6-K 1 d21396d6k.htm FORM 6-K Form 6-K
Table of Contents

 

 

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 2020

COMMISSION FILE NUMBER: 333-04906

 

 

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

 

 

65, Eulji-ro, Jung-gu

Seoul 04539, Korea

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F   ☒             Form 40-F   ☐

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

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

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

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

 

 

 


Table of Contents

QUARTERLY BUSINESS REPORT

(From January 1, 2020 to September 30, 2020)

THIS IS A SUMMARY OF THE QUARTERLY BUSINESS REPORT ORIGINALLY PREPARED IN KOREAN WHICH IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION.

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS.

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

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


Table of Contents
I.

COMPANY OVERVIEW

 

1.    Company Overview

The Company’s quarterly business report for the nine months ended September 30, 2020 includes the following consolidated subsidiaries:

 

Name

  

Date of

Establishment

  

Principal Business

   Total Assets as
of Dec. 31, 2019
(millions of
Won)
    

Material

Subsidiary*

SK Telink Co., Ltd.

   Apr. 9, 1998    Telecommunication services and satellite broadcasting services      265,725      Material

SK M&Service Co., Ltd.

   Feb. 10, 2000    Online information services      109,699      Material

SK Communications Co., Ltd.

   Sept. 19, 1996    Internet portal and other Internet information services      67,327     

SK Broadband Co., Ltd.

   Sept. 5, 1997    Fixed-line telecommunication services, multimedia and Internet protocol TV (“IPTV”) services      4,447,549      Material

Tbroad Nowon Broadcasting Co., Ltd.

   June 15, 2001    Cable broadcasting services      10,421     

Home & Service Co., Ltd.

   June 5, 2017    Information and telecommunication network maintenance      113,176      Material

SK stoa Co., Ltd.

   Dec. 1, 2017    Data broadcasting and commercial retail platform services      70,754     

K-net Culture and Contents Venture Fund

   Nov. 24, 2008    Investment partnership      151,493      Material

PS&Marketing Co., Ltd.

   Apr. 3, 2009    Sale of telecommunication devices      439,947      Material

Service Ace Co., Ltd.

   Jul. 1, 2010    Customer center management services      80,844      Material

Service Top Co., Ltd.

   Jul. 1, 2010    Customer center management services      66,932     

SK O&S Co., Ltd. (formerly known as Network O&S Co., Ltd.)

   Jul. 1, 2010    Network maintenance services      96,446      Material

SK Planet Co., Ltd.

   Oct. 1, 2011    Telecommunication and platform services      595,838      Material

Dreamus Company (formerly known as Iriver Ltd.)

   Jul. 12, 2000    Audio device manufacturing      171,586      Material

Iriver Enterprise Ltd.

   Jan. 14, 2004    Management of Chinese subsidiary      1,689     

Iriver China Co., Ltd.

   Jun. 24, 2004    Electronic device manufacturing      2,185     

DongGuan Iriver Electronics Co., Ltd.

   Jul. 6, 2006    Electronic device manufacturing      0     

Life Design Company Inc. (formerly known as S.M. Life Design Company Japan Inc.)

   June 25, 2008    Japanese merchandise business      8,681     

SK Telecom China Holdings Co., Ltd.

   Jul. 12, 2007    Investment (holding company)      47,572     

SK Global Healthcare Business Group, Ltd.

   Sept. 14, 2012    Investment (SPC)      25,610     

SK Planet Japan, K. K.

   Mar. 14, 2012    Digital contents sourcing services      56,451     

SK Planet Global Holdings Pte. Ltd.

   Aug. 10, 2012    Investment (holding company)      415     

 

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Name

  

Date of

Establishment

  

Principal Business

   Total Assets as
of Dec. 31, 2019
(millions of
Won)
    

Material

Subsidiary*

SKT Americas, Inc.

   Dec. 29, 1995    Information collection and management consulting services      30,704     

SKP America LLC

   Jan. 27, 2012    Digital contents sourcing services      48,344     

YTK Investment Ltd.

   Jul. 1, 2010    Investment      3,424     

Atlas Investment

   Jun. 24, 2011    Investment      116,576      Material

SK Telecom Innovation Fund, L.P.

   Jan. 15, 2016    Investment      47,879     

SK Telecom China Fund I L.P.

   Sept. 14, 2011    Investment      19,896     

Onestore Co., Ltd.

   Mar. 1, 2016    Contents distribution      236,329      Material

SK telecom Japan Inc.

   Mar. 1, 2018    Information collection and management consulting services      10,730     

id Quantique Ltd.

   Oct. 29, 2001    QRNG technology development      38,303     

Eleven Street Co., Ltd.

   Sept. 1, 2018    E-commerce and Internet-related services      923,424      Material

Quantum Innovation Fund I

   Dec. 3, 2018    Investment      8,000     

Life & Security Holdings Co., Ltd.

   Mar. 21, 2014    Holding company      2,639,781      Material

ADT CAPS Co., Ltd.

   Jan. 22, 1971    Unmanned security services      706,808      Material

CAPSTEC Co., Ltd.

   Jan. 1, 2005    Manned security services      29,569     

SK Infosec Co., Ltd.

   Jun. 26, 2000    Information security services      158,424      Material

Id Quantique LLC

   Jul. 27, 2018    Quantum information and communications services      1,177     

FSK L&S Co., Ltd.

   Oct. 20, 2016    Logistics consulting services      47,550     

FSK L&S (Shanghai) Co., Ltd.

   Jul. 29, 2010    International cargo transportation agent      23,454     

FSK L&S Vietnam Company Limited

   May 5, 2020    International cargo transportation agent      0     

FSK L&S (Hungary) Co., Ltd.

   Sept. 13, 2019    International cargo transportation agent      532     

SK Telecom TMT Investment Corp.

   Jan. 4, 2019    Investment      33,482     

Panasia Semiconductor Materials LLC

   May 12, 2020    Trust services and joint investment      0     

Incross Co., Ltd.

   Aug. 13, 2007    Advertising agency services      144,263      Material

Infra Communications Co., Ltd.

   Aug. 1, 2017    Operation of mobile services      1,569     

Happy Hanool Co., Ltd.

   Aug. 8, 2019    Services      800     

SKinfosec Information Technology (wuxi) Co., Ltd.

   Aug. 21, 2019    System software development and supply services      453     

Mindknock Co., Ltd.

   Jan. 23, 2018    Software development services      458     

 

*

Material Subsidiary means a subsidiary with total assets of Won 75 billion or more as of the end of the latest fiscal year.

 

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Changes in subsidiaries during the nine months ended September 30, 2020 are set forth below.

 

Change

  

Name

  

Remarks

Additions    Tbroad Nowon Broadcasting Co., Ltd.    Newly acquired by SK Telecom
   FSK L&S Vietnam Company Limited    Newly established by FSK L&S Co., Ltd.
   Panasia Semiconductor Materials LLC    Newly established by Quantum Innovation Fund I
Exclusions    ADT SECURITY Co., Ltd.    Merged into ADT CAPS Co., Ltd.
   SK TELINK VIETNAM Co., Ltd.    Disposed

 

A.

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

 

B.

Date of Incorporation: March 29, 1984

 

C.

Location of Headquarters

 

  (1)

Address: 65 Euljiro, Jung-gu, Seoul, Korea

 

  (2)

Phone: +82-2-6100-2114

 

  (3)

Website: http://www.sktelecom.com

 

D.

Major Businesses

 

  (1)

Wireless business

The Company provides wireless telecommunications services, characterized by its competitive strengths in handheld devices, affordable pricing, network coverage and an extensive contents library. The Company continues to maintain its reputation as the unparalleled premium network operator in the 3G, 4G and 5G markets on the basis of its technological leadership and network management technology. With the world’s first commercialization of 5G technology in 2019, the Company continues to maintain its position as the top network operator in the 5G era and strives to provide differentiated services to its customers. In particular, in order to expedite its customers’ realization of the benefits of 5G services, the Company is pursuing efficient coverage expansion through the establishment of “5G Clusters” focused on services, key commercial districts and business-to-business (“B2B”).

In order to strengthen its sales channels, the Company has been offering a variety of fixed-line and wireless telecommunication convergence products through its subsidiary, PS&Marketing Co., Ltd. (“PS&Marketing”). PS&Marketing provides differentiated service to customers through the establishment of new sales channels and product development. Through its subsidiaries Service Ace Co., Ltd. and Service Top Co., Ltd., the Company operates customer service centers in Seoul and provides telemarketing services. Additionally, SK O&S Co., Ltd. (“SK O&S”), the Company’s subsidiary responsible for the operation of the Company’s networks, including its 5G network, provides customers with quality network services and provides the Company with technological know-how in network operations.

The Company plans to increase its profitability by strengthening its retention policy, which is the fundamental basis of competitiveness for telecommunication companies in this data-intensive era. The Company will lead the information and communication technology (“ICT”) trend by providing products through which customers can have a distinctive experience and by providing innovative services to transition to service-based competition.

The Company plans to further utilize its big data analysis capabilities to seek momentum for growth in new business areas.

 

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  (2)

Fixed-line business

SK Broadband Co., Ltd. (“SK Broadband”) is engaged in providing telecommunications, broadcasting and new media services and various other services that are permitted to be carried out by SK Broadband under relevant regulations, as well as business activities that are directly or indirectly related to providing those services. In 1999, SK Broadband launched its high-speed Internet service in Seoul, Busan, Incheon and Ulsan and currently provides such services nationwide. SK Broadband also commercialized its TV-Portal service in July 2006 and its IPTV service in January 2009 upon receipt of permit in September 2008. In April 2019, SK Broadband decided to launch an integrated over-the-top (“OTT”) platform “wavve,” combining its OTT service “oksusu” with POOQ, an OTT service alliance of Korea’s three terrestrial broadcasters. SK Broadband is focusing on strengthening the competitiveness of the combined OTT service through an increased investment in content and thereby developing it into a key service in the 5G era. In addition, SK Broadband’s merger with Tbroad Co., Ltd. (“Tbroad”) obtained all requisite regulatory approvals in January 2020, and the merger became effective as of April 30, 2020.

 

  (3)

Security business

In the field of security business, the Company has completed its converged security business portfolio ranging from physical security to information security through the acquisitions of new material subsidiaries ADT CAPS Co., Ltd. (“ADT CAPS”) and SK Infosec Co., Ltd. (“SK Infosec”). Due to a growing number of single-person households and increasing awareness for crime prevention, the security industry has been growing steadily in recent years. New markets for physical security have also been developing as a result of integrating cutting-edge ICT, such as big data, Internet of Things (“IoT”) and AI, and bio-recognition technologies. The domestic market size of the physical security industry expanded from Won 3.6 trillion in 2012 to Won 5.5 trillion in 2017 (at an average annual growth rate of 8.7%), and is expected to grow to Won 7.9 trillion (at an average annual growth rate of 7.5%) in 2022. The Company plans to expand its security business into one of its major business areas by leveraging such industry growth and synergies with its other ICT-based businesses.

 

  (4)

Commerce business

The Company is a leading player in the Korean e-commerce industry through its material subsidiary Eleven Street Co., Ltd. (“Eleven Street”), which operates an e-commerce platform service that connects various sellers and purchasers through its online and mobile platforms. In addition, the Company continues to evolve into a commerce portal by providing differentiated shopping-related services covering shopping information, product search and purchases, relying on the strength of the Company’s core principles of innovation supported by its advanced technological capabilities, including artificial intelligence (“AI”)-based commerce search technology and customized recommendations based on big data analysis.

See “II.1. Business Overview” for more information.

 

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E.

Credit Ratings

 

  (1)

Corporate bonds and other long-term securities

 

Credit rating date

 

Subject of rating

 

Credit rating

  

Credit rating entity
(Credit rating range)

  

Rating classification

February 5, 2018   Corporate bond   AAA (Stable)    Korea Ratings    Current rating
February 5, 2018   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Current rating
February 6, 2018   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Current rating
April 10, 2018   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Regular rating
April 11, 2018   Corporate bond   AAA (Stable)    Korea Ratings    Regular rating
April 16, 2018   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Regular rating
May 29, 2018   Hybrid securities   AA+ (Stable)    Korea Ratings    Current rating
August 31, 2018   Corporate bond   AAA (Stable)    Korea Ratings    Current rating
August 31, 2018   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Current rating
August 31, 2018   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Current rating
February 20, 2019   Corporate bond   AAA (Stable)    Korea Ratings    Current rating
February 20, 2019   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Current rating
February 20, 2019   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Current rating
May 31, 2019   Corporate bond   AAA (Stable)    Korea Ratings    Regular rating
June 4, 2019   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Regular rating
June 18, 2019   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Regular rating
July 15, 2019   Corporate bond   AAA (Stable)    Korea Ratings    Current rating
July 15, 2019   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Current rating
July 15, 2019   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Current rating
October 4, 2019   Corporate bond   AAA (Stable)    Korea Ratings    Current rating
October 7, 2019   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Current rating
October 8, 2019   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Current rating
December 26, 2019   Corporate bond   AAA (Stable)    Korea Ratings    Current rating
December 27, 2019   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Current rating
December 27, 2019   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Current rating
June 16, 2020   Corporate bond   AAA (Stable)    Korea Ratings    Regular rating
June 18, 2020   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Regular rating
June 22, 2020   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Regular rating
September 28, 2020   Corporate bond   AAA (Stable)    NICE Investors Service, Co., Ltd.    Current rating
September 29, 2020   Corporate bond   AAA (Stable)    Korea Ratings    Current rating
September 29, 2020   Corporate bond   AAA (Stable)    Korea Investors Service, Inc.    Current rating

 

*

Rating definition: “AAA” - The certainty of principal and interest payment is at the highest level with extremely low investment risk and is stable such that it will not be influenced by reasonably foreseeable changes in external factors.

*

Rating definition: “AA” - The certainty of principal and interest payment is extremely high with very low investment risk, but has slightly inferior factors compared to “AAA” rating.

 

  (2)

Commercial paper (“CP”) and short-term bonds

 

Credit rating date

  

Subject of rating

  

Credit rating

  

Credit rating entity
(Credit rating range)

  

Rating classification

April 10, 2018

   CP    A1    Korea Investors Service, Inc.    Current rating

April 10, 2018

   Short-term bond    A1    Korea Investors Service, Inc.    Current rating

April 11, 2018

   CP    A1    Korea Ratings    Current rating

April 11, 2018

   Short-term bond    A1    Korea Ratings    Current rating

April 16, 2018

   CP    A1    NICE Investors Service Co., Ltd.    Current rating

April 16, 2018

   Short-term bond    A1    NICE Investors Service Co., Ltd.    Current rating

 

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Credit rating date

  

Subject of rating

  

Credit rating

  

Credit rating entity
(Credit rating range)

  

Rating classification

August 31, 2018

   CP    A1    Korea Ratings    Regular rating

August 31, 2018

   CP    A1    Korea Investors Service, Inc.    Regular rating

August 31, 2018

   CP    A1    NICE Investors Service Co., Ltd.    Regular rating

August 31, 2018

   Short-term bond    A1    Korea Ratings    Regular rating

August 31, 2018

   Short-term bond    A1    Korea Investors Service, Inc.    Regular rating

August 31, 2018

   Short-term bond    A1    NICE Investors Service Co., Ltd.    Regular rating

May 31, 2019

   CP    A1    Korea Ratings    Current rating

May 31, 2019

   Short-term bond    A1    Korea Ratings    Current rating

June 4, 2019

   CP    A1    NICE Investors Service Co., Ltd.    Current rating

June 4, 2019

   Short-term bond    A1    NICE Investors Service Co., Ltd.    Current rating

June 18, 2019

   CP    A1    Korea Investors Service, Inc.    Current rating

June 18, 2019

   Short-term bond    A1    Korea Investors Service, Inc.    Current rating

October 4, 2019

   CP    A1    Korea Ratings    Regular rating

October 4, 2019

   Short-term bond    A1    Korea Ratings    Regular rating

October 7, 2019

   CP    A1    Korea Investors Service, Inc.    Regular rating

October 7, 2019

   Short-term bond    A1    Korea Investors Service, Inc.    Regular rating

October 8, 2019

   CP    A1    NICE Investors Service Co., Ltd.    Regular rating

October 8, 2019

   Short-term bond    A1    NICE Investors Service Co., Ltd.    Regular rating

June 16, 2020

   CP    A1    Korea Ratings    Current rating

June 16, 2020

   Short-term bond    A1    Korea Ratings    Current rating

June 18, 2020

   CP    A1    Korea Investors Service, Inc.    Current rating

June 18, 2020

   Short-term bond    A1    Korea Investors Service, Inc.    Current rating

June 22, 2020

   CP    A1    NICE Investors Service Co., Ltd.    Current rating

June 22, 2020

   Short-term bond    A1    NICE Investors Service Co., Ltd.    Current rating

September 28, 2020

   CP    A1    NICE Investors Service Co., Ltd.    Current rating

September 28, 2020

   Short-term bond    A1    NICE Investors Service Co., Ltd.    Current rating

September 29, 2020

   CP    A1    Korea Ratings    Current rating

September 29, 2020

   Short-term bond    A1    Korea Ratings    Current rating

September 29, 2020

   CP    A1    Korea Investors Service, Inc.    Current rating

September 29, 2020

   Short-term bond    A1    Korea 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.

 

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  (3)

International credit ratings

 

Date of credit rating

  

Subject of rating

  

Credit rating of

securities

  

Credit rating agency

  

Rating type

October 23, 2017

   Bonds denominated in foreign currency    A- (Stable)    Fitch Ratings    Regular rating

April 8, 2018

   Bonds denominated in foreign currency    A- (Stable)    S&P Global Ratings    Current rating

April 9, 2018

   Bonds denominated in foreign currency    A3 (Stable)    Moody’s Investors Service    Current rating

May 8, 2018

   Bonds denominated in foreign currency    A- (Stable)    S&P Global Ratings    Regular rating

May 10, 2018

   Bonds denominated in foreign currency    A3 (Negative)    Moody’s Investors Service    Regular rating

October 15, 2018

   Bonds denominated in foreign currency    A- (Negative)    Fitch Ratings    Regular rating

March 6, 2019

   Bonds denominated in foreign currency    A- (Negative)    S&P Global Ratings    Regular rating

May 30, 2019

   Bonds denominated in foreign currency    A3 (Negative)    Moody’s Investors Service    Regular rating

October 14, 2019

   Bonds denominated in foreign currency    A- (Negative)    Fitch Ratings    Regular rating

June 11, 2020

   Bonds denominated in foreign currency    A3 (Negative)    Moody’s Investors Service    Regular rating

October 6, 2020

   Bonds denominated in foreign currency    A- (Stable)    Fitch Ratings    Regular rating

 

  (4)

Listing (registration or designation) of Company’s shares and special listing status

 

Listing (registration or designation)

of stock                                                

  

Date of listing (registration or designation)

  

Special listing

  

Special listing and applicable

regulations

KOSPI Market of Korea Exchange    November 7, 1989    Not applicable    Not applicable

2.    Company History

March 1984: Establishment of Korea Mobile Telecommunications Co., Ltd.

November 1989: Listing on the KOSPI Market of the Korea Exchange

March 1997: Change of name to SK Telecom Co., Ltd.

March 2008: Acquisition of Hanaro Telecom (the predecessor entity of SK Broadband)

October 2011: Spin-off of SK Planet Co., Ltd. (“SK Planet”)

June 2015: Comprehensive exchange of shares of SK Broadband

April 2016: Spin-off and merger of the location-based services business and the mobile phone verification services business of SK Planet

December 2017: Comprehensive exchange of shares of SK Telink Co., Ltd. (“SK Telink”)

December 2018: Comprehensive exchange of shares of SK Infosec

 

A.

Location of Headquarters

 

   

22 Dohwa-dong, Mapo-gu, Seoul (July 11, 1988)

 

   

16-49 Hangang-ro 3-ga, Yongsan-gu, Seoul (November 19, 1991)

 

   

267 Namdaemun-ro 5-ga, Jung-gu, Seoul (June 14, 1995)

 

   

99 Seorin-dong, Jongro-gu, Seoul (December 20, 1999)

 

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65 Euljiro, Jung-gu, Seoul (December 13, 2004)

 

B.

Significant Changes in Management

At the 32nd General Meeting of Shareholders held on March 18, 2016, Dae Sik Cho was re-elected as an inside director and Dae Shick Oh was re-elected as an independent director and member of the audit committee of the Company’s board of directors (the “Board of Directors”). At the 33rd General Meeting of Shareholders held on March 24, 2017, Jung Ho Park was elected as an inside director and Dae Sik Cho was elected as a non-executive director. Jae Hoon Lee and Jae Hyeon Ahn were re-elected as independent directors and members of the audit committee and Jung Ho Ahn was elected as an independent director. At the 34th General Meeting of Shareholders held on March 21, 2018, Young Sang Ryu was elected as an inside director and Youngmin Yoon was elected as an independent director and member of the audit committee of the Board of Directors. At the 35th General Meeting of Shareholders held on March 26, 2019, Seok-Dong Kim was elected as an independent director and member of the audit committee of the Board of Directors. At the 36th General Meeting of Shareholders held on March 26, 2020, Jung Ho Park was re-elected as an inside director, Dae Sik Cho was re-elected as a non-executive director, Jung Ho Ahn was re-elected as an independent director and member of the audit committee of the Board of Directors, Yong-Hak Kim was newly elected as an independent director and member of the audit committee and Junmo Kim was newly elected as an independent director.

 

C.

Change in Company Name

On January 2, 2017, SK M&Service Co., Ltd. (“SK M&Service”), one of the Company’s subsidiaries, changed its name to SK M&Service Co., Ltd. from M&Service Co., Ltd. in accordance with a resolution at its general meeting of shareholders on December 26, 2016.

On October 23, 2018, Life & Security Holdings Co., Ltd. (“Life & Security Holdings”), one of the Company’s subsidiaries, changed its name to Life & Security Holdings Co., Ltd., from Siren Holdings Korea Co., Ltd., in accordance with a resolution at its extraordinary meeting of shareholders.

On March 28, 2019, Iriver Ltd., one of the Company’s subsidiaries, changed its name to Dreamus Company in accordance with a resolution at its general meeting of shareholders.

On April 17, 2019, Network O&S Co., Ltd., one of the Company’s subsidiaries, changed its name to SK O&S Co., Ltd. pursuant to a resolution at its extraordinary meeting of shareholders.

 

D.

Mergers, Acquisitions and Restructuring

(1) Establishment of SK TechX Co., Ltd. and Onestore

In March 2016, SK Planet spun off its platform business and T Store business and established SK TechX Co., Ltd. (“SK TechX”) and Onestore. The Company exchanged 12,323,905 shares of SK Planet for 6,323,905 shares of SK TechX and 6,000,000 shares of Onestore at the time of the spin-off. The Company later acquired an additional 4,409,600 shares of Onestore at a purchase price of Won 22 billion by participating in the follow-on rights offering. The Company did not participate in the subsequent follow-on rights offering and as of September 30, 2020, the Company had a 52.1% interest in Onestore.

(2) Spin-off and merger of SK Planet’s location-based services business and mobile phone verification services business

Through the merger of SK Planet’s location-based services business and mobile phone verification services business into SK Telecom, the Company seeks to provide a solid base for continued growth, especially in the next generation platform business. The spin-off and merger was effective as of April 5, 2016 and was registered as of April 7, 2016. SK Planet is a wholly-owned subsidiary of the Company, and as the Company did not issue any new shares in connection with the merger, there was no change in the share ownership of the Company.

 

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(3) Establishment of Hana-SK Fintech Corporation

In order to provide an everyday finance platform, the Company entered into a joint venture agreement with Hana Financial Group, in accordance with the resolution of the Board of Directors on July 28, 2016. Combining the Company’s leading mobile technology and big data analysis capabilities with Hana Financial Group’s financial service, Hana-SK Fintech Corporation plans to provide innovative mobile financial services such as mobile asset management, easy payment and overseas wire transfer services. SK Telecom holds a 49% equity stake in the joint venture, and Hana Financial Group holds the remaining 51%.

(4) Capital contribution of shares of NSOK Co., Ltd. (“NSOK”) for new shares of SK Telink

On October 25, 2016, the Company made a capital contribution of all shares of NSOK owned by the Company to SK Telink in exchange for 219,967 newly issued shares of SK Telink, which resulted in an increase of the Company’s equity interest in SK Telink to 85.86%.

(5) Acquisition of shares of SM Mobile Communications

In October 2016, the Company transferred the media platform businesses Hotzil and 5Ducks to SM Mobile Communications in exchange for 1,200,000 shares of SM Mobile Communications. As a result, the Company owned a 46.2% equity interest in SM Mobile Communications as of September 30, 2020.

(6) Exchange of shares of SK Communications Co., Ltd. (“SK Communications”)

On November 24, 2016, the Board of Directors resolved to approve the payment of cash consideration in lieu of the issuance of shares of the Company in a comprehensive exchange of shares of SK Communications. The amount of cash consideration was based on a share exchange ratio of one common share of the Company to 0.0125970 common share of SK Communications. In February 2017, SK Communications became a wholly-owned subsidiary of the Company.

(7) Acquisition of shares of Iriver

The Company acquired 4,699,248 shares of Iriver at a purchase price of Won 5,320 in connection with a capital contribution. The Company’s equity interest in Iriver following the acquisition is 45.9%. See “Report on Important Business Matters (Decision on Capital Increase)” filed on July 17, 2017 by Iriver for more information.

 

*

Iriver changed its name to “Dreamus Company” pursuant to a resolution at its general meeting of shareholders on March 28, 2019.

(8) Acquisition of newly issued shares of SK China Company Limited (“SK China”)

On July 28, 2017, the Company acquired newly issued shares of SK China to find investment opportunities in ICT and other promising areas of growth in China. In exchange for newly issued shares of SK China, the Company contributed its full equity interest in each of SKY Property Management Limited (“SKY”) and SK Industrial Development China Co., Ltd. (“SK IDC”) as well as cash, equal to the following amounts: 1) SKY stock: USD 276,443,440.64, 2) SK IDC stock: USD 108,072,007.67 and 3) Cash: USD 100,000,000.00. As a result of the acquisition, the Company holds 10,928,921 shares and a 27.27% of equity interest in SK China. See “Report on Decision on Acquisition of SK China Shares” filed by the Company on July 28, 2017 for more information about this transaction.

(9) Exchange of shares of SK Telink

On September 28, 2017, the Company disclosed a resolution approving the payment of cash consideration in lieu of the issuance of shares of SK Telecom in an exchange of shares of SK Telink. The amount of cash consideration was based on a share exchange ratio of 1:1.0687714. The exchange was completed on December 14, 2017, upon which exchange SK Telink became a wholly-owned subsidiary of the Company.

 

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(10) Acquisition of shares of FSK L&S Co., Ltd.

On February 6, 2016, the Company acquired 2,415,750 shares of FSK L&S Co., Ltd. at a purchase price of Won 17.8 billion from SK Holdings Co., Ltd. (“SK Holdings”) to utilize its logistics sharing infrastructure with its counterparties and pursue new business opportunities. As a result of the acquisition, the Company had a 60% equity interest in FSK L&S Co., Ltd.

(11) Acquisition of shares of id Quantique SA

In order to increase the value of the Company by enhancing its position as the top mobile network operator (“MNO”) through utilizing quantum cryptography and by generating returns from its global business, the Company acquired an additional 41,157,506 shares of id Quantique SA on April 30, 2018. As a result, the Company owns a total of 58.1% of the issued and outstanding shares (44,157,506 shares), and has acquired control, of id Quantique SA.

(12) Acquisition of shares of Siren Holdings Korea Co., Ltd.

The Company acquired shares of Siren Holdings Korea Co., Ltd. (“SHK”), which wholly owns ADT CAPS, in order to strengthen its security business and expand its residential customer base. See “Report on Decision on Acquisition of Shares of Siren Holdings Korea Co., Ltd.” filed on May 8, 2018 for more information.

 

*

Siren Investments Korea Co., Ltd. merged with and into SHK with SHK as the surviving entity, following which CAPSTEC Co., Ltd. (“CAPSTEC”) and ADT SECURITY Co., Ltd. (“ADT SECURITY”), which were subsidiaries of ADT CAPS, became subsidiaries of SHK.

 

*

SHK changed its name to Life & Security Holdings Co., Ltd. in accordance with a resolution at its extraordinary meeting of shareholders on October 23, 2018.

(13) Capital increase of Iriver

On July 26, 2018, the board of directors of Iriver, a subsidiary of the Company, resolved to approve a capital increase of Won 70,000 million through third-party allotment and subsequently issued 7,990,867 common shares. The Company participated in the capital increase and paid Won 65,000 million to subscribe 7,420,091 common shares of Iriver on August 10, 2018, resulting in an increase of the Company’s ownership interest from 45.9% to 53.7%.

(14) Exchange of shares of SK Infosec

On October 26, 2018, the Company announced the decision of the Board of Directors to approve the comprehensive exchange of shares of SK Infosec for shares of the Company. The share exchange ratio was one common share of the Company to 0.0997678 common share of SK Infosec. The share exchange was completed on December 27, 2018, upon which SK Infosec became a wholly-owned subsidiary of the Company.

(15) Acquisition of shares of SK stoa Co., Ltd. (“SK Stoa”)

On April 25, 2019, the Board of Directors resolved to acquire the 100% equity interest in SK Stoa owned by SK Broadband, a subsidiary of the Company, in order to expand its T-commerce business and maximize synergies with other ICT businesses of the Company. On January 3, 2020, the Company acquired 3,631,355 shares of SK Stoa after obtaining governmental approvals.

(16) Acquisition of shares of Tbroad Nowon Broadcasting Co., Ltd. (“Tbroad Nowon”)

On April 26, 2019, the Board of Directors resolved to acquire shares of Tbroad Nowon to enhance the Company’s competitiveness in the media business pursuant to a share purchase agreement with Tbroad Nowon’s largest shareholder, Tbroad. The Company acquired a 55.00% equity interest, or 627,000 shares, of Tbroad Nowon at a purchase price of Won 10.4 billion. See the report on “Amendment Regarding Decision on Acquisition of Tbroad Nowon” filed by the Company on January 28, 2020 for more information.

 

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(17) Disposal of shares of SMC and Shopkick

On June 11, 2019, SKP America, a subsidiary of the Company, disposed of its 100% equity interest in SMC and SMC’s wholly-owned subsidiary Shopkick.

(18) Acquisition of shares of Incross Co., Ltd. (“Incross”)

On June 28, 2019, the Company acquired 2,786,455 shares of Incross in order to strengthen its digital advertising business. The Company’s equity interest in Incross following the acquisition is 34.6%. See the report on “Decision on Acquisition of Shares of Incross” filed by the Company on April 11, 2019, as amended on June 3, 2019 for more information.

(19) Capital increase of Content Alliance Platform Inc. (“Content Alliance Platform”)

The Company participated in a capital increase by Content Alliance Platform in the amount of Won 90 billion through third-party allotment in order to provide innovative media services and contents to customers and to enhance its competitiveness as a differentiated mobile OTT platform. See the report on “Participation in Capital Increase by Content Alliance Platform” filed by the Company on April 5, 2019, as amended on June 28, 2019.

(20) Acquisition of newly-issued shares of Kakao Corp. (“Kakao”)

In order to pursue a strategic alliance with Kakao, the Company acquired newly-issued common shares of Kakao in the aggregate amount of approximately Won 300 billion through third-party allotment. Kakao acquired treasury shares of the Company. See the report on “Results of Disposal of Treasury Shares” filed by the Company on November 5, 2019 for more information.

[SK Broadband]

(1) Establishment of a subsidiary

On May 23, 2017, SK Broadband’s board of directors resolved to approve the establishment of a subsidiary. On June 5, 2017, SK Broadband established Home & Service Co., Ltd. (“Home & Service”), a subsidiary responsible for the management of customer service operations. Home & Service was incorporated by SK Broadband under the Korean Commercial Code. The subsidiary was capitalized at Won 46 billion and the Korea Fair Trade Commission approved the subsidiary’s incorporation as an SK affiliate on July 1, 2017.

(2) Spin-off

On August 16, 2017, SK Broadband’s board of directors resolved to approve the spin-off of its T-commerce subsidiary through a spin-off and subsequent establishment of a subsidiary pursuant to Article 530-2 and 530-12 of the Korean Commercial Code, with both companies from the simple vertical spin-off remaining as existing companies. The spin-off was effective as of December 1, 2017, and the subsidiary was capitalized at Won 15 billion, with SK Broadband holding a 100% equity interest. The Korea Fair Trade Commission approved the subsidiary’s incorporation as an SK affiliate on January 1, 2018.

 

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(3) Transfer of business

On April 5, 2019, SK Broadband’s board of directors resolved to approve an agreement for the transfer of its OTT service, oksusu, to Content Alliance Platform (POOQ), a joint venture among KBS, MBC and SBS. The transaction was completed on September 18, 2019.

(4) Transfer of subsidiary shares

On April 24, 2019, SK Broadband’s board of directors approved the transfer of its 100% equity interest (3,631,355 shares) in SK Stoa, a subsidiary of SK Broadband, to SK Telecom. On December 30, 2019, the Ministry of Science and ICT (“MSIT”) approved the change in the largest capital contributor, and the transaction was completed on January 3, 2020.

(5) Merger of Tbroad, Tbroad Dongdaemun Broadcasting Co., Ltd. (“Tbroad Dongdaemun”) and Korea Digital Cable Media Center (“KDMC”) with and into SK Broadband (the “Tbroad Merger”)

On April 26, 2019, SK Broadband’s board of directors resolved to enter into a merger agreement pursuant to which Tbroad, Tbroad Dongdaemun and KDMC will merge with and into SK Broadband. On January 23, 2020, the parties entered into an amendment to the merger agreement due to changes in the merger timeline, and on March 26, 2020, the entry into the merger agreement was approved as proposed at the extraordinary general meeting of shareholders. The Tbroad Merger was completed as of April 30, 2020.

(6) Transfer of Business

On July 30, 2020, SK Broadband’s board of directors resolved to approve a certain MVNO Business Transfer Agreement in connection with the sale of its Mobile Virtual Network Operator (“MVNO”) business to Korea Cable Telecom Co., Ltd. The sale was a follow-up measure to, and a condition to MSIT’s approval of, the Tbroad Merger, and was carried out pursuant to the terms of the merger agreement for the Tbroad Merger. The transfer was completed on August 31, 2020.

[SK Telink]

(1) Acquisition of shares of NSOK

In accordance with the resolution of its board of directors on September 22, 2016, SK Telink received a capital contribution of 408,435 shares (an 83.9% equity interest) of NSOK owned by SK Telecom. On October 25, 2016, SK Telink acquired the remaining 78,200 outstanding shares (a 16.1% equity interest) of NSOK, pursuant to which NSOK became a wholly-owned subsidiary of SK Telink.

In accordance with the resolution of its board of directors on April 12, 2017, SK Telink acquired 525,824 additional shares of NSOK pursuant to a rights offering for an aggregate amount of Won 40.0 billion (or Won 76,071 per share), resulting in SK Telink’s ownership of 1,012,459 shares (a 100% equity interest) of NSOK.

(2) Comprehensive exchange of shares

On September 28, 2017, SK Telink’s board of directors approved a comprehensive exchange of shares with SK Telecom, pursuant to which SK Telecom would acquire SK Telink’s remaining outstanding shares for cash consideration in lieu of issuance of shares of SK Telecom. The share exchange agreement was subsequently approved at the extraordinary general meeting of shareholders held on November 9, 2017.

Following the exchange, there were no changes to SK Telecom’s share ownership interest level or to management structure, and SK Telecom and SK Telink will remain as corporate entities. SK Telink became a wholly-owned subsidiary of SK Telecom and remains as an unlisted corporation, while SK Telecom remains as a listed corporation.

(3) Disposal of NSOK shares

Pursuant to the resolution of its board of directors on October 8, 2018, SK Telink entered into an agreement to sell 1,012,459 shares of NSOK (representing a 100.00% equity interest) to Life & Security Holdings. The date of sale was October 10, 2018, and the sale consideration amount was Won 100 billion. See “Report on Disposal of Shares of Related Party” filed on October 8, 2018 by SK Telink for more information about this transaction.

 

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(4) Change in location of headquarters

As of April 20, 2020, SK Telink changed the location of its headquarters to 144 Mapo T-town, Mapo-daero, Mapo-gu, Seoul pursuant to a resolution of its board of directors on April 16, 2020.

(5) Transfer of access ID business

On May 22, 2020, the board of directors of SK Telink resolved to transfer its access ID business and related assets to ADT CAPS, a related party, for Won 0.4 billion, effective as of May 31, 2020.

(6) Transfer of device business

On May 22, 2020, the board of directors of SK Telink resolved to transfer its device business and related assets to SK Networks Co., Ltd., a related party, for Won 4.4 billion, effective as of July 1, 2020. As such transfer qualified as a simplified business transfer, the board resolution served as requisite approval in lieu of approval by the general meeting of shareholders.

[Life & Security Holdings]

(1) Spin-off and merger of certain businesses of ADT CAPS

On May 18, 2018, in order to seek a more efficient corporate structure through reorganization, Life & Security Holdings spun off ADT CAPS’ holding company business (i.e., the business of controlling its subsidiaries CAPSTEC and ADT SECURITY through the ownership of shares of these subsidiaries) from ADT CAPS and merged it with and into Life & Security Holdings, with Life & Security Holdings and ADT CAPS surviving these transactions.

[ADT CAPS]

(1) Merger of NSOK

Pursuant to resolutions of the board of directors on October 8, 2018 and the general meeting of shareholders on October 23, 2018, ADT CAPS merged NSOK with and into itself effective as of December 1, 2018 to seek new sources of growth, taking into account the growth potential of the physical security market.

(2) Merger of ADT SECURITY

Pursuant to resolutions of the board of directors on November 14, 2019 and the general meeting of shareholders on November 29, 2019, ADT CAPS completed the merger of ADT SECURITY with and into itself effective as of January 1, 2020 to enhance management efficiency.

[Eleven Street]

(1) Establishment of Eleven Street

On July 31, 2018, the board of directors of SK Planet resolved to spin off its 11st business division (including Scinic, Gifticon and 11Pay) into a newly established company, Eleven Street, effective as of September 1, 2018. In the spin-off, newly issued shares of the spun-off company were allocated in proportion to the equity interest of the shareholders as of the date of such allocation, at a ratio of 0.14344419 newly issued share for 1 share of SK Planet (8,383,931 common shares).

 

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(2) Capital increase of Eleven Street

Pursuant to the resolution of the board of directors on September 7, 2018, Eleven Street issued new shares through a third-party allotment in order to increase its capital, allocating all such new shares to Nile Holdings Co., Ltd. The payment date was September 28, 2018. After the capital increase, SK Telecom holds a 80.26% interest in Eleven Street. See “Report on Decision on Capital Increase of Eleven Street Co., Ltd.” filed by the Company on September 7, 2018 for more information.

(3) Acquisition of shares of Hello Nature Co., Ltd. (“Hello Nature”)

On October 10, 2018, Eleven Street acquired 281,908 shares of Hello Nature, a fresh food delivery service provider, from SK Planet for Won 29.9 billion. As a result of this acquisition, Eleven Street owns a 49.90% interest in Hello Nature.

(4) Acquisition of shares of KOREACENTER Co., Ltd. (“KOREACENTER”)

Pursuant to the resolution of the board of directors on December 26, 2018, Eleven Street acquired 578,521 shares owned by the shareholders of KOREACENTER (Gi Rok Kim and three other individuals) and 578,521 newly issued shares of KOREACENTER, for a total consideration of Won 27.5 billion, in order to form a strategic alliance and promote its commerce services and global business.

(5) Share repurchase

Pursuant to the resolution at its general shareholders’ meeting held on March 26, 2019 approving a share repurchase and the resolution of its board of directors held on April 26, 2019 approving the terms of such repurchase, Eleven Street repurchased 158,429 units of its own shares from SK Planet for Won 42.5 billion and 203 units of its own shares from certain other shareholders (Young-hoon Jeon and four others) for Won 50 million, effective as of August 30, 2019, in order to enhance the value of its shares. As a result of this repurchase, Eleven Street owns 1.55% of its total shares issued as treasury shares.

[SK Infosec]

(1) Merger of Bizen Co., Ltd. (“Bizen”)

Pursuant to a resolution of its board of directors on November 28, 2014, SK Infosec decided to merge Bizen with and into itself, with SK Infosec as the surviving entity, effective as of January 20, 2015, in order to strengthen its competitiveness through the creation of business synergies. The merger was completed based on a merger ratio of 1:0.0797984.

(2) Comprehensive exchange of shares

On October 25, 2018, the board of directors of SK Infosec resolved to enter into a share exchange agreement with SK Telecom pursuant to which the shareholders of record of SK Infosec would be allotted 0.00997678 treasury share of SK Telecom in exchange for one common share of SK Infosec on December 27, 2018, after which SK Infosec would become a wholly-owned subsidiary of SK Telecom. The share exchange agreement was executed on November 26, 2018 and the comprehensive share exchange was completed on December 27, 2018.

[SK Planet]

Effective as of March 1, 2016, SK Planet spun off its platform business and T Store business in order to enhance the competitiveness of each business for future growth.

Effective as of April 5, 2016, SK Planet spun off its location-based services business and mobile phone verification services business and merged them into the Company in order to further concentrate its resources on its commerce business.

On May 29, 2017, the board of directors of SK Planet resolved to transfer the operations and assets related to its BENEPIA business for Won 7.5 billion to SK M&Service as of July 1, 2017.

 

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On July 17, 2017, the board of directors of SK Planet resolved to (1) spin-off SK Planet’s advertising agency business as a newly established company, SM Contents & Communications, in order to strengthen the competitiveness of the business for future growth, which spin-off was effective as of October 1, 2017 and (2) sell 100% of its shares of SM Contents & Communications to SM Culture & Contents Co., Ltd. to further concentrate business capabilities and efficiently allocate management resources. The closing date of the sale transaction was October 24, 2017.

On June 19, 2018, the board of directors of SK Planet resolved to spin off its 11st business (including Scinic, Gifticon and 11Pay) into a newly established company, effective as of September 1, 2018, in order to enhance the level of specialization and competitiveness of its businesses by strengthening their core competencies and obtain further growth potential of the businesses. See the “Report on Decision on Spin-off of SK Planet’s 11st Business” filed on June 19, 2018 for more information.

On June 19, 2018, the board of directors of SK Planet resolved to merge SK TechX with and into SK Planet, effective as of September 1, 2018, with a merger ratio between SK Planet and SK TechX of 1:3.0504171, in order to enhance management efficiency and create synergies. See the “Report on Decision on Merger of SK TechX into SK Planet” filed on June 19, 2018 for more information.

SK Planet decided to reduce the par value of its shares from Won 500 to Won 150 to improve its financial structure through coverage of losses. The capital reduction is effective as of April 27, 2020.

[SK M&Service]

(1) Acquisition of SK Planet’s BENEPIA business

Pursuant to the resolutions of its board of directors and its extraordinary shareholders meeting held on May 29, 2017, SK M&Service decided to acquire SK Planet’s BENEPIA business (including agency service for the Flexible Benefit Plan and related tangible and intangible assets, goodwill, systems, etc.) for Won 7.5 billion on July 1, 2017.

(2) Change in location of headquarters

Pursuant to the resolution of its board of directors on August 25, 2020, SK M&Service changed the location of its headquarters to 16th Floor, 34, Supyo-ro, Jung-gu, Seoul as of September 4, 2020.

[Dreamus Company]

(1) Merger with Iriver CS Co., Ltd. (“Iriver CS”)

Pursuant to the resolution of its board of directors on November 18, 2014, Dreamus Company merged Iriver CS, a subsidiary of the Company, with and into itself on January 31, 2015, with the purpose of enhancing competitiveness through management rationalization and maximization of synergy. The merger was completed based on a merger ratio of 1:0 with no capital increase. The merger and merger registration were completed on January 31, 2015 and February 2, 2015, respectively. Since this merger qualified as a small-scale merger, the approval of the merger by a resolution of the board of directors substituted for the approval by a general meeting of shareholders.

(2) Acquisition of shares of S.M. Life Design Company Japan Inc.

Pursuant to the resolution of its board of directors on July 17, 2017, Dreamus Company approved a contract to acquire a total of 1,000,000 shares of S.M. Life Design Company Japan Inc. (a 100% equity interest) from S.M. Entertainment Japan Co., Ltd. with the purposes of entering foreign markets and maximizing business synergy. Dreamus Company acquired control of S.M. Life Design Company Japan Inc. upon its completion of payment for the shares on September 1, 2017.

(3) Merger of S.M. Mobile Communications JAPAN Inc.

Pursuant to the resolution of its board of directors on July 17, 2017, Dreamus Company decided to merge with S.M. Mobile Communications JAPAN Inc., a contents and information distribution company, with the purpose of reinforcing its contents based device business and enhancing managerial efficiency. As of October 1, 2017, Dreamus Company merged S.M. Mobile Communications JAPAN Inc. into it with a merger ratio of 1:1.6041745, based on which Dreamus Company issued 4,170,852 new common shares.

 

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(4) Acquisition of important assets (Supply and distribution rights for music and digital contents)

On February 28, 2018, Dreamus Company entered into an agreement with S.M. Entertainment Co., Ltd. to acquire supply and distribution rights for music and digital contents of S.M. Entertainment Co., Ltd., JYP Entertainment Corporation and Big Hit Entertainment. Through this arrangement, the Company plans to increase sales by entering the music and sound recording industries and to create synergies through strategic alliances.

(5) Merger between subsidiaries

In order to achieve management efficiency and maximize organizational operation synergies, groovers Japan Co., Ltd. and SM Mobile Communications Japan Inc., each of which was a Japanese subsidiary of Dreamus Company, completed their merger with groovers Japan Co., Ltd. as the surviving entity, effective as of July 1, 2018.

(6) Investment in groovers Inc. (“Groovers”)

On July 26, 2018, the board of directors of Dreamus Company resolved to make an equity investment of Won 11,000 million (2,200,000 common shares) in Groovers for the purposes of providing operating funds to improve its financial structure and pursue new businesses. Payment was completed on July 27, 2018, and the Company’s ownership interest after such equity investment is 100%.

(7) Transfer of Music Mate business between Groovers and SK TechX

On August 31, 2018, pursuant to the resolutions of its board of directors and the extraordinary meeting of shareholders, each of which was held on June 28, 2018, Groovers acquired all properties, assets and rights related to the Music Mate streaming service from SK TechX for Won 3,570 million.

(8) Merger of Groovers

Pursuant to the resolution of its board of directors on December 26, 2018, Dreamus Company merged Groovers, a provider of music, contents and other services, with and into itself on March 1, 2019, in order to seek synergies by integrating management resources and enhance management efficiency. The merger was completed based on a merger ratio of 1:0 with no capital increase. The merger and merger registration were completed on March 1, 2019 and March 5, 2019, respectively. Since this merger qualified as a small-scale merger, the approval of the merger by a resolution of the board of directors substituted for the approval by a general meeting of shareholders.

(9) Disposal of shares of Iriver Inc.

Pursuant to the resolution of its board of directors on July 18, 2019, Dreamus Company disposed of all of its shares in Iriver Inc., effective as of September 1, 2019, with the goal of achieving sustainable growth of its device business by improving its financial structure and profitability and maintaining its business expertise and continuity of operations.

(10) Merger between subsidiaries

In order to achieve management efficiency and maximize organizational operation synergies, Life Design Company Inc. and groovers Japan Co., Ltd., each of which is a Japanese subsidiary of Dreamus Company, completed their merger with Life Design Company Inc. as the surviving entity, effective as of December 15, 2019.

[Incross]

(1) Spin-off of Infra Communications Co., Ltd. (“Infra Communications”)

Effective as of August 1, 2017, Incross spun off its business related to the operation agency service of the integrated mobile application marketplace “Onestore” into a newly established company, Infra Communications, in order to strengthen the expertise and enhance management efficiency of each of its businesses, to respond effectively to the external environment by re-investing the value generated from each business into such business, and to grow and develop such business through strategic and efficient allocation of management resources.

 

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(2) Transfer of mobile advertising network business

Effective as of April 1, 2017, Incross acquired SK Planet’s mobile advertising network business, “Syrup Ad.”

(3) Transfer of media representative business

Effective as of March 17, 2020, Incross acquired SK Stoa’s advertisement media agency and advertising agency businesses.

3.    Total Number of Shares

 

A.

Total Number of Shares

 

(As of September 30, 2020)      (Unit: in shares)  

Classification

   Share type      Remarks  
   Common shares      Preferred
shares
     Total  

I. Total number of authorized shares

     220,000,000        —          220,000,000        —    

II. Total number of shares issued to date

     89,278,946        —          89,278,946        —    

III. Total number of shares retired to date

     8,533,235        —          8,533,235        —    

a. reduction of capital

     —          —          —          —    

b. retirement with profit

     8,533,235        —          8,533,235        —    

c. redemption of redeemable shares

     —          —          —          —    

d. others

     —          —          —          —    

IV. Total number of shares (II-III)

     80,745,711        —          80,745,711        —    

V. Number of treasury shares

     8,066,133        —          8,066,133       

Based on
voting
rights
 
 
 

VI. Number of shares outstanding (IV-V)

     72,679,578        —          72,679,578        —    

 

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B.

Treasury Shares

 

(As of September 30, 2020)           (Unit: in shares)  

Acquisition methods

  Type of
shares
   At the
beginning of
period
     Changes      At the end of
period
 
   Acquired
(+)
     Disposed
(-)
     Retired
(-)
 

Acquisition pursuant to the
Financial Investment Services and
Capital Markets Act of Korea

   Direct
acquisition
   Direct
acquisition from
market
  Common shares      7,609,263        —          —          —          7,609,263  
  Preferred shares      —          —          —          —          —    
   Direct
over-the-counter
acquisition
  Common shares      —          —          —          —          —    
  Preferred shares      —          —          —          —          —    
   Tender offer   Common shares      —          —          —          —          —    
  Preferred shares      —          —          —          —          —    
   Sub-total (a)   Common shares      7,609,263        —          —          —          7,609,263  
  Preferred shares      —          —          —          —          —    
   Acquisition
through
trust and
other
agreements
   Held by trustee   Common shares      —          456,870        —          —          456,870  
  Preferred shares      —          —          —          —          —    
   Held in actual
stock
  Common shares      —          —          —          —          —    
  Preferred shares      —          —          —          —          —    
   Sub-total (b)   Common shares      —          456,870        —          —          456,870  
  Preferred shares      —          —          —          —          —    

Other acquisition (c)

  Common shares      —          —          —          —          —    
  Preferred shares      —          —          —          —          —    

Total (a+b+c)

  Common shares      7,609,263        456,870        —          —          8,066,133  
  Preferred shares      —          —          —          —          —    

 

*

The Board of Directors resolved to enter into a share repurchase agreement (the “Share Repurchase Agreement”) on August 27, 2020. See the report on the “Decision to Enter into Share Repurchase Agreement” filed by the Company on August 28, 2020 for more information.

4.    Status of Voting Rights

 

(As of September 30, 2020)           (Unit: in shares)  

Classification

     Number of shares      Remarks  

Total shares (A)

     Common share        80,745,711        —    
     Preferred share        —          —    

Number of shares without voting rights (B)

     Common share        8,066,133        Treasury shares  
     Preferred share        —          —    

Shares without voting rights pursuant to the Company’s articles of incorporation (the “Articles of Incorporation”) (C)

     Common share        —          —    
     Preferred share        —          —    

Shares with restricted voting rights pursuant to Korean law (D)

     Common share        —          —    
     Preferred share        —          —    

Shares with reestablished voting rights (E)

     Common share        —          —    
     Preferred share        —          —    

The number of shares with exercisable voting right s
(F = A - B - C - D + E)

     Common share        72,639,578        —    
     Preferred share        —          —    

 

*

As of October 30, 2020, there were 8,669,558 treasury shares without voting rights, of which 1,059,295 shares were acquired and held by a trustee pursuant to the Share Repurchase Agreement.

 

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5.    Dividends and Others

 

A.

Dividends

 

  (1)

Distribution of cash dividends was approved during the 34th General Meeting of Shareholders held on March 21, 2018.

 

   

Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved.

 

  (2)

Distribution of interim dividends of Won 1,000 was approved during the 416th Board of Directors’ Meeting on July 26, 2018.

 

  (3)

Distribution of cash dividends was approved during the 35th General Meeting of Shareholders held on March 26, 2019.

 

   

Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved.

 

  (4)

Distribution of interim dividends of Won 1,000 was approved during the 426th Board of Directors’ Meeting on July 25, 2019.

 

  (5)

Distribution of cash dividends was approved during the 36th General Meeting of Shareholders held on March 26, 2020.

 

   

Distribution of cash dividends per share of Won 9,000 (exclusive of an interim dividend of Won 1,000) was approved.

 

  (6)

Distribution of interim dividends of Won 1,000 was approved during the 438th Board of Directors’ Meeting on July 21, 2020.

 

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B.

Dividends for the Last Three Fiscal Years

 

     (Unit: in millions of Won, except per share data and percentages)  

Classification

     As of and for the nine months
ended September 30, 2020
     As of and for the year ended
December 31, 2019
     As of and for the year ended
December 31, 2018
 

Par value per share (Won)

 

     500        500        500  

(Consolidated) Net income

 

     1,123,549        889,907        3,127,887  

Net income per share (Won)

 

     15,215        12,144        44,066  

Total cash dividend

 

     73,136        730,098        717,438  

Total stock dividends

 

     —          —          —    

(Consolidated) Percentage of cash dividend to available income (%)

 

     6.5        82.0        22.9  

Cash dividend yield ratio (%)

     Common shares        0.4        3.7        3.6  
     Preferred shares        —          —          —    

Stock dividend yield ratio (%)

     Common shares        —          —          —    
     Preferred shares        —          —          —    

Cash dividend per share (Won)

     Common shares        1,000        10,000        10,000  
     Preferred shares        —          —          —    

Stock dividend per share (share)

     Common shares        —          —          —    
     Preferred shares        —          —          —    

 

*

The total amount of cash dividends was calculated by adding the total amount of cash dividends resolved at the general meeting of shareholders for the relevant fiscal year and any quarterly cash dividends paid during such fiscal year (including interim dividends) in accordance with applicable disclosure requirements.

*

Consolidated net income is based on equity attributable to owners of the parent company.

 

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II.

BUSINESS

1.    Business Overview

Each company in the consolidated entity is a separate legal entity providing independent services and products. The business is primarily separated into (1) the wireless business consisting of cellular voice, wireless data and wireless Internet services, (2) the fixed-line business consisting of fixed-line telephone, high speed Internet, data and network lease services, among others, (3) commerce business, (4) security business and (5) other businesses consisting of platform services and Internet portal services, among others.

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

 

Classification

  

Company name

  

Description of business

Wireless    SK Telecom Co., Ltd.    Wireless voice and data telecommunications services via digital wireless networks
   PS&Marketing Co., Ltd.    Sale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels
   SK O&S Co., Ltd.    Maintenance of switching stations
   Service Ace Co., Ltd    Management and operation of customer centers
Fixed-line    SK Broadband Co., Ltd.   

High-speed Internet, TV, telephone, commercial data and other fixed-line services and management of the transmission system for online digital contents

Various media-related services, such as channel management services including video-on-demand (“VOD”)

   SK Telink Co., Ltd.    International wireless direct-dial “00700” services, voice services using Internet protocol and MVNO business
   Home & Service Co., Ltd.    System maintenance of high-speed Internet, IPTV and fixed-line services
Security    Life & Security Holdings Co., Ltd.    Holding company
   ADT CAPS Co., Ltd.    Unmanned machine-based security and manned security services
   SK Infosec Co., Ltd.    Comprehensive information protection services and integrated computer system consulting and implementation services
Commerce    Eleven Street Co., Ltd.    E-commerce and Internet-related businesses
Other business    SK Planet Co., Ltd.    Information telecommunications business and development and supply of software
   Onestore Co., Ltd.    Operation of mobile application store
   Dreamus Company    Online music service and distribution of records and digital content
   SK M&Service Co., Ltd.    System software development, distribution and technical support services and other online information services
   K-net Culture and Contents Venture Fund    Start-up investment support
   Atlas Investment    Investments
   Incross Co., Ltd.    Digital advertisement media lab business and operation of video advertisement network platform

 

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[Wireless Business]

 

A.

Industry Characteristics

The telecommunications services market can be categorized into telecommunications services (such as fixed-line, wireless, leased line and value-added services) and broadcasting and telecommunications convergence services. Pursuant to the Telecommunications Business Act, the telecommunications services market can be further classified into basic telecommunications (fixed-line and wireless telecommunications), special category telecommunications (resale of telecommunications equipment, facilities and services) and value-added telecommunications (Internet connection and management, media contents and others). The size of the domestic telecommunications services market is determined based on various factors specific to Korea, including size of population that uses telecommunication services and telecommunications expenditures per capita. While it is possible for Korean telecommunication service providers to provide services abroad through acquisitions or otherwise, foreign telecommunication services markets have their own characteristics depending, among others, on the regulatory environment and demand for telecommunication services.

The Korean mobile communication market is considered to have reached its maturation stage with more than a 100% penetration rate. However, the Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology and the development of highly advanced smartphones which enable the provision of convergence services for multimedia contents, mobile commerce, telematics, new media and other related services. In addition, through further advancements in LTE networks and the commercialization of 5G networks in 2019, B2B businesses, such as the corporate “connected workforce” business which can directly contribute to an enhancement in productivity, are expected to grow rapidly.

 

B.

Growth Potential

 

                        (Unit: in 1,000 persons)  

Classification

   As of September 30,      As of December 31,  
   2020      2019      2018  

Number of subscribers

   SK Telecom      29,034        28,648        27,382  
   Others (KT, LGU+)      32,848        31,539        29,989  
   MVNO      7,365        7,750        7,989  
   Total      69,247        67,937        65,360  

 

*

Source: Wireless subscriber data from the MSIT as of September 30, 2020.

 

C.

Domestic and Overseas Market Conditions

The Korean mobile communication market includes the entire population of Korea with mobile communication service needs, and almost every Korean is considered a potential user. Sales revenue related to data services has been growing due to the increasing popularity of smartphones and high-speed wireless networks. There is also a growing importance to the B2B segment, which creates added value by selling and developing various solutions. The telecommunications industry is a regulated industry requiring license and approval from the MSIT.

In the wireless business, industry players compete on the basis of the following three main competitive elements:

(i)    brand competitiveness, which refers to the overall sense of recognition and loyalty experienced by customers with respect to services and values provided by a company, including the images created by a company’s comprehensive activities and communications on top of the actual services rendered;

(ii)    product and service competitiveness, which refers to the fundamental criteria for wireless telecommunications services, including voice quality, service coverage, broad ranges of rate plans, diversified mobile Internet services, price and quality of devices and customer service quality, as well as the ability to develop new services that meet customer needs in a market environment defined by convergence; and

 

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(iii)    sales competitiveness, which refers to novel and diversified marketing methods and the strength of the distribution network.

Set forth below is the historical market share of the Company (excluding MVNO subscribers).

 

 

     (Unit: in percentages)  

Classification

   As of September 30,      As of December 31,  
   2020      2019      2018  

Mobile communication services

     46.9        47.6        47.7  

 

*

Source: Wireless subscriber data from the MSIT as of September 30, 2020.

 

D.

Business Overview and Competitive Strengths

The Company is seeking to transform itself from a telecommunications service provider into a comprehensive ICT service provider. It has continued to innovate the scope of its services and achieved strong growth in subscribers amid fierce competition and rate cuts.

As a result of positive customer responses to a series of customer value innovation programs such as no-contract plans, safe roaming and the T Plan, as well as its position as the top player in the 5G services market in terms of number of subscribers, the Company secured approximately 4.26 million 5G subscribers as of September 30, 2020. The churn rate remained relatively stable at a record low of 0.9% (excluding MVNO subscribers). In the third quarter of 2020, the Company recorded revenue of Won 4,730.8 billion and an operating profit of Won 361.5 billion on a consolidated basis, and revenue of Won 2,940.6 billion and an operating profit of Won 264.1 billion on a separate basis.

In the telecommunications technology domain, in June 2018, the Company secured frequency bandwidths that are optimal for the commercialization of 5G services at a reasonable bid price. In the fourth quarter of 2018, the Company began to build its 5G networks, focusing on Seoul and other metropolitan areas. The Company began its first 5G transmission in December 2018 and is focusing on establishing 5G networks with enhanced stability and security through the application of quantum cryptography communication and AI networks.

In April 2019, the Company launched the world’s first 5G subscription services. The Company had 4.26 million 5G subscribers as of September 30, 2020, and the number of 5G subscribers is expected to continue to grow. The Company believes that 5G services would have the greatest impact on customer experiences in media, augmented reality (“AR”) / virtual reality (“VR”) and games, which are the areas that the Company believes would draw the highest level of interest from its customers. The Company is launching services related to these areas, such as the 5GX Boost Park. The Company plans to lead the 5G era by providing differentiated content in various areas including sports and entertainment.

SK Telink, a consolidated subsidiary of the Company, expanded its operations to the MVNO business based on its technical expertise and know-how obtained in its international telecommunications business and launched its MVNO service, ‘SK 7Mobile,’ which is offered at reasonable rates and provides excellent quality. SK Telink is increasing its efforts to develop low-cost distribution channels and create niche markets through targeted marketing towards customers including foreign workers, middle-aged adults and students. An MVNO leases the networks of an MNO and provides wireless telecommunication services under its own brand and fee structure, without owning telecommunication networks or frequencies.

SK O&S, a subsidiary of the Company responsible for the operation of the Company’s base stations and related transmission and power facilities, offers quality fixed-line and wireless network services to customers, including mobile office products to business customers. Network quality is a core competitive factor for not only the traditional consumer market but also for the expanding B2B market, and its importance will only increase in the 5G network era.

PS&Marketing, a subsidiary of the Company, provides a sales platform for products of the Company and SK Broadband including fixed-line and wireless telecommunication products that address customers’ needs for various convergence products. PS&Marketing provides differentiated service to clients through the establishment of new sales channels and product development.

 

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[Fixed-line Business]

 

A.

Industry Characteristics

The telecommunications services market can be categorized into telecommunications services (such as fixed-line, wireless, leased line and value-added services) and broadcasting and telecommunications convergence services (such as IPTV, cable TV and bundled fixed-line/wireless services). Pursuant to the Telecommunications Business Act, the telecommunications services market can be further classified into basic telecommunications (fixed-line and wireless telecommunications), special category telecommunications (resale of telecommunications equipment, facilities and services) and value-added telecommunications (Internet connection and management, media contents and others).

The broadcasting business involves the planning, progamming or production of broadcasting programs and transmission to viewers through telecommuncation facilties. Pursuant to the Broadcasting Act, the broadcasting market can be categorized into terrestrial broadcasting, fixed-line TV broadcasting, satellite broadcasting and programming-providing businesses. The Company engages in the fixed-line TV broadcasting business, which is defined as the business of managing and operating fixed-line TV broadcasting stations (including their facilities and employees for the purpose of providing multi-channel broadcasting) and providing broadcasts through transmission and line facilities.

As a result of the government’s direct and indirect control over the fixed-line telecommunications industry, ranging from service licensing to business activities, the industry’s overall growth potential and degree of competition are greatly affected by the government’s regulatory policies. The fixed-line telecommunications industry is also a technology-intensive industry that evolves rapidly and continuously through the development of communications technology and equipment, which requires proactive responses in meeting the needs of subscribers by developing new services and penetrating the market. Fixed-line telecommunications services have become universal and essential means of communication and act as the foundation for integration and convergence with various other services. The essential nature of such services provides stable demand, resulting in low sensitivity to economic conditions.

The Korean fixed-line services industry is marked by a high level of market concentration, as the government is highly selective in granting telecommunications business licenses. The competitive landscape of the fixed-line and wireless services markets is dominated by its three leading operators, the Company (including SK Broadband), KT and LG U+. Growing competition within the industry has promoted rapid technological evolution, including the convergence of fixed-line and wireless services, as well as broadcasting and telecommunications.

 

B.

Growth Potential

 

     (Unit: in 1,000 persons)  

Classification

   As of September 30,      As of December 31,  
   2020      2019      2018  

Fixed-line Subscribers

   High-speed Internet      22,330        21,906        21,286  
   Fixed-line telephone      13,024        13,600        14,334  
   IPTV      16,833        16,440        15,054  
   Cable TV      13,558        13,642        13,925  

 

*

Source: MSIT website.

 

C.

Cyclical Nature and Seasonality

High-speed Internet and fixed-line telephone services operate in mature markets that are comparatively less sensitive to cyclical economic changes as the services provided by different operators have become less differentiated. TV services have become necessities that provide broadcasting, and the market, which is subject to a subscriber-based business model, has little sensitivity to cyclical economic changes. The telecommunications services market overall is not expected to be particularly affected by economic downturns due to the low income elasticity of demand for telecommunication services.

 

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D.

Domestic and Overseas Market Conditions

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

 

              (Unit: in percentages)  

Classification

   As of September 30,      As of December 31,  
   2020      2019      2018  

High-speed Internet (including resales)

     29.4        25.6        25.4  

Fixed-line telephone (including Voice over Internet Protocol (“VoIP”)

     16.8        16.8        16.8  

IPTV

     30.2        30.3        30.3  

Cable TV

     22.4        22.4        22.5  

 

*

Source: MSIT website.

*

With respect to Internet telephone, the market share was calculated based on market shares among the Company, KT and LG U+ and is based on the number of IP phone subscribers.

In each of its principal business areas, SK Broadband principally competes on the basis of price, service quality and speed. In the IPTV business, the ability to offer complex services and differentiated contents are becoming increasingly important. General telecommunications businesses operate in a licensed industry with a high barrier of entry, which is dominated by SK Broadband, KT and LG U+.

 

E.

Business Overview and Competitive Strengths

In the third quarter of 2020, SK Broadband recorded Won 966.8 billion in revenue, Won 64.9 billion in operating profit and Won 37.4 billion in profit on a consolidated basis. SK Broadband achieved revenue growth compared to the third quarter of 2019 and the second quarter of 2020 as a result of a net increase in IPTV subscribers and the effects of the Tbroad Merger.

In the case of high-speed Internet, revenue increased compared to the third quarter of 2019 due to an increase in the proportion of subscribers of premium services, such as Giga Internet. Despite the absence of new cinematic releases and other new content, the IPTV service business continued its solid growth compared to the second quarter of 2020 due to the growth in subscribers and platform sales. Revenue from the corporate business increased compared to the third quarter of 2019 as a result of new leased lines and an expansion of metered lines.

[Security Business]

 

A.

Industry Characteristics

The security systems service business provides security services to governments, companies and individuals with the purpose of protecting tangible and intangible assets and human resources. Depending on the risk prevention method used, the security business can be classified into machine-based security, security system integration (“SI”) and manned security. Machine-based security operates by receiving information that is detected and transmitted by various sensors and cameras installed at the target facilities through control facility equipment and taking prompt and appropriate action, such as dispatching an agent or contacting the police or the fire department, if an abnormality is detected. Security SI is a service that integrates installation, operation, maintenance and repair of various equipment and systems by analyzing the appropriate security system for customer facilities, such as buildings, factories and schools. Manned security services deploy security personnel to areas subject to security, who perform on-site security services such as patrols and access control of buildings and facilities. The Company’s primary business in the security industry is its unmanned security service, and its business areas consist of the following:

 

Classification

  

Product

Machine-based security    CAPS service (unmanned security service), access control, view guard (CCTV), attendance management, drinking water management
Security SI and maintenance and repair    Access control (entry and parking), CCTV (recording, camera, monitor, network equipment), other security systems
Integrated security services (machine-based security + manned security)    Machine-based security services, manned security services (security, cleaning, concierge, etc.)

 

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B.

Growth Potential

The size of the physical security industry in terms of revenue is as follows:

 

(Unit: in millions of Won except percentages)  
     2019      2018      Change (%)  

Dispatch security services

     1,727,972        1,726,210        0.1

Video security services

     415,647        401,777        3.5

Other security services

     536,208        485,004        10.6

Total

     2,679,827        2,612,991        2.6

 

*

Source: Korea Information Industry Association (2019 Korean Information Security Services Industry Survey published in December 2019). 2019 figures are estimates.

 

C.

Cyclical Nature and Seasonality

The security systems business seeks to satisfy the basic need for safety and is less sensitive to economic fluctuations compared to other industries. Although the slowdown in the Korean economy and competition based on lower-cost alternatives has had a negative impact on industry growth, sustained growth is nevertheless expected due to the recent expansion of the industry into converged security markets with the integration of ICT.

 

D.

Domestic and Overseas Market Conditions

The security industry is experiencing a rapid increase in demand for CCTV, access control and other security systems due to threats including crime, natural disasters and calamities and terrorism. With increased consumer interest in safety, demand for security system services is expected to continue to grow. To date, the Korean security market is characterized by an oligopoly dominated by three leading companies due to the high barriers to entry as a result of high initial investment costs of building large-scale network systems and the effects of brand loyalty. The traditional security industry, characterized by price competition aimed at increasing market share, is expanding into a converged security market with the integration of ICT. In addition, the global converged security market integrating ICT has recently been experiencing rapid growth and increased competition due to the entry of global information technology companies. As a result, the global AI security industry, which had a market size of US$3.9 billion in 2018, is expected to grow tenfold by 2025.

 

E.

Business Overview and Competitive Strengths

For the nine months ended September 30, 2020, ADT CAPS recorded Won 612.3 billion in revenue and Won 86.0 billion in operating profit, and it has secured approximately 650,000 subscribers as of September 30, 2020, including subscribers to newly launched businesses.

Due to the saturation of the unmanned security market, the net growth rate in the number of ADT CAPS’ unmanned security contracts decreased in 2019 compared to the previous year. However, ADT CAPS was able to record approximately Won 740 billion in revenue in 2019, exceeding expectations, due to increases in the number of new subscribers acquired through the SK distribution network and sales in newly-launched businesses, such as CAPS Home and parking services.

Although the unmanned security market is expected to remain saturated in 2020, ADT CAPS will pursue efforts to improve its core unmanned security business through the development of products and market approaches that are tailored to the needs of various customers, while steadily improving its new security businesses at the same time.

In particular, through the merger of ADT SECURITY, a provider of security equipment and solutions, with and into itself, ADT CAPS plans to reach customers with a diverse range of products as a convergence security company in 2020.

 

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Unmanned security services range from crime prevention based on cutting-edge sensors and prompt dispatch of security personnel to follow-up services. With increased efforts to reduce false alarms, ADT CAPS continues to reduce dispatch and control costs, thereby improving service quality and ultimately generating new sources of revenue to establish a positive cycle for continuous growth.

Video security services provide objective security through full identification of subjects with the use of high-definition video, made convenient and safe through a diverse lineup of products and remote control services. Access security services provide outsider access control, employee attendance checks and even drinking water management, which are made user-friendly and convenient due to the integration of cutting edge AI-based technology such as fingerprint, facial and mobile recognition. ADT CAPS plans to continue advancing such technology-based services and deliver more convenient and safer security services to customers through innovative technologies.

The SI business provides comprehensive security solutions suitable for the management of large buildings, such as access control and energy, fire safety and parking management services. ADT CAPS is striving to provide customers with the best comprehensive security solution, including more economical and optimized products through the development of innovative technologies.

[Commerce Business]

 

A.

Industry Characteristics

Electronic commerce, or e-commerce, refers to transactions of goods and services that are processed electronically by information processing systems, such as personal computers, and can be classified into “online order” and “online order brokerage” businesses. The mail order brokerage business refers to the act of intermediating a transaction between a seller and a buyer by an online shopping mall, and the online order business refers to direct sales of goods and services by an online shopping mall. Online shopping malls can be categorized, based on the range of products that they handle, into special malls that handle products limited to specific categories and general malls that handle products across multiple categories. The Korean e-commerce market started to grow in the early 2000s with the spread of the Internet, and it is now going through a second period of growth in the form of mobile commerce as a result of the removal of time and space constraints on shopping following the proliferation of smartphones beginning in 2010, the simplification and improved convenience of payment services, the expansion of fast delivery services following intense competition in such services beginning in 2018, the combination of offline and online shopping experiences (omni-channel and O2O services) and advancements in personalization and recommendation services based on AI. Eleven Street, which operates an online order brokerage business, is known as an “open market business” operator within the e-commerce market. As a result of leading the trend of mobile commerce and pursuing innovative customer experience since the early stages of its business, Eleven Street has grown into a major player in the e-commerce market.

 

B.

Growth Potential

As of December 31, 2019, the size of the Korean e-commerce market was Won 134.6 trillion, accounting for approximately 28% of the total online and offline distribution market and demonstrating rapid growth at an annual average growth rate of over 25% for the past three years. In addition, mobile transactions accounted for 64.4% of the total e-commerce transaction value in 2019, after surpassing 50% for the first time in 2016. Considering the current acceleration in the shift of products traditionally sold offline, such as food products, food delivery services, apparels and household products, to the mobile e-commerce platform, mobile e-commerce is expected to continue its growth in the future.

 

Year

   2019     2018     2017     2016  

E-commerce transaction value (trillion Won)

     134.6       113.7       94.2       65.6  

Annual growth rate

     18.3     20.8     43.6     21.5

 

*

Source: Statistics Korea, “Online Shopping Trends.”

 

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C.

Cyclical Nature and Seasonality

While the commerce industry is inherently affected by fluctuations in the economy to a certain extent, their effect on the e-commerce market has been limited due to its ongoing rapid growth.

 

D.

Domestic and Overseas Market Conditions

The mobile-centered online commerce market is expected to grow steadily due to the further growth potential of the Internet shopping population, the development of online business models by offline commerce operators and the growth of mobile commerce. New business models are expected to emerge and proliferate into new markets as diverse lifestyle services that go beyond commodities are incorporated into the area of commerce.

 

E.

Business Overview and Competitive Strengths

Focusing on the 11st Marketplace, Eleven Street plans to continue expanding its commerce ecosystem and ultimately enhance its corporate value by providing diverse and innovative shopping experiences based on technology and strengthening customer benefits using synergies with other ICT businesses of the Company. In particular, Eleven Street recorded an operating profit in 2019 and, as a result, established a foundation for sustainable growth. Eleven Street has become a leader in the Korean e-commerce market through steady growth since the launch of 11st in 2008, with the largest number of unique visitors per month (at an average of 17 million unique visitors per month in 2019), by building customer trust and through effective marketing, despite its late entry into the online commerce market that was previously dominated by two players, Gmarket and Auction. Eleven Street has also firmly established itself as a market leader and top player in the Korean mobile commerce market by rapidly responding to the shift of the e-commerce market towards mobile platforms. In addition, Eleven Street has made efforts to gain the market’s confidence and improve customer satisfaction since the launch of 11st, resulting in recognition by certifications from KS-SQI (Service Quality Index) for twelve consecutive years, KCSI (Consumer Satisfaction Index) for eleven consecutive years and CCM (Consumer Centered Management). Based on the large user base of 11st, Eleven Street plans to expand the product offerings of 11st based on expanded partnerships with third parties and upgrade services, thereby continuing to strengthen the unique value of 11st as a commerce portal through improvements in customer’s convenience and continuous innovation.

[Other Businesses]

OK Cashbag, operated by SK Planet, is a point-based loyalty marketing program which has grown to become a global top-tier loyalty marketing program since its inception in 1999. Customers have access to increased benefits through accumulation of loyalty reward points and partner companies use OK Cashbag as a marketing resource. As Korea’s largest loyalty mileage program, OK Cashbag maintains a leading position in the industry. The Company is continuing to develop its service in light of market conditions and customers’ needs to enhance its customers’ perception of point value and is reviewing and pursuing various plans to develop OK Cashbag into a service that goes beyond a mileage program that leverages the key competitiveness of OK Cashbag such as its platform and partnership network.

Syrup is a service that provides information about coupons and events based on time, place and occasion, thereby maximizing economic benefits for consumers, as well as a marketing tool based on consumption behavior data that enables its business partners to achieve smart, low-cost and high-efficiency marketing. In 2019, based on big data accumulated over the years, Syrup expanded its service to the area of mobile finance, which allows users to check their financial assets and provides an integrated process including recommendation for and subscription to customized financial products. The Company plans to continue developing Syrup to provide more practical benefits to its customers in their daily lives.

Incross, a material subsidiary of the Company, primarily focuses on the digital advertising media representative business, which involves establishing media strategies and executing advertising on behalf of advertisers and advertising agencies, and its “Dawin” business, Korea’s first video advertising network platform. In April 2020, Incross launched T-Deal, a CPS (cost per sales) advertising product that utilizes SK Telecom’s text messaging services. In addition, Infra Communications, a subsidiary of Incross, provides operational services for the integrated mobile application market “Onestore.”

 

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FLO, launched in December 2018 by Dreamus Company, a material subsidiary of the Company, is a music streaming service that recommends music and provides a user experience (“UX”) tailored to individual users. Based on AI, FLO recommends music for its users by closely analyzing such user’s music listening history and provides various playlists on a home screen that changes daily by applying an adaptive UX. As of September 30, 2020, the market share of FLO in terms of number of average unique visitors (calculated based on the total mobile monthly active users of FLO, Melon, Genie, NAVER Music, Vibe, Bugs and YouTube Music) was approximately 18% (Source: Korean Click). In addition to its online music service, Dreamus Company operates a music records and digital content distribution business, artist merchandise business and device business under the “Astell&Kern” brand.

2.    Updates on Major Products and Services

 

     (Unit: in millions of Won and percentages)  

Business

  

Major Companies

  

Item

  

Major

Trademarks

   Consolidated
Sales Amount
     Ratio  

Wireless

  

SK Telecom Co., Ltd.,
PS&Marketing Co., Ltd.,

Service Ace Co., Ltd.
SK O&S Co., Ltd.

   Mobile communication service,
wireless data service,
ICT service
   T, 5GX, baro, T Plan and others      9,143,651        66

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      2,498,680        18

Security

   ADT CAPS Co., Ltd.    Manned and unmanned security, information security and others    CAPS, T&CAPS, B&CAPS and others      904,270        7

Commerce

   Eleven Street Co., Ltd.    E-commerce    11st, 11Pay, Gifticon and others      578,166        4

Other

  

SK Planet Co., Ltd.,

Onestore Co., Ltd., Dreamus Company,

SK M&Service Co., Ltd.,

Incross Co., Ltd.

   Information telecommunication, electronic finance, advertising, Internet platform service    OK Cashbag, Onestore, FLO and others      659,284        5

Total

     13,784,051        100

3.    Price Trends for Major Products

[Wireless Business]

As of September 30, 2020, based on the Company’s standard monthly subscription plan, the basic service fee was Won 12,100 and the usage fee was Won 1.98 per second. Among the 4G-based “T-Plans” launched in 2018, the “Medium Plan” provides 4 GB of data and unlimited voice calls at Won 50,000 per month (including value-added tax). Among the “5GX Plans” launched in 2019, the “Slim Plan” provides 8 GB of data and unlimited voice calls at Won 55,000 per month (including value-added tax). The Company provides a variety of other subscription plans catered to subscriber demand.

[Fixed-line Business]

SK Broadband offers a variety of subscription plans catering to customer needs, and the price of its services varies accordingly. In the case of IPTV, SK Broadband launched the “B tv All” plan, which provides all of the available B tv channels excluding pay channels at Won 18,700 per month in the case of three-year subscriptions, in July 2019. Other “All”-based packaged plans include “All + Point” and “All + Movie” (Won 20,900 per month) plans.

In the case of Internet, SK Broadband launched the “Giga Premium X” series in December 2018, including the “Giga Premium X2.5” plan, which provides a maximum transmission speed of 2.5 Gbps and Giga WiFi Premium services for Won 44,000 per month in the case of three-year subscriptions. In addition, as a result of the Tbroad Merger in April 2020, Tbroad’s cable Internet plans, such as the optical LAN plan (Won 19,800 per month), have been incorporated as part of SK Broadband’s services. SK Broadband also provides a variety of other subscription plans.

 

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Table of Contents

[Commerce Business]

Eleven Street acts as an intermediary in e-commerce transactions between sellers and buyers on 11st, and charges sellers sales commissions in accordance with the terms of use as consideration for execution of transactions, payment settlement and security measures. Although the amount of sales commissions vary by product category, it is generally set at market standard rates ranging from 10% to 12% of the transaction value. Such sales commission rate structure has largely remained unchanged since the launch of 11st, although Eleven Street occasionally offers temporary promotional reductions for certain periods in order to encourage transactions.

4.     Investment Status

[Wireless Business]

 

A.

Investment in Progress

 

(Unit: in billions of Won)  

Business

   Classification    Investment
period
   Subject of
investment
   Investment effect      Expected
investment
amount
   Amount
already
invested
     Future
investment
 

Network/Common

   Upgrade/
New installation
   Nine months
ended September 30,
2020
   Network,
systems and
others
    

Capacity increase and
quality improvement;
systems improvement
 
 
 
   To be
determined
     1,469        —    

Total

      To be
determined
     1,469        —    

 

B.

Future Investment Plan

 

(Unit: in billions of Won)

Business

   Expected investment amount    Expected investment for each year   

Investment effect

   Asset type    Amount    2020    2021    2022

Network/Common

   Network,
systems and
others
   To be
determined
   To be
determined
   To be
determined
   To be
determined
   Upgrades to the existing services and expanded provision of network services including 5G

Total

   To be
determined
   To be
determined
   To be
determined
   To be
determined
  

[Fixed-line Business]

 

A.

Investment in Progress and Future Investment Plan

 

(Unit: in 100 millions of Won)

Purpose of

investment

   Subject of
investment
   Investment
period
   Amount
already
invested
     Future
investment
   Investment effect

Coverage expansion, upgrade of media platform

   Network, systems,
internet data
center and others
   Nine months
ended September 30,
2020
     3,922      To be
determined
   Secure subscriber networks and
equipment; quality and system
improvements

 

*

The amount of capital expenditures before the Tbroad Merger on April 30, 2020 was approximately Won 6.9 billion.

 

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Table of Contents

5.     Revenues

 

     (Unit: in millions of Won)  

Business

  

Sales

type

  

Item

   For the nine
months ended
September 30,
2020
     For the year
ended December
31, 2019
     For the year
ended December
31, 2018
 

Wireless

   Services    Mobile communication    Export      122,966        141,496        50,959  
   Domestic      9,020,685        12,030,919        12,327,938  
   Subtotal      9,143,651        12,172,415        12,378,897  

Fixed-line

   Services    Fixed-line,
B2B data,
high-speed Internet, IPTV
   Export      106,009        96,962        104,592  
   Domestic      2,392,671        3,445,469        2,828,006  
   Subtotal      2,498,680        3,542,431        2,932,598  

Security

   Services    Personnel and system security, information security and others    Export      19,745        —          —    
   Domestic      884,525        913,301        197,487  
   Subtotal      904,270        913,301        197,487  

Commerce

   Services    E-commerce    Export      912        3,829        5,620  
   Domestic      577,254        526,660        612,459  
   Subtotal      578,166        530,489        618,079  

Other

   Services    Display and
search ad., contents
   Export      36,202        81,844        56,925  
   Domestic      623,082        503,222        689,974  
   Subtotal      659,284        585,066        746,899  

Total

         Export      285,834        324,131        218,096  
   Domestic      13,498,217        17,419,571        16,655,864  
   Total      13,784,051        17,743,702        16,873,960  

 

            (Unit: in millions of Won)  

For the nine months

ended September

30, 2020                    

   Wireless      Fixed      Security      Commerce      Other     Sub total      Internal
transaction
    After
consolidation
 

Total sales

     10,322,718        3,276,766        962,974        589,568        867,588       16,019,614        (2,235,563     13,784,051  

Internal sales

     1,179,067        778,086        58,704        11,402        208,304       2,235,563        (2,235,563     —    

External sales

     9,143,651        2,498,680        904,270        578,166        659,284       13,784,051        —         13,784,051  

Depreciation and amortization

     2,086,864        617,124        174,013        25,144        45,347       2,948,492        —         2,948,492  

Operating profit (loss)

     781,479        169,451        88,275        8,976        (25,130     1,023,051        —         1,023,051  

Finance profit (loss)

 

    (233,967

Gain from subsidiaries, investments in associates and joint ventures

 

    673,800  

Other non-operating profit (loss)

 

    (22,803

Profit before income tax

 

    1,440,081  

 

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Table of Contents

6.     Derivative Transactions

 

A.

Current Swap Contract Applying Cash Flow Risk Hedge Accounting

Currency and interest rate swap contracts under cash flow hedge accounting as of September 30, 2020 are as follows:

 

(Unit: in millions of Won and thousands of USD)

Borrowing

date           

  Hedged item   Hedged risk   Contract type   Financial
institution
  Duration of contract

Jul. 20, 2007

  Foreign currency denominated unsecured
bonds
  Foreign currency
risk
  Cross currency
swap
  Morgan Stanley
and four other
banks
  Jul. 20, 2007 – Jul. 20,
2027

Dec. 16, 2013

  Fixed rate foreign currency denominated
loan
  Foreign currency
risk
  Cross currency
swap
  Deutsche Bank   Dec. 16, 2013 – Apr.
29, 2022

Apr. 16, 2018

  Fixed rate foreign currency denominated
bonds
  Foreign currency
risk
  Cross currency
swap
  The Export-
Import Bank of
Korea and three
other banks
  Apr. 16, 2018 – Apr.
16, 2023

Mar. 4, 2020

  Floating rate foreign currency denominated
bonds
  Foreign currency
and interest rate
risks
  Cross currency
interest rate
swap
  Citibank   Mar. 4, 2020 – Jun. 4,
2025

Aug. 13, 2018

  Foreign currency denominated unsecured
bonds
  Foreign currency
risk
  Cross currency
swap
  Citibank   Aug. 13, 2018 – Aug.
13, 2023

Dec. 20, 2016

  Floating rate Korean Won denominated
loan
  Interest rate risk   Interest rate
swap
  Korea
Development
Bank
  Dec. 20, 2016 – Dec.
20, 2021

Dec. 21, 2017

  Floating rate Korean Won denominated
loan
  Interest rate risk   Interest rate
swap
  Korea
Development
Bank
  Dec. 5, 2017 – Dec.
21, 2022

Dec. 19, 2018

  Floating rate Korean Won denominated
loan
  Interest rate risk   Interest rate
swap
  Credit Agricole
CIB
  Mar. 19, 2019 – Dec.
14, 2023

 

B.

Treatment of Derivative Instruments on the Balance Sheet

As of September 30, 2020, fair values of derivative instruments held by the Company are included in the consolidated financial statements as current derivate financial assets, derivative financial assets and derivative financial liabilities, which are part of its current assets, non-current assets and non-current liabilities, respectively, as follows:

 

(Unit: in millions of Won and thousands of USD)  

Classification

   Hedged item   Fair value  
  Cash flow hedge     Trading purposes     Total  

Cross currency swap

   Fixed rate foreign currency denominated bonds
(face value of USD 400,000)
    70,568       —         70,568  
   Fixed rate foreign currency denominated bonds
(face value of USD 500,000)
    75,451       —         75,451  
   Fixed rate foreign currency denominated loan
(face value of USD 28,732)
    1,317       —         1,317  
   Fixed rate foreign currency denominated bonds
(face value of USD 300,000)
    27,077       —         27,077  

Balance settlement agreements

   Others     —         5,819       5,819  

Put option contracts

   Others     —         14,696       14,696  

Total derivative financial assets

 

    194,928  

Interest rate swap and cross currency interest rate swap (non-current liabilities)

   Floating rate foreign currency denominated
bonds (face value of USD 300,000)
    (20,403     —         (20,403
   Floating rate Korean Won denominated loan
(face value of 21,437)
    (115     —         (115
   Floating rate Korean Won denominated loan
(face value of 34,375)
    (461     —         (461
   Floating rate Korean Won denominated loan
(face value of 46,875)
    (759     —         (759

Warrant agreement

   Others     —         (15,883     (15,883

Total derivative financial liabilities

 

    (37,621

 

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Table of Contents

7.     Major Contracts

[SK Telecom]

None.

[SK Broadband]

 

(Unit: in millions of Won)

Counterparty

   Contract Contents   

Date of Contract

   Contract
Amount
    

Notes

SK D&D Co., Ltd.

   Sale of land and building in
Seocho-dong
   May 16, 2018      40,306      Sale of idle assets to improve financial structure

Sejin Jin (Individual)

   Sale of Deogyang Bunyang
Guksa
   October 10, 2019      788      Sale of idle assets for non-business use

Gihun Lee (Individual)

   Sale of Daegu Namsang-
dong building
   October 15, 2020      3,550      Sale of idle assets for non-business use

8.     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,
2020
    For the year ended
December 31, 2019
    For the year ended
December 31, 2018
    Remarks  

Raw material

     490       633       760       —    

Labor

     125,845       125,248       131,792       —    

Depreciation

     134,942       161,655       155,093       —    

Commissioned service

     34,202       65,794       78,323       —    

Others

     29,352       52,167       47,511       —    

Total R&D costs

     324,831       405,497       413,480       —    

Accounting

  

Sales and administrative expenses

     320,051       391,327       387,675       —    
   Development expenses (Intangible assets)      4,779       14,170       25,805       —    

R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100)

     2.36     2.29     2.45     —    

9.     Other information relating to investment decisions

 

A.

Trademark Policies

The Company manages its corporate brand and other product brands in a comprehensive way to protect and increase their value. The Company operates an intranet system called “Comm.ON” in order to implement consistent communication with consumers across various areas including branding, design, marketing and public relations, and systematically manages the development, registration and licensing of brands through such system.

 

B.

Business-related Intellectual Property

[SK Telecom]

As of September 30, 2020, the Company held 3,086 Korean-registered patents and 1,213 foreign-registered patents. The Company holds 716 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “T” representing its brand. The designed alphabet “T” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to constant change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.

 

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Table of Contents

[SK Broadband]

As of September 30, 2020, SK Broadband held 321 Korean-registered patents and 142 foreign-registered patents (including those held jointly with other companies). It also holds 314 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “B” representing its brand. The designed alphabet “B” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to continual change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.

[SK Planet]

As of September 30, 2020, SK Planet held 1,780 registered patents, 84 registered design marks, 771 registered trademarks and 4 copyrights (in each case including those held jointly with other companies) in Korea. It also holds various other intellectual property rights in other countries, including 273 U.S.-registered patents, 141 Chinese-registered patents, 84 Japanese-registered patents, 91 E.U.-registered patents (in each case including those held jointly with other companies) and 156 foreign registered trademarks.

[Eleven Street]

As of September 30, 2020, Eleven Street held 111 registered patents, 12 registered design marks, 596 registered trademarks and 5 copyrights (in each case including those held jointly with other companies) in Korea. It also holds various other intellectual property rights in other countries, including 35 U.S.-registered patents (including those held jointly with other companies).

 

C.

Business-related Pollutants and Environmental Protection

[SK Telecom]

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

[SK Broadband]

SK Broadband does not directly engage in any manufacturing processes that emit environmental pollutants, and more than 99% of its greenhouse gas emissions is indirect emissions from its use of external electricity. SK Broadband was selected as a business subject to allocation of emission permits as part of Korea’s greenhouse gas emissions trading scheme that commenced in 2015, and it actively fulfills its obligations and consistently achieves the targets set by the government. In addition, SK Broadband continues to invest in environment-friendly facilities for its data centers and improve the stability and efficiency of its services.

 

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Table of Contents
III.

FINANCIAL INFORMATION

1.     Summary Financial Information (Consolidated and Separate)

 

A.

Summary Financial Information (Consolidated)

Below is the summary consolidated financial information of the Company as of September 30, 2020, December 31, 2019 and December 31, 2018 and for the nine months ended September 30, 2020 and 2019 and the years ended December 31, 2019 and 2018. The Company’s unaudited consolidated financial statements as of September 30, 2020 and December 31, 2019 and for the nine months ended September 30, 2020 and 2019, which are prepared in accordance with K-IFRS, are attached hereto.

 

(Unit: in millions of Won except number of companies)  
     As of
September 30, 2020
     As of
December 31, 2019
     As of
December 31, 2018
 

Assets

        

Current Assets

     9,032,091        8,102,294        7,958,839  

•   Cash and Cash Equivalents

     1,883,799        1,270,824        1,506,699  

•   Accounts Receivable – Trade, net

     2,336,642        2,230,979        2,008,640  

•   Accounts Receivable – Other, net

     921,178        905,436        937,837  

•   Others

     3,890,472        3,695,055        3,505,663  

Non-Current Assets

     37,626,402        36,509,326        34,410,272  

•   Long-Term Investment Securities

     1,395,575        857,215        664,726  

•   Investments in Associates and Joint Ventures

     14,101,177        13,385,264        12,811,771  

•   Property and Equipment, net

     12,190,268        12,334,280        10,718,354  

•   Intangible Assets, net

     4,779,360        4,866,092        5,513,510  

•   Goodwill

     3,120,892        2,949,530        2,938,563  

•   Others

     2,039,130        2,116,945        1,763,348  

Total Assets

     46,658,493        44,611,620        42,369,111  

Liabilities

        

Current Liabilities

     7,674,580        7,787,722        6,847,557  

Non-Current Liabilities

     14,660,888        14,000,362        13,172,304  

Total Liabilities

     22,335,468        21,788,084        20,019,861  

Equity

        

Equity Attributable to Owners of the Parent Company

     23,793,796        22,956,829        22,470,822  

Share Capital

     44,639        44,639        44,639  

Capital Surplus (Deficit) and Other Capital Adjustments

     1,097,693        1,006,481        655,084  

Retained Earnings

     22,595,716        22,235,285        22,144,541  

Reserves

     55,748        (329,576      (373,442

Non-controlling Interests

     529,229        (133,293      (121,572

Total Equity

     24,323,025        22,823,536        22,349,250  

Total Liabilities and Equity

     46,658,493        44,611,620        42,369,111  

Number of Companies Consolidated

     49        48        44  

 

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Table of Contents
            (Unit: in millions of Won except per share data)  
     For the nine
months ended
September 30,
2020
     For the nine
months ended
September 30,
2019
     For the year ended
December 31, 2019
     For the year ended
December 31, 2018
 

Operating Revenue

     13,784,051        13,333,148        17,743,702        16,873,960  

Operating Profit

     1,023,051        947,492        1,109,980        1,201,760  

Profit Before Income Tax

     1,440,081        1,170,416        1,162,655        3,975,966  

Profit for the Period

     1,134,676        907,112        861,942        3,131,988  

Profit for the Period Attributable to Owners of the Parent Company

     1,123,549        916,966        889,907        3,127,887  

Profit for the Period Attributable to Non-controlling Interests

     11,127        (9,854      (27,965      4,101  

Basic Earnings Per Share (Won)

     15,218        12,605        12,144        44,066  

Diluted Earnings Per Share (Won)

     15,215        12,605        12,144        44,066  

 

B.

Summary Financial Information (Separate)

Below is the summary separate financial information of the Company as of September 30, 2020, December 31, 2019 and December 31, 2018 and for the nine months ended September 30, 2020 and 2019 and the years ended December 31, 2019 and 2018. The Company’s unaudited separate financial statements as of September 30, 2020 and December 31, 2019 and for the nine months ended September 30, 2020 and 2019, which are prepared in accordance with K-IFRS, are attached hereto.

 

     (Unit: in millions of Won)  
     As of September 30,
2020
     As of December 31,
2019
     As of December 31,
2018
 

Assets

        

Current Assets

     5,282,778        5,011,363        4,679,378  

•   Cash and Cash Equivalents

     675,244        497,282        877,823  

•   Accounts Receivable – Trade, net

     1,590,067        1,479,971        1,354,260  

•   Accounts Receivable – Other, net

     406,786        507,680        518,451  

•   Others

     2,610,681        2,526,430        1,928,844  

Non-Current Assets

     25,735,998        25,828,004        24,168,645  

•   Long-Term Investment Securities

     954,733        510,633        410,672  

•   Investments in Subsidiaries and Associates

     10,845,040        10,578,158        10,188,914  

•   Property and Equipment, net

     8,131,623        8,264,888        6,943,490  

•   Intangible Assets, net

     3,011,398        3,461,152        4,010,864  

•   Goodwill

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

•   Others

     1,486,968        1,706,937        1,308,469  

Total Assets

     31,018,776        30,839,367        28,848,023  

Liabilities

        

Current Liabilities

     4,783,877        5,057,478        4,178,068  

Non-Current Liabilities

     8,639,067        8,392,150        7,782,468  

Total Liabilities

     13,422,944        13,449,628        11,960,536  

Equity

        

Share Capital

     44,639        44,639        44,639  

Capital Surplus and Other Capital Adjustments

     596,804        715,619        415,324  

Retained Earnings

     16,662,589        16,678,787        16,467,789  

Reserves

     291,800        (49,306      (40,265

Total Equity

     17,595,832        17,389,739        16,887,487  

Total Liabilities and Equity

     31,018,776        30,839,367        28,848,023  

 

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Table of Contents
            (Unit: in millions of Won except per share data)  
     For the nine
months ended
September 30,
2020
     For the nine
months ended
September 30,
2019
     For the year
ended
December 31,
2019
     For the year
ended
December 31,
2018
 

Operating Revenue

     8,803,310        8,571,475        11,416,215        11,705,639  

Operating Profit

     792,269        833,721        950,109        1,307,494  

Profit Before Income Tax

     919,843        1,182,176        1,185,490        1,221,244  

Profit for the Period

     733,122        967,095        980,338        933,902  

Basic Earnings Per Share (Won)

     9,877        13,302        13,399        13,000  

Diluted Earnings Per Share (Won)

     9,876        13,302        13,399        13,000  

2.     Other Matters Related to Financial Information

 

A.

Restatement of the Financial Statements

Not applicable.

 

B.

Loss Allowance

 

  (1)

Loss Allowance of Trade and Other Receivables

 

     (Unit: in millions of Won)  
     For the nine months ended September 30, 2020  
     Gross amount      Loss Allowance      Percentage  

Accounts receivable – trade

     2,640,961        278,221        11

Loans

     180,705        45,696        25

Accounts receivable – other

     1,275,416        50,018        4

Accrued income

     5,887        166        3

Guarantee deposits

     302,745        300        0

Total

     4,405,714        374,401        8
    
(Unit: in millions of Won)
 
     For the year ended December 31, 2019  
   Gross amount      Loss Allowance      Percentage  

Accounts receivable – trade

     2,497,396        249,501        10

Loans

     147,937        48,054        32

Accounts receivable – other

     1,298,477        48,379        4

Accrued income

     3,977        166        4

Guarantee deposits

     310,074        299        0

Total

     4,257,861        346,399        8
     (Unit: in millions of Won)  
     For the year ended December 31, 2018  
   Gross amount      Loss Allowance      Percentage  

Accounts receivable – trade

     2,280,090        260,157        11

Loans

     135,503        47,375        35

Accounts receivable – other

     1,280,236        68,346        5

Accrued income

     6,232        166        3

Guarantee deposits

     315,854        —          0

Total

     4,017,915        376,045        9

 

  (2)

Movements in Loss Allowance of Trade and Other Receivables

 

            (Unit: in millions of Won)  
     For the nine months
ended September 30,
2020
     For the year ended
December 31, 2019
     For the year ended
December 31, 2018
 

Beginning balance

     346,399        376,045        362,171  

Effect of change in accounting policy

     —          —          13,049  

Increase of loss allowance

     43,298        28,841        45,051  

Reversal of loss allowance

     —          —          —    

Write-offs

     (27,022      (46,616      (65,762

Other

     9,847        17,650        21,536  

Ending balance

     374,401        346,399        376,045  

 

38


Table of Contents
  (3)

Policies for Loss Allowance

The Company establishes loss allowances based on the likelihood of recoverability of trade and other receivables based on their aging at the end of the period and past customer default experience for the past three years. With respect to trade receivables relating to wireless telecommunications services, the Company considers the likelihood of recovery based on past customer default experience and the length of default in connection with the type of default (e.g., whether the customer’s service has been terminated or is continued). For such trade receivables that have been overdue for more than two years after the customer’s service has been terminated, the Company records an allowance of 100% of such receivables. For such trade receivables that have been overdue for less than two years after the customer’s service has been terminated or relates to a customer that is continuing his service, the Company records an allowance of a certain percentage of such receivable. Consistent with customary practice, the Company writes off trade and other receivables for which the prescription period has passed or that are determined to be impossible or economically too costly to collect, including receivables that are less than Won 200,000 and more than six months overdue and receivables that have been determined to be the subject of identity theft.

 

  (4)

Aging of Accounts Receivable

 

      (Unit: in millions of Won)  
     As of September 30, 2020  
   Six months or
less
    From six
months to one
year
    From one year
to three years
    More than
three years
    Total  

Accounts receivable – general

     2,346,765       60,596       152,641       80,960       2,640,961  

Percentage

     89     2     6     3     100

 

C.

Inventories

 

  (1)

Detailed Categories of Inventories

 

     (Unit: in millions of Won)  

Account Category

   For the nine months
ended September 30,
2020
    For the year ended
December 31, 2019
    For the year ended
December 31, 2018
 

Merchandise

     204,732       147,928       259,524  

Goods in transit

     —         —         —    

Other inventories

     11,289       14,954       28,529  

Total

     216,021       162,882       288,053  

Percentage of inventories to total assets [ Inventories / Total assets ]

     0.46     0.37     0.68

Inventory turnover
[ Cost of sales / { ( Beginning balance of inventories + Ending balance of inventories ) / 2} ]

     6.33       7.79       6.41  

 

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Table of Contents
  (2)

Reporting of Inventories

The Company holds handsets, ICT equipment for offline sales, etc. in inventory. The Company conducts physical due diligence of its inventories with its auditors at the end of each year.

 

D.

Fair Value Measurement

See note 2 of the notes to the Company’s unaudited consolidated financial statements as of September 30, 2020 and December 31, 2019 and for the nine months ended September 30, 2020 and 2019, for more information.

 

E.

Key Terms of Debt Securities

[SK Telecom]

The following are key terms and conditions of bonds issued by the Company. The compliance status is as of the date of the latest financial statements including the audit opinion of the independent auditor applicable to the determination of compliance status, except for the compliance status of the restriction on changes of ownership structure, which is as of the end of the reporting period.

 

Name

   Issue Date    Maturity Date            Principal Amount        
(millions of Won)
             Date of Fiscal        
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 61-2

   Dec. 27, 2011    Dec. 27, 2021      190,000      Dec. 19, 2011    Hana Financial
Investment Co.,
Ltd.

 

Maintenance of Financial Ratio    Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant
Restriction on Liens    Key Term    The total amount of secured debt not to exceed 50% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant
Restriction on Disposition of Assets    Key Term    Disposal of assets per fiscal year not to exceed Won 2 trillion
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term    Not applicable
   Compliance Status    Not applicable
Submission of Compliance Certificate    Compliance Status    Submitted on August 14, 2020

 

Name

   Issue Date    Maturity Date            Principal Amount        
(millions of  Won)
             Date of Fiscal        
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 62-2

   Aug. 28, 2012    Aug. 28, 2022      140,000      Aug. 22, 2012    Meritz Securities
Co., Ltd.

Unsecured Bond – Series 62-3

   Aug. 28, 2012    Aug. 28, 2032      90,000      Aug. 22, 2012    Meritz Securities
Co., Ltd.

 

Maintenance of Financial Ratio    Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant
Restriction on Liens    Key Term    The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant
Restriction on Disposition of Assets    Key Term    Disposal of assets per fiscal year not to exceed Won 2 trillion
   Compliance Status    Compliant
Submission of Compliance Certificate    Compliance Status    Submitted on August 14, 2020

 

40


Table of Contents

Name

   Issue Date    Maturity Date    Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 63-1

   April 23, 2013    April 23, 2023      230,000      April 17, 2013    Korea Securities
Finance Corp.

Unsecured Bond – Series 63-2

   April 23, 2013    April 23, 2033      130,000      April 17, 2013    Korea Securities
Finance Corp.

Unsecured Bond – Series 64-2

   May 14, 2014    May 14, 2024      150,000      April 29, 2014    Korea Securities
Finance Corp.

Unsecured Bond – Series 65-3

   Oct. 28, 2014    Oct. 28, 2024      190,000      Oct. 16, 2014    Korea Securities
Finance Corp.

Unsecured Bond – Series 66-1

   Feb. 26, 2015    Feb. 26, 2022      100,000      Feb. 11, 2015    Korea Securities
Finance Corp.

Unsecured Bond – Series 66-2

   Feb. 26, 2015    Feb. 26, 2025      150,000      Feb. 11, 2015    Korea Securities
Finance Corp.

Unsecured Bond – Series 66-3

   Feb. 26, 2015    Feb. 26, 2030      50,000      Feb. 11, 2015    Korea Securities
Finance Corp.

Unsecured Bond – Series 67-2

   July 17, 2015    July 17, 2025      70,000      July 9, 2015    Korea Securities
Finance Corp.

Unsecured Bond – Series 67-3

   July 17, 2015    July 17, 2030      90,000      July 9, 2015    Korea Securities
Finance Corp.

Unsecured Bond – Series 68-2

   Nov. 30, 2015    Nov. 30, 2025      100,000      Nov. 18, 2015    Korea Securities
Finance Corp.

Unsecured Bond – Series 68-3

   Nov. 30, 2015    Nov. 30, 2035      70,000      Nov. 18, 2015    Korea Securities
Finance Corp.

Unsecured Bond – Series 69-2

   March 4, 2016    March 4, 2021      100,000      Feb. 22, 2016    Korea Securities
Finance Corp.

Unsecured Bond – Series 69-3

   March 4, 2016    March 4, 2026      90,000      Feb. 22, 2016    Korea Securities
Finance Corp.

Unsecured Bond – Series 69-4

   March 4, 2016    March 4, 2036      80,000      Feb. 22, 2016    Korea Securities
Finance Corp.

 

Maintenance of Financial Ratio    Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant
Restriction on Liens    Key Term    The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant
Restriction on Disposition of Assets    Key Term    Disposal of assets per fiscal year not to exceed Won 2 trillion
   Compliance Status    Compliant
Submission of Compliance Certificate    Compliance Status    Submitted on August 14, 2020

 

Name

   Issue Date    Maturity Date    Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 70-2

   June 3, 2016    June 3, 2021      50,000      May 24, 2016    Korea Securities
Finance Corp.

Unsecured Bond – Series 70-3

   June 3, 2016    June 3, 2026      120,000      May 24, 2016    Korea Securities
Finance Corp.

Unsecured Bond – Series 70-4

   June 3, 2016    June 3, 2031      50,000      May 24, 2016    Korea Securities
Finance Corp.

Unsecured Bond – Series 71-1

   April 25, 2017    April 25, 2020      60,000      April 13, 2017    Korea Securities
Finance Corp.

Unsecured Bond – Series 71-2

   April 25, 2017    April 25, 2022      120,000      April 13, 2017    Korea Securities
Finance Corp.

Unsecured Bond – Series 71-3

   April 25, 2017    April 25, 2027      100,000      April 13, 2017    Korea Securities
Finance Corp.

Unsecured Bond – Series 71-4

   April 25, 2017    April 25, 2032      90,000      April 13, 2017    Korea Securities
Finance Corp.

 

41


Table of Contents
Maintenance of Financial Ratio    Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant
Restriction on Liens    Key Term    The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant
Restriction on Disposition of Assets    Key Term    Disposal of assets per fiscal year not to exceed Won 5 trillion
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term    —  
   Compliance Status    —  
Submission of Compliance Certificate    Compliance Status    Submitted on April 20, 2020

 

Name

   Issue Date    Maturity Date    Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 72-1

   Nov. 10, 2017    Nov. 10, 2020      100,000      Oct. 31, 2017    Korea Securities
Finance Corp.

Unsecured Bond – Series 72-2

   Nov. 10, 2017    Nov. 10, 2022      80,000      Oct. 31, 2017    Korea Securities
Finance Corp.

Unsecured Bond – Series 72-3

   Nov. 10, 2017    Nov. 10, 2027      100,000      Oct. 31, 2017    Korea Securities
Finance Corp.

Unsecured Bond – Series 73-1

   Feb. 20, 2018    Feb. 20, 2021      110,000      Feb. 6. 2018    Korea Securities
Finance Corp.

Unsecured Bond – Series 73-2

   Feb. 20, 2018    Feb. 20, 2023      100,000      Feb. 6. 2018    Korea Securities
Finance Corp.

Unsecured Bond – Series 73-3

   Feb. 20, 2018    Feb. 20, 2028      200,000      Feb. 6. 2018    Korea Securities
Finance Corp.

Unsecured Bond – Series 73-4

   Feb. 20, 2018    Feb. 20, 2038      90,000      Feb. 6. 2018    Korea Securities
Finance Corp.

Unsecured Bond – Series 74-1

   Sept. 17, 2018    Sept. 17, 2021      100,000      Sept. 5, 2018    Korea Securities
Finance Corp.

Unsecured Bond – Series 74-2

   Sept. 17, 2018    Sept. 17, 2023      150,000      Sept. 5, 2018    Korea Securities
Finance Corp.

Unsecured Bond – Series 74-3

   Sept. 17, 2018    Sept. 17, 2038      50,000      Sept. 5, 2018    Korea Securities
Finance Corp.

Unsecured Bond – Series 75-1

   March 6, 2019    March 6, 2022      180,000      Feb. 21, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 75-2

   March 6, 2019    March 6, 2024      120,000      Feb. 21, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 75-3

   March 6, 2019    March 6, 2029      50,000      Feb. 21, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 75-4

   March 6, 2019    March 6, 2039      50,000      Feb. 21, 2019    Korea Securities
Finance Corp.

 

Maintenance of Financial Ratio

   Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant

Restriction on Liens

   Key Term    The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant

Restriction on Disposition of Assets

   Key Term    Disposal of assets per fiscal year not to exceed 50% of total assets
   Compliance Status    Compliant

Restriction on Changes of Ownership Structure

   Key Term   

Restriction of cross-shareholding

Exclusion from corporate group

   Compliance Status    Compliant

Submission of Compliance Certificate

   Compliance Status    Submitted on August 14, 2020

 

42


Table of Contents

Name

   Issue Date    Maturity Date    Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 76-1

   July 29, 2019    July 29, 2022      120,000      July 17, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 76-2

   July 29, 2019    July 29, 2024      60,000      July 17, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 76-3

   July 29, 2019    July 29, 2029      120,000      July 17, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 76-4

   July 29, 2019    July 29, 2039      50,000      July 17, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 76-5

   July 29, 2019    July 29, 2049      50,000      July 17, 2019    Korea Securities
Finance Corp.

 

Maintenance of Financial Ratio    Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant
Restriction on Liens    Key Term    The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant
Restriction on Disposition of Assets    Key Term    Disposal of assets per fiscal year not to exceed 50% of total assets
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term   

Restriction of cross-shareholding

Exclusion from corporate group

   Compliance Status    Compliant
Submission of Compliance Certificate    Compliance Status    Submitted on August 14, 2020

 

Name

   Issue Date    Maturity Date    Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 77-1

   Oct. 22, 2019    Oct. 21, 2022      90,000      Oct. 10, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 77-2

   Oct. 22, 2019    Oct. 22, 2024      50,000      Oct. 10, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 77-3

   Oct. 22, 2019    Oct. 22, 2029      30,000      Oct. 10, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 77-4

   Oct. 22, 2019    Oct. 22, 2039      30,000      Oct. 10, 2019    Korea Securities
Finance Corp.

 

Maintenance of Financial Ratio    Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant
Restriction on Liens    Key Term    The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant
Restriction on Disposition of Assets    Key Term    Disposal of assets per fiscal year not to exceed 50% of total assets
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term   

Restriction of cross-shareholding

Exclusion from corporate group

   Compliance Status    Compliant
Submission of Compliance Certificate    Compliance Status    Submitted on August 14, 2020

 

43


Table of Contents

Name

   Issue Date    Maturity Date    Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 78-1

   Jan. 14, 2020    Jan. 13, 2023      170,000      Dec. 31, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 78-2

   Jan. 14, 2020    Jan. 14, 2025      130,000      Dec. 31, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 78-3

   Jan. 14, 2020    Jan. 14, 2030      50,000      Dec. 31, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 78-4

   Jan. 14, 2020    Jan. 14, 2040      70,000      Dec. 31, 2019    Korea Securities
Finance Corp.

 

Maintenance of Financial Ratio    Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant
Restriction on Liens    Key Term    The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant
Restriction on Disposition of Assets    Key Term    Disposal of assets per fiscal year not to exceed 50% of total assets
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term   

Restriction of cross-shareholding

Exclusion from corporate group

   Compliance Status    Compliant
Submission of Compliance Certificate    Compliance Status    Submitted on August 14, 2020

 

Name

   Issue Date    Maturity Date    Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 79-1

   Oct. 19, 2020    Oct. 19, 2025      140,000      Oct. 6, 2020    Korea Securities
Finance Corp.

Unsecured Bond – Series 79-2

   Oct. 19, 2020    Oct. 19, 2030      40,000      Oct. 6, 2020    Korea Securities
Finance Corp.

Unsecured Bond – Series 79-3

   Oct. 19, 2020    Oct. 19, 2040      110,000      Oct. 6, 2020    Korea Securities
Finance Corp.

 

Maintenance of Financial Ratio    Key Term    Debt ratio no greater than 300%
   Compliance Status    Compliant
Restriction on Liens    Key Term    The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant
Restriction on Disposition of Assets    Key Term    Disposal of assets per fiscal year not to exceed 50% of total assets
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term   

Restriction of cross-shareholding

Exclusion from corporate group

   Compliance Status    Compliant
Submission of Compliance Certificate    Compliance Status    To be submitted after the release of the 2020 business report

 

44


Table of Contents

[SK Broadband]

The following are key terms and conditions of bonds issued by SK Broadband.

 

Name

   Issue Date      Maturity Date      Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
     Fiscal Agent  

Unsecured Bond – Series 42

     Oct. 6, 2015        Oct. 6, 2020        130,000        Sept. 22, 2015       
Korea Securities
Finance Corp.
 
 

Unsecured Bond – Series 43-2

     Oct. 5, 2016        Oct. 5, 2021        120,000        Sept. 22, 2016       
Korea Securities
Finance Corp.
 
 

Unsecured Bond – Series 44

     Feb. 3, 2017        Feb. 3, 2022        150,000        Jan. 20, 2017       
Korea Securities
Finance Corp.
 
 

 

Maintenance of Financial Ratio    Key Term    Debt ratio no greater than 400%
   Compliance Status    Compliant
Restriction on Liens    Key Term    The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant
Restriction on Disposition of Assets    Key Term    Disposal of assets per fiscal year not to exceed Won 2 trillion
   Compliance Status    Compliant
Restriction on Changes of Ownership Structure    Key Term    —  
   Compliance Status    —  
Submission of Compliance Certificate    Compliance Status    Submitted on September 11, 2020

 

*

Unsecured Bond – Series 42 has been repaid after the reporting period.

 

Name

   Issue Date    Maturity Date    Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 45-1

   Oct. 11, 2017    Oct. 11, 2020      30,000      Sept. 20, 2017    Korea Securities
Finance Corp.

Unsecured Bond – Series 45-2

   Oct. 11, 2017    Oct. 11, 2022      140,000      Sept. 20, 2017    Korea Securities
Finance Corp.

 

Maintenance of Financial Ratio

   Key Term    Debt ratio no greater than 400%
   Compliance Status    Compliant

Restriction on Liens

   Key Term    The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant

Restriction on Disposition of Assets

   Key Term    Disposal of assets per fiscal year not to exceed 70% of total assets
   Compliance Status    Compliant

Restriction on Changes of Ownership Structure

   Key Term    —  
   Compliance Status    —  

Submission of Compliance Certificate

   Compliance Status    Submitted on September 11, 2020

 

*

Unsecured Bond – Series 45-1 has been repaid after the reporting period.

 

45


Table of Contents

Name

   Issue Date    Maturity Date    Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
   Fiscal Agent

Unsecured Bond – Series 46-1

   Feb. 1, 2018    Feb. 1, 2021      70,000      Jan. 19, 2018    Korea Securities
Finance Corp.

Unsecured Bond – Series 46-2

   Feb. 1, 2018    Feb. 1, 2023      80,000      Jan. 19, 2018    Korea Securities
Finance Corp.

Unsecured Bond – Series 47-1

   March 26, 2019    March 26, 2022      50,000      March 14, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 47-2

   March 26, 2019    March 26, 2024      160,000      March 14, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 48-1

   Sept. 24, 2019    Sept. 23, 2022      80,000      Sept. 10, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 48-2

   Sept. 24, 2019    Sept. 24, 2024      100,000      Sept. 10, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 48-3

   Sept. 24, 2019    Sept. 23, 2026      50,000      Sept. 10, 2019    Korea Securities
Finance Corp.

Unsecured Bond – Series 49-1

   June 11, 2020    June 9, 2023      100,000      June 1, 2020    Korea Securities
Finance Corp.

Unsecured Bond – Series 49-2

   June 11, 2020    June 11, 2025      100,000      June 1, 2020    Korea Securities
Finance Corp.

 

Maintenance of Financial Ratio

   Key Term    Debt ratio no greater than 400%
   Compliance Status    Compliant

Restriction on Liens

   Key Term    The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant

Restriction on Disposition of Assets

   Key Term    Disposal of assets per fiscal year not to exceed 70% of total assets
   Compliance Status    Compliant

Restriction on Changes of Ownership Structure

   Key Term    Restriction on changes of ownership structure
   Compliance Status    Compliant

Submission of Compliance Certificate

   Compliance Status    Submitted on September 11, 2020

 

*

Beginning with Series 47, the basis for the maintenance of financial ratio has changed to a consolidated basis.

 

Name

   Issue Date      Maturity Date      Principal Amount
(millions of Won)
     Date of Fiscal
Agency
Agreement
     Fiscal Agent  

Unsecured Bond – Series 50

     Sept. 25, 2020        Sept. 25, 2020        160,000        Sept. 15, 2025       
Korea Securities
Finance Corp.
 
 

 

Maintenance of Financial Ratio

   Key Term    Debt ratio no greater than 400%
   Compliance Status    Compliant

Restriction on Liens

   Key Term    The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year
   Compliance Status    Compliant

Restriction on Disposition of Assets

   Key Term    Disposal of assets per fiscal year not to exceed 70% of total assets
   Compliance Status    Compliant

Restriction on Changes of Ownership Structure

   Key Term    Restriction on changes of ownership structure
   Compliance Status    Compliant

Submission of Compliance Certificate

   Compliance Status    To be submitted after the finalization of the financial statements for the year 2020

 

46


Table of Contents
IV.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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

 

V.

AUDITOR’S OPINION

1.    Independent Auditors and Audit Opinions

 

A.

Independent Auditor and Audit Opinion (Consolidated)

 

Period

  

Independent auditor

  

Audit opinion

  

Emphasis of

Matter

  

Critical Audit

Matters

Nine months ended September 30, 2020

   KPMG Samjong Accounting Corp.    —      —      —  

Year ended December 31, 2019

   KPMG Samjong Accounting Corp.    Unqualified    N/A    Revenue recognition; assessment of impairment of cash-generating unit of security services

Year ended December 31, 2018

   KPMG Samjong Accounting Corp.    Unqualified    N/A    Revenue recognition; recognition of incremental costs of obtaining contracts

 

B.

Audit Services Contracts with Independent Auditors

 

(Unit: in millions of Won except number of hours)  
                 Audit Contract      Actual Performance  

Period

   Auditors     

Contents

   Fee      Total
number of
hours
     Fee      Total
number
of hours
 

Nine months ended September 30, 2020

    
KPMG Samjong
Accounting Corp.
 
 
   Quarterly review      2,360        23,600        1,050        12,051  
   Separate financial statements audit
   Consolidated financial statements audit
   English financial statements review and other audit task
      Internal accounting system audit

Year ended December 31, 2019

    
KPMG Samjong
Accounting Corp.
 
 
   Quarterly review      1,860        23,040        1,860        23,040  
   Separate financial statements audit
   Consolidated financial statements audit
   English financial statements review and other audit task

Year ended December 31, 2018

    
KPMG Samjong
Accounting Corp.
 
 
   Semi-annual review      1,700        22,058        1,700        22,058  
   Quarterly review
   Separate financial statements audit
   Consolidated financial statements audit
   English financial statements review and other audit task

 

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C.

Non-Audit Services Contracts with Independent Auditors

 

(Unit: in millions of Won)

Period

   Contract date   

Service provided

   Service duration    Fee

Nine months ended September 30, 2020

   July 23, 2020    Confirmation of financial information    July 23, 2020 – July 30, 2020    3

Year ended December 31, 2019

   February 8, 2019    Consulting for publication of 2018 integrated annual report    February 8, 2019 – June 30,
2019
   120
   April 26, 2019    Confirmation of financial information    April 26, 2019 –  April 29,
2019
   3

Year ended December 31, 2018

   September 20, 2018    Confirmation of financial information    September 20, 2018 –
September 21, 2018
   2
   March 5, 2018    Issuance of comfort letters    March 5, 2018 – April 26,
2018
   110

 

D.

Discussions between Audit Committee and Independent Auditors

 

Date

  

Attendance

  

Method

  

Key Matters Discussed

February 3, 2020

  

Audit Committee: 4

Independent Auditor: 2

   Written    Report on the progress of internal accounting management system audit

February 19, 2020

  

Audit Committee: 4

Independent Auditor: 2

   In-person    Report on critical audit matters and results of audit of financial statements; report on the results of internal accounting management system audit

April 22, 2020

  

Audit Committee: 4

Independent Auditor: 1

   In-person    Report on 2019 Public Company Accounting Oversight Board audit results; report on 2020 audit plan and selection of critical audit matters

June 10, 2020

  

Audit Committee: 4

Independent Auditor: 3

   In-person    Report on evaluation of 2019 independent auditor services

July 20, 2020

  

Audit Committee: 4

Independent Auditor: 1

   In-person    Report on independent auditor’s 2020 semi-annual review

 

VI.

CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS

1.    Board of Directors

 

A.

Overview of the Composition of the Board of Directors

The Board of Directors is composed of eight members: five independent directors, two inside directors and one non-executive director. Within the Board of Directors, there are five committees: Independent Director Nomination Committee, Audit Committee, Compensation Committee, CapEx Review Committee and Corporate Citizenship Committee.

 

(As of September 30, 2020)

Total number of

persons              

  

Inside directors

  

Non-executive
director

  

Independent directors

8

   Jung Ho Park, Young Sang Ryu    Dae Sik Cho    Yong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn, Youngmin Yoon, Junmo Kim

 

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At the 36th General Meeting of Shareholders held on March 26, 2020, Yong-Hak Kim was newly elected as an independent director and a member of the audit committee and Junmo Kim was newly elected as an independent director.

Yong-Hak Kim, as a highly respected sociologist with knowledge and virtue that can contribute to the Company’s proactive pursuit of social value, was elected as the chairman of the Board of Directors by the directors pursuant to Article 4(2) of the regulations of the Board of Directors.

 

B.

Significant Activities of the Board of Directors

 

Meeting

  

Date

  

Agenda

  

Approval

431st (the 1st meeting of 2020)    January 16, 2020   

•  Management plan for 2020

   Approved as proposed
432nd (the 2nd meeting of 2020)    February 6, 2020   

•  Financial statements as of and for the year ended December 31, 2019

 

•  Delegation of funding through long-term borrowings

 

•  Annual business report as of and for the year ended December 31, 2019

 

•  Participation in capital increase by SK’s investment company in Southeast Asia

 

•  Donation to the Korean Fencing Association

 

•  Donation for the creation of social values

 

•  Report of internal accounting management

 

•  Report for the period after the fourth quarter of 2019

  

Approved as proposed

 

Approved as proposed

 

Approved as proposed

 

Approved as proposed

 

Approved as proposed

 

Approved as proposed

—  

 

—  

 

433rd (the 3rd meeting of 2020)    February 20, 2020   

•  Plan for the 36th General Meeting of Shareholders

 

•  Results on internal accounting management

  

Approved as proposed

 

—  

434th (the 4th meeting of 2020)    March 26, 2020   

•  Election of the chairman of the Board of Directors

 

•  Election of the representative director

 

•  Election of committee members

 

•  Transactions with SK Holdings in the second quarter of 2020

  

Approved as proposed

 

Approved as proposed

 

Approved as proposed

 

Approved as proposed

435th (the 5th meeting of 2020)    April 23, 2020   

•  Payment of operating costs of SUPEX Council in 2020

 

•  Report for the period after the first quarter of 2020

  

Approved as proposed

 

—  

436th (the 6th meeting of 2020)    May 28, 2020   

•  Participation in capital increase of SK Telecom TMT Investment Corp., an overseas subsidiary, for investment in NANO-X IMAGING Ltd.

 

•  Participation in capital increase of ID Quantique SA, an overseas subsidiary

  

Approved as proposed

 

Approved as proposed

 

437th (the 7th meeting of 2020)    June 25, 2020   

•  Transactions with SK Holdings in the third quarter of 2020

   Approved as proposed
438th (the 8th meeting of 2020)    July 21, 2020   

•  Interim dividends

 

•  Report on settlement of accounts for first half of 2020

 

•  Report for the period after the second quarter of 2020

  

Approved as proposed

 

—  

 

—  

 

439th (the 9th meeting of 2020)    August 27, 2020   

•  Entry into the Share Repurchase Agreement

   Approved as proposed
440th (the 10th meeting of 2020)    September 25, 2020   

•  Transactions with SK Holdings in the fourth quarter of 2020

 

•  Donation to the Center for Social Value Enhancement Studies in 2020

 

•  Sale of SK Academy training facilities in Yongin to SK hynix Co., Ltd. (“SK hynix”)

 

•  Corporate value-linked compensation

  

Approved as proposed

 

Approved as proposed

 

Approved as modified

 

Approved as modified

441th (the 11th meeting of 2020)    October 15, 2020   

•  Spin-off plan

 

•  Convocation of first extraordinary general meeting of shareholders of 2020

 

•  Determination of record date

 

•  Report for the period after the third quarter of 2020

  

Approved as proposed

 

Approved as proposed

 

Approved as proposed

 

—  

 

*

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

 

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C.

Committees within Board of Directors

 

  (1)

Committee structure (as of September 30, 2020)

(a)    Independent Director Nomination Committee

 

Total number

of persons      

   Members      Task  
   Inside Directors      Independent Directors  

3

     Jung Ho Park        Seok-Dong Kim, Jung Ho Ahn        Nomination of independent directors  

 

*

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

(b)    Compensation Review Committee

 

Total number

of persons      

   Members    Task
   Inside Directors    Independent Directors

3

   —      Yong-Hak Kim, Seok-Dong Kim, Junmo Kim    Review CEO remuneration
system and amount

 

*

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

(c)    Capex Review Committee

 

Total number

of persons      

   Members    Task
   Inside Directors    Independent Directors

6

   Young Sang Ryu    Yong-Hak Kim, Seok-Dong Kim, Jung Ho Ahn,
Youngmin Yoon, Junmo Kim
   Review major investment
plans and changes thereto

 

*

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

(d)    Corporate Citizenship Committee

 

Total number of
persons

   Members    Task
   Inside Directors    Independent Directors

3

   —      Jung Ho Ahn, Youngmin Yoon,
Junmo Kim
   Review guidelines on corporate social
responsibility (“CSR”) programs, etc.

 

*

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

(e)    Audit Committee

 

Total number
of persons

   Members    Task
   Inside Directors    Independent Directors

4

   —      Seok-Dong Kim, Yong-Hak Kim,
Youngmin Yoon, Jung Ho Ahn
   Review financial statements and supervise
independent audit process, etc.

 

*

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

2.     Audit System

The Company’s Audit Committee consists of four independent directors, Seok-Dong Kim (chairman of the Audit Committee and financial and accounting expert), Yong-Hak Kim, Youngmin Yoon and Jung Ho Ahn.

Major activities of the Audit Committee as of September 30, 2020 are set forth below.

 

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Meeting

   Date   

Agenda

   Approval

The 1st meeting of 2020

   February 5,
2020
  

•  Evaluation of internal accounting management system operation

 

•  Review of business and audit results for 2019 and business and audit plans for 2020

 

•  Evaluation of internal monitoring controls based on the opinion of the members of the Audit Committee

   —  

 

—  

 

Approved as proposed

The 2nd meeting of 2020

   February 19,
2020
  

•  Report on results of audit of fiscal year 2019

 

•  Report on audit of 2019 internal accounting management system

 

•  Evaluation of internal accounting management system operation

 

•  Report on contract for customer appreciation gifts to fixed-line telephone customers for 2020

   —  

 

—  

 

Approved as proposed

 

Approved as proposed

The 3rd meeting of 2020

   February 20,
2020
  

•  Agenda and document review for the 36th General Meeting of Shareholders

 

•  Auditor’s report for fiscal year 2019

   Approved as proposed

 

Approved as proposed

The 4th meeting of 2020

   March 25,
2020
  

•  Contract for maintenance services of optical cables in 2020

 

•  Contract for maintenance services of transmission equipment in 2020

   Approved as proposed

 

Approved as proposed

The 5th meeting of 2020

   April 22,
2020
  

•  Election of the chairman of the Audit Committee

 

•  Approval of external auditor services for fiscal year 2020

 

•  Audit plan for fiscal year 2020

   Approved as proposed

 

Approved as proposed

 

—  

The 6th meeting of 2020

   May 27,
2020
  

•  Establishment of regulations for appointment of independent auditors

 

•  Report on evaluation of independent auditor services for fiscal year 2019

   Approved as proposed

 

—  

The 7th meeting of 2020

   July 20,
2020
  

•  Report on results of semi-annual review by independent auditors of fiscal year 2020

   —  

The 8th meeting of 2020

   October 14,
2020
  

•  Review of agenda and documents for the first extraordinary general meeting of shareholders of 2020

   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 12th Supplement to the Articles of Incorporation (Interim Regulation)    Article 32(3) of the Articles of Incorporation shall remain effective until the day immediately preceding the date of the general meeting of shareholders held in 2003.

During the 34th general meeting of shareholders held on March 21, 2018, the Company adopted the electronic voting method. Pursuant to Article 368-4 of the Korean Commercial Code, the Company entrusted the Korea Securities Depository with the role of administering the electronic voting system, allowing shareholders to exercise their voting rights through electronic voting without attending the general meeting of shareholders.

Written voting system is not applicable. Minority shareholder rights were not exercised during the relevant period.

 

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VII.

SHAREHOLDERS

1.     Shareholdings of the Largest Shareholder and Related Persons

 

A.

Shareholdings of the Largest Shareholder and Related Persons

 

(As of September 30, 2020)      (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        21,624,120        26.78        21,624,120        26.78  

Tae Won Chey

   Officer of affiliated company      Common share        100        0.00        100        0.00  

Dong Hyun Jang

   Officer of affiliated company      Common share        251        0.00        251        0.00  

Jung Ho Park

   Officer of the Company      Common share        1,000        0.00        2,500        0.00  

Young Sang Ryu

   Officer of the Company      Common share        —          0.00        500        0.00  

Total

     Common share        21,625,471        26.78        21,627,471        26.78  

 

B.

Overview of the Largest Shareholder

As of September 30, 2020, the Company’s largest shareholder was SK Holdings. SK Holdings was established on April 13, 1991 and was made public on the securities market on November 11, 2009 under the identification code “034730.” SK Holdings is located at 26, Jong-ro, Jongno-gu, Seoul, Korea. SK Holdings’ telephone number is +82-2-2121-5114 and its website is www.sk.co.kr.

 

C.

Changes in Shareholdings of the Largest Shareholder and Related Persons

Changes in shareholdings of the largest shareholder are as follows:

 

(As of September 30, 2020)      (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 Holdings

 

   March 24, 2017      20,364,870        25.22      Retirement of Myung Hyun Cho, SK Broadband’s independent director (ownership of 60 shares of the Company)
   March 28, 2017      20,365,370        25.22      Jung Ho Park, CEO of the Company, purchased 500 shares.
   March 30, 2017      20,365,870        25.22      Jung Ho Park, CEO of the Company, purchased 500 additional shares.
   July 7, 2017      20,364,803        25.22      Shin Won Chey, SKC’s Chairman, disposed of 1,067 shares.
   December 27, 2018      21,625,471        26.78      SK Holdings’ interest in SK Infosec was transferred to the Company in exchange for the Company’s issuance of treasury shares to SK Holdings.
   February 17, 2020      21,627,471        26.78      Jung Ho Park, CEO of the Company, purchased 1,500 additional shares; Young Sang Ryu, inside director of the Company, purchased 500 shares.

 

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2.     Distribution of Shares

 

A.

Shareholders with Ownership of 5% or Greater

 

(As of September 30, 2020)      (Unit: in shares and percentages)

Name (title)

   Common share
   Number of shares      Ownership ratio     Remarks

SK Holdings

     21,624,120        26.78   —  

National Pension Service

     9,353,384        11.58   —  

SK Telecom

     8,066,133        9.99   Treasury shares

Citibank ADR

     6,974,109        8.64   —  

Shareholdings under the Employee Stock Ownership Program

     —          —       —  

 

B.

Minority Shareholders

 

(As of September 30, 2020)      (Unit: in shares and percentages)  
     Shareholders     Ownership  

Classification

   Number of
minority
shareholders
     Total number
of
shareholders
     Ratio (%)     Number of
shares owned by
minority
shareholders
     Total number
of shares
issued
     Ratio (%)  

Minority shareholders*

     139,292        139,298        99.9     31,930,053        80,745,711        39.6

 

*

Shareholders who hold less than 1% of total shares issued.

3.    Share Price and Trading Volume in the Last Nine Months

 

A.

Domestic Securities Market

 

(Unit: in Won and shares)  

Types

   September 2020      August 2020      July 2020      June 2020      May 2020      April 2020  

Common stock

   Highest      248,000        248,500        225,000        230,000        216,000        215,500  
   Lowest      230,500        219,000        208,000        201,000        204,000        175,000  
   Average      239,975        235,675        217,130        213,250        209,000        198,700  

Daily transaction volume

   Highest      528,401        2,365,827        872,553        461,453        466,946        549,624  
   Lowest      108,166        418,322        202,037        208,905        170,965        195,673  

Monthly transaction volume

     5,961,664        14,992,417        8,729,265        6,988,459        5,186,311        7,141,342  

 

B.

Foreign Securities Market (New York Stock Exchange)

 

(Unit : in US$ and ADRs)  

Types

   September 2020      August 2020      July 2020      June 2020      May 2020      April 2020  

Depositary receipt

   Highest      23.09        23.11        20.86        20.76        19.25        19.34  
   Lowest      21.92        20.32        18.98        18.31        18.41        15.57  
   Average      21.98        21.55        19.86        19.40        18.74        18.04  

Daily transaction volume

   Highest      610,280        741,516        1,227,702        1,207,916        926,362        864,362  
   Lowest      110,616        147,412        290,473        247,522        182,737        287,220  

Monthly transaction volume

     6,092,468        7,535,024        12,125,909        10,424,277        7,557,776        9,736,261  

 

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VIII.

EMPLOYEES AND DIRECTORS

1.    Officers and Employees

 

A.

Employees

 

(As of September 30, 2020)      (Unit: in persons and millions of Won)  

Business

segment

   Gender    Number of employees      Average
length of
service
(years)
     Aggregate wage for
the year of 2020
     Average wage
per person
 
   Employees without a
fixed term of
employment
     Employees with a
fixed term of
employment
     Total  
   Total      Part-time
employees
     Total      Part-time
employees
 

—  

   Male      4,372        —          67        —          4,439        13.0        463,685        104  

—  

   Female      887        —          168        —          1,055        8.1        70,976        67  

Total

     5,259        —          235        —          5,494        12.1        534,661        97  

 

B.

Compensation of Unregistered Officers

 

(As of September 30, 2020)    (Unit: in persons and millions of Won)

Number of Unregistered Officers

   Aggregate wage for the year of 2020    Average wage per person

101

   46,012    456

2.     Compensation of Directors

 

A.

Amount Approved at the Shareholders’ Meeting

 

(As of September 30, 2020)    (Unit: in millions of Won)

Classification

   Number of Directors    Aggregate Amount Approved

Directors

   8    12,000

 

B.

Amount Paid

B-1. Total Amount

 

(As of September 30, 2020)    (Unit: in millions of Won)

Number of Directors

   Aggregate Amount Paid    Average Amount Paid Per Director    Remarks

8

   6,190    774    —  

 

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B-2. Amount by Classification

 

(As of September 30, 2020)    (Unit: in millions of Won)

Classification

   Number of Directors    Aggregate Amount Paid    Average Amount Paid Per
Director
   Remarks

Inside Directors

   3    5,875    1,958    —  

Independent Directors (Excluding Audit Committee Members)

   1    63    63    —  

Audit Committee Members

   4    252    63    —  

Auditor

   —      —      —      —  

3.     Individual Compensation of Directors and Officers

Omitted in quarterly reports in accordance with applicable Korean disclosure rules.

4.    Stock Options Granted and Exercised

 

A.

Stock Options Granted to Directors and Auditors

 

(As of September 30, 2020)  

Classification

   Number of Directors    Fair Value of Stock Options
(millions of Won)
     Remarks  

Inside Directors

   3      125        —    

Independent Directors (Excluding Audit Committee Members)

   1      —          —    

Audit Committee Members

   4      —          —    

Total

   8      125        —    

 

B.

Stock Options Granted and Exercised

 

(As of September 30, 2020)     (Unit: in Won and shares)  
   

Relationship

with the

  Date of   Method of   Initially     Changes
during
Reporting
Period
    Total Changes    

Unexercised

as of End of

Reporting

    Exercise   Exercise  

Grantee

 

Company

 

Grant

 

Grant

  Granted     Exercised     Canceled     Exercised     Canceled     Period    

Period

  Price  

Jung Ho Park

  Inside Director   March 24, 2017   Issuance of treasury stock, cash settlement     22,168       —         —         —         —         22,168     March 25, 2019 – March 24, 2022     246,750  

Jung Ho Park

  Inside Director   March 24, 2017   Issuance of treasury stock, cash settlement     22,168       —         —         —         —         22,168     March 25, 2020 – March 24, 2023     266,490  

Jung Ho Park

  Inside Director   March 24, 2017   Issuance of treasury stock, cash settlement     22,168       —         —         —         —         22,168     Mach 25, 2021 – March 24, 2024     287,810  

Jung Ho Park

  Inside Director   March 26, 2020   Issuance of treasury stock, cash settlement     111,106       —         —         —         —         111,106     March 27, 2023 – March 26, 2027     192,260  

 

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(As of September 30, 2020)     (Unit: in Won and shares)  
   

Relationship

with the

  Date of   Method of   Initially     Changes
during
Reporting
Period
    Total Changes    

Unexercised

as of End of

Reporting

    Exercise   Exercise  

Grantee

 

Company

 

Grant

 

Grant

  Granted     Exercised     Canceled     Exercised     Canceled     Period    

Period

  Price  

Young Sang

Ryu

  Inside Director   February 20, 2018   Issuance of treasury stock, cash settlement     1,358       —         —         —         —         1,358     February 21, 2020 – February 20, 2023     254,120  

Young Sang

Ryu

  Inside Director   March 26, 2019   Issuance of treasury stock, cash settlement     1,734       —         —         —         —         1,734     March 27, 2021 – March 26, 2024     254,310  

Young Sang Ryu

  Inside Director   March, 26, 2020   Issuance of treasury stock, cash settlement     2,353       —         —         —         —         2,353     March 27, 2023 – March 26, 2027     192,260  

Jong Ryeol Kang

  Unregistered Officer   March 26, 2020   Issuance of treasury stock, cash settlement     2,048       —         —         —         —         2,048     March 27, 2023 – March 26, 2027     192,260  

Hyoung Il Ha

  Unregistered Officer   February 22, 2019   Issuance of treasury stock, cash settlement     1,564       —         —         —         —         1,564     February 23, 2021 – February 22, 2024     265,260  

Hyoung Il Ha

  Unregistered Officer   March 26, 2020   Issuance of treasury stock, cash settlement     1,961       —         —         —         —         1,961     March 27, 2023 – March 26, 2027     192,260  

Yoon Kim

  Unregistered Officer   March 26, 2020   Issuance of treasury stock, cash settlement     1,874       —         —         —         —         1,874     March 27, 2023 – March 26, 2027     192,260  

Seok Joon Huh

  Unregistered Officer   March 26, 2020   Issuance of treasury stock, cash settlement     1,852       —         —         —         —         1,852     March 27, 2023 – March 26, 2027     192,260  

Poong Young Yoon

  Unregistered Officer   February 22, 2019   Issuance of treasury stock, cash settlement     1,244       —         —         —         —         1,244     February 23, 2021 – February 22, 2024     265,260  

Poong Young Yoon

  Unregistered Officer   March 26, 2020   Issuance of treasury stock, cash settlement     1,743       —         —         —         —         1,743     March 27, 2023 – March 26, 2027     192,260  

Seong Ho Ha

  Unregistered Officer   February 22, 2019   Issuance of treasury stock, cash settlement     1,369       —         —         —         —         1,369     February 23, 2021 – February 22, 2024     265,260  

Seong Ho Ha

  Unregistered Officer   March 26, 2020   Issuance of treasury stock, cash settlement     1,656       —         —         —         —         1,656     March 27, 2023 – March 26, 2027     192,260  

Dong Hwan Cho

  Unregistered Officer   March 26, 2020   Issuance of treasury stock, cash settlement     1,525       —         —         —         —         1,525     March 27, 2023 – March 26, 2027     192,260  

HyunA Lee

  Unregistered Officer   March 26, 2020   Issuance of treasury stock, cash settlement     1,525       —         —         —         —         1,525     March 27, 2023 – March 26, 2027     192,260  

 

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IX.

RELATED PARTY TRANSACTIONS

1.    Line of Credit Extended to the Largest Shareholder and Related Parties

 

(As of September 30, 2020)      (Unit: in millions of Won)  

Name

(Corporate

name)        

   Relationship    Account category    Change details      Accrued
interest
     Remarks  
   Beginning      Increase      Decrease      Ending  

SK Wyverns

   Affiliate    Long-term and
short-term loans
     204        —          —          204        —          —    

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

Purchase and Dispositions of Investments

 

(As of September 30, 2020)      (Unit: in millions of Won)  

Name (Corporate name)

   Relationship    Purchase and Dispositions of Investments      Remarks  
   Type of
Investment
   Transaction Details  
   Beginning      Increase      Decrease      Ending  

SK Telecom TMT Investment Corp.

   Overseas
Affiliate
   Shares      33,834        60,302        —          94,136        Capital increase  

SE ASIA INVESTMENT PTE. LTD.

   Overseas
Affiliate
   Shares      224,470        119,770        —          344,240        Capital increase  

id Quantique Ltd.

   Overseas
Affiliate
   Shares      94,119        6,409        —          100,528        Capital increase  

Purchase and Disposition of Securities

 

 

On January 3, 2020, in order to achieve growth in the T-commerce business and enhance synergies with the Company’s ICT businesses, SK Telecom completed its acquisition of a 100% interest in SK Stoa (3,631,355 shares), with a book value of Won 40 billion, from SK Broadband.

Transfer of Assets

 

(Unit: in millions of Won)  

Counterparty

   Relationship    Details of Transfer  
   with    Type    Date of
Transaction
   Purpose    Subject of Transfer    Transaction Amount  
   Counterparty    Purchase      Sale  

SK Innovation Co., Ltd.

   Affiliate    Sale    February 18, 2020    Transfer of assets    Golf membership
(Lakeside)
     —          573  

SK Innovation Co., Ltd.

   Affiliate    Sale    June 24, 2020    Transfer of assets    Equipment and
construction
supplies for
Susong Tower
     —          413  

Total

     —          986  

 

*

In accordance with applicable disclosure requirements, transactions of less than Won 100 million are omitted.

 

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*

Pursuant to the resolution of the Board of Directors on September 24, 2020, the Company is in the process of selling the Yongin SK Academy training facilities to SK hynix.

3.    Transactions with the Largest Shareholder and Related Parties

 

(Unit: in millions of Won)  

Counterparty

   Relationship
with
Counterparty
   Type    Transaction
Period
   Transaction Details    Transaction Amount  

PS&Marketing

   Affiliate    Purchase    January 1, 2020 –
September 30, 2020
   Marketing
fees, etc.
     981,768  

4.    Related Party Transactions

See note 31 of the notes to the Company’s unaudited consolidated financial statements attached hereto for more information regarding related party transactions.

5.    Other Related Party Transactions (excluding Transactions with the Largest Shareholder and Related Parties listed above)

 

A.

Provisional Payment and Loans (including loans on marketable securities)

 

(As of September 30, 2020)      (Unit: in millions of Won)  

Name

(Corporate

name)        

   Relationship    Account category    Change details      Accrued
interest
     Remarks  
   Beginning      Increase      Decrease      Ending  

Baekmajang and others

   Agency    Long-term and
short-term loans
     65,681        94,374        65,505        94,550        —          —    

Daehan Kanggun BCN Inc.

   Investee    Long-term loans      22,148        —          —          22,148        —          —    

 

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X.

OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS

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

 

A.

Summary Minutes of the General Meeting of Shareholders

 

Date

  

Agenda

  

Resolution

34th Fiscal Year Meeting of Shareholders

(March 21, 2018)

  

1.  Approval of the financial statements for the year ended December 31, 2017

 

2.  Award of stock options

 

3.  Election of directors

 

•   Election of an inside director

 

•   Election of an independent director

 

4.  Election of an independent director as Audit Committee member

 

5.  Approval of remuneration limit for directors

  

Approved (Cash dividend, Won 9,000 per share)

 

Approved

 

Approved (Young Sang Ryu)

 

Approved (Youngmin Yoon)

 

Approved (Youngmin Yoon)

 

Approved (Won 12 billion)

35th Fiscal Year Meeting of Shareholders

(March 26, 2019)

  

1.  Approval of the financial statements for the year ended December 31, 2018

 

2.  Amendments to Articles of Incorporation

 

3.  Approval of award of stock options

 

4.  Award of stock options

 

5.  Election of an independent director

 

6.  Election of an independent director as Audit Committee member

 

7.  Approval of remuneration limit for directors

  

Approved (Cash dividend, Won 9,000 per share)

 

Approved

 

Approved

 

Approved

 

Approved (Seok-Dong Kim)

 

Approved (Seok-Dong Kim)

 

Approved (Won 12 billion)

36th Fiscal Year Meeting of Shareholders

(March 26, 2020)

  

1.  Approval of the financial statements for the year ended December 31, 2019

 

2.  Amendments to Articles of Incorporation

 

3.  Award of stock options

 

4.  Election of directors

 

•   Election of an inside director

 

•   Election of a non-executive director

 

•   Election of an independent director

 

•   Election of an independent director

 

•   Election of an independent director

 

5.  Election of an independent director as Audit Committee member

 

•   Election of an independent director as Audit Committee member

 

•   Election of an independent director as Audit Committee member

 

6.  Approval of remuneration limit for directors

 

7.  Amendment of remuneration policy for executives

  

Approved (Cash dividend, Won 9,000 per share)

 

Approved

 

Approved

 

Approved (Jung Ho Park)

 

Approved (Dae Sik Cho)

 

Approved (Yong-Hak Kim)

 

Approved (Junmo Kim)

 

Approved (Jung Ho Ahn)

 

Approved (Yong-Hak Kim)

 

Approved (Jung Ho Ahn)

 

Approved (Won 12 billion)

Approved

 

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Table of Contents

2.    Contingent Liabilities

 

A.

Legal Proceedings

[SK Telecom]

As of September 30, 2020, the Company is involved in various pending legal proceedings and the provisions recognized for these proceedings are not material. The management of the Company has determined that there are currently no present obligations in connection with proceedings for which no provision has been recognized. The management has also determined that the outcome of these proceedings will not have a significant impact on the Company’s financial position and operating performance.

[SK Broadband]

As of September 30, 2020, there were 26 pending lawsuits against SK Broadband (aggregate amount of claims of Won 22,983 million), and provisions in the amount of Won 12,447 million in connection with such lawsuits were recognized.

[SK Planet]

As of September 30, 2020, there were two pending lawsuits against SK Planet (aggregate amount of claims of Won 250 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.

[Eleven Street]

As of September 30, 2020, there were four pending lawsuits against Eleven Street (aggregate amount of claims of Won 268 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.

[Life & Security Holdings]

As of September 30, 2020, there were 22 pending lawsuits against Life & Security Holdings (aggregate amount of claims of Won 1,448 million), and provisions in the amount of Won 976 million in connection with such lawsuits were recognized.

[Incross]

As of September 30, 2020, there was one pending lawsuit against Incross, and the management cannot reasonably predict the outcome of such proceeding.

[SK Telink]

As of September 30, 2020, there were three pending lawsuits against SK Telink (aggregate amount of claims of Won 210 million). The management cannot reasonably predict the outcome of these cases, and no amount in connection with these proceedings was recognized on the Company’s financial statements.

 

B.

Other Contingent Liabilities

[SK Telecom]

None.

[SK Broadband]

As of September 30, 2020, SK Broadband has entered into revolving credit facilities with a limit of Won 218.7 billion with four financial institutions including Hana Bank in relation to its loans.

In connection with public offerings of notes, SK Broadband is subject to certain restrictions with respect to its debt ratio, third party payment guarantees and other limitations on liens.

SK Broadband has provided “geun” mortgage amounting to Won 4,220 million on certain of its buildings, including Seodaemun Guksa, in connection with leasing of such buildings.

SK Broadband has entered into a leased line contract and a resale contract for fixed-line telecommunication services with SK Telecom.

 

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As of September 30, 2020, Seoul Guarantee Insurance Company has provided a performance guarantee of Won 43,644 million to SK Broadband in connection with the performance of certain contracts and the repair of any defects.

[SK Planet]

As of September 30, 2020, SK Planet has entered into revolving credit facilities of up to Won 17 billion with Shinhan Bank and KEB Hana Bank.

As of September 30, 2020, Seoul Guarantee Insurance Company and KEB Hana Bank have provided guarantees of Won 5,829 million in total to SK Planet in connection with the performance of certain contracts and curing of defects.

[ADT CAPS]

As of September 30, 2020, ADT CAPS has entered into the following agreements with financial institutions, including loan agreements:

 

(Unit: in millions of Won)  

Financial Institution

   Type of Loan    Line of Credit      Amount Borrowed  

KEB Hana Bank

   Revolving credit      5,000        5,000  

KEB Hana Bank

   Revolving credit      27,000        27,000  

Shinhan Bank

   Revolving credit      15,000        15,000  

As of September 30, 2020, ADT CAPS has been provided with the following material payment guarantees by other parties:

 

(Unit: in millions of Won)  

Guarantor

  

Guarantee Details

   Guaranteed Amount  

Seoul Guarantee Insurance Company

   Defect performance guarantee, etc.      24,051  

Seoul Guarantee Insurance Company

   Fidelity guarantee      45,930  

As of September 30, 2020, ADT CAPS has entered into an accounts receivable-backed loan agreement with a credit limit of Won 58,000 million (of which ADT Caps has borrowed Won 52,907 million) and a letter of credit of Won 2,000 million with KEB Hana Bank in order to make purchase payments. In addition, ADT CAPS has entered into an accounts receivable-backed loan agreement with a credit limit of Won 25,000 million (of which ADT Caps has borrowed Won 5,515 million) with Kookmin Bank.

ADT CAPS has provided its shares as collateral for a long-term loan (face value of Won 1,900 billion) of Life & Security Holdings.

[Dreamus Company]

As of September 30, 2020, Dreamus Company is involved in the following pending legal proceedings:

 

(Unit: in millions of Won)  

Court

  

Plaintiff

  

Defendant

  

Case Details

   Amount of Claim  

Seoul Central District Court

   Gwanghun Ha    Dreamus Company    Unjust enrichment      30  

The management cannot reasonably predict the outcome of this case or its impact on the Company’s financial statements due to the uncertainty of the amount to be paid by the Company.

As of September 30, 2020, Seoul Guarantee Insurance Company has provided a guarantee of Won 206 million in connection with the performance, prepayment and curing of defects under certain contracts related to product development, and Dreamus Company has provided certain guarantees of Won 548 million.

 

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Dreamus Company has entered into agreements with certain domestic and foreign companies for the implementation of designs and technologies in connection with product manufacturing, pursuant to which it is paying certain fees for the revenues generated from applicable products and the use of patents. The aggregate amount of such fees paid in the third quarter of 2020 and the second quarter of 2020 were Won 1,061 million and Won 3,807 million, respectively, which were included in its cost of sales and selling and administrative expenses.

[SK Infosec]

SK Infosec has issued a blank note to SK Holdings as collateral in connection with a contract performance guarantee.

[Onestore]

As of September 30, 2020, details of the major payment guarantees received by Onestore from third parties are as follows:

 

(Unit: in millions of Won)  

Guarantor

   Guarantee Details   Guaranteed Amount  

KEB Hana Bank

   Miscellaneous Won payment guarantee     100  

Seoul Guarantee Insurance Company

   E-commerce (payment method)
guarantee
    115  

[Incross]

As of September 30, 2020, Incross has pledged the following assets:

 

(Unit: in millions of Won)

Pledged Assets

  

Agreement Details

   Amount     

Pledgee

Short-term financial instruments

   Guarantee of contract performance      9,100      NAVER Corporation
     6,919      Kakao Corp.
     250      Smart Media Representative Co., Ltd.
     1,500      SK Broadband
     955      KT
     748      Kakao Games Corp.
     1,610      LG U+
     

 

 

    

Total

     21,082     
     

 

 

    

As of September 30, 2020, Incross has entered into the following loan or transaction limit agreements on a consolidated basis:

 

(Unit: in millions of Won)  

Counterparty

  

Agreement Details

   Amount  

KEB Hana Bank

   Loan for general funds      2,000  

Woori Bank

   Loan for general funds      2,000  

Industrial Bank of Korea

   Loan for general funds      4,100  
     

 

 

 

Total

     8,100  
     

 

 

 

As of September 30, 2020, Seoul Guarantee Insurance Company has provided a guarantee of Won 162 million (Won 230 million as of December 31, 2019) in connection with the guarantee of contract performance related to Incross’ operations.

Pursuant to Article 530-3(1) of the Korean Commercial Code, Incross’ SP business was spun off into a newly established company pursuant to a special resolution of its general shareholders’ meeting on March 28, 2014, and pursuant to Article 530-9(1) of the Korean Commercial Code, Incross and the new spun-off company are jointly liable for the repayment of debt incurred prior to the spin-off.

 

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Table of Contents

[M&Service]

As of September 30, 2020, M&Service has entered into the following agreements with financial institutions, including loan agreements:

 

(Unit: in millions of Won)  

Financial Institution

  

Type of Loan

   Line of Credit      Amount Borrowed  

Shinhan Bank

   Payment guarantee      1,000        200  

KEB Hana Bank

   Revolving credit      5,000        —    

Korea Development Bank

   Revolving credit      10,000        —    

3.     Status of Sanctions, etc.

[SK Telecom]

 

Date

   Authority    Subject of
Action
  

Sanction

  

Reason and the Relevant

Law

  

Status of

Implementation

  

Company’s

Measures

Jan. 24, 2018

   KCC    SK Telecom   

Decision of 5th KCC Meeting of 2018

 

•   Correctional order

 

•   Fine of Won 21.1 billion

   Payment of subsidies exceeding 115% limit by dealers; payment of discriminatory subsidies by dealers; inducement of such payments (Articles 4-5, 3-1(1) and 9-3 of the MDDIA)    Decision confirmed; fine paid; correctional order implemented    Immediately ceased such activities; provided notice of plan for implementation of correctional order to marketing personnel; revised standard agreement and reinforced supervision

Jan. 24, 2018

   KCC    SK Telecom   

Decision of 5th KCC Meeting of 2018

 

•   Correctional order

 

•   Fine of Won 223.4 million

   Payment of excessive subsidies contradictory with disclosure for recruitment of corporate customers (Article 4-4 of the MDDIA)    Decision confirmed; fine paid; correctional order implemented    Immediately ceased such activities; provided notice of plan for implementation of correctional order to marketing personnel; provided training and reinforced supervision of corporate business

Jan. 24, 2018

   KCC    SK Telecom   

Decision of 5th KCC Meeting of 2018

 

•   Correctional order

 

•   Fine of Won 27 million

   Payment of subsidies exceeding 115% limit by Samsung Electronics; payment of discriminatory subsidies by Samsung Electronics; inducement of such payments (Articles 4-5, 3-1(1) and 9-3 of the MDDIA)    Decision confirmed; fine paid; correctional order implemented    Immediately ceased such activities; provided notice of plan for implementation of correctional order to marketing personnel; provided training and reinforced supervision

 

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Date

   Authority    Subject of
Action
  

Sanction

  

Reason and the Relevant

Law

  

Status of

Implementation

  

Company’s

Measures

Sept. 2, 2018

   Korea Fair
Trade
Commission
   SK Telecom,
former
director
  

Sept. 12, 2018 decision by Seoul Central District Court

 

•   SK Telecom: Fine of Won 50 million

 

•   Former director: Sentence of 6 months of imprisonment (2 years of probation)

   Abuse of bargaining power in transferring visiting salespeople against the intent of the head of the sales office that contracted with such salespeople (Articles 70, 67-2 and 23-1(4) of the Monopoly Regulation and Fair Trade Act; Article 30 of the Criminal Code)    Decision confirmed; fine paid    Provided training (twice a year); implemented compliance program for employees and executives

Mar. 20, 2019

   KCC    SK Telecom   

Decision of 14th KCC Meeting of 2019

 

•   Correctional order

 

•   Fine of Won 975 million

   Payment of subsidies exceeding 115% limit by dealers; payment of discriminatory subsidies by dealers; inducement of such payments in connection with operation of online business channels (Articles 4-5, 3-1(1) and 9-3 of the MDDIA)    Decision confirmed; fine paid; correctional order implemented    Immediately ceased such activities; implemented compliance monitoring of online sales guidelines; revised online request system

June 26, 2019

   KCC    SK Telecom   

Decision of 31st KCC Meeting of 2019

 

•   Correctional order

 

•   Fine of Won 231 million

   Refusal or delay of termination of user contract without just cause (Article 50-1(5) of the Telecommunications Business Act; Article 42-1(5) of the Enforcement Decree)    Decision confirmed; payment of fine and implementation of correctional order completed    Addressed issues discovered during investigation, such as outbound contact with customers regarding termination without customer consent

July 9, 2019

   KCC    SK Telecom   

Decision of 33rd KCC Meeting of 2019

 

•   Correctional order

 

•   Fine of Won 1.5 million

   Failure to maintain subsidies without change for a minimum period of seven days (Article 4-3 of the MDDIA)    Decision confirmed; report on implementation of correctional order and payment of fine completed    Implemented improvements to work procedures (announce subsidies separately from public announcements on official website in case of notice of subsidies during pre-order period)

June 4, 2020

   KCC    SK Telecom   

Decision of 33rd KCC Meeting of 2020

 

•   Correctional order

 

•   Fine of Won 4 million

   Obtaining consent from users for collection of personal location information through new contracts for mobile phones with material omissions instead of applicable terms of use for location information business (Article 18-1 of the Location Information Act and Article 22 of Enforcement Decree)    Decision confirmed; payment of fine and implementation of correctional order completed    Provided training to persons responsible for location information management, including representatives, and personnel handling location information

 

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Date

   Authority    Subject of
Action
  

Sanction

  

Reason and the Relevant

Law

  

Status of

Implementation

  

Company’s

Measures

July 8, 2020    KCC    SK Telecom   

Decision of 40th KCC Meeting of 2020

 

•   Correctional order and submission of report

 

•   Fine of Won 22.3 billion

   Payment of subsidies exceeding 115% limit by dealers; payment of unreasonably discriminatory subsidies based on subscription type and rate plan; selection of certain dealers and instruction to and inducement of such subsidies by such dealers (Articles 3-1, 4-5 and 9-3 of the MDDIA)    Decision confirmed; payment of fine completed; implementation plan submitted; report on implementation of correctional order to be submitted    Immediately ceased such activities; promoted measures to prevent recurrence, such as operation of voluntary consultative body regarding illegal online postings, standardization of incentive instructions/forms, establishment of record management system, development of monitoring activities of online retailers and expansion of the electronic subscription system
Sept. 9, 2020    KCC    SK Telecom   

Decision of 49th KCC Meeting of 2020

 

•   Correctional order and submission of report

 

•   Fine of Won 76 million

   False, exaggerated or deceptive advertising through offline and online channels that could potentially mislead users regarding key information about bundled products, such as component products and discount details, to induce subscription (Article 50(1)-5 of the Telecommunications Business Act and Article 42(1) of Enforcement Decree)    Decision confirmed; payment of fine to be completed and implementation plan to be submitted    Immediately ceased such activities; implemented improvements to work procedures such as designation of manager for false or exaggerated advertising of bundled products, regular self-monitoring, strengthening of evaluation and employee training of dealers/agents

[SK Broadband]

 

Subject

Company

  

Date

  

Reason

  

Sanction

  

Relevant Law

  

Status of

Implementation

  

Company’s

Measures

SK Broadband    October 12, 2018    Failure to explain or disclose or misrepresentation of important matters to users such as rates, contract conditions or rate discounts    Correctional order (corrective measures for violation of the Telecommunications Business Act related to representative phone number card payment services)    Article 50-1 Paragraph 5(2) of the Telecommunications Business Act and Article 42-1 of its Enforcement Decree    Made an official announcement about having received the correctional order and paid the fine    Implement the correctional order and pay the fine
   December 21, 2018    Failure to prepare and submit the Telecommunications Business Report for the year ended December 31, 2017 in compliance with the requirements under the Regulations on Accounting and Reporting of Telecommunications Businesses and the Accounting Classification Standards of Telecommunications Businesses, as such report contained errors in the classification of assets, income and expenses    Correctional order to amend its business report for the year ended December 31, 2017 to correct errors and submit it to the MSIT; fine of Won 164 million    Article 49 of the Telecommunications Business Act    Submitted the amended business report and paid the fine    Improve work procedures to prevent errors in the future

 

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Subject

Company

  

Date

  

Reason

  

Sanction

  

Relevant Law

  

Status of

Implementation

  

Company’s

Measures

   February 25, 2019    Failure to accurately report the number of high-speed Internet subscribers    Correctional order (for violation of the Telecommunications Business Act related to a misrepresentation of statistics) and fine of Won 2.8 million    Article 88-1, Article 92-1 and Article 104-5(17) of the Telecommunications Business Act    Submitted plans for implementation of correctional order, including improvement of relevant business procedures    Implement the correctional order and pay the fine
   March 15, 2019    Failure to establish service rejection procedures against spammers    Fine of Won 4.8 million for breach of restrictions on rendering information transmission services    Articles 50-4 and 76 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. and Article 74 of its Enforcement Decree    Implemented improvements to advertisement transmission related activities and paid the fine (April 2018)    Implement procedures for denying services to spammers
   June 26, 2019    Delaying, rejecting or restricting termination of user contracts without just cause    Correctional order (corrective measures for damaging users’ interests by restricting termination of high-speed Internet and bundled services)    Article 50-1(5) of the Telecommunications Business Act and Article 42-1(5) of its Enforcement Decree    Made an official announcement about having received the correctional order, improved operating procedures and paid the fine (Won 165 million).    Implement the correctional order and pay the fine
   July 29, 2019    Substantially restricting competition in a bidding process for a public sector-only network project by agreeing on the winning bidder, bidding participants and the bidding price in advance (SK Broadband was the first to voluntarily report the act of collusion and was granted exemption from applicable sanctions)    Correctional order (for unjustly restricting