, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho	Review CEO remuneration system and amount.

*	The Compensation Review Committee is a committee established by the resolution of the Board of Directors.

Capex Review Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
5	Dong Seob Jee	Rak Yong Uhm, Dae Shick Oh, Jay Young Chung, Jae Ho Cho	Review major investment plans and changes thereto.

*	The Capex Review Committee is a committee established by the resolution of the Board of Directors.

Corporate Citizenship Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
5	Dong Seob Jee	Rak Yong Uhm, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho	Review guidelines on “Corporate Social Responsibility” (“CSR”) programs, etc.

*	The Corporate Citizenship Committee is a committee established by the resolution of the Board of Directors.

Independent Director Nomination Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
3	Sung Min Ha	Dae Shick Oh, Hyun Chin Lim	Nomination of independent directors

*	Under the Korean Commercial Code, a majority of the members of the Independent Director Nomination Committee should be independent directors.

Audit Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
4	-	Dae Shick Oh, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho	Review financial statements and supervise independent audit process, etc.

*	The Audit Committee is a committee established under the provisions of the Articles of Incorporation and Korean Commercial Code.

2.	Audit System

The Company’s Audit Committee consists of four independent directors, Dae Shick Oh, Hyun Chin Lim, Jae Ho Cho and Jay Young Chung.

Major activities of the Audit Committee are as follows.


Meeting	Date	Agenda	Approval	Remarks
The 1st meeting of 2013	February 6, 2013	• Construction of mobile phone facilities for 2013	Approved as proposed
		• Construction of transmission network facilities for 2013	Approved as proposed
		• Evaluation of internal accounting controls based on the opinion of the members of the audit committee	Approved as proposed
		• Review business and audit results for the second half of 2012 and business and audit plan for 2013	-
		• Report of internal accounting management system	-
The 2nd meeting of 2013	February 20, 2013	• Report on 2012 IFRS audit	-
		• Report on review of 2012 internal accounting management system	-
		• Evaluation of internal accounting management system operation	Approved as proposed
		• Agenda and document review for the 29th annual general meeting of shareholders	Approved as proposed
		• Auditor’s report for fiscal year 2012	Approved as proposed
		• 2013 IT SM contract	Approved as proposed
The 3rd meeting of 2013	March 21, 2013	• Transactions with SK C&C in the second quarter of 2013	Approved as proposed
The 3rd meeting of 2013	March 21, 2013	• Plans for financial transactions with affiliated company (SK Securities)	-
The 4th meeting of 2013	April 24, 2013	• Election of chairman	Approved as proposed
		• Purchase of maintenance, repair and operations items from Happynarae Co., Ltd.	Approved as proposed
		• Service contract for SK Telecom China Holdings Co., Ltd.	Approved as proposed
		• Remuneration for outside auditor for fiscal year 2013	Approved as proposed
		• Outside auditor service plan for fiscal year 2013	Approved as proposed
		• Audit plan for fiscal year 2013	-

*	The line items that do not show approval are for reporting purposes only.

3.	Shareholders’ Exercise of Voting Rights

A.	Voting System and Exercise of Minority Shareholders’ Rights

Pursuant to the Articles of Incorporation as shown below, the cumulative voting system was first introduced in the General Meeting of Shareholders 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 12^th 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.

4.	Affiliated Companies

A.	Capital Investments between Affiliated Companies

(As of March 31, 2013)


Investing company	Invested companies
Investing company	SK Corporation			SK Innovation			SK Energy			SK Global Chemical			SK Telecom			SK Networks			SKC			SK E&C			SK Shipping			SK Securities
SK Holdings					33.4	%								25.2	%		39.1	%		42.5	%		40.0	%		83.1	%
SK Innovation								100.0	%		100.0	%
SK Energy
SK Global Chemical
SK Networks
SK Telecom
SK Chemicals																	0.02	%					25.4	%
SKC
SK E&C
SK Gas
SK C&C		31.8	%																										10.0	%
SK E&S
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet
SK Hynix
Ko-one Energy
SK Seentec

Total affiliated companies		31.8	%		33.4	%		100.0	%		100.0	%		25.2	%		39.2	%		42.5	%		65.4	%		83.1	%		10.0	%


	Invested companies
Investing company	SK E&S			SK Gas			DOPCO			CCE			YN Energy			Ko-one Energy Service			SK Sci-tech			SK Telink			Busan City Gas			Jeonnam City Gas
SK Holdings		94.1	%
SK Innovation								41.0	%
SK Energy
SK Global Chemical
SK Networks
SK Telecom																							83.5	%
SK Chemicals					45.5	%														50.0	%
SK C
SK E&C
SK Gas
SK C&C		5.9	%
SK E&S											100.0	%		100.0	%		99.7	%								40.0	%		100.0	%
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet
SK Hynix
Ko-one Energy Service
SK Seentec					10.0	%

Total affiliated companies		100.0	%		55.5	%		41.0	%		100.0	%		100.0	%		99.7	%		50.0	%		83.5	%		40.0	%		100.0	%


	Invested companies
Investing company	Gangwon City Gas			JBES			M & Service			SK Wyverns			Infosec			Happynarae (formerly, MRO Korea)			SK Telesys			Encar network			F&U Credit Info			Hanam Energy Service
SK Holdings
SK Innovation																	42.5	%
SK Energy
SK Global Chemical
SK Networks
SK Telecom											100.0	%					42.5	%								50.0	%
SK Chemicals
SK C																				50.0	%
SK E&C
SK Gas																	5.0	%
SK C&C														100.0	%		5.0	%					100.0	%
SK E&S		100.0	%		100.0	%
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet								100.0	%
SK Hynix
Ko-one Energy Service																													100.0	%
SK Seentec

Total affiliated companies		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		95.0	%		50.0	%		100.0	%		50.0	%		100.0	%


	Invested companies
Investing company	SK D&D			Natruck			Loen Entertainment			Speed Motor			SK Mobile Energy			SK Petrochemical			SK Communications			SK Planet			SKC Air Gas			SKN service
SK Holdings
SK Innovation														100.0	%
SK Energy					100.0	%
SK Global Chemical																	100.0	%
SK Networks											100.0	%																	86.5	%
SK Telecom																							100.0	%
SK Chemicals
SK C																										80.0	%
SK E&C		40.4	%
SK Gas
SK C&C
SK E&S
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet								67.6	%											64.6	%
SK Hynix
Ko-one Energy Service
SK Seentec

Total affiliated companies		40.4	%		100.0	%		67.6	%		100.0	%		100.0	%		100.0	%		64.6	%		100.0	%		80.0	%		86.5	%


	Invested companies
Investing company	Commerce Planet			Real Vest			SKC Solmics Co., Ltd.			SK Broadband			LC&C			PMP			PS&Marketing			UBcare			PyongTaek Energy Service			Wirye Energy Service
SK Holdings
SK Innovation
SK Energy
SK Global Chemical
SK Networks														79.6	%
SK Telecom											50.6	%								100.0	%
SK Chemicals																							44.0	%
SK C								46.3	%
SK E&C					100.0	%
SK Gas
SK C&C
SK E&S																	100.0	%								100.0	%		71.0	%
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet		100.0	%
SK Hynix
Ko-one Energy Service
SK Seentec

Total affiliated companies		100.0	%		100.0	%		46.3	%		50.6	%		79.6	%		100.0	%		100.0	%		44.0	%		100.0	%		71.0	%


	Invested companies
Investing company	Jeju United FC			MKS Guarantee			SK Forest			SK Lubricants			MAD Smart			Bizen			SK HY ENG			HYSTEC			Silicon File			Ami Power
SK Holdings								100.0	%
SK Innovation											100.0	%
SK Energy		100.0	%
SK Global Chemical
SK Networks
SK Telecom
SK Chemicals
SK C
SK E&C
SK Gas
SK C&C																	99.0	%
SK E&S
SK Communications
SK Broadband
SK D&D					100.0	%
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet														100.0	%
SK Hynix																				100.0	%		100.0	%		27.9	%		100.0	%
Ko-one Energy Service
SK Seentec

Total affiliated companies		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		99.0	%		100.0	%		100.0	%		27.9	%		100.0	%


	Invested companies
Investing company	SK Seentec			Daejeon Pure Water			Gwangju Pure Water			SKW			Television Media Korea			Network O&S			Service Ace			Service Top			SK Pinx			U base Manufacturing Asia
SK Holdings
SK Innovation
SK Energy
SK Global Chemical
SK Networks																										100.0	%
SK Telecom																	100.0	%		100.0	%		100.0	%
SK Chemicals		100.0	%
SK C											65.0	%
SK E&C					32.0	%		42.0	%
SK Gas
SK C&C
SK E&S
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion																													100.0	%
SK Lubricants
SK Shipping
SK Planet														51.0	%
SK Hynix
Ko-one Energy Service
SK Seentec

Total affiliated companies		100.0	%		32.0	%		42.0	%		65.0	%		51.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%


	Invested companies
Investing company	SKSM			Ulsan Aromatics			SK Biofarm			SK Hynix			SKC Lighting			Gimcheon Energy			SK Continental E-Motion
SK Holdings								100.0	%
SK Innovation
SK Energy
SK Global Chemical					50.0	%
SK Networks
SK Telecom											21.1	%
SK Chemicals
SK C														72.2	%
SK E&C
SK Gas
SK C&C
SK E&S																	50.0	%
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion																				100.0	%
SK Lubricants
SK Shipping		100.0	%
SK Planet
SK Hynix
Ko-one Energy Service
SK Seentec

Total affiliated companies		100.0	%		50.0	%		100.0	%		21.1	%		72.2	%		50.0	%		100.0	%

*	Change in company names:

•

Ko-one Energy Service changed its name from Daehan City Gas

•

Ulsan Aromatics changed its name from Arochemi

•

Happynarae changed its name from MRO Korea

•

Bizen changed its name from Telsk

•

SK Hystec changed its name from Hystec

•

SK HY ENG changed its name from Hynix Engineering

VI.

SHAREHOLDERS

1.	Shareholdings of the Largest Shareholder and Related Persons

A.	Shareholdings of the Largest Shareholder and Related Persons


(As of March 31, 2013)										(Unit: Shares, %)
			Number of shares owned and ownership ratio
			Beginning of Period				End of Period
Name	Relationship	Type of share	Number of shares		Ownership ratio		Number of shares		Ownership ratio
SK Holdings Co., Ltd.	Largest Shareholder	Common share		20,363,452		25.22		20,363,452		25.22
Tae Won Chey	Officer of affiliated company	Common share		100		0.00		100		0.00
Shin Won Chey	Officer of affiliated company	Common share		2,000		0.00		2,000		0.00
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		0		0.00

Total-		Common share		20,366,490		25.22		20,366,290		25.22

*	Resigned on January 31, 2012.

B.	Overview of the Largest Shareholder

SK Holdings Co., Ltd. (“SK Holdings”) is a holding company and as of March 31, 2013, has nine subsidiaries: SK Innovation Co., Ltd., SK Telecom Co., Ltd., SK Networks Co., Ltd., SKC Co., Ltd., SK Shipping Co., Ltd., SK E&C Co., Ltd., SK E&S Co., Ltd., SK Biofarm Co., Ltd. and SK Forest Co., Ltd.

Details of the subsidiaries of SK Holdings are as follows:


								(Unit: in millions of Won)
Affiliates	Share Holdings			Book Value (million Won)		Industry	Description
SK Innovation Co., Ltd.		33.4	%		3,944,657	Energy and Petrochemical		Publicly Listed
SK Telecom Co., Ltd.		25.2	%		3,091,125	Telecommunication		Publicly Listed
SK Networks Co., Ltd.		39.1	%		1,165,759	Trading, Energy Sale		Publicly Listed
SKC Co., Ltd.		42.5	%		254,632	Synthetic Resin Manufacturing		Publicly Listed
SK E&C Co., Ltd.		40.0	%		485,171	Construction		Privately Held
SK Shipping Co., Ltd.		83.1	%		607,643	Ocean Freight		Privately Held
SK E&S Co., Ltd.		94.1	%		1,026,307	Gas Company Holdings and Power Generation		Privately Held
SK Biofarm Co., Ltd.		100.0	%		228,702	Biotechnology		Privately Held
SK Forest Co., Ltd.		100.0	%		60,200	Forestry and landscaping		Privately Held

*	The above share holdings are based on common stock holdings as of March 31, 2013.

SK Holdings 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 Holdings 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, 2012. SK Innovation 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.

(As of March 31, 2013)

(Unit: Shares, %)

Largest Shareholder

Date of the change in
the largest
shareholder/
Date of change in
shareholding

Shares Held

Holding
Ratio

Remarks

SK Corporation

March 11, 2011

18,750,490

23.22

Man Won Jung, SK Telecom’s CEO, resigned

Shin Bae Kim, SK C&C’s CEO, resigned

April. 5, 2011

18,749,990

23.22

Dal Sup Shim, an Independent Director, disposed 500 shares

July 8, 2011

18,749,990

23.22

Shin Won Chey, SKC’s Chairman, purchased 500 shares

August 5, 2011

18,750,490

23.22

Shin Won Chey, SKC’s Chairman, purchased 500 shares

August 23, 2011

18,751,490

23.22

Shin Won Chey, SKC’s Chairman, purchased 500 shares

December 21, 2011

20,366,490

25.22

SK Holdings purchased 1,615,000 shares

January 31, 2012

20,366,290

25.22

Retirement of Bang Hyung Lee, a former officer of an affiliated company

*	Shares held are the sum of shares held by SK Holdings and its related parties.

3.	Distribution of Shares

A.	Shareholders with ownership of 5% or more and others


(As of December 31, 2012)			(Unit: shares, %)

Rank	Name (title)	Common share
Rank	Name (title)	Number of shares		Ownership ratio
1	Citibank ADR		19,377,247		24.00
2	SK Holdings		20,363,452		25.22
3	SK Telecom		11,050,712		13.69
4	National Pension Service*		4,928,904		6.10
Shareholdings under the Employee Stock Ownership Program**			189,954		0.24

*	Shares held as of February 6, 2013.

**	Shares held as of March 31, 2013.

B.	Shareholder Distribution


(As of December 31, 2012)		(Unit: shares, %)

Classification	Number of shareholders		Ratio (%)			Number of shares		Ratio (%)			Remarks
Total minority shareholders *		23,891		99.78	%		25,939,500		32.12	%		—

*	Defined as shareholders whose shareholding is less than a hundredth of the total issued and outstanding shares.

4.	Share Price and Trading Volume in the Last Six Months

A.	Domestic Securities Market

(Unit: Won, shares)


Types		March 2013		February 2013		January 2013		December 2012		November 2012		October 2012
Common stock	Highest		185,500		181,500		173,500		161,000		156,500		159,500
	Lowest		176,500		170,000		150,000		151,500		148,000		145,500
Monthly transaction volume			4,078,714		5,273,834		4,963,152		3,490,158		3,941,628		3,423,464

B.	Foreign Securities Market


New York Stock Exchange									(Unit: US$, ADR)

Types		March 2013		February 2013		January 2013		December 2012		November 2012		October 2012
Depository Receipt	Highest		18.69		18.45		17.98	16.48			15.94		16.19
	Lowest		17.63		17.14		15.69	15.40			15.09		14.48
Monthly transaction volume			26,144,041		45,507,772		42,451,234	26,702,427			34,396,407		24,874,194

VII.

EMPLOYEES AND DIRECTORS

1.	Employees


(As of March 31, 2013)		(Unit: persons, in thousands of Won)

Classification	Number of employees								Average service year		Aggregate wage for the year ended December 31, 2012		Average wage per person		Remarks
Classification	Regular employees		Contract employees		Others		Total		Average service year				Average wage per person		Remarks
Male		3,516		54		—		3,570		13		200,013,197		55,948		—
Female		528		66		—		594		11		24,138,286		39,964		—

Total		4,044		120		—		4,164		13		224,151,483		53,638		—

* Excludes retirement and severance payments to employees whose employment was terminated before the end of the respective employment periods.

2.	Compensation of Directors

A.	Amount Approved at the Shareholders’ Meeting


		(Unit: in millions of Won)

Classification	Number of Directors		Aggregate Amount Approved
Directors		8		12,000

B.	Amount Paid


(As of March 31, 2013)		(Unit: in millions of Won)

Classification	Number of Directors		Aggregate Amount Paid		Average Amount Paid Per Director
Insider Directors		3		1,861		620
Independent Directors*		1		23		23
Audit Committee Members		4		91		23

Total		8		1,975		247

*	Excludes independent directors who are Audit Committee members.

VIII.

RELATED PARTY TRANSACTIONS

1.	Loans to the Largest Shareholder and Related Persons

None

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

A.	Investment and Disposition of Investment

None.

B.	Transfer of Assets

None.

3.	Related Party Transactions (excluding Transactions with the Largest Shareholder and Related Persons)

A.	Provisional Payment and Loans (including loans on marketable securities)

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Account

category

Change details

Accrued
interest

Remarks

Beginning

Increase

Decrease

Ending

Midus and others

Agency

Long-term and short-term loans

89,491

99,138

91,232

97,397

—

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Account

category

Change details

Accrued
interest

Remarks

Beginning

Increase

Decrease

Ending

Daehan Kanggun BcN Co., Ltd.

Investee

Long-term loans

22,102

—

22,102

—

IX.

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

None.

B.	Summary Minutes of the General Meeting of Shareholders


Date	Agenda			Resolution
27^th Fiscal Year Meeting of Shareholders (March 11, 2011)	1.	Approval of the financial statements for the year ended December 31, 2010		Approved (Cash dividend, Won 8,400 per share)
	2.	Approval of Remuneration Limit for Directors		Approved
	3.	Amendment to Company Regulation on Executive Compensation		Approved (Won 12 billion)
	4.	Election of Directors		Approved (Sung Min Ha, Jin Woo So)
		•	Election of inside directors	Approved (Rak Young Uhm, Jay Young Chung, Jae Ho Cho)
		•	Election of independent directors	Approved (Rak Young Uhm, Jay Young Chung, Jae Ho Cho)
		•	Election of independent directors as Audit Committee member	Approved (Jay Young Chung, Jae Ho Cho)
1^st Extraordinary Meeting of Shareholders (August 31, 2011)	1.	Approval of the Spin-off Plan		Approved (Spin-off of SK Planet)
	2.	Election of Directors		Approved (Jun Ho Kim)
28^th Fiscal Year Meeting of Shareholders (March 23, 2012)	1.	Approval of the financial statements for the year ended December 31, 2011		Approved (Cash dividend, Won 8,400 per share)
	2.	Amendment to Articles of Incorporation		Approved
	3.	Election of Directors		Approved (Young Tae Kim)
		•	Election of inside directors	Approved (Dong Seob Jee)
		•	Election of inside directors	Approved (Hyun Chin Lim)
		•	Election of independent directors
	4.	Election of an independent director as Audit Committee member		Approved (Hyun Chin Lim)
	5.	Approval of Remuneration Limit for Directors		Approved (Won 12 billion)
29^th Fiscal Year Meeting of Shareholders (March 22, 2013)	1.	Approval of the financial statements for the year ended December 31, 2012		Approved (Cash dividend, Won 8,400 per share)
	2.	Amendments to Articles of Incorporation		Approved
	3.	Election of Directors		Approved (Dae Sik Cho)
		•	Election of an inside director	Approved (Dae Shick Oh)
		•	Election of an independent director
	4.	Election of an independent director as Audit Committee member		Approved (Dae Shick Oh)
	5.	Approval of Remuneration Limit for Directors		Approved (Won 12 billion)

2.	Contingent Liabilities

[SK Telecom]

A.	Material Legal Proceedings

(1)

Claim for Copyright License Fees regarding “Coloring” Services

On May 7, 2010, Korea Music Copyright Association (“KOMCA”) filed a lawsuit with the court demanding that the Company pay KOMCA license fees for the Company’s “Coloring” services. The court rendered a judgment against the Company ordering the Company to pay Won 570 million to KOMCA, which was affirmed by the appellate court on October 26, 2011. The Company appealed to the Supreme Court on November 8, 2011. The Company plans to vigorously defend itself in the Supreme Court by supplementing legal analysis relating to the interpretation of legal actions. While the Company does not expect this litigation to have an immediate impact on its business or results of operation because the judgment amount is Won 570 million and the final outcome of the litigation has not been decided, the Company may be required to pay increased on-going license fees in the future if the final judgment is rendered against it.

* Actual impact on the Company’s business and financial condition from the litigation may be different from the Company’s expectation stated above.

B. Other Matters

(1)

Pledged Assets and Covenants

SK Broadband has provided “geun” mortgage amounting to Won 15.2 billion to others, including Ilsan Guksa, on a part of its buildings in connection with the leasing of the buildings.

In 2011, PS&Marketing, a consolidated subsidiary of the Company, entered into a loan agreement to borrow up to Won 40 billion of working capital from Shinhan Bank. In connection with the loan agreement, it pledged Won 52 billion of its inventories to Shinhan Bank as collateral.

(2)

Payment Guarantee by the Company

The Company is participating in the tactical aeronautics project of the Defense Acquisition Program Administration of Korea (the “DAPA”), together with the Joint Defense Corporation. The Company has guaranteed the payment of US$3,897,196 that the DAPA has prepaid to the Joint Defense Corporation.

[SK Broadband]

A. Material Legal Proceedings

(1)

SK Broadband as the Plaintiff


	(Unit: in thousands of Won)

Description of Proceedings	Date of Commencement of Proceedings	Amount of Claim		Status
Claim for Cancellation of Korea Fair Trade Commission’s Penalty Reassessment	September 2009		1,810,000	Pending before Supreme Court
Claim relating to Gangamgu District Office Cable-Burying Project	March 2010		345,271	Pending before Supreme Court
Administrative Proceeding relating to Gangnamgu District Office	April 2010		703,440	Pending before Administrative Court
Damages Claims against Golden Young and Others	April 2011		454,267	Pending before District Court
Damages Claim relating to Hyundai Construction	December 2010		561,282	Pending before Appellate Court
Other claims and proceedings	—		2,000

Total	—		3,876,261	—

(2)

SK Broadband as the Defendant


	(Unit: in thousands of Won)

Description of Proceedings	Date of Commencement of Proceedings	Amount of Claim		Status
Damage Claim by Sun Technology and One Other	October 2011		1,006,429	Pending before Appellate Court
Damages Claim from Jin Man Cho and One Other	January 2011		200,000	Pending before Appellate Court
Damages Claim by Mac Telecom and Five Other Companies	January 2012		606,000	Pending before District Court
Damages Claim by On-nuri Co., Ltd.	December 2011		101,000	Pending before District Court
Damages Claim by Haein Networks	March 2013		101,000	Pending before District Court
Other claims and proceedings	—		166,584	—

Total	—		2,181,013	—

The management believes that the final results of the litigations listed above would not have a material impact on the company’s financial statements. In addition, in 2011, SK Broadband partly lost in a litigation relating to the leak of personal information at the district court, which ordered SK Broadband to pay damages of Won 5,459 million (out of the plaintiffs’ claims of Won 24,689 million), and recognized such damage order as other accounts payable.

[SK Communications]

A. Material Legal Proceedings

As of March 31, 2013, the aggregate amount of claims was Won 6.1 billion. The management cannot reasonably forecast the outcome of the pending cases.

B. Other Contingent Liabilities

The material payment guarantees provided by third parties to SK Communications as of March 31, 2013 are set forth in the table below.


	(Unit: in thousands of Won)

Financial Institution	Guarantee	Amount
Seoul Guarantee Insurance Company	Prepaid coverage payment guarantee		700,000
Seoul Guarantee Insurance Company	Provisional deposit guarantee insurance for bonds		1,068,051
Seoul Guarantee Insurance Company	Contractual payment guarantee		514,161

[SK Planet]

A. Material Legal Proceedings

As of March 31, 2013, there were two pending proceedings with SK Planet as the defendant and the aggregate amount of the claims was Won 1.2 billion. The management cannot reasonably forecast the outcome of the pending cases and no amount in connection with these proceedings were recognized on the Company’s financial statements.

3.	Status of sanctions, etc.

[SK Telecom]

On December 2, 2010, the Korea Communications Commission imposed on the Company a fine of Won 6.2 billion and issued a correctional order in a case relating to the obstruction of subscribers’ utilization of wireless Internet services. The Company paid the fine and completed the improvement of the procedures in consultation with the Korea Communications Commission by March 2011.

On September 19, 2011, the Korea Communications Commission imposed on the Company a fine of Won 6.86 billion and issued a correctional order for providing discriminatory subsidy to subscribers. The Company paid the fine and completed the improvement of the procedures in consultation with the Korea Communications Commission by January 2012.

On April 22, 2011, the Company received a correctional order from the Fair Trade Commission of Korea for violation of Article 21 of the Electronic Commerce Act and was imposed a fine of Won 5 million. The Company paid the fine and filed a suit disputing the order of the Fair Trade Commission. The suit is currently pending.

On November 11, 2011, the Company received a correctional order from the Fair Trade Commission of Korea for violation of Article 23 of the Fair Trade Act relating to the transfer of patented technology necessary for the supply of relay facilities. The Company has corrected the procedures before receiving the correctional order.

On March 14, 2012, the Company received a correctional order from the Fair Trade Commission of Korea for an alleged violation of Article 23 of the Fair Trade Act relating to the handset subsidy practice and distribution of handsets and was imposed a fine of Won 21,928 million. The Company appealed the order and filed a suit with the administrative court. The suit is currently pending.

On February 6, 2012, the Company received three penalty points and was imposed a fine of Won 3 million from the Korea Exchange for a violation of Article 35 of Korea Exchange’s disclosure rules. The Company paid the fine and has been taking efforts to prevent a repetitive violation.

On June 21, 2012, the Company received a correctional order from the Korea Communications Commission in connection with its decision on whether the Company had violated regulations related to the safeguarding of location information. The Company completed the improvement of the procedures in consultation with the Korea Communications Commission by December 2012.

On July 4, 2012, the Company received a correctional order and a fine of Won 24,987 million from the Fair Trade Commission of Korea for alleged violation of Article 23 of the Fair Trade Act relating to the payment of system management and operation fees. The Company appealed the order and filed a suit with the administrative court. On September 12, 2012, the Company received a formal written letter from the Fair Trade Commission of Korea with a corrected fine of Won 25,042 million, which also includes the fine for transactions in the first half of 2012.

On December 24, 2012, the Korea Communications Commission imposed on the Company a fine of Won 6.89 billion, imposed a suspension on acquiring new subscribers from January 31, 2013 to February 21, 2013 and issued a correctional order for providing discriminatory subsidiaries to subscribers. The Company paid the fine and completed the improvement of the procedures in consultation with the Korea Communications Commission by March 2013.

On January 11, 2013, the Company received a correctional order and a fine of Won 100 million from the Fair Trade Commission of Korea for alleged violation of Article 23 of the Fair Trade Act relating to the Company’s transactions with its distribution network. The Company paid the fine by May 10, 2013.

On March 14, 2013, the Korea Communications Commission imposed on the Company a fine of Won 3.14 billion and issued a correctional order in a case for providing discriminatory subsidiaries to subscribers. The Company paid the fine and completed the improvement of the procedures in consultation with the Korea Communications Commission by April 2013.

Certain former executive officers of the Company were acquitted in district court with respect to certain of the Company’s past transactions. An appeal has been filed at the applicable high court, where the case is currently pending.

[SK Broadband]

(1) Violation of Accounting Rules

•

Date: December 13, 2012

•

Subject Company: SK Broadband

•

Sanction: SK Broadband was imposed a fine of Won 39 million from the Korea Communications Commission.

•

Reason and the relevant law: Business report for 2011 violated accounting rules under Article 49 of the Telecommunication Business Act.

•

Status of Implementation: Paid the fine.

•

Company’s plan: Will improve accounting management system.

(2) Violation of the Telecommunications Business Act

•

Date: May 18, 2012

•

Subject Company: SK Broadband

•

Sanction: SK Broadband received a correctional order and a fine of Won 253 million

•

Reason and relevant law: Violation of Article 50, Paragraph 1, Number 5 of the Telecommunications Business Act and Article 50, Paragraph 1 of the related Enforcement Decree for offering discounts outside the terms and conditions of the subscription agreement to certain subscribers and thereby discriminating against certain subscribers

•

Status of implementation: Paid the fine, ceased the prohibitive practice, disclosed receiving the correctional order in a newspaper advertisement and changed business practice to prevent reoccurrence.

•

Company’s plan: Continuous management of the company’s distribution network and improve the company’s distribution structure.

(3) Violation of Accounting Rules

•

Date: January 20, 2012

•

Subject Company: SK Broadband

•

Sanction: SK Broadband was imposed a fine of Won 54 million from the Korea Communications Commission.

•

Reason and the Relevant Law: Business report for 2010 violated accounting rules under Article 49 of the Telecommunication Business Act.

•

Status of Implementation: Paid the fine.

•

Company’s Plan: Will improve accounting management system.

(4) Violation of the Telecommunication Business Act

•

Date: November 23, 2011

•

Subject Company: SK Broadband

•

Sanction: SK Broadband was imposed a fine of Won 30 million from the Korea Communications Commission.

•

Reason and the Relevant Law: Violated Telecommunication Business Act by allocating “060” number without prior review and charging fees for the service usage.

•

Status of Implementation: Paid the fine, stopped the prohibited practice, improved operating procedures and reported the results.

•

Company’s Plan: Will improve operating procedures.

(5) Violation of the Act on Facilitation of the Use of Information Network and Protection of Information

•

Date: July 14, 2011

•

Subject: SK Broadband and a former officer of SK Broadband

•

Sanction: SK Broadband was imposed a fine of Won 15 million and the former officer was imposed a fine of Won 5 million.

•

Reason and the Relevant Law: Violated Articles 24 and 62 of the Act on Facilitation of the Use of Information Network and Protection of Information by providing subscribers’ personal information to telemarketers without subscribers’ consents.

•

Status of Implementation: Paid the fine.

•

Company’s Plan: Provide education to officers and employees and strengthen internal regulations.

(6) Violation of the Telecommunication Business Act

•

Date: February 21, 2011

•

Subject Company: SK Broadband

•

Sanction: SK Broadband was imposed a correctional order and a fine of Won 3.2 billion from the Korea Communications Commission.

•

Reason and the Relevant Law: Improperly discriminated subscribers with respect to the fee reduction in the process of acquiring high-speed Internet subscribers. Violated Article 50 of the Telecommunication Business Act and Article 42 of the Enforcement Decree.

•

Status of Implementation: Paid the fine, stopped the prohibited practice, published the sanction on newspapers, improved operating procedures and amended the terms of services.

•

Company’s Plan: Continue to monitor marketing networks, improve marketing procedures, distribute incentive items directly and reduce incentive items.

4.	Important Matters That Occurred After March 31, 2013

[SK Telecom]

(1) Bond offering

On April 23, 2013, the Company issued two tranches of fixed-rate unsecured bonds in the principal amounts of Won 230 billion (with an annual interest rate of 3.03% and maturity date of April 23, 2023) and Won 130 billion (with an annual interest rate of 3.22% and maturity date of April 23, 2033).

[SK Planet]

(1) Merger

On April 22, 2013, the board of directors of SK Planet resolved to merge MAD Smart into SK Planet to combine the companies’ ICT capacities and increase its competitiveness in the platform business. The merger will be effective on June 1, 2013. In connection with this merger, SK Planet will not issue any new shares.

5.	Use of Proceeds

A.	Use of Proceeds from Public Offerings

•

Not applicable.

B.	Use of Proceeds from Private Offerings

(Unit: In millions of Won)

Classification

Closing Date

Proceeds

Planned Use of Proceeds

Actual Use

of Proceeds

Reasons
for
Change

Convertible Bonds

April 7, 2009

437,673

Refinancing of convertible bonds issued in May 2004

Refinancing and working capital

—

SK TELECOM CO., LTD.

Condensed Consolidated Interim Financial Statements

(Unaudited)

March 31, 2013 and 2012

(With Independent Auditors’ Review Report Thereon)

Contents


	Page

Independent Auditors’ Review Report		1

Condensed Consolidated Statements of Financial Position		3

Condensed Consolidated Statements of Income		5

Condensed Consolidated Statements of Comprehensive Income		6

Condensed Consolidated Statements of Changes in Equity		7

Condensed Consolidated Statements of Cash Flows		8

Notes to the Condensed Interim Consolidated Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To The Board of Directors and Shareholders

SK Telecom Co., Ltd.:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of SK Telecom Co., Ltd. and its subsidiaries (the “Group”), which comprise the condensed consolidated statement of financial position as of March 31, 2013, the related condensed consolidated statements of income, comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2013 and 2012 and notes, comprising a summary of significant accounting policies and other explanatory information.

We did not review the financial statements of SK Broadband Co., Ltd., a domestic subsidiary, and an associate, whose financial statements constitute 19.6% of the Group’s consolidated total assets as of March 31, 2013 and 11.9% (2012: 15.2%) of the Group’s consolidated operating revenue for the three-month period ended March 31, 2013. Other auditors reviewed those financial statements and our report, insofar as it relates to the amounts included for these entities, is based solely on the reports of other auditors.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034, ‘Interim Financial Reporting’, and for such internal controls as management determines necessary to enable the preparation of condensed consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews and the reports of other auditors, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared fairly, in all material respects, in accordance with K-IFRS No.1034 ‘Interim Financial Reporting’.

Highlights

As discussed in note 35, during the three-month period ended June 30, 2012 the Group decided to discontinue the broadcasting business operation due to the accumulating losses resulting from the continuing decline in satellite digital multimedia broadcasting subscribers. The Group has presented operating results of this broadcasting business as loss from discontinued operation and accordingly restated the comparative information of the statement of income for the three-month period ended March 31, 2012.

As discussed in note 3 to the condensed consolidated interim financial statements, the Group adopted amendments to K-IFRS No.1001, ‘Presentation of Financial Statements’ from the interim period ended September 30, 2012 and separately presents operating income on the consolidated statements of income, which is calculated as operating revenue less operating expense. The Group applied this change in accounting policies retrospectively and accordingly restated the comparative information of the consolidated statement of income for the three-month period ended March 31, 2012.

Other matters

The statement of financial position of the Group as of December 31, 2012, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated February 22, 2013, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2012, presented for comparative purposes, is not different from that audited by us in all material respects.

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying condensed consolidated interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice.

KPMG Samjong Accounting Corp.

Seoul, Korea

May 10, 2013

This report is effective as of May 10, 2013, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Financial Position

As of March 31, 2013 and December 31, 2012


(In millions of won)	Note		March 31, 2013		December 31, 2012

Assets
Current Assets:
Cash and cash equivalents		10,31,32	￦	1,124,348		920,125
Short-term financial instruments		5,10,31,32		338,651		514,417
Short-term investment securities		8,10,31,32		188,454		60,127
Accounts receivable - trade, net		6,10,31,32,33		2,223,429		1,954,920
Short-term loans, net		6,31,32,33		93,306		84,908
Accounts receivable - other, net		6,31,32,33		697,239		582,098
Prepaid expenses		10		111,256		102,572
Derivative financial assets		21,31,32		13,677		9,656
Inventories, net		7,10,34		205,115		242,146
Assets classified as held for sale		9		2,143		775,556
Advanced payments and other		6,10,31,32		84,060		47,896

Total Current Assets				5,081,678		5,294,421


Non-Current Assets:
Long-term financial instruments		5,10,31,32		634		144
Long-term investment securities		8,10,31,32		990,700		953,712
Investments in associates		10,11		4,817,238		4,632,477
Property and equipment, net		10,12,34		9,577,989		9,712,719
Investment property, net		13		26,140		27,479
Goodwill		14		1,736,161		1,744,483
Intangible assets, net		10,15		2,653,778		2,689,658
Long-term loans, net		6,10,31,32		61,942		69,299
Long-term prepaid expenses		34		25,321		31,341
Guarantee deposits		5,6,10,31,32		238,697		236,242
Long-term derivative financial assets		21,31,32		84,062		52,992
Deferred tax assets		10,29		85,669		124,098
Other non-current assets		6,31,32		28,833		26,494

Total Non-Current Assets				20,327,164		20,301,138


Total Assets			￦	25,408,842		25,595,559

See accompany notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Financial Position, Continued

As of March 31, 2013 and December 31, 2012


(In millions of won)	Note		March 31, 2013			December 31, 2012

Liabilities and Equity
Current Liabilities:
Short-term borrowings		16	￦	160,000			600,245
Current portion of long-term debt, net		10,16,19,31,32		910,255			892,867
Accounts payable - trade		10,31,32		253,537			253,884
Accounts payable - other		10,31,32		2,203,409			1,811,038
Withholdings		10,31,32		834,663			717,170
Accrued expenses		10,31,32		979,105			890,863
Income tax payable		29		102,955			60,253
Unearned revenue		10		509,912			258,691
Provisions		18		208,427			287,307
Advanced receipts and other		10,31,32		124,845			108,272
Liabilities classified as held for sale		9		—			294,305

Total Current Liabilities				6,287,108			6,174,895


Non-Current Liabilities:
Debentures, net, excluding current portion		16,31,32		5,731,863			4,979,220
Long-term borrowings, excluding current portion		16,31,32		18,412			369,237
Long-term payables - other		17,31,32		565,599			715,508
Long-term unearned revenue				150,409			160,821
Finance lease liabilities		19,31,32		18,106			22,036
Defined benefit liabilities		10,20		102,342			86,521
Long-term derivative financial liabilities		21,31,32		28,802			63,599
Long-term provisions		18		76,667			106,561
Other non-current liabilities		31,32		61,834			62,379

Total Non-Current Liabilities				6,754,034			6,565,882


Total Liabilities				13,041,142			12,740,777


Equity
Share capital		1,22		44,639			44,639
Capital deficit and other capital adjustments		10,22,23		(351,978	)		(288,883	)
Retained earnings		24		11,890,283			12,124,657
Reserves		25		2,176			(25,636	)

Equity attributable to owners of the Parent Company				11,585,120			11,854,777
Non-controlling interests				782,580			1,000,005

Total Equity				12,367,700			12,854,782

Total Liabilities and Equity			￦	25,408,842			25,595,559

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Income

For the three-month periods ended March 31, 2013 and 2012


(In millions of won except for per share data)	Note		March 31, 2013			March 31, 2012

Continuing operations
Operating revenue:		4,33
Revenue			￦	4,112,637			3,969,711

Operating expense:		33
Labor cost				448,619			355,533
Commissions paid				1,450,758			1,414,443
Depreciation and amortization		4		640,839			580,260
Network interconnection				252,549			296,151
Leased line				113,629			118,935
Advertising				64,906			69,903
Rent				110,866			106,876
Cost of products that have been resold				320,673			271,436
Other operating expenses		26		299,165			256,880

Sub-total				3,702,004			3,470,417


Operating income		3,4		410,633			499,294

Finance income		4,28		37,450			68,205
Finance costs		4,28		(148,763	)		(110,954	)
Gains (losses) related to investments in subsidiaries, associates and joint ventures, net		4,9,11		161,325			(27,583	)
Other non-operating income		4,27		13,863			9,942
Other non-operating expenses		27		(46,602	)		(44,054	)

Profit before income tax				427,906			394,850

Income tax expense from continuing operations		29		(81,972	)		(84,576	)

Profit from continuing operations				345,934			310,274

Discontinued operation
Loss from discontinued operation, net of income taxes		35		—			(9,893	)

Profit for the period			￦	345,934			300,381

Attributable to:
Owners of the Parent Company			￦	354,154			306,424
Non-controlling interests				(8,220	)		(6,043	)

Earnings per share		30
Basic earnings per share			￦	5,081			4,397

Diluted earnings per share			￦	5,081			4,312


Earnings per share - Continuing operations		30
Basic earnings per share			￦	5,081			4,539

Diluted earnings per share			￦	5,081			4,454

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

For the three-month periods ended March 31, 2013 and 2012


(In millions of won)	Note		March 31, 2013			March 31, 2012

Profit for the period			￦	345,934			300,381

Other comprehensive income (loss)
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit obligations, net		20		(3,083	)		(3,691	)
Items that may be reclassified subsequently to profit or loss:
Net change in unrealized fair value of available-for-sale financial assets		25,28		(19,237	)		(14,232	)
Net change in other comprehensive income of investments in associates and joint ventures		25		48,964			6,435
Net change in unrealized fair value of derivatives		25,28		(7,450	)		(17,981	)
Foreign currency translation differences for foreign operations		25		6,208			(10,319	)

				25,402			(39,788	)

Total comprehensive income			￦	371,336			260,593


Total comprehensive income attributable to:
Owners of the Parent Company			￦	378,876			271,631
Non-controlling interests				(7,540	)		(11,038	)

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity

For the three-month periods ended March 31, 2013 and 2012


(In millions of won)
	Controlling Interest
	Share capital		Capital deficit and other capital adjustments			Retained earnings			Reserves			Sub-total			Non- controlling interests			Total equity
Balance, January 1, 2012	￦	44,639		(285,347	)		11,642,525			260,064			11,661,881			1,070,828			12,732,709
Cash dividends		—		—			(585,438	)		—			(585,438	)		(1,956	)		(587,394	)
Total comprehensive income
Profit (loss) for the period		—		—			306,424			—			306,424			(6,043	)		300,381
Other comprehensive loss		—		—			(4,169	)		(30,624	)		(34,793	)		(4,995	)		(39,788	)
Changes in ownership in subsidiaries		—		(5,341	)		—			—			(5,341	)		(8,577	)		(13,918	)

Balance, March 31, 2012	￦	44,639		(290,688	)		11,359,342			229,440			11,342,733			1,049,257			12,391,990


Balance, January 1, 2013		44,639		(288,883	)		12,124,657			(25,636	)		11,854,777			1,000,005			12,854,782
Cash dividends		—		—			(585,438	)		—			(585,438	)		(2,032	)		(587,470	)
Total comprehensive income
Profit (loss) for the period		—		—			354,154			—			354,154			(8,220	)		345,934
Other comprehensive income (loss)		—		—			(3,090	)		27,812			24,722			680			25,402
Business combination under common control		—		(61,854	)		—			—			(61,854	)		—			(61,854	)
Changes in ownership in subsidiaries		—		(1,241	)		—			—			(1,241	)		(207,853	)		(209,094	)

Balance, March 31, 2013	￦	44,639		(351,978	)		11,890,283			2,176			11,585,120			782,580			12,367,700

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the three-month periods ended March 31, 2013 and 2012


(In millions of won)	Note		March 31, 2013			March 31, 2012

Cash flows from operating activities:
Cash generated from operating activities
Profit for the period			￦	345,934			300,381
Adjustments for income and expenses		36		772,594			825,200
Changes in assets and liabilities related to operating activities		36		(393,493	)		144,288

Sub-total				725,035			1,269,869
Interest received				11,017			30,335
Dividends received				1			22,333
Interest paid				(86,091	)		(97,361	)
Income tax refund received (income tax paid)				24,186			(4,008	)

Net cash provided by operating activities				674,148			1,221,168


Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net				198,336			403,106
Collection of short-term loans				93,124			54,153
Proceeds from disposal of long-term financial instruments				106,679			—
Proceeds from disposal of long-term investment securities				10,811			28,780
Proceeds from disposal of investments in associates				1,250			1,850
Proceeds from disposal of property and equipment				3,083			2,137
Proceeds from disposal of intangible assets				742			1,792
Proceeds from disposal of assets held for sale				190,393			—
Collection of long-term loans				5,750			3,416
Decrease of deposits				3,110			3,378
Proceeds from disposal of other non-current assets				344			41
Proceeds from disposal of a subsidiary				7,221			88,602

Sub-total				620,843			587,255
Cash outflows for investing activities:
Increase in short-term investment securities, net				(19,996	)		(45,000	)
Increase in short-term loans				(99,312	)		(49,466	)
Increase in long-term loans				(522	)		(793	)
Increase in long-term financial instruments				—			(3	)
Acquisition of long-term investment securities				(1,003	)		(16,228	)
Acquisition of investments in associates and joint ventures				(22,128	)		(3,068,050	)
Acquisition of property and equipment				(522,415	)		(530,977	)
Acquisition of intangible assets				(16,948	)		(32,706	)
Increase in deposits				(6,501	)		(6,375	)
Increase in other non-current assets				(2,948	)		—
Acquisition of business, net of cash acquired				(94,805	)		(11,867	)

Sub-total				(786,578	)		(3,761,465	)

Net cash used in investing activities			￦	(165,735	)		(3,174,210	)

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Cash Flows, Continued

For the three-month periods ended March 31, 2013 and 2012


(In millions of won)	Note	March 31, 2013			March 31, 2012

Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings		￦	40,000			642,989
Issuance of debentures			656,359			318,696
Proceeds from long-term borrowings			—			2,054,944
Cash inflows from transaction of derivatives			2,199			1,517

Sub-total			698,558			3,018,146
Cash outflows for financing activities:
Repayment of short-term borrowings			(480,245	)		(202,317	)
Repayment of current portion of long-term debt			(161,575	)		(95,446	)
Repayment of debentures			—			(634,398	)
Repayment of long-term borrowings			(352,561	)		(2,693	)
Cash outflows from transaction of derivatives			—			(3,157	)
Payment of finance lease liabilities			(5,491	)		(4,993	)
Decrease in cash from transactions with owners of the Parent Company			(3,871	)		(1,025	)

Sub-total			(1,003,743	)		(944,029	)

Net cash provided by (used in) financing activities			(305,185	)		2,074,117


Net increase in cash and cash equivalents			203,228			121,075
Cash and cash equivalents at beginning of the period			920,125			1,650,794
Effects of exchange rate changes on cash and cash equivalents			995			(2,478	)

Cash and cash equivalents at end of the period		￦	1,124,348			1,769,391

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

1.	Reporting Entity

(1)

General

SK Telecom Co., Ltd. (“the Parent Company”) was incorporated in March 1984 under the laws of Republic of Korea (“Korea”) to engage in providing cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications in Korea. The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of March 31, 2013, the Parent Company’s total issued shares are held by the following:


	Number of shares		Percentage of total shares issued (%)
SK Holdings Co., Ltd.		20,363,452		25.22
National Pension		4,928,904		6.10
Institutional investors and other minority stockholders		44,402,643		54.99
Treasury stock		11,050,712		13.69

Total number of shares		80,745,711		100.00

These condensed consolidated interim financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individuals as “Group entities”). SK Holdings Co., Ltd. is the ultimate controlling entity of the Parent Company because it has de facto control of the Parent Company. An entity is viewed to have de facto control when the balance of holdings is dispersed and the other shareholders have not organized their interests in such a way that they exercise more votes than the minority holder.

(2)

List of subsidiaries

The list of subsidiaries as of March 31, 2013 and December 31, 2012 is as follows:

Ownership(%)

Subsidiary

Location

Primary business

March 31,
2013

December 31,
2012

SK Telink Co., Ltd.

Korea

Telecommunication service

83.5

M&Service Co., Ltd.(*)

Korea

Data base and online information agency

100.0

—

SK Communications Co., Ltd.

Korea

Internet website services

64.6

PAXNet Co., Ltd.(*)

Korea

Internet website services

—

59.7

Loen Entertainment, Inc.

Korea

Release of music disc.

67.6

Stonebridge Cinema Fund

Korea

Investment association

57.0

Commerce Planet Co., Ltd.

Korea

Online shopping mall operation agency

100.0

SK Broadband Co., Ltd.

Korea

Telecommunication services

50.6

Broadband Media Co., Ltd.(*)

Korea

Multimedia TV portal services

—

100.0

K-net Culture and Contents Venture Fund

Korea

Investment association

59.0

Fitech Focus Limited Partnership II

Korea

Investment association

66.7

Open Innovation Fund

Korea

Investment association

98.9

PS&Marketing Corporation

Korea

Communications device retail business

100.0

Service Ace Co., Ltd.

Korea

Customer center management service

100.0

Service Top Co., Ltd.

Korea

Customer center management service

100.0

Network O&S Co., Ltd.

Korea

Base station maintenance service

100.0

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

1.	Reporting Entity, Continued

(2)

List of subsidiaries, Continued

Ownership(%)

Subsidiary

Location

Primary business

March 31,
2013

December 31,
2012

BNCP Co., Ltd.

Korea

Internet website services

100.0

SK Planet Co., Ltd.

Korea

Telecommunication service and new media business

100.0

Madsmart, Inc.

Korea

Application software production

100.0

SK Telecom China Holdings Co., Ltd.

China

Investment association

100.0

SKY Property Mgmt. Ltd.(*)

Virgin Island

Real estate investment

—

60.0

Shenzhen E-eye High Tech Co., Ltd.

China

Manufacturing

65.5

SK Global Healthcare Business Group., Ltd.

China

Investment association

100.0

SK China Real Estate Co., Ltd.(*)

Hong Kong

Real estate investment

—

99.4

SK Planet Japan

Japan

Digital contents sourcing service

100.0

SKT Vietnam PTE. Ltd.

Singapore

Telecommunication service

73.3

SK Planet Global PTE. Ltd.

Singapore

Digital contents sourcing service

100.0

SKT Americas, Inc.

USA

Information gathering and consulting

100.0

SKP America LLC.

USA

Digital contents sourcing service

100.0

YTK Investment Ltd.

Cayman

Investment association

100.0

Atlas Investment

Cayman

Investment association

100.0

Technology Innovation Partners, L.P.

Cayman

Investment association

100.0

SK Telecom China Fund I L.P.

Cayman

Investment association

100.0

(*)	Changes in subsidiaries are explained in Note 1-(4).

In accordance with the accounting policy relating to the scope of consolidation, small-sized subsidiaries including IM Shopping Inc. were excluded from the list of subsidiaries as the effects on the financial statements are not material considering both individual and overall quantitative and qualitative effects, although the Group has ownership interests of more than 50% on those subsidiaries.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

1.	Reporting Entity, Continued

(3)

Condensed financial information of subsidiaries

Condensed financial information of subsidiaries as of and for the three-month period ended March 31, 2013 is as follows:


(In millions of won)
Subsidiary	Total assets		Total liabilities		Total equity			Revenue		Profit (loss)
SK Telink Co., Ltd.	￦	235,892		125,031		110,861			109,701		281
M&Service Co., Ltd.		64,770		31,882		32,888			28,087		1,143
SK Communications Co., Ltd.		252,462		64,577		187,885			33,059		(7,478	)
Loen Entertainment, Inc.		184,127		54,745		129,382			50,470		5,960
Stonebridge Cinema Fund		10,556		421		10,135			—		73
Commerce Planet Co., Ltd.		30,751		31,778		(1,027	)		16,444		317
SK Broadband Co., Ltd.		2,887,589		1,772,347		1,115,242			605,172		5,204
K-net Culture and Contents Venture Fund		24,999		—		24,999			—		(13,765	)
Fitech Focus Limited Partnership II		22,131		283		21,848			—		(767	)
Open Innovation Fund		29,168		426		28,742			—		(14,650	)
PS&Marketing Corporation		300,847		167,243		133,604			305,976		(2,535	)
Service Ace Co., Ltd.		50,637		24,246		26,391			45,766		1,920
Service Top Co., Ltd.		44,325		25,294		19,031			39,547		1,663
Network O&S Co., Ltd.		60,374		33,477		26,897			48,419		1,954
BNCP Co., Ltd.		12,751		7,349		5,402			3,892		(9,231	)
SK Planet Co., Ltd.		2,185,902		667,389		1,518,513			295,438		(10,157	)
Madsmart, Inc.		2,176		373		1,803			—		(1,222	)
SK Telecom China Holdings Co., Ltd.		37,857		2,824		35,033			5,123		1,047
Shenzhen E-eye High Tech Co., Ltd.		19,639		1,777		17,862			2,109		30
SK Global Healthcare Business Group., Ltd.		25,784		—		25,784			—		—
SK Planet Japan		1,064		163		901			108		(404	)
SKT Vietnam PTE. Ltd.		39,649		9,310		30,339			—		(1,221	)
SK Planet Global PTE. Ltd.		1,839		42		1,797			89		(239	)
SKT Americas, Inc.		38,809		547		38,262			1,693		(2,630	)
SKP America LLC.		5,486		1,644		3,842			—		—
YTK Investment Ltd.		66,487		—		66,487			—		—
Atlas Investment(*)		52,557		90		52,467			—		(331	)

(*)	The financial information of Atlas Investment includes financial information of Technology Innovation Partners, L.P. and SK Telecom China Fund I L.P., subsidiaries of Atlas Investment.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

1.	Reporting Entity, Continued

(3)

Condensed financial information of subsidiaries, Continued

Condensed financial information of subsidiaries as of and for the year ended December 31, 2012 is as follows:


(In millions of won)
Subsidiary	Total assets		Total liabilities		Total equity			Revenue		Profit (loss)
SK Telink Co., Ltd.	￦	241,977		128,191		113,786			341,084		(74,951	)
SK Communications Co., Ltd.		265,819		70,483		195,336			197,153		(35,334	)
PAXNet Co., Ltd.		31,400		9,173		22,227			34,237		(156	)
Loen Entertainment, Inc.		173,079		44,998		128,081			185,016		23,839
Stonebridge Cinema Fund		10,965		903		10,062			509		5,707
Commerce Planet Co., Ltd.		34,007		35,351		(1,344	)		52,507		655
SK Broadband Co., Ltd.		3,035,657		1,656,923		1,378,734			2,486,317		26,412
Broadband media Co., Ltd.		50,574		320,727		(270,153	)		90,602		(3,396	)
K-net Culture and Contents Venture Fund		43,779		15		43,764			—		(1,778	)
Fitech Focus Limited Partnership II		22,547		—		22,547			—		(3,934	)
Open Innovation Fund		43,394		—		43,394			—		(788	)
PS&Marketing Corporation		317,613		181,737		135,876			1,484,492		(9,662	)
Service Ace Co., Ltd.		48,956		24,461		24,495			146,554		3,418
Service Top Co., Ltd.		43,332		25,963		17,369			133,705		4,198
Network O&S Co., Ltd.		165,818		140,853		24,965			377,909		7,970
BNCP Co., Ltd.		24,000		9,367		14,633			26,167		(2,463	)
SK Planet Co., Ltd.		1,647,965		381,620		1,266,345			1,034,697		11,977
Madsmart, Inc.		1,591		724		867			635		(2,756	)
SK Telecom China Holdings Co., Ltd.		35,233		1,782		33,451			25,755		(151	)
SKY Property Mgmt. Ltd.(*1)		773,413		294,305		479,108			70,808		10,390
Shenzhen E-eye High Tech Co., Ltd.		18,915		1,788		17,127			9,590		(1,068	)
SK Global Healthcare Business Group., Ltd.		25,784		—		25,784			—		—
SK Planet Japan		47		4		43			—		(63	)
SKT Vietnam PTE. Ltd.		38,331		7,904		30,427			990		(8	)
SK Planet Global PTE. Ltd.		636		130		506			—		(526	)
SKT Americas, Inc.		36,378		784		35,594			10,712		(10,837	)
SKP America LLC.		6,669		2,431		4,238			109		(3,301	)
YTK Investment Ltd.		64,036		—		64,036			—		—
Atlas Investment(*2)		51,065		205		50,860			—		(4,324	)

(*1)	The financial information of Sky Property Mgmt. Ltd. includes the financial information of SK China Real Estate Co., Ltd., a subsidiary of Sky Property Mgmt. Ltd..

(*2)	The financial information of Atlas Investment includes financial information of Technology Innovation Partners, L.P. and SK Telecom China Fund I L.P., subsidiaries of Atlas Investment.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

1.	Reporting Entity, Continued

(4)

Changes in subsidiaries

The list of subsidiary that was newly included during the three-month period ended March 31, 2013 is as follows:


Subsidiary		Reason
M&Service Co., Ltd.		The Group acquired additional ownership interest in M&Service Co., Ltd. and obtained control

The list of subsidiaries that were excluded during the three-month period ended March 31, 2013 is as follows:


Subsidiary		Reason
PAXNet Co., Ltd.		The Parent Company sold its investment during the period.
Broadband media Co., Ltd.		Merged into SK Broadband Co., Ltd. during the period.
SKY Property Mgmt. Ltd.		The Parent Company sold its investment during the period.
SK China Real Estate Co., Ltd.		The Parent Company sold its investment during the period.

(5)

The information of significant non-controlling interests of consolidated entities as of and for the three-month period ended March 31, 2013, and for the year ended December 31, 2012 is as follows:


(In millions of won)
	March 31, 2013
	SK Communications Co., Ltd.			SK Broadband Co., Ltd.
Ownership of non-controlling interests (%)		35.4			49.4

Current assets	￦	131,756			552,489
Non-current assets		120,706			2,335,100
Current liabilities		(56,986	)		(718,785	)
Non-current liabilities		(7,591	)		(1,053,562	)
Net assets		187,885			1,115,242
Adjustment for fair value		—			136,711
Net assets of consolidated entities		187,885			1,251,953
Carrying amount of non-controlling interests		66,619			618,922

Revenue	￦	33,059			605,172
Profit (loss) for the period		(7,478	)		5,204
Amortization of adjustment for fair value		—			(7,744	)
Loss of the consolidated entities		(7,478	)		(2,540	)
Total comprehensive income (loss)		(7,470	)		5,532
Loss attributable to non-controlling interests		(2,650	)		(1,256	)

Net cash provided by (used in) operating activities	￦	(8,398	)		98,416
Net cash provided by investing activities		2,619			114,402
Net cash provided by (used in) financing activities		19			(159,553	)
Net increase (decrease) in cash and cash equivalents		(5,760	)		53,265

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

1.	Reporting Entity, Continued


(In millions of won)
	December 31, 2012
	SK Communications Co., Ltd.			SK Broadband Co., Ltd.(*1)			SKY Property Mgmt. Ltd.(*2)
Ownership of non-controlling interests(%)		35.4			49.4			40.0

Current assets	￦	99,599			684,804			69,093
Non-current assets		166,220			2,394,352			704,319
Current liabilities		(64,811	)		(907,000	)		(51,068	)
Non-current liabilities		(5,672	)		(1,061,608	)		(243,236	)
Net assets		195,336			1,110,548			479,108
Adjustment for fair value		—			144,455			—
Net assets of consolidated entities		195,336			1,255,003			479,108
Carrying amount of non-controlling interests		69,222			621,055			195,907

Revenue	￦	197,153			2,492,160			70,808
Profit (loss) for the period		(35,334	)		22,499			10,390
Amortization of adjustment for fair value		—			(72,192	)		—
Profit (loss) of the consolidated entities		(35,334	)		(49,693	)		10,390
Total comprehensive Income(loss)		(36,785	)		17,397			(23,948	)
Profit (loss) attribute to non-controlling interests		(12,525	)		(24,595	)		4,156

Net cash provided by (used in) operating activities	￦	(14,925	)		375,848			16,258
Net cash provided by (used in) Investing activities		5,319			(287,975	)		(396	)
Net cash provided by (used in) financing activities		92			(224,837	)		(1,405	)
Net increase (decrease) in cash and cash equivalents		(9,514	)		(136,964	)		14,457

(*1)	The condensed financial information of SK Broadband Co., Ltd. is consolidated financial information which includes financial information of Broadband Media Co., Ltd., a subsidiary of SK Broadband Co., Ltd.

(*2)	The condensed financial information of Sky Property Mgmt. Ltd. is consolidated financial information which includes financial information of SK China Real Estate Co., Ltd., a subsidiary of Sky Property Mgmt. Ltd.

There were no dividends received for the three-month period ended March 31, 2013 and for the year ended December 31, 2012.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

2.	Basis of Preparation

(1)

Statement of compliance

The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audits of Stock Companies.

These condensed consolidated interim financial statements were prepared in accordance with K-IFRS No. 1034, ‘Interim Financial Reporting’ as part of the period covered by the Group’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended December 31, 2012. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

(2)

Use of estimates and judgments

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

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2012.

(3)

Common control transactions

SK Holdings Co., Ltd. (“the Ultimate Controlling Entity”) is the Ultimate Controlling Entity of the Parent Company because it has de facto control of the Parent Company. Accordingly, gains and losses from business acquisitions and dispositions involving entities that are under the control of the Ultimate Controlling Entity are accounted for as common control transactions within equity.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

3.	Significant Accounting Policies

Except as described below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2012. The following changes in accounting policy are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2013.

(1)

Changes in accounting policies

1) K-IFRS No. 1001, ‘Presentation of Financial Statements’

The Group has applied the amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ since January 1, 2013, classified items within other comprehensive income by nature and presented “items that are not subsequently recycled through profit or loss” and “items that are subsequently reclassified if certain conditions are met” as a group.

2) K-IFRS No.1110, ‘Consolidated Financial Statements’

The Group has applied the amendments to K-IFRS No. 1110, ‘Consolidated Financial Statements’ since January 1, 2013. The standard introduces a single control model to determine whether an investee should be consolidated. Subsidiary is an entity that is controlled by a controlling entity or a subsidiary of a controlling company. A controlling entity or a subsidiary of a controlling company controls a subsidiary when the controlling entity or the subsidiary of the controlling company is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

3) K-IFRS No.1111, ‘Joint Arrangements’

The Group has applied the amendments to K-IFRS No. 1111, ‘Joint Arrangements’ since January 1, 2013. The standard classifies joint arrangements into two types - joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint ventures) have rights to the net assets of the arrangement. The standard requires a joint operator to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in relation to its interest in the arrangement in accordance with relevant IFRSs applicable to the particular assets, liabilities, revenues and expenses. The standard requires a joint venture to recognize an investment and to account for that investment using the equity method.

4) K-IFRS No.1112, ‘Disclosure of Interests in Other Entities’

The Group has applied the amendments to K-IFRS No. 1112, ‘Disclosure of Interests in Other Entities’ since January 1, 2013. The standard brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Group is currently assessing the disclosure requirements for interests in subsidiaries, interests in joint arrangements and associates and unconsolidated structured entities in comparison with the existing disclosures. The standard requires the disclosure of information about the nature, risks and financial effects of these interests.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

3.	Significant Accounting Policies, Continued

(1)

Changes in accounting policies, Continued

5) K-IFRS No. 1019, ‘Employee Benefits’

The Group has applied the amendments to K-IFRS No. 1019, ‘Employee Benefits’ since January 1, 2013. The standard requires recognition of actuarial gains and losses immediately in other comprehensive income and to calculate expected return on plan assets based on the rate used to discount the defined benefit obligation.

6) Amendments to K-IFRS No. 1113, ‘Fair Value Measurement’

The Group has applied the amendments to K-IFRS No. 1113, ‘Fair Value Measurement’ since January 1, 2013. The standard defines fair value and a single framework for fair value, and requires disclosures about fair value measurements.

(2)

Impact of changes in accounting policies

1) K-IFRS No.1110, ‘Consolidated Financial Statements’

In accordance with the transitional provision on K-IFRS No. 1110, the Group assessed control on investees as of January 1, 2013, the initial adoption date of the standard, and there have been no changes in subsidiaries upon adoption of the standard.

2) K-IFRS No. 1001, ‘Presentation of Financial Statements’

The Group early adopted the amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ since the interim period ended September 30, 2012 and separately present its operating income as operating revenue less operating expense on the consolidated statement of income.

The Group retrospectively applied the amendment to K-IFRS No. 1001, for which the impact is as follows:


(In millions of won)
	For the three-month ended March 31, 2012
Operating income before adoption of the amendment	￦	465,182
Differences:
Other non-operating income
Fees revenues		(465	)
Gain on disposal of property and equipment and intangible assets		(1,010	)
Others		(8,467	)

		(9,942	)
Other non-operating expense
Impairment loss on property and equipment and intangible assets		3,429
Loss on disposal of property and equipment and intangible assets		1,994
Donations		12,908
Bad debt for accounts receivable - other		19,687
Others		6,036

		44,054

Operating income after adoption of the amendment	￦	499,294

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

3.	Significant Accounting Policies, Continued

(3)

New standards and interpretations not yet adopted

The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Group for annual periods beginning after January 1, 2013, and the Group has not early adopted them.

1) K-IFRS No.1032, ‘Financial Instruments: Presentation’

The amendments clarified the application guidance related to ‘offsetting a financial asset and a financial liability’. The amendment is mandatorily effective for periods beginning on or after January 1, 2014 with earlier application permitted.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

4.	Operating Segments

The Group’s operating segments have been determined to be each business unit, for which the Group provides independent services and merchandise. The Group’s reportable segments are: 1) cellular services, which include cellular voice service, wireless data service and wireless internet services, and 2) fixed-line telecommunication services, which include telephone services, internet services, and leased line services. All other operating segments, which include the Group’s internet portal services and other operations, do not meet the quantitative thresholds to be considered reportable segments and are presented as Other.

Cellular services include cellular voice service, wireless data service and wireless internet services. Fixed-line telecommunication services include telephone services, internet services, and leased line services. Other includes the Group’s Internet portal services, game manufacturing and other immaterial operations.

As discussed in Note 35, during the 3-month period ended June 30, 2012, the Group decided to cease the broadcasting business due to the accumulating losses resulting from the continuing decline in satellite digital multimedia broadcasting subscribers. The comparative consolidated financial statements for the 3-month period ended March 31, 2012 have been retrospectively adjusted for discontinued operations

(1) Details of the segment information as of and for the three-month period ended March 31, 2013 are as follows:


(In millions of won)
	Cellular Services		Fixed-line Telecommunication services		Other			Sub-total		Consolidation adjustments			Consolidated amount
Total revenue	￦	3,551,807		714,873		435,747			4,702,427		(589,790	)		4,112,637
Internal revenue		286,793		134,245		168,752			589,790		(589,790	)		—
External revenue		3,265,014		580,628		266,995			4,112,637		—			4,112,637
Depreciation and amortization		479,302		131,590		29,947			640,839		—			640,839
Operating income		423,524		7,914		(20,805	)		410,633		—			410,633

Finance income and costs, net														(111,313	)
Gain related to investments in subsidiaries, associates and joint ventures, net														161,325
Other non-operating income and expense, net														(32,739	)

Profit from continuing operations before income tax														427,906

Total assets		22,878,131		3,123,480		3,037,280			29,038,891		(3,630,049	)		25,408,842
Total liabilities		10,607,538		1,897,378		856,846			13,361,762		(320,620	)		13,041,142

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

4.	Operating Segments, Continued

(2) Details of the segment information as of and for the three-month period ended March 31, 2012 are as follows:


(In millions of won)
	Cellular Services		Fixed-line Telecommunication services		Other		Sub-total		Consolidation adjustments			Consolidated amount
Total revenue	￦	3,430,413		675,841		398,039		4,504,293		(534,582	)		3,969,711
Internal revenue		216,612		144,139		173,831		534,582		(534,582	)		—
External revenue		3,213,801		531,702		224,208		3,969,711		—			3,969,711
Depreciation and amortization		402,416		122,261		55,583		580,260		—			580,260
Operating income		494,372		3,247		1,675		499,294		—			499,294

Finance income and costs, net													(42,749	)
Loss related to investments in subsidiaries, associates and joint ventures, net													(27,583	)
Other non-operating income and expense, net													(34,112	)

Profit from continuing operations before income tax													394,850

Total assets		23,537,231		3,442,233		3,294,060		30,273,524		(3,726,623	)		26,546,901
Total liabilities		11,642,535		2,152,591		819,822		14,614,948		(460,037	)		14,154,911

Intersegment sales and purchases are conducted on an arms-length basis and eliminated on consolidation. Since there are no intersegment sales of inventory, there is no unrealized intersegment profit to be eliminated on consolidation. The Group principally operates its business in its domestic market in Korea and the amounts outside of Korea are immaterial, therefore no entity-wide geographical information is presented.

No single customer contributed 10% or more to the Group’s total revenue for the three-month periods ended March 31, 2013 and 2012.

5.	Restricted Deposits

Deposits which are restricted in use as of March 31, 2013 and December 31, 2012 are summarized as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Short-term financial instruments(*)	￦	95,717		241,587
Long-term financial instruments(*)		103		106
Guarantee deposits		40		40

	￦	95,860		241,733

(*)	Financial instruments include charitable trust fund established by the Group (profits from this charitable fund are donated to charitable institutions and the funds cannot be withdrawn as of March 31, 2013) and guarantees for loans and other similar instruments.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

6.	Trade and Other Receivables

(1)

Details of trade and other receivables as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)	March 31, 2013
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable - trade	￦	2,447,974		(224,545	)		2,223,429
Short-term loans		95,179		(1,873	)		93,306
Accounts receivable - other		766,939		(69,700	)		697,239
Accrued income		19,491		(171	)		19,320
Others		1,651		—			1,651

		3,331,234		(296,289	)		3,034,945
Non-current assets:
Long-term loans		90,427		(28,485	)		61,942
Guarantee deposits		238,697		—			238,697
Long-term accounts receivable - trade		13,540		—			13,540

		342,664		(28,485	)		314,179

	￦	3,673,898		(324,774	)		3,349,124


(In millions of won)	December 31, 2012
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable - trade	￦	2,166,293		(211,373	)		1,954,920
Short-term loans		86,789		(1,881	)		84,908
Accounts receivable - other		639,386		(57,288	)		582,098
Accrued income		8,857		(142	)		8,715
Others		431		—			431

		2,901,756		(270,684	)		2,631,072
Non-current assets:
Long-term loans		97,636		(28,337	)		69,299
Guarantee deposits		236,242		—			236,242
Long-term accounts receivable - trade		15,024		(1,647	)		13,377

		348,902		(29,984	)		318,918

	￦	3,250,658		(300,668	)		2,949,990

(2)

The movements in allowances for doubtful accounts of trade and other receivables during the three-month periods ended March 31, 2013 and 2012 were as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Balance at January 1	￦	300,668			318,820
Increase of bad debt		22,643			26,944
Reversal of allowance for doubtful accounts		(50	)		(5,654	)
Write-off		(5,625	)		(4,806	)
Others (*)		7,138			2,918

Balance at March 31	￦	324,774			338,222

(*)	Others include collection of receivables written-off, net exchange difference and changes in consolidation scope.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

6.	Trade and Other Receivables, Continued

(3)

Details of overdue but not impaired, and impaired trade and other receivables as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013						December 31, 2012
	Accounts receivable - trade			Other receivables			Accounts receivable - trade			Other receivables
Neither overdue nor impaired	￦	1,875,257			1,041,882			1,589,911			976,882
Overdue but not impaired		81,487			32,209			38,590			1,588
Impaired		504,770			138,293			552,816			90,871

		2,461,514			1,212,384			2,181,317			1,069,341
Allowance for doubtful accounts		(224,545	)		(100,229	)		(213,020	)		(87,648	)

	￦	2,236,969			1,112,155			1,968,297			981,693

The Group establishes allowance for doubtful accounts based on the likelihood of recoverability of accounts receivable based on the aging of accounts receivables at the end of the period, past customer default experience and their credit status, and economic and industrial factors.

(4)

The aging of overdue but not impaired accounts receivable as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013				December 31, 2012
	Accounts receivable - trade		Accounts receivable - other		Accounts receivable - trade		Accounts receivable - other
Less than 1 month	￦	17,741		11,547		4,067		171
1 ~ 3 months		32,592		6,910		10,264		673
3 ~ 6 months		6,118		589		10,507		101
More than 6 months		25,036		13,163		13,752		643

	￦	81,487		32,209		38,590		1,588

7.	Inventories

Details of inventories as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013							December 31, 2012
	Acquisition cost		Write- down of inventory			Carrying amount		Acquisition cost		Write- down of inventory			Carrying amount
Merchandise	￦	200,477		(1,926	)		198,551		230,640		(1,784	)		228,856
Finished goods		3,611		(1,013	)		2,598		3,525		(962	)		2,563
Work in process		34		—			34		309		—			309
Raw materials and supplies		4,006		(74	)		3,932		10,487		(69	)		10,418

	￦	208,128		(3,013	)		205,115		244,961		(2,815	)		242,146

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

8.	Investment Securities

(1)

Details of short-term investment securities as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Beneficiary certificates (*)	￦	184,097		56,160
Current portion of long-term investment securities		4,357		3,967

	￦	188,454		60,127

(*)	The distributions arising from beneficiary certificates as of March 31, 2013 were accounted for as accrued income.

(2)

Details of long-term investment securities as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013			December 31, 2012
Equity securities:
Marketable equity securities	￦	560,963			584,035
Unlisted equity securities		91,735			99,643
Equity investments		266,244			223,370

		918,942			907,048
Debt securities:
Public bonds(*1)		368			377
Investment bonds(*2)		75,747			50,254

		76,115			50,631

Total		995,057			957,679
Less current portion of long-term investment securities		(4,357	)		(3,967	)

Long-term investment securities	￦	990,700			953,712

(*1)	Details of maturity for the public bonds as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Less than 1 year	￦	—		8
1 ~ 5 years		368		369

	￦	368		377

(*2)	The Group classified convertible bonds of NanoEnTek, Inc. (carrying amount as of March 31, 2013: ￦16,294 million) as financial assets at fair value through profit or loss. The difference between acquisition cost and fair value is accounted for as finance income(loss).

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

9.	Assets and Liabilities Classified as Held for Sale

(1)

Subsidiary

For the year ended December 31, 2012, the Group classified assets and liabilities of a subsidiary, SKY Property Mgmt. Ltd., as held for sale as a result of the Board of Directors’ decision on December 21, 2012 to dispose of the Group’s ownership interests of 27% in the subsidiary in order to utilize the proceeds for new business opportunities.

Non-current assets and liabilities held for sale as of December 31, 2012 are as follows:


(In millions of won)
	December 31, 2012
Asset group held-for sale	￦	773,413
Current assets(*1)		69,094
Non-current assets		704,319
Long-term prepaid expense		486,439
Investment property		186,682
Property and equipment		1,566
Other non-current assets		29,632
Liability group held-for-sale		294,305
Current liabilities		51,069
Non-current liabilities		243,236

(*1)	Cash and cash equivalents of ￦51,831 million which are included in current assets are recognized as cash outflows from investing activities in the statement of cashflows as the cash equivalents are expected to be recovered through the disposal of assets and liabilities held for sale.

As of December 31, 2012, the assets and liabilities classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

On January 11, 2013, the Group sold the Group’s ownership interests of 27% accounted for as a non-current assets held for sale to SK Innovation Co., Ltd., a related party, and recognized a gain on disposal of a subsidiary of ￦140,689 million in profit or loss.

(2)

Investments in associates

The Group entered into agreement to dispose of its ownership interests in SK Fans Co., Ltd., an associate, during the year ended December 31, 2012 and investment in the associate was reclassified to non-current assets held for sale after an impairment loss of ￦7,656 million was recognized.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

10.

Business combination

(1)

General information

The Parent Company acquired the ownership interest of 50% of SK Marketing & Company Co., Ltd., advertising and e-commerce agency, from SK Innovation Co., Ltd., a related party under common control, through additional purchase of shares and obtained the control over SK Marketing & Company Co., Ltd., and its subsidiary, M&Service Co., Ltd.

Prior to the acquisition, the Parent Company owns 50% ownership of SK Marketing & Company Co., Ltd. After obtaining the control over SK Marketing & Company Co., Ltd, the Parent Company acquired the shares of SK Planet Co., Ltd. by investing its ownership interest of 100% of SK Marketing & Company Co., Ltd. as a form of investment in kind. On February 1, 2013, SK Planet Co., Ltd. merged SK Marketing & Company Co., Ltd.

As the business combination occurred during the three-month period ended March 31, 2013 was a business combination between entities under common control, the difference between the transferred price and book value of net assets was recognized as capital deficit and other capital adjustments.

(2)

Consideration paid and identifiable assets and liabilities transferred


(In millions of won)
	Amount
Consideration paid	￦
Cash and cash equivalents		190,605
Investments in associates (carrying value)		141,534

		332,139

Identifiable assets and liabilities transferred
Cash and cash equivalents	￦	95,800
Trade receivables		132,514
Inventories		3,472
Tangible and intangible assets		68,699
Other assets		457,431
Trade payables		(150,014	)
Other liabilities		(337,617	)

	￦	270,285

Amount recorded in capital deficit and other capital adjustments	￦	61,854

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

11.

Investments in Associates and Joint Ventures

(1)

Investments in associates and joint ventures accounted for using the equity method as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)		March 31, 2013				December 31, 2012
	Country	Ownership percentage		Carrying amount		Ownership percentage		Carrying amount
Investments in associates
SK Marketing & Company Co., Ltd.(*1)	Korea		—	￦	—		50.0	￦	145,333
SK China Company Ltd.(*2)	China		9.6		38,732		9.6		37,628
SK USA, Inc.	USA		49.0		4,819		49.0		4,580
F&U Credit information Co., Ltd.	Korea		50.0		3,552		50.0		4,011
Korea IT Fund(*3)	Korea		63.3		229,977		63.3		230,016
JYP Entertainment Corporation	Korea		25.5		5,877		25.5		4,232
Konan Technology	Korea		29.5		4,479		29.5		4,835
Etoos Co., Ltd. (*2)	Korea		15.6		11,599		15.6		12,037
Wave City Development Co., Ltd. (*2)	Korea		19.1		—		19.1		—
HanaSK Card Co., Ltd.	Korea		49.0		377,289		49.0		378,457
Daehan Kanggun BcN Co., Ltd.	Korea		29.0		7,982		29.0		7,982
Candle Media Co., Ltd.	Korea		40.9		20,943		40.9		21,935
NanoEnTek, Inc. (*2)	Korea		9.3		9,199		9.3		9,276
UNISK(Beijing) Information Technology Co., Ltd.	China		49.0		7,038		49.0		6,589
SK Industrial Development China Co., Ltd.	Hong kong		35.0		80,580		35.0		77,967
PT. Melon Indonesia	Indonesia		49.0		4,483		49.0		4,447
Packet One Network	Malaysia		27.0		98,550		28.2		88,389
Mobile Money Venture, LLC	USA		50.0		848		50.0		826
SK Technology Innovation Company	Cayman		49.0		64,398		49.0		63,559
LightSquared Inc. (*2)	USA		3.3		—		3.3		—
ViKi, Inc.	USA		24.8		14,515		26.3		15,667
HappyNarae Co., Ltd.	Korea		42.5		12,927		42.5		13,113
SK Hynix Inc.	Korea		21.1		3,387,837		21.1		3,328,245
SK MENA Investment B.V.	Netherlands		32.1		14,180		32.1		13,666
SK Latin America Investment	Spain		32.1		14,196		32.1		13,685
Gemini	Singapore		20.0		4,951		20.0		7,139
SKY Property Mgmt. Ltd.(*4)	Virgin Island		33.0		240,468		—		—
TR Entertainment and others	—		—		119,700		—		121,101

Sub-total					4,779,119				4,614,715


Investments in joint ventures

Dogus Planet, Inc.	Turkey		50.0		26,845		50.0		6,005
Television Media Korea Ltd.	Korea		51.0		11,274		51.0		11,757

Sub-total					38,119				17,762

Total				￦	4,817,238			￦	4,632,477

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

11.

Investments in Associates and Joint Ventures, Continued

(*1)	SK Marketing & Company Co., Ltd. was merged into SK Planet Co., Ltd., a subsidiary of the Parent Company during the three-month period ended March 31, 2013 (note 10).

(*2)

The Group classified the investments in SK China Company Ltd., Etoos Co., Ltd., Wave City Development Co., Ltd., NanoEnTek, Inc. and LightSquared Inc. as investments in associates as the Group can exercise significant influence on these investees through participation of their board of directors even though the Group has less than 20% of equity interests in those investees.

(*3)	Investment in Korea IT Fund was classified as investment in associates as the Group has less than 50% of voting rights, and therefore does not have control over Korea IT Fund under the agreement.

(*4)	The Group reclassified investment in SKY Property Mgmt. Ltd. as investments in associates from subsidiaries due to partial disposal of its shares.

(2)

There is no joint venture listed publicly and the market price of investments in associates listed publicly as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won, except for share and per share data)
	March 31, 2013						December 31, 2012
	Market value per share		Number of shares		Market price		Market value per share		Number of shares		Market price
Candle Media Co., Ltd.	￦	897		21,620,360		19,393		858		21,620,360		18,550
NanoEnTek, Inc.		4,700		1,807,130		8,494		3,915		1,807,130		7,075
SK hynix Inc.		28,750		146,100,000		4,200,375		25,750		146,100,000		3,762,075

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

11.

Investments in Associates and Joint Ventures, Continued

(3)

The condensed financial information of the major investees as of and for the three-month period ended March 31, 2013 and as of and for the year ended December 31, 2012 are as follows:


(In millions of won)	As of and for the three-month period ended March 31, 2013
	SK Hynix Inc.		HanaSK Card Co., Ltd.			SKY Property Mgmt. Ltd.		Korea IT Fund			Packet One Network
Current assets	￦	5,700,143		6,647,262			83,990		179,649			56,418
Non-current assets		13,358,072		337,410			726,708		183,628			252,605
Current liabilities		4,455,681		91,052			60,020		—			124,488
Non-current liabilities		4,558,987		6,210,601			253,008		—			89,567
Revenue		2,777,049		219,942			17,642		763			28,319
Profit (loss) from continuing operations		178,713		563			3,736		(62	)		(12,746	)
Other comprehensive income (loss)		125,854		(1,652	)		—		—			2,414
Total comprehensive income (loss)		304,567		(1,089	)		3,736		(62	)		(10,332	)


(In millions of won)	As of and for the year ended December 31, 2012
	SK Hynix Inc.			HanaSK Card Co., Ltd.			Korea IT Fund		Packet One Network
Current assets	￦	5,313,573			7,888,008			195,164		46,872
Non-current assets		13,335,120			296,007			168,182		210,027
Current liabilities		4,441,180			259,659			6		143,936
Non-current liabilities		4,468,071			7,240,140			—		80,896
Revenue		10,162,210			1,012,772			19,444		110,152
Profit (loss) from continuing operations		(158,795	)		(29,571	)		5,820		(42,830	)
Other comprehensive income (loss)		(305,601	)		(2,653	)		—		2,259
Total comprehensive income (loss)		(464,396	)		(32,224	)		5,820		(40,571	)

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

11.

Investments in Associates and Joint Ventures, Continued

(4)

The condensed financial information of joint ventures as of and for the three-month period ended March 31, 2013 and as of and for the year ended December 31, 2012 are as follows:


(In millions of won)	As of and for three-month period ended March 31, 2013
	Television Media Korea Ltd.			Dogus Planet, Inc.
Current assets	￦	22,704			47,266
Cash and cash equivalents		10,292			44,531
Non-current assets		5,475			7,900
Current liabilities		6,336			1,368
Account payable, other payables and provisions		5,936			1,025
Non-current liabilities		207			107
Account payable, other payables and provisions		—			107
Revenue		3,367			7
Depreciation and amortization		(906	)		(397	)
Interest income		47			413
Interest expense		—			(9	)
Loss from continuing operations		(919	)		(2,617	)
Total comprehensive loss		(919	)		(2,617	)

	As of and for the year ended December 31, 2012
(In millions of won)	Television Media Korea Ltd.			Dogus Planet, Inc.
Current assets	￦	22,449			7,735
Cash and cash equivalents		10,562			6,085
Non-current assets		6,056			7,349
Current liabilities		5,724			2,970
Account payable, other payables and provisions		5,323			2,631
Non-current liabilities		199			104
Account payable, other payables and provisions		—			104
Revenue		12,115			—
Depreciation and amortization		(2,886	)		(864	)
Interest income		758			539
Loss from continuing operations		(6,873	)		(4,494	)
Total comprehensive loss		(6,873	)		(4,494	)

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

11.

Investments in Associates and Joint Ventures, Continued

(5)

Details of changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended March 31, 2013
	Beginning balance		Acquisition and Disposal			Share of profits (losses)			Other comprehensive income			Other increase (decrease)			Ending balance
Investments in associates
SK Marketing & Company Co., Ltd.(*1)	￦	145,333		190,606			(3,955	)		155			(332,139	)		—
SK China Company Ltd.		37,628		—			(8,354	)		9,458			—			38,732
SK USA, Inc.		4,580		—			63			176			—			4,819
F&U Credit information Co., Ltd.		4,011		—			(75	)		(384	)		—			3,552
Korea IT Fund		230,016		—			(39	)		—			—			229,977
JYP Entertainment Corporation		4,232		—			1,245			400			—			5,877
Konan Technology		4,835		—			(356	)		—			—			4,479
Etoos Co., Ltd.		12,037		—			(438	)		—			—			11,599
Wave City Development Co., Ltd.		—		—			—			—			—			—
HanaSK Card Co., Ltd.		378,457		—			(316	)		(852	)		—			377,289
Daehan Kanggun BcN Co., Ltd.		7,982		—			—			—			—			7,982
Candle Media Co., Ltd.		21,935		—			(1,058	)		(22	)		88			20,943
NanoEnTek, Inc.		9,276		—			(83	)		6			—			9,199
UNISK(Beijing) Information Technology Co., Ltd.		6,589		—			174			275			—			7,038
PT. Melon Indonesia		4,447		—			143			(107	)		—			4,483
Packet One Network		88,389		—			9,258			903			—			98,550
Mobile Money Venture, LLC		826		—			(12	)		31			3			848
SK Technology Innovation Company		63,559		—			(1,549	)		2,388			—			64,398
LightSquared Inc.		—		—			—			—			—			—
ViKi, Inc.		15,667		—			(995	)		(157	)		—			14,515
SK Industrial Development China Co., Ltd.		77,967		—			(361	)		2,974			—			80,580
HappyNarae Co., Ltd.		13,113		—			(186	)		—			—			12,927
SK Hynix Inc.		3,328,245		—			33,103			26,489			—			3,387,837
SK MENA Investment B.V.		13,666		—			—			514			—			14,180
SK Latin America Investment		13,685		—			428			83			—			14,196
Gemini		7,139		—			(2,322	)		134			—			4,951
SKY Property Mgmt. Ltd.(*2)		—		—			829			6,936			232,703			240,468
TR Entertainment and others		121,101		(550	)		(2,781	)		937			993			119,700

Sub-total		4,614,715		190,056			22,363			50,337			(98,352	)		4,779,119

Investments in joint ventures
Television Media Korea Ltd.		6,005		21,428			(1,309	)		721			—			26,845
Dogus Planet, Inc.		11,757		—			(483	)		—			—			11,274

Sub-total		17,762		21,428			(1,792	)		721			—			38,119

Total	￦	4,632,477		211,484			20,571			51,058			(98,352	)		4,817,238

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

11.

Investments in Associates and Joint Ventures, Continued

(*1)	The entity was merged into SK Planet Co., Ltd., a subsidiary of the Parent Company during the three-month period ended March 31, 2013 (note 10).

(*2)	The Group reclassified the investments in SKY Property Mgmt. Ltd. as investments in associates during the three-month period ended March 31, 2013.


(In millions of won)	For the three-month period ended March 31, 2012
	Beginning balance		Acquisition and Disposal			Share of profits (losses)			Other comprehensive income			Impairment loss			Other increase (decrease)			Ending balance
Investments in associates
SK Marketing & Company Co., Ltd.	￦	128,320		—			3,149			(246	)		—			—			131,223
SK China Company Ltd.		48,488		—			(614	)		(65	)		—			—			47,809
SK USA, Inc.		4,534		—			(988	)		1,024			—			—			4,570
F&U Credit information Co., Ltd.		3,565		—			583			—			—			—			4,148
Korea IT Fund		230,980		—			(4,787	)		782			—			—			226,975
JYP Entertainment Corporation		4,008		—			200			(58	)		—			—			4,150
Konan Technology		4,760		—			(477	)		—			—			—			4,283
Etoos Co., Ltd.		13,928		—			(1,670	)		—			—			—			12,258
Wave City Development Co., Ltd.		1,124		—			(1,124	)		—			—			—			—
HanaSK Card Co., Ltd.		396,553		—			4,406			452			—			—			401,411
Candle Media Co., Ltd.		11,814		—			400			(410	)		—			—			11,804
NanoEnTek, Inc.		10,470		—			(788	)		87			—			—			9,769
UNISK(Beijing) Information Technology Co., Ltd.		5,886		—			507			(274	)		—			—			6,119
PT. Melon Indonesia		5,326		—			(77	)		(126	)		—			—			5,123
Packet One Network		103,408		—			(5,248	)		821			—			—			98,981
Mobile Money Venture, LLC		982		—			(16	)		—			—			(13	)		953
SK Technology Innovation Company		75,974		—			(1,451	)		(1,045	)		—			—			73,478
LightSquared Inc.		49,441		—			(10,571	)		1,513			(40,383	)		—			—
SK Hynix Inc.		—		3,374,726			(34,588	)		4,668			—			—			3,344,806
SK MENA Investment B.V.		—		14,485			—			—			—			—			14,485
TR Entertainment and others		269,782		(348	)		607			(749	)		—			(418	)		268,874

Sub-total		1,369,343		3,388,863			(52,547	)		6,374			(40,383	)		(431	)		4,671,219
Investments in joint ventures
Television Media Korea Ltd.		15,262		—			(659	)		—			—			—			14,603

Total	￦	1,384,605		3,388,863			(53,206	)		6,374			(40,383	)		(431	)		4,685,822

11.

Investments in Associates and Joint Ventures, Continued

(6)

As the Group discontinued the application of the equity method due to the carrying amount of the Group’s share being reduced to zero, the unrecognized accumulated equity losses as of March 31, 2013 are as follows:


(In millions of won)	Unrealized loss					Unrealized change in equity
	Period ended Mar. 31, 2013			Accumulated		Period ended Mar. 31, 2013		Accumulated
ULand Company Limited	￦	—			1,703		—		—
Wave City Development Co., Ltd.		(1,315	)		434		—		127
Cyworld Holdings Hong Kong and others		—			2,937		—		334

	￦	(1,315	)		5,074		—		461

12.

Property and Equipment

(1)

Property and equipment as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013										December 31, 2012
	Acquisition cost		Accumulated depreciation			Accumulated impairment loss			Carrying amount		Carrying Amount
Land	￦	706,908		—			—			706,908		704,908
Buildings		1,399,535		(517,513	)		—			882,022		886,371
Structures		687,540		(327,148	)		—			360,392		363,484
Machinery		23,245,933		(16,938,401	)		(122,863	)		6,184,669		6,316,192
Other		1,660,801		(1,004,002	)		(760	)		656,039		637,212
Construction in progress		787,959		—			—			787,959		804,552

	￦	28,488,676		(18,787,064	)		(123,623	)		9,577,989		9,712,719

(2)

Changes in property and equipment for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2013
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Change of consolidation scope		Ending balance
Land	￦	704,908		—		(6	)		220			—			1,786		706,908
Buildings		886,371		13		(89	)		2,069			(11,252	)		4,910		882,022
Structures		363,484		—		(7	)		5,646			(8,731	)		—		360,392
Machinery		6,316,192		33,398		(5,297	)		312,192			(479,297	)		7,481		6,184,669
Other		637,212		307,831		(714	)		(262,036	)		(31,281	)		5,027		656,039
Construction in progress		804,552		62,260		(273	)		(83,801	)		—			5,221		787,959

	￦	9,712,719		403,502		(6,386	)		(25,710	)		(530,561	)		24,425		9,577,989

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

12.

Property and Equipment, Continued


(In millions of won)
	For the three-month period ended March 31, 2012
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Impairment			Change of consolidation scope			Ending balance
Land	￦	730,361		1		—			229			—			—			—			730,591
Buildings		989,079		259		—			1,793			(13,268	)		—			—			977,863
Structures		301,115		8		(1	)		132			(8,744	)		—			—			292,510
Machinery		5,493,572		20,853		(2,393	)		202,538			(426,999	)		—			—			5,287,571
Other		711,461		411,481		(728	)		(346,612	)		(30,257	)		—			(1,554	)		743,791
Construction in progress		805,410		98,375		—			(236,226	)		—			(3,429	)		—			664,130

	￦	9,030,998		530,977		(3,122	)		(378,146	)		(479,268	)		(3,429	)		(1,554	)		8,696,456

13.

Investment Property

(1)

Investment property as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013							December 31, 2012
	Acquisition cost		Accumulated depreciation			Carrying amount		Carrying amount
Land	￦	12,417		—			12,417		12,638
Buildings		18,749		(5,026	)		13,723		14,841

	￦	31,166		(5,026	)		26,140		27,479

(2)

Changes in investment property for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended March 31, 2013
	Beginning balance		Transfer			Depreciation			Ending balance
Land	￦	12,638		(221	)		—			12,417
Buildings		14,841		(404	)		(714	)		13,723

	￦	27,479		(625	)		(714	)		26,140


(In millions of won)	For the three-month period ended March 31, 2012
	Beginning balance		Transfer			Depreciation			Ending balance
Land	￦	23,153		40			—			23,193
Buildings		247,933		(4,199	)		(1,842	)		241,892

	￦	271,086		(4,159	)		(1,842	)		265,085

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

14.

Goodwill

(1)

Goodwill as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Goodwill related to acquisition of Shinsegi Telecomm, Inc.	￦	1,306,236		1,306,236
Goodwill related to acquisition of SK Broadband Co., Ltd.		358,443		358,443
Other goodwill		71,482		79,804

	￦	1,736,161		1,744,483

(2)

Details of changes in goodwill for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Beginning balance	￦	1,744,483			1,749,933
Change of consolidation scope		1,660			(9,684	)
Impairment loss on goodwill		(9,982	)		—
Other decrease		—			(45	)

	￦	1,736,161			1,740,204

15.

Intangible Assets

(1)

Intangible assets as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)	March 31, 2013										December 31, 2012
	Acquisition cost		Accumulated depreciation			Accumulated impairment			Carrying amount		Carrying amount
Frequency use rights	￦	2,837,385		(1,203,764	)		(2,907	)		1,630,714		1,693,868
Land use rights		42,369		(27,848	)		—			14,521		16,062
Industrial rights		85,788		(25,856	)		—			59,932		60,104
Development costs		173,387		(148,235	)		(11,714	)		13,438		13,420
Facility usage rights		142,465		(79,018	)		—			63,447		65,340
Customer relations		53,005		(14,915	)		—			38,090		48,886
Memberships(*1)		127,861		—			(732	)		127,129		118,954
Other(*2)		2,213,327		(1,500,573	)		(6,247	)		706,507		673,024

	￦	5,675,587		(3,000,209	)		(21,600	)		2,653,778		2,689,658

(*1)	Memberships are classified as intangible assets with indefinite useful life and are not amortized.

(*2)	Other intangible assets consist of computer software and usage rights to a research facility which the Group built and donated to a university and the Group in turn is given rights-to-use for a definite number of years.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

15.

Intangible Assets, Continued

(2)

Details of changes in intangible assets for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2013
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Impairment			Change of consolidation scope			Ending balance
Frequency use rights	￦	1,693,868		—		—			—		(63,154	)		—			—			1,630,714
Land use rights		16,062		327		(169	)		—		(1,699	)		—			—			14,521
Industrial rights		60,104		833		—			—		(936	)		—			(69	)		59,932
Development costs		13,420		1,196		—			—		(1,414	)		(635	)		871			13,438
Facility usage rights		65,340		182		(12	)		—		(2,063	)		—			—			63,447
Customer relations		48,886		213		—			—		(11,009	)		—			—			38,090
Memberships		118,954		279		(614	)		—		—			—			8,510			127,129
Other		673,024		13,918		(13	)		62,467		(70,423	)		—			27,534			706,507

	￦	2,689,658		16,948		(808	)		62,467		(150,698	)		(635	)		36,846			2,653,778


(In millions of won)
	For the three-month period ended March 31, 2012
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Change of consolidation scope			Ending balance
Frequency use rights	￦	1,889,102		16,659		—			—		(43,542	)		—			1,862,219
Land use rights		19,327		613		(80	)		—		(1,665	)		—			18,195
Industrial rights		59,473		2,946		—			310		(1,175	)		(48	)		61,506
Development costs		20,961		58		—			—		(1,885	)		—			19,134
Facility usage rights		69,491		131		(38	)		—		(2,028	)		—			67,556
Customer relations		141,819		61		—			—		(21,299	)		—			120,581
Memberships		117,711		2,029		(106	)		—		—			(784	)		118,850
Other		677,919		18,218		(1,568	)		53,126		(73,100	)		(1,709	)		672,886

	￦	2,995,803		40,715		(1,792	)		53,436		(144,694	)		(2,541	)		2,940,927

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

15.

Intangible Assets, Continued

(3)

The carrying amount and residual useful lives of major intangible assets as of March 31, 2013 are as follows:


(In millions of won)
	Amount		Description	Residual useful lives
W-CDMA license	￦	366,023	Frequency use rights relating to W-CDMA service			(*1)
W-CDMA license		61,166	Frequency use rights relating to W-CDMA service			(*2)
800MHz license		334,488	Frequency use rights relating to CDMA and LTE service			(*3)
1.8GHz license		854,924	Frequency use rights relating to LTE service			(*4)
WiBro license		14,113	WiBro service			(*5)
Customer relationships		28,155	Customer relationships related to acquisition of SK Broadband Co., Ltd.		6 months

	￦	1,658,869

(*1)

The Group purchased the W-CDMA license from Korea Communication Commission (“KCC”) on December 4, 2001. Amortization of the W-CDMA license commenced once the Group began its commercial W-CDMA services on December 29, 2003 under a straight-line basis over the remaining useful life of the license. The W-COMA license will expire in December 2016.

(*2)

The Group purchased the additional W-CDMA license from KCC in May 2010. Amortization of the additional W-CDMA license commenced once the Group started its related commercial W-CDMA services on October 7, 2010, under a straight-line basis over the remaining useful life of the W-CDMA license. The additional W-COMA license will expire in December 2016.

(*3)

The Group purchased 800MHz license from KCC in June 2011. Amortization of the 800MHz license commenced once the Group started its related commercial CDMA and LTE services on July 1, 2011, under a straight-line basis over the remaining useful life of the 800MHz license. The 800MHz license will expire in June 2021.

(*4)

The Group purchased 1.8GHz license from KCC in December 2011. Amortization of the 1.8GHz license will commence when the Group starts its related commercial LTE services in the second half of year 2012, under a straight-line basis over the remaining useful life of the 1.8GHz license. The 1.8GHz license will expire in December 2021.

(*5)	The Group additionally purchased Wibro license in March 2012. Amortization of this WiBro license commenced when the Group started its commercial WiBro services on March 30, 2012, under a straight line basis over the remaining useful life. This Wibro license will expire in March 2019.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

16.

Borrowings and Debentures

(1)

Short-term borrowings as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	Lender	Annual interest rate (%)		March 31, 2013		December 31, 2012
Commercial Paper	Meritz Securities Co., Ltd., etc		2.97	￦	120,000		130,000
Short-term borrowings	Kookmin Bank, etc.		3.98		40,000		470,245

				￦	160,000		600,245

(2)

Long-term borrowings as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)	Maturity	March 31, 2013			December 31, 2012
Bank of Communications (*)	6M Libor + 0.29	Oct. 10, 2013	￦ (USD	33,363 30,000	)	(USD	32,133 30,000	)
Bank of China (*)	6M Libor + 0.29	Oct. 10, 2013	(USD	22,242 20,000	)	(USD	21,422 20,000	)
DBS Bank (*)	6M Libor + 0.29	Oct. 10, 2013	(USD	27,803 25,000	)	(USD	26,778 25,000	)
SMBC (*)	6M Libor + 0.29	Oct. 10, 2013	(USD	27,803 25,000	)	(USD	26,778 25,000	)
Kookmin Bank and 13 others	4.48	Feb. 14, 2015		—			350,000
Korea Development Bank	3.56	Jun. 17, 2013		881			1,762
Korea Development Bank	3.56	Jun. 16, 2014		4,118			4,942
Shinhan Bank	3.56	Jun. 15, 2015		7,705			8,561
Kookmin Bank	3.56	Jun. 15, 2016		9,749			9,749
Kookmin Bank	3.56	Mar. 15, 2017		5,996			5,996

Sub-total				139,660			488,121
Less present value discount on long-term borrowings				—			(1,667	)

				139,660			486,454
Less current portion of long-term borrowings				(121,248	)		(117,217	)

Long-term borrowings			￦	18,412			369,237

(*)	As of March 31, 2013, 6M Libor rate is 0.44%.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

16.

Borrowings and Debentures, Continued

(3)

Debentures as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won, thousands of U.S. dollars and thousands of other currencies)
	Purpose	Maturity	Annual interest rate (%)	March 31, 2013			December 31, 2012
Unsecured private bonds	Refinancing fund	2016	5.00	￦	200,000			200,000
Unsecured private bonds		2013	4.00		200,000			200,000
Unsecured private bonds		2014	5.00		200,000			200,000
Unsecured private bonds	Other fund	2015	5.00		200,000			200,000
Unsecured private bonds		2018	5.00		200,000			200,000
Unsecured private bonds		2013	6.92		250,000			250,000
Unsecured private bonds		2016	5.54		40,000			40,000
Unsecured private bonds		2016	5.92		230,000			230,000
Unsecured private bonds	Operating fund	2016	3.95		110,000			110,000
Unsecured private bonds	Operating fund	2021	4.22		190,000			190,000
Unsecured private bonds	Operating and refinancing fund	2019	3.24		170,000			170,000
Unsecured private bonds		2022	3.30		140,000			140,000
Unsecured private bonds		2032	3.45		90,000			90,000
Unsecured private bonds(*1)	Operating fund	2014	4.86		20,000			20,000
Unsecured private bonds(*1)		2015	4.62		10,000			10,000
Unsecured private bonds(*2)		2013	3.99		150,000			150,000
Unsecured private bonds(*2)		2014	4.53		290,000			290,000
Unsecured private bonds(*2)		2014	4.40		100,000			100,000
Unsecured private bonds(*2)		2015	4.09		110,000			110,000
Unsecured private bonds(*2)		2015	4.14		110,000			110,000
Unsecured private bonds(*2)		2017	4.28		100,000			100,000
Unsecured private bonds(*2)		2015	3.14		130,000			130,000
Unsecured private bonds(*2)		2017	3.27		120,000			120,000
Foreign global bonds		2027	6.63	(USD	444,840 400,000	)	(USD	428,440 400,000	)
		2027	6.63	(USD	444,840 400,000	)	(USD	428,440 400,000	)
Exchangeable bonds(*5)	Refinancing fund	2014	1.75	(USD	443,765 332,528	)	(USD	405,678 332,528	)
Floating rate notes(*3)	Operating fund	2014	3M Libor + 1.60	(USD	278,025 250,000	)		267,775
		2014	3M Libor + 1.60	(USD	278,025 250,000	)	(USD	250,000	)
Floating rate notes(*4)		2014	SOR rate + 1.20	(SGD	58,258 65,000	)		56,906
		2014	SOR rate + 1.20	(SGD	58,258 65,000	)	(SGD	65,000	)
Swiss unsecured private bonds		2017	1.75	(CHF	351,300 300,000	)		351,930
		2017	1.75	(CHF	351,300 300,000	)	(CHF	300,000	)
Foreign global bonds		2018	2.13	(USD	778,470 700,000	)		749,770
		2018	2.13	(USD	778,470 700,000	)	(USD	700,000	)
Australia unsecured private bonds		2017	4.75		347,427			—
Australia unsecured private bonds		2017	4.75	(AUD	300,000	)		—
Floating rate notes(*3)		2020	3M Libor + 0.88		333,630			—
Floating rate notes(*3)		2020	3M Libor + 0.88	(USD	300,000	)		—

Sub-total					6,395,715			5,620,499
Less discounts on bonds					(45,480	)		(43,500	)

					6,350,235			5,576,999
Less current portion of bonds					(618,372	)		(597,779	)

				￦	5,731,863			4,979,220

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

16.

Borrowings and Debentures, Continued

(*1)	Unsecured private bonds were issued by SK Telink Co., Ltd., a subsidiary of the Parent Company.

(*2)	Unsecured private bonds were issued by SK Broadband Co, Ltd., a subsidiary of the Parent Company.

(*3)	As of March 31, 2013, 3M Libor rate is 0.28%.

(*4)	As of March 31, 2013, SOR rate is 0.20%.

(*5)

On April 7, 2009, the Group issued exchangeable bonds with a maturity of five years in the principal amount of USD 332,528,000 for USD 326,397,463 with a coupon rate of 1.75%. As of March 31, 2013, fair value of the exchangeable bonds is USD 399,033,600. The exchange price could be adjusted and the exchange price is ￦190,006 with the exchange rate of ￦1,383.40 per USD 1.

The Group may redeem the principal amount after 3 years from the issuance date if the market price exceeds 130% of the exchange price during a predetermined period. The exchange right may be exercised during the period from May 18, 2009 to March 24, 2014 and the number of common shares that can be exchanged as of March 31, 2013 is 2,421,077 shares.

Exchange 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 Group’s voting stock. If such 49% ownership limitation is violated due to the exercise of exchange rights, the Group will pay the bond holder a cash settlement which will be determined at the average price of one day after a holder exercises its exchange right or the weighted average price for the following five or twenty business days. Unless either previously redeemed or exchanged, the notes are redeemable at 100% of the principal amount at maturity.

In accordance with a resolution of the general shareholder’s meeting on March 22, 2013, the exchange price has changed from ￦197,760 to ￦190,006 and the number of common shares that can be exchanged was changed from 2,326,149 shares to 2,421,077 shares due to the payment of periodic dividends. During the three-month period ended March 31, 2013, no exchange was made.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

17.

Long-term Payables - other

(1)

Long-term payables as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Payables related to acquisition of W-CDMA licenses	￦	555,416		705,605
Other (*)		10,183		9,903

	￦	565,599		715,508

(*)	Other includes vested compensation claims of employees who have rendered long-term service, etc.

(2)

As of March 31, 2013 and December 31, 2012, long-term payables consist of payables related to acquisition of W-CDMA licenses for 2.1GHz, 800MHZ, 1.8GHz and 2.3GHz frequency and other details are as follows:


(In millions of won)
	2.1GHz			800MHz			1.8GHz			2.3GHz			Total
Period of repayment		2012~2014			2013~2015			2012~2021			2014~2016
Coupon rate (*1)		3.58	%		3.51	%		3.00	%		3.00	%
Annual effective interest rate (*2)		5.89	%		5.69	%		5.25	%		5.80	%
Nominal value	￦	52,600			208,250			746,250			8,650			1,015,750
Present value discount on long-term payments - other		(3,237	)		(11,060	)		(66,797	)		(641	)		(81,735	)

Present value of long-term payables - other at the time of acquisition		49,363			197,190			679,453			8,009			934,015

Nominal value		35,066			208,250			671,625			8,650			923,591
Present value discount on long-term payables - other		(3,076	)		(10,178	)		(64,230	)		(641	)		(78,125	)
Current portion of long-term payables - other		(17,533	)		(69,417	)		(74,625	)		—			(161,575	)
Accumulated amortization of present value discount at December 31, 2012		2,693			5,955			12,911			155			21,714

Carrying amount as of December 31, 2012		17,150			134,610			545,681			8,164			705,605
Amortization of present value discount		173			966			2,884			52			4,075
Current portion of amortization of present value discount		(161	)		(882	)		(2,567	)		—			(3,610	)
Less current portion of long-term payables - other		(17,162	)		(66,711	)		(64,156	)		(2,625	)		(150,654	)

Carrying amount at March 31, 2013	￦	—			67,983			481,842			5,591			555,416

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

17.

Long-term Payables - other, Continued

(*1)	The Group applied an annual interest rate equal to the previous year average lending rate of public funds financing account less1%.

(*2)	The Group estimated the discount rate based on its credit ratings and corporate bond yield rate as there is no market interest rate available for long-term payables-other.

(2)

The repayment schedule of long-term payables - other as of March 31, 2013 is as follows:


(In millions of won)
	Amount
2014	￦	164,458
2015		146,925
2016		77,508
2017 and thereafter		373,125

	￦	762,016

18.

Provisions

Change in provisions for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2013											As of March 31, 2013
	Beginning balance		Increase		Utilization *()**			Others		Ending balance		Current		Non-current
Provision for handset subsidy	￦	353,383		1,485		(111,815	)		—		243,053		199,990		43,063
Provision for restoration		39,895		467		(107	)		1,224		41,479		8,364		33,115
Other provisions		590		—		(36	)		8		562		73		489

	￦	393,868		1,952		(111,958	)		1,232		285,094		208,427		76,667

(*)	Utilization includes reversal of other provisions of ￦1 million.


(In millions of won)
	For the three-month period ended March 31, 2012												As of March 31, 2012
	Beginning balance		Increase		Utilization			Others			Ending balance		Current		Non-current
Provision for handset subsidy	￦	762,238		169,931		(195,806	)		—			736,363		627,946		108,417
Provision for restoration		36,379		684		(288	)		2,003			38,778		4,738		34,040
Other provisions		942		40		(44	)		(92	)		846		52		794

	￦	799,559		170,655		(196,138	)		1,911			775,987		632,736		143,251

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

18.

Provisions, Continued

The Group has provided handset subsidy for the subscribers who purchase handsets on an installment basis and recognized provision for handset subsidy in accordance with the payment duration as of period end.

19.

Finance Lease Liabilities

(1)

Finance Lease

The Group has leased telecommunication equipment under the finance lease agreement with Cisco Capital Korea and display equipment under the finance lease agreement with Hana Capital. Finance lease liabilities as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Finance Lease Liabilities
Current portion of long-term finance lease liabilities	￦	19,981		19,904
Long-term finance lease liabilities		18,106		22,036

	￦	38,087		41,940

The Group’s related interest and principal as of March 31, 2013, December 31, 2012 are as follows:


(In millions of won)	March 31, 2013					December 31, 2012
	Minimum lease payment		Present value			Minimum lease payment		Present value
Less than 1 year	￦	21,335		19,981			21,375		19,904
1~5 years		18,682		18,106			22,744		22,036

Sub-total		40,017		38,087			44,119		41,940

Current portion of long-term finance lease liabilities				(19,981	)				(19,904	)

Long-term finance lease liabilities				18,106					22,036

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

(2)

Operating Lease

The Group entered into operating lease and sublease agreements in relation to rented office space and the expected future lease payments and lease revenues are as follows:


(In millions of won)
	Lease payments		Lease revenues
Less than 1 year		30,650		1,050
1~5 years	￦	79,375		1,074
More than 5 years		79,673		1,282

	￦	189,698		3,406

(3)

Sales and Leaseback

For the year ended December 31, 2012, the Group disposed a portion of its property and equipment and investment property, and entered into lease agreements with respect to those assets. This sale and leaseback transaction is considered as an operating lease and expected future lease payments and lease revenues are explained in Note 19-(2).

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

20.

Defined Benefit Liabilities

(1)

Details of defined benefit liabilities as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013			December 31, 2012
Present value of defined benefit obligations	￦	271,034			244,867
Fair value of plan assets		(168,692	)		(158,345	)

	￦	102,342			86,522

(2)

Principal actuarial assumptions as of March 31, 2013 and December 31, 2012 are as follows:


	March 31, 2013	December 31, 2012
Discount rate for defined benefit obligations	3.28% ~ 4.75%	3.28% ~ 4.75%
Expected rate of salary increase	3.00% ~ 5.81%	3.00% ~ 5.81%

Discount rate for defined benefit obligation is determined based on the Group’s credit ratings and yield rate of corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of salary increase is determined based on the Group’s historical promotion index, inflation rate and salary increase ratio in accordance with salary agreement.

(3)

Changes in defined benefit obligations for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Beginning balance	￦	244,866			188,120
Current service cost		21,723			19,367
Interest cost		2,112			2,005
Remeasurement
- Adjustment based on experience		3,421			5,488
Benefit paid		(15,801	)		(15,862	)
Others(*)		14,713			(3,451	)

Ending balance	￦	271,034			195,667

(*)

Others include liabilities of ￦14,703 million, transferred due to business combination and transfer to construction in progress during the three-month period ended March 31, 2013 and effects of changes in consolidation scope of ￦(4,185) million in relation to the disposal of Ntreev Soft Co., Ltd. during the three-month period ended March 31, 2012.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

20.

Defined Benefit Liabilities, Continued

(4)

Changes in plan assets for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Beginning balance	￦	158,345			102,179
Expected return on plan assets		1,431			949
Remeasurement factor of plan assets		785			243
Contributions by employer directly to plan assets		45			1,388
Benefit paid		(5,077	)		(2,229	)
Others		13,163			3

Ending balance	￦	168,692			102,533

(*)	Others include assets of ￦14,334 million transferred due to business combination and effects of changes in consolidation scope of ￦(1,312) million during the three-month period ended March 31, 2013.

(5)

Expenses recognized in profit and loss for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Current service cost	￦	21,723		19,367
Net interest cost		681		1,056

	￦	22,404		20,423

The above costs are recognized in labor cost, research and development, or capitalized into construction-in-progress.

(6)

Details of plan assets as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Equity instruments	￦	1,630		1,221
Debt instruments		42,689		34,269
Short-term financial instruments, etc.		124,373		122,855

	￦	168,692		158,345

Actual return on plan assets for the three-month periods ended March 31, 2013 and 2012 amounted to ￦2,216 million and ￦1,191 million, respectively.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

21.

Derivative Instruments

(1)

Currency swap contracts under cash flow hedge accounting

The Group has entered into a floating-to-fixed cross currency 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 long-term borrowings with face amounts totaling USD 100,000,000 borrowed on October 10, 2006. As of March 31, 2013, in connection with unsettled cross currency interest rate swap contract to which cash flow hedge accounting is applied since May 12, 2010, an accumulated loss on valuation of derivatives amounting to ￦2,802 million (net of tax effect totaling ￦394 million and foreign currency translation loss arising from U.S. dollar denominated long-term borrowings totaling ￦16,410 million) is accounted for as accumulated other comprehensive loss.

In addition, the Group has entered into a fixed-to-fixed cross currency swap contract with Morgan Stanley and five other banks to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds with face amounts totaling USD 400,000,000 at annual fixed interest rate of 6.63% issued on July 20, 2007. As of March 31, 2013, in connection with unsettled cross currency swap contract to which cash flow hedge accounting is applied since May 12 2010, an accumulated loss on valuation of derivatives amounting to ￦37,356 million (net of tax effect totaling ￦11,926 million and foreign currency translation gain arising from unguaranteed U.S. dollar denominated bonds totaling ￦12,483 million) is accounted for as accumulated other comprehensive loss. In connection with the cross currency swap contract, gain on valuation of currency swap which was incurred before application of hedge accounting, amounting to ￦129,806 million was recognized in profit or loss.

In addition, the Group has entered into a floating-to-fixed cross currency interest rate swap contract with DBS Bank and Citi Bank to hedge the foreign currency risk and the interest rate risk of its U.S. dollar denominated bonds with face amounts totaling USD 250,000,000 issued on December 15, 2011. As of March 31, 2013, in connection with unsettled cross currency interest rate swap contract, an accumulated gain on valuation of derivatives amounting to ￦5,767 million (net of tax effect totaling ￦1,841 million and foreign currency translation gain arising from unguaranteed U.S. dollar denominated bonds totaling ￦11,490 million) is accounted for as accumulated other comprehensive income.

In addition, the Group has entered into a floating-to-fixed cross currency interest rate swap contract with United Overseas Bank to hedge the foreign currency risk and the interest rate risk of its Singapore dollar denominated bonds with face amounts totaling SGD 65,000,000 issued on December 15, 2011. As of March 31, 2013, in connection with unsettled cross currency interest rate swap contract an accumulated loss on valuation of derivatives amounting to ￦173 million (net of tax effect totaling ￦55 million and foreign currency translation loss arising from unguaranteed Singapore dollar denominated bonds totaling ￦791 million) is accounted for as accumulated other comprehensive loss.

In addition, the Group has entered into a fixed-to-fixed cross currency swap contract with Citi Bank and five other banks to hedge the foreign currency risk of its Swiss Franc denominated bonds with face amounts totaling CHF 300,000,000 issued on June 12, 2012. As of March 31, 2013, in connection with the unsettled cross currency swap contract, an accumulated loss on valuation of derivatives amounting to ￦8,912 million (net of tax effect totaling ￦2,845 million and foreign currency translation gain arising from unguaranteed Swiss Franc denominated bonds totaling ￦12,176 million) is accounted for as accumulated other comprehensive loss.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

21.

Derivative Instruments, Continued

(1)

Currency swap contracts under cash flow hedge accounting, Continued

In addition, the Group has entered into a fixed-to-fixed cross currency swap contract with Barclays and nine other banks to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds with face amounts totaling USD 700,000,000 issued on November 1, 2012. As of December 31, 2013, in connection with the unsettled cross currency swap contract, an accumulated loss on valuation of derivatives amounting to ￦12,029 million (net of tax effect totaling ￦3,840 million and foreign currency translation loss arising from unguaranteed U.S. dollar denominated bonds totaling ￦14,883 million) is accounted for as accumulated other comprehensive loss.

In addition, the Group has entered into a fixed-to-fixed cross currency swap contract with BNP Paribas and three other banks to hedge the foreign currency risk of unguaranteed Australia dollar denominated bonds with face amounts totaling AUD 300,000,000 issued on January 17, 2013. As of March 31, 2013, in connection with the unsettled cross currency swap contract, an accumulated gain on valuation of derivatives amounting to ￦307 million (net of tax effect totaling ￦98 million and foreign currency translation loss arising from unguaranteed Australia dollar denominated bonds totaling ￦11,703 million) is accounted for as accumulated other comprehensive income.

In addition, the Group has entered into a floating-to-fixed cross currency interest rate swap contract with DBS Bank to hedge the foreign currency risk and the interest rate risk of its US dollar denominated bonds with face amounts totaling USD 300,000,000 issued on March 07, 2013. As of March 31, 2013, in connection with unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to ￦4,077 million (net of tax effect totaling ￦1,302 million and foreign currency translation loss arising from unguaranteed US dollar denominated bonds totaling ￦8,506 million) is accounted for as accumulated other comprehensive loss.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

21.

Derivative Instruments, Continued

(2)

As of March 31, 2013, fair values of above derivatives recorded in assets or liabilities and details of derivative instruments are as follows:


(In millions of won, thousands of U.S. dollars, Singapore dollars, Australian dollars, and Swiss franc)
					Fair value
	Hedged item	Amount		Duration of Contract	Designated as Cash Flow Hedge		Not Designated		Total
Current assets:
Floating-to-fixed cross currency swap	U.S. dollar denominated bonds	USD	100,000	Oct. 10, 2006 ~ Oct. 10, 2013	￦	13,214		—		13,214
Convertible option	Convertible bonds (*)	KRW	50,000	Sep. 01, 2009 ~ Aug. 31, 2014		—		463		463
Non-current assets:
Fix-to-fixed cross currency swap	U.S. dollar denominated bonds	USD	400,000	Jul. 20, 2007 ~ Jul. 20, 2027		68,040		—		68,040
Floating-to-fixed cross currency swap	Singapore dollar denominated bonds	SGD	65,000	Dec. 15, 2011 ~ Dec. 12, 2014		562		—		562
Fix-to-fixed cross currency swap	Australia dollar denominated bonds	AUD	300,000	Jan. 17, 2013 ~ Nov. 17, 2017		12,107		—		12,107
Floating-to-fixed cross currency swap	U.S. dollar denominated bonds	USD	300,000	Mar. 07, 2013 ~ Mar. 07, 2020		3,127		—		3,127
Convertible option	Convertible bonds (*)	KRW	50,000	Sep. 01, 2009 ~ Aug. 31, 2014		—		226		226

Total assets					￦	97,050		689		97,739

Non-current liabilities:
Floating-to-fixed interest rate swap	U.S. dollar denominated bonds	USD	250,000	Dec. 15, 2011 ~ Dec.12, 2014		3,882		—		3,882
Fix-to-fixed cross currency swap	Swiss franc denominated bonds	CHF	300,000	Jun. 12, 2012 ~ Jun. 12, 2017		23,933		—		23,933
Fix-to-fixed cross currency swap	U.S. dollar denominated bonds	USD	700,000	Nov. 01, 2012 ~ May. 01, 2018		987		—		987

Total liabilities					￦	28,802		—		28,802

(*)	Fair value of the conversion option of convertible bonds held by SK Communications Co., Ltd., a subsidiary, amounting to ￦689 million was accounted for as non-current derivative financial assets.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

22.

Share Capital and Capital Surplus (Deficit) and Other Capital Adjustments

The Parent Company’s outstanding share capital consists entirely of common stock with a par value of ￦500. The number of authorized, issued and outstanding common shares and capital surplus (deficit) and other capital adjustments as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won, except for share data)
	March 31, 2013			December 31, 2012
Authorized shares	￦	220,000,000			220,000,000
Issued shares(*1)		80,745,711			80,745,711
Share capital
Common stock		44,639			44,639
Capital surplus (deficit) and other capital adjustments:
Paid-in surplus		2,915,887			2,915,887
Treasury stock		(2,410,451	)		(2,410,451	)
Loss on disposal of treasury stock		(18,855	)		(18,855	)
Others(*2)		(838,559	)		(775,464	)

	￦	(351,978	)		(288,883	)

(*1)

During the years ended December 31, 2003, 2006 and 2009, the Parent Company retired 7,002,235 shares, 1,083,000 shares and 448,000 shares, respectively, of treasury stock which reduced its retained earnings before appropriation in accordance with the Korean Commercial Law. As a result, the Parent Company’s outstanding shares have decreased without change in the share capital.

(*2)	Others primarily consist of net losses on disposals of businesses and the excess of the consideration paid by the Group over the carrying values of net assets acquired from common control transactions with entities within the control of the Ultimate Controlling Entity.

There were no changes in share capital for the three-month period ended March 31, 2013 and the years ended December 31, 2012.

23.

Treasury Stock

Through 2009, the Parent Company acquired 8,400,712 shares of treasury stock in the open market for ￦1,992,083 million to provide stock dividends, issue new stocks, merge with Shinsegi Telecom, Inc. and SK IMT Co., Ltd., increase shareholder value, and to stabilize its stock prices when needed.

In addition, the Parent Company acquired 1,250,000 shares of treasury stock for ￦210,356 million from July 26, 2010 to October 20, 2010 and 1,400,000 shares of treasury stock for ￦208,012 million from July 21, 2011 to September 28, 2011, in accordance with the resolution of the Board of Directors on July 22, 2010 and July 19, 2011, respectively.

As a result of these treasury stock transactions, as of March 31, 2013 and December 31, 2012, the Parent Company has 11,050,712 shares of treasury stock at ￦2,410,451 million.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

24.

Retained Earnings

(1)

Retained earnings as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Appropriated:
Legal reserve	￦	22,320		22,320
Reserve for research & manpower development		155,766		220,000
Reserve for business expansion		9,376,138		9,106,138
Reserve for technology development		2,271,300		1,901,300

		11,825,524		11,249,758
Unappropriated		64,759		874,899

	￦	11,890,283		12,124,657

(2)

Legal reserve

The Korean Commercial Code requires the Parent Company to appropriate as a legal reserve at least 10% of cash dividends paid for each accounting period until the reserve equals 50% of outstanding share capital. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to share capital.

(3)

Reserve for research & manpower development

Reserve for research and manpower development were appropriated in order to recognize certain tax deductible benefits through the early recognition of future expenditure for tax purposes. These reserves will be reversed from appropriated and retained earnings in accordance with the relevant tax laws. Such reversal will be included in taxable income in the year of reversal.

25.

Reserves

(1)

Details of reserves as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013			December 31, 2012
Net change in unrealized fair value of available-for-sale financial assets	￦	187,822			207,063
Net change in other comprehensive income of investments in associates and joint ventures		(126,204	)		(175,044	)
Net change in unrealized fair value of derivatives		(54,102	)		(46,652	)
Foreign currency translations differences for foreign operations		(5,340	)		(11,003	)

	￦	2,176			(25,636	)

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

25.

Reserves, Continued

(2)

Change in reserves for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	Net change in unrealized fair value of available-for- sale financial assets			Net change in other comprehensive income of investment in associates			Net change in unrealized fair value of derivatives			Foreign currency translation differences for foreign operations			Total
Balance at January 1, 2012	￦	354,951			(93,598	)		(25,099	)		23,810			260,064
Changes		(17,436	)		6,317			(20,745	)		(7,536	)		(39,400	)
Tax effect		4,135			68			4,573			—			8,776

Balance at March 31, 2012		341,650			(87,213	)		(41,271	)		16,274			229,440

Balance at January 1, 2013		207,063			(175,044	)		(46,652	)		(11,003	)		(25,636	)
Changes		(25,409	)		51,057			(9,829	)		5,663			21,482
Tax effect		6,168			(2,217	)		2,379			—			6,330

Balance at March 31, 2013	￦	187,822			(126,204	)		(54,102	)		(5,340	)		2,176

26.

Other Operating Expenses

Details of other operating expenses for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Other Operating Expenses:
Communication expenses	￦	13,760			17,327
Utilities		54,698			44,451
Taxes and dues		7,670			31,121
Repair		64,416			60,780
Research and development		81,597			66,544
Training		6,388			6,076
Bad debt for accounts receivables - trade		12,113			7,257
Reversal of allowance for doubtful accounts		(50	)		(5,654	)
Travel		6,526			7,084
Supplies and other		52,047			21,894

	￦	299,165			256,880

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

27.

Other Non-operating Income and Expenses

(1)

Details of other non-operating income and expenses for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012

Other Non-operating Income:
Fees revenues	￦	758		465
Gain on disposal of property and equipment and intangible assets		2,009		1,010
Others		11,096		8,467

	￦	13,863		9,942

Other Non-operating Expenses:
Loss on impairment of property and equipment and intangible assets	￦	10,617		3,429
Loss on disposal of property and equipment and intangible assets		5,379		1,994
Donations		12,162		12,907
Bad debt for accounts receivable - other		10,530		19,687
Others		7,914		6,037

	￦	46,602		44,054

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

28.

Finance Income and Costs

(1)

Details of finance income and costs for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012

Finance Income:
Interest income	￦	17,571		32,396
Dividends		10,149		22,333
Gain on foreign currency transactions		2,538		1,953
Gain on foreign currency translation		2,939		819
Gain on disposal of long-term investment securities		1,041		6,412
Gain on settlement of derivatives		2,274		4,292
Gain on valuation of financial asset at fair value through profit or loss		938		—

	￦	37,450		68,205


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Finance Costs:
Interest expense	￦	89,907		97,035
Loss on foreign currency transactions		3,035		1,182
Loss on foreign currency translation		3,975		859
Loss on disposal of long-term investment securities		190		7,505
Loss on valuation of financial asset at fair value through profit or loss		—		640
Loss on valuation of financial liability at fair value through profit or loss		38,087		3,733
Impairment loss of long-term investment securities		13,569		—

	￦	148,763		110,954

(2)

Details of interest income included in finance income for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Interest income on cash equivalents and deposits	￦	11,394		20,789
Interest income on installment receivables and others		6,177		11,607

	￦	17,571		32,396

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

28.

Finance Income and Costs, Continued

(3)

Details of interest expense included in finance costs for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Interest expense on bank overdrafts and borrowings	￦	15,752		15,547
Interest expense on debentures		62,165		52,355
Interest on finance lease liabilities		411		811
Others		11,579		28,322

	￦	89,907		97,035

(4)

Details of impairment losses for financial assets for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Available-for-sale financial assets	￦	13,569		—
Bad debt for accounts receivable - trade		12,113		7,257
Bad debt for accounts receivable - other		10,530		19,687

	￦	36,212		26,944

29.

Income Tax Expense

Income tax expense was recognized as current tax expense adjusted to changes in estimates related to prior periods, deferred tax expenses by origination and reversal of temporary differences, and income tax recognized in other comprehensive income.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

30.

Earnings per Share

(1)

Basic earnings per share

Basic earnings per share for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


(In millions of won, except for share data)	For the three-month period ended
	March 31, 2013		March 31, 2012
Profit for the period	￦	354,154		306,424
Weighted average number of common shares outstanding		69,694,999		69,694,999

Basic earnings per share (In won)	￦	5,081		4,397

The weighted average number of common shares outstanding for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


(In shares)	Number of shares			Weighted number of days	Weighted number of shares
Outstanding common shares at January 1, 2013		80,745,711		90/90		80,745,711
Effect of treasury stock		(11,050,712	)	90/90		(11,050,712	)

Number of shares at March 31, 2013		69,694,999				69,694,999


(In shares)	Number of shares			Weighted number of days	Weighted number of shares
Outstanding common shares at January 1, 2012		80,745,711		91/91		80,745,711
Effect of treasury stock		(11,050,712	)	91/91		(11,050,712	)

Number of shares at March 31, 2012		69,694,999				69,694,999

(2)

Diluted earnings per share

Diluted earnings per share for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


(In millions of won, except for share data)	For the three-month period ended
	*March 31, 2013()**		March 31, 2012
Diluted profit for the period	￦	354,154		310,486
Diluted weighted average number of common shares outstanding		69,694,999		72,003,405

Diluted earnings per share (In won)	￦	5,081		4,312

(*)

The number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds is excluded from the diluted earnings per share calculation for the three-month period ended March 31, 2013 as the effect of exchangeable bond would have been ant-dilutive (diluted shares of 2,421,077); thus, diluted earnings per share for the three-month period ended March 31, 2013 is the same as basic earnings per share.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

30.

Earnings per Share, Continued

Diluted profit for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Profit for the period	￦	354,154		306,424
Effect of exchangeable bonds		—		4,062

Diluted profit for the period	￦	354,154		310,486

Adjusted weighted average number of common shares outstanding for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


(In shares)	For the three-month period ended
	March 31, 2013		March 31, 2012
Weighted average number of common shares outstanding		69,694,999		69,694,999
Effect of exchangeable bonds(*)		—		2,308,406

Adjusted weighted average number of common shares outstanding		69,694,999		72,003,405

(*)	Effect of exchangeable bonds represents weighted average number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds, which could be exchanged to treasury stock.

(3)

Basic loss per share from discontinued operation


(In millions of won, shares)	For the three-month period ended
	March 31, 2013		March 31, 2012
Loss from discontinued operation attributable to owners of the Parent Company		—		9,893
Weighted average number of common shares outstanding		69,694,999		69,694,999

Basic loss per share (In won)		—		142

Diluted loss per share from discontinued operation is the same as basic loss per share from discontinued operation.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

31.

Categories of Financial Instruments

(1)

Financial assets by categories as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	￦	—		—		1,124,348		—		1,124,348
Financial instruments		—		—		339,285		—		339,285
Short-term investment securities		—		188,454		—		—		188,454
Long-term investment securities(*1)		16,294		974,406		—		—		990,700
Accounts receivable - trade		—		—		2,236,969		—		2,236,969
Loans and receivables(*2)		—		—		1,112,155		—		1,112,155
Derivative financial assets(*3)		689		—		—		97,050		97,739

	￦	16,983		1,162,860		4,812,757		97,050		6,089,650


(In millions of won)
	December 31, 2012
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	￦	—		—		920,125		—		920,125
Financial instruments		—		—		514,561		—		514,561
Short-term investment securities		—		60,127		—		—		60,127
Long-term investment securities(*1)		15,356		938,356		—		—		953,712
Accounts receivable - trade		—		—		1,968,297		—		1,968,297
Loans and receivables(*2)		—		—		981,693		—		981,693
Derivative financial assets(*3)		689		—		—		61,959		62,648

	￦	16,045		998,483		4,384,676		61,959		5,461,163

(*1)	The entire amount of long-term investment securities was designated as financial assets at fair value through profit or loss as the embedded derivative (conversion right option), which should be separated from the main contract, could not be separately measured.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

31.

Categories of Financial Instruments, Continued

(*2)	Details of loans and receivables as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Short-term loans	￦	93,306		84,908
Accounts receivable - other		697,239		582,098
Accrued income		19,320		8,715
Other current assets		1,651		431
Long-term loans		61,942		69,299
Guarantee deposits		238,697		236,242

	￦	1,112,155		981,693

(*3)	Derivative financial assets classified as financial assets at fair value through profit or loss is the fair value of conversion right of convertible bonds held by SK Communications Co., Ltd., a subsidiary of the Parent Company.

(2)

Financial liabilities by categories as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)	March 31, 2013
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Accounts payable - trade	￦	—		253,537		—		253,537
Derivative financial liabilities		—		—		28,802		28,802
Borrowings		—		299,660		—		299,660
Debentures(*1)		443,765		5,906,470		—		6,350,235
Accounts payable - other and other payables(*2)		—		3,966,172		—		3,966,172

	￦	443,765		10,425,839		28,802		10,898,406


(In millions of won)	December 31, 2012
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Accounts payable - trade	￦	—		253,884		—		253,884
Derivative financial liabilities		—		—		63,599		63,599
Borrowings		—		1,086,699		—		1,086,699
Debentures(*1)		405,678		5,171,321		—		5,576,999
Accounts payable - other and other payables(*2)		—		3,646,486		—		3,646,486

	￦	405,678		10,158,390		63,599		10,627,667

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

31.

Categories of Financial Instruments, Continued

(*1)	The entire amount of debentures was designated as financial liabilities at fair value through profit or loss as the embedded derivative (conversion right option), which should be separated from the main contract, could not be separately measured.

(*2)	Details of accounts payable and other payables as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Accounts payable - other	￦	2,203,100		1,811,038
Withholdings		1,998		1,840
Accrued expenses		979,105		890,863
Current portion of long-term payables - other		170,635		177,870
Long-term payables - other		565,599		715,508
Finance lease liabilities		18,106		22,036
Other non-current liabilities		27,629		27,331

	￦	3,966,172		3,646,486

32.

Financial Risk Management

(1)

Financial risk management

The Group is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates, interest rates and equity prices. The Group implements a risk management system to monitor and manage these specific risks.

The Group’s financial assets under financial risk management consist of cash and cash equivalents, financial instruments, financial assets available-for-sale, trade and other receivables. Financial liabilities consist of trade and other payables, borrowings, and debentures.

Market risk

(i)

Currency risk

The Group is exposed to currency risk mainly on exchange fluctuations on recognized assets and liabilities. The Group manages currency risk by currency forward, etc. if needed to hedge currency risk on business transactions. Currency risk occurs on forecasted transaction and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Group.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

32.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Monetary foreign currency assets and liabilities as of March 31, 2013 are as follows:


(In millions of won, thousands of U.S. dollars, thousands of Euros, thousands of Japanese Yen, thousands of other currencies)
	Assets				Liabilities
	Foreign currencies		Won translation		Foreign Currencies		Won translation
USD		112,302		124,891		2,179,213		2,423,502
EUR		37,062		52,822		14,879		21,205
JPY		102,257		1,207		10,600		125
AUD		—		—		297,700		344,764
CHF		—		—		298,236		349,234
SGD		—		—		64,663		57,956
Others		10,749		2,001		13,403		2,514

				180,921				3,199,300

In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (Refer to Note 20)

As of March 31, 2013, effects on income (loss) before income tax as a result of change in exchange rate by 10% are as follows:


(In millions of won)
	If increased by 10%			If decreased by 10%
USD	￦	(37,204	)		37,204
EUR		3,162			(3,162	)
JPY		108			(108	)
Others		(51	)		51

	￦	(33,985	)		33,985

(ii)

Equity price risk

The Group has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of March 31, 2013, available-for-sale equity instruments measured at fair value amount of ￦715,525 million.

(iii)

Interest rate risk

Since the Group’s interest bearing assets are mostly fixed-interest bearing assets, as such, the Group’s revenue and operating cash flow are not influenced by the changes in market interest rates. However, the Group still has interest rate risk arising from borrowings and debentures.

Accordingly, the Group performs various analysis of interest rate risk, which includes refinancing, renewal, alternative financing and hedging instrument option, to reduce interest rate risk and to optimize its financing.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

32.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

The Group’s interest rate risk arises from floating-rate borrowings and payables. As of March 31, 2013, floating-rate borrowings and debentures amount to ￦669,913 million and ￦111,210 million respectively, the Group has entered into interest rate swaps to hedge interest rate risk related to floating-rate borrowings and debentures. (Refer to Note 21) If interest rate only increases (decreases) by 1%, income before income taxes for the three-month period ended March 31, 2013 would not have been changed due to the interest expense from floating-rate borrowings and debentures.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet his/her contractual obligations. The maximum credit exposure as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Cash and cash equivalents	￦	1,124,348		920,125
Financial instruments		339,285		514,561
Available-for-sale financial assets		1,162,860		998,483
Accounts receivable - trade		2,236,969		1,968,297
Loans and receivables		1,112,155		981,693
Derivative financial assets		97,050		61,959
Financial assets at fair value through profit or loss		16,983		16,045

	￦	6,089,650		5,461,163

To manage credit risk, the Group evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors; based on such information, the Group establishes credit limits for each customer or counterparty.

For the three-month period ended March 31, 2013, the Group has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Group believes that the possibility of default is remote. Also, the Group’s credit risk can rise due to transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivates. To minimize such risk, the Group has a policy to deal with high credit worthy financial institutions. The amount of maximum exposure to credit risk of the Group is the carrying amount of financial assets as of March 31, 2013.

In addition, the aging of trade and other receivables that are overdue at the end of the reporting period but not impaired is stated in Note 6 and the analysis of financial assets that are individually determined to be impaired at the end of the reporting period is stated in Note 28.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

32.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Liquidity risk

The Group’s approach to managing liquidity is to ensure that it will always maintain sufficient cash equivalents balance and have enough liquidity through various committed credit lines. The Group maintains flexibly enough liquidity under credit lines through active operating activities.

Contractual maturities of financial liabilities as of March 31, 2013 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 - 5 years		More than 5 years
Accounts Payable - trade	￦	253,537		253,537		253,524		13		—
Derivative financial liabilities		28,802		26,943		17,985		38,817		(29,859	)
Borrowings		299,660		302,234		283,179		19,055		—
Debentures (*1)		6,350,235		7,587,861		847,920		4,192,648		2,547,293
Accounts payable - other and others(*2)		3,946,499		4,243,980		3,499,376		513,704		230,900

	￦	10,878,733		12,414,555		4,901,984		4,764,237		2,748,334

The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.

(*1)	Includes estimated interest to be paid and excludes discounts on bonds.

(*2)	Excludes discounts on accounts payable-other and others.

(2)

Capital management

The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity balance. The overall strategy of the Group is the same as that of the group as of and for the year ended 31 December 2012.

The Group monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total debt divided by total equity; the total debt and equity is extracted from the financial statements.

Debt-equity ratio as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013			December 31, 2012
Liabilities	￦	13,041,142			12,740,777
Equity		12,367,700			12,854,782

Debt-equity ratio		105.45	%		99.11	%

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

32.

Financial Risk Management, Continued

(3)

Fair value

Fair value of the financial instruments that are traded in an active market is measured based on the quoted market price at the end of the reporting date. Disclosed market price of the financial assets held by the Group is the bid price.

Fair value of the financial instruments that are not traded in an active market is determined using the valuation method. The Group uses the various valuation methods and makes assumptions that are mainly based on market conditions existing at the end of each reporting period. Fair value of financial instruments such as long-term liabilities is measured using the various methods including estimated discounted cash flow method.

Fair values of accounts receivable – trade, and accounts payable - trade are considered to be carrying amount less impairment and fair value of financial liabilities for the disclosure purpose is estimated by discounting contractual future cash flows using the current market interest rate used for the similar financial instruments by the Group.

Interest rates used by the Group for the fair value measurement as of March 31, 2013 are as follows:


		Interest rate
Derivative instruments		2.55~4.26%
Borrowings and debentures		2.81~2.82%

Fair value and carrying amount

Carrying amount and fair value of financial assets and liabilities are as follows:


(In millions of won)
	March 31, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
Assets carried at fair value
Financial assets at fair value through profit or loss	￦	16,983		16,983		16,045		16,045
Derivative financial assets		97,050		97,050		61,959		61,959
Available-for-sale financial assets		715,525		715,525		765,759		765,759

	￦	829,558		829,558		843,763		843,763

Assets carried at amortized cost
Cash and cash equivalents		1,124,348		1,124,348		920,125		920,125
Available-for-sale financial assets		447,335		463,629		232,724		232,724
Accounts receivable - trade and others		3,349,124		3,349,124		2,949,990		2,949,990
Financial instruments		339,285		339,285		514,561		514,561

	￦	5,260,092		5,276,386		4,617,400		4,617,400

Liabilities carried at fair value
Financial liabilities at fair value through profit or loss		443,765		443,765		405,678		405,678
Derivative financial liabilities		28,802		28,802		63,599		63,599

	￦	472,567		472,567		469,277		469,277

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

32.

Financial Risk Management, Continued

(3)

Fair value, Continued


(In millions of won)
	March 31, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
Liabilities carried at amortized cost
Accounts payable - trade	￦	253,537		253,537		253,884		253,884
Borrowings		299,660		309,788		1,086,699		1,100,464
Debentures		5,906,470		6,228,039		5,171,321		5,461,142
Accounts payable - other and others		3,966,172		3,966,172		3,646,486		3,646,486

	￦	10,425,839		10,757,536		10,158,390		10,461,976

Fair value hierarchy

The different levels have been defined as follows:

•

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

•

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

•

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

The table below analyzes financial instruments carried at fair value, by fair value hierarchy as of March 31, 2013.


(In millions of won)
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss	￦	—		16,294		689		16,983
Derivative financial assets		—		97,050		—		97,050
Available-for-sale financial assets		560,957		46,262		108,306		715,525
Financial liabilities at fair value through profit or loss		443,765		—		—		443,765
Derivative financial liabilities		—		28,802		—		28,802

There have been no transfers from Level 2 to Level 1 in 2013 and changes of financial assets classified as Level 3 for the three-month period ended March 31, 2013 are as follows:


(In millions of won)
	Balance at January 1		Acquisition		Other comprehensive income			Disposal			Balance at March 31
Financial assets at fair value through profit or loss	￦	689		—		—			—			689
Available-for-sale financial assets		125,572		1,000		(2,520	)		(15,746	)		108,306

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

33.

Transactions with Related Parties

Transactions among consolidated entities have been eliminated upon the consolidation and significant related party transactions of the Group for the three-month periods ended March 31, 2013 and 2012, and account balances as of March 31, 2013 and December 31, 2012 are as follows:

(1)

Transactions


(In millions of won)
	Operating revenue and others				Operating expense and others
	Three-month period ended March 31, 2013		Three-month period ended March 31, 2012		Three-month period ended March 31, 2013		Three-month period ended March 31, 2012
Parent Company	￦	574		100		179,866		7,766
Associates		5,794		50,884		19,638		137,626
Others		30,260		14,429		502,276		542,145

	￦	36,628		65,413		701,780		687,537

Please refer to note 10 for details of business combination with entities under common control.

(2)

Account balances


(In millions of won)
	Accounts receivable and others				Accounts payable and others
	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Parent Company	￦	571		310		171,268		—
Associates		75,953		68,768		6,029		164,783
Others		23,853		55,757		281,577		520,487

	￦	100,377		124,835		458,874		685,270

(3)

Compensation for the key management

The Parent Company considers registered directors who have substantial role and responsibility in planning, operating, and controlling of the business as key management. The compensations given to such key management for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Salaries	￦	1,253		7,991
Provision for retirement benefits		721		565

	￦	1,974		8,556

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

34.

Commitments and Contingencies

(1)

Collateral assets and commitments

SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount of ￦15,200 million as of March 31, 2013.

PS & Marketing Corporation, a subsidiary of the Parent Company, has obtained a line of credit for ￦40,000 million from Shinhan Bank for operational purposes. In relation to the line of credit, PS & Marketing Corporation pledged ￦52,000 million of inventory as collateral to Shinhan Bank as of March 31, 2013.

(2)

Guarantee provided

As of March 31, 2013, the Parent Company has participated in “Tactical Airship” program of the Defense Acquisition Program Administration with Joint Defense Corporation. For an advance receipt amounting to USD 3,897,196, which Joint Defense Corporation received from the Defense Acquisition Program Administration, the Parent Company provides payment guarantees to the Defense Acquisition Program Administration.

(3)

Contingencies

As of March 31, 2013, the Group has recorded a provision in the amount of ￦5,459 million as SK Broadband Co., Ltd., a subsidiary of the Parent Company, have partially lost the first trial relating to the violation of customer’s privacy (plaintiff’s claims of ￦24,689 million).

As of March 31, 2013, the claim amount of pending litigations of SK Communications Co., Ltd., a subsidiary of the Parent Company, amounts to ￦6,131 million and the ultimate result of these litigations cannot be reasonably estimated.

35.

Discontinued Operation

(1)

Discontinued operation

During the three-month period ended June 30, 2012, SK Telink Co., Ltd., a subsidiary of the Parent Company, ceased its broadcasting business due to the rapid decrease in satellite digital multimedia broadcasting subscribers along with the effects from smart phones, etc.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

35.

Discontinued Operation, Continued

(2)

Results of discontinued operation

Results of discontinued operation included in the consolidated statements of income for the three-month period ended March 31, 2012 are as follows. The consolidated statement of income presented for comparative purposes was restated in order to present discontinued operation segregated from the continuing operations.


(In millions of won)
	March 31, 2012
Results of discontinued operation:
Revenue	￦	261
Expense		(13,127	)

Operating loss generated by discontinued operation		(12,866	)
Income tax benefit		2,973

Loss generated by discontinued operation	￦	(9,893	)

Attributable to:
Owners of the Parent Company		(9,398	)
Non-controlling interests		(495	)

(3)

Cash flows used in discontinued operation

Cash flows used in discontinued operation for the three-month period ended March 31, 2012 are as follows:


(In millions of won)
	March 31, 2012
Cash flow used in discontinued operation:
Net cash used in operating activities	￦	(9,704	)
Net cash used in investing activities		(300	)
Net cash used in financing activities		(9,602	)

Net cash used in discontinued operation	￦	(19,606	)

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

36.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Interest income	￦	(17,571	)		(32,396	)
Dividend		(10,149	)		(22,333	)
Gain on foreign currency translation		(2,939	)		(819	)
Gain on disposal of long-term investments assets		(1,041	)		(6,412	)
Gain on settlement of derivatives		(2,274	)		(4,292	)
Equity in losses of investments in affiliates		(161,325	)		27,583
Gain on disposal of property, equipment and intangible assets		(2,009	)		(1,010	)
Reversal of allowance for doubtful accounts		(50	)		(5,654	)
Gain on valuation of financial assets at fair value through profit or loss		(938	)		—
Other income		(2,067	)		(2,193	)
Interest expenses		89,907			97,035
Loss on foreign currency translation		3,975			859
Loss on disposal of long-term investments securities		190			7,505
Impairment loss on long-term investment securities		13,569			—
Income tax expense		81,972			81,604
Provision for retirement benefits		22,404			20,423
Depreciation and amortization		681,973			625,804
Bad debt expenses		12,113			7,257
Loss on disposal of property, equipment and intangible assets		5,379			1,994
Impairment loss on property, equipment and intangible assets		10,617			3,429
Loss on valuation of financial assets at fair value through profit or loss		—			640
Loss on valuation of financial liabilities at fair value through profit or loss		38,087			3,733
Bad debt for accounts receivable - other		10,530			19,687
Loss on disposition of other investment		1			—
Other expenses		2,240			2,756

	￦	772,594			825,200

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

36.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Accounts receivable - trade	￦	(149,972	)		67,254
Accounts receivable - other		(59,722	)		181,448
Accrued income		(829	)		(5,653	)
Advance payments		(37,172	)		(13,865	)
Prepaid expenses		3,478			12,324
Proxy paid V.A.T.		(10,833	)		(311	)
Inventories		18,477			17,128
Guarantee deposits		6,998			12,775
Accounts payable - trade		6,519			(44,706	)
Accounts payable - other		(252,480	)		(274,740	)
Advanced receipts		1,285			(188	)
Withholdings		99,189			117,747
Deposits received		(542	)		(3,089	)
Accrued expenses		92,390			129,735
Advanced V.A.T.		25,607			13,488
Unearned revenue		(21,544	)		(26,245	)
Provisions		(79,988	)		(28,679	)
Long-term provisions		(30,061	)		3,718
Plan assets		5,032			841
Retirement benefit payment		(15,801	)		(15,862	)
Others		6,476			1,168

	￦	(393,493	)		144,288

(3)

Significant non-cash transactions for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Transfer of other tangible assets to construction in progress	￦	264,163			367,439
Transfer of construction in progress to property, equipment and investment in associates		316,508			603,665
Accounts payable - other related to acquisition of tangible assets and others		(118,913	)		8,010

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

37.

Subsequent Events

On April 23, 2013, the Group issued bonds of ￦230,000 million with fixed interest rate of 3.03% and ￦130,000 million with fixed interest rate of 3.22%. Maturities of those bonds are April 23, 2023 and April 23, 2033, respectively.

SK TELECOM CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

March 31, 2013 and 2012

(With Independent Auditors’ Review Report Thereon)

Contents


	Page

Independent Auditors’ Review Report		1

Condensed Separate Statements of Financial Position		3

Condensed Separate Statements of Income		5

Condensed Separate Statements of Comprehensive Income		6

Condensed Separate Statements of Changes in Equity		7

Condensed Separate Statements of Cash Flows		8

Notes to the Condensed Interim Separate Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To The Board of Directors and Shareholders

SK Telecom Co., Ltd.:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of SK Telecom Co., Ltd. (the “Company”), which comprise the condensed separate statement of financial position as of March 31, 2013, the related condensed separate statements of income, comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2013 and 2012, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034 ‘Interim Financial Reporting’, and for such internal controls as management determines necessary to enable the preparation of condensed separate interim financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to issue a report on these condensed separate interim financial statements based on our reviews.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared fairly, in all material respects, in accordance with K-IFRS No.1034 ‘Interim Financial Reporting’.

Highlights

As discussed in Note 3 to the condensed separate interim financial statements, the Company adopted amendments to K-IFRS No.1001, ‘Presentation of Financial Statements’ from the interim period ended September 30, 2012 and separately presents operating income on the separate statements of income, which is calculated as operating revenue less operating expense. The Company applied this change in accounting policies retrospectively and accordingly restated the comparative information of the separate statement of income for the three-month ended March 31, 2012.

Other matters

The statement of financial position of the Company as of December 31, 2012, and the related separate statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated February 22, 2013, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2012, presented for comparative purposes, is not different from that audited by us in all material respects.

The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying condensed consolidated interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice.

KPMG Samjong Accounting Corp.

Seoul, Korea

May 10, 2013

This report is effective as of May 10, 2013, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying condensed separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

SK TELECOM CO., LTD.

Condensed Separate Statements of Financial Position

As of March 31, 2013 and December 31, 2012


(In millions of won)	Note		March 31, 2013		December 31, 2012

Assets
Current Assets:
Cash and cash equivalents		26,27	￦	465,783		256,577
Short-term financial instruments		4,26,27		135,500		179,300
Short-term investment securities		6, 26,27		76,504		56,401
Accounts receivable - trade, net		5,26,27,28		1,416,415		1,407,206
Short-term loans, net		5,26,27,28		84,714		75,449
Accounts receivable - other, net		5,26,27,28		454,931		383,048
Prepaid expenses				73,252		76,016
Derivative financial assets		16,26,27		13,214		9,656
Inventories, net				10,482		15,995
Non-current assets held for sale		7		2,143		121,337
Advanced payments and other		5,26,27		32,873		8,714

Total Current Assets				2,765,811		2,589,699


Non-Current Assets:
Long-term financial instruments		4,26,27		69		69
Long-term investment securities		6,26,27		700,382		733,893
Investments in subsidiaries and associates		8		8,110,130		7,915,547
Property and equipment, net		9,28		7,043,807		7,119,090
Goodwill		10		1,306,236		1,306,236
Intangible assets, net		11		2,113,179		2,187,872
Long-term loans, net		5,26,27,28		43,273		49,672
Long-term prepaid expenses				15,974		21,582
Guarantee deposits		4,5,26,27,28		143,135		149,373
Long-term derivative financial assets		16,26,27		83,836		52,303
Deferred tax assets		24		65,312		123,723
Other non-current assets				397		443

Total Non-Current Assets				19,625,730		19,659,803


Total Assets			￦	22,391,541		22,249,502

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Financial Position, Continued

As of March 31, 2013 and December 31, 2012


(In millions of won)	Note		March 31, 2013			December 31, 2012

Liabilities and Equity
Current Liabilities:
Short-term borrowings		12,26,27	￦	40,000			330,000
Current portion of long-term debt, net		12,13,26,27		710,419			713,072
Accounts payable - other		26,27,28		1,932,347			1,509,456
Withholdings		26,27		659,696			552,380
Accrued expenses		26,27		663,396			600,101
Income tax payable				87,663			52,267
Unearned revenue				241,077			252,298
Provisions		14		207,940			286,819
Advanced receipts				49,048			46,693

Total Current Liabilities				4,591,586			4,343,086


Non-Current Liabilities:
Debentures, net, excluding current portion		12,26,27		4,764,416			3,992,111
Long-term borrowings, excluding current portion		12,26,27		—			348,333
Long-term payables - other		13,26,27		555,416			705,605
Long-term unearned revenue				150,408			160,820
Defined benefit liabilities		15		41,993			34,951
Long-term derivative financial liabilities		16,26,27		28,802			63,599
Long-term provisions		14		68,666			99,355
Other non-current liabilities		26,27,28		125,586			124,594

Total Non-Current Liabilities				5,735,287			5,529,368


Total Liabilities				10,326,873			9,872,454


Equity
Share capital		1,17		44,639			44,639
Capital deficit and other capital adjustments		17,18		(236,160	)		(236,160	)
Retained earnings		19		12,128,372			12,413,981
Reserves		20		127,817			154,588

Total Equity				12,064,668			12,377,048


Total Liabilities and Equity			￦	22,391,541			22,249,502

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Income

For the three-month periods ended March 31, 2013 and 2012


(In millions of won except for per share data)	Note		March 31, 2013			March 31, 2012

Operating revenue:		3,28
Revenue			￦	3,112,099			3,007,439

Operating expense:		28
Labor cost				199,905			169,735
Commissions paid				1,369,500			1,271,355
Depreciation and amortization				476,364			400,956
Network interconnection				176,366			225,750
Leased line				104,036			107,436
Advertising				34,669			36,198
Rent				86,286			80,888
Cost of products that have been resold				78,802			61,945
Other operating expenses		21		166,060			170,511

Sub-total				2,691,988			2,524,774


Operating income		3		420,111			482,665

Finance income		23		27,865			52,113
Finance costs		23		(115,402	)		(84,365	)
Other non-operating income		3,22		6,973			4,706
Other non-operating expenses		3,22		(30,571	)		(29,669	)
Gain on disposal of investments in subsidiaries and associates		8		71,200			80,483
Impairment loss on investments in associates				—			(72,096	)

Profit before income tax				380,176			433,837

Income tax expense		24		77,999			88,865


Profit for the period			￦	302,177			344,972


Earnings per share		25
Basic earnings per share			￦	4,336			4,950

Diluted earnings per share			￦	4,336			4,847

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Comprehensive Income

For the three-month periods ended March 31, 2013 and 2012


(In millions of won)	Note		March 31, 2013			March 31, 2012

Profit for the period			￦	302,177			344,972

Other comprehensive loss
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit obligations, net		15,19		(2,348	)		(4,684	)
Items that are or may be reclassified subsequently to profit or loss:
Net change in unrealized fair value of available-for-sale financial assets		20		(19,320	)		(11,699	)
Net change in unrealized fair value of derivatives		16,20		(7,451	)		(14,323	)

				(29,119	)		(30,706	)

Total comprehensive income			￦	273,058			314,266

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Changes in Equity

For the three-month periods ended March 31, 2013 and 2012


(In millions of won)
			Capital deficit and other capital adjustments
	Share capital		Paid-in surplus		Treasury stock			Loss on disposal of treasury stock			Other			Retained earnings			Reserves			Total equity
Balance, January 1, 2012	￦	44,639		2,915,887		(2,410,451	)		(18,855	)		(722,597	)		11,837,185			320,494			11,966,302
Cash dividends		—		—		—			—			—			(585,439	)		—			(585,439	)
Total comprehensive income
Profit for the period		—		—		—			—			—			344,972			—			344,972
Other comprehensive loss		—		—		—			—			—			(4,684	)		(26,022	)		(30,706	)

Balance, March 31, 2012	￦	44,639		2,915,887		(2,410,451	)		(18,855	)		(722,597	)		11,592,034			294,472			11,695,129


Balance, January 1, 2013	￦	44,639		2,915,887		(2,410,451	)		(18,855	)		(722,741	)		12,413,981			154,588			12,377,048
Cash dividends		—		—		—			—			—			(585,438	)		—			(585,438	)
Total comprehensive income
Profit for the period		—		—		—			—			—			302,177			—			302,177
Other comprehensive loss		—		—		—			—			—			(2,348	)		(26,771	)		(29,119	)

Balance, March 31, 2013	￦	44,639		2,915,887		(2,410,451	)		(18,855	)		(722,741	)		12,128,372			127,817			12,064,668

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Cash Flows

For the three-month periods ended March 31, 2013 and 2012


(In millions of won)	Note		March 31, 2013			March 31, 2012

Cash flows from operating activities:
Cash generated from operating activities
Profit for the period			￦	302,177			344,972
Adjustments for income and expenses		31		625,487			557,635
Changes in assets and liabilities related to operating activities		31		(90,051	)		211,427

Sub-total				837,613			1,114,034
Interest received				5,037			20,621
Dividends received				—			25,167
Interest paid				(71,719	)		(59,468	)
Income tax refund received (income tax paid)				18,589			(1,972	)

Net cash provided by operating activities				789,520			1,098,382


Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net				43,800			422,500
Collection of short-term loans				91,232			51,956
Proceeds from disposal of long-term investment securities				10,712			469
Proceeds from disposal of investments in subsidiaries and associates				—			88,602
Proceeds from disposal of property and equipment				684			450
Proceeds from disposal of intangible assets				512			1,577
Proceeds from disposal of non-current assets held for sale				190,393			—
Collection of long-term loans				5,531			2,811
Proceeds from disposal of other non-current assets				48			—

Sub-total				342,912			568,365
Cash outflows for investing activities:
Increase in short-term financial instruments, net				(20,000	)		(45,000	)
Increase in short-term loans				(99,138	)		(48,808	)
Acquisition of long-term investment securities				(1,003	)		(9,469	)
Acquisition of investments in subsidiaries and associates				(194,584	)		(3,066,547	)
Acquisition of property and equipment				(459,439	)		(486,802	)
Acquisition of intangible assets				(6,048	)		(15,939	)
Increase in other non-current assets				—			(246	)

Sub-total				(780,212	)		(3,672,811	)

Net cash used in investing activities				(437,300	)		(3,104,446	)

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Cash Flows, Continued

For the three-month periods ended March 31, 2013 and 2012


(In millions of won)	Note	March 31, 2013			March 31, 2012

Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings		￦	40,000			500,000
Proceeds from long-term borrowings			—			1,986,800
Issuance of debentures			656,359			—
Cash inflows from transaction of derivatives			2,274			1,517

Sub-total			698,633			2,488,317
Cash outflows for financing activities:
Repayment of short-term borrowings			(330,000	)		—
Repayment of long-term borrowings			(350,000	)		—
Repayment of current portion of long-term debt			(161,575	)		(92,158	)
Repayment of debentures			—			(118,813	)
Cash outflows from transaction of derivatives			—			(3,157	)

Sub-total			(841,575	)		(214,128	)

Net cash provided by (used in) financing activities			(142,942	)		2,274,189


Net increase in cash and cash equivalents			209,278			268,125
Cash and cash equivalents at beginning of the period			256,577			895,558
Effects of exchange rate changes on cash and cash equivalents			(72	)		—

Cash and cash equivalents at end of the period		￦	465,783			1,163,683

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the three-month periods ended March 31, 2013 and 2012

1.	Reporting Entity

SK Telecom Co., Ltd. (“the Company”) was incorporated in March 1984 under the laws of Republic of Korea (“Korea”) to engage in providing cellular telephone communication services in Korea. The Company mainly provides wireless telecommunications in Korea. The Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of March 31, 2013, the Company’s total issued shares are held by the following:


	Number of shares		Percentage of total shares issued (%)
SK Holdings, Co., Ltd.		20,363,452		25.22
National Pension		4,928,904		6.10
Institutional investors and other minority stockholders		44,402,643		54.99
Treasury stock		11,050,712		13.69

Total number of shares		80,745,711		100.00

2.	Basis of Presentation

(1)

Statement of compliance

The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audits of Stock Companies.

These condensed separate interim financial statements were prepared in accordance with K-IFRS No. 1034, ‘Interim Financial Reporting’ as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as at and for the year ended December 31, 2012. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.

These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No.1027, ‘Separate Financial Statements’ presented by a parent, an investor in an associate or a venture in a jointly controlled entity, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

(2)

Use of estimates and judgments

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

In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as of and for the year ended December 31, 2012.

2.	Basis of Presentation, Continued

(3)

Common control transactions

SK Holdings Co., Ltd. (“the Ultimate Controlling Entity”) is the Ultimate Controlling Entity of the Company because it has de facto control of the Company. Accordingly, gains and losses from business acquisitions and dispositions involving entities that are under the control of the Ultimate Controlling Entity are accounted for as common control transactions within equity.

3.	Significant Accounting Policies

Except as described below, the accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2012. The following changes in accounting policy are also expected to be reflected in the Company’s separate financial statements as at and for the year ending December 31, 2013.

(1)

Changes in accounting policies

1) K-IFRS No. 1001, ‘Presentation of Financial Statements’

2) K-IFRS No.1110, ‘Consolidated Financial Statements’

3) K-IFRS No.1111, ‘Joint Arrangements’

The Company has applied the amendments to K-IFRS No. 1111, ‘Joint Arrangements’ since January 1, 2013. The standard classifies joint arrangements into two types - joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. The standard requires a joint operator to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in relation to its interest in the arrangement in accordance with relevant IFRSs applicable to the particular assets, liabilities, revenues and expenses. The standard requires a joint venturer to recognize an investment and to account for that investment using the equity method.

3.	Significant Accounting Policies, Continued

(1)

Changes in accounting policies, Continued

4) K-IFRS No.1112, ‘Disclosure of Interests in Other Entities’

5) K-IFRS No. 1019, ‘Employee Benefits’

6) K-IFRS No. 1113, ‘Fair Value Measurement’

(2)

Impact of changes in accounting policies

1) K-IFRS No.1110, ‘Consolidated Financial Statements’

2) K-IFRS No. 1001, ‘Presentation of Financial Statements’

3.	Significant Accounting Policies, Continued

(2)

Impact of changes in accounting policies, Continued

The Company retrospectively applied the amendment to K-IFRS No. 1001, for which the impact is as follows:


(In millions of won)
	For the three month ended March 31, 2012
Operating income before adoption of the amendment	￦	457,702
Differences:
Other non-operating income		—
Gain on disposal of property and equipment and intangible assets		231
Others		4,475

		(4,706	)
Other non-operating expense
Loss on disposal of property and equipment and intangible assets		762
Donations		12,270
Bad debt for accounts receivable - other		15,959
Others		678

		29,669

Operating income after adoption of the amendment	￦	482,665

(3)

New standards and interpretations not yet adopted

The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Company for annual periods beginning after January 1, 2013. Impact of these new standards, interpretations and amendments to the separate interim financial statements cannot be measured as of March 31, 2013.

1) K-IFRS No. 1032, ‘Financial Instruments: Presentation’

4.	Restricted Deposits

Deposits which are restricted in use as of March 31, 2013 and December 31, 2012 are summarized as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Short-term financial instruments(*)	￦	83,500		83,500
Long-term financial instruments(*)		69		69
Deposit		40		40

	￦	83,609		83,609

(*)	Financial instruments include charitable trust fund established by the Company. Profits from this charitable fund are donated to charitable institutions the funds cannot be withdrawn as of March 31, 2013.

5.	Trade and Other Receivables

(1)

Details of trade and other receivables as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)	March 31, 2013
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable - trade	￦	1,516,552		(100,137	)		1,416,415
Short-term loans		85,828		(1,114	)		84,714
Accounts receivable - other		504,489		(49,558	)		454,931
Accrued income		5,375		—			5,375

		2,112,244		(150,809	)		1,961,435
Non-current assets:
Long-term loans		66,334		(23,061	)		43,273
Guarantee deposits		143,135		—			143,135

		209,469		(23,061	)		186,408

	￦	2,321,713		(173,870	)		2,147,843

5.	Trade and Other Receivables, Continued


(In millions of won)	December 31, 2012
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable - trade	￦	1,497,745		(90,539	)		1,407,206
Short-term loans		76,471		(1,022	)		75,449
Accounts receivable - other		421,695		(38,647	)		383,048
Accrued income		4,147		—			4,147

		2,000,058		(130,208	)		1,869,850
Non-current assets:
Long-term loans		72,801		(23,129	)		49,672
Guarantee deposits		149,373		—			149,373

		222,174		(23,129	)		199,045

	￦	2,222,232		(153,337	)		2,068,895

(2)

The movement in allowance for doubtful accounts of trade and other receivables during the three-month periods ended March 31, 2013 and 2012 were as follows:


(In millions of won)
	March 31, 2013			March 31, 2012
Balance at January 1	￦	153,337			171,639
Increase of bad debt allowances		15,527			16,249
Reversal of allowances for doubtful accounts		—			(4,301	)
Write-offs		(204	)		(256	)
Collection of receivables previously written-off		5,210			5,669

Balance at March 31	￦	173,870			189,000

(3)

Details of overdue but not impaired, and impaired trade and other receivable as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)	March 31, 2013						December 31, 2012
	Accounts receivable - trade			Other receivables			Accounts receivable - trade			Other receivables
Neither overdue or impaired	￦	1,105,682			698,319			1,093,481			636,292
Overdue but not impaired		30,183			—			25,502			—
Impaired		380,687			106,842			378,762			88,196

		1,516,552			805,161			1,497,745			724,488
Allowances for doubtful accounts		(100,137	)		(73,733	)		(90,539	)		(62,798	)

	￦	1,416,415			731,428			1,407,206			661,690

The Company establishes allowances for doubtful accounts based on the likelihood of recoverability of trade and other receivables based on their aging at the end of the period, past customer default experience, customer credit status, and economic and industrial factors.

5.	Trade and Other Receivables, Continued

(4)

The aging of overdue but not impaired accounts receivable as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Less than 1 month	￦	6,590		3,699
1 ~ 3 months		6,404		3,686
3 ~ 6 months		2,043		9,175
More than 6 months		15,146		8,942

	￦	30,183		25,502

6.	Investment Securities

(1)

Details of short-term investment securities as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Beneficiary certificates(*)	￦	76,262		56,159
Current portion of long-term investment securities		242		242

	￦	76,504		56,401

(*)	The distributions arising from beneficiary certificates as of March 31, 2013, were accounted for as accrued income.

(2)

Details of long-term investment securities as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013			December 31, 2012
Equity securities:
Marketable equity securities	￦	560,957			584,029
Unlisted equity securities		18,814			18,814
Equity investments		103,743			115,120

		683,514			717,963
Debt securities:
Public bonds(*1)		356			356
Investment bonds(*2)		16,754			15,816

		17,110			16,172

Total		700,624			734,135
Less current portion of long-term investment securities		(242	)		(242	)

Long-term investment securities	￦	700,382			733,893

6.	Investment Securities, Continued

(*1)	Details of maturity for the public bonds as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
1 ~ 5 years		356		356

(*2)	The Company classified convertible bonds of NanoEnTek, Inc. (carrying amount as of March 31, 2013: ￦16,294 million) as financial assets at fair value through profit or loss. The difference between acquisition cost and fair value is accounted for as finance income (loss).

7.	Non-current Assets Held for Sale

A disposal contract for the Company’s ownership interests in SK Fans Co., Ltd., an associate, has been entered into during the year ended December 31, 2012 and investment in the associate was reclassified to non-current assets held for sale.

Non-current assets held for sale as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Investments in subsidiaries(*)	￦	—		119,194
Investments in associates		2,143		2,143

	￦	2,143		121,337

(*)	For the three-month period ended March 31, 2013, the Company disposed its ownership interests of 27% in SKY Property Mgmt. Ltd., a subsidiary, to SK Innovation Co., Ltd., a related party and recognized ￦71,200 million of disposal gain.

The assets classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

8.	Investments in Subsidiaries and Associates

(1)

Investments in subsidiaries and associates as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Investments in subsidiaries	￦	3,476,663		3,315,205
Investments in associates		4,633,467		4,600,342

	￦	8,110,130		7,915,547

8.	Investments in Subsidiaries and Associates, Continued

(2)

Details of investments in subsidiaries as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)	March 31, 2013						December 31, 2012
	Number of shares		Ownership (%)		Carrying amount		Carrying amount
SK Telink Co., Ltd.		1,082,272		83.5	￦	144,740		144,740
SK Broadband Co., Ltd.		149,638,354		50.6		1,242,247		1,242,247
PS&Marketing Corporation		46,000,000		100.0		213,934		213,934
Service Ace Co., Ltd.		4,385,400		100.0		21,927		21,927
Service Top Co., Ltd.		2,856,200		100.0		14,281		14,281
Network O&S Co., Ltd.		3,000,000		100.0		15,000		15,000
SK Planet Co., Ltd.(*1)		72,927,317		100.0		1,538,020		1,234,884
SK Telecom China Holdings Co., Ltd.		—		100.0		29,116		29,116
SKY Property Mgmt. Ltd.(*2)		—		—		—		264,850
SKT Vietnam PTE. Ltd.		180,476,700		73.3		26,264		26,264
SKT Americas, Inc.		122		100.0		76,764		72,786
YTK Investment Ltd.		—		100.0		69,464		69,464
Atlas Investment		—		100.0		59,122		59,122
SK Global Healthcare Business Group Ltd.		—		100.0		25,784		25,784

						3,476,663		3,434,399

Non-current assets held for sale						—		(119,194	)

					￦	3,476,663		3,315,205

(*1)

The Company acquired additional 50% shares of SK Marketing & Company Co., Ltd., an associate, from SK Innovation Co., Ltd., a related party, and transferred its 100% shares of SK Marketing & Company Co., Ltd. (100%) to SK Planet Co.,Ltd., and received 12,927,317 of new shares of SK Planet Co.,Ltd. as a consideration. The additional interest in SK Planet Co., Ltd is measured at the carrying value of the Company’s investments in SK Marketing & Company Co., Ltd. at the date of transaction.

(*2)

The Company disposed its ownership interests of 27% in SKY Property Mgmt. Ltd., a subsidiary, to SK Innovation Co., Ltd., a related party and reclassified carrying value of the ownership interests of ￦145,656 million to investments in associates as the Company has less than 50% of the ownership interests.

8.	Investments in Subsidiaries and Associates, Continued

(3)

Details of investments in associates as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)	March 31, 2013						December 31, 2012
	Number of shares		Ownership percentage (%)		Carrying amount		Carrying amount
SK Marketing & Company Co., Ltd.(*1)		—		—		—		112,531
SK China Company Ltd.(*2)		720,000		9.6		47,830		47,830
SK USA, Inc.		49		49.0		5,498		5,498
HappyNarae Co., Ltd.		680,000		42.5		12,250		12,250
F&U Credit information Co., Ltd.		300,000		50.0		4,482		4,482
Korea IT Fund(*3)		190		63.3		220,957		220,957
Wave City Development Co., Ltd.(*2)		382,000		19.1		1,532		1,532
HanaSK Card Co., Ltd.		57,647,058		49.0		400,000		400,000
Daehan Kanggun BcN Co., Ltd.		1,675,126		29.0		8,340		8,340
NanoEnTek, Inc.(*2)		1,807,130		9.3		11,000		11,000
Health Connect Co., Ltd.		954,000		49.5		9,540		9,540
UNISK (Beijing) Information Technology Co., Ltd.		49		49.0		4,247		4,247
TR Entertainment		—		42.2		7,560		7,560
SK Industrial Development China Co., Ltd.		72,952,360		35.0		83,691		83,691
Packet One Network		1,153,674		27.0		140,139		140,139
SK Technology Innovation Company		9,800		49.0		85,873		85,873
Lightsquared Inc.(*2,4)		3,387,916		3.3		—		—
SK Hynix Inc.		146,100,000		21.1		3,374,725		3,374,725
SK MENA Investment B.V.		—		32.1		14,485		14,485
SK Latin America Investment S.A.		—		32.1		14,243		14,243
Gemini		—		20.0		6,108		6,108
SKY Property Mgmt. Ltd.		12,639		33.0		145,656		—
SK Wyverns Baseball Club Co., Ltd. and others		—		—		35,311		35,311

					￦	4,633,467		4,600,342

(*1)	Increased by ￦190,606 million as the Company acquired 50% shares from SK Innovation Co., Ltd., a related party, during the three-month period ended March 31, 2013, and the entire ownership interests has been provided to SK Planet Co., Ltd. as a consideration for the investment in kind.

(*2)	Classified as an investment in associate because the Company can exercise significant influence over the associate through participation on the associate’s board of directors.

(*3)	Classified as an investment in associate because the Company has less than 50% of the voting rights of the board of directors.

(*4)	Recognized the entire amount as impairment loss as recoverable amount is considered to be zero as of December 31, 2012.

8.	Investments in Subsidiaries and Associates, Continued

(4)

The market price of investments in listed subsidiaries as of March 31, 2013 and December 31, 2012 are as follows:

(In millions of won, except for share data)

March 31, 2013

December 31, 2012

Market
value per
share
(In won)

Number of
shares

Market
price

Market
value per
share
(In won)

Number of
shares

Market
price

SK Broadband Co., Ltd.

￦

4,095

149,638,354

612,769

4,665

149,638,354

698,063

9.	Property and Equipment

(1)

Property and equipment as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)	March 31, 2013										December 31, 2012
	Acquisition cost		Accumulated depreciation			Accumulated impairment losses			Carrying amount		Carrying amount
Land	￦	395,962		—			—			395,962		395,968
Buildings		1,004,898		(404,574	)		—			600,324		607,973
Structures		687,384		(327,112	)		—			360,272		363,364
Machinery		17,520,474		(13,051,663	)		(12,531	)		4,456,280		4,532,811
Other		1,467,613		(871,165	)		—			596,448		579,448
Construction in progress		634,521		—			—			634,521		639,526

	￦	21,710,852		(14,654,514	)		(12,531	)		7,043,807		7,119,090

(2)

Changes in property and equipment for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2013
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	￦	395,968		—		(6	)		—			—			395,962
Buildings		607,973		13		(89	)		949			(8,522	)		600,324
Structures		363,364		—		(7	)		5,646			(8,731	)		360,272
Machinery		4,532,811		1,180		(3,995	)		287,594			(361,310	)		4,456,280
Other		579,448		304,028		(493	)		(262,098	)		(24,437	)		596,448
Construction in progress		639,526		33,900		(235	)		(38,670	)		—			634,521

	￦	7,119,090		339,121		(4,825	)		(6,579	)		(403,000	)		7,043,807

9.	Property and Equipment, Continued


(In millions of won)	For the three-month period ended March 31, 2012
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	￦	409,696		1		—			(270	)		—			409,427
Buildings		676,095		258		—			53			(10,100	)		666,306
Structures		300,995		8		(1	)		131			(8,743	)		292,390
Machinery		3,581,275		2,707		(377	)		177,255			(304,446	)		3,456,414
Other		640,317		405,401		(606	)		(347,537	)		(22,800	)		674,775
Construction in progress		651,791		78,427		—			(203,486	)		—			526,732

	￦	6,260,169		486,802		(984	)		(373,854	)		(346,089	)		6,026,044

10.

Goodwill

Goodwill as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Goodwill related to acquisition of Shinsegi Telecom, Inc.	￦	1,306,236		1,306,236

11.

Intangible Assets

(1)

Intangible assets as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)	March 31, 2013										December 31, 2012
	Acquisition cost		Accumulated depreciation			Accumulated impairment losses			Carrying amount		Carrying amount
Frequency use rights	￦	2,837,385		(1,203,764	)		(2,907	)		1,630,714		1,693,868
Land use rights		31,193		(22,586	)		—			8,607		9,815
Industrial rights		32,512		(22,692	)		—			9,820		9,769
Development costs		125,477		(125,067	)		—			410		665
Facility usage rights		41,945		(25,581	)		—			16,364		16,786
Memberships(*1)		81,039		—			—			81,039		81,518
Other(*2)		1,548,116		(1,181,891	)		—			366,225		375,451

	￦	4,697,667		(2,581,581	)		(2,907	)		2,113,179		2,187,872

(*1)	Memberships are classified as intangible assets with indefinite useful life and are not amortized.

(*2)	Other intangible assets consist of computer software and usage rights to a research facility which the Company built and donated to a university and the Company in turn is given rights-to-use for a definite number of years.

11.

Intangible Assets, Continued

(2)

Details of changes in intangible assets for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2013
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Ending balance
Frequency use rights	￦	1,693,868		—		—			—		(63,154	)		1,630,714
Land use rights		9,815		—		(50	)		—		(1,158	)		8,607
Industrial rights		9,769		666		—			—		(615	)		9,820
Development costs		665		—		—			—		(255	)		410
Facility usage rights		16,786		183		(12	)		—		(593	)		16,364
Memberships		81,518		22		(501	)		—		—			81,039
Other		375,451		5,177		—			20,423		(34,826	)		366,225

	￦	2,187,872		6,048		(563	)		20,423		(100,601	)		2,113,179


(In millions of won)
	For the three-month period ended March 31, 2012
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Ending balance
Frequency use rights	￦	1,889,102		16,659		—			—		(43,542	)		1,862,219
Land use rights		12,740		—		(80	)		—		(1,197	)		11,463
Industrial rights		8,328		2,934		—			—		(758	)		10,504
Development costs		1,185		—		—			—		(644	)		541
Facility usage rights		15,058		131		(38	)		—		(558	)		14,593
Memberships		80,607		—		(27	)		—		—			80,580
Other		357,775		4,225		(1,431	)		28,519		(34,023	)		355,065

	￦	2,364,795		23,949		(1,576	)		28,519		(80,722	)		2,334,965

11.

Intangible Assets, Continued

(3)

The carrying amount and residual useful lives of frequency usage rights as of March 31, 2013 are as follows:


(In millions of won)
	Amount		Description	Residual useful lives
W-CDMA license	￦	366,023	Frequency use rights relating to W-CDMA service		(*1)
W-CDMA license		61,166	Frequency use rights relating to W-CDMA service		(*2)
800MHz license		334,488	Frequency use rights relating to CDMA and LTE service		(*3)
1.8GHz license		854,924	Frequency use rights relating to LTE service		(*4)
WiBro license		14,113	WiBro service		(*5)

	￦	1,630,714

(*1)

The Company purchased the W-CDMA license from Korea Communication Commission (“KCC”) on December 4, 2001. Amortization of the W-CDMA license commenced once the Company began its commercial W-CDMA services on December 29, 2003 under a straight-line basis over the remaining useful life of the license. The W-COMA license will expire in December 2016.

(*2)

The Company purchased the additional W-CDMA license from KCC in May 2010. Amortization of the additional W-CDMA license commenced once the Company started its related commercial W-CDMA services on October 7, 2010, under a straight-line basis over the remaining useful life of the W-CDMA license. The additional W-COMA license will expire in December 2016.

(*3)

The Company purchased 800MHz license from KCC in June 2011. Amortization of the 800MHz license commenced once the Company started its related commercial CDMA and LTE services on July 1, 2011, under a straight-line basis over the remaining useful life of the 800MHz license. The 800MHz license will expire in June 2021.

(*4)

The Company purchased 1.8GHz license from KCC in December 2011. Amortization of the 1.8GHz license will commence when the Company starts its related commercial LTE services in the second half of year 2012, under a straight-line basis over the remaining useful life of the 1.8GHz license. The 1.8GHz license will expire in December 2021.

(*5)	The Company additionally purchased Wibro license in March 2012. Amortization of this WiBro license commenced when the Company started its commercial WiBro services on March 30, 2012, under a straight line basis over the remaining useful life. This Wibro license will expire in March 2019.

12.

Borrowings and Debentures

(1)

Short-term borrowings as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)	Maturity	March 31, 2013		December 31, 2012
Kookmin Bank	3.98	Apr. 4, 2013	￦	40,000		—
	3.98	Jan. 10, 2013		—		100,000
Woori Bank	4.20	Jan. 10, 2013		—		100,000
CP	2.98	Jan. 14, 2013		—		60,000
	3.05	Jan. 25, 2013		—		20,000
	3.10	Jan. 29, 2013		—		50,000

			￦	40,000		330,000

(2)

Long-term borrowings as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)	Maturity	March 31, 2013			December 31, 2012
Bank of Communications (*)	6M Libor + 0.29	Oct. 10, 2013	￦	33,363			32,133
			(USD	30,000	)	(USD	30,000	)
Bank of China(*)	6M Libor + 0.29	Oct. 10, 2013		22,242			21,422
			(USD	20,000	)	(USD	20,000	)
DBS Bank(*)	6M Libor + 0.29	Oct. 10, 2013		27,803			26,777
			(USD	25,000	)	(USD	25,000	)
SMBC(*)	6M Libor + 0.29	Oct. 10, 2013		27,802			26,778
			(USD	25,000	)	(USD	25,000	)
Kookmin Bank and 13 others	4.48	Feb. 14, 2015		—			350,000

				111,210			457,110
Less present value discount on long-term borrowings				—			(1,667	)

				111,210			455,443
Less current portion of bonds				(111,210	)		(107,110	)

			￦	—			348,333

(*)	As of March 31, 2013, 6M Libor rate is 0.44%.

12.

Borrowings and Debentures, Continued

(3)

Debentures as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won, thousands of U.S. dollars, thousands of Japanese Yen, and thousands of other currencies)
	Purpose	Maturity	Annual interest rate (%)	March 31, 2013			December 31, 2012
Unsecured private bonds	Refinancing fund	2016	5.00	￦	200,000			200,000
Unsecured private bonds		2013	4.00		200,000			200,000
Unsecured private bonds		2014	5.00		200,000			200,000
Unsecured private bonds	Other fund	2015	5.00		200,000			200,000
Unsecured private bonds		2018	5.00		200,000			200,000
Unsecured private bonds		2013	6.92		250,000			250,000
Unsecured private bonds		2016	5.54		40,000			40,000
Unsecured private bonds		2016	5.92		230,000			230,000
Unsecured private bonds	Operating fund	2016	3.95		110,000			110,000
Unsecured private bonds	Operating fund	2021	4.22		190,000			190,000
Unsecured private bonds	Operating and refinancing fund	2019	3.24		170,000			170,000
Unsecured private bonds		2022	3.30		140,000			140,000
Unsecured private bonds		2032	3.45		90,000			90,000
Foreign global bonds	Operating fund	2027	6.63	(USD	444,840 400,000	)	(USD	428,440 400,000	)
Exchangeable bonds (*3,4)	Refinancing fund	2014	1.75	(USD	443,765 332,528	)	(USD	405,678 332,528	)
Floating rate notes (*1)	Operating fund	2014	3M Libor + 1.60	(USD	278,025 250,000	)	(USD	267,775 250,000	)
Floating rate notes (*2)		2014	SOR rate + 1.20	(SGD	58,258 65,000	)	(SGD	56,906 65,000	)
Swiss unsecured private bonds		2017	1.75	(CHF	351,300 300,000	)	(CHF	351,930 300,000	)
Foreign global bonds		2018	2.13	(USD	778,470 700,000	)	(USD	749,770 700,000	)
Australian unsecured private bonds		2017	4.75	(AUD	347,427 300,000	)		— —
Floating rate notes (*1)		2020	3M Libor + 0.88	(USD	333,630 300,000	)		— —

					5,255,715			4,480,499
Less discounts on bonds					(42,744	)		(40,392	)

					5,212,971			4,440,107
Less current portion of bonds					(448,555	)		(447,996	)

				￦	4,764,416			3,992,111

12.

Borrowings and Debentures, Continued

(*1)	As of March 31, 2013, 3M Libor rate is 0.28%.

(*2)	As of March 31, 2013, SOR rate is 0.20%.

(*3)	As of March 31, 2013, exchangeable bonds are classified as financial liabilities at fair value through profit or loss.

(*4)

On April 7, 2009, the Company issued exchangeable bonds with a maturity of five years in the principal amount of USD 332,528,000 for USD 326,397,463 with a coupon rate of 1.75%. As of March 31, 2013, fair value of the exchangeable bonds is USD 399,033,600. The exchange price could be adjusted and the exchange price is ￦190,006 with the exchange rate of ￦1,383.40 per USD 1.

The Company may redeem the principal amount after 3 years from the issuance date if the market price exceeds 130% of the exchange price during a predetermined period. The exchange right may be exercised during the period from May 18, 2009 to March 24, 2014 and the number of common shares that can be exchanged as of March 31, 2013 is 2,421,077 shares.

Exchange 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 such 49% ownership limitation is violated due to the exercise of exchange rights, the Company will pay the bond holder a cash settlement which will be determined at the average price of one day after a holder exercises its exchange right or the weighted average price for the following five or twenty business days. Unless either previously redeemed or exchanged, the notes are redeemable at 100% of the principal amount at maturity.

In accordance with a resolution of the general shareholder’s meeting on March 22, 2013, the exchange price was changed from ￦197,760 to ￦190,006 and the number of common shares that can be exchanged was changed from 2,326,149 shares to 2,421,077 shares due to the payment of periodic dividends. During the three-month period ended March 31, 2013, no exchange was made.

13.

Long-term Payables - other

(1)

As of March 31, 2013 and December 31, 2012, long-term payables consist of payables related to the acquisition of W-CDMA licenses for 2.1GHz, 800MHZ, 1.8GHz and 2.3GHz frequencies as follows (Refer to Note 11):


(In millions of won)
	2.1GHz			800MHz			1.8GHz			2.3GHz			Total
Period of repayment		2012~2014			2013~2015			2012~2021			2014~2016
Coupon rate(*1)		3.58	%		3.51	%		3.00	%		3.00	%
Annual effective interest rate(*2)		5.89	%		5.69	%		5.25	%		5.80	%
Nominal value at the acquisition date	￦	52,600			208,250			746,250			8,650			1,015,750
Present value discount on long-term payables - other		(3,237	)		(11,060	)		(66,797	)		(641	)		(81,735	)

Present value of long-term payables - other at the time of acquisition		49,363			197,190			679,453			8,009			934,015

Nominal value at December 31, 2012		35,066			208,250			671,625			8,650			923,591
Present value discount on long-term payables - other		(3,076	)		(10,178	)		(64,230	)		(641	)		(78,125	)
Current portion of long-term payables - other		(17,533	)		(69,417	)		(74,625	)		—			(161,575	)
Accumulated amortization of present value discount at December 31, 2012		2,693			5,955			12,911			155			21,714

Carrying amount as of December 31, 2012		17,150			134,610			545,681			8,164			705,605
Amortization of present value discount		173			966			2,884			52			4,075
Current portion of amortization of present value discount		(161	)		(882	)		(2,567	)		—			(3,610	)
Less current portion of long-term payables - other		(17,162	)		(66,711	)		(64,156	)		(2,625	)		(150,654	)

Carrying amount at March 31, 2013	￦	—			67,983			481,842			5,591			555,416

(*1)	The Company applied an annual interest rate equal to the previous year average lending rate of public funds financing account less 1%.

(*2)	The Company estimated the discount rate based on its credit ratings and corporate bond yield rate as there is no market interest rate available for long-term payables - other.

13.

Long-term Payables - other, Continued

(2)

The repayment schedule of long-term payables - other as of March 31, 2013 is as follows:


(In millions of won)	Amount
2014	￦	164,458
2015		146,925
2016		77,508
2017 and thereafter		373,125

	￦	762,016

14.

Provisions

Change in provisions for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended March 31, 2013												As of Mar. 31, 2013
	Beginning balance		Increase		Utilization			Reversal			Ending balance		Current		Non-current
Provision for handset subsidy	￦	353,383		1,486		(111,816	)		—			243,053		199,990		43,063
Provision for restoration		32,791		898		(108	)		(28	)		33,553		7,950		25,603

	￦	386,174		2,384		(111,924	)		(28	)		276,606		207,940		68,666


(In millions of won)	For the three-month period ended March 31, 2012									As of Mar. 31, 2012
	Beginning balance		Increase		Utilization			Ending balance		Current		Non-current
Provision for handset subsidy	￦	762,238		169,931		(195,806	)		736,363		627,946		108,417
Provision for restoration		28,623		2,606		(66	)		31,163		4,267		26,896

	￦	790,861		172,537		(195,872	)		767,526		632,213		135,313

The Company recognizes a provision for handset subsidies given to the subscribers who purchase handsets on an installment basis.

15.

Defined Benefit Liabilities

(1)

Details of defined benefit liabilities as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013			December 31, 2012
Present value of defined benefit obligations	￦	139,475			133,098
Fair value of plan assets		(97,482	)		(98,147	)

	￦	41,993			34,951

(2)

Principal actuarial assumptions as of March 31, 2013 and December 31, 2012 are as follows:


	March 31, 2013			December 31, 2012
Discount rate for defined benefit obligations		3.56	%		3.56	%
Expected rate of salary increase		5.20	%		5.20	%

Discount rate for defined benefit obligation is determined based on the Company’s credit ratings and yield rate of corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of salary increase is determined based on the Company’s historical promotion index, inflation rate and salary increase ratio in accordance with salary agreement.

(3)

Changes in defined benefit obligations for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Beginning balance	￦	133,098			95,359
Current service cost		8,282			7,220
Interest cost		1,136			1,044
Remeasurement:
- Adjustment based on experience		3,940			6,458
Benefit paid		(8,003	)		(9,530	)
Others(*)		1,022			395

Ending balance	￦	139,475			100,946

(*)	Others for the year ended March 31, 2013 include transfer to construction in progress and liabilities succeeded in relation to transfer of an executive from affiliates.

15.

Defined Benefit Liabilities, Continued

(4)

Changes in plan assets for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Beginning balance	￦	98,147			68,619
Interest income		831			618
Remeasurement of plan assets		842			239
Contribution to the plan		(2,338	)		(1,184	)

Ending balance	￦	97,482			68,292

(5)

Expenses recognized in profit and loss and capitalized into construction-in-progress for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Current service cost	￦	8,282		7,220
Net interest cost		305		426

	￦	8,587		7,646

The above costs are recognized in labor cost, research and development, or capitalized into construction-in-progress.

(6)

Details of plan assets as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Equity instruments	￦	122		55
Debt instruments		30,335		24,199
Short-term financial instruments, etc.		67,025		73,893

	￦	97,482		98,147

Actual return on plan assets for the three-month periods ended March 31, 2013 and 2012 amounted to ￦1,673 million and ￦857 million, respectively.

16.

Derivative Instruments

(1)

Currency swap contracts under cash flow hedge accounting

The Company has entered into a floating-to-fixed cross currency 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 long-term borrowings with face amounts totaling USD 100,000,000 borrowed on October 10, 2006. As of March 31, 2013, in connection with unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to ￦2,802 million (net of tax effect totaling ￦394 million and foreign currency translation loss arising from U.S. dollar denominated long-term borrowings totaling ￦16,410 million) is accounted for as accumulated other comprehensive loss.

In addition, the Company has entered into a fixed-to-fixed cross currency swap contract with Morgan Stanley and five other banks to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds with face amounts totaling USD 400,000,000 at annual fixed interest rate of 6.63% issued on July 20, 2007. As of March 31, 2013, in connection with unsettled cross currency swap contract to which cash flow hedge accounting is applied since May 12, 2010, an accumulated loss on valuation of derivatives amounting to ￦37,356 million (net of tax effect totaling ￦11,926 million and foreign currency translation gain arising from unguaranteed U.S. dollar denominated bonds totaling ￦12,483 million) is accounted for as accumulated other comprehensive loss. In connection with the cross currency swap contract, a gain on valuation of the currency swap contract which was incurred before application of hedge accounting, amounting to ￦129,806 million was recognized in profit or loss.

In addition, the Company has entered into a floating-to-fixed cross currency interest rate swap contract with United Overseas Bank to hedge the foreign currency risk and the interest rate risk of its Singapore dollar denominated bonds with face amounts totaling SGD 65,000,000 issued on December 15, 2011. As of March 31, 2013, in connection with the unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to ￦173 million (net of tax effect totaling ￦55 million and foreign currency translation loss arising from unguaranteed Singapore dollar denominated bonds totaling ￦791 million) is accounted for as accumulated other comprehensive loss.

In addition, the Company has entered into a floating-to-fixed cross currency interest rate swap contract with DBS Bank and Citi Bank to hedge the foreign currency risk and the interest rate risk of its unguaranteed U.S. dollar denominated bonds with face amounts totaling USD 250,000,000 issued on December 15, 2011. As of March 31, 2013, in connection with the unsettled cross currency interest rate swap contract, an accumulated gain on valuation of derivatives amounting to ￦5,767 million (net of tax effect totaling ￦1,841 million and foreign currency translation gain arising from unguaranteed U.S. dollar denominated bonds totaling ￦11,490 million) is accounted for as other comprehensive income.

In addition, the Company has entered into a fixed-to-fixed cross currency swap contract with Citi Bank and five other banks to hedge the foreign currency risk of its Swiss Franc denominated bonds with face amounts totaling CHF 300,000,000 issued on June 12, 2012. As of March 31, 2013, in connection with the unsettled cross currency swap contract, an accumulated loss on valuation of derivatives amounting to ￦8,912 million (net of tax effect totaling ￦2,845 million and foreign currency translation gain arising from unguaranteed Swiss Franc denominated bonds totaling ￦12,176 million) is accounted for as accumulated other comprehensive loss.

16.

Derivative Instruments, Continued

In addition, the Company has entered into a fixed-to-fixed cross currency swap contract with Barclays and nine other banks to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds with face amounts totaling USD 700,000,000 issued on November 1, 2012. As of March 31, 2013, in connection with the unsettled cross currency swap contract, an accumulated loss on valuation of derivatives amounting to ￦12,029 million (net of tax effect totaling ￦3,840 million and foreign currency translation loss arising from unguaranteed U.S. dollar denominated bonds totaling ￦14,883 million) is accounted for as accumulated other comprehensive loss.

In addition, the Company has entered into a fixed-to-fixed cross currency swap contract with BNP Paribas and three other banks to hedge the foreign currency risk of unguaranteed Australian dollar denominated bonds with face amounts totaling AUD 300,000,000 issued on January 17, 2013. As of March 31, 2013, in connection with the unsettled cross currency swap contract, an accumulated gain on valuation of derivatives amounting to ￦307 million (net of tax effect totaling ￦98 million and foreign currency translation loss arising from unguaranteed Australian dollar denominated bonds totaling ￦11,703 million) is accounted for as accumulated other comprehensive income.

In addition, the Company has entered into a floating-to-fixed cross currency interest rate swap contract with DBS bank to hedge the foreign currency risk of unguaranteed U.S dollar denominated bonds with face amounts totaling USD 300,000,000 issued on March 7, 2013. As of March 31, 2013, in connection with the unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to ￦4,077 million (net of tax effect totaling ￦1,302 million and foreign currency translation loss arising from unguaranteed U.S dollar denominated bonds totaling ￦8,506 million) is accounted for as accumulated other comprehensive loss.

(2)

As of March 31, 2013, fair values of the above derivatives recorded in assets or liabilities and details of derivative instruments are as follows:

(In millions of won, thousands of U.S. dollars, Singapore dollars, Australian dollars, and Swiss franc)

Fair value

Hedged item

Amount

Duration of
Contract

Designated
as Cash Flow
Hedge

Current assets:

Floating-to-fixed cross currency swap

U.S. dollar denominated
long-term borrowings

USD

100,000

Oct. 10, 2006 ~ Oct. 10, 2013

￦

13,214

Non-current assets:

Fixed-to-fixed cross currency swap

U.S. dollar denominated bonds

USD

400,000

Jul. 20, 2007 ~ Jul. 20, 2027

68,040

Floating-to-fixed cross currency swap

Singapore dollar denominated bonds

SGD

65,000

Dec. 15, 2011 ~ Dec. 12, 2014

562

Fixed-to-fixed cross currency swap

Australian dollar denominated bonds

AUD

300,000

Jan. 17, 2013 ~ Nov. 17, 2017

12,107

Floating-to-fixed cross currency swap

U.S. dollar denominated bonds

USD

300,000

Mar. 7, 2013 ~ Mar. 7, 2020

3,127

Total assets

￦

97,050

Non-current liabilities:

Floating-to-fixed cross currency swap

U.S. dollar denominated bonds

USD

250,000

Dec. 15, 2011 ~ Dec. 12, 2014

￦

3,882

Fixed-to-fixed cross currency swap

Swiss Franc denominated bonds

CHF

300,000

Jun. 12, 2012 ~ Jun. 12, 2017

23,933

Fixed -to-fixed cross currency swap

U.S. dollar denominated bonds

USD

700,000

Nov. 1, 2012 ~ May. 1, 2018

987

Total liabilities

￦

28,802

17.

Share Capital and Capital Surplus (Deficit) and Other Capital Adjustments

The Company’s outstanding share capital consists entirely of common stock with a par value of ￦500. The number of authorized, issued and outstanding common shares and capital surplus (deficit) and other capital adjustments as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won, except for share data)
	March 31, 2013			December 31, 2012
Authorized shares		220,000,000			220,000,000
Issued shares(*1)		80,745,711			80,745,711
Share capital
Common stock	￦	44,639			44,639
Capital surplus (deficit) and other capital adjustments:
Paid-in surplus		2,915,887			2,915,887
Treasury stock		(2,410,451	)		(2,410,451	)
Loss on disposal of treasury stock		(18,855	)		(18,855	)
Others(*2)		(722,741	)		(722,741	)

	￦	(236,160	)		(236,160	)

(*1)

During the years ended December 31, 2003, 2006 and 2009, the Company retired 7,002,235 shares, 1,083,000 shares and 448,000 shares, respectively, of treasury stock which reduced its retained earnings before appropriation in accordance with the Korean Commercial Law. As a result, the Company’s outstanding shares have decreased without change in the share capital.

(*2)	Others represent the difference between net assets and considerations paid in relation to the transfer of Imagine business from SK Planet Co., Ltd., a subsidiary.

There were no changes in share capital for the three-month period ended March 31, 2013 and the year ended December 31, 2012.

18.

Treasury Stock

Through 2009, the Company acquired 8,400,712 shares of treasury stock in the open market for ￦1,992,083 million to provide stock dividends, issue new stocks, merge with Shinsegi Telecom, Inc. and SK IMT Co, Ltd., increase shareholder value and to stabilize its stock prices when needed.

In addition, the Company acquired 1,250,000 shares of treasury stock for ￦210,356 million from July 26, 2010 to October 20, 2010 and 1,400,000 shares of treasury stock for ￦208,012 million from July 21, 2011 to September 28, 2011, in accordance with the resolution of the Board of Directors on July 22, 2010 and July 19, 2011, respectively.

As a result of these treasury stock transactions, as of March 31, 2013 and December 31, 2012, the Company has 11,050,712 shares of treasury stock at ￦2,410,451 million.

19.

Retained Earnings

(1)

Retained earnings as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Appropriated:	￦
Legal reserve		22,320		22,320
Reserve for research & manpower development		155,766		220,000
Reserve for business expansion		9,376,138		9,106,138
Reserve for technology development		2,271,300		1,901,300

		11,825,524		11,249,758
Unappropriated		302,848		1,164,223

	￦	12,128,372		12,413,981

(2)

Legal reserve

The Korean Commercial Code requires the Company to appropriate as a legal reserve at least 10% of cash dividends paid for each accounting period until the reserve equals 50% of outstanding share capital. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to share capital.

(3)

Reserve for research & manpower development

The reserve for research and manpower development was appropriated in order to recognize certain tax deductible benefits through the early recognition of future expenditures for tax purposes. These reserves will be reversed from appropriated and retained earnings in accordance with the relevant tax laws. Such reversal will be included in taxable income in the year of reversal.

20.

Reserves

(1)

Details of reserves, net of taxes, as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013			December 31, 2012
Unrealized fair value of available-for-sale financial assets	￦	187,094			206,414
Unrealized fair value of derivatives		(59,277	)		(51,826	)

	￦	127,817			154,588

(2)

Changes in reserves for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended March 31, 2013
	Net change in unrealized fair value of available-for-sale financial assets			Net change in unrealized fair value of derivatives			Total
Balance at January 1, 2013		206,414			(51,826	)		154,588
Changes		(25,488	)		(9,829	)		(35,317	)
Tax effect		6,168			2,378			8,546

Balance at March 31, 2013	￦	187,094			(59,277	)		127,817


(In millions of won)	For the three-month period ended March 31, 2012
	Net change in unrealized fair value of available-for-sale financial assets			Net change in unrealized fair value of derivatives			Total
Balance at January 1, 2012	￦	352,616			(32,122	)		320,494
Changes		(15,433	)		(18,896	)		(34,329	)
Tax effect		3,735			4,572			8,307

Balance at March 31, 2012		340,918			(46,446	)		294,472

21.

Other Operating Expenses

Details of other operating expenses for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012

Other Operating Expenses:
Communication expenses	￦	12,737		16,171
Utilities		39,590		32,000
Taxes and dues		4,307		27,410
Repair		38,052		39,237
Research and development		52,699		43,745
Training		4,602		4,759
Bad debt for accounts receivables - trade		5,175		290
Reversal of allowance for doubtful accounts		—		(4,301	)
Other		8,898		11,200

	￦	166,060		170,511

22.

Other Non-operating Income and Expenses

Details of other non-operating income and expenses for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012

Other Non-operating Income:
Gain on disposal of property and equipment and intangible assets	￦	348		231
Others		6,625		4,475

	￦	6,973		4,706

Other Non-operating Expenses:
Loss on disposal of property and equipment and intangible assets	￦	4,540		762
Donations		11,863		12,270
Bad debt for accounts receivable - other		10,352		15,959
Others		3,816		678

	￦	30,571		29,669

23.

Finance Income and Costs

(1)

Details of finance income and costs for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012

Finance Income:
Interest income	￦	8,432		20,991
Dividends		12,577		25,167
Gain on foreign currency transactions		2,130		1,150
Gain on foreign currency translation		592		43
Gain on valuation of financial assets at fair value through profit or loss		938		—
Gain on disposal of long-term investment securities		922		470
Gain on settlement of derivatives		2,274		4,292

	￦	27,865		52,113


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Finance Costs:
Interest expense	￦	73,551		71,002
Loss on foreign currency transactions		2,581		1,375
Loss on foreign currency translation		1,111		110
Loss on disposal of long-term investment securities		72		7,505
Loss on valuation of financial assets at fair value through profit or loss		—		640
Loss on valuation of financial liabilities at fair value through profit or loss		38,087		3,733

	￦	115,402		84,365

(2)

Details of interest income included in finance income for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Interest income on cash equivalents and deposits	￦	4,880		12,425
Interest income on installment receivables and others		3,552		8,566

	￦	8,432		20,991

23.

Finance Income and Costs, Continued

(3)

Details of interest expense included in finance costs for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Interest expense on bank overdrafts and borrowings	￦	12,182		3,465
Interest expense on debentures		50,587		40,902
Others		10,782		26,635

	￦	73,551		71,002

(4)

Details of impairment losses for financial assets for the three-month periods ended March 31, 2013 and 2012 are as follows.


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Bad debt for accounts receivable - trade	￦	5,175		290
Bad debt for accounts receivable - other		10,352		15,959

	￦	15,527		16,249

24.

Income Tax Expense

25.

Earnings per Share

(1)

Basic earnings per share

Basic earnings per share for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


(In millions of won, shares)	For the three-month period ended
	March 31, 2013		March 31, 2012
Profit for the period	￦	302,177		344,972
Weighted average number of common shares outstanding		69,694,999		69,694,999

Basic earnings per share (In won)	￦	4,336		4,950

The weighted average number of common shares outstanding for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


	Number of shares			Weighted number of days	Weighted number of shares
Outstanding common shares at January 1, 2013		80,745,711		90/90		80,745,711
Effect of treasury stock		(11,050,712	)	90/90		(11,050,712	)

Number of shares at March 31, 2013		69,694,999				69,694,999

25.

Earnings per Share, Continued


	Number of shares			Weighted number of days	Weighted number of shares
Outstanding common shares at January 1, 2012		80,745,711		91/91		80,745,711
Effect of treasury stock		(11,050,712	)	91/91		(11,050,712	)

Number of shares at March 31, 2012		69,694,999				69,694,999

(2)

Diluted earnings per share

Diluted earnings per share for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


(In millions of won, shares)	For the three-month period ended
	March 31, 2013(*)		March 31, 2012
Diluted profit for the period	￦	302,177		349,034
Diluted weighted average number of common shares outstanding		69,694,999		72,003,405

Diluted earnings per share (In won)	￦	4,336		4,847

(*)

The number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds is excluded from the diluted earnings per share calculation for the three-month period ended March 31, 2013 as the effect of exchangeable bond is nil (diluted shares of 2,421,077); thus, diluted earnings per share for the three-month period ended March 31, 2013 is the same as basic earnings per share.

Diluted profit for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Profit for the period	￦	302,177		344,972
Effect of exchangeable bonds		—		4,062

Diluted profit for the period	￦	302,177		349,034

Adjusted weighted average number of common shares outstanding for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:


(In shares)	For the three-month period ended
	March 31, 2013		March 31, 2012
Weighted average number of common shares outstanding		69,694,999		69,694,999
Effect of exchangeable bonds(*)		—		2,308,406

Adjusted weighted average number of common shares outstanding		69,694,999		72,003,405

(*)	Effect of exchangeable bonds represents weighted average number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds, which could be exchanged to treasury stock.

26.

Categories of Financial Instruments

(1)

Financial assets by categories as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	￦	—		—		465,783		—		465,783
Financial instruments		—		—		135,569		—		135,569
Short-term investment securities		—		76,504		—		—		76,504
Long-term investment securities(*1)		16,294		684,088		—		—		700,382
Accounts receivable - trade		—		—		1,416,415		—		1,416,415
Loans and other receivables(*2)		—		—		731,428		—		731,428
Derivative financial assets		—		—		—		97,050		97,050

	￦	16,294		760,592		2,749,195		97,050		3,623,131


(In millions of won)
	December 31, 2012
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	￦	—		—		256,577		—		256,577
Financial instruments		—		—		179,369		—		179,369
Short-term investment securities		—		56,401		—		—		56,401
Long-term investment securities(*1)		15,356		718,537		—		—		733,893
Accounts receivable - trade		—		—		1,407,206		—		1,407,206
Loans and other receivables(*2)		—		—		661,689		—		661,689
Derivative financial assets		—		—		—		61,959		61,959

	￦	15,356		774,938		2,504,841		61,959		3,357,094

(*1)	Long-term investment securities of which the embedded derivative (conversion right option), which should be separated from the main contract, could not be separately measured, were designated as financial assets at fair value through profit or loss.

26.

Categories of Financial Instruments, Continued

(*2)	Details of loans and other receivables as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Short-term loans	￦	84,714		75,449
Accounts receivable - other		454,931		383,048
Accrued income		5,375		4,147
Long-term loans		43,273		49,672
Guarantee deposits		143,135		149,373

	￦	731,428		661,689

(2)

Financial liabilities by categories as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Derivative financial liabilities	￦	—		—		28,802		28,802
Borrowings		—		151,210		—		151,210
Debentures (*1)		443,765		4,769,206		—		5,212,971
Accounts payable - other and others (*2)		—		3,403,544		—		3,403,544

	￦	443,765		8,323,960		28,802		8,796,527


(In millions of won)
	December 31, 2012
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Derivative financial liabilities	￦	—		—		63,599		63,599
Borrowings		—		785,443		—		785,443
Debentures(*1)		405,678		4,034,429		—		4,440,107
Accounts payable - other and others(*2)		—		3,073,290		—		3,073,290

	￦	405,678		7,893,162		63,599		8,362,439

(*1)	Debentures of which the embedded derivative (conversion right option), which should be separated from the main contract, could not be separately measured, were designated as financial liabilities at fair value through profit or loss.

26.

Categories of Financial Instruments, Continued

(*2)	Details of accounts payable and other payables as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Accounts payable - other	￦	1,932,347		1,509,456
Withholdings		6		18
Accrued expenses		663,396		600,101
Current portion of long-term payables - other		150,654		157,965
Long-term payables - other		555,416		705,605
Other non-current liabilities		101,725		100,145

	￦	3,403,544		3,073,290

27.

Financial Risk Management

(1)

Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates, interest rates and equity prices. The Company implements a risk management system to monitor and manage these specific risks.

The Company’s financial assets under financial risk management consist of cash and cash equivalents, financial instruments, available-for-sale financial assets, trade and other receivables. Financial liabilities consist of trade and other payables, borrowings, and debentures.

1) Market risk

(i) Currency risk

The Company is exposed to currency risk mainly on exchange fluctuations on recognized assets and liabilities. The Company manages currency risk by currency forward, etc. if needed to hedge currency risk on business transactions. Currency risk occurs on forecasted transaction and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Company.

27.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Monetary foreign currency assets and liabilities as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won, thousands of U.S. dollars, thousands of Euros, thousands of Japanese Yen, thousands of other currencies)
	Assets				Liabilities
	Foreign currencies		Korean won equivalent		Foreign currencies		Korean won equivalent
USD		21,107		23,473		2,098,650		2,333,908
EUR		37,062		52,822		14,879		21,205
JPY		98,757		1,165		—		—
CHF		—		—		298,236		349,234
SGD		—		—		64,663		57,956
AUD		—		—		297,700		344,764
Others		81		78		70		115

				77,538				3,107,182

In addition, the Company has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (Refer to Note 16)

As of March 31, 2013, effects on income (loss) before income tax as a result of change in exchange rate by 10% are as follows:


(In millions of won)
	If increased by 10%			If decreased by 10%
USD	￦	(38,386	)		38,386
EUR		3,162			(3,162	)
JPY		116			(116	)
Others		(4	)		4

	￦	(35,112	)		35,112

(ii) Equity price risk

The Company has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of March 31, 2013, available-for-sale equity instruments measured at fair value amounts to ￦696,754 million.

(iii) Interest rate risk

Since the Company’s interest bearing assets are mostly fixed-interest bearing assets, as such, the Company’s revenue and operating cash flow are not influenced by the changes in market interest rates. However, the Company still has interest rate risk arising from borrowings and debentures.

Accordingly, the Company performs various analysis of interest rate risk, which includes refinancing, renewal, alternative financing and hedging instrument option, to reduce interest rate risk and to optimize its financing.

27.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

The Company’s interest rate risk arises from floating-rate borrowings and payables. As of March 31, 2013, floating-rate debentures and borrowings amount to ￦669,913 million and ￦111,210 million, respectively, and the Company has entered into interest rate swaps to hedge interest rate risk related to floating-rate borrowings and debentures (Refer to Note 16). If interest rate only increases (decreases) by 1%, income before income taxes for the year ended March 31, 2013 would not have been changed due to the interest expense from floating-rate borrowings and debentures.

2) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet his/her contractual obligations. The maximum credit exposure as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013		December 31, 2012
Cash and cash equivalents	￦	465,783		256,577
Financial instruments		135,569		179,369
Available-for-sale financial assets		760,592		774,938
Accounts receivable - trade		1,416,415		1,407,206
Loans and receivables		731,428		661,689
Derivative financial assets		97,050		61,959
Financial assets at fair value through profit or loss		16,294		15,356

	￦	3,623,131		3,357,094

To manage credit risk, the Company evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors; based on such information, the Company establishes credit limits for each customer or counterparty.

For the three-month period ended March 31, 2013, the Company has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Company believes that the possibility of default is remote. Also, the Company’s credit risk can rise due to transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivates. To minimize such risk, the Company has a policy to deal with high credit worthy financial institutions. The amount of maximum exposure to credit risk of the Company is the carrying amount of financial assets as of March 31, 2013.

In addition, the aging of trade and other receivables that are overdue at the end of the reporting period but not impaired is stated in Note 5 and the analysis of financial assets that are individually determined to be impaired at the end of the reporting period is stated in Note 23.

27.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

3) Liquidity risk

The Company’s approach to managing liquidity is to ensure that it will always maintain sufficient cash equivalents balance and have enough liquidity through various committed credit lines. The Company maintains flexibly enough liquidity under credit lines through active operating activities.

Contractual maturities of financial liabilities as of March 31, 2013 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 - 5 years		More than 5 years
Derivative financial liabilities	￦	28,802		26,944		17,985		38,817		(29,858	)
Borrowings		151,210		152,425		152,425		—		—
Debentures (*1)		5,212,971		6,354,294		636,784		3,170,217		2,547,293
Accounts payable - other and others (*2)		3,403,544		3,512,523		2,747,910		527,317		237,296

	￦	8,796,527		10,046,186		3,555,104		3,736,351		2,754,731

The Company does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.

(*1)	Includes estimated interest to be paid and excludes discounts on bonds.

(*2)	Excludes discounts on accounts payable-other and others.

(2)

Capital management

The Company manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity balance. The overall strategy of the Company is the same as that of the Company as of and for the year ended December 31, 2012.

The Company monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total debt divided by total equity; the total debt and equity is extracted from the financial statements.

Debt-equity ratio as of March 31, 2013 and December 31, 2012 are as follows:


(In millions of won)
	March 31, 2013			December 31, 2012
Liability	￦	10,326,873			9,872,454
Equity		12,064,668			12,377,048

Debt-equity ratio		85.60	%		79.76	%

27.

Financial Risk Management, Continued

(3)

Fair value

Fair value of the financial instruments that are not traded in an active market is determined using the valuation method. The Company uses the various valuation methods and makes assumptions that are mainly based on market conditions existing at the end of each reporting period. Fair value of financial instruments such as long-term liabilities is measured using the various methods including estimated discounted cash flow method.

Fair values of accounts receivable - trade, and accounts payable - trade are considered to be carrying amount less impairment and fair value of financial liabilities for the disclosure purpose is estimated by discounting contractual future cash flows using the current market interest rate used for the similar financial instruments by the Company.

Interest rates used by the Company for the fair value measurement as of March 31, 2013 are as follows:


	Interest rate
Derivative instruments		2.55~4.26	%
Borrowings and Debentures		2.82	%

1) Fair value and carrying amount

Carrying amount and fair value of financial assets and liabilities are as follows:


(In millions of won)
	March 31, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
Assets carried at fair value
Financial assets at fair value through profit or loss	￦	16,294		16,294		15,356		15,356
Derivative financial assets		97,050		97,050		61,959		61,959
Available-for-sale financial assets		696,754		696,754		730,754		730,754

	￦	810,098		810,098		808,069		808,069

Assets carried at amortized cost
Cash and cash equivalents	￦	465,783		465,783		256,577		256,577
Available-for-sale financial assets		63,838		63,838		44,184		44,184
Accounts receivable - trade and others		2,147,843		2,147,843		2,068,895		2,068,895
Financial instruments		135,569		135,569		179,369		179,369

	￦	2,813,033		2,813,033		2,549,025		2,549,025

27.

Financial Risk Management, Continued

(3)

Fair value, Continued


(In millions of won)
	March 31, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
Liabilities carried at fair value
Financial liabilities at fair value through profit or loss	￦	443,765		443,765		405,678		405,678
Derivative financial liabilities		28,802		28,802		63,599		63,599

	￦	472,567		472,567		469,277		469,277

Liabilities carried at amortized cost
Borrowings	￦	151,210		151,480		785,443		798,908
Debentures		4,769,206		5,097,674		4,034,429		4,224,907
Accounts payable - other and others		3,403,544		3,403,544		3,073,290		3,073,290

	￦	8,323,960		8,652,698		7,893,162		8,097,105

2) Fair value hierarchy

The different levels have been defined as follows:

•

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

•

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

•

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

The table below analyzes financial instruments carried at fair value, by fair value hierarchy as of March 31, 2013.


(In millions of won)
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss	￦	—		16,294		—		16,294
Derivative financial assets		—		97,050		—		97,050
Available-for-sale financial assets		560,957		46,262		89,535		696,754
Financial liabilities at fair value through profit or loss		443,765		—		—		443,765
Derivative financial liabilities		—		28,802		—		28,802

There have been no transfers from Level 2 to Level 1 in March 31, 2013 and changes of financial assets classified as Level 3 for the three-month period ended March 31, 2013 are as follows:


(In millions of won)
	Balance at Jan. 1		Other comprehensive loss			Disposal			Balance at Mar. 31
Available-for-sale financial assets	￦	100,566		(2,519	)		(8,512	)		89,535

28.

Transactions with Related Parties

(1)

As of March 31, 2013, the parent company and subsidiaries of the Company are as follows:


Type	Company	Ownership percentage (%)			Types of business

Ultimate Controlling Entity(*1)	SK Holdings Co., Ltd.		25.2	(*2)	Holding company

Subsidiaries	SK Telink Co., Ltd.		83.5		Telecommunication service
	M&Service Co., Ltd.(*3,4)		100.0		Data base and internet website service
	SK Communications Co., Ltd.		64.6	(*4)	Internet website services
	PAXNet Co., Ltd.(*5)		—		Internet website services
	Loen Entertainment, Inc.		67.6	(*4)	Release of music disc
	Stonebridge Cinema Fund		57.0		Investment association
	Commerce Planet Co., Ltd.		100.0	(*4)	Online shopping mall operation agency
	SK Broadband Co., Ltd.		50.6		Telecommunication services
	Broadband Media Co., Ltd.(*6)		—		Multimedia TV portal service
	K-net Culture and Contents Venture Fund		59.0	(*4)	Investment association
	Fitech Focus Limited Partnership II		66.7	(*4)	Investment association
	Open Innovation Fund		98.9	(*4)	Investment association
	PS&Marketing Corporation		100.0		Communications device retail business
	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
	BNCP Co., Ltd.		100.0	(*4)	Internet website services
	SK Planet Co., Ltd.		100.0		Telecommunication services
	Madsmart, Inc.		100.0	(*4)	Application software production
	SK Telecom China Holdings Co., Ltd.		100.0		Investment association
	SKY Property Mgmt. Ltd.(*5)		—		Investment association
	Shenzhen E-eye High Tech Co., Ltd.		65.5	(*4)	Manufacturing
	SK Global Healthcare Business Group., Ltd.		100.0		Investment
	SK China Real Estate Co., Ltd.(*5)		—		Investment association
	SK Planet Japan		100.0	(*4)	Digital contents sourcing service
	SKT Vietnam PTE. Ltd.		73.3		Telecommunication service
	SK Planet Global PTE. Ltd.		100.0	(*4)	Digital contents sourcing service
	SKT Americas, Inc.		100.0		Information gathering and consulting
	SKP America LLC.		100.0	(*4)	Digital contents sourcing service
	YTK Investment Ltd.		100.0		Investment association
	Atlas Investment		100.0		Investment association
	Technology Innovation Partners, L.P.		100.0	(*4)	Investment association
	SK Telecom China Fund I L.P.		100.0	(*4)	Investment association

28.

Transactions with Related Parties, Continued

(*1)	SK Holdings Co., Ltd. is the Ultimate Controlling Entity because of its de facto control over the Company.

(*2)	The ownership percentage represents parent company’s ownership over the Company.

(*3)	Newly included as subsidiaries during the three-month period ended March 31, 2013.

(*4)	The ownership percentage represents subsidiaries’ ownership over their subsidiaries, in which the Company has no direct investment.

(*5)	Excluded as the ownership interests have been disposed for the three-month period ended March 31, 2013.

(*6)	Merged into SK Broadband Co., Ltd. for the three-month period ended March 31, 2013.

(2)

Transactions


(In millions of won)	Operating revenue and others				Operating expense and others
	Three-month period ended March 31, 2013		Three-month period ended March 31, 2012		Three-month period ended March 31, 2013		Three-month period ended March 31, 2012
Parent Company	￦	195		99		177,939		6,230
Subsidiaries		40,759		60,122		486,035		386,300
Associates		3,399		50,018		17,077		127,320
Others		18,717		10,040		137,390		264,508

	￦	63,070		120,279		818,441		784,358

Operating revenue include commission received in relation to the interconnection charges and satellite lease. Operating expense include commission paid in relation to the service provided by related parties.

(3)

Account balances


(In millions of won)	Accounts receivable and others				Accounts payable and others
	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
Parent Company	￦	185		222		171,261		—
Subsidiaries		19,107		17,329		197,757		385,818
Associates		63,717		63,606		5,776		73,637
Others		9,722		15,122		94,209		189,659

	￦	92,731		96,279		469,003		649,114

28.

Transactions with Related Parties, Continued

(4)

Compensation for the key management

The Company considers registered directors who have substantial role and responsibility in planning, operating, and controlling of the business as key management. Compensations given to key management for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013		March 31, 2012
Salaries	￦	1,253		7,991
Provision for retirement benefits		721		565

	￦	1,974		8,556

29.

Commitments and Contingencies

As of March 31, 2013, the Company has participated in “Tactical Airship” program of the Defense Acquisition Program Administration with Joint Defense Corporation. For an advance receipt amounting to USD 3,897,196 which Joint Defense Corporation received from the Defense Acquisition Program Administration, the Company provides payment guarantees to the Defense Acquisition Program Administration.

30.

Sale and Leaseback

For the year ended December 31, 2012, the Company disposed a portion of its property and equipment and investment property, and entered into lease agreements with respect to those assets. This sale and leaseback transaction is considered as an operating lease.

For the three-month period ended March 31, 2013, the Company recognized lease payment of ￦4,144 million relating to the above operating lease agreement and lease revenue of ￦2,116 million through a sublease agreement. Future lease payments and lease revenue from the above operating lease agreement and sublease agreement are as follows:


(In millions of won)	Lease payments		Lease revenue
Less than 1 year	￦	16,698		8,462
1~5 years		71,089		33,196
More than 5 years		79,674		27,791

	￦	167,461		69,449

31.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Interest income	￦	(8,432	)		(20,991	)
Dividends		(12,577	)		(25,167	)
Gain on foreign currency translation		(592	)		(43	)
Gain on valuation of financial assets at fair value through profit or loss		(938	)		—
Gain on disposal of long-term investment securities		(922	)		(470	)
Gain on settlement of derivatives		(2,274	)		(4,292	)
Gain on disposal of investments in subsidiaries and associates		(71,200	)		(80,483	)
Gain on disposal of property and equipment and intangible assets		(348	)		(231	)
Reversal of allowance for doubtful accounts		—			(4,301	)
Other income		(1,067	)		(2,131	)
Interest expenses		73,551			71,002
Loss on foreign currency translation		1,111			110
Loss on disposal of long-term investment securities		72			7,505
Loss on valuation of financial assets at fair value through profit or loss		—			640
Loss on valuation of financial liabilities at fair value through profit or loss		38,087			3,733
Impairment loss on investment in associates		—			72,096
Income tax expense		77,999			88,865
Provision for retirement benefits		8,587			7,646
Depreciation and amortization		503,601			427,136
Bad debt for accounts receivable - trade		5,175			290
Loss on disposal of property and equipment and intangible assets		4,539			762
Bad debt for accounts receivable - other		10,352			15,959
Other expenses		763			—

	￦	625,487			557,635

31.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Accounts receivable - trade	￦	(15,094	)		(1,727	)
Accounts receivable - other		(61,923	)		250,337
Advance payments		(36,050	)		(9,574	)
Prepaid expenses		8,372			12,268
Inventories		5,512			5,158
Long-term accounts receivables - other		—			2,556
Guarantee deposits		7,859			14,247
Accounts payable - other		(43,838	)		(227,014	)
Advanced receipts		2,355			(709	)
Withholdings		107,316			108,020
Deposits received		1,295			(1,637	)
Accrued expenses		71,194			116,378
Unearned revenue		(21,633	)		(24,915	)
Provisions		(79,988	)		(28,651	)
Long-term provisions		(30,059	)		5,037
Plan assets		2,338			1,184
Retirement benefit payment		(8,003	)		(9,530	)
Others		296			(1	)

	￦	(90,051	)		211,427

(3)

Significant non-cash transactions for the three-month periods ended March 31, 2013 and 2012 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2013			March 31, 2012
Transfer of other property and equipment to construction in progress	￦	264,163			367,293
Transfer of construction in progress to property and equipment		316,508			570,779
Accounts payable - other related to acquisition of tangible assets and others		(120,318	)		8,010

32.

Subsequent Events

On April 23, 2013, the Company issued bonds of ￦230,000 million with fixed interest rate of 3.03% and ￦130,000 million with fixed interest rate of 3.22%. Maturities of those bonds are April 23, 2023 and April 23, 2033, respectively.

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/ Soo Cheol Hwang
(Signature)



Name:		Soo Cheol Hwang
Title:		Senior Vice President

Date: June 14, 2013