Edgar Filing: SK TELECOM CO LTD

(Unit: in thousands of Won)

Financial Institution

Guarantee

Amount

Seoul Guarantee Insurance Company

Prepaid coverage payment guarantee

Seoul Guarantee Insurance Company

Provisional deposit guarantee insurance for bonds

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 DECEMBER 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 þ Form 40-F ¨

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

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

QUARTERLY BUSINESS REPORT

(From January 1, 2013 to September 30, 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 nine months ended September 30, 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
M&Service Co., Ltd.	Feb. 10, 2000	Online information services		48,493
SK Communications Co., Ltd.	Sep. 19, 1996	Internet portal and other Internet information services		265,819	Material
Stonebridge Cinema Fund	Sep. 30, 2005	Investment partnership		10,965
Commerce Planet Co., Ltd.	Jul. 1, 1997	Online shopping mall operation services		34,007
SK Broadband Co., Ltd.	Sep. 26, 1997	Fixed-line telecommunication services, multimedia and IPTV 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	Sale of telecommunication devices		317,613	Material
Service Ace Co., Ltd.	Jul. 1, 2010	Customer center management services		48,956
Service Top Co., Ltd.	Jul 1, 2010	Customer center management services		43,332
Network O&S Co., Ltd.	Jul. 1, 2010	Network maintenance services		165,818	Material
BNCP Co., Ltd.	Dec. 7, 2009	Internet services		24,000
SK Planet Co., Ltd.	Oct. 1, 2011	Telecommunication and platform services		1,647,965	Material
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
SKP Global Holdings PTE, LTD.	Apr. 22, 2013	Holding company for overseas commerce		—
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 manufacturing		18,915


Name	Date of Establishment	Principal Business	Total Assets as of Dec. 31, 2012 (millions of Won)		Material Subsidiary*
SKT Vietnam PTE., Ltd.	Apr. 5, 2000	Telecommunication services		38,331
SKT Americas, Inc.	Dec. 29, 1995	Information collection and management consulting services		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. In June 2013, the Company became the first telecommunications service provider in the world to provide commercial LTE-Advanced (“LTE-A”) services using carrier aggregation technology. In September 2013, beginning with the Seoul area, the Company also began offering wideband LTE service, which utilizes the 1.8 GHz band to enhance the customer experience of new and existing LTE customers. 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. As of September 30, 2013, the Company had 480,000 paying subscribers for our mobile IPTV services, which commercially launched in October 2012. The Company is the first telecommunications services provider in the world to provide full high definition streaming services using its LTE-A network. With increasing video on demand usage and the potential to expand into other business areas such as advertising and shopping, the Company expects that the mobile IPTV services business will grow in the mid- to long-term.

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 IPTV services.

(3)

Other businesses

In the digital contents business area, the Company provides high-quality digital contents in its leading mobile contents marketplace, T Store, which had 21.3 million subscribers as of September 30, 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 online. 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 reached 18.0 million as of September 30, 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 Internet 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 online 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 online 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 online 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 and application development.

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-1. 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 Meeting of Shareholders 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 Meeting of Shareholders 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 general meeting of shareholders.

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 a summary of the Company’s 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

The schedule of the spin-off is set forth below.


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 had a 21.05% equity interest in SK Hynix after the purchase. The Company’s equity interest in SK Hynix decreased to 20.6% after certain convertible bonds issued by SK Hynix were converted into shares upon the exercise of conversion rights by their holders during the three months ended September 30, 2013.

(3)

Merger of SK Planet and SK Marketing & Company Co., Ltd.

On January 11, 2013, the Company acquired the remaining 50% equity stake in SK Marketing & Company Co., Ltd. (“SK Marketing & Company”), a company providing e-commerce and advertising services, from SK Innovation Co., Ltd. and gained control of both SK Marketing & Company and its subsidiary, SK M&Service Co., Ltd. The Company thereafter contributed the 100% equity stake in SK Marketing & Company to SK Planet and merged SK Marketing & Company into SK Planet as of February 1, 2013.

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

On April 22, 2013, the board of directors of SK Planet resolved to merge Madsmart, Inc., its wholly-owned subsidiary, into SK Planet to enhance the competitiveness of its platform business and provide faster service to customers by merging the information and communication technology (“ICT”) capabilities of the two companies. The merger was effective as of June 1, 2013 and SK Planet did not issue any new shares in connection with the merger.

[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

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.

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.

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

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 billion 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.

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.

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.

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)

Issuance of bonds

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 a maturity date of April 23, 2023) and Won 130 billion (with an annual interest rate of 3.22% and a maturity date of April, 23, 2033).

(2)

Issuance of hybrid securities

On June 7, 2013, the Company issued Won 400 billion principal amount of hybrid securities in the form of unguaranteed subordinated bonds with an annual interest rate of 4.21%, which interest rate is adjusted five years after the date of issuance. The Company classified the hybrid securities as equity as there is no contractual obligation to deliver financial assets to the bondholders. The maturity date of the hybrid securities is June 7, 2073, which can be extended by the Company without any notice or announcement.

(3)

Conversion of convertible notes

On April 7, 2009, the Company issued convertible notes with a maturity of five years in the principal amount of US$332,528,000 with an annual interest rate of 1.75%. During the nine-month period ended September 30, 2013, holders exercised their conversion rights with respect to an aggregate principal amount of US$120,901,000 of the convertible notes and the Company delivered 880,557 treasury shares upon conversion. In connection with such conversion, the Company recognized Won 40,422 million in financial costs during the nine-month period ended September 30, 2013. As of September 30, 2013, 1,548,032 common shares are available for conversion upon the holders’ exercise of their conversion rights. The conversion price was lowered from Won 197,760 to Won 189,121 as a result of dividend payments made following their declaration on March 22, 2013 and July 25, 2013.

[SK Broadband]

SK Broadband acquired subscriberships of regional cable and other service providers on several different occasions. Such acquisitions were intended to secure a stable subscriber base for its 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, SK Broadband 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 its business, and therefore decided that such acquisitions did not require resolutions of its shareholders.

[SK Communications]

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 September 30, 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.

3.	Total Number of Shares

A.	Total Number of Shares


(As of September 30, 2013)				(Unit: in 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		10,170,155	—		10,170,155		—
VI. Number of shares outstanding (IV-V)		70,575,556	—		70,575,556		—

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 September 30, 2013)											(Unit: in 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		—		880,557	*		—		(802,583	)
Other acquisition			Preferred shares		—		—		—			—		—

Total			Common shares		11,050,712		—		880,557			—		10,170,155

			Preferred shares		—		—		—			—		—

During the nine-month period ended September 30, 2013, 880,557 common shares were delivered to bondholders upon conversion of the Company’s convertible notes. Of the 10,170,155 treasury shares held by the Company as of September 30, 2013, 1,548,032 shares are deposited with the Korea Securities Depository for delivery upon conversion of the Company’s convertible notes.

4.	Status of Voting Rights


(As of September 30, 2013)		(Unit: in 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		10,170,155		Treasury shares
Number of shares without voting rights (B)	Preferred share		—		—
Shares without voting rights pursuant to the Company’s articles of incorporation (the “Articles of Incorporation”) (C)	Common share		—		—
	Preferred share		—		—
Shares with restricted voting rights pursuant to Korean law (D)	Common share		—		—
	Preferred share		—		—
Shares with reestablished voting rights (E)	Common share		—		—
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		70,575,556		—
	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.

(6)

Distribution of interim dividends of Won 1,000 was approved during the 357th Board of Directors’ Meeting on July 25, 2013.

B.	Dividends for the Last Three Fiscal Years


(Unit: in millions of Won, except per share values and percentages)
Classification		As of and for the nine months ended September 30, 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			741,756		1,242,767		1,694,363
Net income per share (Won)			10,516		17,832		24,002

Total cash dividend			70,508		655,133		656,533

Total stock dividends			—		—		—

Percentage of cash dividend to available income (%)			9.5		52.7		38.7
Cash dividend yield ratio (%)	Common share		0.5		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		1,000		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		—		—		—

*	The above figures were 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 business consisting of cellular voice, wireless data and wireless Internet services, (2) the fixed-line business consisting of fixed-line telephone, high speed Internet, data and network lease services, among others, and (3) other businesses consisting of platform services and Internet portal services, among others.

1.	Business Overview

Set forth below is a summary business description of material consolidated subsidiaries.


Classification	Company name	Description of business
Wireless	SK Telecom Co., Ltd.	Wireless voice and data telecommunications services via digital wireless networks
	PS&Marketing Co., Ltd.	Sale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels
	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
Fixed-line	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
	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 September 30, 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-A, 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 commercialization of LTE network in July 2011 and LTE-A network in June 2013, B2B businesses, such as the corporate “connected workforce” business which can directly contribute to an enhancement in productivity, are expected to grow rapidly.

B.	Growth Potential


(Unit: in 1,000 persons)
		As of September, 30,		As of December 31,
Classification		2013		2012		2011		2010		2009
Number of subscribers	SK Telecom		27,211		26,961		26,553		25,750		24,270
	Others (KT, LGU+)		27,038		26,663		25,954		25,062		23,675

	Total		54,249		53,624		52,507		50,767		47,944

*	Source: Ministry of Science, ICT and Future Planning (“MSIP”) website and each Korean telecommunications company’s respective earnings releases (including MVNOs).

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 high-speed wireless networks. 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.

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

(Unit: in percentages)

Classification

As of
September, 30,

As of December 31,

2013

2012

2011

2010

2009

Mobile communication services

50.2

50.3

50.6

*	Source: MSIP website and each Korean telecommunications company’s respective earnings releases (including MVNOs).

D.	Business Overview and Competitive Strengths

The Company is seeking to transform itself from a telecommunications service provider into a comprehensive ICT service provider. It has continued to innovate the scope of its services and achieved strong growth in subscribers amid fierce competition and rate cuts. As of September 30, 2013, the Company recorded Won 12.3 trillion in revenue and Won 1.5 trillion in operating income on a consolidated basis and Won 9.5 trillion in revenue and Won 1.5 trillion in operating income on a separate basis.

The number of subscribers (including MVNO subscribers) as of September 30, 2013 was 27.21 million, an increase of approximately 70,000 from the previous quarter. In particular, the number of smartphone subscribers as of September 30, 2013 was 18.08 million, an increase of approximately 600,000 from the previous quarter, including 12.3 million LTE subscribers, solidifying the Company’s market leadership. Following the launch of commercial LTE services in July 2011, the Company became the first telecommunications service provider in the world to launch commercial LTE-A services in June 2013, and also launched commercial wideband LTE services in September 2013 utilizing its newly acquired 1.8 GHz band. By launching various high quality services utilizing the LTE-A network such as group video conference call services, full high definition mobile IPTV streaming services, and ‘T Baseball Multiview,’ which allows users to watch multiple baseball games on one screen, the Company plans to provide an innovative user experience, enhance customer satisfaction and increase profitability.

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, 16 years and 14 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 network services 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, and with the advent in the wireless telecommunications industry of a market for wideband LTE services utilizing LTE frequencies allocated to wireless operators following the completion of frequency auctions in August 2013, a market structure has evolved 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 offering superior services. As subscribers to various bundled wireless and fixed-line products are continuing to increase, the IPTV business is evolving to satisfy diverse customer needs for media services through differentiated service offerings including mobile IPTV and bundled wireless and IPTV products. 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, the pilot programming of commercial ultra-high definition television broadcasting services and competition for wideband LTE services has greatly increased data traffic, thereby further emphasizing the importance of fixed-line network infrastructure that is capable of handling large capacities of data traffic with stability and efficiency.

B.	Growth Potential


(Unit: in 1,000 persons)
Classification		As of September 30,		As of December 31,
Classification		2013		2012		2011
Fixed-line Subscribers	High-speed Internet		18,636		18,254		17,860
	Fixed-line telephone		17,912		18,459		18,633
	IPTV (real-time)		7,898		6,310		4,570

*	Source: MSIP website and Korea Communications Commission website.

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. The telecommunications services market overall is not expected to be particularly affected by economic downturns due to the low income elasticity of demand for telecommunication services.

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


			(Unit: in percentages)
Classification	As of September 30, 2013		As of December 31,
Classification	As of September 30, 2013		2012		2011
High-speed Internet (include resales)		24.2		24.1		23.4
Fixed-line telephone (include VOIP)		16.6		16.7		15.5
IPTV (real-time)		23.9		22.2		19.3

*	Source: MSIP website, Korea Communications Commission website and each Korean telecommunications company’s respective 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, SK Broadband has positioned itself to focus on corporate customer services and IPTV services as key strategic areas for mid- to long-term growth, exploiting opportunities in new ICT-based businesses that have led to revenue growth, and providing differentiated contents in its IPTV business by securing popular programming which includes exclusive children’s channels and live broadcasts of Major League Baseball games. In addition, SK Broadband intends to generate revenue in the mid- to long-term by strengthening the competitiveness of its IPTV business through efforts that include the first fully high-definition live broadcast on mobile television in Korea, its collaboration with Samsung Electronics in developing set-top box-free smart television services and development of ultra-high definition broadcast technology.

SK Telink 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 strategically target the convergence of wireless and fixed-line telecommunications and strengthen its existing business, including international and long-distance calling services, value-added services for local calling and B2B services, and video conference call services while aiming to satisfy the diverse needs of customers through the provision of quality solutions at reasonable prices.

[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.

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. It is becoming increasingly important to enhance competitiveness through a database that can register and analyze purchase patterns of customers across all areas and a platform with large data capacity to utilize this database and provide differentiated services to customers.

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. The importance of building a platform with large data capacity that is connected to various digital contents and commerce is expected to increase in the future.

C.	Domestic and Overseas Market Conditions

(1)

Commerce markets

The Company expects that online commerce markets will continue to grow due to the growth potential of the Internet shopping population and the strengthening of online business models by off-line operators.

(2)

Digital contents

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.

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 online and mobile video market.

D.	Business Overview and Competitive Strengths

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

(1)

Digital contents

T Store, launched in September 2009, reached 21.25 million subscribers and cumulative downloads of 1.4 billion as of September 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 enables subscribers to enjoy wide-ranging video on demand contents. Through continual service improvements and stable service provision, Hoppin has become the leading mobile video on demand service.

(2)

Commerce (Open Market, OK Cashbag)

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 in March 2013.

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.

(3)

Location-based services

T-Map Navigation provides map, local information, real-time traffic information and navigation services. With cumulative subscribers of 17.96 million as of September 30, 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.

(4)

Social networking services (“SNS”) and Internet portal services

“CyWorld” service, the Company’s social networking website in Korea, had 26 million cumulative subscribers, 10 million monthly net users and 270 million page views as of September 30, 2013. The Company’s instant messenger service, “Nate-On,” had the largest market share of 70.9% in the instant messenger market in Korea with 6 million net users as of September 30, 2013. The Company’s Internet search portal service, “Nate,” had a market share of 5.8% as of September 30, 2013. (Source: Korean Click and Company’s internal data)

LOGO Satellite DMB service

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 of SK Telink 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 and percentages)
Business	Major Companies	Item	Major Trademarks	Consolidated Sales Amount (ratio)
Wireless	SK Telecom Co., Ltd., PS&Marketing Co., Ltd., Service Ace Co., Ltd., Service Top Co. Ltd., Network O&S Co., Ltd.	Mobile communication service, wireless data service, ICT service	T and others		9,888,302(80.4	%)
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, 7Mobile and others		1,727,591(14.0	%)
Other	SK Planet Co., Ltd , Commerce Planet Co., Ltd , SK Communications Co., Ltd., M&Service Co., Ltd., YTK Investment Ltd., Atlas Investment	Internet portal service and investment	OK Cashbag, NATE, 11th Street, T Store, T-Map Navigation, Cyworld and others		691,321(5.6	%)

Total					12,307,214(100.0	%)

[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 (daytime calls) 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 June 30, 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 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 September 30, 2013, broadband Internet and TV services comprised 49.9% of SK Broadband’s revenue, telephony service 23.7%, corporate data services 25.4% and other telecommunications services 1.0%. Price fluctuations in the different services provided by SK Broadband are due to discounts provided for long-term contracts, changes in equipment costs and competition between companies.

[Other Business]

Set forth below are major products and services of the Company’s material consolidated subsidiaries.


Business	Item	Major Trademarks
Platform	ICT services, new media services, advertisement services, telecommunications sales, e-commerce and others	T Store, 11th Street, T Map, Hoppin, OK Cashbag and others
Display advertisement	Online advertisement services	Nate, CyWorld, Nate-On
Search advertisement	Online advertisement services	Nate, CyWorld, Nate-On
Contents and others	Pay content sales and other services	Nate, CyWorld, Nate-On

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

9,489

To be
determined

Total

21,000

9,489

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 including
LTE Multi-Carrier and LTE-A

Total

21,000

To be
determined

[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

For the nine
months ended
September 30,
2013

Backbone and
subscriber network
/ others

Expand subscriber networks and facilities

2,980

786

To be
determined

Telephone

Television

428

Corporate Data

Increase leased-line and integrated information system

1,305

Others

Expand networks and required space

425

Total

2,980

4.	Revenues


				(Unit: in millions of Won)
Business	Sales type	Item		For the nine months ended September 30, 2013		For the year ended December 31, 2012*		For the year ended December 31, 2011*
Wireless	Services	Mobile communication	Export		1,907		14,202		1,331
			Domestic		9,886,396		13,204,702		13,100,614
			Subtotal		9,888,303		13,218,904		13,101,945
Fixed-line	Services	Fixed-line, B2B data, High-speed Internet, TV	Export		20,362		29,883		28,070
			Domestic		1,707,229		2,163,978		2,134,498
			Subtotal		1,727,591		2,193,861		2,162,568
Other	Services	Display and Search ad., Content	Export		7,220		4,698		12,036
			Domestic		684,100		723,946		526,625
			Subtotal		691,320		728,644		538,661

Total			Export		29,489		48,783		41,437

			Domestic		12,277,725		16,092,626		15,761,737

			Total		12,307,214		16,141,409		15,803,174

*	Revenues for the years ended December 31, 2011 and 2012 have been retroactively revised to reflect the effect of discontinued operations resulting from the sale of Loen Entertainment.


(Unit: in millions of Won)
For the nine months ended September 30, 2013	Wireless		Fixed		Other			Sub total		Internal transaction		After consolidation
Total sales		10,760,819		2,173,316		1,251,228			14,185,363		1,878,149		12,307,214
Internal sales		872,517		445,725		559,907			1,878,149		1,878,149		—
External sales		9,888,302		1,727,591		691,321			12,307,214		—		12,307,214
Operating income (loss)		1,504,189		31,340		(34,120	)		1,501,409		—		1,501,409

Total assets		22,831,074		3,119,903		3,163,102			29,114,079		3,180,600		25,933,479

Total liabilities		9,595,320		1,871,875		905,828			12,373,023		222,547		12,150,476

5.	Derivative Transactions

A.	Current Swap Contract Applying Cash Flow Risk Hedge Accounting

Currency swap contracts under cash flow hedge accounting as of September 30, 2013 are as follows.


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Oct.10, 2006	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of US$100,000,000)	Foreign currency risk and interest rate risk	Cross currency interest rate swap	Credit Agricole Corporate & Investment Bank	Oct.10, 2006 – Oct. 10, 2013
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$400,000,000)	Foreign currency risk	Cross currency swap	Morgan Stanley and five other banks	Jul. 20, 2007 – Jul. 20, 2027
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of US$250,000,000)	Foreign currency risk and interest rate risk	Cross currency interest rate swap	DBS Bank and Citibank	Dec. 15, 2011 – Dec. 12, 2014
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD65,000,000)	Foreign currency risk and interest rate risk	Cross currency interest rate swap	United Overseas Bank	Dec. 15, 2011 – Dec. 12, 2014
Jun. 12, 2012	Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF300,000,000)	Foreign currency risk	Cross currency swap	Citibank and five other banks	Jun. 12, 2012 – Jun.12, 2017
Nov. 1, 2012	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$700,000,000)	Foreign currency risk	Cross currency swap	Barclays and nine other banks	Nov. 1, 2012 – May. 1, 2018
Jan. 17, 2013	Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD300,000,000)	Foreign currency risk	Cross currency swap	BNP Paribas and three other banks	Jan. 17, 2013 – Nov. 17, 2017
Mar. 7, 2013	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of US$300,000,000)	Foreign currency risk and interest rate risk	Cross currency interest rate swap	DBS Bank	Mar. 7, 2013 – Mar. 7, 2020

B.	Treatment of Derivative Instruments on the Balance Sheet

As of September 30, 2013, fair values of the above derivatives recorded in assets or liabilities and details of derivative instruments are as follows.


(Unit: in millions of Won and thousands of foreign currencies)
Hedged item	Fair value
	Cash flow hedge											Trading purposes		Total
	Accumulated gain (loss) on valuation of derivatives			Tax effect			Foreign currency translation gain (loss)			*Others^(1)**		Trading purposes		Total
Current assets:
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of US$100,000,000)		(1,778	)		(68	)		12,760			—		—		10,914
Convertible option^(*2) (face amounts of Won 50,000 million)		—			—			—			—		491		491
Non-current assets:
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$400,000,000)		(40,166	)		(12,823	)		(26,855	)		129,806		—		49,962
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of US$300,000,000)		5,878			1,877			(2,389	)		—		—		5,367

Total assets															66,732

Non-current liabilities:
Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD65,000,000)		21			7			(1,838	)		—		—		(1,810	)
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of US$250,000,000)		6,206			1,981			(20,548	)		—		—		(12,361	)
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF300,000,000)		(9,417	)		(3,006	)		(7,205	)		—		—		(19,628	)
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$700,000,000)		(11,454	)		(3,657	)		(10,368	)		—		—		(25,479	)
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD300,000,000)		6,432			2,054			(35,167	)		—		—		(26,681	)

Total liabilities															(85,959	)

(*1)	Cash flow hedge accounting has been applied to the relevant contract from May 12, 2010. Others represent gain on valuation of currency swap incurred prior to the application of hedge accounting and was recognized through profit or loss prior to the year ended December 31, 2012.

(*2)	Fair value of the conversion option of convertible bonds held by SK Communications Co., Ltd. amounting to Won 491 million was accounted for as derivative financial assets.

6.	Major Contracts

[SK Telecom]

(Unit: in 100 millions of Won)

Category

Vendor

Start Date

Completion Date

Contract Title

Contract
Amount

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 Marketing & Company)

Service

M&Service Co., Ltd.

January 1, 2013

December 31, 2013

Contract for 2013 operation of virtual learning center

Service

Happy Ecophone
Foundation

April 1, 2013

December 31, 2013

Contract for 2013 operation of T ecophone center

Construction

Dongwon Construction
Industry Corporation

March 1, 2013

May 20, 2014

Construction of SK Dream Park

146

Real Estate

Woori Bank*

—

December 26, 2012

Disposal of Namsan Green Building

1,972

Real Estate

Woori Bank*

—

December 26, 2012

Disposal of Guro Offices

400

Real Estate

Individual

January 1, 2013

June 30, 2013

Purchase of regional centers (23 centers)

180

Subtotal

2,993

*	The manager of the 18th IGIS KORIF private real estate investment fund.

[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 Nov. 2013	Use of electricity poles
Seoul City Railway	Use of telecommunication line conduits	From Jan. 2009 to Dec. 2011 (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 (Renewal in progress)	Use of railway telecommunication conduit (Serviced areas to expand)
Busan Transportation Corporation	Use of telecommunication line conduits	From July 2009 to July 2012 (Renewal in progress)	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 (Service lease)

[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 Planet Co., Ltd.	Sale of asset in construction (Pangyo office building)	—	Sold for Won 69.5 billion on June 11, 2013
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

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

7.	R&D Investments

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


(Unit: in millions of Won except percentages)
Category		For the nine months ended September 30, 2013			For the year ended December 31,						Remarks
Category		For the nine months ended September 30, 2013			2012			2011			Remarks
Raw material			25			42			45			—
Labor			66,306			59,050			48,656			—
Depreciation			115,740			163,295			149,850			—
Commissioned service			17,338			62,399			40,257			—
Others			49,875			61,546			57,118			—
Total R&D costs			249,284			346,332			295,927			—
Accounting	Sales and administrative expenses		239,680			304,557			289,979			—
Accounting	Development expenses (Intangible assets)		9,604			41,775			5,948			—
R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100)			2.03	%		2.12	%		1.85	%		—

8.	Other information relating to investment decisions

A. Trademark Policies

The Company manages its corporate brand and other product brands in a comprehensive way to protect and increase their value. The Company’s Brand Strategy 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 registering and licensing of the brands.

B. Business-related Intellectual Property

[SK Telecom]

The Company holds 5,023 Korean-registered patents, 288 U.S.-registered patents, 203 Chinese-registered patents (all including patents held jointly with other companies) and more patents with other countries. The Company holds 860 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 396 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 September 30, 2013, SK Planet held 2,227 registered patents, 94 registered design marks, 1,135 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, 17 E.U.-registered patents (all including patents held jointly with other companies) and 168 registered trademarks, along with a number of other intellectual property rights, in other countries.

[SK Communications]

As of September 30, 2013, SK Communications held 70 registered patents, 26 registered design rights and 720 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.

III.

FINANCIAL INFORMATION

1.	Summary Financial Information (Consolidated)

A.	Summary Financial Information (Consolidated)


	(Unit: in thousands of Won except number of companies)
	As of September 30, 2013			As of December 31, 2012			As of December 31, 2011			As of December 31, 2010
Current Assets		5,381,629,864			5,294,420,978			6,117,478,958			6,653,991,923
• Cash and Cash Equivalents		1,470,615,400			920,124,810			1,650,793,876			659,404,935
• Accounts Receivable – Trade, net		2,272,796,560			1,954,920,332			1,823,169,889			1,949,397,279
• Accounts Receivable – Other, net		638,483,671			582,098,398			908,836,454			2,531,847,155
• Others		999,734,233			1,837,277,438			1,734,678,739			1,513,342,554
Non-Current Assets		20,551,848,375			20,301,138,645			18,248,557,471			16,478,397,157
• Long-Term Investment Securities		946,465,998			953,712,512			1,537,945,216			1,680,582,091
• Investments in Associates and Joint Ventures		5,289,873,703			4,632,477,315			1,384,605,401			1,204,691,805
• Property and Equipment, net		9,388,430,999			9,712,718,716			9,030,998,201			8,153,412,683
• Intangible Assets, net		2,707,539,778			2,689,657,645			2,995,803,300			1,884,955,652
• Goodwill		1,733,260,574			1,744,483,009			1,749,932,878			1,736,649,137
• Others		486,277,323			568,089,448			1,549,272,475			1,818,105,789

Total Assets		25,933,478,239			25,595,559,623			24,366,036,429			23,132,389,080

Current Liabilities		5,653,315,400			6,174,895,434			6,673,589,809			6,202,170,452
Non-Current Liabilities		6,497,159,721			6,565,881,872			4,959,737,573			4,522,219,358

Total Liabilities		12,150,475,121			12,740,777,306			11,633,327,382			10,724,389,810

Equity Attributable to Owners of the Parent Company		13,047,893,347			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 Surplus (Deficit) and Other Capital Adjustments		236,307,569			(288,882,796	)		(285,347,419	)		(78,952,875	)
Retained Earnings		12,785,127,879			12,124,657,526			11,642,525,267			10,721,249,327
Reserves		(18,181,574	)		(25,636,422	)		260,063,542			643,054,975
Non-controlling Interests		735,109,771			1,000,004,536			1,070,828,184			1,078,008,370

Total Equity		13,783,003,118			12,854,782,317			12,732,709,047			12,407,999,270

Number of Companies Consolidated		28			32			31			32


	(Unit: in thousands of Won except per share amounts)
	For the nine months ended September 30, 2013			For the year ended December 31, 2012*			For the year ended December 31, 2011*			For the year ended December 31, 2010
Operating Revenue		12,307,212,791			16,141,409,477			15,803,173,999			15,489,373,747
Operating Income		1,501,408,792			1,730,049,433			2,266,197,346			2,555,781,816
Profit Before Income Tax		1,442,592,156			1,519,368,041			2,212,273,226			2,373,223,839
Profit for the Period		1,315,879,605			1,115,662,553			1,582,073,280			1,766,834,754
Profit for the Period Attributable to Owners of the Parent Company		1,324,824,488			1,151,704,905			1,612,889,086			1,841,612,790
Profit for the Period Attributable to Non-controlling Interests		(8,944,883	)		(36,042,352	)		(30,815,806	)		(74,778,036	)
Basic Earnings Per Share (Won)		18,841			16,525			22,848			25,598
Diluted Earnings Per Share (Won)		18,841			16,141			22,223			24,942

*	Financial information for the years ended December 31, 2011 and 2012 have been retroactively revised to reflect the effect of discontinued operations resulting from the sale of Loen Entertainment.

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.	Summary Financial Information (Separate)

A.	Summary Financial Information (Separate)


			(Unit: in thousands of Won)
	As of September 30, 2013	As of December 31, 2012	As of December 31, 2011	As of December 31, 2010
Current Assets	2,956,840,090	2,589,699,186	3,948,077,706	5,316,976,799
• Cash and Cash Equivalents	505,512,739	256,576,827	895,557,654	357,469,908
• Accounts Receivable – Trade, net	1,560,619,447	1,407,205,772	1,282,233,900	1,453,060,673
• Accounts Receivable – Other, net	403,549,462	383,048,424	774,221,266	2,499,969,010
• Others	487,158,442	542,868,163	996,064,886	1,006,477,208
Non-Current Assets	19,459,368,771	19,659,803,155	16,572,449,699	14,410,149,512
• Long-Term Investment Securities	701,949,359	733,893,220	1,312,437,834	1,517,029,011
• Investments in Subsidiaries and Associates	8,122,175,262	7,915,546,670	4,647,505,583	3,584,394,790
• Property and Equipment, net	6,818,443,325	7,119,090,098	6,260,168,675	5,469,747,495
• Intangible Assets, net	2,200,441,075	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	310,123,451	397,164,759	681,306,126	1,105,587,577

Total Assets	22,416,208,861	22,249,502,341	20,520,527,405	19,727,126,311

Current Liabilities	3,600,713,719	4,343,086,486	4,467,005,877	4,561,013,611
Non-Current Liabilities	5,785,747,981	5,529,367,602	4,087,219,816	3,585,155,050

Total Liabilities	9,386,461,700	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 Surplus and Other Capital Adjustments	352,885,915	(236,160,479)	(236,016,201)	(24,643,471)
Retained Earnings	12,491,288,297	12,413,981,340	11,837,184,788	10,824,355,758
Reserves	140,933,476	154,587,919	320,493,652	736,605,890

Total Equity	13,029,747,161	12,377,048,253	11,966,301,712	11,580,957,650


	(Unit: in thousands of Won except per share amounts)
	For the nine months ended September 30, 2013		For the year ended December 31, 2012		For the year ended December 31, 2011		For the year ended December 31, 2010
Operating Revenue		9,544,076,711		12,332,719,444		12,551,255,630		12,514,520,922
Operating Income		1,489,538,574		1,675,388,351		2,184,498,641		2,530,954,768
Profit Before Income Tax		993,312,640		1,546,719,635		2,274,421,558		2,503,637,367
Profit for the Period		741,756,284		1,242,767,480		1,694,363,093		1,947,007,919
Basic Earnings Per Share (Won)		10,516		17,832		24,002		27,063
Diluted Earnings Per Share (Won)		10,516		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

3.	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.”

IV.

AUDITOR’S OPINION

1.	Auditor (Consolidated)


Nine months ended September 30, 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
Nine months ended September 30, 2013	—	—
Year ended December 31, 2012	Unqualified	—
Year ended December 31, 2011	Unqualified	—

3.	Auditor (Separate)


Nine months ended September 30, 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
Nine months ended September 30, 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 except number of hours)

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
Nine months ended September 30, 2013	N/A	N/A	N/A		N/A
Year ended December 31, 2012	N/A	N/A	N/A		N/A
Year ended December 31, 2011	April 11, 2011	Tax consulting	30 days		45,000
Year ended December 31, 2011	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.

V.	MANAGEMENT’S DISCUSSION AND ANALYSIS

Omitted in quarterly and semi-annual reports in accordance with Korean disclosure rules.

VI.

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 November 8, 2013)
Total 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 Meeting of Shareholders 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 • Annual business report as of and for the year ended December 31, 2012 • Bond offering • Report of internal accounting management • Report for subsequent events following 4Q 2012	Approved as proposed Approved as proposed Approved as proposed — —
352th (the 2nd meeting of 2013)	February 21, 2013	• 2013 transaction of goods, services and assets with SK Planet • Convocation of the 29th annual general meeting of shareholders • Result of internal accounting management system evaluation	Approved as proposed Approved as proposed —
353th (the 3rd meeting of 2013)	March 22, 2013	• Election of chairman of the Board of Directors • Election of committee members • Financial transactions with affiliated company (SK Securities)	Approved as proposed Approved as proposed Approved as proposed
354th (the 4th meeting of 2013)	April 25, 2013	• Sublease transaction of advisor offices • Budget and operation plans for 2013 SUPEX conferences • Report for the period after the first quarter of 2013	Approved as proposed Approved as proposed —
355^th (the 5th meeting of 2013)	May 23, 2013	• Landscaping at Future Management Institute • Issuance of hybrid securities • Issuance of asset-backed short-term bonds • Report of compliance review and validity evaluation	Approved as proposed Approved as proposed Approved as proposed —
356^th (the 6th meeting of 2013)	June 20, 2013	• Financial transactions with affiliated company (SK Securities) • Service transactions with SK Telecom China Holdings Co., Ltd.	Approved as proposed Approved as proposed

357^th

(the 7th meeting of 2013)

July 25, 2013

• Payment of interim dividends

• Incurrence of long-term debt

• Additional procurement of LTE network frequency

• Financial results for the first six months of 2013

• Post-second quarter of 2013 report

Approved as proposed

—

358^th

(the 8th meeting of 2013)

September 26, 2013

• Financial transactions with affiliated company (SK Securities)

• Additional investments in LTE network

Approved as proposed

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

C.	Committees within Board of Directors

(1)

Committee structure (as of November 8, 2013)

(a)

Compensation Review Committee


Total number of persons	Members		Task
Total 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.

(b)

Capex Review Committee


Total number of persons	Members		Task
Total 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.

(c)

Corporate Citizenship Committee


Total number of persons	Members		Task
Total 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.

(d)

Independent Director Nomination Committee


Total number of persons	Members		Task
Total 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.

(e)

Audit Committee


Total number of persons	Members		Task
Total 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 the 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 as of November 8, 2013 are set forth below.


Meeting	Date	Agenda	Approval
The 1st meeting of 2013	February 6, 2013	• Construction of mobile phone facilities for 2013 • Construction of transmission network facilities for 2013 • Evaluation of internal accounting controls based on the opinion of the members of the Audit Committee • Review business and audit results for the second half of 2012 and business and audit plan for 2013 • Report of internal accounting management system	Approved as proposed Approved as proposed Approved as proposed — —
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 • Agenda and document review for the 29th annual general meeting of shareholders • Auditor’s report for fiscal year 2012 • IT service management contract for 2013	— — Approved as proposed Approved as proposed Approved as proposed Approved as proposed
The 3rd meeting of 2013	March 21, 2013	• Transactions with SK C&C in the second quarter of 2013 • Plans for financial transactions with affiliated company (SK Securities)	Approved as proposed —
The 4th meeting of 2013	April 24, 2013	• Election of chairman • Purchase of maintenance, repair and operations items from Happynarae Co., Ltd. • Service contract for SK Telecom China Holdings Co., Ltd. • Remuneration for outside auditor for fiscal year 2013 • Outside auditor service plan for fiscal year 2013 • Audit plan for fiscal year 2013	Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed —
The 5th meeting of 2013	June 19, 2013	• Transactions with SK C&C in the third quarter of 2013 • Myshop solution supply agreement with the Company’s Thailand branch • Plans for financial transactions with affiliated company (SK Securities)	Approved as proposed Approved as proposed —
The 6th meeting of 2013	July 24, 2013	• Construction of mobile phone facilities for 2013 • Construction of transmission network facilities for 2013 • Report on the 2013 first half IFRS review	Approved as proposed Approved as proposed —
The 7th meeting of 2013	September 25, 2013	• Transactions with SK C&C in the fourth quarter of 2013 • Review business and audit results and business and audit plan for 2013	Approved as proposed —

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

3.	Shareholders’ Exercise of Voting Rights

A.	Voting System and Exercise of Minority Shareholders’ Rights

Pursuant to the Articles of Incorporation as shown below, the cumulative voting system was first introduced in the general meeting of shareholders held in 2003.


Articles of Incorporation		Description
Article 32 (3) (Election of Directors)		Cumulative voting under Article 382-2 of the Korean Commercial Code will not be applied for the election of directors.
Article 4 of the 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 meeting of shareholders held in 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 September 30, 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			Entis			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	%
SKC
SK E&C
SK Gas
SK C&C		5.9	%
SK E&S											100.0	%		100.0	%		99.9	%								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	%		99.9	%		50.0	%		83.5	%		40.0	%		100.0	%


	Invested companies
Investing company	Gangwon City Gas			JBES			M & Service			SK Wyverns			Infosec			Happynarae			SK Telesys			Gimcheon Energy			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
SKC																				50.0	%
SK E&C
SK Gas																	5.0	%
SK C&C														100.0	%		5.0	%
SK E&S		100.0	%		100.0	%																	80.0	%
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	%		80.0	%		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
SKC																										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								15.0	%											64.5	%
SK Hynix
Ko-one Energy Service
SK Seentec

Total affiliated companies		40.4	%		100.0	%		15.0	%		100.0	%		100.0	%		100.0	%		64.5	%		100.0	%		80.0	%		86.5	%


Investing company	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	%
SKC								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			SKC Lighting			Bizen			SK HY ENG			HYSTEC			Silicon File			SKSM
SK Holdings								100.0	%
SK Innovation											100.0	%
SK Energy		100.0	%
SK Global Chemical
SK Networks
SK Telecom
SK Chemicals
SKC														72.2	%
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																													100.0	%
SK Planet
SK Hynix																				100.0	%		100.0	%		27.9	%
Ko-one Energy Service
SK Seentec

Total affiliated companies		100.0	%		100.0	%		100.0	%		100.0	%		72.2	%		99.0	%		100.0	%		100.0	%		27.9	%		100.0	%


Investing company	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	%
SKC											90.0	%
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
SK Lubricants																													100.0	%
SK Shipping
SK Planet														51.0	%
SK Hynix
Ko-one Energy Service
SK Seentec

Total affiliated companies		100.0	%		32.0	%		42.0	%		90.0	%		51.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%


Investing company	Invested companies
Investing company	SK Hynix			Ulsan Aromatics			SK Biofarm			SK Continental E-Motion Korea			G.Hub			SK Incheon Petrochem			SK Trading International			Boryeong LNG Terminal			Initz
SK Holdings								100.0	%
SK Innovation																	100.0	%		100.0	%
SK Energy
SK Global Chemical					50.0	%
SK Networks
SK Telecom		20.6	%
SK Chemicals																										66.0	%
SKC
SK E&C
SK Gas														100.0	%
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
SK Planet
SK Hynix
Ko-one Energy Service
SK Seentec

Total affiliated companies		20.6	%		50.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		50.0	%		66.0	%

*	Change in company names:

•

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

•

Entis changed its name from SK Sci-tech

VII.

SHAREHOLDERS

1.	Shareholdings of the Largest Shareholder and Related Persons

A.	Shareholdings of the Largest Shareholder and Related Persons


(As of September 30, 2013)							(Unit: in shares and percentages)
Name	Relationship	Type of share	Number of shares owned and ownership ratio
			Beginning of Period				End of Period
			Number of shares		Ownership ratio		Number of shares		Ownership ratio
SK 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 September 30, 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	%		61,387	Forestry and landscaping	Privately Held

*	The above shareholdings are based on common share holdings as of September 30, 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 September 30, 2013)

(Unit: in shares and percentages)

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 June 30, 2013)				(Unit: in shares and percentages)
Rank	Name (title)	Common share
Rank	Name (title)	Number of shares		Ownership ratio		Remarks
1	Citibank ADR		14,345,852		17.77	—
2	SK Holdings		20,363,452		25.22	—
3	SK Telecom		10,237,229		12.68	Treasury shares
4	National Pension Service		4,928,904		6.10	As of February 6, 2013
Shareholdings under the Employee Stock Ownership Program			122,365		0.15	As of September 30, 2013

B.	Shareholder Distribution


(As of June 30, 2013)								(Unit: in shares and percentages)
Classification	Number of shareholders		Ratio (%)			Number of shares		Ratio (%)			Remarks
Total minority shareholders*		26,885		99.76	%		29,869,979		36.99	%		—

*	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: in Won and shares)
Types		September 2013		August 2013		July 2013		June 2013		May 2013		April 2013
Common stock	Highest		222,000		226,500		225,000		226,500		125,500		196,000
Common stock	Lowest		213,000		208,000		202,000		200,500		204,500		172,000
Monthly transaction volume			3,308,919		3,450,141		4,132,452		4,627,223		5,682,439		5,003,456

B.	Foreign Securities Market


New York Stock Exchange				(Unit: in US dollars and number of American Depositary Receipts)
Types		September 2013		August 2013		July 2013		June 2013		May 2013		April 2013
Depository Receipt	Highest		22.70		22.32		22.26		21.43		22.37		19.49
Depository Receipt	Lowest		21.64		20.47		19.47		19.13		19.31		17.05
Monthly transaction volume			16,420,048		14,577,017		24,407,441		35,332,275		44,906,511		30,418,749

VIII.

EMPLOYEES AND DIRECTORS

1.	Employees


(As of September 30, 2013)								(Unit: in persons and 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		Aggregate wage for the year ended December 31, 2012		Average wage per person		Remarks
Male		3,532		57		—	3,589			12.7		342,676,841		90,920	—
Female		524		66		—	590			10.2		41,165,815		61,442	—
Total		4,056		123		—	4,179			12.3		383,842,656		86,471	—

*	Excludes retirement and severance payments to employees whose employment was terminated before the end of the respective employment periods. Average wage per person was calculated with respect to the total number of paid employees.

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

*	The amounts approved for the years ended December 31, 2011 and 2012 were also Won 12 billion.

B.	Amount Paid


(As of September 30, 2013)			(Unit: in millions of Won)
Classification	Number of Directors		Aggregate Amount Paid		Average Amount Paid Per Director
Insider Directors		3		2,750		917
Independent Directors*		1		63		63
Audit Committee Members		4		241		60

Total		8		3,053		382

*	Excludes independent directors who are Audit Committee members.

IX.

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

166,593

170,110

85,974

—

(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

—

X.	OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS

1.	Developments in the Items Mentioned in Prior Reports on Important Business Matters

A.	Status and Progress of Major Management Events

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
	• Election of inside directors	Approved (Sung Min Ha, Jin Woo So)
	• 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 of 2011 (August 31, 2011)	1. Approval of the Spin-off Plan 2. Election of Directors	Approved (Spin-off of SK Planet) 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
	• Election of inside directors	Approved (Young Tae Kim)
	• Election of inside directors	Approved (Dong Seob Jee)
	• Election of independent directors	Approved (Hyun Chin Lim)
	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
	• Election of an inside director	Approved (Dae Sik Cho)
	• Election of an independent director	Approved (Dae Shick Oh)
	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 filed an appeal at the Supreme Court of Korea and the judgment was overturned on July 11, 2013. The case was remanded down to the appellate court and the Company plans to fortify its arguments and vigorously defend itself. While the Company does not expect this litigation to have an immediate impact on the Company’s business or results of operation as the final outcome of this litigation has not been determined, the Company may be required to pay increased annual license fees to KOMCA if the final judgment is rendered against the Company.

*	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 14.8 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.

[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 Gangnamgu 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		561,283	Pending before Appellate Court
Other claims and proceedings	—		52,074	—

Total	—		3,926,334	—

(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		1,223,778	Pending before Supreme Court
Damages Claim by Haein Networks	March 2013		101,000	Pending before District Court
Damages Claim by On-nuri Co., Ltd.	December 2011		101,000	Pending before District Court
Damages Claim by Mac Telecom and Five Other Companies	January 2012		606,000	Pending before District Court
Other claims and proceedings	—		265,746	—

Total	—		2,297,524	—

During the first half of 2013, SK Broadband paid an aggregate of Won 5,599 million in damages in connection with the litigation relating to the leak of personal information at the district court with respect to the cases in which final judgments have been rendered (the total amount of which is Won 24,689 million and the total amount of damages ordered being Won 6,091 million). The Company has recorded a provision in the amount of Won 192 million for the pending cases (the total amount of which is Won 3,000 million.)

[SK Communications]

A. Material Legal Proceedings

As of September 30, 2013, the aggregate amount of claims was Won 3.9 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 September 30, 2013 are set forth in the table below.

[SK Planet]

A. Material Legal Proceedings

As of September 30, 2013, there were two pending proceedings with SK Planet as the defendant and the aggregate amount of the claims was Won 1.7 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.

In addition, on July 4, 2012, SK Planet received a correctional order and a fine of Won 1,349 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. SK Planet appealed the order and filed a suit with the administrative court, which is still pending.

3.	Status of sanctions, etc.

[SK Telecom]

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 subsidies 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 subsidies 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 subsidies to subscribers. The Company paid the fine and completed the improvement of the procedures in consultation with the Korea Communications Commission by April 2013.

On July 18, 2013, the Korea Communications Commission imposed on the Company a fine of Won 36.5 billion and issued a correctional order for providing discriminatory subsidies to subscribers. The Company completed to pay the fine and reported to the Korea Communications Commission regarding the implementation of actions pursuant to the correctional order in August 2013.

On August 21, 2013, the Company received a correctional order from the Korea Communications Commission in connection with its decision on whether the Company had violated procedural regulations related to terms and conditions of usage. The Company is expected to complete the improvement of the procedures in consultation with the Korea Communications Commission by November 2013.

On September 16, 2013, 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 wholesale provision of telecommunication services. The Company completed and reported to the Korea Communications Commission regarding the implementation of actions pursuant to the correctional order in October 2013.

On January 31, 2013, the Seoul Central District Court acquitted Mr. Jae Won Chey, our former director and vice chairman, on all charges against him. On September 27, 2013, the Seoul High Court reversed the acquittal of the above-mentioned former director, sentencing him to a prison term of three and a half years for violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes. On October 2, 2013, both the above-mentioned former director and the prosecutors have appealed the decision and the case is currently pending in the Supreme Court of Korea. While the court’s decision on the appealed case is not expected to have a material effect on the Company’s financial position, investors should note that it is difficult to predict, among others, the market’s assessment of such case.

[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 in 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.

(7) Violation of the Telecommunication Business Act

•

Date: June 5, 2013

•

Subject Company: SK Broadband

•

Sanction: SK Broadband received a correctional order from the Korea Communications Commission.

•

Reason and the Relevant Law: Improperly delayed cancellations of high-speed Internet subscribers and violated Articles 42 and 50 of the Telecommunication Business Act.

•

Status of Implementation: Improving operating procedures to stop the prohibited practice due for completion in August, completed amendment of the terms of service and published the sanction in newspapers.

•

Company’s Plan: Improve cancellation procedures to prevent recurrence of the cancellation delays.

(8) Violation of the Telecommunication Business Act

•

Date: August 21, 2013

•

Subject Company: SK Broadband

•

Sanction: SK Broadband received a correctional order from the Korea Communications Commission.

•

Reason and the Relevant Law: Violation of Article 50, Paragraph 1, Number 5 of the Telecommunications Business Act for use of subscription agreements that omitted certain material terms and conditions pertaining to high-speed Internet usage.

•

Status of Implementation: Completed revision of subscription agreements to include material terms and conditions pertaining to high-speed Internet usage. Planning to distribute information sheets on current terms and conditions to new subscribers.

•

Company’s Plan: Improve operations including through revision of subscription agreements.

4.	Important Matters That Occurred After September 30, 2013

•

None.

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	—

6.	Information on Developments including Mergers, etc.

A.	Disposition of Loen Entertainment shares by SK Planet

During the three-month period ended September 30, 2013, SK Planet sold 13,294,369 shares (52.6% ownership interest) of Loen Entertainment, a company engaged in the publishing of music and provision of online music services, to Star Invest Holdings Limited. Consideration for the sale amounted to Won 265,887 million, and following the disposition of shares, SK Planet’s ownership interests in Loen Entertainment decreased to 15.0%. As a result of the transaction, Loen Entertainment was excluded from scope of consolidation.

SK TELECOM CO., LTD.

Condensed Consolidated Interim Financial Statements

(Unaudited)

September 30, 2013 and 2012

(With Independent Auditors’ Review Report Thereon)

Contents


	Page
Independent Auditors’ Review Report		63

Condensed Consolidated Statements of Financial Position		65

Condensed Consolidated Statements of Income		67

Condensed Consolidated Statements of Comprehensive Income		68

Condensed Consolidated Statements of Changes in Equity		69

Condensed Consolidated Statements of Cash Flows		70

Notes to the Condensed Interim Consolidated Financial Statements		72

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 September 30, 2013, the related condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2013 and 2012, the condensed consolidated interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 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 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 did not review the financial statements of SK Broadband Co., Ltd., a domestic subsidiary, and an associate, whose financial statements constitute 20.7% of the Group’s consolidated total assets as of September 30, 2013, 11.9% of the Group’s consolidated operating revenue and 32.1% of the Group’s profit before income tax for the nine-month period ended September 30, 2013 and the financial statements of SK Broadband Co., Ltd., and two other domestic subsidiaries and an associate, whose financial statements constitute 15.2% of the Group’s consolidated operating revenue for the nine-month period ended September 30, 2012. 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.

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 36 to the condensed consolidated interim financial statements, the Group disposed of its partial interests in Loen Entertainment, Inc., a subsidiary, which resulted in loss of control during the nine-month period ended September 30, 2013. The Group presented the results of operations of Loan Entertainment, Inc. as discontinued operation in the condensed consolidated statements of income for the for the three and nine-month periods ended September 30, 2013 and accordingly restated the comparative information for the three and nine-month periods ended September 30, 2012.

Other matters

The consolidated 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, from which it was derived, 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

November 8, 2013

This report is effective as of November 8, 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 September 30, 2013 and December 31, 2012


(In millions of won)	Note		September 30, 2013		December 31, 2012
Assets
Current Assets:
Cash and cash equivalents		10,32,33	￦	1,470,615		920,125
Short-term financial instruments		5,10,32,33		426,378		514,417
Short-term investment securities		8,10,32,33		135,679		60,127
Accounts receivable - trade, net		6,10,32,33,34		2,272,797		1,954,920
Short-term loans, net		6,32,33,34		76,056		84,908
Accounts receivable - other, net		6,32,33,34		638,484		582,098
Prepaid expenses		10		111,327		102,572
Derivative financial assets		21,32,33		11,405		9,656
Inventories, net		7,10,35		176,220		242,146
Assets classified as held for sale		9		2,143		775,556
Advanced payments and other		6,10,32,33		60,526		47,896

Total Current Assets				5,381,630		5,294,421

Non-Current Assets:
Long-term financial instruments		5,10,32,33		8,141		144
Long-term investment securities		8,10,32,33		946,466		953,712
Investments in associates and joint ventures		10,11		5,289,874		4,632,477
Property and equipment, net		10,12,35		9,388,431		9,712,719
Investment property, net		13		15,871		27,479
Goodwill		14		1,733,261		1,744,483
Intangible assets, net		10,15		2,707,540		2,689,658
Long-term loans, net		6,10,32,33		56,201		69,299
Long-term prepaid expenses		35		30,069		31,341
Guarantee deposits		5,6,10,32,33		248,684		236,242
Long-term derivative financial assets		21,32,33		55,327		52,992
Deferred tax assets		10,30		35,653		124,098
Other non-current assets		6,32,33		36,330		26,494

Total Non-Current Assets				20,551,848		20,301,138

Total Assets			￦	25,933,478		25,595,559

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Financial Position, Continued

As of September 30, 2013 and December 31, 2012


(In millions of won)	Note		September 30, 2013			December 31, 2012
Liabilities and Equity
Current Liabilities:
Short-term borrowings		16	￦	80,500			600,245
Current portion of long-term debt, net		10,16,17,19,32,33		1,691,107			892,867
Accounts payable - trade		10,32,33		185,611			253,884
Accounts payable - other		10,32,33,34		1,099,495			1,811,038
Withholdings		10,32,33		781,788			717,170
Accrued expenses		10,32,33		985,695			890,863
Income tax payable		30		136,487			60,253
Unearned revenue		10		484,970			258,691
Provisions		18		98,985			287,307
Advanced receipts and other		10,32,33		108,677			108,272
Liabilities classified as held for sale		9		—			294,305

Total Current Liabilities				5,653,315			6,174,895

Non-Current Liabilities:
Debentures, net, excluding current portion		16,32,33		5,158,275			4,979,220
Long-term borrowings, excluding current portion		16,32,33		21,852			369,237
Long-term payables - other		17, 32,33		835,391			715,508
Long-term unearned revenue				87,672			160,821
Finance lease liabilities		19,32,33		8,428			22,036
Defined benefit liabilities		10,20		137,507			86,521
Long-term derivative financial liabilities		21,32,33		85,959			63,599
Long-term provisions		18		36,462			106,561
Deferred tax liabilities		30		63,038			—
Other non-current liabilities		32,33		62,576			62,379

Total Non-Current Liabilities				6,497,160			6,565,882

Total Liabilities				12,150,475			12,740,777

Equity
Share capital		1,22		44,639			44,639
Capital surplus and other capital adjustments		10,22,23,24		236,307			(288,883	)
Retained earnings		25		12,785,128			12,124,657
Reserves		26		(18,181	)		(25,636	)

Equity attributable to owners of the Parent Company				13,047,893			11,854,777
Non-controlling interests				735,110			1,000,005

Total Equity				13,783,003			12,854,782

Total Liabilities and Equity			￦	25,933,478			25,595,559

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Unaudited Condensed Consolidated Statements of Income

For the three and nine-month periods ended September 30, 2013 and 2012


(In millions of won except for per share data)			September 30, 2013						September 30, 2012 (Restated)
	Note		Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended
Continuing operations
Operating revenue:		4,34
Revenue			￦	4,124,594			12,307,213			4,084,360			11,985,698
Operating expense:		34
Labor cost				363,241			1,166,404			305,254			945,469
Commissions paid				1,349,595			4,132,638			1,572,936			4,501,967
Depreciation and amortization		4		667,476			1,975,969			611,784			1,762,458
Network interconnection				264,877			769,719			286,168			855,787
Leased lines				113,661			343,891			121,748			353,507
Advertising				91,629			263,799			89,479			251,860
Rent				115,331			336,386			105,182			311,443
Cost of products that have been resold				306,335			930,475			417,325			985,854
Other operating expenses		27		301,013			886,523			281,829			826,345

Sub-total				3,573,158			10,805,804			3,791,705			10,794,690

Operating income		4		551,436			1,501,409			292,655			1,191,008
Finance income		4,29		17,297			76,406			28,947			139,006
Finance costs		4,29		(100,856	)		(407,250	)		(113,560	)		(323,873	)
Gain (losses) related to investments in subsidiaries, associates and joint ventures, net		4,9,11		235,155			584,758			4,841			(41,007	)
Other non-operating income		4,28		12,082			50,292			14,507			32,360
Other non-operating expense		4,28		(285,398	)		(363,023	)		(40,901	)		(123,734	)

Profit before income tax		4		429,716			1,442,592			186,489			873,760
Income tax expense from continuing operations		30		99,356			310,490			17,655			163,530

Profit from continuing operations				330,360			1,132,102			168,834			710,230
Discontinued operations
Gain (loss) from discontinued operations, net of income taxes		36		171,874			183,778			6,802			(113,657	)

Profit for the period			￦	502,234			1,315,880			175,636			596,573

Attributable to :
Owners of the Parent Company			￦	504,026			1,324,824			178,872			628,692
Non-controlling interests				(1,792	)		(8,944	)		(3,236	)		(32,119	)
Earnings per share (in won)
Basic earnings per share		31	￦	7,086			18,841			2,566			9,021

Diluted earnings per share		31	￦	7,086			18,841			2,566			8,800

Earnings per share - Continuing operations (in won)
Basic earnings per share		31		4,699			16,322			2,496			10,476

Diluted earnings per share		31		4,699			16,322			2,496			10,208

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 and nine-month periods ended September 30, 2013 and 2012


(In millions of won)	Note		September 30, 2013						September 30, 2012
			Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended
Profit for the period			￦	502,234			1,315,880			175,636			596,573
Other comprehensive loss
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit obligations		20		2,778			(2,827	)		680			(4,266	)
Items that may be reclassified subsequently to profit or loss:
Net change in unrealized fair value of available-for-sale financial assets		26		27,039			(24,366	)		12,392			(38,107	)
Net change in other comprehensive income of investments in associates and joint ventures		26		(74,986	)		24,493			(24,699	)		(17,522	)
Net change in unrealized fair value of derivatives		26,29		71,641			7,547			(13,875	)		(14,769	)
Foreign currency translation differences for foreign operations		26		(15,239	)		(1,184	)		(21,962	)		(24,459	)

				11,233			3,663			(47,464)			(99,123)

Total comprehensive income			￦	513,467			1,319,543			128,172			497,450

Total comprehensive income (loss) attributable to:
Owners of the Parent Company			￦	515,846			1,329,163			138,370			539,100
Non-controlling interests				(2,379	)		(9,620	)		(10,198	)		(41,650	)

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 nine-month periods ended September 30, 2013 and 2012


(In millions of won)															Non-controlling interests			Total equity
	Controlling Interest
	Share capital		Capital surplus and other capital adjustments			Retained earnings			Reserves			Sub-total
Balance, January 1, 2012	￦	44,639		(285,347	)		11,642,525			260,064			11,661,881			1,070,828			12,732,709
Cash dividends		—		—			(655,133	)		—			(655,133	)		(2,133	)		(657,266	)
Total comprehensive income
Profit (loss) for the period		—		—			628,692			—			628,692			(32,119	)		596,573
Other comprehensive loss		—		—			(5,328	)		(84,264	)		(89,592	)		(9,531	)		(99,123	)
Changes in ownership in subsidiaries		—		(5,313	)		—			—			(5,313)			(8,651)			(13,964)

Balance, September 30, 2012	￦	44,639		(290,660	)		11,610,756			175,800			11,540,535			1,018,394			12,558,929

Balance, January 1, 2013		44,639		(288,883	)		12,124,657			(25,636	)		11,854,777			1,000,005			12,854,782
Cash dividends		—		—			(655,946	)		—			(655,946	)		(2,242	)		(658,188	)
Total comprehensive income
Profit (loss) for the period		—		—			1,324,824			—			1,324,824			(8,944	)		1,315,880
Other comprehensive loss		—		—			(3,116	)		7,455			4,339			(676	)		3,663
Issuance of hybrid bond		—		398,518			—			—			398,518			—			398,518
Interest on hybrid bond		—		—			(5,291	)		—			(5,291	)		—			(5,291	)
Treasury stock		—		190,528			—			—			190,528			—			190,528
Business combination under common control		—		(61,854	)		—			—			(61,854	)		—			(61,854	)
Changes in ownership in subsidiaries		—		(2,002	)		—			—			(2,002	)		(253,033	)		(255,035	)

Balance, September 30, 2013	￦	44,639		236,307			12,785,128			(18,181	)		13,047,893			735,110			13,783,003

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the nine-month periods ended September 30, 2013 and 2012


(In millions of won)	Note		September 30, 2013			September 30, 2012
Cash flows from operating activities:
Cash generated from operating activities
Profit for the period			￦	1,315,880			596,573
Adjustments for income and expenses		37		2,363,633			2,547,459
Changes in assets and liabilities related to operating activities		37		(1,210,694	)		483,852

Sub-total				2,468,819			3,627,884
Interest received				40,313			70,287
Dividends received				10,199			28,310
Interest paid				(218,764	)		(272,553	)
Income tax paid				(118,689	)		(369,583	)

Net cash provided by operating activities				2,181,878			3,084,345

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net				74,970			502,990
Decrease in short-term investment securities, net				—			14,182
Collection of short-term loans				225,493			189,476
Proceeds from disposal of long-term financial instruments				15			5,000
Proceeds from disposal of long-term investment securities				224,118			58,922
Proceeds from disposal of investments in associates and joint ventures				40,021			1,898
Proceeds from disposal of property and equipment				8,572			10,234
Proceeds from disposal of intangible assets				2,117			6,589
Proceeds from disposal of assets held for sale				190,393			—
Collection of long-term loans				11,563			8,783
Decrease of guarantee deposits				9,761			6,556
Proceeds from disposal of other non-current assets				554			640
Proceeds from disposal of subsidiaries				216,471			88,641

Sub-total				1,004,048			893,911
Cash outflows for investing activities:
Increase in short-term investment securities, net				(30,422	)		(2,000	)
Increase in short-term loans				(211,677	)		(163,785	)
Increase in long-term loans				(3,069	)		(2,523	)
Increase in long-term financial instruments				(7,504	)		(12	)
Acquisition of long-term investment securities				(15,762	)		(36,146	)
Acquisition of investments in associates and joint ventures				(93,191	)		(3,132,690	)
Acquisition of property and equipment				(1,668,004	)		(2,144,752	)
Acquisition of intangible assets				(192,846	)		(84,529	)
Increase in guarantee deposits				(19,686	)		(4,186	)
Increase in other non-current assets				(1,103	)		(1,838	)
Acquisition of business, net of cash acquired				(94,805	)		(11,560	)

Sub-total				(2,338,069	)		(5,584,021	)

Net cash used in investing activities			￦	(1,334,021)			(4,690,110	)

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 nine-month periods ended September 30, 2013 and 2012


(In millions of won)	September 30, 2013			September 30, 2012
Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings	￦	44,000			1,791,386
Issuance of debentures		1,014,859			1,086,992
Proceeds from long-term borrowings		8,600			2,059,779
Issuance of hybrid bond		398,518			—
Cash inflows from settlement of derivatives		2,270			1,619
Cash inflows from other financial activities		—			92

Sub-total		1,468,247			4,939,868
Cash outflows for financing activities:
Repayment of short-term borrowings		(563,745	)		(1,937,255	)
Repayment of current portion of long-term debt		(161,575	)		(100,464	)
Repayment of debentures		—			(888,124	)
Repayment of long-term borrowings		(357,615	)		(207,948	)
Cash outflows from settlement of derivatives		—			(5,415	)
Payment of finance lease liabilities		(15,359	)		(15,204	)
Payment of dividends		(658,189	)		(657,266	)
Cash paid for transactions with non-controlling interest		(3,871	)		(1,025	)

Sub-total		(1,760,354	)		(3,812,701	)

Net cash provided by (used in) financing activities		(292,107	)		1,127,167

Net increase in cash and cash equivalents		555,750			(478,598	)
Cash and cash equivalents at beginning of the period		920,125			1,650,794
Effects of exchange rate changes on cash and cash equivalents		(5,260	)		(4,105	)

Cash and cash equivalents at end of the period	￦	1,470,615			1,168,091

See accompanying notes to the condensed consolidated interim financial statements.

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 September 30, 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		45,283,200		56.08	%
Treasury stock		10,170,155		12.60	%

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.

(2)

List of subsidiaries

The list of subsidiaries as of September 30, 2013 and December 31, 2012 is as follows:

Ownership(%)

Subsidiary

Location

Primary business

September 30,
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

54.1

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

1.	Reporting Entity, Continued

(2)

List of subsidiaries, Continued

Ownership(%)

Subsidiary

Location

Primary business

September 30,
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

SKP Global Holdings PTE. Ltd.(*)

Singapore

Investment association

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.

USA

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.

1.	Reporting Entity, Continued

(3)

Condensed financial information of subsidiaries

Condensed financial information of subsidiaries as of and for the nine-month period ended September 30, 2013 is as follows:


(In millions of won)
Subsidiary	Total assets		Total liabilities		Total equity			Revenue		Profit (loss)
SK Telink Co., Ltd.	￦	254,644		127,691		126,953			320,906		16,349
M&Service Co., Ltd.(*1)		68,463		32,136		36,327			94,373		4,658
SK Communications Co., Ltd.		239,655		59,848		179,807			100,818		(15,795	)
Stonebridge Cinema Fund		11,348		349		10,999			1		937
Commerce Planet Co., Ltd.		34,925		35,130		(205	)		43,503		1,442
SK Broadband Co., Ltd.		2,865,258		1,744,184		1,121,074			1,852,410		10,691
K-net Culture and Contents Venture Fund		24,970		—		24,970			—		(13,794	)
Fitech Focus Limited Partnership II		21,700		—		21,700			—		(925	)
Open Innovation Fund		28,107		—		28,107			—		(15,297	)
PS&Marketing Corporation		256,127		119,648		136,479			812,427		134
Service Ace Co., Ltd.		55,025		28,238		26,787			137,969		4,158
Service Top Co., Ltd.		47,375		28,669		18,706			117,806		3,538
Network O&S Co., Ltd.		57,589		33,554		24,035			148,540		3,117
BNCP Co., Ltd.		12,257		6,899		5,358			10,993		(9,275	)
SK Planet Co., Ltd.		2,481,866		759,385		1,722,481			978,586		198,192
SK Telecom China Holdings Co., Ltd.		35,928		1,046		34,882			13,206		1,177
Shenzhen E-eye High Tech Co., Ltd.		17,650		1,532		16,118			5,639		(885	)
SK Global Healthcare Business Group., Ltd.		25,784		—		25,784			—		—
SK Planet Japan		673		118		555			380		(1,091	)
SKT Vietnam PTE. Ltd.		38,206		9,036		29,170			—		(1,424	)
SK Planet Global PTE. Ltd.		1,107		129		978			277		(1,005	)
SKP Global Holdings PTE. Ltd.(*1)		21,419		10		21,409			—		1,698
SKT Americas, Inc.		34,293		323		33,970			4,671		(5,807	)
SKP America LLC.		8,795		1,607		7,188			—		—
YTK Investment Ltd.		64,305		—		64,305			—		—
Atlas Investment(*2)		40,154		144		40,010			—		(9,236	)

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

(*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.

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.

1.	Reporting Entity, Continued

(4)

Changes in subsidiaries

The list of subsidiary that was newly included during the nine-month period ended September 30, 2013 is as follows:


Subsidiary		Reason
M&Service Co., Ltd.		The Group acquired additional ownership interest in M&Service Co., Ltd. and obtained control.
SKP Global Holdings PTE. Ltd.		The Group newly invested in SKP Global Holdings PTE. Ltd.

The list of subsidiaries that were excluded during the nine-month period ended September 30, 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.
Madsmart, Inc.		Merged into SK Planet 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.
Loen Entertainment, Inc.		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 nine-month period ended September 30, 2013, and as of and for the year ended December 31, 2012 is as follows. There were no dividends paid from the consolidated entities of which non-controlling interests are significant.


(In millions of won)
	September 30, 2013
	SK Communications Co., Ltd.			SK Broadband Co., Ltd.
Ownership of non-controlling interests (%)		35.4			49.4
Current assets	￦	127,679			492,504
Non-current assets		111,976			2,372,754
Current liabilities		(52,291	)		(1,077,455	)
Non-current liabilities		(7,557	)		(666,729	)
Net assets		179,807			1,121,074
Adjustment for fair value		—			121,222
Net assets of consolidated entities		179,807			1,242,296
Carrying amount of non-controlling interests		63,693			614,148
Revenue	￦	100,818			1,852,410
Profit (loss) for the period		(15,795	)		10,691
Amortization of adjustment for fair value		—			(23,233	)
Loss of the consolidated entities		(15,795	)		(12,542	)
Total comprehensive loss		(15,548	)		(11,869	)
Loss attributable to non-controlling interests		(5,599	)		(6,200	)

1.	Reporting Entity, Continued


(In millions of won)	September 30, 2013
	SK Communications Co., Ltd.			SK Broadband Co., Ltd.
Net cash provided by (used in) operating activities	￦	(14,148	)		319,762
Net cash provided by (used in) investing activities		29,877			(103,673	)
Net cash provided by (used in) financing activities		19			(205,633	)
Net increase in cash and cash equivalents		15,748			10,456


(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 nine-month period ended September 30, 2013 and for the year ended December 31, 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 controls 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.

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

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.

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.

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.

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.

3.	Significant Accounting Policies, Continued

(1)

Changes in accounting policies, Continued

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.

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

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.

(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. The Group is in the process of evaluating the impact of these new standards, interpretations and amendments to the consolidated financial statements, if any, as of September 30, 2013.

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.

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 immaterial operations, do not meet the quantitative thresholds to be considered reportable segments and are presented as Other.

(1)

Details of the segment information as of and for the nine-month period ended September 30, 2013 are as follows:


(In millions of won)
	Cellular Services		Fixed-line Telecommunication services		Other			Sub-total		Consolidation adjustments			Consolidated amount
Total revenue	￦	10,760,819		2,173,316		1,251,228			14,185,363		(1,878,150	)		12,307,213
Internal revenue		872,517		445,725		559,908			1,878,150		(1,878,150	)		—
External revenue		9,888,302		1,727,591		691,320			12,307,213		—			12,307,213
Depreciation and amortization		1,493,938		390,975		91,056			1,975,969		—			1,975,969
Operating income		1,504,189		31,340		(34,120	)		1,501,409		—			1,501,409
Finance income and costs, net														(330,844	)
Gain related to investments in subsidiaries, associates and joint ventures, net														584,758
Other non-operating income and expense, net														(312,731	)

Profit from continuing operations before income tax														1,442,592
Total assets		22,831,074		3,119,903		3,163,101			29,114,078		(3,180,600	)		25,933,478
Total liabilities		9,595,320		1,871,875		905,828			12,373,023		(222,548	)		12,150,475

4.	Operating Segments, Continued

(2)

Details of the segment information as of and for the nine-month period ended September 30, 2012 are as follows:


(In millions of won)
	Cellular Services		Fixed-line Telecommunication services		Other		Sub-total		Consolidation Adjustments			Consolidated amount
Total revenue	￦	10,763,934		2,206,565		1,092,333		14,062,832		(2,077,134	)		11,985,698
Internal revenue		965,481		560,536		551,117		2,077,134		(2,077,134	)		—
External revenue		9,798,453		1,646,029		541,216		11,985,698		—			11,985,698
Depreciation and amortization		1,248,116		433,990		80,352		1,762,458		—			1,762,458
Operating income		1,125,869		39,501		25,638		1,191,008		—			1,191,008
Finance income and costs, net													(184,867	)
Loss related to investments in subsidiaries, associates and joint ventures, net													(41,007	)
Other non-operating income and expense, net													(91,374	)

Profit from continuing operations before income tax													873,760
Total assets		23,116,767		3,372,434		3,349,851		29,839,052		(3,780,556	)		26,058,496
Total liabilities		10,922,843		2,164,119		844,364		13,931,326		(431,759	)		13,499,567

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 nine-month periods ended September 30, 2013 and 2012.

5.	Restricted Deposits

Deposits which are restricted in use as of September 30, 2013 and December 31, 2012 are summarized as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Short-term financial instruments(*)	￦	79,284		241,587
Long-term financial instruments(*)		7,569		106
Guarantee deposits		40		40

	￦	86,893		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 September 30, 2013) and guarantees for loans and other similar instruments.

6.	Trade and Other Receivables

(1)

Details of trade and other receivables as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 2013
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable—trade	￦	2,506,775		(233,978	)		2,272,797
Short-term loans		77,638		(1,582	)		76,056
Accounts receivable—other		710,539		(72,055	)		638,484
Accrued income		14,073		(171	)		13,902
Others		2,670		—			2,670

		3,311,695		(307,786	)		3,003,909
Non-current assets:
Long-term loans		84,962		(28,761	)		56,201
Guarantee deposits		248,684		—			248,684
Long-term accounts receivable—trade		13,960		—			13,960

		347,606		(28,761	)		318,845

	￦	3,659,301		(336,547	)		3,322,754


(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 nine-month periods ended September 30, 2013 and 2012 were as follows:


(In millions of won)	For the nine-month period ended
	2013			2012
Balance at January 1	￦	300,668			318,820
Increase of bad debt		64,641			58,903
Write-off		(43,553	)		(69,250	)
Others(*)		14,791			19,926

Balance at September 30	￦	336,547			328,399

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

6.	Trade and Other Receivables, Continued

(3)

Details of overdue but not impaired, and impaired trade and other receivables as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013						December 31, 2012
	Accounts receivable - trade			Other receivables			Accounts receivable - trade			Other receivables
Neither overdue nor impaired	￦	1,913,436			940,361			1,589,911			976,882
Overdue but not impaired		47,713			1,285			38,590			1,588
Impaired		559,586			196,920			552,816			90,871

		2,520,735			1,138,566			2,181,317			1,069,341
Allowance for doubtful accounts		(233,978	)		(102,569	)		(213,020	)		(87,648	)

	￦	2,286,757			1,035,997			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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013				December 31, 2012
	Accounts receivable - trade		Accounts receivable - other		Accounts receivable - trade		Accounts receivable - other
Less than 1 month	￦	21,172		608		4,067		171
1 ~ 3 months		5,624		403		10,264		673
3 ~ 6 months		3,016		37		10,507		101
More than 6 months		17,901		237		13,752		643

	￦	47,713		1,285		38,590		1,588

7.	Inventories

Details of inventories as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013							December 31, 2012
	Acquisition cost		Write - down of inventory			Carrying amount		Acquisition cost		Write - down of inventory			Carrying amount
Merchandise	￦	171,709		(2,004	)		169,705		230,640		(1,784	)		228,856
Finished goods		2,229		(35	)		2,194		3,525		(962	)		2,563
Work in process		—		—			—		309		—			309
Raw materials and supplies		4,321		—			4,321		10,487		(69	)		10,418

	￦	178,259		(2,039	)		176,220		244,961		(2,815	)		242,146

8.	Investment Securities

(1)

Details of short-term investment securities as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Beneficiary certificates(*)	￦	132,045		56,160
Current portion of long-term investment securities		3,634		3,967

	￦	135,679		60,127

(*)	The distributions arising from beneficiary certificates as of September 30, 2013 were accounted for as accrued income.

(2)

Details of long-term investment securities as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013			December 31, 2012
Equity securities:
Marketable equity securities	￦	551,308			584,035
Unlisted equity securities		88,204			99,643
Equity investments		264,124			223,370

		903,636			907,048
Debt securities:
Public bonds(*1)		356			377
Investment bonds(*2)		46,108			50,254

		46,464			50,631

Total		950,100			957,679
Less current portion of long-term investment securities		(3,634	)		(3,967	)

Long-term investment securities	￦	946,466			953,712

(*1)	Details of maturity for the public bonds as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Less than 1 year	￦	198		8
1 ~ 5 years		158		369

	￦	356		377

(*2)	The Group classified convertible bonds of NanoEnTek, Inc. (carrying amount as of September 30, 2013: W 17,743 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).

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.

Non-current assets held for sale relating to investment in associates as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Investments in associates	￦	2,143		2,143

10.

Business combination

(1)

General information

In January 2013, 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 nine-month period ended September 30, 2013 was a business combination between entities under common control, the difference between the consideration 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
Property and equipment, and intangible assets		68,699
Other assets		457,431
Trade payables		(150,014	)
Other liabilities		(337,617	)

	￦	270,285

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

11.

Investments in Associates and Joint Ventures

(1)

Investments in associates and joint ventures accounted for using the equity method as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)		September 30, 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		36,500		9.6		37,628
SK USA, Inc.	USA		49.0		3,986		49.0		4,580
F&U Credit information Co., Ltd.	Korea		50.0		3,648		50.0		4,011
Korea IT Fund(*3)	Korea		63.3		230,945		63.3		230,016
Loen Entertainment, Inc.(*2,4)	Korea		15.0		50,267		—		—
JYP Entertainment Corporation(*5)	Korea		—		—		25.5		4,232
Konan Technology	Korea		29.5		4,143		29.5		4,835
Etoos Co., Ltd. (*2)	Korea		15.6		13,437		15.6		12,037
Wave City Development Co., Ltd. (*2)	Korea		19.1		—		19.1		—
HanaSK Card Co., Ltd.	Korea		49.0		377,609		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		21,110		40.9		21,935
NanoEnTek, Inc. (*2)	Korea		9.3		9,265		9.3		9,276
UNISK(Beijing) Information Technology Co., Ltd.	China		49.0		7,502		49.0		6,589
SK Industrial Development China Co. Ltd.	Hong Kong		35.0		78,765		35.0		77,967
Packet One Network	Malaysia		27.0		88,704		28.2		88,389
Mobile Money Venture, LLC	USA		50.0		793		50.0		826
SK Technology Innovation Company	Cayman		49.0		59,907		49.0		63,559
LightSquared Inc.(*2)	USA		3.3		—		3.3		—
ViKi, Inc.(*6)	USA		—		—		26.3		15,667
HappyNarae Co., Ltd.	Korea		42.5		13,895		42.5		13,113
SK hynix Inc.	Korea		20.6		3,795,765		21.1		3,328,245
SK MENA Investment B.V.	Netherlands		32.1		13,731		32.1		13,666
SK Latin America Investment	Spain		32.1		13,731		32.1		13,685
Gemini	Singapore		20.0		3,943		20.0		7,139
SKY Property Mgmt. Ltd.(*4)	Virgin Island		33.0		238,937		—		—
Xinan Tianlong Science and Technology Co., Ltd. (*7)	China		49.0		26,982		—		—
TR Entertainment and others	—		—		138,193		—		121,101

Sub-total					5,239,740				4,610,268

Investments in joint ventures
Dogus Planet, Inc.	Turkey		50.0		16,068		50.0		6,005
PT. Melon Indonesia	Indonesia		49.0		3,460		49.0		4,447
Television Media Korea Ltd.	Korea		51.0		9,187		51.0		11,757
PT XL Planet Digital(*7)	Indonesia		50.0		21,419		—		—

Sub-total					50,134				22,209

Total				￦	5,289,874			￦	4,632,477

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 nine-month period ended September 30, 2013 (Note 10).

(*2)

The Group classified the investments in SK China Company Ltd., Loen Entertainment, Inc., 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. and Loen Entertainment, Inc. as investments in associates from subsidiaries due to partial disposal of its shares.

(*5)

The Group de-recognized this investment during the nine-month period ended September 30, 2013 as this investee is an associate of Loen Entertainment, Inc., which was reclassified from subsidiaries to investment in associates upon the Group’s partial disposal of its interest in Loen Entertainment, Inc.

(*6)	The Group de-recognized this investment during the nine-month period ended September 30, 2013 upon disposal.

(*7)	The Group newly acquired this investment during the nine-month period ended September 30, 2013.

(2)

There is no joint venture listed publicly and the market price of investments in associates listed publicly as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won, except for share and per share data)
	September 30, 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.	￦	994		21,620,360		21,491		858		21,620,360		18,550
NanoEnTek, Inc.		4,285		1,807,130		7,744		3,915		1,807,130		7,075
SK hynix Inc.		30,250		146,100,000		4,419,525		25,750		146,100,000		3,762,075
Loen Entertainment, Inc.		12,950		3,793,756		49,129		—		—		—

11.

Investments in Associates and Joint Ventures, Continued

(3)

The condensed financial information of the major investees as of and for the nine-month period ended September 30, 2013 and as of and for the year ended December 31, 2012 are as follows:


(In millions of won)	As of and for the nine-month period ended September 30, 2013
	SK hynix Inc.			HanaSK Card Co., Ltd.		SKY Property Mgmt. Ltd.		Korea IT Fund		Packet One Network
Current assets	￦	6,802,076			5,304,412		103,101		148,463		49,037
Non-current assets		13,735,214			209,656		705,986		216,342		223,058
Current liabilities		3,495,675			1,905,780		141,120		—		114,644
Non-current liabilities		4,727,911			2,938,288		167,024		—		89,566
Revenue		10,797,415			643,009		58,063		7,432		81,200
Profit (loss) from continuing operations		2,083,710			781		8,884		1,405		(34,376	)
Other comprehensive income (loss)		(219,424	)		1,102		—		—		—
Total comprehensive income (loss)		1,864,286			1,883		8,884		1,405		(34,376	)


(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	)

11.

Investments in Associates and Joint Ventures, Continued

(4)

The condensed financial information of joint ventures as of and for the nine-month period ended September 30, 2013 and as of and for the year ended December 31, 2012 are as follows:


(In millions of won)	As of and for the nine-month period ended September 30, 2013
	Television Media Korea Ltd.			Dogus Planet, Inc.			PT. Melon Indonesia			PT XL Planet Digitals
Current assets	￦	19,171			31,478			7,845			39,183
Cash and cash equivalents		15,146			28,241			5,171			38,500
Non-current assets		5,503			8,501			1,648			879
Current liabilities		6,814			7,647			2,315			2,259
Account payable, other payables and provisions		6,701			7,509			2,315			2,259
Non-current liabilities		317			194			66			—
Account payable, other payables and provisions		—			103			—			—
Revenue		10,335			3,107			5,419			—
Depreciation and amortization		(8	)		(1,314	)		(108	)		2
Interest income		304			1,315			210			82
Interest expense		—			(24	)		—			1
Profit (loss) from continuing operations		(4,983	)		(18,228	)		(551	)		3,968
Total comprehensive income (loss)		(4,983	)		(18,228	)		(551	)		3,968


(In millions of won)	As of and for the year ended December 31, 2012
	Television Media Korea Ltd.			Dogus Planet, Inc.			PT. Melon Indonesia
Current assets	￦	22,449			7,735			7,770
Cash and cash equivalents		10,562			6,085			6,882
Non-current assets		6,056			7,349			2,265
Current liabilities		5,724			2,970			832
Account payable, other payables and provisions		5,323			2,631			821
Non-current liabilities		199			104			78
Account payable, other payables and provisions		—			104			—
Revenue		12,115			—			1,218
Depreciation and amortization		(2,886	)		(864	)		(442	)
Interest income		758			539			418
Loss from continuing operations		(6,873	)		(4,494	)		(572	)
Total comprehensive loss		(6,873	)		(4,494	)		(572	)

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 nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended September 30, 2013
	Beginning balance		Acquisition and disposal			Share of profits (losses)			Other comprehe- nsive income			Other increase (decrease)			Ending balance
Investments in associates
SK Marketing & Company Co., Ltd.(*1)	￦	145,333		—			(3,955	)		155			(141,533	)		—
SK China Company Ltd.		37,628		—			(9,189	)		8,061			—			36,500
SK USA, Inc.		4,580		—			(630	)		36			—			3,986
F&U Credit information Co., Ltd.		4,011		—			21			(384	)		—			3,648
Korea IT Fund		230,016		—			890			39			—			230,945
Loen Entertainment, Inc.(*2)		—		—			—			—			50,267			50,267
JYP Entertainment Corporation(*3)		4,232		—			999			58			(5,289	)		—
Konan Technology		4,835		—			(692	)		—			—			4,143
Etoos Co., Ltd.		12,037		—			1,400			—			—			13,437
Wave City Development Co., Ltd.		—		—			—			—			—			—
HanaSK Card Co., Ltd.		378,457		—			(1,373	)		525			—			377,609
Daehan Kanggun BcN Co., Ltd.		7,982		—			—			—			—			7,982
Candle Media Co., Ltd.		21,935		—			(912	)		87			—			21,110
NanoEnTek, Inc.		9,276		—			(14	)		3			—			9,265
UNISK(Beijing) Information Technology Co., Ltd.		6,589		—			782			131			—			7,502
SK Industrial Development China Co., Ltd.		77,967		—			(635	)		1,433			—			78,765
Packet One Network		88,389		—			1,156			(841	)		—			88,704
Mobile Money Venture, LLC		826		—			(20	)		—			(13	)		793
SK Technology Innovation Company		63,559		—			(3,999	)		347			—			59,907
LightSquared Inc.		—		—			—			—			—			—
ViKi, Inc.(*4)		15,667		(14,636	)		(995	)		(36	)		—			—
HappyNarae Co., Ltd.		13,113		—			781			1			—			13,895
SK hynix Inc.		3,328,245		—			453,042			14,478			—			3,795,765
SK MENA Investment B.V.		13,666		—			—			65			—			13,731
SK Latin America Investment		13,685		—			(287	)		333			—			13,731
Gemini		7,139		—			(3,213	)		17			—			3,943
SKY Property Mgmt. Ltd.(*2)		—		—			4,229			2,005			232,703			238,937
Xinan Tianlong Science and Technology Co., Ltd.		—		26,982			—			—			—			26,982
TR Entertainment and others		121,100		23,681			(5,795	)		216			(1,009	)		138,193

Sub-total		4,610,267		36,027			431,591			26,729			135,126			5,239,740

Investments in joint ventures
Dogus Planet, Inc.		6,006		21,428			(9,115	)		(2,251	)		—			16,068
PT. Melon Indonesia		4,447		—			(326	)		(661	)		—			3,460
Television Media Korea Ltd.		11,757		—			(2,570	)		—			—			9,187
PT XL Planet Digital		—		19,713			1,706			—			—			21,419

Sub-total		22,210		41,141			(10,305	)		(2,912	)		—			50,134

Total	￦	4,632,477		77,168			421,286			23,817			135,126			5,289,874

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 nine-month period ended September 30, 2013 (Note 10).

(*2)	The Group reclassified the investments in Loen Entertainment, Inc., and SKY Property Mgmt. Ltd. as investments in associates during the nine-month period ended September 30, 2013.

(*3)	Investment in JYP Entertainment Corporation was de-recognized as Loen Entertainment, Inc., which controls JYP Entertainment Corporation, was classified from investments in subsidiaries to investments in associates.

(*4)	De-recognized upon disposal during the nine-month period ended September 30, 2013.


(In millions of won)	For the nine-month period ended September 30, 2012
	Beginning balance		Acquisition and Disposal		Share of profits (losses)			Other compre- hensive income			Impair- ment loss			Other increase (decrease)			Ending balance
Investments in associates
SK Marketing & Company Co., Ltd.	￦	128,320		—		10,963			(1,134	)		—			—			138,149
SK China Company Ltd.		48,488		—		69			(5,513	)		—			—			43,044
SK USA, Inc.		4,534		—		328			(85	)		—			—			4,777
F&U Credit information Co., Ltd.		3,565		—		1,700			—			—			—			5,265
Korea IT Fund		230,980		—		(3,502	)		320			—			(750	)		227,048
JYP Entertainment Corporation		4,008		—		351			(58	)		—			—			4,301
Konan Technology		4,760		—		(644	)		—			—			—			4,116
Etoos Co., Ltd.		13,928		—		(828	)		—			—			—			13,100
Wave City Development Co., Ltd.		1,124		—		(1,124	)		—			—			—			—
HanaSK Card Co., Ltd.		396,553		—		(10,758	)		(1,566	)		—			—			384,229
Candle Media Co., Ltd.		11,814		5,854		4,160			308			—			47			22,183
NanoEnTek, Inc.		10,470		—		(1,010	)		93			—			—			9,553
UNISK(Beijing) Information Technology Co., Ltd.		5,886		—		1,021			(380	)		—			—			6,527
Packet One Network		103,409		—		(13,473	)		844			—			—			90,780
Mobile Money Venture, LLC		983		—		(77	)		—			—			(29	)		877
SK Technology Innovation Company		75,974		—		(3,368	)		(26	)		—			—			72,580
LightSquared Inc.		49,441		—		(10,571	)		1,513			(40,383	)		—			—
SK hynix Inc.		—		3,374,725		(29,550	)		(8,830	)		—			—			3,336,345
SK MENA Investment B.V.		—		14,485		16			(240	)		—			—			14,261
SK Latin America Investment		—		14,243		—			—			—			—			14,243
Gemini		—		6,108		—			—			—			—			6,108
TR Entertainment and others		269,780		42,565		(4,623	)		(2,443	)		—			(1,401	)		303,878

Sub-total		1,364,017		3,457,980		(60,920	)		(17,197	)		(40,383	)		(2,133	)		4,701,364
Investments in joint ventures
PT. Melon Indonesia		5,326		—		(469	)		(411	)		—			—			4,446
Television Media Korea Ltd.		15,262		—		(2,831	)		—			—			—			12,431

Sub-total		20,588		—		(3,300	)		(411	)		—			—			16,877

Total	￦	1,384,605		3,457,980		(64,220	)		(17,608	)		(40,383	)		(2,133	)		4,718,241

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 September 30, 2013 are as follows:


(In millions of won)	Unrealized loss					Unrealized change in equity
	Period ended September 30, 2013			Accumulated		Period ended September 30, 2013		Accumulated
ULand Company Limited	￦	—			1,703		—		127
Wave City Development Co., Ltd.		(1,035	)		714		—		—
Cyworld Holdings Hong Kong and others		—			2,937		—		334

	￦	(1,035	)		5,354		—		461

12.

Property and Equipment

(1)

Property and equipment as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 2013										December 31, 2012
	Acquisition cost		Accumulated depreciation			Accumulated impairment loss			Carrying amount		Carrying Amount
Land	￦	722,662		—			—			722,662		704,908
Buildings		1,410,341		(542,602	)		—			867,739		886,371
Structures		697,508		(343,727	)		—			353,781		363,484
Machinery		24,194,958		(17,903,593	)		(1,698	)		6,289,667		6,316,192
Other		1,427,089		(913,480	)		(761	)		512,848		637,212
Construction in progress		641,734		—			—			641,734		804,552

	￦	29,094,292		(19,703,402	)		(2,459	)		9,388,431		9,712,719

(2)

Changes in property and equipment for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended September 30, 2013
	Beginning balance		Acquisi- tion		Disposal			Transfer			Deprecia- tion			Change of consolida- tion scope		Ending balance
Land	￦	704,908		6,696		(24	)		5,994			—			5,088		722,662
Buildings		886,371		165		(136	)		11,216			(33,848	)		3,971		867,739
Structures		363,484		8,577		(7	)		7,037			(25,310	)		—		353,781
Machinery		6,316,192		270,163		(9,231	)		1,190,378			(1,478,874	)		1,039		6,289,667
Other		637,212		616,902		(2,463	)		(641,619	)		(100,278	)		3,094		512,848
Construction in progress		804,552		470,656		(13,008	)		(628,981	)		—			8,515		641,734

	￦	9,712,719		1,373,159		(24,869	)		(55,975	)		(1,638,310	)		21,707		9,388,431

12.

Property and Equipment, Continued


(In millions of won)
	For the nine-month period ended September 30, 2012
	Beginning balance		Acquisi- tion		Disposal			Transfer			Deprecia- tion			Impair- ment(*)			Classified as held for sale			Change of consolida- tion scope			Ending balance
Land	￦	730,361		569		(1,052	)		5,740			—			—			(42,727	)		—			692,891
Buildings		989,078		1,020		(1,040	)		5,594			(39,251	)		—			(65,539	)		—			889,862
Structures		301,115		30,854		(4	)		15,305			(25,226	)		—			(111	)		—			321,933
Machinery		5,493,572		299,541		(3,469	)		1,518,874			(1,295,597	)		(108,026	)		—			—			5,904,895
Other		711,461		1,122,986		(11,712	)		(1,145,313	)		(92,539	)		(449	)		—			(1,555	)		582,879
Construction in progress		805,411		689,782		(810	)		(803,898	)		—			(10,062	)		—			—			680,423

	￦	9,030,998		2,144,752		(18,087	)		(403,698	)		(1,452,613	)		(118,537	)		(108,377	)		(1,555	)		9,072,883

(*)	The Group recognized W 108,899 million of impairment loss on property and equipment in relation to the discontinuance of the Digital Multimedia Broadcasting service and included the amount in profit (loss) from discontinued operation.

13.

Investment Property

(1)

Investment property as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013							December 31, 2012
	Acquisition cost		Accumulated depreciation			Carrying amount		Carrying amount
Land	￦	2,846		—			2,846		12,638
Buildings		15,632		(2,607	)		13,025		14,841

	￦	18,478		(2,607	)		15,871		27,479

(2)

Changes in investment property for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended September 30, 2013
	Beginning balance		Transfer			Depreciation			Ending balance
Land	￦	12,638		(9,792	)		—			2,846
Buildings		14,841		(830	)		(986	)		13,025

	￦	27,479		(10,622	)		(986	)		15,871


(In millions of won)	For the nine-month period ended September 30, 2012
	Beginning balance		Transfer			Depreciation			Classified as held for sale			Ending balance
Land	￦	23,153		278			—			(10,737	)		12,694
Buildings		247,933		(9,264	)		(6,267	)		(22,723	)		209,679

	￦	271,086		(8,986	)		(6,267	)		(33,460	)		222,373

14.

Goodwill

(1)

Goodwill as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 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		68,582		79,804

	￦	1,733,261		1,744,483

(2)

Details of changes in goodwill for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2013			September 30, 2012
Beginning balance	￦	1,744,483			1,749,933
Change of consolidation scope		1,253			(9,685	)
Impairment loss on goodwill		(9,982	)		—
Other decrease		(2,493	)		(99	)

	￦	1,733,261			1,740,149

15.

Intangible Assets

(1)

Intangible assets as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 2013										December 31, 2012
	Acquisition cost		Accumulated depreciation			Accumulated impairment			Carrying amount		Carrying amount
Frequency use rights	￦	3,033,879		(1,299,177	)		—			1,734,702		1,693,868
Land use rights		45,595		(30,887	)		—			14,708		16,062
Industrial rights		87,018		(27,783	)		—			59,235		60,104
Development costs		171,664		(148,672	)		(11,930	)		11,062		13,420
Facility usage rights		143,387		(83,157	)		—			60,230		65,340
Customer relations		53,087		(35,626	)		—			17,461		48,886
Memberships(*1)		129,120		—			(732	)		128,388		118,954
Other(*2)		2,416,222		(1,727,592	)		(6,876	)		681,754		673,024

	￦	6,079,972		(3,352,894	)		(19,538	)		2,707,540		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.

15.

Intangible Assets, Continued

(2)

Details of changes in intangible assets for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	For the nine-month period ended September 30, 2013
	Beginning balance		Acquisition		Disposal			Transfer		Amortiza- tion			Impair- ment			Change of consolida- tion scope			Ending balance
Frequency use rights(*)	￦	1,693,868		1,046,833		(814,213	)		—		(191,786	)		—			—			1,734,702
Land use rights		16,062		3,823		(269	)		—		(4,908	)		—			—			14,708
Industrial rights		60,104		2,137		(75	)		—		(2,809	)		—			(122	)		59,235
Development costs		13,420		409		—			—		(4,057	)		(851	)		2,141			11,062
Facility usage rights		65,340		1,179		(75	)		—		(6,214	)		—			—			60,230
Customer relations		48,886		295		—			—		(31,720	)		—			—			17,461
Memberships		118,954		2,763		(997	)		—		—			—			7,668			128,388
Other		673,024		67,075		(903	)		152,193		(220,916	)		(628	)		11,909			681,754

	￦	2,689,658		1,124,514		(816,532	)		152,193		(462,410	)		(1,479	)		21,596			2,707,540

(*)

The Group newly acquired 1.8GHz frequency use rights through auction for the nine-month period ended September 30, 2013 and returned the existing 1.8GHz frequency use rights as partial consideration in connection with the new acquisition. The Group recognized W 199,613 million of loss on disposal of property and equipment and intangible assets with regard to this transaction.


(In millions of won)
	For the nine-month period ended September 30, 2012
	Beginning balance		Acquisition		Disposal			Transfer		Amortiza- tion			Impair- ment(*)			Change of consolida- tion scope			Ending balance
Frequency use rights	￦	1,889,102		16,660		—			—		(145,834	)		(2,907	)		—			1,757,021
Land use rights		19,327		3,167		(80	)		—		(5,195	)		—			—			17,219
Industrial rights		59,473		4,045		—			599		(3,333	)		(6	)		(48	)		60,730
Development costs		20,961		1,832		—			—		(5,211	)		—			—			17,582
Facility usage rights		69,491		681		(92	)		13		(6,095	)		—			—			63,998
Customer relations		141,819		249		—			—		(68,178	)		—			—			73,890
Memberships		117,711		3,325		(3,848	)		—		—			—			(784	)		116,404
Other		677,919		62,579		(3,003	)		122,237		(216,309	)		(9,260	)		(1,709	)		632,454

	￦	2,995,803		92,538		(7,023	)		122,849		(450,155	)		(12,173	)		(2,541	)		2,739,298

15.

Intangible Assets, Continued

(*)	The Group recognized W12,101 million of impairment loss on intangible assets in relation to the frequency use rights of the discontinuance of Digital Multimedia Broadcasting service and included the amount in gain (loss) from discontinued operations.

(3)

The carrying amount and residual useful lives of major intangible assets as of September 30, 2013 are as follows:

(In millions of won)

Amount

Description

Commencement
of depreciation

Completion of
depreciation

Depreciation
method

W-CDMA license

￦

318,171

Frequency use rights relating to W-CDMA service

Dec. 2003

Dec. 2016

W-CDMA license

53,011

Frequency use rights relating to W-CDMA service

Oct. 2010

Dec. 2016

800MHz license

314,216

Frequency use rights relating to CDMA and LTE service

Jul. 2011

Jun. 2021

Straight-line
method

1.8GHz license

1,036,365

Frequency use rights relating to LTE service

Sep. 2013

Dec. 2021

WiBro license

12,939

WiBro service

Mar. 2012

Mar. 2019

￦

1,734,702

16.

Borrowings and Debentures

(1)

Short-term borrowings as of September 30, 2013 and December 31, 2012 are as follows:

(In millions of won)

Lender

Annual
interest rate
(%)

September 30,
2013

December 31,
2012

Commercial Paper

Korea Exchange Bank, etc.

2.69 ~ 3.10

￦

80,000

130,000

Short-term borrowings (Korean won)

Kookmin Bank, etc.

3.65 ~ 6.20

500

470,245

￦

80,500

600,245

16.

Borrowings and Debentures, Continued

(2)

Long-term borrowings as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)	Maturity	September 30, 2013			December 31, 2012
Bank of Communications (*)	6M Libor + 0.29	Oct. 10, 2013	￦	32,268 (USD 30,000	)		32,133 (USD 30,000	)
Bank of China (*)	6M Libor + 0.29	Oct. 10, 2013		21,512 (USD 20,000	)		21,422 (USD 20,000	)
DBS Bank (*)	6M Libor + 0.29	Oct. 10, 2013		26,890 (USD 25,000	)		26,778 (USD 25,000	)
SMBC (*)	6M Libor + 0.29	Oct. 10, 2013		26,890 (USD 25,000	)		26,778 (USD 25,000	)
Kookmin Bank and 13 others	4.48	Feb. 14, 2015		—			350,000
Korea Development Bank	2.89	Jun. 17, 2013		—			1,762
Korea Development Bank	2.84	Jun. 16, 2014		2,471			4,942
Shinhan Bank	2.84	Jun. 15, 2015		5,993			8,561
Kookmin Bank	2.84	Jun. 15, 2016		8,937			9,749
Kookmin Bank	2.84	Mar. 15, 2017		5,996			5,996
Kookmin Bank	2.84	Mar. 15, 2018		8,600			—

Sub-total				139,557			488,121
Less present value discount on long-term borrowings				—			(1,667	)

				139,557			486,454
Less current portion of long-term borrowings				(117,705	)		(117,217	)

Long-term borrowings			￦	21,852			369,237

(*)	As of September 30, 2013, 6M Libor rate is 0.44%.

16.

Borrowings and Debentures, Continued

(3)

Debentures as of September 30, 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 (%)	September 30, 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		2021	4.22		190,000			190,000
Unsecured private bonds	Operating and	2019	3.24		170,000			170,000
Unsecured private bonds	refinancing fund	2022	3.30		140,000			140,000
Unsecured private bonds		2032	3.45		90,000			90,000
Unsecured private bonds	Operating fund	2023	3.03		230,000			—
Unsecured private bonds		2033	3.22		130,000			—
Unsecured private bonds(*1)		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		430,240			428,440
					(USD 400,000	)		(USD 400,000	)
Exchangeable bonds(*5,6)	Refinancing fund	2014	1.75		338,594			405,678
					(USD 220,797	)		(USD 332,528	)
Floating rate notes(*3)	Operating fund	2014	3M Libor + 1.60		268,900			267,775
					(USD 250,000	)		(USD 250,000	)
Floating rate notes(*4)		2014	SOR rate + 1.20		55,617			56,906
					(SGD 65,000	)		(SGD 65,000	)
Swiss unsecured private bonds		2017	1.75		356,298			351,930
					(CHF 300,000	)		(CHF 300,000	)
Foreign global bonds		2018	2.13		752,920			749,770
					(USD 700,000	)		(USD 700,000	)
Australia unsecured private bonds		2017	4.75		300,222			—
					(AUD 300,000	)		—
Floating rate notes(*3)		2020	3M Libor + 0.88		322,680			—
					(USD 300,000	)		—

Sub-total					6,545,471			5,620,499
Less discounts on bonds					(39,322	)		(43,500	)

					6,506,149			5,576,999
Less current portion of bonds					(1,347,874	)		(597,779	)

				￦	5,158,275			4,979,220

100

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 September 30, 2013, 3M Libor rate is 0.25%.

(*4)	As of September 30, 2013, SOR rate is 0.21%.

(*5)	As of September 30, 2013, exchangeable bonds are classified as financial liabilities at fair value through profit or loss.

(*6)	On April 7, 2009, the Company issued exchangeable bonds with a maturity of five years in the principal amount of USD332,528,000 for USD326,397,463 with a coupon rate of 1.75%.

The Company may redeem the principal amount after three 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.

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.

As of September 30, 2013, accumulated principal amount claimed for exchange is USD120,901,000. During the nine-month period ended September 30, 2013, exchange of bonds in the principal amount of USD120,901,000 were claimed and the Group granted 880,557 shares of treasury stock. The Company recognized ￦40,422 million of financial costs in relation to the exchanged bonds for the nine-month period ended September 30, 2013.

In accordance with a resolution of the general shareholder’s meeting on March 22, 2013 and a resolution of the Board of Directors’ meeting on July 25, 2013, the exchange price has changed from ￦197,760 to ￦189,121 and the number of common shares that can be exchanged was changed from 1,480,404 shares to 1,548,029 shares based on number of shares unexchanged, due to the payment of periodic and interim dividends.

As of September 30, 2013, fair value of the exchangeable bonds is USD314,795,162 and the exchange price is ￦189,121. The exchange price could be adjusted with the exchange rate of ￦1,383.40 per USD1. In addition, the number of common shares that can be exchanged as of September 30, 2013 is 1,548,029 shares.

101

17.

Long-term Payables - other

(1) Long-term payables as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Payables related to acquisition of W-CDMA licenses	￦	824,492		705,605
Other(*)		10,899		9,903

	￦	835,391		715,508

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

(2)

As of September 30, 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)
	Period of repayment		Coupon rate(*1)			Annual effective interest rate(*2)			September 30, 2013			December 31, 2012
2.1GHz		2012~2014		3.58	%		5.89	%		17,533			35,067
800MHz		2013~2015		3.51	%		5.69	%		138,833			208,250
2.3GHz		2014~2016		3.00	%		5.80	%		8,650			8,650
1.8GHz		2012~2021		2.43~3.00	%		4.84~5.25	%		942,675			671,625

										1,107,691			923,592
Present value discount on long-term payables - other										(77,444	)		(60,021	)

										1,030,247			863,571
Current portion of long-term payables – other										(205,755	)		(157,966	)

Carrying amount at September 30, 2013									￦	824,492			705,605

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

(*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 September 30, 2013 is as follows:


(In millions of won)
	Amount
2014	￦	207,667
2015		190,134
2016		120,718
2017 and thereafter		589,172

	￦	1,107,691

102

18.

Provisions

Change in provisions for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	For the nine-month period ended September 30, 2013															As of September 30, 2013
	Beginning balance		Increase		Utilization			Reversal			Others			Ending balance		Current		Non-current
Provision for handset subsidy	￦	353,383		5,581		(264,036	)		—			—			94,928		88,042		6,886
Provision for restoration		39,895		3,404		(363	)		(3,785	)		940			40,091		10,943		29,148
Other provisions		590		—		(89	)		(17	)		(56	)		428		—		428

	￦	393,868		8,985		(264,488	)		(3,802	)		884			135,447		98,985		36,462


(In millions of won)
	For the nine-month period ended September 30, 2012															As of September 30, 2012
	Beginning balance		Increase		Utilization			Reversal			Others			Ending balance		Current		Non-current
Provision for handset subsidy	￦	762,238		272,869		(538,804	)		—			—			496,303		373,044		123,259
Provision for restoration		36,378		2,477		(468	)		—			7,226			45,613		7,525		38,088
Other provisions		943		25		(244	)		(87	)		(118	)		519		64		455

	￦	799,559		275,371		(539,516	)		(87	)		7,108			542,435		380,633		161,802

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.

103

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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Finance Lease Liabilities
Current portion of long-term finance lease liabilities	￦	19,773		19,904
Long-term finance lease liabilities		8,428		22,036

	￦	28,201		41,940

The Group’s related interest and principal as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 2013					December 31, 2012
	Minimum lease payment		Present value			Minimum lease payment		Present value
Less than 1 year	￦	20,708		19,773			21,375		19,904
1~5 years		8,641		8,428			22,744		22,036

Sub-total		29,349		28,201			44,119		41,940

Current portion of long-term finance lease liabilities				(19,773	)				(19,904	)

Long-term finance lease liabilities				8,428					22,036

(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	￦	27,771		1,050
1~5 years		76,842		1,074
More than 5 years		68,837		1,090

	￦	173,450		3,214

(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).

104

20.

Defined Benefit Liabilities

(1)

Details of defined benefit liabilities as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013			December 31, 2012
Present value of defined benefit obligations	￦	309,686			244,866
Fair value of plan assets		(172,179	)		(158,345	)

	￦	137,507			86,521

(2)

Principal actuarial assumptions as of September 30, 2013 and December 31, 2012 are as follows:


	September 30, 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 nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2013			September 30, 2012
Beginning balance	￦	244,866			188,120
Current service cost		66,040			56,242
Interest cost		6,704			6,269
Remeasurement - Adjustment based on experience		4,519			6,503
Benefit paid		(28,555	)		(32,388	)
Others(*)		16,112			(2,672	)

Ending balance	￦	309,686			222,074

(*)

Others include liabilities of ￦14,703 million transferred due to business combination, ￦(4,141) million for changes in consolidation scope and transfer to construction in progress during the nine-month period ended September 30, 2013 and effects of changes in consolidation scope of ￦(4,185) million in relation to the disposal of Ntreev Soft Co., Ltd. during the nine-month period ended September 30, 2012.

105

20.

Defined Benefit Liabilities, Continued

(4)

Changes in plan assets for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2013			September 30, 2012
Beginning balance	￦	158,345			102,179
Expected return on plan assets		4,585			2,818
Remeasurement factor of plan assets		1,040			801
Contributions by employer directly to plan assets		8,606			5,597
Benefit paid		(11,674	)		(6,351	)
Others(*)		11,277			(135	)

Ending balance	￦	172,179			104,909

(*)	Others include assets of ￦14,334 million transferred due to business combination and effects of changes in consolidation scope of ￦(3,074) million during the nine-month period ended September 30, 2013.

(5)

Expenses recognized in profit and loss for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2013		September 30, 2012
Current service cost	￦	66,040		56,242
Interest cost, net		2,119		3,451

	￦	68,159		59,693

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

(6)

Details of plan assets as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Equity instruments	￦	1,485		1,221
Debt instruments		46,520		34,269
Short-term financial instruments, etc.		124,174		122,855

	￦	172,179		158,345

Actual return on plan assets for the nine-month periods ended September 30, 2013 and 2012 amounted to ￦5,625 million and ￦3,619 million, respectively.

106

21.

Derivative Instruments

(1)

Currency swap contracts under cash flow hedge accounting as of September 30, 2013 are as follows:


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Oct. 10, 2006	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of USD100,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	Credit Agricole Corporate & Investment Bank	Oct. 10, 2006 ~ Oct. 10, 2013
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD400,000,000)	Foreign currency risk	Currency swap	Morgan Stanley and five other banks	Jul. 20, 2007 ~ Jul. 20, 2027
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD250,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	DBS Bank and Citi Bank	Dec. 15, 2011 ~ Dec. 12, 2014
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD65,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	United Overseas Bank	Dec. 15, 2011 ~ Dec. 12, 2014
Jun. 12, 2012	Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF300,000,000)	Foreign currency risk	Currency swap	Citibank and five other banks	Jun. 12, 2012 ~ Jun. 12, 2017
Nov. 1, 2012	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD700,000,000)	Foreign currency risk	Currency swap	Barclays and nine other banks	Nov. 1, 2012~ May. 1, 2018
Jan. 17, 2013	Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD300,000,000)	Foreign currency risk	Currency swap	BNP Paribas and three other banks	Jan. 17, 2013 ~ Nov. 17, 2017
Mar. 7, 2013	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD300,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	DBS Bank	Mar. 7, 2013 ~ Mar. 7, 2020

107

21.

Derivative Instruments, Continued

(2)

As of September 30, 2013, fair values of the above derivatives recorded in assets or liabilities and details of derivative instruments are as follows:


(In millions of won and thousands of foreign currencies)
	Fair value
	Cash flow hedge											Held for trading purpose		Total
Hedged item	Accumulated gain (loss) on valuation of derivatives			Tax effect			Accumulated foreign currency translation gain (loss)			Others *(1)**		Held for trading purpose		Total
Current assets:
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of USD100,000,000)	￦	(1,778	)		(68	)		12,760			—		—		10,914
Convertible bonds (available-for-sale securities) (Korean won denominated bonds face value of ￦50,000 million)		—			—			—			—		491		491
Non-current assets:
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD400,000,000)		(40,166	)		(12,823	)		(26,855	)		129,806		—		49,962
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD300,000,000)		5,878			1,876			(2,389	)		—		—		5,365

Total assets														￦	66,732
Non-current liabilities:
Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD65,000,000)		21			7			(1,838	)		—		—		(1,810	)
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD250,000,000)		6,206			1,981			(20,548	)		—		—		(12,361	)
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF300,000,000)		(9,417	)		(3,006	)		(7,205	)		—		—		(19,628	)
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD700,000,000)		(11,454	)		(3,657	)		(10,368	)		—		—		(25,479	)
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD300,000,000)		6,432			2,054			(35,167	)		—		—		(26,681	)

Total liabilities														￦	(85,959	)

(*1)	Cash flow hedge accounting has been applied to the relevant contract from May 12, 2010. Others represent gain on valuation of currency swap incurred prior to the application of hedge accounting and was recognized through profit or loss prior to the year ended December 31, 2012.

(*2)	Fair value of the conversion option of convertible bonds held by SK Communications Co., Ltd., a subsidiary, amounting to ￦491 million was accounted for as derivative financial assets.

108

22.

Share Capital and Capital Surplus 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 and other capital adjustments as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won, except for share data)
	September 30, 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 and other capital adjustments:
Paid-in surplus		2,915,887			2,915,887
Treasury stock		(2,218,379	)		(2,410,451	)
Loss on disposal of treasury stock		(20,399	)		(18,855	)
Hybrid bond(Note 24)		398,518			—
Others(*2)		(839,320	)		(775,464	)

	￦	236,307			(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 nine-month period ended September 30, 2013 and the year ended December 31, 2012. Changes in number of shares outstanding for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In shares)	For the nine-month period ended
	September 30, 2013							September 30, 2012
	Issued shares		Treasury stock			Outstanding shares		Issued shares		Treasury stock		Outstanding shares
Beginning issued shares		80,745,711		11,050,712			69,694,999		80,745,711		11,050,712		69,694,999
Disposal of treasury stock		—		(880,557	)		880,557		—		—		—

Ending issued shares		80,745,711		10,170,155			70,575,556		80,745,711		11,050,712		69,694,999

109

23.

Treasury Stock

The Parent Company acquired treasury stock to provide stock dividends, 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 granted 880,557 shares of treasury stock for ￦192,072 million from May 14, 2013 to June 28, 2013 as a result of exercise of exchange rights by the holders of exchangeable bonds.

Treasury stock as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won, shares)
	September 30, 2013		December 31, 2012
Number of shares		10,170,155		11,050,712
Amount	￦	2,218,379		2,410,451

24.

Hybrid Bond

The Parent Company issued hybrid bond at face amount on June 7, 2013 and details as of September 30, 2013 are as follows:

(In millions of won)

Type

Issuance date

Maturity

Annual
interest
rate (%)

Amount

Private hybrid bond

Blank coupon unguaranteed subordinated bond

June 7, 2013

June 7, 2073

(*1)

4.21

(*2)

￦

400,000

Issuance costs

(1,482

)

￦

398,518

Hybrid bond issued by the Parent Company is classified as equity as there is no contractual obligation for delivery of financial assets to the bond holders.

(*1)	The Parent Company has a right to extend the maturity under the same issuance terms without any notice or announcement. The Parent Company also has the right to defer interest payment at its sole discretion.

(*2)	Annual interest rate is adjusted after five years from the issuance date.

110

25.

Retained Earnings

(1)

Retained earnings as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Appropriated:
Legal reserve	￦	22,320		22,320
Reserve for research & manpower development		155,767		220,000
Reserve for business expansion		9,376,138		9,106,138
Reserve for technology development		2,271,300		1,901,300

		11,825,525		11,249,758
Unappropriated		959,603		874,899

	￦	12,785,128		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.

26.

Reserves

(1)

Details of reserves as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013			December 31, 2012
Net change in unrealized fair value of available-for-sale financial assets	￦	182,611			207,063
Net change in other comprehensive income of investments in associates and joint ventures		(150,676	)		(175,044	)
Net change in unrealized fair value of derivatives		(39,104	)		(46,652	)
Foreign currency translations differences for foreign operations		(11,012	)		(11,003	)

	￦	(18,181	)		(25,636	)

111

26.

Reserves, Continued

(2)

Change in reserves for the nine-month periods ended September 30, 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 compre- hensive income of investment in associates and joint ventures			Net change in unrealized fair value of derivatives			Foreign currency translation differences for foreign operations			Total
Balance at January 1, 2012	￦	354,951			(93,599	)		(25,100	)		23,812			260,064
Changes		(48,567	)		(17,831	)		(16,508	)		(16,691	)		(99,597	)
Tax effect		11,566			219			3,548			—			15,333

Balance at September 30, 2012		317,950			(111,211	)		(38,060	)		7,121			175,800

Balance at January 1, 2013		207,063			(175,044	)		(46,652	)		(11,003	)		(25,636	)
Changes		(31,221	)		23,817			9,958			(9	)		2,545
Tax effect		6,769			551			(2,410	)		—			4,910

Balance at September 30, 2013	￦	182,611			(150,676	)		(39,104	)		(11,012	)		(18,181	)

27.

Other Operating Expenses

Details of other operating expenses for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Other Operating Expenses:
Communication expenses	￦	16,075		46,789		14,996		48,575
Utilities		65,238		170,544		55,518		144,107
Taxes and dues		8,945		22,435		13,071		76,502
Repair		60,924		185,648		39,222		160,887
Research and development		77,469		239,680		83,982		221,147
Training		11,528		26,106		10,527		25,507
Bad debt for accounts receivables - trade		16,645		43,974		10,062		30,877
Travel		7,687		22,742		7,476		22,123
Supplies and other		36,502		128,605		46,975		96,620

	￦	301,013		886,523		281,829		826,345

112

28.

Other Non-operating Income and Expenses

Details of other non-operating income and expenses for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Other Non-operating Income:
Fees revenues	￦	1,329		4,193		1,026		1,987
Gain on disposal of property and equipment and intangible assets		1,095		5,849		2,138		4,970
Others		9,658		40,250		11,343		25,403

	￦	12,082		50,292		14,507		32,360

Other Non-operating Expenses:
Impairment loss on property and equipment and intangible assets	￦	216		10,833		5,850		9,648
Loss on disposal of property and equipment and intangible assets		208,665		221,727		8,301		13,258
Donations		32,653		55,302		4,192		45,191
Bad debt for accounts receivable – other		4,150		20,667		4,989		28,026
Others		39,714		54,494		17,569		27,611

	￦	285,398		363,023		40,901		123,734

113

29.

Finance Income and Costs

(1)

Details of finance income and costs for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Finance Income:
Interest income	￦	14,853		47,704		21,552		77,430
Dividends		2		10,199		5,363		28,310
Gain on foreign currency transactions		1,239		8,670		—		4,879
Gain on foreign currency translation		—		1,835		1,351		2,065
Gain on disposal of long-term investment securities		1,203		3,337		681		13,628
Gain on settlement of derivatives		—		2,274		—		12,694
Gain on valuation of financial asset at fair value through profit or loss		—		2,387		—		—

	￦	17,297		76,406		28,947		139,006

Finance Costs:
Interest expense	￦	78,669		251,593		102,899		302,339
Loss on foreign currency transactions		3,032		10,298		526		5,441
Loss on foreign currency translation		1,785		2,908		1,562		2,089
Loss on disposal of long-term investment securities		151		4,864		—		9,134
Impairment loss of long-term investment securities		8		16,556		—		580
Loss on valuation of derivatives		—		198		—		443
Loss on settlement of derivatives		—		—		—		1,232
Loss on valuation of financial asset at fair value through profit or loss		978		—		1,007		824
Loss relating to financial liability at fair value through profit or loss(*)		16,233		120,833		7,566		1,791

	￦	100,856		407,250		113,560		323,873

(*)

Loss relating to financial liability at fair value through profit or loss for the nine-month period ended September 30, 2013 represents 1) valuation loss related to exchangeable bond (issue price of USD326,397,463) as a result of increase in stock price of the Parent Company and increase in foreign exchange rate, and 2) loss on repayment of debentures upon the claim for exchange.

114

29.

Finance Income and Costs, Continued

(2)

Details of interest income included in finance income for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Interest income on cash equivalents and deposits	￦	10,252		32,412		13,981		50,581
Interest income on installment receivables and others		4,601		15,292		7,571		26,849

	￦	14,853		47,704		21,552		77,430

(3)

Details of interest expense included in finance costs for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Interest expense on bank overdrafts and borrowings	￦	2,205		25,264		42,537		102,830
Interest expense on debentures		67,072		195,372		51,004		151,202
Interest on finance lease liabilities		310		1,077		603		2,116
Others		9,082		29,880		8,755		46,191

	￦	78,669		251,593		102,899		302,339

(4)

Details of impairment losses for financial assets for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Available-for-sale financial assets	￦	8		16,556		—		580
Accounts receivable - trade		16,645		43,974		10,062		30,877
Accounts receivable - other		4,150		20,667		4,989		28,026

	￦	20,803		81,197		15,051		59,483

30.

Income Tax Expense

115

31.

Earnings per Share

(1)

Basic earnings per share

Basic earnings per share for the three and nine-month periods ended September 30, 2013 and 2012 are calculated as follows:


(In millions of won, shares)	2013						2012
	Three-month period ended Sep. 30			Nine-month period ended Sep. 30			Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Basic earnings per share attributable to owners of the Parent Company from continuing operation:
Profit attributable to owners of the Parent Company from continuing operations	￦	335,669			1,148,424			173,975		730,098
Interest on hybrid bond		(4,233	)		(5,291	)		—		—
Profit for the period on common shares		331,436			1,143,133			173,975		730,098
Weighted average number of common shares outstanding		70,527,972			70,034,852			69,694,999		69,694,999

Basic earnings per share from continuing operations (In won)	￦	4,699			16,322			2,496		10,476

Basic earnings per share attributable to owners of the Parent Company:
Profit attributable to owners of the Parent Company	￦	504,026			1,324,824			178,872		628,692
Interest on hybrid bond		(4,233	)		(5,291	)		—		—
Profit for the period on common shares		499,793			1,319,533			178,872		628,692
Weighted average number of common shares outstanding		70,527,972			70,034,852			69,694,999		69,694,999

Basic earnings per share (In won)	￦	7,086			18,841			2,566		9,021

Profit attributable to owners of the Parent Company from continuing operation for the three and nine-month periods ended September 30, 2013 and 2012 are calculated as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Profit attributable to owners of the Parent Company	￦	504,026		1,324,824		178,872		628,692
Results of discontinued operation attributable to owners of the Parent Company		168,357		176,400		4,897		(101,406	)

Profit attributable to owners of the Parent Company from continuing operation	￦	335,669		1,148,424		173,975		730,098

116

31.

Earnings per Share, Continued

(1)

Basic earnings per share, Continued

The weighted average number of common shares outstanding for the three and nine-month periods ended September 30, 2013 and 2012 are calculated as follows:


(In shares)	2013						2012
	Three-month period ended Sep. 30			Nine-month period ended Sep. 30			Three-month period ended Sep. 30			Nine-month period ended Sep. 30
Outstanding common shares	￦	80,745,711			80,745,711			80,745,711			80,745,711
Weighted number of treasury stocks		(10,217,739	)		(10,710,859	)		(11,050,712	)		(11,050,712	)

Weighted average number of common shares outstanding	￦	70,527,972			70,034,852			69,694,999			69,694,999

(2)

Diluted earnings per share

Diluted earnings per share for the three and nine-month periods ended September 30, 2013 and 2012 are calculated as follows:


(In millions of won, shares)	2013				2012
	Three-month period ended Sep. 30(*)		Nine-month period ended Sep. 30(*)		Three-month period ended Sep. 30(*)		Nine-month period ended Sep. 30
Diluted earnings per share attributable to owners of the Parent Company from continuing operation:
Profit attributable to owners of the Parent Company from continuing operations	￦	331,436		1,143,133		173,975		730,098
Profit relating to exchangeable bonds		—		—		—		5,058
Diluted profit attributable to owners of the Parent Company from continuing operations		331,436		1,143,133		173,975		735,156
Weighted average number of common shares outstanding		70,527,972		70,034,852		69,694,999		72,021,148

Diluted earnings per share from continuing operations (In won)	￦	4,699		16,322		2,496		10,208

Diluted earnings per share attributable to owners of the Parent Company:
Profit attributable to owners of the Parent Company	￦	499,793		1,319,533		178,872		628,692
Profit relating to exchangeable bonds		—		—		—		5,058
Diluted profit attributable to owners of the Parent Company from continuing operations		499,793		1,319,533		178,872		633,750
Weighted average number of common shares outstanding		70,527,972		70,034,852		69,694,999		72,021,148

Diluted earnings per share (In won)	￦	7,086		18,841		2,566		8,800

(*)

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 and nine-month periods ended September 30, 2013 and for the three-month period ended September 30, 2012, as the effect of exchangeable bond would have been anti-dilutive (the weighted average number of diluted shares of 1,548,209, 2,088,733, and 2,326,149, respectively); thus, diluted earnings per share for the three and nine-month periods ended September 30, 2013 and for the three-month period September 30, 2012 is the same as basic earnings per share.

117

31.

Earnings per Share, Continued

(2)

Diluted earnings per share, Continued

Adjusted weighted average number of common shares outstanding for the three and nine-month periods ended September 30, 2013 and 2012 are calculated as follows:


(In shares)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Weighted average number of common shares outstanding		70,527,972		70,034,852		69,694,999		69,694,999
Effect of exchangeable bonds(*)		—		—		—		2,326,149

Adjusted weighted average number of common shares outstanding		70,527,972		70,034,852		69,694,999		72,021,148

(*)	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 earnings (loss) per share from discontinued operation


(In millions of won, shares)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Profit (loss) from discontinued operation attributable to owners of the Parent Company	￦	168,357		176,400		4,897		(101,406	)
Weighted average number of common shares outstanding		70,527,972		70,034,852		69,694,999		69,694,999

Basic earnings (loss) per share (In won)	￦	2,387		2,519		70		(1,455	)

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

118

32.

Categories of Financial Instruments

(1)

Financial assets by categories as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedging instruments		Total
Cash and cash equivalents	￦	—		—		1,470,615		—		1,470,615
Financial instruments		—		—		434,519		—		434,519
Short-term investment securities		—		135,679		—		—		135,679
Long-term investment securities(*1)		17,743		928,723		—		—		946,466
Accounts receivable - trade		—		—		2,286,757		—		2,286,757
Loans and receivables(*2)		—		—		1,035,997		—		1,035,997
Derivative financial assets (*3)		491		—		—		66,241		66,732

	￦	18,234		1,064,402		5,227,888		66,241		6,376,765


(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 hedging instruments		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), which should be separated from the main contract, could not be separately measured.

119

32.

Categories of Financial Instruments, Continued

(*2)	Details of loans and receivables as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Short-term loans	￦	76,056		84,908
Accounts receivable - other		638,484		582,098
Accrued income		13,902		8,715
Other current assets		2,670		431
Long-term loans		56,201		69,299
Guarantee deposits		248,684		236,242

	￦	1,035,997		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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 2013
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedging instruments		Total
Accounts payable - trade	￦	—		185,611		—		185,611
Derivative financial liabilities		—		—		85,959		85,959
Borrowings		—		220,057		—		220,057
Debentures(*1)		338,594		6,167,555		—		6,506,149
Accounts payable - other and other payables(*2)		—		3,183,923		—		3,183,923

	￦	338,594		9,757,146		85,959		10,181,699


(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 hedging instruments		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

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

120

32.

Categories of Financial Instruments, Continued

(*2)	Details of accounts payable and other payables as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Accounts payable - other	￦	1,099,495		1,811,038
Withholdings		2,066		1,840
Accrued expenses		985,695		890,863
Current portion of long-term payables - other		225,528		177,870
Long-term payables - other		835,391		715,508
Finance lease liabilities		8,428		22,036
Other non-current liabilities		27,320		27,331

	￦	3,183,923		3,646,486

33.

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.

1) 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.

121

33.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Monetary foreign currency assets and liabilities as of September 30, 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		136,810		147,153		2,146,210		2,308,464
EUR		14,044		20,382		1,599		2,321
JPY		20,401		224		—		—
SGD		192		165		64,761		55,413
AUD		—		—		297,921		298,141
CHF		—		—		298,439		354,444
Others		284		138		415		718

				168,062				3,019,501

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 21)

As of September 30, 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	￦	(29,635	)		29,635
EUR		1,806			(1,806	)
JPY		22			(22	)
SGD		16			(16	)
Other		(57	)		57

	￦	(27,848	)		27,848

(ii) Equity price risk

The Group has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of September 30, 2013, available-for-sale equity instruments measured at fair value amount of ￦718,508 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.

122

33.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

The Group’s interest rate risk arises from floating-rate borrowings and payables. As of September 30, 2013, floating-rate borrowings and debentures amount to ￦647,197 million and ￦107,560 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 nine-month period ended September 30, 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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Cash and cash equivalents	￦	1,470,615		920,125
Financial instruments		434,519		514,561
Available-for-sale financial assets		1,064,402		998,483
Accounts receivable - trade		2,286,757		1,968,297
Loans and receivables		1,035,997		981,693
Derivative financial assets		66,241		61,959
Financial assets at fair value through profit or loss		18,234		16,045

	￦	6,376,765		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 nine-month period ended September 30, 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 September 30, 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 determined to be impaired at the end of the reporting period is stated in Note 29.

123

33.

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 September 30, 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	￦	185,611		185,611		185,579		32		—
Derivative financial liabilities		85,959		92,470		15,544		76,926		—
Borrowings		220,057		221,714		198,990		22,724		—
Debentures(*1)		6,506,149		7,825,526		1,564,674		4,107,355		2,153,497
Accounts payable - other and others(*2)		3,183,923		3,321,482		2,218,064		728,752		374,666

	￦	10,181,699		11,646,803		4,182,851		4,935,789		2,528,163

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 December 31, 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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013			December 31, 2012
Liabilities	￦	12,150,475			12,740,777
Equity		13,783,003			12,854,782

Debt-equity ratio		88.16	%		99.11	%

124

33.

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 September 30, 2013 are as follows:


		Interest rate
Derivative instruments		2.91~3.74%
Borrowings and debentures		3.00~3.51%

Fair value and carrying amount

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


(In millions of won)
	September 30, 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	￦	18,234		18,234		16,045		16,045
Derivative financial assets		66,241		66,241		61,959		61,959
Available-for-sale financial assets		718,508		718,508		765,759		765,759

	￦	802,983		802,983		843,763		843,763

Assets carried at amortized cost
Cash and cash equivalents		1,470,615		1,470,615		920,125		920,125
Available-for-sale financial assets		345,894		345,894		232,724		232,724
Accounts receivable – trade and others		3,322,754		3,322,754		2,949,990		2,949,990
Financial instruments		434,519		434,519		514,561		514,561

	￦	5,573,782		5,573,782		4,617,400		4,617,400

Liabilities carried at fair value
Financial liabilities at fair value through profit or loss		338,594		338,594		405,678		405,678
Derivative financial liabilities		85,959		85,959		63,599		63,599

	￦	424,553		424,553		469,277		469,277

125

33.

Financial Risk Management, Continued

(3)

Fair value, Continued


(In millions of won)
	September 30, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
Liabilities carried at amortized cost
Accounts payable - trade	￦	185,611		185,611		253,884		253,884
Borrowings		220,057		211,396		1,086,699		1,100,464
Debentures		6,167,555		6,299,921		5,171,321		5,461,142
Accounts payable - other and others		3,183,923		3,183,923		3,646,486		3,646,486

	￦	9,757,146		9,880,851		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 September 30, 2013.


(In millions of won)
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss	￦	—		17,743		491		18,234
Derivative financial assets		—		66,241		—		66,241
Available-for-sale financial assets		551,308		46,345		120,855		718,508
Financial liabilities at fair value through profit or loss		338,594		—		—		338,594
Derivative financial liabilities		—		85,959		—		85,959

There have been no transfers from Level 2 to Level 1 in 2013 and changes of financial assets classified as Level 3 for the nine-month period ended September 30, 2013 are as follows:


(In millions of won)
	Balance at Jan. 1		Acquisition		Profit(loss) for the period			Other comprehensive income			Disposal			Other		Balance at Sep. 30
Financial assets at fair value through profit or loss	￦	689		—		(198	)		—			—			—		491
Available-for-sale financial assets		125,572		4,950		(16,548	)		(3,275	)		(16,297	)		26,453		120,855

126

34.

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 and nine-month periods ended September 30, 2013 and 2012, and account balances as of September 30, 2013 and December 31, 2012 are as follows:

(1)

Transactions


(In millions of won)	Operating revenue and others
	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Ultimate controlling entity	￦	—		1,320		198		501
Associates		6,889		21,194		112,103		530,788
Others		41,719		108,943		25,937		58,385

	￦	48,608		131,457		138,238		589,674


(In millions of won)	Operating expense and others
	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Ultimate controlling entity	￦	—		188,534		29,107		195,448
Associates		41,579		112,833		115,347		378,775
Others		719,427		1,959,136		929,720		2,211,194

	￦	761,006		2,260,503		1,074,174		2,785,417

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
	September 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
Ultimate controlling entity	￦	—		310		—		23
Associates		66,943		68,768		20,238		164,783
Others		48,980		55,757		238,546		520,487

	￦	115,923		124,835		258,784		685,293

(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 and nine-month periods ended September 30, 2013 and 2012 are as follows:

127

34.

Transactions with Related Parties, Continued

(3)

Compensation for the key management, Continued


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Salaries	￦	329		1,923		300		8,588
Provision for retirement benefits		97		915		79		721

	￦	426		2,838		379		9,309

35.

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 ￦14,800 million as of September 30, 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.

(2)

Contingencies

As of September 30, 2013, the Group paid cumulative amount of ￦5,599 million for the closed cases among total compensation of ￦6,091 million in relation to the violation of customer’s privacy (plaintiff’s claims of ￦24,689 million) by SK Broadband Co., Ltd., a subsidiary of the Parent Company. In addition, the Group has recorded a provision in the amount of ￦192 million for pending cases (plaintiff’s claims of ￦3,000 million).

As of September 30, 2013, the claim amount of pending litigations of SK Communications Co., Ltd., a subsidiary of the Parent Company, amounts to ￦3,937 million and management does not believe that the ultimate result of these litigations will have a material impact on the Company’s results or financial position.

36.

Discontinued Operation

(1)

Discontinued operation

During the nine-month period ended September 30, 2013, SK Planet Co., Ltd., a subsidiary of the Parent Company sold its investment in 52.6% of ownership interests (13,294,369 shares) of Loen Entertainment, Inc., to Star Invest Holdings Limited. Consideration for the sale amounts to ￦265,887 million. Loen Entertainment was a subsidiary of SK Planet Co., Ltd. and is engaged in release of music disc as primary business, The Group’s ownership interests after the transfer is 15.0% and Loen Entertainment, Inc. was excluded from scope of consolidation upon the sale.

In addition, during the nine-month period ended September 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.

128

36.

Discontinued Operation, Continued

(2)

Results of discontinued operation

Results of discontinued operation included in the consolidated statements of income for the nine-month periods ended September 30, 2013 and 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)
	For the nine-month period ended September 30, 2013
	Discontinue release of music disc of Loen Entertainment, Inc.
Results of discontinued operation:
Revenue	￦	167,033
Expense		(140,204	)

Operating income generated by discontinued operations		26,829
Non-operating income		3,189
Gain on disposal relating to discontinued operations		214,885
Income tax expense		(61,125	)

Gain from discontinued operation	￦	183,778

Attributable to :
Owners of the Parent Company		176,400
Non-controlling interests		7,378


(In millions of won)
	For the nine-month period ended September 30, 2012
	Discontinue release of music disc of Loen Entertainment, Inc.			Discontinue satellite digital multimedia broadcasting of SK Telink Co., Ltd.			Total
Results of discontinued operation:
Revenue	￦	117,393			2,924			120,317
Expense		(92,864	)		(155,401	)		(248,265	)

Operating income generated by discontinued operations		24,529			(152,477	)		(127,948	)
Non-operating income		2,374			—			2,374
Gain on disposal relating to discontinued operations		—			—			—
Income tax benefit (expense)		(6,958	)		18,875			11,917

Gain (loss) from discontinued operation	￦	19,945			(133,602	)		(113,657	)

Attributable to :
Owners of the Parent Company		13,475			(114,881	)		(101,406	)
Non-controlling interests		6,470			(18,721	)		(12,251	)

129

36.

Discontinued Operation, Continued

(3)

Cash flows from discontinued operation

Cash flows from discontinued operation for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	For the nine-month period ended September 30, 2013
	Discontinue release of music disc of Loen Entertainment, Inc.
Cash flow from discontinued operation:
Net cash provided by operating activities	￦	40,885
Net cash provided by investing activities		180,023
Net cash used in financing activities		(4,780	)

	￦	216,128


(In millions of won)
	For the nine-month period ended September 30, 2012
	Discontinue release of music disc of Loen Entertainment, Inc.			Discontinue satellite digital multimedia broadcasting of SK Telink Co., Ltd.			Total
Cash flow from discontinued operation:
Net cash provided by operating activities	￦	25,596			3,647			29,243
Net cash used in investing activities		(15,996	)		(303	)		(16,299	)
Net cash used in financing activities		(4,300	)		(9,475	)		(13,775	)

	￦	5,300			(6,131	)		(831	)

(4)

Changes in financial condition relating to discontinued operation due to the disposal of ownership interests in Loen Entertainment, Inc. as of September 30, 2013 is as follows:


(In millions of won)
	September 30, 2013
Cash and cash equivalents	￦	55,527
Long-term and short-term financial instruments		42,404
Accounts receivable – trade		49,700
Property and equipment, and intangible assets		26,334
Other assets		39,526
Accounts payable – trade		(33,154	)
Defined benefit liabilities		(737	)
Other liabilities		(87,022	)

Decrease in net assets		92,578

Consideration paid for disposal		264,778
Cash and cash equivalents disposed		(55,527	)

Net cash inflow	￦	209,251

130

37.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	September 30, 2013			September 30, 2012
Interest income	￦	(49,503	)		(79,459	)
Dividend		(10,199	)		(28,310	)
Gain on foreign currency translation		(1,835	)		(2,065	)
Gain on disposal of long-term investments securities		(3,337	)		(13,628	)
Gain on settlement of derivatives		(2,274	)		(12,694	)
Losses (gains) related to investments in subsidiaries, associates and joint ventures, net		(800,642	)		40,656
Gain on disposal of property, equipment and intangible assets		(5,849	)		(4,970	)
Gain on valuation of financial assets at fair value through profit or loss		(2,387	)		—
Other income		(3,219	)		5,251
Interest expenses		251,593			302,339
Loss on foreign currency translation		2,908			2,089
Loss on disposal of long-term investments securities		4,864			9,134
Impairment loss on long-term investment securities		16,556			580
Loss on valuation of derivatives		198			443
Loss on settlement of derivatives		—			1,232
Income tax expense		371,615			151,613
Provision for retirement benefits		68,159			59,693
Depreciation and amortization		2,101,706			1,909,035
Bad debt expenses for accounts receivable - trade		43,974			30,877
Loss on disposal of property and equipment and intangible assets		221,961			13,258
Impairment loss on property and equipment and intangible assets		11,461			130,709
Loss on valuation of financial assets at fair value through profit or loss		—			824
Loss relating to financial liabilities at fair value through profit or loss		120,833			1,791
Bad debt for accounts receivable - other		20,667			28,026
Loss on disposal of other investment securities		1			—
Loss on impairment of other investment securities		—			950
Other expenses		6,382			85

	￦	2,363,633			2,547,459

131

37.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	September 30, 2013			September 30, 2012
Accounts receivable—trade	￦	(274,514	)		(167,107	)
Accounts receivable—other		(22,828	)		345,826
Accrued income		1,206			(31,721	)
Advance payments		(37,449	)		3,572
Prepaid expenses		(2,071	)		20,533
Proxy paid V.A.T.		(165	)		(787	)
Inventories		(2,237	)		(80,360	)
Long-term accounts receivables—other		—			5,393
Guarantee deposits		1,947			15,448
Accounts payable—trade		(33,270	)		213,780
Accounts payable—other		(562,502	)		(191,109	)
Advanced receipts		1,301			(4,366	)
Withholdings		44,845			234,410
Deposits received		(708	)		(942	)
Accrued expenses		86,937			439,104
Advanced V.A.T.		12,264			1,611
Unearned revenue		(109,222	)		(28,849	)
Provisions		(192,190	)		(283,568	)
Long-term provisions		(66,080	)		25,681
Plan assets		3,069			754
Retirement benefit payment		(28,555	)		(32,388	)
Others		(30,472	)		(1,063	)

	￦	(1,210,694	)		483,852

(3)

Significant non-cash transactions for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	2013		2012
Transfer of construction in progress to property and equipment, and intangible assets	￦	1,290,314		1,977,765
Transfer of other property and equipment and others to construction in progress		659,801		1,173,522
Transfer of inventories to property and equipment		73,534		60,055
Accounts payable—other related to acquisition of property and equipment and intangible assets		22,223		8,010
Return of the existing 1.8GHz frequency use rights		614,600		—

132

SK TELECOM CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

September 30, 2013 and 2012

(With Independent Auditors’ Review Report Thereon)

133

Contents


	Page
Independent Auditors’ Review Report		135

Condensed Separate Statements of Financial Position		137

Condensed Separate Statements of Income		139

Condensed Separate Statements of Comprehensive Income		140

Condensed Separate Statements of Changes in Equity		141

Condensed Separate Statements of Cash Flows		142

Notes to the Condensed Interim Separate Financial Statements		144

134

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 September 30, 2013, the related condensed separate statements of income, comprehensive income for the three and nine-month periods ended September 30, 2013 and 2012, the changes in equity and cash flows for the nine-month periods ended September 30, 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’.

Other matters

The separate 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, from which it was derived, in all material respects.

135

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 separate interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice.

KPMG Samjong Accounting Corp.

Seoul, Korea

November 8, 2013

This report is effective as of November 8, 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.

136

SK TELECOM CO., LTD.

Condensed Separate Statements of Financial Position

As of September 30, 2013 and December 31, 2012


(In millions of won)	Note		September 30, 2013		December 31, 2012
Assets
Current Assets:
Cash and cash equivalents		27,28	￦	505,513		256,577
Short-term financial instruments		4,27,28		209,000		179,300
Short-term investment securities		6,27,28		86,816		56,401
Accounts receivable - trade, net		5,27,28,29		1,560,619		1,407,206
Short-term loans, net		5,27,28,29		68,472		75,449
Accounts receivable - other, net		5,27,28,29		403,549		383,048
Prepaid expenses				78,169		76,016
Derivative financial assets		16,27,28		10,914		9,656
Inventories, net				12,156		15,995
Non-current assets held for sale		7		2,143		121,337
Advanced payments and other		5,27,28		19,489		8,714

Total Current Assets				2,956,840		2,589,699

Non-Current Assets:
Long-term financial instruments		4,27,28		7,569		69
Long-term investment securities		6,27,28		701,949		733,893
Investments in subsidiaries and associates		8		8,122,175		7,915,547
Property and equipment, net		9,29		6,818,443		7,119,090
Goodwill		10		1,306,236		1,306,236
Intangible assets, net		11		2,200,441		2,187,872
Long-term loans, net		5,27,28,29		38,117		49,672
Long-term prepaid expenses				20,980		21,582
Guarantee deposits		4,5,27,28,29		154,218		149,373
Long-term derivative financial assets		16,27,28		55,328		52,303
Deferred tax assets		25		33,638		123,723
Other non-current assets				275		443

Total Non-Current Assets				19,459,369		19,659,803

Total Assets			￦	22,416,209		22,249,502

See accompanying notes to the condensed separate interim financial statements.

137

SK TELECOM CO., LTD.

Condensed Separate Statements of Financial Position, Continued

As of September 30, 2013 and December 31, 2012


(In millions of won)	Note		September 30, 2013		December 31, 2012
Liabilities and Equity
Current Liabilities:
Short-term borrowings		12,27,28	￦	—		330,000
Current portion of long-term debt, net		12,13,27,28		1,101,634		713,072
Accounts payable - other		27,28,29		822,357		1,509,456
Withholdings		27,28		610,478		552,380
Accrued expenses		27,28		592,850		600,101
Income tax payable				110,260		52,267
Unearned revenue				211,732		252,298
Provisions		14		98,808		286,819
Advanced receipts				52,596		46,693

Total Current Liabilities				3,600,715		4,343,086

Non-Current Liabilities:
Debentures, net, excluding current portion		12,27,28		4,579,811		3,992,111
Long-term borrowings, excluding current portion		12,27,28		—		348,333
Long-term payables - other		13,27,28		824,492		705,605
Long-term unearned revenue				87,672		160,820
Defined benefit liabilities		15		56,016		34,951
Long-term derivative financial liabilities		16,27,28		85,959		63,599
Long-term provisions		14		27,597		99,355
Other non-current liabilities		27,28,29		124,200		124,594

Total Non-Current Liabilities				5,785,747		5,529,368

Total Liabilities				9,386,462		9,872,454

Equity
Share capital		1,17		44,639		44,639
Capital surplus and other capital adjustments		17,18,19		352,886		(236,160	)
Retained earnings		20		12,491,288		12,413,981
Reserves		21		140,934		154,588

Total Equity				13,029,747		12,377,048

Total Liabilities and Equity			￦	22,416,209		22,249,502

See accompanying notes to the condensed separate interim financial statements.

138

SK TELECOM CO., LTD.

Condensed Separate Statements of Income

For the three and nine-month periods ended September 30, 2013 and 2012


(In millions of won except for per share data)			September 30, 2013						September 30, 2012
	Note		Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended
Operating revenue:		29
Revenue			￦	3,222,924			9,544,077			3,097,482			9,173,497
Operating expense:		29
Labor cost				126,092			457,358			113,976			402,171
Commissions paid				1,303,741			3,974,437			1,563,778			4,285,001
Depreciation and amortization				502,021			1,484,739			439,076			1,240,348
Network interconnection				197,747			558,682			216,233			648,645
Leased lines				102,682			313,387			110,413			321,297
Advertising				58,228			168,306			48,347			146,228
Rent				94,478			269,433			82,493			244,348
Cost of products that have been resold				104,617			277,691			77,638			194,893
Other operating expenses		22		196,128			550,505			195,987			565,062

Sub-total				2,685,734			8,054,538			2,847,941			8,047,993

Operating income		3		537,190			1,489,539			249,541			1,125,504
Finance income		24		17,021			59,099			15,148			90,423
Finance costs		24		(87,653	)		(339,242	)		(90,153	)		(247,506	)
Other non-operating income		23		9,884			30,227			8,751			14,756
Other non-operating expenses		23		(260,210	)		(317,511	)		(21,389	)		(100,097	)
Gain on disposal of investments in subsidiaries and associates		8		—			71,200			—			80,483
Impairment loss on investments in associates		8		—			—			—			(72,096	)

Profit before income tax				216,232			993,312			161,898			891,467
Income tax expense		25		90,085			251,556			13,897			167,129

Profit for the period			￦	126,147			741,756			148,001			724,338

Basic earnings per share (in won)		26	￦	1,729			10,516			2,124			10,393

Diluted earnings per share (in won)		26	￦	1,729			10,516			2,124			10,128

See accompanying notes to the condensed separate interim financial statements.

139

SK TELECOM CO., LTD.

Condensed Separate Statements of Comprehensive Income

For the three and nine-month periods ended September 30, 2013 and 2012


(In millions of won)			September 30, 2013					September 30, 2012
	Note		Three-month period ended		Nine-month period ended			Three-month period ended			Nine-month period ended
Profit for the period			￦	126,147		741,756			148,001			724,338
Other comprehensive loss
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit obligations		15		2,105		(3,212	)		1,016			(4,870	)
Items that are or may be reclassified subsequently to profit or loss:
Net change in unrealized fair value of available-for-sale financial assets		21		27,039		(21,202	)		12,969			(35,306	)
Net change in unrealized fair value of derivatives		16,21		71,640		7,548			(13,875	)		(11,112	)

				100,784		(16,866	)		110			(51,288	)

Total comprehensive income			￦	226,931		724,890			148,111			673,050

See accompanying notes to the condensed separate interim financial statements.

140

SK TELECOM CO., LTD.

Condensed Separate Statements of Changes in Equity

For the nine-month periods ended September 30, 2013 and 2012


(In millions of won)
			Capital surplus and other capital adjustments													Retained earnings			Reserves			Total equity
	Share capital		Paid-in surplus		Treasury stock			Loss on disposal of treasury stock			Hybrid bond		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		—		—		—			—			—		—			(655,133	)		—			(655,133	)
Transfer of business		—		—		—			—			—		(145	)		—			—			(145	)
Total comprehensive income												—					—			—			—
Profit for the period		—		—		—			—			—		—			724,338			—			724,338
Other comprehensive loss		—		—		—			—			—		—			(4,870	)		(46,418	)		(51,288	)

Balance, September 30, 2012	￦	44,639		2,915,887		(2,410,451	)		(18,855	)		—		(722,742	)		11,901,520			274,076			11,984,074

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		—		—		—			—			—		—			(655,946	)		—			(655,946	)
Issuance of hybrid bond		—		—		—			—			398,518		—			—			—			398,518
Interest on hybrid bond		—		—		—			—			—		—			(5,291	)		—			(5,291	)
Treasury stock		—		—		192,072			(1,544	)		—		—			—			—			190,528
Total comprehensive income
Profit for the period		—		—		—			—			—		—			741,756			—			741,756
Other comprehensive loss		—		—		—			—			—		—			(3,212	)		(13,654	)		(16,866	)

Balance, September 30, 2013	￦	44,639		2,915,887		(2,218,379	)		(20,399	)		398,518		(722,741	)		12,491,288			140,934			13,029,747

See accompanying notes to the condensed separate interim financial statements.

141

SK TELECOM CO., LTD.

Condensed Separate Statements of Cash Flows

For the nine-month periods ended September 30, 2013 and 2012


(In millions of won)	Note		September 30, 2013			September 30, 2012
Cash flows from operating activities:
Cash generated from operating activities
Profit for the period			￦	741,756			724,338
Adjustments for income and expenses		31		2,309,683			1,713,369
Changes in assets and liabilities related to operating activities		31		(965,127	)		415,077

Sub-total				2,086,312			2,852,784
Interest received				16,186			37,744
Dividends received				20,641			31,143
Interest paid				(178,418	)		(194,593	)
Income tax paid				(95,482	)		(328,107	)

Net cash provided by operating activities				1,849,239			2,398,971

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term investment securities, net				—			14,182
Decrease in short-term financial instruments, net				—			506,700
Collection of short-term loans				216,944			183,363
Proceeds from disposal of long-term investment securities				14,432			15,411
Proceeds from disposal of investments in subsidiaries and associates				137			88,602
Proceeds from disposal of property and equipment				1,890			2,968
Proceeds from disposal of intangible assets				965			2,832
Proceeds from disposal of non-current assets held for sale				190,393			—
Collection of long-term loans				10,567			8,098
Decrease in other non-current assets, net				169			—

Sub-total				435,497			822,156
Cash outflows for investing activities:
Increase in short-term investment securities, net				(30,415	)		—
Increase in short-term financial instruments, net				(29,700	)		—
Increase in short-term loans				(208,395	)		(162,434	)
Increase in long-term financial instruments				(7,500	)		—
Acquisition of long-term investment securities				(6,157	)		(3,920	)
Acquisition of investments in subsidiaries and associates				(206,766	)		(3,105,160	)
Acquisition of property and equipment				(1,318,050	)		(1,865,858	)
Acquisition of intangible assets				(146,899	)		(41,271	)
Increase in long-term loans				—			(22	)
Cash outflows from transfer of business				—			(3,387	)
Increase in other non-current assets, net				—			(329	)

Sub-total				(1,953,882	)		(5,182,381	)

Net cash used in investing activities				(1,518,385	)		(4,360,225	)

See accompanying notes to the condensed separate interim financial statements.

142

SK TELECOM CO., LTD.

Condensed Separate Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2013 and 2012


(In millions of won)	September 30, 2013			September 30, 2012
Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings	￦	40,000			1,500,000
Proceeds from long-term borrowings		—			1,986,800
Issuance of hybrid bond		398,518			—
Issuance of debenture		1,014,858			768,296
Cash inflows from settlement of derivatives		2,274			1,517

Sub-total		1,455,650			4,256,613
Cash outflows for financing activities:
Repayment of short-term borrowings		(370,000	)		(1,500,000	)
Repayment of long-term borrowings		(350,000	)		(200,000	)
Repayment of current portion of long-term debt		(161,575	)		(92,158	)
Repayment of debentures		—			(372,539	)
Payment of cash dividends		(655,946	)		(655,133	)
Cash outflows from settlement of derivatives		—			(5,415	)

Sub-total		(1,537,521	)		(2,825,245	)

Net cash provided by (used in) financing activities		(81,871	)		1,431,368

Net increase in cash and cash equivalents		248,983			(529,886	)
Cash and cash equivalents at beginning of the period		256,577			895,558
Effects of exchange rate changes on cash and cash equivalents		(47	)		1

Cash and cash equivalents at end of the period	￦	505,513			365,673

See accompanying notes to the condensed separate interim financial statements.

143

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 September 30, 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		45,283,200		56.08	%
Treasury stock		10,170,155		12.60	%

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 of 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 venturer 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.

144

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 controls 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

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

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

In its 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.

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.

145

3.	Significant Accounting Policies, Continued

(1)

Changes in accounting policies, Continued

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

K-IFRS No. 1019, ‘Employee Benefits’

K-IFRS No. 1113, ‘Fair Value Measurement’

(2)

Impact of changes in accounting policies

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

(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. The Company is in process of evaluating the impact of these new standards, interpretations and amendments to the separate financial statements, if any, as of September 30, 2013.

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

146

4.	Restricted Deposits

Deposits which are restricted in use as of September 30, 2013 and December 31, 2012 are summarized as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Short-term financial instruments(*)	￦	76,000		83,500
Long-term financial instruments(*)		7,569		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. As of September 30, 2013, the funds cannot be withdrawn.

5.	Trade and Other Receivables

(1)

Details of trade and other receivables as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 2013
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable - trade	￦	1,667,323		(106,704	)		1,560,619
Short-term loans		69,296		(824	)		68,472
Accounts receivable - other		455,161		(51,612	)		403,549
Accrued income		6,445		—			6,445

		2,198,225		(159,140	)		2,039,085
Non-current assets:
Long-term loans		61,691		(23,574	)		38,117
Guarantee deposits		154,218		—			154,218

		215,909		(23,574	)		192,335

	￦	2,414,134		(182,714	)		2,231,420

147

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 nine-month periods ended September 30, 2013 and 2012 were as follows:


(In millions of won)
	2013			2012
Balance at January 1	￦	153,337			171,639
Increase of bad debt allowances		42,638			34,441
Reversal of allowances for doubtful accounts		—			(4,531	)
Write-offs		(28,236	)		(51,473	)
Collection of receivables previously written-off		14,975			24,068

Balance at September 30	￦	182,714			174,144

(3)

Details of overdue but not impaired, and impaired trade and other receivable as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 2013						December 31, 2012
	Accounts receivable – trade			Other receivables			Accounts receivable – trade			Other receivables
Neither overdue nor impaired	￦	1,231,160			630,448			1,093,481			636,291
Overdue but not impaired		33,353			—			25,502			—
Impaired		402,810			116,363			378,762			88,196

		1,667,323			746,811			1,497,745			724,487
Allowances for doubtful accounts		(106,704	)		(76,010	)		(90,539	)		(62,798	)

	￦	1,560,619			670,801			1,407,206			661,689

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.

148

5.	Trade and Other Receivables, Continued

(4)

The aging of overdue but not impaired accounts receivable as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Less than 1 month	￦	10,537		3,699
1 ~ 3 months		5,413		3,686
3 ~ 6 months		2,725		9,175
More than 6 months		14,678		8,942

	￦	33,353		25,502

6.	Investment Securities

(1)

Details of short-term investment securities as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Beneficiary certificates(*)	￦	86,345		56,159
Current portion of long-term investment securities		471		242

	￦	86,816		56,401

(*)	The distributions arising from beneficiary certificates as of September 30, 2013, were accounted for as accrued income.

(2)

Details of long-term investment securities as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013			December 31, 2012
Equity securities:
Marketable equity securities	￦	551,308			584,029
Unlisted equity securities		19,131			18,814
Equity investments		113,422			115,120

		683,861			717,963
Debt securities:
Public bonds(*1)		356			356
Investment bonds(*2)		18,203			15,816

		18,559			16,172

Total		702,420			734,135
Less current portion of long-term investment securities		(471	)		(242	)

Long-term investment securities	￦	701,949			733,893

149

6.	Investment Securities, Continued

(*1)	Details of maturity for the public bonds as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Within 1 year	￦	198		—
1 ~ 5 years		158		356

	￦	356		356

(*2)	The Company classified convertible bonds of NanoEnTek, Inc. (carrying amount as of September 30, 2013: ￦17,743 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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Investments in subsidiaries(*)	￦	—		119,194
Investments in associates		2,143		2,143

	￦	2,143		121,337

(*)	For the nine-month period ended September 30, 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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Investments in subsidiaries	￦	3,477,888		3,315,205
Investments in associates		4,644,287		4,600,342

	￦	8,122,175		7,915,547

150

8.	Investments in Subsidiaries and Associates, Continued

(2)

Details of investments in subsidiaries as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 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		60,347		59,122
SK Global Healthcare Business Group Ltd.		—		100.0		25,784		25,784

						3,477,888		3,434,399

Non-current assets held for sale						—		(119,194	)

					￦	3,477,888		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. 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.

151

8.	Investments in Subsidiaries and Associates, Continued

(3)

Details of investments in associates as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 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.(*2,6)		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		7,423		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.(*5)		146,100,000		20.6		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		—		—		46,268		35,311

					￦	4,644,287		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 nine-month period ended September 30, 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 investments in associates 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.

152

8.	Investments in Subsidiaries and Associates, Continued

(*5)	The Company’s ownership interests in SK hynix Inc. decreased as investors of convertible bonds issued by SK hynix Inc. exercised their conversion rights during the nine-month period ended September 30, 2013.

(4)

The market price of investments in listed subsidiaries as of September 30, 2013 and December 31, 2012 are as follows:

(In millions of won, except for share data)

September 30, 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.

￦

4,750

149,638,354

710,782

4,665

149,638,354

698,063

9.	Property and Equipment

(1)

Property and equipment as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013							December 31, 2012
	Acquisition cost		Accumulated depreciation			Carrying amount		Carrying amount
Land	￦	407,277		—			407,277		395,968
Buildings		1,005,753		(421,726	)		584,027		607,973
Structures		697,312		(343,689	)		353,623		363,364
Machinery		18,215,174		(13,642,140	)		4,573,034		4,532,811
Other		1,226,980		(772,254	)		454,726		579,448
Construction in progress		445,756		—			445,756		639,526

	￦	21,998,252		(15,179,809	)		6,818,443		7,119,090

(2)

Changes in property and equipment for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	For the nine-month period ended September 30, 2013
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	￦	395,968		5,573		(14	)		5,750			—			407,277
Buildings		607,973		34		(98	)		1,811			(25,693	)		584,027
Structures		363,364		8,539		(7	)		7,036			(25,309	)		353,623
Machinery		4,532,811		68,435		(5,313	)		1,104,969			(1,127,868	)		4,573,034
Other		579,448		598,473		(1,739	)		(641,992	)		(79,464	)		454,726
Construction in progress		639,526		339,682		(13,009	)		(520,443	)		—			445,756

	￦	7,119,090		1,020,736		(20,180	)		(42,869	)		(1,258,334	)		6,818,443

153

9.	Property and Equipment, Continued


(In millions of won)
	For the nine-month period ended September 30, 2012
	Beginning balance		Acquisition (*1)		Disposal			Transfer			Depreciation			Impairment (*2)			Ending balance
Land(*3)	￦	409,696		569		(140	)		(25,756	)		—			—			384,369
Buildings(*3)		676,095		1,020		(89	)		(38,869	)		(29,140	)		—			609,017
Structures(*3)		300,995		30,853		(4	)		15,194			(25,225	)		—			321,813
Machinery		3,581,275		131,113		(796	)		1,425,619			(935,800	)		(12,531	)		4,188,881
Other		640,317		1,108,710		(7,908	)		(1,149,815	)		(70,718	)		—			520,585
Construction in progress		651,791		594,858		(810	)		(720,219	)		—			—			525,620

	￦	6,260,169		1,867,123		(9,747	)		(493,846	)		(1,060,883	)		(12,531	)		6,550,285

(*1)	Acquisition for the nine-month period ended September 30, 2012 includes assets transferred of ￦1,265 million in relation to the transfer of Imagine business from SK Planet Co., Ltd.

(*2)	The Company recognized impairment loss on property and equipment of ￦12,531 million for the nine-month period ended September 30, 2012 in relation to the Digital Multimedia Broadcasting service.

(*3)	Carrying amounts of ￦72,015 million of land, buildings and structures were classified as non-current assets held for sale for the nine-month period ended September 30, 2012.

10.

Goodwill

Goodwill as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Goodwill related to acquisition of Shinsegi Telecom, Inc.	￦	1,306,236		1,306,236

154

11.

Intangible Assets

(1)

Intangible assets as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013							December 31, 2012
	Acquisition cost		Accumulated depreciation			Carrying amount		Carrying amount
Frequency use rights	￦	3,033,879		(1,299,177	)		1,734,702		1,693,868
Land use rights		32,761		(23,966	)		8,795		9,815
Industrial rights		32,570		(23,158	)		9,412		9,769
Development costs		101,957		(101,907	)		50		665
Facility usage rights		42,701		(26,615	)		16,086		16,786
Memberships(*1)		82,750		—			82,750		81,518
Other(*2)		1,560,054		(1,211,408	)		348,646		375,451

	￦	4,886,672		(2,686,231	)		2,200,441		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.

(2)

Details of changes in intangible assets for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	For the nine-month period ended September 30, 2013
	Beginning balance		Acquisition *(1)**		Disposal			Transfer		Amortization			Ending balance
Frequency use rights	￦	1,693,868		1,046,833		(814,213	)		—		(191,786	)		1,734,702
Land use rights		9,815		2,280		(50	)		—		(3,250	)		8,795
Industrial rights		9,769		1,620		(74	)		—		(1,903	)		9,412
Development costs		665		—		—			—		(615	)		50
Facility usage rights		16,786		1,179		(75	)		—		(1,804	)		16,086
Memberships		81,518		2,066		(834	)		—		—			82,750
Other		375,451		24,530		(5	)		54,555		(105,885	)		348,646

	￦	2,187,872		1,078,508		(815,251	)		54,555		(305,243	)		2,200,441

(*1)

The Company newly acquired 1.8GHz frequency use rights through auction for the nine-month period ended September 30, 2013 and provided the existing 1.8GHz frequency use rights as partial consideration in connection with the new acquisition. The Company recognized ￦199,613 million of loss on disposal of property and equipment and intangible assets with regard to this transaction.

155

11.

Intangible Assets, Continued


(In millions of won)
	For the nine-month period ended September 30, 2012
	Beginning balance		*Acquisition(1)**		Disposal			Transfer		Amortization			Impairment loss(*2)			Ending balance
Frequency use rights	￦	1,889,102		16,659		—			—		(145,833	)		(2,907	)		1,757,021
Land use rights		12,739		1,770		(80	)		—		(3,700	)		—			10,729
Industrial rights		8,328		4,006		—			—		(2,169	)		—			10,165
Development costs		1,186		—		—			—		(1,169	)		—			17
Facility usage rights		15,058		681		(92	)		13		(1,685	)		—			13,975
Memberships		80,607		20		(1,427	)		—		—			—			79,200
Other		357,775		26,344		(1,431	)		76,962		(104,869	)		—			354,781

	￦	2,364,795		49,480		(3,030	)		76,975		(259,425	)		(2,907	)		2,225,888

(*1)	Acquisition for the nine-month period ended September 30, 2012 includes assets transferred of ￦200 million in relation to the transfer of Imagine business from SK Planet Co., Ltd.

(*2)	The Company recognized impairment loss on intangible assets of ￦2,907 million in relation to the frequency use rights of the discontinued Digital Multimedia Broadcasting service.

(3)

The carrying amount and residual useful lives of frequency usage rights as of September 30, 2013 are as follows:

(In millions of won)

Amount

Description

Commencement
of depreciation

Completion of
depreciation

Depreciation
method

W-CDMA license

￦

318,171

Frequency use rights relating
to W-CDMA service

Dec. 2003

Dec. 2016

W-CDMA license

53,011

Frequency use rights relating
to W-CDMA service

Oct. 2010

Dec. 2016

800MHz license

314,216

Frequency use rights relating
to CDMA and LTE service

Jul. 2011

Jun. 2021

Straight-line
method

1.8GHz license

1,036,365

Frequency use rights relating
to LTE service

Sep. 2013

Dec. 2021

WiBro license

12,939

WiBro service

Mar. 2012

Mar. 2019

￦

1,734,702

156

12.

Borrowings and Debentures

(1)

Short-term borrowings as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)		Maturity		September 30, 2013		December 31, 2012
Kookmin Bank		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

					￦	—		330,000

(2)

Long-term borrowings as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)	Maturity	September 30, 2013			December 31, 2012
Bank of Communications (*)	6M Libor + 0.29	Oct. 10, 2013	￦	32,268 (USD 30,000	)		32,133 (USD 30,000	)
Bank of China(*)	6M Libor + 0.29	Oct. 10, 2013		21,512 (USD 20,000	)		21,422 (USD 20,000	)
DBS Bank(*)	6M Libor + 0.29	Oct. 10, 2013		26,890 (USD 25,000	)		26,778 (USD 25,000	)
SMBC(*)	6M Libor + 0.29	Oct. 10, 2013		26,890 (USD 25,000	)		26,778 (USD 25,000	)
Kookmin Bank and 13 others	4.48	Feb. 14, 2015		—			350,000

				107,560			457,111
Less present value discount on long-term borrowings				—			(1,668	)

				107,560			455,443
Less current portion of bonds				(107,560	)		(107,110	)

			￦	—			348,333

(*)	As of September 30, 2013, 6M Libor rate is 0.44%.

157

12.

Borrowings and Debentures, Continued

(3)

Debentures as of September 30, 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 (%)	September 30, 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			2021	4.22		190,000			190,000
Unsecured private bonds	Operating and		2019	3.24		170,000			170,000
Unsecured private bonds	refinancing		2022	3.30		140,000			140,000
Unsecured private bonds	fund		2032	3.45		90,000			90,000
Unsecured private bonds	Operating fund		2023	3.03		230,000			—
Unsecured private bonds			2033	3.22		130,000			—
Foreign global bonds			2027	6.63		430,240 (USD 400,000	)		428,440 (USD 400,000	)
Exchangeable bonds (*3,4)	Refinancing fund		2014	1.75		338,594 (USD 211,627	)		405,678 (USD 332,528	)
Floating rate notes (*1)	Operating fund		2014	3M Libor + 1.60		268,900 (USD 250,000	)		267,775 (USD 250,000	)
Floating rate notes (*2)			2014	SOR rate + 1.20		55,617 (SGD 65,000	)		56,906 (SGD 65,000	)
Swiss unsecured private bonds			2017	1.75		356,298 (CHF 300,000	)		351,930 (CHF 300,000	)
Foreign global bonds			2018	2.13		752,920 (USD 700,000	)		749,770 (USD 700,000	)
Australian unsecured private bonds			2017	4.75		300,222			—
						(AUD 300,000	)		—
Floating rate notes (*1)			2020	3M Libor + 0.88		322,680			—
						(USD 300,000	)		—

						5,405,471			4,480,499
Less discounts on bonds						(37,341	)		(40,392	)

						5,368,130			4,440,107
Less current portion of bonds						(788,319	)		(447,996	)

					￦	4,579,811			3,992,111

158

12.

Borrowings and Debentures, Continued

(*1)	As of September 30, 2013, 3M Libor rate is 0.25%.

(*2)	As of September 30, 2013, SOR rate is 0.21%.

(*3)	As of September 30, 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 USD332,528,000 for USD326,397,463 with a coupon rate of 1.75%.

As of September 30, 2013, fair value of the exchangeable bonds is USD 314,795,162 and the exchange price is ￦189,121. The exchange price could be adjusted with the exchange rate of ￦1,383.40 per USD1. In addition, the number of common shares that can be exchanged as of September 30, 2013 is 1,548,029 shares.

159

13.

Long-term Payables - other

(1)

As of September 30, 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)
	Period of repayment		Coupon rate(*1)			Annual effective interest rate(*2)			September 30, 2013			December 31, 2012
2.1GHz		2012~2014		3.58	%		5.89	%		17,533			35,067
800MHz		2013~2015		3.51	%		5.69	%		138,833			208,250
2.3GHz		2014~2016		3.00	%		5.80	%		8,650			8,650
1.8GHz		2012~2021		2.43~3.00	%		4.84~5.25	%		942,675			671,625

										1,107,691			923,592
Present value discount on long-term payables—other										(77,444	)		(60,021	)

										1,030,247			863,571
Less current portion of long-term payables – other										(207,667	)		(161,575	)
Current portion of present value discount on long-term payables – other										1,912			3,609

Carrying amount at September 30, 2013									￦	824,492			705,605

(*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.

(2)

The repayment schedule of long-term payables—other as of September 30, 2013 is as follows:


(In millions of won)
	Amount
2014	￦	207,667
2015		190,134
2016		120,718
2017 and thereafter		589,172

	￦	1,107,691

160

14.

Provisions

Change in provisions for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended September 30, 2013												As of September 30, 2013
	Beginning balance		Increase		Utilization			Reversal			Ending balance		Current		Non- current
Provision for handset subsidy	￦	353,383		5,582		(264,036	)		—			94,929		88,042		6,887
Provision for restoration		32,791		2,766		(296	)		(3,785	)		31,476		10,766		20,710

	￦	386,174		8,348		(264,332	)		(3,785	)		126,405		98,808		27,597


(In millions of won)	For the nine-month period ended September 30, 2012									As of September 30, 2012
	Beginning balance		Increase		Utilization			Ending balance		Current		Non- current
Provision for handset subsidy	￦	762,238		272,869		(538,803	)		496,304		373,045		123,259
Provision for restoration		28,623		9,450		(207	)		37,866		7,054		30,812

	￦	790,861		282,319		(539,010	)		534,170		380,099		154,071

The Company recognizes a provision for handset subsidies given to the subscribers who purchase handsets on an installment basis.

161

15.

Defined Benefit Liabilities

(1)

Details of defined benefit liabilities as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013			December 31, 2012
Present value of defined benefit obligations	￦	157,375			133,098
Fair value of plan assets		(101,359	)		(98,147	)

	￦	56,016			34,951

(2)

Principal actuarial assumptions as of September 30, 2013 and December 31, 2012 are as follows:


	September 30, 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 nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended
	2013			2012
Beginning balance	￦	133,098			95,359
Current service cost		25,346			21,958
Interest cost		3,629			3,384
Remeasurement:
- Adjustment based on experience		5,407			7,229
Benefit paid		(14,011	)		(12,306	)
Others(*)		3,906			1,150

Ending balance	￦	157,375			116,774

(*)	Others include transfer to construction in progress and liabilities succeeded in relation to transfer of an executive from affiliates.

162

15.

Defined Benefit Liabilities, Continued

(4)

Changes in plan assets for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2013			September 30, 2012
Beginning balance	￦	98,147			68,619
Expected return on plan assets		2,508			1,673
Contributions to the plan		4,000			1,000
Remeasurement		1,171			803
Benefit paid		(4,528	)		(2,416	)
Others		61			189

Ending balance	￦	101,359			69,868

(5)

Expenses recognized in profit and loss and capitalized into construction-in-progress for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2013		September 30, 2012
Current service cost	￦	25,346		21,958
Net interest cost		1,121		1,711

	￦	26,467		23,669

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

(6)

Details of plan assets as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Equity instruments	￦	102		55
Debt instruments		34,709		24,199
Short-term financial instruments, etc.		66,548		73,893

	￦	101,359		98,147

Actual return on plan assets for the nine-month periods ended September 30, 2013 and 2012 amounted to ￦3,679 million and ￦2,476 million, respectively.

163

16.

Derivative Instruments

(1)

Currency swap contracts under cash flow hedge accounting as of September 30, 2013 are as follows:


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Oct.10, 2006	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of USD100,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	Credit Agricole Corporate & Investment Bank	Oct. 10, 2006 ~ Oct. 10, 2013
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD400,000,000)	Foreign currency risk	Currency swap	Morgan Stanley and five other banks	Jul. 20, 2007 ~ Jul. 20, 2027
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD65,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	United Overseas Bank	Dec. 15, 2011 ~ Dec. 12, 2014
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD250,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	DBS Bank and Citi Bank	Dec. 15, 2011 ~ Dec. 12, 2014
Jun. 12, 2012	Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF300,000,000)	Foreign currency risk	Currency swap	Citibank and five other banks	Jun. 12, 2012 ~ Jun.12, 2017
Nov. 1, 2012	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD700,000,000)	Foreign currency risk	Currency swap	Barclays and nine other banks	Nov. 1, 2012~ May. 1, 2018
Jan. 17, 2013	Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD300,000,000)	Foreign currency risk	Currency swap	BNP Paribas and three other banks	Jan. 17, 2013 ~ Nov. 17, 2017
Mar. 7, 2013	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD300,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	DBS Bank	Mar. 7, 2013 ~ Mar. 7, 2020

164

16.

Derivative Instruments, Continued

(2)

As of September 30, 2013, fair values of the above derivatives recorded in assets or liabilities and details of derivative instruments are as follows:


(In millions of won and thousands of foreign currencies)
	Fair value
Hedged item	Accumulated gain (loss) on valuation of derivatives		Tax effect		Accumulated foreign currency translation gain (loss)		*Others()**		Fair value
Current assets:
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of USD100,000,000)	￦	(1,778)		(68)		12,760		—		10,914
Non-current assets:
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD400,000,000)		(40,166)		(12,823)		(26,855)		129,806		49,962
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD300,000,000)		5,878		1,877		(2,389)		—		5,366

Total assets									￦	66,242
Non-current liabilities:
Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD65,000,000)	￦	21		7		(1,838)		—		(1,810)
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD250,000,000)		6,206		1,981		(20,548)		—		(12,361)
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF300,000,000)		(9,417)		(3,006)		(7,205)		—		(19,628)
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD700,000,000)		(11,454)		(3,657)		(10,368)		—		(25,479)
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD300,000,000)		6,432		2,054		(35,167)		—		(26,681)

Total liabilities									￦	(85,959)

(*)	Cash flow hedge accounting has been applied to the relevant contract from May 12, 2010. Others represent gain on valuation of currency swap incurred prior to the application of hedge accounting and was recognized through profit or loss prior to the year ended December 31, 2012.

165

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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won, except for share data)
	September 30, 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		(2,218,379	)		(2,410,451	)
Loss on disposal of treasury stock		(20,399	)		(18,855	)
Hybrid bond(Note 19)		398,518			—
Others		(722,741	)		(722,741	)

	￦	352,886			(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.

There were no changes in share capital for the nine-month period ended September 30, 2013 and the year ended December 31, 2012. Changes in number of shares outstanding for the nine-month period ended September 30, 2013 and the year ended December 31, 2012 are as follows:


(In shares)	For the nine-month period ended
	September 30, 2013							September 30, 2012
	Issued shares		Treasury stock			Outstanding shares		Issued shares		Treasury stock		Outstanding shares
Beginning issued shares		80,745,711		11,050,712			69,694,999		80,745,711		11,050,712		69,694,999
Disposal of treasury stock		—		(880,557	)		880,557		—		—		—

Ending issued shares		80,745,711		10,170,155			70,575,556		80,745,711		11,050,712		69,694,999

166

18.

Treasury Stock

The Company acquired treasury stock to provide stock dividends, 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 granted 880,557 shares of treasury stock for ￦192,072 million from May 14, 2013 to September 26, 2013 as a result of exercise of exchange rights by the holders of exchangeable bonds.

Treasury stock as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won, shares)
	September 30, 2013		December 31, 2012
Number of shares		10,170,155		11,050,712
Amount	￦	2,218,379		2,410,451

19.

Hybrid Bond

Hybrid bond classified as equity as of September 30, 2013 is as follows:

(In millions of won)

Type

Issuance date

Maturity

Annual
interest
rate (%)

Amount

Private hybrid bond

Blank coupon unguaranteed subordinated bond

June 7, 2013

June 7, 2073

(*1)

4.21

(*2)

￦

400,000

Issuance costs

(1,482

)

￦

398,518

Hybrid bond issued by the Company is classified as equity as there is no contractual obligation for delivery of financial assets to the underwriter.

(*1)	The Company is able to extend the maturity under the same issuance terms without any notice or announcement.

(*2)	Annual interest rate is adjusted after five years from the issuance date.

167

20.

Retained Earnings

(1)

Retained earnings as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Appropriated:
Legal reserve	￦	22,320		22,320
Reserve for research & manpower development		155,767		220,000
Reserve for business expansion		9,376,138		9,106,138
Reserve for technology development		2,271,300		1,901,300

		11,825,525		11,249,758
Unappropriated		665,763		1,164,223

	￦	12,491,288		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.

21.

Reserves

(1)

Details of reserves, net of taxes, as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013			December 31, 2012
Unrealized fair value of available-for-sale financial assets	￦	185,212			206,414
Unrealized fair value of derivatives		(44,278	)		(51,826	)

	￦	140,934			154,588

168

21.

Reserves, Continued

(2)

Changes in reserves for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	For the nine-month period ended September 30, 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		(27,971	)		9,958			(18,013	)
Tax effect		6,769			(2,410	)		4,359

Balance at September 30, 2013	￦	185,212			(44,278	)		140,934


(In millions of won)	For the nine-month period ended September 30, 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		(46,578	)		(14,660	)		(61,238	)
Tax effect		11,272			3,548			14,820

Balance at September 30, 2012	￦	317,310			(43,234	)		274,076

22.

Other Operating Expenses

Details of other operating expenses for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30			Nine-month period ended Sep. 30
Other Operating Expenses:
Communication expenses	￦	12,588		38,099		14,178			45,784
Utilities		48,913		125,904		41,844			107,159
Taxes and dues		6,477		14,179		10,490			67,903
Repair		45,480		132,331		45,775			129,903
Research and development		56,410		165,762		58,422			150,945
Training		8,258		18,210		7,877			19,072
Bad debt for accounts receivables—trade		6,455		22,820		6,013			14,567
Reversal of allowance for doubtful accounts		—		—		(57	)		(4,531	)
Other		11,547		33,200		11,445			34,260

	￦	196,128		550,505		195,987			565,062

169

23.

Other Non-operating Income and Expenses

Details of other non-operating income and expenses for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Other Non-operating Income:
Gain on disposal of property and equipment and intangible assets	￦	102		961		1,523		1,881
Others		9,782		29,266		7,228		12,875

	￦	9,884		30,227		8,751		14,756

Other Non-operating Expenses:
Loss on disposal of property and equipment and intangible assets	￦	207,480		218,937		6,773		8,858
Impairment loss on property and equipment and intangible assets		—		—		—		15,438
Donations		11,902		33,189		4,013		44,495
Bad debt for accounts receivable—other		3,492		19,818		503		19,874
Others		37,336		45,567		10,100		11,432

	￦	260,210		317,511		21,389		100,097

170

24.

Finance Income and Costs

(1)

Details of finance income and costs for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Finance Income:
Interest income	￦	7,564		24,035		9,785		43,556
Dividends		7,998		20,640		5,363		31,143
Gain on foreign currency transactions		763		7,492		—		2,420
Gain on foreign currency translation		—		283		—		140
Gain on valuation of financial asset at fair value through profit or loss		—		2,387		—		—
Gain on disposal of long-term investment securities		696		1,988		—		470
Gain on settlement of derivatives		—		2,274		—		12,694

	￦	17,021		59,099		15,148		90,423

Finance Costs:
Interest expense	￦	65,594		208,692		80,706		231,289
Loss on foreign currency transactions		2,252		8,104		452		2,824
Loss on foreign currency translation		2,596		1,539		422		412
Loss on valuation of financial asset at fair value through profit or loss		978		—		1,007		824
Loss on disposal of long-term investment securities		—		73		—		9,134
Loss on settlement of derivatives		—		—		—		1,232
Loss relating to financial liability at fair value through profit or loss(*)		16,233		120,834		7,566		1,791

	￦	87,653		339,242		90,153		247,506

(*)

(2)

Details of interest income included in finance income for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Interest income on cash equivalents and deposits	￦	4,605		14,343		5,971		25,761
Interest income on installment receivables and others		2,959		9,692		3,814		17,795

	￦	7,564		24,035		9,785		43,556

171

24.

Finance Income and Costs, Continued

(3)

Details of interest expense included in finance costs for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Interest expense on bank overdrafts and borrowings	￦	1,552		20,127		32,101		69,373
Interest expense on debentures		55,487		160,627		41,503		120,749
Others		8,555		27,938		7,102		41,167

	￦	65,594		208,692		80,706		231,289

(4)

Details of impairment losses for financial assets for the three and nine-month periods ended September 30, 2013 and 2012 are as follows.


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Accounts receivable—trade	￦	6,455		22,820		6,013		14,567
Accounts receivable—other		3,492		19,818		503		19,874

	￦	9,947		42,638		6,516		34,441

25.

Income Tax Expense

Income tax expense was recognized as current tax expense adjusted to current adjustments for prior periods, deferred tax expenses by origination and reversal of temporary differences, and income tax recognized in other comprehensive income. Changes in effective tax rate for the nine-month periods ended September 30, 2013 and 2012 mainly arose from changes in realizability of deferred tax assets.

26.

Earnings per Share

(1)

Basic earnings per share

Basic earnings per share for the three and nine-month periods ended September 30, 2013 and 2012 are calculated as follows:


(In millions of won, shares)	2013						2012
	Three-month period ended Sep. 30			Nine-month period ended Sep. 30			Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Profit for the period	￦	126,147			741,756			148,001		724,338
Interest on hybrid bond		(4,233	)		(5,291	)		—		—
Profit for the period on common shares		121,914			736,465			148,001		724,338
Weighted average number of common shares outstanding		70,527,972			70,034,852			69,694,999		69,694,999

Basic earnings per share (In Won)	￦	1,729			10,516			2,124		10,393

172

26.

Earnings per Share, Continued

The weighted average number of common shares outstanding for the three and nine-month periods ended September 30, 2013 and 2012 are calculated as follows:


(In shares)	2013						2012
	Three-month period ended Sep. 30			Nine-month period ended Sep. 30			Three-month period ended Sep. 30			Nine-month period ended Sep. 30
Outstanding common shares	￦	80,745,711			80,745,711			80,745,711			80,745,711
Weighted number of treasury stocks		(10,217,739	)		(10,710,859	)		(11,050,712	)		(11,050,712	)

Weighted average number of common shares outstanding	￦	70,527,972			70,034,852			69,694,999			69,694,999

(2)

Diluted earnings per share

Diluted earnings per share for the three and nine-month periods ended September 30, 2013 and 2012 are calculated as follows:


(In millions of won, shares)	2013				2012
	Three-month period ended Sep. 30(*)		Nine-month period ended Sep. 30(*)		Three-month period ended Sep. 30(*)		Nine-month period ended Sep. 30
Profit for the period on common shares	￦	121,914		736,465		148,001		724,338
Profit from exchangeable bonds		—		—		—		5,059
Diluted profit for the period on common shares		121,914		736,465		148,001		729,397
Diluted weighted average number of common shares outstanding		70,527,972		70,034,852		69,694,999		72,021,148

Diluted earnings per share (In Won)	￦	1,729		10,516		2,124		10,128

(*)

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 and nine-month periods ended September 30, 2013 and three-month period ended September 30, 2012, as the effect of exchangeable bond is nil (the weighted average number of diluted shares of 1,548,029, 2088,733, and 2,326,149, respectively); thus, diluted earnings per share for the three and nine-month periods ended September 30, 2013 and three-month period ended September 30, 2012 are the same as basic earnings per share.

The weighted average number of common shares outstanding for the three and nine-month periods ended September 30, 2013 and 2012 are calculated as follows:


(In shares)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Weighted average number of common shares outstanding		70,527,972		70,034,852		69,694,999		69,694,999
Effect of exchangeable bonds(*)		—		—		—		2,326,149

Adjusted weighted average number of common shares outstanding		70,527,972		70,034,852		69,694,999		72,021,148

(*)	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.

173

27.

Categories of Financial Instruments

(1)

Financial assets by categories as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedging instruments		Total
Cash and cash equivalents	￦	—		—		505,513		—		505,513
Financial instruments		—		—		216,569		—		216,569
Short-term investment securities		—		86,816		—		—		86,816
Long-term investment securities(*1)		17,743		684,206		—		—		701,949
Accounts receivable—trade		—		—		1,560,619		—		1,560,619
Loans and other receivables(*2)		—		—		670,801		—		670,801
Derivative financial assets		—		—		—		66,242		66,242

	￦	17,743		771,022		2,953,502		66,242		3,808,509


(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 hedging instruments		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), 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.

174

27.

Categories of Financial Instruments, Continued

(*2)	Details of loans and other receivables as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Short-term loans	￦	68,472		75,449
Accounts receivable – other		403,549		383,048
Accrued income		6,445		4,147
Long-term loans		38,117		49,672
Guarantee deposits		154,218		149,373

	￦	670,801		661,689

(2)

Financial liabilities by categories as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	September 30, 2013
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedging instruments		Total
Derivative financial liabilities	￦	—		—		85,959		85,959
Borrowings		—		107,560		—		107,560
Debentures(*1)		338,594		5,029,536		—		5,368,130
Accounts payable – other and others(*2)		—		2,546,574		—		2,546,574

	￦	338,594		7,683,670		85,959		8,108,223


(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 hedging instruments		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), 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.

175

27.

Categories of Financial Instruments, Continued

(*2)	Details of accounts payable and other payables as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Accounts payable – other	￦	822,357		1,509,456
Withholdings		2		17
Accrued expenses		592,850		600,101
Current portion of long-term payables – other		205,755		157,966
Long-term payables – other		824,492		705,605
Other non-current liabilities		101,118		100,145

	￦	2,546,574		3,073,290

28.

Financial Risk Management

(1)

Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates, 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.

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.

Monetary foreign currency assets and liabilities as of September 30, 2013 and December 31, 2012 are as follows:


(In millions of won, thousands of U.S. dollars, thousands of Euros, thousands of other currencies)
	Assets				Liabilities
	Foreign currencies		Korean won equivalent		Foreign currencies		Korean won equivalent
USD		57,842		62,215		2,062,412		2,218,330
EUR		14,044		20,382		1,599		2,321
JPY		18,370		202		—		—
SGD		192		164		64,761		55,413
AUD		—		—		297,921		298,141
CHF		—		—		298,439		354,444
Others		277		130		414		718

			￦	83,093				2,929,367

176

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

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 September 30, 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	￦	(29,115	)		29,115
EUR		1,806			(1,806	)
JPY		20			(20	)
SGD		16			(16	)
Other		(58	)		58

	￦	(27,331)			27,331

(ii) Equity price risk

The Company has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of September 30, 2013, available-for-sale equity instruments measured at fair value amounts to W 694,271 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.

The Company’s interest rate risk arises from floating-rate borrowings and payables. As of September 30, 2013, floating-rate debentures and borrowings amount to W 647,197 million and W 107,560 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 September 30, 2013 would not have been changed due to the interest expense from floating-rate borrowings and debentures.

177

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013		December 31, 2012
Cash and cash equivalents	￦	505,513		256,577
Financial instruments		216,569		179,369
Available-for-sale financial assets		771,022		774,938
Accounts receivable – trade		1,560,619		1,407,206
Loans and receivables		670,801		661,689
Derivative financial assets		66,242		61,959
Financial assets at fair value through profit or loss		17,743		15,356

	￦	3,808,509		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 nine-month period ended September 30, 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 September 30, 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 24.

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.

178

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Contractual maturities of financial liabilities as of September 30, 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	￦	85,959		92,470		15,544		76,926		—
Borrowings		107,560		107,581		107,581		—		—
Debentures (*1)		5,368,130		6,614,911		969,981		3,491,432		2,153,498
Accounts payable—other and others (*2)		2,546,574		2,671,626		1,605,155		699,547		366,924

	￦	8,108,223		9,486,588		2,698,261		4,267,905		2,520,422

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 September 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	September 30, 2013			December 31, 2012
Liability	￦	9,386,462			9,872,454
Equity		13,029,747			12,377,048

Debt-equity ratio		72.04	%		79.76	%

179

28.

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 September 30, 2013 are as follows:


		Interest rate
Derivative instruments		2.91 ~ 3.74%
Borrowings and Debentures		3.51%

1) Fair value and carrying amount

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


(In millions of won)
	September 30, 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	￦	17,743		17,743		15,356		15,356
Derivative financial assets		66,242		66,242		61,959		61,959
Available-for-sale financial assets		694,271		694,271		730,754		730,754

	￦	778,256		778,256		808,069		808,069

Assets carried at amortized cost
Cash and cash equivalents	￦	505,513		505,513		256,577		256,577
Available-for-sale financial assets		76,751		76,751		44,184		44,184
Accounts receivable – trade and others		2,231,420		2,231,420		2,068,895		2,068,895
Financial instruments		216,569		216,569		179,369		179,369

	￦	3,030,253		3,030,253		2,549,025		2,549,025

180

28.

Financial Risk Management, Continued

(3)

Fair value, Continued


(In millions of won)
	September 30, 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	￦	338,594		338,594		405,678		405,678
Derivative financial liabilities		85,959		85,959		63,599		63,599

	￦	424,553		424,553		469,277		469,277

Liabilities carried at amortized cost
Borrowings	￦	107,560		107,560		785,443		798,908
Debentures		5,029,536		5,135,071		4,034,429		4,224,907
Accounts payable—other and others		2,546,574		2,546,574		3,073,290		3,073,290

	￦	7,683,670		7,789,205		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 September 30, 2013.


(In millions of won)
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss	￦	—		17,743		—		17,743
Derivative financial assets		—		66,242		—		66,242
Available-for-sale financial assets		551,308		46,345		96,618		694,271
Financial liabilities at fair value through profit or loss		338,594		—		—		338,594
Derivative financial liabilities		—		85,959		—		85,959

There have been no transfers from Level 2 to Level 1 in September 30, 2013 and changes of financial assets classified as Level 3 for the nine-month period ended September 30, 2013 are as follows:


(In millions of won)
	Balance at Jan. 1		Other comprehensive income		Disposal			Balance at Sep. 30
Available-for-sale financial assets	￦	100,566		4,563		(8,511	)		96,618

181

29.

Transactions with Related Parties

(1)

As of September 30, 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(*1)	Holding company
Subsidiaries	SK Telink Co., Ltd.	83.5	Telecommunication service
	M&Service Co., Ltd.(*2)	100	Data base and internet website service
	SK Communications Co., Ltd.	64.6(*3)	Internet website services
	PAXNet Co., Ltd.(*4)	—	Internet website services
	Loen Entertainment, Inc.(*5)	15.0(*3)	Release of music disc
	Stonebridge Cinema Fund	57	Investment association
	Commerce Planet Co., Ltd.	100.0(*3)	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(*3)	Investment association
	Fitech Focus Limited Partnership II	66.7(*3)	Investment association
	Open Innovation Fund	98.9(*3)	Investment association
	PS&Marketing Corporation	100	Communications device retail business
	Service Ace Co., Ltd.	100	Customer center management service
	Service Top Co., Ltd.	100	Customer center management service
	Network O&S Co., Ltd.	100	Base station maintenance service
	BNCP Co., Ltd.	100.0(*3)	Internet website services
	SK Planet Co., Ltd.	100	Telecommunication services
	Madsmart, Inc.(*7)	—	Application software production
	SK Telecom China Holdings Co., Ltd.	100	Investment association
	SKY Property Mgmt. Ltd.(*5)	33.0	Investment association
	Shenzhen E-eye High Tech Co., Ltd.	65.5(*3)	Manufacturing
	SK Global Healthcare Business Group., Ltd.	100.0	Investment
	SK China Real Estate Co., Ltd.(*4)	—	Investment association
	SK Planet Japan	100.0(*3)	Digital contents sourcing service
	SKT Vietnam PTE. Ltd.	73.3	Telecommunication service
	SK Planet Global PTE. Ltd.	100.0(*3)	Digital contents sourcing service
	SK Planet Global Holdings PTE. Ltd.	100.0(*3)	Information gathering and consulting
	SKT Americas, Inc.	100.0	Digital contents sourcing service
	SKP America LLC.	100.0(*3)	Investment association
	YTK Investment Ltd.	100.0	Investment association
	Atlas Investment	100.0	Investment association
	Technology Innovation Partners, L.P.	100.0(*3)	Investment association
	SK Telecom China Fund I L.P.	100.0(*3)	Investment association

182

29.

Transactions with Related Parties, Continued

(*1)	SK Holdings Co., Ltd. is the Ultimate Controlling Entity because of its de facto control over the Company. The ownership percentage represents parent company’s ownership over the Company.

(*2)	Newly included as subsidiaries during the nine-month period ended September 30, 2013.

(*3)	The ownership percentage represents subsidiaries’ ownership over their subsidiaries, in which the Company has no direct investment.

(*4)	Excluded as the ownership interests have been disposed for the nine-month period ended September 30, 2013.

(*5)	Reclassified to investment in associate as part of the ownership interests have been disposed for the nine-month period ended September 30, 2013.

(*6)	Merged into SK Broadband Co., Ltd. for the nine-month period ended September 30, 2013.

(*7)	Merged into SK Planet Co., Ltd. for the nine-month period ended September 30, 2013.

(2)

Transactions


(In millions of won)	Operating revenue and others
	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Parent Company	￦	—		501		191		474
Subsidiaries		56,362		156,042		58,192		187,040
Associates		7,040		11,929		18,538		69,045
Others		17,733		56,712		17,323		37,570

	￦	81,135		225,184		94,244		294,129


(In millions of won)	Operating expense and others
	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Parent Company	￦	—		184,419		27,415		190,285
Subsidiaries		520,169		1,493,297		809,147		1,732,432
Associates		23,660		73,987		99,945		341,392
Others		334,326		853,758		487,423		1,245,209

	￦	878,155		2,605,461		1,423,930		3,509,318

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.

183

29.

Transactions with Related Parties, Continued

(3)

Account balances


(In millions of won)	Accounts receivable and others				Accounts payable and others
	September 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
Parent Company	￦	51		222		—		—
Subsidiaries		23,851		17,329		177,285		385,818
Associates		39,065		63,606		683		73,637
Others		16,876		15,122		61,933		189,659

	￦	79,843		96,279		239,901		649,114

(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. The compensations given to key management for the three and nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Salaries	￦	329		1,923		301		8,588
Provision for retirement benefits		97		915		78		721

	￦	426		2,838		379		9,309

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 nine-month period ended September 30, 2013, the Company recognized lease payment of W 10,277 million relating to the above operating lease agreement and lease revenue of W 6,347 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	￦	14,013		8,462
1~5 years		57,784		31,890
More than 5 years		56,633		24,866

	￦	128,430		65,218

184

31.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	2013			2012
Interest income	￦	(24,035	)		(43,556	)
Dividends		(20,640	)		(31,143	)
Gain on foreign currency translation		(283	)		(140	)
Gain on valuation of financial assets at fair value through profit or loss		(2,387	)		—
Gain on disposal of long-term investments securities		(1,988	)		(470	)
Gain on settlement of derivatives		(2,274	)		(12,694	)
Gain on disposal of investments in subsidiaries and associates		(71,200	)		(80,483	)
Gain on disposal of property and equipment and intangible assets		(961	)		(1,881	)
Reversal of allowance for doubtful accounts		—			(4,531	)
Other income		(3,149	)		—
Interest expenses		208,692			231,289
Loss on foreign currency translation		1,539			412
Loss on disposal of long-term investments securities		73			9,134
Loss on valuation of financial assets at fair value through profit or loss		—			824
Loss on settlement of derivatives		—			1,232
Loss relating to financial liabilities at fair value through profit or loss		120,834			1,791
Impairment loss on investment in associates		—			72,096
Income tax expense		251,556			167,129
Provision for retirement benefits		26,467			23,669
Depreciation and amortization		1,563,577			1,321,897
Bad debt for accounts receivable – trade		22,820			14,567
Loss on disposal of property and equipment and intangible assets		218,937			8,858
Impairment loss on property and equipment and intangible assets		—			15,438
Bad debt for accounts receivable – other		19,818			19,874
Other expenses		2,287			57

	￦	2,309,683			1,713,369

185

31.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	2013			2012
Accounts receivable – trade	￦	(176,999	)		(151,836	)
Accounts receivable – other		(41,398	)		408,092
Advance payments		(21,226	)		18,944
Prepaid expenses		(2,153	)		7,995
Inventories		3,839			(4,420	)
Long-term accounts receivables – other		—			5,393
Long-term prepaid expenses		602			—
Guarantee deposits		(180	)		18,309
Accounts payable – other		(394,851	)		(191,107	)
Advanced receipts		5,903			2,642
Withholdings		58,098			226,808
Deposits received		467			(1,792	)
Accrued expenses		(14,159	)		373,013
Unearned revenue		(113,714	)		(27,067	)
Provisions		(191,936	)		(283,552	)
Long-term provisions		(66,276	)		25,927
Plan assets		467			1,416
Retirement benefit payment		(14,011	)		(12,306	)
Others		2,400			(1,382	)

	￦	(965,127	)		415,077

(3)

Significant non-cash transactions for the nine-month periods ended September 30, 2013 and 2012 are as follows:


(In millions of won)
	2013		2012
Transfer of construction in progress to property and equipment and intangible assets	￦	1,180,245		1,893,741
Transfer of other property and equipment and others to construction in progress		659,800		1,173,522
Accounts payable—other related to acquisition of tangible assets and others		19,695		8,010
Provide the existing 1.8GHz frequency use rights		614,600		—

186

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: December 13, 2013

187