Edgar Filing: SK TELECOM CO LTD

(As of June 30, 2015)

(Unit: in millions of Won)

Aggregate Amount Paid

Sung Min Ha

Chief Executive Officer and President

Dong Seob Jee

Head of Strategy & Planning Office

Form 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF SEPTEMBER 2015

COMMISSION FILE NUMBER 333-04906

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

Euljiro 65 (Euljiro2-ga), Jung-gu

Seoul 100-999, Korea

(Address of principal executive offices)

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

Form 20-F x Form 40-F ¨

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

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

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

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

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ¨ No x

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

SEMI-ANNUAL BUSINESS REPORT

(From January 1, 2015 to June 30, 2015)

THIS IS A SUMMARY OF THE SEMI-ANNUAL 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,” “WE,” “US,” OR “OUR” SHALL MEAN SK TELECOM CO., LTD. AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS CONSOLIDATED SUBSIDIARIES. REFERENCES TO “SK TELECOM” SHALL MEAN SK TELECOM CO., LTD., BUT SHALL NOT INCLUDE ITS CONSOLIDATED SUBSIDIARIES.

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

COMPANY OVERVIEW

1. Company Overview

Since the first quarter of 2011, the Company has reported its financial statements under K-IFRS. The transition date of the Company and its consolidated subsidiaries to K-IFRS is January 1, 2010, and the adoption date is January 1, 2011. The Company’s semi-annual business report for the six months ended June 30, 2015 includes the following consolidated subsidiaries:


Name	Date of Establishment	Principal Business	Total Assets as of Dec. 31, 2014 (millions of Won)		Material Subsidiary*
SK Telink Co., Ltd.	Apr. 9, 1998	Telecommunication services and satellite broadcasting services		324,028	Material
M&Service Co., Ltd.	Feb. 10, 2000	Online information services		78,826	Material
SK Communications Co., Ltd.	Sep. 19, 1996	Internet portal and other Internet information services		176,168	Material
Stonebridge Cinema Fund	Sep. 30, 2005	Investment partnership		11,137	—
Commerce Planet Co., Ltd.	Jul. 1, 1997	Online shopping mall operation services		26,078	—
SK Broadband Co., Ltd.	Sep. 26, 1997	Fixed-line telecommunication services, multimedia and IPTV services		3,109,991	Material
K-net Culture and Contents Venture Fund	Nov. 24, 2008	Investment partnership		21,094	—
Hwaitec Focus Investment Partnership 2	Dec. 12, 2008	Investment partnership		19,301	—
Open Innovation Fund	Dec. 22, 2008	Investment partnership		21,765	—
PS&Marketing Co., Ltd.	Apr. 3, 2009	Sale of telecommunication devices		544,292	Material
Service Ace Co., Ltd.	Jul. 1, 2010	Customer center management services		66,336	—
Service Top Co., Ltd.	Jul. 1, 2010	Customer center management services		57,032	—
Network O&S Co., Ltd.	Jul. 1, 2010	Network maintenance services		71,348	—
BNCP Co., Ltd.	Dec. 7, 2009	Internet services		6,785	—
Iconcube, Inc.	Sep. 14, 2011	Online information services		1,382	—
Iconcube Holdings, Inc.	Sep. 5, 2014	Consulting services		1,934	—
Iriver Ltd.	Jul. 12, 2000	Audio device manufacturing		65,252	—
groovers Japan Co. Ltd.	Feb. 25, 2015	Contents and information distribution		46	—
SK Planet Co., Ltd.	Oct. 1, 2011	Telecommunication and platform services		2,579,286	Material
SK Planet Japan, K.K.	Mar. 14, 2012	Digital contents sourcing services		5,222	—
SK Planet Global PTE, LTD.	Aug. 4, 2012	Digital contents sourcing services		4,215	—
SK Planet America LLC	Jan. 27, 2012	Digital contents sourcing services		297,981	Material
SKP Global Holdings PTE, LTD.	Aug. 10, 2012	Holding company for overseas commerce		29,529	—
SK Global Healthcare Business Group, Ltd.	Sep. 14, 2012	Investment		25,784	—
Technology Innovation Partners, L.P.	Jun. 24, 2011	Investment		33,194	—


Name	Date of Establishment	Principal Business	Total Assets as of Dec. 31, 2014 (millions of Won)		Material Subsidiary*
SK Telecom China Fund I L.P.	Sep. 14, 2011	Investment		14,290	—
SK Telecom China Holdings Co., Ltd.	Jul. 12, 2007	Investment		37,877	—
Iriver China Co., Ltd.	Jun 24, 2004	Electronic device manufacturing		4,519	—
DongGuan Iriver Electronics Co., Ltd.	Jul. 6, 2006	Electronic device manufacturing		394	—
Iriver Enterprise Ltd.	Jan. 14, 2014	Wholesale and retail		4,931	—
Iriver Inc.	Feb. 15, 2007	Wholesale and retail		3,008	—
Iriver America Inc.**	May 1, 2005	Wholesale and retail		—	—
SKT Vietnam PTE., Ltd.	Apr. 5, 2000	Telecommunication services		4,242	—
SKT Americas, Inc.	Dec. 29, 1995	Information collection and management consulting services		42,159	—
YTK Investment Ltd.	Jul. 1, 2010	Investment		27,944	—
Atlas Investment	Jun. 24, 2011	Investment		66,596	—
Neosnetworks Co., Ltd.	Jun. 12, 2008	Security system services		31,633	—
Shopkick Management Company, Inc.	Oct. 9, 2014	Investment		230,925	Material
Shopkick, Inc.	Jun. 1, 2009	Mileage based e-commerce application development		28,216	—

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

**	Iriver America Inc. is currently in liquidation proceedings and possesses no assets.

Changes in subsidiaries are set forth below.


Change	Name	Remarks
Additions	groovers Japan Co. Ltd.	Established by Iriver Ltd. (“Iriver”) in the first half of 2015
Exclusions	Iriver CS Co., Ltd.	Merged into Iriver
Exclusions	Shenzen E-eye High Tech Co., Ltd. (“Shenzen E-eye”)	Disposed of equity investment

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. Since the introduction of services employing LTE technology in July 2011, the telecommunications market for such services has grown, as demand for fast data transfer speeds and differentiated services has increased. Having reached one million subscribers by January 2012 and over 10 million subscribers by April 2013, the Company has solidified its leadership position in LTE services as it has done with its 3G services. In June 2013, the Company became the first telecommunications service provider in the world to provide commercial LTE-Advanced (“LTE-A”) services using carrier aggregation technology, and in June 2014, the Company reaffirmed its technological leadership by becoming the first to provide commercial 225 Mbps wideband LTE-A services, which is three times faster than LTE. In December 2014, the Company launched tri-band LTE-A, which is four times faster than LTE. The Company also launched unlimited LTE data plans and other innovative data plans, such as “Rush hour / Subway Free” plans that are unlimited data plans based on time, place and occasion (or, TPO), reflecting the data pattern usage of customers and their lifestyles. “T-Phone,” “T-outdoor” and “T Kids Phone – Joon,” introduced in 2014, are customer-focused products that create additional value for customers. In addition, the Company released “Pet Fit”, a smart healthcare device for pets in April 2015 and “T-Pet,” which provides a variety of services such as a pet’s live location information through a device embedded with USIM and positioning modules in May 2015. The Company expects that these products will have a lock-in effect on existing customers.

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, such as the “T-Phone,” to transition to service-based competition.

In the business-to-business (“B2B”) area, the Company has strengthened its solutions business through the implementation of five main solution products: Smart Store, Smart Work, Smart Cloud, Green & Safety and M–Ad & Payment. Since the commercial launch of its mobile IPTV services, “B tv Mobile,” in October 2012, the Company has gained over one million paying subscribers as of March 2014. The Company is the first telecommunications services provider in the world to provide full high definition streaming services using its LTE-A network. In 2014, the number of its mobile IPTV service subscribers increased by 1.56 million to reach 2.37 million subscribers by the end of the year, and as of June 30, 2015, the number of subscribers was 3.19 million.

In the area of healthcare, the Company achieved several tangible milestones in 2014: point-of-care diagnostic devices manufactured by a company of which the Company is the largest shareholder received approval from the U.S. Food and Drug Administration; the Company entered the Chinese healthcare market; and the Company was the first Korean company to export medical information systems. The Company plans to continue to find and develop new growth engines in the mid- to long-term. The Company also plans to seek out new growth engines in existing businesses, including the intelligence business, by utilizing its technologies relating to big data.

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

(2) Fixed-line business

SK Broadband Co., Ltd. (“SK Broadband”) is engaged in providing telecommunications, broadcasting and new media services and various other services that are permitted to be carried out by SK Broadband under relevant regulations, as well as business activities that are directly or indirectly related to providing those services. 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.

(3) Other businesses

With respect to the Company’s e-commerce business, 11th Street, a platform service that connects various sellers and purchasers online, continues to gain market share. In the commerce platform business area, the Company, utilizing the existing network of partner businesses of OK Cashbag, Korea’s largest loyalty mileage program with 39.0 million members as of June 30, 2015, consumer information from big data, information technology, and other sources of competitive edges that can lead the industry, launched Syrup to provide smart shopping services to consumers and Syrup Store to provide integrated marketing solutions to partner businesses in June 2014. Syrup, a mobile wallet service upgraded and rebranded from its predecessor service, Smart Wallet, reached 14.1 million users as of June 30, 2015 and leads the online-to-offline commerce business.

In the location-based services business area, users of the Company’s T-Map Navigation service reached 19.6 million as of June 30, 2015. T-Map Navigation provides real time traffic information and various local information. Utilizing location-based service technology in other services, including leisure, logistics and travel services, the Company provides increased convenience and added value to customers.

In the digital contents business area, the Company provides high-quality digital contents in its leading mobile contents marketplace, T Store, which had 23.8 million subscribers as of June 30, 2015 and which the Company plans to expand.

In the media business area, the Company provides the optimum environment for subscribers to access multimedia contents according to personal taste and preference through “Hoppin” and “Btv mobile,” available on various digital devices such as personal computers and mobile devices.

In the advertising business area, the Company is engaged in advertisement production, promotion services and research and consulting services to substantively help businesses increase their value in a rapidly evolving business environment. SK Planet Co., Ltd. (“SK Planet”) will continue to provide value to customers by constantly developing and improving its services.

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

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

E. Credit Ratings

(1) Corporate bonds


Credit rating date	Subject of rating	Credit rating	Credit rating entity (Credit rating range)	Rating classification
June 21, 2012	Corporate bond	AAA	Korea Ratings	Regular rating
June 22, 2012	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
June 29, 2012	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
August 10, 2012	Corporate bond	AAA	Korea Ratings	Current rating
August 14, 2012	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
August 14, 2012	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating
April 11, 2013	Corporate bond	AAA	Korea Ratings	Current rating
April 11, 2013	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
April 11, 2013	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating
April 11, 2013	Corporate bond	AAA	Korea Ratings	Regular rating
April 11, 2013	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
April 11, 2013	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
April 22, 2014	Corporate bond	AAA	Korea Ratings	Regular rating
April 22, 2014	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
April 22, 2014	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
April 22, 2014	Corporate bond	AAA	Korea Ratings	Current rating
April 22, 2014	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
April 22, 2014	Corporate bond	AAA	NICE Investors Service, Co., Ltd.	Current rating
October 15, 2014	Corporate bond	AAA	Korea Ratings	Current rating
October 15, 2014	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
October 15, 2014	Corporate bond	AAA	NICE Investors Service, Co., Ltd.	Current rating
February 9, 2015	Corporate bond	AAA	Korea Ratings	Current rating
February 9, 2015	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
February 9, 2015	Corporate bond	AAA	NICE Investors Service, Co., Ltd.	Current rating
May 21, 2015	Corporate bond	AAA	Korea Ratings	Regular rating
May 27, 2015	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
June 10, 2015	Corporate bond	AAA	NICE Investors Service, Co., Ltd	Regular rating
July 6, 2015	Corporate bond	AAA	Korea Ratings	Current rating
July 6, 2015	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
July 6, 2015	Corporate bond	AAA	NICE Investors Service, Co., Ltd.	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.

(2) Commercial paper (“CP”)


Credit rating date	Subject of rating	Credit rating	Credit rating entity (Credit rating range)	Rating classification
June 21, 2012	CP	A1	Korea Ratings	Current rating
June 22, 2012	CP	A1	Korea Investors Service, Inc.	Current rating
June 29, 2012	CP	A1	NICE Investors Service Co., Ltd.	Current rating
December 14, 2012	CP	A1	Korea Investors Service, Inc.	Regular rating
December 18, 2012	CP	A1	Korea Ratings	Regular rating
December 18, 2012	CP	A1	NICE Investors Service Co., Ltd.	Regular rating


Credit rating date	Subject of rating	Credit rating	Credit rating entity (Credit rating range)	Rating classification
April 11, 2013	CP	A1	Korea Ratings	Current rating
April 11, 2013	CP	A1	Korea Investors Service, Inc.	Current rating
April 11, 2013	CP	A1	NICE Investors Service Co., Ltd.	Current rating
November 29, 2013	CP	A1	Korea Ratings	Regular rating
December 18, 2013	CP	A1	Korea Investors Service, Inc.	Regular rating
December 20, 2013	CP	A1	NICE Investors Service Co., Ltd.	Regular rating
April 22, 2014	CP	A1	Korea Ratings	Current rating
April 22, 2014	CP	A1	Korea Investors Service, Inc.	Current rating
April 22, 2014	CP	A1	NICE Investors Service Co., Ltd.	Current rating
October 15, 2014	CP	A1	Korea Ratings	Regular rating
October 15, 2014	CP	A1	Korea Investors Service, Inc.	Regular rating
October 15, 2014	CP	A1	NICE Investors Service Co., Ltd.	Regular rating
May 21, 2015	CP	A1	Korea Ratings	Current rating
May 27, 2015	CP	A1	Korea Investors Service, Inc.	Current rating
June 10, 2015	CP	A1	NICE Investors Service Co., Ltd.	Current rating

*	Rating definition: “A1” - Timely repayment capability is at the highest level with extremely low investment risk and is stable such that it will not be influenced by reasonably foreseeable changes in external factors.

(3) International credit ratings


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

*	On August 9, 2013, Moody’s Investors Service raised the outlook on the Company’s rating from A3 (Negative) to A3 (Stable).

*	On April 8, 2014, S&P raised the outlook on the Company’s rating from A- (Stable) to A- (Positive).

2. Company History

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

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

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

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

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

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

June 2015: Consummation of the comprehensive share exchange transaction (the “Share Exchange”) through which the Company acquired all of the shares of SK Broadband that it did not otherwise own in exchange for its treasury shares such that SK Broadband became a wholly-owned subsidiary of the Company.

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)

•

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

B. Significant Changes in Management

At the 28th General Meeting of Shareholders held on March 23, 2012, Young Tae Kim and Dong Seob Jee were elected as inside directors, and Hyun Chin Lim was re-elected as an independent director and as a member of the audit committee of the Company’s board of directors. At the 29th General Meeting of Shareholders held on March 22, 2013, Dae Sik Cho was elected as an inside director and Dae Shick Oh was elected as an independent director and member of the audit committee of the Company’s board of directors. At the 30th General Meeting of Shareholders held on March 21, 2014, Jae Hoon Lee was elected as an independent director and Jae Hyeon Ahn was elected as an independent director and member of the audit committee of the Company’s board of directors. At the 31st General Meeting of Shareholders held on March 20, 2015, Dong Hyun Jang was elected as an inside director.

C. Change in Company Name

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

D. Mergers, Acquisitions and Restructuring

(1) Spin-off

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


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

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


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

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


Category		Date
Board resolution on spin-off		July 19, 2011
Record Date for Determination of Shareholders for the Shareholders’ Meeting for Spin-off		August 4, 2011
Shareholders’ Meeting for Approval of Spin-off Plan		August 31, 2011
Date of Spin-off		October 1, 2011
Shareholders’ Meeting for Report of Spin-off and Inaugural Meeting of Shareholders		October 4, 2011
Registration of Spin-off		October 5, 2011
Others	Notice of closure of shareholders register Period of closure of shareholders register Public notice of shareholders’ meeting Dispatch of notice of shareholders’ meeting	July 20, 2011 August 5, 2011~ August 8, 2011 August 10, 2011 and August 12, 2011 August 12, 2011

•

Changes in shareholding, including majority shareholder

•

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

•

Appraisal rights of shareholders

•

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

•

Protection of creditors

•

In accordance with Article 530-9 Paragraph 1, both SK Telecom and SK Planet will be jointly and severally liable for the payment of all obligations of SK Telecom incurred prior to the spin-off.

•

Allocation of new shares

•

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

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

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

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

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

(4) Acquisition of shares of PS&Marketing

On February 20, 2014, the board of directors of the Company resolved to invest an additional Won 100 billion (20 million common shares) into PS&Marketing, an affiliated company, in order to increase its mid- to long-term competitiveness in distribution. The date of investment was April 2, 2014, and the cumulative investment amount totaled Won 330 billion.

(5) Disposition of shares of iHQ Inc.

On March 10, 2014, the Company disposed of 3,790,000 shares of iHQ Inc. (9.4% of its equity share) to rebalance its investment portfolio.

(6) Acquisition of shares of Neosnetworks Co., Ltd. (“Neosnetworks”)

In order to acquire a new growth engine, the Company acquired a controlling stake in Neosnetworks, a building security company, with the purchase of 31,310 shares (a 66.7% equity interest) of Neosnetworks on April 2, 2014. The Company acquired an additional 50,377 shares in Neosnetworks in April 2015 through a rights offering, resulting in an increase of its ownership to 83.9%.

(7) Acquisition of shares of Iriver

On August 13, 2014, the Company purchased 10,241,722 shares (a 39.3% equity interest) of Iriver Ltd. (“Iriver”) from Vogo-Rio Investment Holdings Co., Ltd. and KGF-Rio Limited in order to foster application development and smartphone accessories as part of the Company’s growth engines. As of December 31, 2014, the Company holds a 48.9% equity interest of Iriver by acquiring additional shares in its rights offering. The Company does not hold a majority of the voting rights of Iriver, but the Company has concluded that it has effective control, as it holds significantly more voting rights than any other shareholder or any organized group of shareholders.

(8) Acquisition of shares of Shopkick, Inc. (“Shopkick”)

On October 10, 2014, SK Planet America LLC, a subsidiary of the Company, acquired (through its 95.2%-owned subsidiary Shopkick Management Company, Inc.) a 100.0% ownership interest in Shopkick, a developer of a shopping app for mobile devices that provides benefits to customers for visiting stores, in order to penetrate the mobile commerce market in the United States.

(9) Disposition of Shenzen E-Eye shares

In 2014, the Company entered into an agreement to dispose of its equity interest in Shenzen E-eye in order to focus its business portfolio on high-growth business areas in the Chinese ICT market. The sale was completed on March 23, 2015.

(10) Disposition of a portion of KEB Hana Card shares

On April 3, 2015, the Company sold 27,725,264 shares (10.4% out of the 25.4% equity interest the Company held prior to the sale) of KEB Hana Card Co., Ltd. to Hana Financial Group in cash. With the proceeds of such sale (Won 180 billion), the Company acquired equity interests in Hana Financial Group on April 17, 2015 through participation in a rights offering by Hana Financial Group. The Company plans to maintain its strategic alliance and pursue opportunities to create synergies with Hana Financial Group.

(11) SK Broadband - Comprehensive Share Exchange

On March 20, 2015, the Company’s board of directors resolved to approve the Share Exchange.

•

Share Exchange ratio: Shareholders of one common share of SK Broadband will be allotted 0.0168936 common shares of SK Telecom

•

Shares exchanged: 2,471,883 registered common shares of SK Telecom

•

Date of Share Exchange agreement: March 23, 2015

•

Record date: April 6, 2015

•

Announcement date for the proceeding of the Share Exchange as a small-scale share swap: April 6, 2015

•

Meeting of board of directors for approval of the Share Exchange: May 6, 2015

•

Date of the Share Exchange: June 9, 2015

[SK Broadband]

(1) Merger

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

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

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

(2) Share Exchange

On March 20, 2015, the board of directors of SK Broadband resolved to approve the Share Exchange. The Share Exchange was approved at the extraordinary shareholders meeting held on May 6, 2015. Subsequent to the Share Exchange, the Company became the parent company of SK Broadband with 100% ownership and remained a listed corporation on the KRX KOSPI Market, and SK Broadband became a wholly-owned subsidiary of the Company and was delisted from the KRX KOSDAQ Market. There was no change in the share ownership interest of the Company’s existing shareholders or the Company’s management in connection with the Share Exchange.

•

Share Exchange ratio: Shareholders of one common share of SK Broadband were allotted 0.0168936 common shares of SK Telecom

•

Shares exchanged: 2,471,883 registered common shares of SK Telecom

•

Date of Share Exchange agreement: March 23, 2015

•

Record date: April 6, 2015

•

Announcement date for the proceeding of the Share Exchange as a small-scale share swap: April 6, 2015

•

Meeting of board of directors for approval of the Share Exchange: May 6, 2015

•

Date of the Share Exchange: June 9, 2015

[SK Planet]

(1) Merger

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

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

[SK Communications]

(1) Disposition of shares of SK i-media

Pursuant to the resolution of its board of directors on October 17, 2011, SK Communications sold all of the shares of SK i-media Co., Ltd. it owns to LK Media Tec Co., Ltd. for Won 1 million of cash.

(2) Disposition of shares of U-Land

Pursuant to the resolution of its board of directors on December 21, 2011, SK Communications sold all of the shares of U-Land Co., Ltd. (a 29.85% equity interest) it owns to SK Planet for Won 10 million.

(3) Disposition of the Cyworld service

Pursuant to the resolution of its board of directors on March 6, 2014, SK Communications sold its Cyworld service and certain related assets to Cyworld Co., Ltd. for Won 2.8 billion on April 8, 2014.

(4) Disposition of shares of Service-In

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

[PS&Marketing]

On February 20, 2014, the board of directors of PS&Marketing resolved to acquire the retail distribution business, including related assets, liabilities, contracts and human capital of the information technology and mobile wing of SK Networks. On the same day, the board of directors of PS&Marketing also resolved to acquire retail stores, including their assets and liabilities, of LCNC Co., Ltd (“LCNC”). The acquisitions were completed on April 30, 2014 at a purchase price of Won 124.5 billion for the assets acquired from SK Networks and a purchase price of Won 10 billion for the assets acquired from LCNC.

[M&Service]

Upon the merger between SK Marketing & Company, which held a 100% equity stake in M&Service, and SK Planet on February 1, 2013, SK Planet holds a 100% equity stake in M&Service.

[Neosnetworks]

On March 31, 2015, Neos Networks acquired the unmanned electronic security business of Joeun Safe to expand its unmanned security business. The acquisition cost, which had been reported on January 5, 2015 as Won 19.4 billion, is subject to adjustment depending on the customer transfer rate and is currently determined to be Won 14.0 billion. The final acquisition cost will be determined on September 30, 2015, based on the customer transfer rate as of such date. Joeun Safe was spun off from its parent company Joeun System in 2006 and has the fourth largest market share in the Korean unmanned security industry. Upon this acquisition, it is expected that the Company will quickly expand into the unmanned security market.

[Iriver]

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

Pursuant to the resolution of its board of directors on November 18, 2014, Iriver decided to merge with Iriver CS, its wholly-owned subsidiary, with Iriver as the surviving entity. The merger was completed based on the 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.

(2) New Establishment of groovers Japan Co. Ltd. (“groovers Japan”)

On February 25, 2015, Iriver newly established its overseas subsidiary, groovers Japan, for the purpose of strengthening new business opportunities in Japan.

E. Other Important Matters related to Management Activities

[SK Telecom]

(1) Issuance of bonds

On May 14, 2014, the Company issued four tranches of fixed-rate unsecured bonds in the principal amounts of Won 50 billion (with an annual interest rate of 3.301% and a maturity date of May 14, 2019), Won 150 billion (with an annual interest rate of 3.637% and a maturity date of May 14, 2024), Won 50 billion (with embedded options, an annual interest rate of 4.725% and a maturity date of May 14, 2029), and Won 50 billion (with embedded options, an annual interest rate of 4.72% and a maturity date of May 14, 2029).

On October 28, 2014, the Company issued three tranches of fixed-rate unsecured bonds in the principal amounts of Won 160 billion (with an annual interest rate of 2.53% and a maturity date of October 28, 2019), Won 150 billion (with an annual interest rate of 2.66% and a maturity date of October 28, 2021), and Won 190 billion (with an annual interest rate of 2.82% and a maturity date of October 28, 2024).

On February 26, 2015, the Company issued three tranches of fixed-rate unsecured bonds in the principal amounts of Won 100 billion (with an annual interest rate of 2.40% and a maturity date of February 26, 2022), Won 150 billion (with an annual interest rate of 2.49% and a maturity date of February 26, 2025), and Won 50 billion (with an annual interest rate of 2.61% and a maturity date of February 26, 2030).

On July 17, 2015, the Company issued four tranches of fixed-rate unsecured bonds in the principal amounts of Won 90 billion (with an annual interest rate of 1.89% and a maturity date of July 17, 2018), Won 70 billion (with an annual interest rate of 2.66% and a maturity date of July 17, 2025), Won 90 billion (with an annual interest rate of 2.82% and a maturity date of July 17, 2030), and Won 50 billion (with an annual interest rate of 3.40% and a maturity date of July 17, 2030).

(2) Issuance of hybrid securities

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

(3) Conversion of convertible notes

On April 7, 2009, the Company issued convertible notes with a maturity of five years in the principal amount of US$332,528,000 with an annual interest rate of 1.75%. In 2013, holders exercised their conversion rights with respect to an aggregate principal amount of US$326,023,000 of the convertible notes. The Company delivered 1,241,337 treasury shares in respect of US$170,223,000 of the exercised aggregate principal amount and delivered cash in respect of the remainder due to the limit on foreign ownership. In connection with such conversion, the Company recognized Won 135 billion in financial expenses in 2013. On November 13, 2013, the Company exercised its early redemption right and on December 13, 2013, redeemed the US$6,505,000 principal amount of convertible notes not converted by noteholders. A 20-day volume weighted average pricing formula was used for the delivery of cash made in place of treasury shares. Due to such calculation, the Company still had US$91,108,507 outstanding in payables as of December 31, 2013. The amount was paid in full as of January 6, 2014 and currently there is no amount outstanding.

[SK Broadband]

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

3. Total Number of Shares

A. Total Number of Shares


(As of June 30, 2015)		(Unit: in shares)


	Share type
Classification	Common shares		Preferred shares		Total		Remarks
I. Total number of authorized shares		220,000,000		—		220,000,000		—
II. Total number of shares issued to date		89,278,946		—		89,278,946		—
III. Total number of shares retired to date		8,533,235		—		8,533,235		—
a. reduction of capital		—		—		—		—
b. retirement with profit		8,533,235		—		8,533,235		—
c. redemption of redeemable shares		—		—		—		—
d. others		—		—		—		—
IV. Total number of shares (II-III)		80,745,711		—		80,745,711		—
V. Number of treasury shares		8,116,551		—		8,116,551		—
VI. Number of shares outstanding (IV-V)		72,629,160		—		72,629,160		—

B. Treasury Shares

(1) Acquisitions and dispositions of treasury shares


(As of June 30, 2015)		(Unit: in shares)



Acquisition methods			Type of shares	At the beginning of period			Changes							At the end of period
Acquisition methods			Type of shares	At the beginning of period			Acquired (+)		Disposed (-)			Retired (-)		At the end of period
Acquisition pursuant to the Financial Investment Services and Capital Markets Act of Korea (“FSCMA”)	Direct acquisition	Direct acquisition from market	Common shares		7,086,028			—		—			—		7,086,028
		Direct acquisition from market	Preferred shares		—			—		—			—		—
		Direct over-the- counter acquisition	Common shares		—			—		—			—		—
		Direct over-the- counter acquisition	Preferred shares		—			—		—			—		—
		Tender offer	Common shares		—			—		—			—		—
		Tender offer	Preferred shares		—			—		—			—		—
		Sub-total	Common shares		7,086,028			—		—			—		7,086,028
		Sub-total	Preferred shares		—			—		—			—		—
	Acquisition through trust and other agreements	Held by trustee	Common shares		—			—		—			—		—
		Held by trustee	Preferred shares		—			—		—			—		—
		Held in actual stock	Common shares		3,886,710			—		—			—		3,886,710
		Held in actual stock	Preferred shares		—			—		—			—		—
		Sub-total	Common shares		3,886,710			—		—			—		3,886,710
		Sub-total	Preferred shares		—			—		—			—		—
Other acquisition			Common shares		(1,163,363	)		—		(1,692,824	)		—		(2,856,187	)
			Preferred shares		—			—		—			—		—
Total			Common shares		9,809,375			—		—			—		8,116,551
			Preferred shares		—			—		—			—		—

*	Due to the Company’s exercise of its early redemption right with respect to its convertible notes on November 13, 2013, the conversion right exercise period had expired by December 31, 2013, and there are no more treasury shares deposited with the Korea Securities Depository.

**	The change in treasury shares through other acquisitions was a result of the Share Exchange.

4. Status of Voting Rights


(As of June 30, 2015)		(Unit: in shares)


Classification		Number of shares		Remarks
Total shares (A)	Common share		80,745,711		—
Total shares (A)	Preferred share		—		—
Number of shares without voting rights (B)	Common share		8,116,551		Treasury shares
Number of shares without voting rights (B)	Preferred share		—		—
Shares without voting rights pursuant to the Company’s articles of incorporation (the “Articles of Incorporation”) (C)	Common share		—		—
	Preferred share		—		—
Shares with restricted voting rights pursuant to Korean law (D)	Common share		—		—
	Preferred share		—		—
Shares with reestablished voting rights (E)	Common share		—		—
Shares with reestablished voting rights (E)	Preferred share		—		—
The number of shares with exercisable voting rights (F = A - B - C - D + E)	Common share		72,629,160		—
	Preferred share		—		—

5. Dividends and Others

A. Dividends

(1)

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

•

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

(2)

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

(3)

Distribution of cash dividends was approved during the 30th General Meeting of Shareholders held on March 21, 2014.

•

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

(4)

Distribution of interim dividends of Won 1,000 was approved during the 366th Board of Directors’ Meeting on July 24, 2014.

(5)

Distribution of cash dividends was approved during the 31st General Meeting of Shareholders held on March 20, 2015.

•

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

(6)

Distribution of interim dividends of Won 1,000 was approved during the 378th Board of Directors’ Meeting on July 23, 2015.

B. Dividends for the Last Three Fiscal Years

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



Classification		As of and for the six months ended June 30, 2015		As of and for the year ended December 31, 2014		As of and for the year ended December 31, 2013
Par value per share (Won)			500		500		500
(Consolidated) Net income			840,635		1,799,320		1,609,549
Net income per share (Won)			11,695		25,154		23,211
Total cash dividend			72,629		666,802		666,374
Total stock dividends			—		—		—
(Consolidated) Percentage of cash dividend to available income (%)			8.6		37.1		41.4
Cash dividend yield ratio (%)	Common share		0.4		3.5		4.1
Cash dividend yield ratio (%)	Preferred share		—		—		—
Stock dividend yield ratio (%)	Common share		—		—		—
Stock dividend yield ratio (%)	Preferred share		—		—		—
Cash dividend per share (Won)	Common share		1,000		9,400		9,400
Cash dividend per share (Won)	Preferred share		—		—		—
Stock dividend per share (share)	Common share		—		—		—
Stock dividend per share (share)	Preferred share		—		—		—

*	Net income per share means basic net income per share. The cash dividend per share of Won 9,400 includes the interim cash dividend per share of Won 1,000.

II. BUSINESS

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

1. Business Overview

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


Classification	Company name	Description of business
Wireless	SK Telecom Co., Ltd.	Wireless voice and data telecommunications services via digital wireless networks
Wireless	PS&Marketing Co., Ltd.	Sale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels
Fixed-line	SK Broadband Co., Ltd.	High-speed Internet, TV, telephone, commercial data and other fixed-line services and management of the transmission system for online digital contents Various media-related services, such as channel management, including video on demand, and mobile IPTV services
Fixed-line	SK Telink Co., Ltd.	International wireless direct-dial “00700” services, pre-paid international card calling services, voice services using Internet protocol and Mobile Virtual Network Operator (“MVNO”) services
Other business	SK Planet Co., Ltd.	Various platform services such as 11th Street, Syrup, T Store and T-Map Navigation in the application and commerce areas
	SK Communications Co., Ltd.	Integrated portal services through NATE and instant messaging services through NATE-ON
	M&Service Co., Ltd.	System software development, distribution and technical support services and other online information services
	SK Planet America LLC	System software development, distribution and investments
	Shopkick Management Company, Inc.	System software development, distribution and investments

[Wireless Business]

A. Industry Characteristics

As of June 30, 2015, the Korean mobile communication market can be considered to have reached its maturation stage with more than a 100% penetration rate. However, the Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology and the development of highly advanced LTE-A, LTE and 3G smartphones which enable the provision of convergence services for multimedia contents, mobile commerce, telematics, new media and other related services. In addition, through the commercialization of LTE network in July 2011 and LTE-A network in June 2013, B2B businesses, such as the corporate “connected workforce” business which can directly contribute to an enhancement in productivity, are expected to grow rapidly. In the first half of 2014, wideband LTE-A service was commercialized and on December 29, 2014, tri-band LTE-A service with a maximum speed of 300 Mbps was also commercialized. Such achievements were the building blocks towards the Company’s LTE penetration reaching 62% as of June 30, 2015.

B. Growth Potential


			(Unit: in 1,000 persons)

Classification		As of June 30, 2015		As of December 31,
Classification		As of June 30, 2015		2014		2013		2012
Number of subscribers	SK Telecom		26,238		26,468		26,286		26,555
	Others (KT, LGU+)		26,322		26,125		25,909		25,793
	MVNO		5,308		4,584		2,485		1,276
	Total		57,868		57,177		54,680		53,624

*	Source: Ministry of Science, ICT and Future Planning (“MSIP”) website.

C. Domestic and Overseas Market Conditions

The Korean mobile communication market includes the entire population of Korea with mobile communication service needs, and almost every Korean is considered a potential user. Sales revenue related to data services is expected to increase due to the increasing popularity of smartphones and high-speed wireless networks. There is also a growing importance to the business-to-business segment, which creates added value by selling and developing various solutions. Seasonal and economic fluctuations have much less impact on the Korean mobile communication market compared to other industries.

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

(Unit: in percentages)

Classification

As of June 30,
2015

As of December 31,

2014

2013

2012

Mobile communication services

49.5

50.0

50.3

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

D. Business Overview and Competitive Strengths

The Company is seeking to transform itself from a telecommunications service provider into a comprehensive ICT service provider. It has continued to innovate the scope of its services and achieved strong growth in subscribers amid fierce competition and rate cuts. As a result, for the six months ended June 30, 2015, the Company recorded Won 8.5 trillion in revenue and Won 0.8 trillion in operating income on a consolidated basis and Won 6.3 trillion in revenue and Won 0.8 trillion in operating income on a separate basis.

The number of subscribers (including MVNO subscribers) as of June 30, 2015 was 28.7 million, an increase of approximately 290,000 from the previous quarter due to the popularity of the newly launched data-centric tariff plans. In particular, the number of smartphone subscribers as of June 30, 2015 was 20.0 million, an increase of approximately 220,000 from the previous quarter propelled by 17.9 million LTE subscribers, solidifying the Company’s market leadership. Following the launch of commercial LTE services in July 2011, the Company became the first telecommunications service provider in the world to launch commercial wideband LTE-A services in June 2014. In December 2014, the Company launched tri-band LTE-A services. By launching various high quality services utilizing the LTE-A and wideband LTE networks such as group video conference call services, full high definition mobile IPTV streaming services, and “T Baseball Multiview,” which allows users to watch multiple baseball games on one screen, the Company plans to provide an innovative user experience, enhance customer satisfaction and increase profitability.

The Company has proved that it has superior network quality compared to its competitors according to the Korea Communications Commission quality evaluations. The Company has also proved to be the leader in Korea’s top three customer satisfaction indices: according to the National Customer Satisfaction Index, Korean Customer Satisfaction Index and Korean Standard Service Quality Index, the Company has continued to hold the leading position for 18 years, 17 years and 16 years, respectively.

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

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

PS&Marketing, a subsidiary of the Company, 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.

[Fixed-line Business]

A. Industry Characteristics

As subscribers to various bundled wireless and fixed-line products continue to increase, the IPTV business is evolving to satisfy diverse customer needs for media services through differentiated service offerings, including mobile IPTV, bundled wireless and IPTV products and ultra-high definition services for smart televisions. The market for our corporate business is also growing, with cloud computing, mobile offices and other new information and communications technologies being commercialized. The increased usage of smartphones and tablet computers, the pilot programming of commercial ultra-high definition television broadcasting services and competition for wideband LTE services have greatly increased data traffic, thereby further emphasizing the importance of fixed-line network infrastructure that is capable of handling large capacities of data traffic with stability and efficiency.

B. Growth Potential

(Unit: in 1,000 persons)


				As of December 31,
Classification		As of June 30, 2015		2014		2013
Fixed-line Subscribers	High-speed Internet		19,470		19,199		18,738
	Fixed-line telephone		16,641		16,939		17,620
	IPTV (real-time)		11,338		10,840		8,522

*	Source: MSIP website and Korea Communications Commission website

**	The number of IPTV subscribers as of June 30, 2015 has not been announced by the MSIP, and the number shown above is as of March 31, 2015.

C. Cyclical Nature and Seasonality

High-speed Internet, fixed-line telephone and IPTV services are mature markets that are comparatively less sensitive to cyclical economic changes as such services have become more of a necessity and the market has matured. The telecommunications services market overall is not expected to be particularly affected by economic downturns due to the low income elasticity of demand for telecommunication services.

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


			(Unit: in percentages)

Classification	As of		As of December 31,
Classification	June 30, 2015		2014		2013		2012
High-speed Internet (including resales)		25.4		25.1		24.4		24.1
Fixed-line telephone (including Voice over Internet Protocol (“VoIP”))		17.1		17.0		16.9		16.7
IPTV		26.6		26.1		23.8		22.0

*	Source: MSIP website and the Korea Communications Commission website.

*	With respect to VoIP services, the market share was calculated based on the number of VoIP subscribers among the Company, KT and LG U+.

*	The audience share for IPTV as of June 30, 2015 has not been announced by the MSIP, and the number shown above is as of March 31, 2015.

D. Business Overview and Competitive Strengths

In 1999, the Company was the first in the world to commence commercial ADSL services. On the back of its premium technology and enhanced competitiveness achieved through bundled products, it is currently expanding subscriber base across all of its businesses, including broadband Internet, telephone and IPTV. In particular, SK Broadband has positioned itself to focus on corporate customer services and IPTV services as key strategic areas for mid- to long-term growth, exploiting opportunities in new ICT-based businesses that have led to revenue growth and providing differentiated contents in its IPTV business by securing popular programming, which includes exclusive children’s channels and live broadcasts of Major League Baseball games. In addition, the Company has reinforced its leadership in the ultra-high definition broadcasting market by launching ultra-high definition services that require no set-top boxes in April 2014 and by commercializing ultra-high definition set-top boxes for the first time in Korea in September 2014. Furthermore, the Company was the first in the industry to adopt solutions to upgrade full high definition to ultra-high definition, and the Company also strengthened the line-up of ultra-high definition contents by securing access to diverse contents provided by Sony and NBC Universal. Moreover, the Company provides the greatest number of channels in full high definition in the IPTV market due to its recent upgrade of all 130 live high definition channels to full high definition.

In September 2013, the Company developed technology that compresses videos for its ultra-high definition IPTV services. During the first quarter of 2014, the Company commercialized new transmission technology that can more efficiently transmit signals on the hybrid fiber-coaxial network despite its limited frequency. Furthermore, the Company solidified its technological leadership for providing ultra-high definition broadcasting for wireless and fixed line in the IPTV industry by commercializing a unique ultra-high-definition service that can be provided directly to smart televisions without the installation of “smart” set-top boxes in April 2014 and started transmitting ultra-high definition contents to mobile IPTV in May 2014.

SK Telink, a provider of international telecommunications service, has been able to establish itself as a market leader as a result of its affordable pricing, proactive marketing and the quality of its services. It launched a mobile phone-based international calling service under the brand name “00700” in 1998, creating a new niche market within the long-distance telephony market that was otherwise dominated by existing service providers. In 2003, SK Telink was designated a common carrier for international calling services, which allowed us to expand our international calling services to fixed-line international calling services. SK Telink plans to strategically target the convergence of wireless and fixed-line telecommunications and strengthen its existing business, including international and long-distance calling services, value-added services for local calling and B2B services and video conference call services while aiming to satisfy the diverse needs of customers by providing quality solutions at reasonable prices.

[Other Business]

A. Industry Characteristics

As the number of smartphones distributed in Korea exceeds 40 million, the growth in various mobile devices has spurred the rise of the service provider with a strong platform business as the leader in the ICT market. It is becoming increasingly important to enhance competitiveness by building a platform with large data capacity to handle the increase in data transmission.

A platform business acts as an intermediary by promoting interactions among various customer groups, thereby generating new values. It is important for a platform business to continually attract subscribers and users and to create an ecosystem with certain lock-in effects. A platform can exist in various forms, including as a technological standard (iOS, Android OS), a subscriber-based service platform (Facebook, Twitter) or a marketplace (Amazon, T Store). Platform businesses are evolving and expanding globally.

A platform business has strong growth potential due to its connectivity with related services and ease of global expansion. Apple became a world-leading smartphone producer based on its innovative design and the competitive strength of its App Store platform. Google has created a new ecosystem of long-tail advertising by attracting millions of third parties to its advertising platform, as well as showing strong growth in mobile markets with its competitive platform based on Android OS. It is becoming increasingly important to enhance competitiveness through a database that can register and analyze purchase patterns of customers across all areas and a platform with large data capacity with which to utilize this database and provide differentiated services to customers.

B. Growth Potential

The scope and value generated by the platform business, including application and content marketplaces and N-screen services, continue to increase as smartphones and tablet computers become more popular and the bandwidth and speed of network infrastructure improve. As the wireless network evolves to LTE, business opportunities for the platform business exist, including multimedia streaming, N-screen service based on cloud technology and high-definition location-based services. Since the platform business realizes profit by connecting with advertisements or commerce sites after building a critical mass of subscribers and traffic, the recent growth in the advertising and commerce markets is expected to present an opportunity for platform businesses. The importance of building a platform with large data capacity that is connected to various digital contents and commerce is expected to increase in the future.

C. Domestic and Overseas Market Conditions

(1) Commerce markets

The Company expects that online commerce markets will continue to grow due to the growth potential of the Internet shopping population, the strengthening of online business models by off-line operators and the rapid rise of mobile commerce. Recently, due to the widespread use of smartphones and social media, the commercialization of location-based services and the development of big data technology, online to offline (or, O2O) business, which is a concept of attracting customers to offline stores using online and mobile environments, is being highlighted as a new field in the online commerce market industry.

(2) Digital contents

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

(3) Media

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

D. Business Overview and Competitive Strengths

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

(1) Commerce

11th Street, an online marketplace, has continued its growth through effective marketing and customer satisfaction. Despite its later entry into the online commerce market (launched in 2008), which was already divided between Auction and G-Market, it is leading the domestic e-commerce market and is also rapidly growing in the mobile commerce market. Growth plans involving overseas joint ventures based on 11th Street’s business expertise have resulted in the successful launch of an open online commerce market in Turkey in partnership with Doğuş Group in March 2013. In Indonesia, an open market platform was successfully launched through a joint venture established in July 2013 with PT XM Axiata Tbk, a wireless telecommunications company in Indonesia. In October 2014, SK Planet and Celcom Axiata Berhad, which is a leading telecommunications service provider in Malaysia, established a joint venture, Celcom Planet, and launched online commerce services tailored to the Malaysian market in April 2015.

Syrup is a consumer-oriented commerce service with the goal of minimizing its customers’ time and efforts while maximizing the economic benefits by providing information about coupons and events based on time, place and occasion. To achieve this goal, Syrup combines location-based services, such as geo-fencing, a virtual perimeter technology using a global positioning system (or, GPS) and Bluetooth Low Energy (or, BLE), with big data analysis of consumption patterns. Syrup’s business partners can benefit from cost-effective marketing through Syrup by utilizing statistics and analysis regarding consumers’ frequency of visits, preferred products, and consumption patterns. Furthermore, Syrup is strengthening its service foundation and competitiveness through the continual release of vertical products such as Syrup Pay, Syrup Order and Syrup Table and the expansion of Merchant.

OK Cashbag is a point-based loyalty marketing program which has grown to become a global top-tier loyalty marketing program since its inception in 1999. Customers have access to increased benefits through accumulation of loyalty reward points and partner companies use OK Cashbag as a marketing resource. With 39.0 million subscribers, OK Cashbag maintains a leading position in the industry and plans to continue strengthening its position by providing customized services befitting customers’ needs and market conditions.

(2) Location-based services

T-Map Navigation provides map, local information, real-time traffic information and navigation services. With cumulative subscribers of 19.6 million as of June 30, 2015, T-Map Navigation is one of the leading location-based service platforms in Korea. By entering the Online to Offline service area with T map Taxi, T map Public Transportation and others, the Company is expanding its mobile platform foundation that connects day-to-day life. The Company is broadening the range of its location-based services by also providing “infotainment” systems to commercial vehicle businesses as well as providing localized content on its products, such as region-specific information and advertisements. The Company plans to further develop the T-Map Navigation platform by initiating open application programming interface-based services, providing services to more diverse types of devices and providing local area-based services.

(3) Digital contents

T Store, launched in September 2009, reached 23.8 million subscribers and cumulative downloads of 2.8 billion as of June 30, 2015, solidifying its leadership position in the application market and plans to widen its services to tablets and navigation devices. The Company intends to further develop T Store into a personalized gateway and mobile playground through expansion of the scope of serviceable devices, reinforcement of digital content offerings and enhancement of search services, among other things.

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

The Company’s instant messenger service, “Nate-On,” had a market share of 27.6% in the instant messenger market in Korea, with 4.6 million net users who logged in during the month of June 2015. The Company’s Internet search portal service, “Nate,” had a page-view market share of 4.5% as of June 30, 2015. (Source: Korean Click, based on fixed-line access)

•

Satellite DMB service

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

2. Major Products & Services

A. Updates on Major Products and Services

(Unit: in millions of Won and percentages)


Business	Major Companies	Item	Major Trademarks	Consolidated Sales Amount (ratio)
Wireless	SK Telecom Co., Ltd., PS&Marketing Co., Ltd., Service Ace Co., Ltd., Network O&S Co., Ltd.	Mobile communication service, wireless data service, ICT service	T and others		6,622,093	(78%)
Fixed-line	SK Broadband Co., Ltd., SK Telink Co., Ltd.	Fixed-line phone, high speed Internet, data and network lease service	B tv , 00700 international call, 7Mobile and others		1,232,229	(15%)
Other	SK Planet Co., Ltd , SK Communications Co., Ltd., Iriver Inc. M&Service Co., Ltd.,	Internet portal service and e-commerce	OK Cashbag, NATE, T Store, T-Map Navigation and others		641,703	(7%)
Total					8,496,025	(100%)

[Wireless Business]

As of June 30, 2015, based on the Company’s standard monthly subscription plan, the basic service fee was Won 11,000, and the usage fee was Won 1.8 per second.

[Fixed-line Business]

SK Broadband provides broadband Internet access service, telephony, TV, corporate data services and other services for both individual and corporate customers. As of June 30, 2015, broadband Internet and TV services comprised 54.7% of SK Broadband’s revenue, telephony service 20.0%, corporate data services 24.4% and other telecommunications services 0.9%. Price fluctuations in the different services provided by SK Broadband are due to discounts provided for long-term contracts, changes in equipment costs and competition between companies.

[Other Business]

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


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

3. Investment Status

[Wireless Business]

A. Investment in Progress

(Unit: in 100 millions of Won)

Business

Classification

Investment
period

Subject of
investment

Investment effect

Expected
investment
amount

Amount
already
invested

Future
investment

Network/Common

Upgrade/
New installation

2015

Network,
systems and
others

Capacity increase and
quality improvement;
systems improvement

20,000

6,672

—

Total

20,000

6,672

—

B. Future Investment Plan

(Unit: in 100 millions of Won)

Business

Expected investment amount

Expected investment for each year

Investment effect

Asset type

Amount

2015

2016

2017

Network/Common

Network,
systems
and others

20,000

To be
determined

Upgrades to the existing
services and expanded
provision of services
including wideband
LTE-A

Total

20,000

To be
determined

[Fixed-line Business]

A. Investment in Progress

For the six months ended June 30, 2015, the Company made the capital expenditures set out below in order to expand its client base and network infrastructure, and the Company expects that the total amount of capital investments in 2015 will be similar to that of 2014.

(Unit: in 100 millions of Won)

Business

Classification

Investment
period

Subject of
investment

Investment effect

Total
investments

Amount
already
invested

Future
investment

High-speed Internet

Upgrade/
New installation

For the
six
months
ended
June 30,
2015

Backbone and
subscriber
network /
others

Expand subscriber
networks and facilities

2,261

733

To be
determined

Telephone

Television

450

Corporate Data

Increase leased-line
and integrated
information system

725

Others

Expand networks and
required space

332

Total

2,261

4. Revenues

(Unit: in millions of Won)


Business	Sales type	Item		For the six months ended June 30, 2015		For the year ended December 31, 2014		For the year ended December 31, 2013
Wireless	Services	Mobile communication	Export		6,533		6,773		2,526
			Domestic		6,615,560		13,521,108		13,313,006
			Subtotal		6,622,093		13,527,881		13,315,532
Fixed-line	Services	Fixed-line, B2B data, High-speed Internet, TV	Export		38,759		63,608		28,002
			Domestic		1,193,470		2,386,312		2,296,387
			Subtotal		1,232,229		2,449,920		2,324,389
Other	Services	Display and Search ad., Content	Export		23,226		20,798		14,049
			Domestic		618,477		1,165,199		948,084
			Subtotal		641,703		1,185,997		962,133
Total			Export		68,518		91,179		44,577
			Domestic		8,427,507		17,072,619		16,557,477
			Total		8,496,025		17,163,798		16,602,054

(Unit: in millions of Won)


For the six months ended June 30, 2015	Wireless		Fixed		Other			Sub total		Internal transaction			After consolidation
Total sales		7,469,465		1,533,405		997,767			10,000,637		(1,504,612	)		8,496,025
Internal sales		847,372		301,176		356,064			1,504,612		(1,504,612	)		—
External sales		6,622,093		1,232,229		641,703			8,496,025		—			8,496,025
Operating income (loss)		815,120		42,805		(42,399	)		815,526		—			815,526
Profit (loss) for the period		—		—		—			—		—			1,075,605
Total assets		23,580,421		3,516,376		3,214,927			30,311,724		(2,270,218	)		28,041,506
Total liabilities		9,483,378		2,242,744		897,624			12,623,746		100,173			12,723,919

5. Derivative Transactions

A. Current Swap Contract Applying Cash Flow Risk Hedge Accounting

Currency swap and interest rate swap contracts under cash flow hedge accounting as of June 30, 2015 are as follows:


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$400,000,000)	Foreign currency risk	Cross currency swap	Morgan Stanley and five other banks	Jul. 20, 2007 – Jul. 20, 2027
Jun. 12, 2012	Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000,000)	Foreign currency risk	Cross currency swap	Citibank and five other banks	Jun. 12, 2012 – Jun.12, 2017
Nov. 1, 2012	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$700,000,000)	Foreign currency risk	Cross currency swap	Barclays and nine other banks	Nov. 1, 2012 – May. 1, 2018
Jan. 17, 2013	Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000,000)	Foreign currency risk	Cross currency swap	BNP Paribas and three other banks	Jan. 17, 2013 – Nov. 17, 2017
Mar. 7, 2013	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of US$300,000,000)	Foreign currency risk and interest rate risk	Cross currency interest rate swap	DBS Bank	Mar. 7, 2013 – Mar. 7, 2020
Oct. 29, 2013	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$300,000,000)	Foreign currency risk	Cross currency swap	Korea Development Bank and others	Oct. 29, 2013 – Oct. 26, 2018
Dec. 16, 2013	Fixed-to-fixed cross currency swap (U.S. dollar denominated loan face value of US$80,577,000)	Foreign currency risk	Cross currency swap	Deutsche Bank	Dec. 16, 2013 – Apr. 29, 2022

B. Treatment of Derivative Instruments on the Balance Sheet

As of June 30, 2015, fair values of the above derivatives recorded in assets or liabilities and details of derivative instruments are as follows.

(Unit: in millions of Won and thousands of foreign currencies)


Hedged item	Fair value
	Cash flow hedge											Trading purposes		Total
	Accumulated gain (loss) on valuation of derivatives			Tax effect			Foreign currency translation gain (loss)			*Others^(1)**		Trading purposes		Total
Non-current assets:
Convertible option^(*2) (face amounts of Won 50 billion)		—			—			—			—		5,380		5,380
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$400,000,000)		(55,930	)		(17,856	)		(7,724	)		129,806		—		48,296


Hedged item	Fair value
	Cash flow hedge											Trading purposes		Total
	Accumulated gain (loss) on valuation of derivatives			Tax effect			Foreign currency translation gain (loss)			*Others^(1)**		Trading purposes		Total
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of US$300,000,000)		(5,992	)		(1,913	)		12,112							4,207
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$300,000,000)		(8,992	)		—			18,603			—		—		9,611

Total assets															67,494

Non-current liabilities:
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000,000)		(6,361	)		(2,031	)		749			—		—		(7,643	)
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$700,000,000)		(22,835	)		(7,290	)		23,372			—		—		(6,753	)
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000,000)		2,149			686			(76,321	)		—		—		(73,486	)
Fixed-to-fixed cross currency swap (U.S. dollar denominated loan face value of US$80,577,000)		(4,640	)		(1,482	)		5,506			—		—		(616	)

Total liabilities															(88,498	)

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

(*2)	Fair value of the conversion option of convertible bonds held by SK Communications Co., Ltd. amounting to Won 10 million was accounted for as derivative financial assets.

6. Major Contracts

[SK Telecom]

(Unit: in 100 millions of Won)


Category	Vendor	Start Date	Completion Date	Contract Title	Contract Amount
Goods	Telcoware Co.	January 22, 2015	December 31, 2015	2014 B2B GOP Unmanned Security System Installation in eastern Korea	118
	Cremotech Co.	April 9, 2015	September 30, 2015	2015 Purchase of Smart Beam Laser Products	58
	Noori Telecom	November 8, 2012	April 30, 2015	2012 B2B Unit Price Contract for Wireless Modems to Remotely Read Meters of KEPCO’s Transformer Users	52
Construction	Kocom	January 9, 2015	December 31, 2015	2014 B2B GOP Unmanned Security System Installation in eastern Korea	60
Equipment	Oracle Korea	January 1, 2015	December 31, 2017	2015 B2B SK Planet Oracle DBMS ULA	49
Real Estate	SK Broadband Co., Ltd.	February 1, 2015	January 31, 2016	Namsan Office Building Lease Contract	52
Real Estate	Individuals	January 1, 2015	March 31, 2015	Purchase of land (Jeonju region and 10 others)	113
Subtotal					502

[SK Broadband]

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


Counterparty	Contract Contents	Contract Period	Note
Telecommunication service providers	Interconnection among telecommunication service providers	—	Automatically renewed for two years at a time unless specific amendments are requested
KEPCO	Provision of electric facilities	From Jan. 2015 to Dec. 2015 (Unless special reasons arise, the usage period will be renewed annually)	Use of electricity poles
Seoul City Railway	Use of telecommunication line conduits	From Jan. 2012 to Dec. 2014 (Renewal in progress, expected to enter into a contract after deciding technical service unit price, to be applied retroactively to 2015 payments)	Use of railway telecommunication conduit (Serviced areas to expand)
Busan Transportation Corporation	Use of telecommunication line conduits	From July 2009 to July 2013 (Renewal in progress, currently in the process of transitioning to private network system, plans to enter into a contract once completed and the remaining work is confirmed)	Use of railway telecommunication conduit (Serviced areas to expand)
Seoul Metro	Use of telecommunication line conduits	From May 2010 to May 2013 (Renewal in progress, currently in discussion to decide usage unit price, future plans to enter into a contract)	Use of railway telecommunication conduit (Serviced areas to expand)
Gwangju City Railway	Use of telecommunication line conduits	From Sep. 2010 to Dec. 2012 (Renewal in progress, in the completion stage of transitioning to private network system, currently reviewing whether to renew contract at the end of 2015)	Use of railway telecommunication conduit (Service lease)

*	Renewal is in progress after negotiation of lower usage fees.

[SK Communications]


Counterparty	Purpose	Contract Period	Contract Amount
Daum Kakao Corp.	Cost-per-click Internet search advertisement	—	Amount determined based on the number of clicks

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

7. R&D Investments

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

(Unit: in millions of Won except percentages)


Category		For the six months ended June 30, 2015			For the year ended December 31,						Remarks
Category		For the six months ended June 30, 2015			2014			2013			Remarks
Raw material			775			530			38			—
Labor			33,883			71,224			79,865			—
Depreciation			71,386			176,975			158,158			—
Commissioned service			18,495			67,802			22,923			—
Others			26,867			81,221			102,668			—
Total R&D costs			151,406			397,752			363,652			—
Accounting	Sales and administrative expenses		147,422			390,943			352,385			—
Accounting	Development expenses (Intangible assets)		3,984			6,809			11,267			—
R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100)			1.78	%		2.32	%		2.19	%		—

8. Other information relating to investment decisions

A. Trademark Policies

The Company manages its corporate brand and other product brands in a comprehensive way to protect and increase their value. The Company’s Brand Strategy Council in charge of overseeing its systematic corporate branding operates full-time to execute decisions involving major brands and operates “Brandnet,” an intranet system to manage corporate brands by providing solutions such as registering and licensing of the brands.

B. Business-related Intellectual Property

[SK Telecom]

The Company holds 5,495 Korean-registered patents, 345 U.S.-registered patents, 234 Chinese-registered patents (all including patents held jointly with other companies) and more patents with other countries. The Company holds 944 Korean-registered trademarks and owns intellectual property rights to the design of the alphabet “T.” The designed alphabet “T” is registered in all business categories for trademarks (total of 45) and is being used as the primary brand of the Company.

[SK Broadband]

SK Broadband holds 411 Korean-registered patents relating to high-speed Internet, telephone and IPTV service. In addition, SK Broadband has applied for a patent relating to two-way broadcasting system. SK Broadband also holds a number of trademarks and service marks relating to its service and brand.

[SK Planet]

As of June 30, 2015, SK Planet held 2,603 registered patents, 117 registered design marks, 1,242 registered trademarks and five copyrights (including those held jointly with other companies) in Korea. It also holds 117 U.S.-registered patents, 88 Chinese-registered patents, 63 Japanese-registered patents, 31 E.U.-registered patents (all including patents held jointly with other companies) and 295 registered trademarks, along with a number of other intellectual property rights in other countries.

[SK Communications]

As of June 30, 2015, SK Communications held 81 registered patents, 26 registered design rights and 703 registered trademarks in Korea.

C. Business-related Pollutants and Environmental Protection

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

III. FINANCIAL INFORMATION

1. Summary Financial Information (Consolidated and Separate)

A. Summary Financial Information (Consolidated)

Below is the summary consolidated financial information of the Company as of June 30, 2015, December 31, 2014 and December 31, 2013 and for the six months ended June 30, 2015 and 2014 and the years ended December 31, 2014 and 2013. The Company’s reviewed consolidated financial statements as of June 30, 2015 and December 31, 2014 and for the six months ended June 30, 2015 and 2014, which are prepared in accordance with K-IFRS, are attached hereto.


		(Unit: in millions of Won except number of companies)

	As of March 31, 2015		As of December 31, 2014			As of December 31, 2013
Assets
Current Assets		5,180,521		5,083,148			5,123,415
• Cash and Cash Equivalents		829,659		834,429			1,398,639
• Accounts Receivable – Trade, net		2,443,502		2,392,150			2,257,316
• Accounts Receivable – Other, net		697,103		690,527			643,603
• Others		1,210,257		1,166,042			823,857
Non-Current Assets		22,860,985		22,858,085			21,453,100
• Long-Term Investment Securities		1,149,319		956,280			968,527
• Investments in Associates and Joint Ventures		6,581,767		6,298,088			5,325,297
• Property and Equipment, net		10,252,498		10,567,701			10,196,607
• Intangible Assets, net		2,298,574		2,483,994			2,750,782
• Goodwill		1,930,205		1,917,595			1,733,261
• Others		648,622		634,427			478,626
Total Assets		28,041,506		27,941,233			26,576,515
Liabilities
Current Liabilities		5,308,391		5,420,310			6,069,220
Non-Current Liabilities		7,415,528		7,272,653			6,340,738
Total Liabilities		12,723,919		12,692,963			12,409,958
Equity
Equity Attributable to Owners of the Parent Company		15,187,526		14,506,739			13,452,372
Share Capital		44,639		44,639			44,639
Capital Surplus (Deficit) and Other Capital Adjustments		662,455		277,998			317,508
Retained Earnings		14,421,043		14,188,591			13,102,495
Reserves		59,389		(4,489	)		(12,270	)
Non-controlling Interests		130,061		741,531			714,185
Total Equity		15,317,587		15,248,270			14,166,557
Total Liabilities and Equity		28,041,506		27,941,233			26,576,515
Number of Companies Consolidated		39		40			28


		(Unit: in millions of Won except per share amounts)

	For the six months ended June 30, 2015		For the six months ended June 30, 2014			For the year ended December 31, 2014			For the year ended December 31, 2013
Operating Revenue		8,496,025		8,507,288			17,163,798			16,602,054
Operating Income		815,526		798,490			1,825,105			2,011,109
Profit Before Income Tax		1,075,605		940,583			2,253,828			1,827,101
Profit for the Period		840,635		764,948			1,799,320			1,609,549
Profit for the Period Attributable to Owners of the Parent Company		840,334		768,350			1,801,178			1,638,964
Profit for the Period Attributable to Non-controlling Interests		301		(3,402	)		(1,858	)		(29,415	)
Basic Earnings Per Share (Won)		11,695		10,713			25,154			20,708
Diluted Earnings Per Share (Won)		11,695		10,713			25,154			23,211

B. Summary Financial Information (Separate)

Below is the summary separate financial information of the Company as of June 30, 2015, December 31, 2014 and December 31, 2013 and for the six months ended June 30, 2015 and 2014 and the years ended December 31, 2014 and 2013. The Company’s reviewed separate financial statements as of June 30, 2015 and December 31, 2014 and for the six months ended June 30, 2015 and 2014, which are prepared in accordance with K-IFRS, are attached hereto.


		(Unit: in millions of Won)

	As of June 30, 2015			As of December 31, 2014		As of December 31, 2013
Assets
Current Assets		2,685,875			2,689,913		2,817,782
• Cash and Cash Equivalents		155,687			248,311		448,459
• Accounts Receivable – Trade, net		1,597,007			1,559,281		1,513,138
• Accounts Receivable – Other, net		300,037			305,990		388,475
• Others		633,144			576,331		467,710
Non-Current Assets		20,177,570			20,022,549		20,009,637
• Long-Term Investment Securities		731,379			608,797		729,703
• Investments in Subsidiaries and Associates		8,674,128			8,181,769		8,010,121
• Property and Equipment, net		7,423,274			7,705,906		7,459,986
• Intangible Assets, net		1,755,891			1,928,169		2,239,167
• Goodwill		1,306,236			1,306,236		1,306,236
• Others		286,662			291,672		264,424
Total Assets		22,863,445			22,712,462		22,827,419
Liabilities
Current Liabilities		3,456,046			3,378,046		4,288,073
Non-Current Liabilities		5,601,032			5,792,195		5,223,938
Total Liabilities		9,057,078			9,170,241		9,512,011
Equity
Share Capital		44,639			44,639		44,639
Capital Surplus and Other Capital Adjustments		845,966			433,894		433,894
Retained Earnings		12,917,835			12,996,790		12,665,699
Reserves		(2,073	)		66,898		171,176
Total Equity		13,806,367			13,542,221		13,315,408
Total Liabilities and Equity		22,863,445			22,712,462		22,827,419


		(Unit: in millions of Won except per share amounts)

	For the six months ended June 30, 2015		For the six months ended June 30, 2014		For the year ended December 31, 2014		For the year ended December 31, 2013
Operating Revenue		6,277,222		6,528,313		13,012,644		12,860,379
Operating Income		803,916		778,959		1,737,160		1,969,684
Profit Before Income Tax		698,142		640,379		1,321,750		1,220,797
Profit for the Period		527,783		516,907		1,028,541		910,157
Basic Earnings Per Share (Won)		7,301		7,168		14,262		12,837
Diluted Earnings Per Share (Won)		7,301		7,168		14,262		12,837

2. Other Matters Related to Financial Information

A. Restatement of the Financial Statements

Not applicable.

B. Allowance for Doubtful Accounts

(1) Allowance for Doubtful Accounts of Trade and Other Receivables


		(Unit: in millions of Won)

	For the six months ended June 30, 2015
	Gross amount		Allowance for Doubtful Accounts		Percentage
Accounts receivable – trade		2,743,758		235,262		9	%
Loans		118,296		27,350		23	%
Accounts receivable – other		780,748		79,987		10	%
Accrued income		10,264		—		0	%
Guarantee deposits		301,121		—		0	%
Total		3,954,187		342,599		9	%

		(Unit: in millions of Won)

	For the year ended December 31, 2014
	Gross amount		Allowance for Doubtful Accounts		Percentage
Accounts receivable – trade		2,682,595		221,909		8	%
Loans		157,934		27,694		18	%
Accounts receivable – other		772,711		78,588		10	%
Accrued income		10,134		—		0	%
Guarantee deposits		289,009		—		0	%
Total		3,912,383		328,191		8	%


		(Unit: in millions of Won)

	For the year ended December 31, 2013
	Gross amount		Allowance for Doubtful Accounts		Percentage
Accounts receivable – trade		2,495,155		224,685		9	%
Loans		164,306		27,469		17	%
Accounts receivable – other		715,405		71,802		10	%
Accrued income		11,970		29		0	%
Guarantee deposits		252,148		—		0	%
Total		3,638,984		323,985		9	%

(2) Movements in Allowance for Doubtful Accounts of Trade and Other Receivables


		(Unit: in millions of Won)

	For the six months ended June 30, 2015			For the year ended December 31, 2014			For the year ended December 31, 2013
Beginning balance		328,191			323,985			300,668
Increase of allowance for doubtful accounts		39,029			63,697			79,330
Reversal of allowance for doubtful accounts		—			—			(359	)
Write-offs		(38,911	)		(89,529	)		(76,697	)
Other		14,250			30,039			21,042
Ending balance		342,599			328,191			323,985

(3) Policies for Allowance for Doubtful Accounts

The Company establishes allowances for doubtful accounts based on the likelihood of recoverability of trade and other receivables based on their aging at the end of the period and past customer default experience for the past two 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 June 30, 2015
	Six months or less			From six months to one year			From one year to three years			More than three years			Total
Accounts receivable – trade		2,446,490			56,741			159,779			80,748			2,743,758
Percentage		89.2	%		2.1	%		5.8	%		2.9	%		100.0	%

C. Inventories

(1) Detailed Categories of Inventories


	(Unit: in millions of Won)

Account Category	For the six months ended June 30, 2015			For the year ended December 31, 2014			For the year ended December 31, 2013
Merchandise		249,932			246,738			161,928
Goods in transit		—			—			—
Other inventories		32,939			20,929			15,192
Total		282,871			267,667			177,120
Percentage of inventories to total assets [ Inventories / Total assets ]		1.01	%		0.96	%		0.67	%
Inventory turnover [ Cost of sales / { ( Beginning balance of inventories + Ending balance of inventories ) / 2} ]		6.84			7.55			6.20

(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 notes 4(5) to 4(7) and 4(16) of the notes to our audited consolidated financial statements as of and for the years ended December 31, 2014 and 2013 for more information.

IV. AUDITOR’S OPINION

1. Auditor (Consolidated)

Six months ended June 30,

2015

Year ended December 31,
2014

Year ended December 31,
2013

KPMG Samjong Accounting Corp.

2. Audit Opinion (Consolidated)


Period	Auditor’s opinion	Issues noted
Six months ended June 30, 2015	—	—
Year ended December 31, 2014	Unqualified	N/A
Year ended December 31, 2013	Unqualified	N/A

3. Auditor (Separate)

Six months ended March 31,

2015

Year ended December 31,
2014

Year ended December 31,
2013

KPMG Samjong Accounting Corp.

4. Audit Opinion (Separate)


Period	Auditor’s opinion		Issues noted
Six months ended June 30, 2015		—		—
Year ended December 31, 2014		Unqualified		N/A
Year ended December 31, 2013		Unqualified		N/A

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

A. Audit Contracts

(Unit: in thousands of Won except number of hours)

Fiscal Year

Auditors

Contents

Fee

Total
number of
hours
accumulated
for the fiscal
year

Year ended December 31, 2015

KPMG Samjong
Accounting Corp.

Semi-annual review

1,320,000

19,008

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Year ended December 31, 2014

KPMG Samjong
Accounting Corp.

Semi-annual review

1,280,000

17,890

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Year ended December 31, 2013

KPMG Samjong
Accounting Corp.

Semi-annual review

1,250,000

17,796

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

B. Non-Audit Services Contract with External Auditors

(Unit: in millions of Won)

Period

Contract date

Service provided

Service duration

Fee

Year ended December 31, 2015

January 9, 2015

Audit of public WiFi

Jan. 9-Jan. 23,
2015

Year ended December 31, 2014

March 18, 2014

Due diligence of assets

March 18-
April 2, 2014

May 28, 2014

Tax advice

May 28-
September 23,
2014

June 12, 2014

Review revised local tax laws

June 12-
July 14, 2014

Year ended December 31, 2013

N/A

—

6. Change of Independent Auditors

Not applicable.

V. MANAGEMENT’S DISCUSSION AND ANALYSIS

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

VI. CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS

1. Board of Directors

A. Overview of the Composition of the Board of Directors

The Company’s board of directors (the “Board of Directors”) is composed of six members: four independent directors and two inside directors. Within the Board, there are five committees: Independent Director Nomination Committee, Audit Committee, Compensation Committee, CapEx Review Committee, and Corporate Citizenship Committee.


(As of July 31, 2015)
Total number of persons	Inside directors	Independent directors
6	Dong Hyun Jang, Dae Sik Cho	Jae Hyeon Ahn, Dae Shick Oh, Jae Hoon Lee, Jay Young Chung

At the 31st General Meeting of Shareholders held on March 20, 2015, Dong Hyun Jang was newly elected as an inside director. At the meeting of the Board of Directors held on March 20, 2015, Jay Young Chung was appointed as the chairman of the Board of Directors.

B. Significant Activities of the Board of Directors


Meeting	Date	Agenda	Approval
371st (the 1st meeting of 2015)	February 5, 2015	• Financial statements as of and for the year ended December 31, 2014 • Annual business report as of and for the year ended December 31, 2014 • Bond offering • Lease contract of Namsan office building with SK Broadband • Report of internal accounting management • Report for the period after the fourth quarter of 2014	Approved as proposed Approved as proposed Approved as proposed Approved as proposed — —

372nd (the 2nd meeting of 2015)	February 24, 2015	• Convocation of the 31st General Meeting of Shareholders • Report of internal accounting management	Approved as proposed —

373rd (the 3rd meeting of 2015)	March 20, 2015	• Election of the representative director • Election of the chairman of the Board of Directors • Election of committee members • Financial transactions with affiliated company (SK Securities) • Share Exchange with SK Broadband • Disposal of treasury shares	Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed

374th (the 4th meeting of 2015)	April 23, 2015	• Additional investment in Neosnetworks • Reappointment of compliance officer • Provision of funds for management of the 2015 SUPEX meetings • Report for the period after the first quarter of 2015	Approved as proposed Approved as proposed Approved as proposed —

375th (the 5th meeting of 2015)	May 6, 2015	• Approval of Share Exchange Agreement with SK Broadband	Approved as proposed

376th (the 6th meeting of 2015)	May 29, 2015	• Purchase of SK Broadband shares • Report in relation to the equity spinoff for SK Planet’s cloud streaming business	Approved as proposed —


Meeting	Date	Agenda	Approval
377^th (the 7th meeting of 2015)	June 25, 2015	• Transactions with SK C&C in the third quarter of 2015 • Transactions with INFOSEC Co., Ltd. in the third quarter of 2015 • Bond offering • Transactions regarding corporate shares with affiliated company (SK Securities) • Financial transactions with affiliated company (SK Securities)	Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed

378th (the 8th meeting of 2015)	July 23, 2015	• Service transactions with SK (China) Enterprise Management Co., Ltd. • Investment in Entrix Co., Ltd. • Extension of maturity of KIF (Korea IT Fund) • Extension of SK Telecom’s CVC • Payment of interim dividends • Report on the financial results for the first half of 2015 • Report for the period after the second quarter of 2015 • Status of SK Telecom’s media business	Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed — — —

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

*	The term of Hyun Jin Lim ended on March 20, 2015.

C. Committees within Board of Directors

(1) Committee structure (as of July 31, 2015)

(a) Compensation Review Committee


Total number of persons	Members		Task
Total number of persons	Inside Directors	Independent Directors	Task
3	—	Jay Young Chung, Jae Hoon Lee, Dae Shick Oh	Review CEO remuneration system and amount

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

(b) Capex Review Committee


Total number of persons	Members		Task
Total number of persons	Inside Directors	Independent Directors	Task
4	—	Jae Hoon Lee, Jay Young Chung, Dae Shick Oh, Jae Hyeon Ahn	Review major investment plans and changes thereto

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


Total number of persons	Members		Task
Total number of persons	Inside Directors	Independent Directors	Task
3	—	Jae Hyeon Ahn, Jay Young Chung, Dae Shick Oh	Review guidelines on corporate social responsibility (“CSR”) programs, etc.

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

(d) Independent Director Nomination Committee


Total number of persons	Members		Task
Total number of persons	Inside Directors	Independent Directors	Task
3	Dong Hyun Jang	Jae Hyeon Ahn, Jae Hoon Lee	Nomination of independent directors

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

(e) Audit Committee


Total number of persons	Members		Task
Total number of persons	Inside Directors	Independent Directors	Task
3	—	Dae Shick Oh, Jae Hoon Lee, Jae Hyeon 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 three independent directors, Dae Shick Oh, Jae Hoon Lee and Jae Hyeon Ahn.

Major activities of the Audit Committee as of July 31, 2015 are set forth below.


Meeting	Date	Agenda	Approval
The 1st meeting of 2015	February 4, 2015	• Report of internal accounting management system • Review of business and audit results for the second half of 2014 and business and audit plans for 2015 • Evaluation of internal monitoring controls based on the opinion of the members of the Audit Committee • Service contract with SKTCH • Transactions with INFOSEC Co., Ltd. in the first quarter of 2015 • Engagement of Independent Auditing Firm for 2015 to 2017	— — Approved as proposed Approved as proposed Approved as proposed Approved as proposed

The 2nd meeting of 2015	February 23, 2015	• Report on the IFRS audit of fiscal year 2014 • Report on review of 2014 internal accounting management system • Evaluation of internal accounting management system operation • Agenda and document review for the 31st General Meeting of Shareholders • Auditor’s report for fiscal year 2014 • Construction of fixed-line and wireless networks in 2015 • Contract for payment of customer appreciation gifts in 2015	— — Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed

The 3rd meeting of 2015	March 19, 2015	• Transactions with SK C&C Co., Ltd. in the second quarter of 2015 • Transactions with INFOSEC Co., Ltd. in the second quarter of 2015 • Transaction with SK Planet Co., Ltd. for VIP program in 2015	Approved as proposed Approved as proposed Approved as proposed

The 4th meeting of 2015	April 22, 2015	• Election of the chairman • Purchase of maintenance, repair and operations items from Happynarae Co., Ltd. • Remuneration for outside auditors for fiscal year 2015 • Outside auditor service plan for fiscal year 2015 • Audit plan for fiscal year 2015	Approved as proposed Approved as proposed Approved as proposed Approved as proposed —

The 5th meeting of 2015	May 29, 2015	• Construction of fixed-line and wireless networks in 2015	Approved as proposed

The 6th meeting of 2015	July 22, 2015	• Remuneration increase for outside auditors for fiscal year 2015 • Review report of outside auditors for the first half of fiscal year 2015 • Review of business and audit results for the first half of 2015 and business and audit plans for the second half of 2015	Approved as proposed — —

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

3. Shareholders’ Exercise of Voting Rights

A. Voting System and Exercise of Minority Shareholders’ Rights

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


Articles of Incorporation		Description
Article 32(3) (Election of Directors)		Cumulative voting under Article 382-2 of the Korean Commercial Code will not be applied for the election of directors.

Article 4 of the 12^th Supplement to the Articles of Incorporation (Interim Regulation)		Article 32(3) of the Articles of Incorporation shall remain effective until the day immediately preceding the date of the general meeting of shareholders held in 2003.

Also, neither written or electronic voting system nor minority shareholder rights is applicable.

VII. SHAREHOLDERS

1. Shareholdings of the Largest Shareholder and Related Persons

A. Shareholdings of the Largest Shareholder and Related Persons


(As of June 30, 2015)	(Unit: in shares and percentages)

Name	Relationship	Type of share	Number of shares owned and ownership ratio
			Beginning of Period				End of Period
			Number of shares		Ownership ratio		Number of shares		Ownership ratio
SK Holdings Co., Ltd.	Largest Shareholder	Common share		20,363,452		25.22		20,363,452		25.22
Tae Won Chey	Officer of affiliated company	Common share		100		0.00		100		0.00
Shin Won Chey	Officer of affiliated company	Common share		4,000		0.00		1,067		0.00
Dong Hyun Jang	Officer of the Company	Common share		0		0.00		251		0.00
Myung Hyun Cho	Officer of affiliated company	Common share		0		0.00		136		0.00
Total		Common share		20,367,552		25.22		20,365,006		25.22

B. Overview of the Largest Shareholder

SK Holdings Co., Ltd. (“SK Holdings”) is a holding company in accordance with the Fair Trade Act and as of June 30, 2015, has nine subsidiaries: SK Innovation Co., Ltd., SK Telecom Co., Ltd., SK Networks Co., Ltd., SKC Co., Ltd., SK E&C Co., Ltd., SK Shipping Co., Ltd., SK E&S Co., Ltd., SK Biofarm Co., Ltd. and SK Forest Co., Ltd.

Details of the subsidiaries of SK Holdings are as follows:


		(Unit: in millions of Won)

Affiliates	Share Holdings			Book Value (million Won)		Industry	Description
SK Innovation Co., Ltd.		33.4	%		3,944,657	Energy and Petrochemical	Publicly Listed
SK Telecom Co., Ltd.		25.2	%		3,091,125	Telecommunication	Publicly Listed
SK Networks Co., Ltd.		39.1	%		905,691	Trading and Energy	Publicly Listed
SKC Co., Ltd.		41.9	%		254,632	PET Film Manufacturing and Chemical Products	Publicly Listed
SK E&C Co., Ltd.		44.5	%		470,014	Infrastructure, Architectural Housing and Plant Construction	Privately Held
SK Shipping Co., Ltd.		83.1	%		420,568	Ocean Freight	Privately Held
SK E&S Co., Ltd.		94.1	%		1,026,307	Gas Company Holdings and Power Generation	Privately Held
SK Biofarm Co., Ltd.		100.0	%		328,702	Biotechnology	Privately Held
SK Forest Co., Ltd.		100.0	%		61,387	Forestry and Landscaping	Privately Held

*	The above shareholdings are based on common share holdings as of June 30, 2015.

SK Holdings is a publicly listed company and is required to submit a report of its significant business activities in accordance with Article 161 of the Financial Investment Services and Capital Markets Act. Also as a holding company, SK Holdings is required to report key management activities of its subsidiaries in accordance with Article 8 of KOSPI Market Disclosure Regulation.

The rule is applicable to subsidiaries whose book value of the holding company’s shareholding exceeds 10% of their total assets based on the financial statements as of December 31, 2014. SK Innovation Co., Ltd. and SK Telecom Co., Ltd. are two such subsidiaries.

2. Matters Relevant to the Largest Shareholder

SK Holdings, the company’s largest shareholder, resolved to merge with and into SK C&C through the approval of the board of directors on April 20, 2015 and the approval of the shareholders on June 26, 2015. On August 3, 2015, SK Holdings merged with and into SK C&C such that SK Holdings was dissolved and SK C&C (which was renamed SK Holdings) became the largest shareholder of the Company.

It is expected that the combination of SK C&C’s growth potential based on ICT capabilities and SK Holdings’ resources will lead to an improved financial structure and provide for enhanced capacity to discover new growth engines, thus leading to greater competitiveness of the two companies.

Surviving entity: SK C&C

Name of the surviving entity after the merger: SK Holdings

Merger Ratio:

Common share of SK C&C : Common share of SK Holdings = 1 : 0.7367839

Preferred share of SK C&C : Preferred share of SK Holdings = 1 : 1.1102438

3. Changes in Shareholdings of the Largest Shareholder

Changes in shareholdings of the largest shareholder are as follows.

(As of June 30, 2015)

(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

January 31, 2012

20,366,290

25.22

Retirement of Bang Hyung Lee, a former officer of an affiliated company (ownership of 200 shares of the Company)

January 2, 2014

20,367,290

25.22

Shin Won Chey, SKC’s Chairman, purchased 1,000 shares

March 24, 2014

20,368,290

25.23

Shin Won Chey, SKC’s Chairman, purchased 1,000 shares

January 2, 2015

20,364,290

25.22

Shin Won Chey, SKC’s Chairman, disposed of 4,000 shares

March 20, 2015

20,363,803

25.22

Appointment of CEO Dong Hyun Jang (ownership of 251 shares of the Company), Retirement of Sung Min Ha

June 9, 2015

20,365,006

25.22

Purchase through the Share Exchange between SK Broadband and SK Telecom (Shin Won Chey, SKC’s Chairman, purchased 1,067 shares, and Myung Hyun Cho, SK Broadband’s independent director, purchased 136 shares)

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

4. Distribution of Shares

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


(As of June 30, 2015)			(Unit: in shares and percentages)

Rank	Name (title)	Common share
Rank	Name (title)	Number of shares		Ownership ratio		Remarks
1	Citibank ADR		9,974,658		12.35		—
2	SK Holdings		20,363,452		25.22		—
3	SK Telecom		8,116,551		10.05		Treasury shares
4	National Pension Service		6,403,901		7.93		—
Shareholdings under the Employee Stock Ownership Program			209		0.00		—

B. Shareholder Distribution


(As of June 30, 2015)		(Unit: in shares and percentages)

Classification	Number of shareholders		Ratio (%)			Number of shares		Ratio (%)			Remarks
Total minority shareholders*		56,778		99.87	%		34,906,951		43.23	%		—

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

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

A. Domestic Securities Market


(Unit: in Won and shares)

Types		June 2015		May 2015		April 2015		March 2015		February 2015		January 2015
Common stock	Highest		262,500		281,500		293,500		290,500		301,000		290,000
	Lowest		240,500		246,500		262,500		269,000		274,000		264,000
Monthly transaction volume			3,727,042		4,782,569		4,506,099		3,612,290		2,153,718		3,341,160

B. Foreign Securities Market


New York Stock Exchange			(Unit: in U.S. dollars and number of American Depositary Receipts)

Types		June 2015		May 2015		April 2015		March 2015		February 2015		January 2015
Depository Receipt	Highest		26.00		29.61		30.07		29.30		29.76		29.27
	Lowest		23.96		24.44		26.49		26.22		27.65		26.78
Monthly transaction volume			11,842,065		13,521,822		12,349,916		14,783,781		14,057,769		19,189,999

VIII. EMPLOYEES AND DIRECTORS

1. Employees


(As of June 30, 2015)		(Unit: in persons and millions of Won)

	Number of employees								Average		Aggregate		Average
Classification	Regular employees		Contract employees		Others		Total		service year		wage for the year 2015		wage per person		Remarks
Male		3,372		190		—		3,562		12.5		232,063		64		—
Female		475		103		—		578		9.4		26,606		45		—
Total		3,847		293		—		4,140		12.1		258,669		62		—

*	Based on Section 9-1-2 (Employee Status) of the Corporate Disclosure Guidelines (amended as of February 2015).

*	Average wage per person was calculated based on the average number of employees for the six months ended June 30, 2015 (Total: 4,199, Male: 3,612 Female: 587)

2. Compensation of Directors

A. Amount Approved at the Shareholders’ Meeting


(As of June 30, 2015)		(Unit: in millions of Won)

Classification	Number of Directors		Aggregate Amount Approved
Directors		6		12,000

B. Amount Paid


(As of June 30, 2015)		(Unit: in millions of Won)

Classification	Number of Directors*		Aggregate Amount Paid		Average Amount Paid Per Director
Insider Directors		4		1,927		482
Independent Directors		2		70		35
Audit Committee Members		3		105		35
Total		9		2,102		—

*	Includes three directors whose terms have expired as of March 31, 2015.

3. Individual Compensation of Directors

IX. RELATED PARTY TRANSACTIONS

1. Line of Credit Extended to the Largest Shareholder

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Account category

Change details

Accrued

Remarks

Beginning

Increase

Decrease

Ending

interest

SK Wyverns

Affiliate

Long-term and short-term loans

1,221

—

1,221

—

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

A. Investment and Disposition of Investment

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Investment

Transaction

date

Base date

Transaction
items

Transaction
amount

Neosnetworks

Affiliate

Acquisition of shares

April 29, 2015

—

Registered common shares

39,999

B. Acquisition and Sale of Securities

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Investment

Transaction
date

Base date

Transaction
items

Transaction
amount

SK Broadband

Affilate

Purchase of shares

June 1, 2015

—

Registered common shares

186,817

C. Transfer of Assets

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Details

Remarks

Transferred
Assets

Purpose of

Transfer

Date of Transfer

Purchase Price

Sale Price

SK Broadband

Affiliate

Vehicles and
transportation
equipment

Disposition of assets

March 17, 2015

—

SK Planet

Affiliate

Machinery and
equipment

Disposition of assets

March 31, 2015

—

PS&Marketing

Affiliate

Vehicles,
computer
software and
trademark rights

Transfer of Business

April 30, 2015

—

152

Total

—

185

—

D. Transfer of Business

None.

3. Transactions with the Largest Shareholder

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Investment

Transaction period

Transaction items

Transaction
amount

PS&Marketing

Affiliate

Sales/Purchases

January 1, 2015 to June 30, 2015

Marketing commissions, etc.

416,028

SK Broadband

Affiliate

Sales/Purchases

January 1, 2015 to June 30, 2015

Interconnection revenues, etc.

325,277

4. Related Party Transactions

See note 33 of the notes to our consolidated financial statements attached hereto for more information regarding related party transactions.

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

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

(Unit: in millions of Won)


Name (Corporate name)	Relationship		Account category	Change details									Accrued		Remarks
Name (Corporate name)	Relationship		Account category	Beginning		Increase		Decrease			Ending		interest		Remarks
Baekmajang and others		Agency	Long-term and short-term loans		82,739		153,283		(203,887	)		32,135		—		—
Daehan Kanggun BCN Inc.		Investee	Long-term loans		22,147		—		—			22,147		—		—
Wave City Development, Inc.		Investee	Short-term loans		1,200		500		—			1,700		—		—

X. OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS

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

A. Status and Progress of Major Management Events

None.

B. Summary Minutes of the General Meeting of Shareholders


Date	Agenda	Resolution
27th Fiscal Year Meeting of Shareholders (March 11, 2011)	1. Approval of the financial statements for the year ended December 31, 2010 2. Approval of Remuneration Limit for Directors 3. Amendment to Company Regulation on Executive Compensation 4. Election of directors • Election of inside directors • Election of independent directors • Election of independent directors as Audit Committee members	Approved (Cash dividend, Won 8,400 per share) Approved Approved (Won 12 billion) Approved (Sung Min Ha, Jin Woo So) Approved (Rak Young Uhm, Jay Young Chung, Jae Ho Cho) Approved (Jay Young Chung, Jae Ho Cho)
1st Extraordinary Meeting of Shareholders of 2011 (August 31, 2011)	1. Approval of the Spin-off Plan 2. Election of director	Approved (Spin-off of SK Planet) Approved (Jun Ho Kim)
28th Fiscal Year Meeting of Shareholders (March 23, 2012)	1. Approval of the financial statements for the year ended December 31, 2011 2. Amendment to Articles of Incorporation 3. Election of directors • Election of an inside director • 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 8,400 per share) Approved Approved (Young Tae Kim) Approved (Dong Seob Jee) Approved (Hyun Chin Lim) Approved (Hyun Chin Lim) Approved (Won 12 billion)
29th Fiscal Year Meeting of Shareholders (March 22, 2013)	1. Approval of the financial statements for the year ended December 31, 2012 2. Amendments to Articles of Incorporation 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 8,400 per share) Approved Approved (Dae Sik Cho) Approved (Dae Shick Oh) Approved (Dae Shick Oh) Approved (Won 12 billion)
30th Fiscal Year Meeting of Shareholders (March 21, 2014)	1. Approval of the financial statements for the year ended December 31, 2013 2. Amendments to Articles of Incorporation 3. Election of directors • Election of an inside director • Election of an independent director • Election of an independent 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 8,400 per share) Approved Approved (Sung Min Ha) Approved (Jay Young Chung) Approved (Jae Hoon Lee) Approved (Jae Hyeon Ahn) Approved (Jae Hyeon Ahn) Approved (Won 12 billion)

Date

Agenda

Resolution

31st Fiscal Year Meeting of Shareholders

(March 20, 2015)

1. Approval of the financial statements for the year ended December 31, 2014

2. Amendments to Articles of Incorporation

3. Election of directors

• Election of an inside director

4. Election of an independent director as Audit Committee member

5. Approval of remuneration limit for directors

Approved (Cash dividend, Won 8,400 per share)

Approved

Approved (Dong Hyun Jang)

Approved (Jae Hoon Lee)

Approved (Won 12 billion)

2. Contingent Liabilities

[SK Telecom]

A. Material Legal Proceedings

(1) Claim for copyright license fees regarding “Coloring” services

On May 7, 2010, Korea Music Copyright Association (“KOMCA”) filed a lawsuit with the court demanding that the Company pay KOMCA license fees for the Company’s “Coloring” services. The court rendered a judgment against the Company ordering the Company to pay Won 570 million to KOMCA, which was affirmed by the appellate court on October 26, 2011. The Company filed an appeal at the Supreme Court of Korea and the judgment was overturned on July 11, 2013. The case was remanded down to the appellate court which ruled in favor of the Company on September 4, 2014. KOMCA filed an appeal at the Supreme Court of Korea, and on January 15, 2015, the Supreme Court of Korea affirmed the Seoul High Court’s decision. There is no impact on the Company’s business or results of operation as the final outcome of this litigation has been rendered in favor of the Company.

B. Other Matters

None.

[SK Broadband]

A. Material Legal Proceedings

(1) SK Broadband as the plaintiff


	(Unit: in thousands of Won)

Description of Proceedings	Date of Commencement of Proceedings	Amount of Claim		Status
Dispute to dismiss an order to compensate for damages	October 2014		715,121	Pending before district court
Others			287,364
Total			1,002,485	—

(2) SK Broadband as the defendant


	(Unit: in thousands of Won)

Description of Proceedings	Date of Commencement of Proceedings	Amount of Claim		Status
Damages claim by Haein Networks Co., Ltd.	March 2013		101,000	Pending before district court
Damages claim by Mag Telecom Co., Ltd. and others	January 2012		606,000	Pending before district court
Damages claim by GT Com Co., Ltd.	March 2014		101,000	Pending before district court
Others			278,358
Total			1,086,358	—

The Company does not believe that the outcome of any of the proceedings in which SK Broadband is named as a defendant will have a material effect on the Company’s financial statements.

B. Other Contingent Liabilities

(1) Pledged assets and covenants

SK Broadband, upon approval by its board of directors, has provided guarantees for financial instruments amounting to Won 1,775 million to support employees’ funding for the Employee Stock Ownership Program.

Additionally, SK Broadband has provided “geun” mortgage amounting to Won 16.1 billion to others, including Ilsan Guksa, on a part of its buildings in connection with the leasing of the buildings. Seoul Guarantee Insurance Company has provided a performance guarantee of Won 16.6 billion to SK Broadband in connection with the performance of certain contracts and the repair of any defects.

[SK Planet]

A. Material Legal Proceedings

As of June 30, 2015, there were three pending cases proceeding with SK Planet as the defendant, and the aggregate amount of the claim was Won 43.9 million. The management cannot reasonably forecast the outcome of this case, and no amount in connection with this proceeding was recognized on the Company’s financial statements.

B. Other Contingent Liabilities

None.

[SK Communications]

A. Material Legal Proceedings

As of June 30, 2015, the aggregate amount of claims was Won 1.4 billion. The Company successfully defended some but not all suits relating to a leak of personal information of subscribers of NATE. Relevant proceedings remain pending at various courts in Korea. The management cannot reasonably forecast the outcome of the pending proceedings, and as a result, adjustments were not made in the financial statements of the Company. The Company does not believe that the outcome of any of the proceedings in which SK Communications is named as a defendant will have a material effect on the Company’s financial statements.

B. Other Contingent Liabilities

The material payment guarantees provided by third parties to SK Communications as of June 30, 2015 are set forth in the table below.


(Unit: in thousands of Won)

Financial Institution	Guarantee	Amount
Seoul Guarantee Insurance Company	Prepaid coverage payment guarantee		700,000
	Provisional deposit guarantee insurance for bonds		873,000
	Support for production and publication of cartoon series		160,000
Total			1,733,000

[PS&Marketing]

A. Other Contingent Liabilities

Shinhan Bank has provided a payment guarantee of Won 3 billion for PS&Marketing’s purchase of mobile devices from Apple Korea Ltd.

3. Status of sanctions, etc.

[SK Telecom]

On March 14, 2012, the Company received a correctional order from the Fair Trade Commission of Korea for an alleged violation of Article 23 of the Fair Trade Act relating to the handset subsidy practice and distribution of handsets and was imposed a fine of Won 21,928 million. The Company filed an administrative proceeding to appeal the order and the Seoul High Court ruled against it on October 29, 2014. The Company appealed the decision, and the case is currently pending before the Supreme Court of Korea.

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

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

On July 4, 2012, the Fair Trade Commission issued correctional orders and imposed fines on the Company and seven affiliated companies for alleged unfair advantage provided to SK C&C, an affiliated company, in services fees for information technology system management and operation. The Company and SK Planet were imposed fines of Won 25,042 million and Won 1,349 million, respectively. The Company and the seven affiliated companies appealed the orders and on May 14, 2014, won the suit at the Seoul High Court. The Fair Trade Commission appealed the decision, and the case is currently pending before the Supreme Court of Korea.

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

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

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

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

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

On September 16, 2013, the Company received a correctional order from the Korea Communications Commission in connection with its decision on whether the Company had violated regulations related to wholesale provision of telecommunication services. The Company completed the improvement of the procedures and reported to the Korea Communications Commission on the implementation of actions pursuant to the correctional order by October 2013.

On November 15, 2013, the Korea Communications Commission imposed a fine of Won 676 million and issued a correctional order for limiting termination of telecommunication services. The Company paid the fine and completed the improvement of the procedures and reported to the Korea Communications Commission on the implementation of actions pursuant to the correctional order by December 2013.

On December 27, 2013, the Korea Communications Commission imposed on the Company a fine of Won 56.0 billion and issued a correctional order for providing discriminatory subsidies to subscribers. The Company paid the fine and completed the improvement of the procedures and reported to the Korea Communications Commission on the implementation of actions pursuant to the correctional order by January 2014.

On March 7, 2014, the MSIP imposed a suspension of operations for 45 days for failure to observe the order of the Korea Communications Commission to cease providing discriminatory subsidies to subscribers. The Company suspended its operations during the period between April 5, 2014 and May 19, 2014, and reported to the MSIP on the implementation of actions pursuant to the suspension order by May 2014.

On March 13, 2014, the Korea Communications Commission imposed on the Company a fine of Won 16.65 billion, imposed a suspension on acquiring new customers for 7 days, and issued a correctional order for providing discriminatory subsidies to subscribers. In April 2014, the Company paid the fine and completed the improvement of the procedures and reported to the Korea Communications Commission on the implementation of actions pursuant to the correctional order by April 2014. The Company suspended acquisition of new customers during the period beginning September 11, 2014 and ending September 17, 2014, and reported to the Korea Communications Commission on the implementation of actions pursuant to the correctional order by September 2014.

On January 31, 2013, the Seoul Central District Court acquitted Mr. Jae Won Chey, our former director and vice chairman, on all charges against him. On September 27, 2013, the Seoul High Court reversed the acquittal of the above-mentioned former director, sentencing him to a prison term of three and a half years for violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes. On February 27, 2014, the Supreme Court of Korea affirmed the Seoul High Court’s decision. While the court’s final decision on the appealed case is not expected to have a material effect on the Company’s financial position, investors should note that it is difficult to predict, among others, the market’s assessment of such case.

On August 21, 2014, the Korea Communications Commission imposed on the Company a fine of Won 37.1 billion and issued a correctional order for providing discriminatory subsidies to subscribers. The Company paid the fine and completed the improvement of the procedures and reported to the Korea Communications Commission on the implementation of actions pursuant to the correctional order by September 2014.

On December 4, 2014, the Korea Communications Commission imposed on the Company a fine of Won 800 million and issued a correctional order for violating the Mobile Device Distribution Improvement Act. The Company paid the fine and completed the improvement of the procedures and reported to the Korea Communications Commission on the implementation of actions pursuant to the correctional order by January 2015.

On March 12, 2015, the Korea Communications Commission imposed on the Company a fine of Won 934 million and issued a correctional order for violating the Mobile Device Distribution Improvement Act with respect to the Company’s compensation programs for used handsets. The Company paid the fine and completed the improvement of the procedures and reported to the Korea Communications Commission on the implementation of actions pursuant to the correctional order by April 2015.

On March 26, 2015, the Korea Communications Commission imposed on the Company a fine of Won 23.5 billion, imposed a suspension on acquiring new customers for seven days, and issued a correctional order for violating the Mobile Device Distribution Improvement Act. The Company paid the fine and implemented the improvement of the procedures and reported to the Korea Communications Commission on the implementation of actions pursuant to the correctional order in May 2015. The suspension on acquiring new customers will be implemented hereafter.

On May 13, 2015, the Korea Communications Commission imposed on the Company a fine of Won 3.56 billion and issued a correctional order for violating its obligations to protect personal information (a fine of Won 360 million imposed for violation of its obligations to protect personal information and Won 3.2 billion imposed for damaging users’ interests). The Company paid the fine in July 2015 and plans to report to the Korea Communications Commission on the implementation of actions pursuant to the correctional order in the future. Whether the correctional order on the violation of obligations to protect personal information will be enforced depends on the Court’s ruling following the Company’s filing of an administrative proceeding to appeal the order on June 24, 2015.

On May 28, 2015, the Korea Communications Commission imposed on the Company a fine of Won 350 million and issued a correctional order for damaging users’ interests through misleading and exaggerated advertisement of bundled media and telecommunications products. The Company plans to pay the fine and report to the Korea Communications Commission on the implementation of actions pursuant to the correctional order in the future.

[SK Broadband]

(1) Violation of the Telecommunications Business Act

•

Date: May 28, 2015

•

Subject: SK Broadband

•

Sanction: SK Broadband received a correctional order (corrective measures for damaging users’ interests through misleading and exaggerated advertisement of bundled media and telecommunications products).

•

Reason and the Relevant Law: Violated Article 50-1 Paragraph 5 of the Telecommunications Business Act and Article 42-1 of its enforcement ordinance by inducing subscribers through misleading and exaggerated advertisements.

•

Status of Implementation: Established plans to manage distribution network related to the misleading and exaggerated advertisements.

•

Company’s Plan: Make an official announcement about having received the correctional order and improve operational procedures.

(2) Violation of the Act on Consumer Protection in Electronic Commerce

•

Date: July 11, 2014

•

Subject: SK Broadband

•

Sanction: SK Broadband received a correctional order (relating to the failure to notify consumers of information relating to cancellations of purchases) and a fine of Won 1 billion.

•

Reason and the Relevant Law: Violated Article 13 of the Act on Consumer Protection in Electronic Commerce by not having notified consumers of the procedures for cancellation of purchases for paid IPTV contents.

•

Status of Implementation: Implemented voluntary improvements to notify consumers of cancellation procedures for such purchase prior to a decision by the Fair Trade Commission.

•

Company’s Plan: Implement the correctional order and pay the fine.

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

•

Date: June 16, 2014

•

Subject: SK Broadband

•

Sanction: SK Broadband was imposed a fine of Won 3 million.

•

Reason and the Relevant Law: Violated Articles 59 and 76 of the Act on Facilitation of the Use of Information Network and Protection of Information and Article 76 of the Enforcement Decree of the Act by not having designated proper contacts for the users of telecommunications billing services to raise objections and protect rights and interests of the users and by not having provided the contact information on the Internet or other means of communication.

•

Status of Implementation: Paid the fine, designated contact persons for user protection of telecommunications billing services, provided contact information on the Company’s website, and paid the fine.

•

Company’s Plan: Designate contact persons for user protection of telecommunications billing services and provide contact information to users.

(4) Violation of the Telecommunication Business Act

•

Date: August 21, 2013

•

Subject Company: SK Broadband

•

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

•

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

•

Status of Implementation: Completed revision of subscription agreements to include material terms and conditions pertaining to high-speed Internet usage. Has distributed information sheets on current terms and conditions to new subscribers since November 25, 2013.

•

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

(5) Violation of the Telecommunication Business Act

•

Date: June 5, 2013

•

Subject Company: SK Broadband

•

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

•

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

•

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

•

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

(6) Violation of accounting rules

•

Date: December 13, 2012

•

Subject Company: SK Broadband

•

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

•

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

•

Status of Implementation: Paid the fine.

•

Company’s plan: Will improve accounting management system.

(7) Violation of the Telecommunications Business Act

•

Date: May 18, 2012

•

Subject Company: SK Broadband

•

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

•

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

•

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

•

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

(8) Violation of accounting rules

•

Date: January 20, 2012

•

Subject Company: SK Broadband

•

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

•

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

•

Status of Implementation: Paid the fine.

•

Company’s Plan: Will improve accounting management system.

4. Important Matters That Occurred After June 30, 2015

(1) On July 1, 2015, the Company’s material consolidated subsidiary SK Broadband delisted in accordance with Articles 45 and 46 of the KOSDAQ stock market’s listing regulations pursuant to its voluntary application to delist in connection with the Share Exchange of its 295,959,087 ordinary shares.

(2) SK Broadband’s resolution to acquire the Hoppin business from SK Planet through a spin-off and subsequent merger transaction pursuant to Article 530-2 of the Korean Commercial Code was approved by its board of directors on July 29, 2015 and its shareholders on July 30, 2015. The transaction closed on September 1, 2015.

A. Use of Proceeds from Public Offerings

Not applicable.

B. Use of Proceeds from Private Offerings


(As of June 30, 2015)						(Unit: in millions of Won)

Classification

Closing Date

Proceeds

Planned Use of Proceeds

Actual Use
of Proceeds

Reasons
for
Change

Convertible Bonds*

April 7, 2009

437,673

Refinancing of convertible bonds issued in May 2004

Refinancing and
working capital

—

In 2013, holders exercised their conversion rights with respect to an aggregate principal amount of US$326,023,000 of the convertible notes. The Company delivered 1,241,337 treasury shares in respect of US$170,223,000 of the exercised aggregate principal amount and delivered cash in respect of the remainder due to the limit on foreign ownership. In connection with such conversion, the Company recognized Won 135.1 billion in financial expenses in 2013. On November 13, 2013, the Company exercised its early redemption right and on December 13, 2013, redeemed the US$6,505,000 principal amount of convertible notes not converted by noteholders.

SK TELECOM CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2015 and 2014

(With Independent Auditors’ Review Report Thereon)

Contents


	Page

Independent Auditors’ Review Report		1

Condensed Consolidated Statements of Financial Position		3

Condensed Consolidated Statements of Income		5

Condensed Consolidated Statements of Comprehensive Income		6

Condensed Consolidated Statements of Changes in Equity		7

Condensed Consolidated Statements of Cash Flows		8

Notes to the Condensed Consolidated Interim Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To The Board of Directors and Shareholders

SK Telecom Co., Ltd.:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of SK Telecom Co., Ltd. and its subsidiaries (the “Group”), which comprise the condensed consolidated statement of financial position as of June 30, 2015, the related condensed consolidated statements of income and comprehensive income for the three and six-month periods ended June 30, 2015 and 2014, the condensed consolidated interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2015 and 2014, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

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

Auditors’ responsibility

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

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

Conclusion

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

Other matters

The consolidated statement of financial position of the Group as of December 31, 2014, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated February 23, 2015, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2014, presented for comparative purposes, is not different from that audited by us in all material respects.

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

KPMG Samjong Accounting Corp.

Seoul, Korea

August 7, 2015

This report is effective as of August 7, 2015, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Financial Position

As of June 30, 2015 and December 31, 2014


(In millions of won)	Note		June 30, 2015		December 31, 2014
Assets

Current Assets:
Cash and cash equivalents		32,33	￦	829,659		834,429
Short-term financial instruments		5,32,33,34,35		285,587		313,068
Short-term investment securities		8,32,33		342,795		280,161
Accounts receivable—trade, net		6,32,33,34		2,443,502		2,392,150
Short-term loans, net		6,32,33,34		32,195		74,512
Accounts receivable—other, net		6,32,33,34		697,103		690,527
Prepaid expenses				140,256		134,404
Inventories, net		7,35		282,871		267,667
Assets classified as held for sale		9		—		10,510
Advanced payments and other		6,8,32,33,34		126,553		85,720

Total Current Assets				5,180,521		5,083,148

Non-Current Assets:
Long-term financial instruments		5,32,33,35		631		631
Long-term investment securities		8,32,33		1,149,319		956,280
Investments in associates and joint ventures		11		6,581,767		6,298,088
Property and equipment, net		12,34,35		10,252,498		10,567,701
Investment property, net		13		16,147		14,997
Goodwill		14		1,930,205		1,917,595
Intangible assets, net		15		2,298,574		2,483,994
Long-term loans, net		6,32,33,34		58,751		55,728
Long-term accounts receivable—other		6,32,33		3,658		3,596
Long-term prepaid expenses		35		61,400		51,961
Guarantee deposits		5,6,32,33,34		296,436		285,144
Long-term derivative financial assets		21,32,33		67,494		70,035
Deferred tax assets		30		24,905		25,083
Other non-current assets		6,32,33		119,200		127,252

Total Non-Current Assets				22,860,985		22,858,085

Total Assets			￦	28,041,506		27,941,233

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Financial Position, Continued

As of June 30, 2015 and December 31, 2014


(In millions of won)	Note		June 30, 2015		December 31, 2014
Liabilities and Equity

Current Liabilities:
Short-term borrowings		16,32,33	￦	929,300		366,600
Current installments of debentures and long-term borrowings, net		16,32,33		560,331		590,714
Current installments of finance lease liabilities		19,32,33		1,744		3,804
Current installments of long-term payables—other		17,32,33		118,955		189,389
Accounts payable—trade		32,33,34		291,316		275,495
Accounts payable—other		32,33,34		1,066,880		1,381,850
Withholdings		32,33,34		887,656		1,053,063
Accrued expenses		32,33		786,418		952,418
Income tax payable		30		224,673		99,236
Unearned revenue				270,809		327,003
Provisions		18		39,285		51,075
Advanced receipts				126,791		129,255
Liabilities classified as held for sale		9		—		408
Other current liabilities				4,233		—

Total Current Liabilities				5,308,391		5,420,310

Non-Current Liabilities:
Debentures, excluding current installments, net		16,32,33		5,887,803		5,649,158
Long-term borrowings, excluding current installments		16,32,33		131,302		149,720
Long-term payables—other		17,32,33		577,406		684,567
Long-term unearned revenue				4,688		19,659
Finance lease liabilities		19,32,33		—		26
Defined benefit liabilities		20		121,729		91,587
Long-term derivative financial liabilities		21,32,33		88,498		130,889
Long-term provisions		18		29,907		36,013
Deferred tax liabilities		30		511,611		444,211
Other non-current liabilities		32,33		62,584		66,823

Total Non-Current Liabilities				7,415,528		7,272,653

Total Liabilities				12,723,919		12,692,963

Equity
Share capital		1,22		44,639		44,639
Capital surplus and other capital adjustments		22,23,24		662,455		277,998
Retained earnings		25		14,421,043		14,188,591
Reserves		26		59,389		(4,489	)

Equity attributable to owners of the Parent Company				15,187,526		14,506,739
Non-controlling interests				130,061		741,531

Total Equity				15,317,587		15,248,270

Total Liabilities and Equity			￦	28,041,506		27,941,233

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Income

For the three and six-month periods ended June 30, 2015 and 2014


(In millions of won except for per share data)
			June 30, 2015						June 30, 2014
	Note		Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Operating revenue:		4,34
Revenue			￦	4,255,739			8,496,025			4,305,368			8,507,288
Operating expense:		34
Labor cost				543,881			1,018,862			401,137			830,276
Commissions paid				1,262,168			2,609,298			1,364,310			2,991,953
Depreciation and amortization		4		703,859			1,396,447			668,435			1,324,263
Network interconnection				239,857			474,109			280,736			556,533
Leased line				93,393			196,390			101,176			207,337
Advertising				120,452			197,438			99,883			185,233
Rent				117,037			239,488			113,376			222,576
Cost of products that have been resold				449,918			940,850			393,957			729,654
Other operating expenses		27		312,296			607,617			336,264			660,973

				3,842,861			7,680,499			3,759,274			7,708,798

Operating income		4		412,878			815,526			546,094			798,490
Finance income		4,29		29,053			61,302			35,167			75,162
Finance costs		4,29		(89,690	)		(171,040	)		(110,919	)		(199,699	)
Gains relating to investments in subsidiaries, associates and joint ventures, net		1,4,11		208,066			452,323			149,647			294,702
Other non-operating income		4,28		7,176			15,363			16,731			36,574
Other non-operating expenses		4,28		(51,891	)		(97,869	)		(28,714	)		(64,646	)

Profit before income tax		4		515,592			1,075,605			608,006			940,583
Income tax expense		30		117,704			234,970			110,367			175,635

Profit for the period			￦	397,888			840,635			497,639			764,948

Attributable to :
Owners of the Parent Company			￦	395,839			840,334			498,536			768,350
Non-controlling interests				2,049			301			(897	)		(3,402	)
Earnings per share		31
Basic earnings per share (in won)			￦	5,432			11,695			6,909			10,713

Diluted earnings per share (in won)			￦	5,432			11,695			6,909			10,713

See accompanying notes to the condensed consolidated interim financial statements

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

For the three and six-month periods ended June 30, 2015 and 2014


(In millions of won)	Note		June 30, 2015						June 30, 2014
			Three- month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Profit for the period			￦	397,888			840,635			497,639			764,948

Other comprehensive income (loss)
Items that will never be reclassified to profit or loss, net of taxes:
Remeasurement of defined benefit liabilities		20		5,527			(3,092	)		(7,841	)		(11,994	)
Items that are or may be reclassified subsequently to profit or loss, net of taxes:
Net change in unrealized fair value of available-for-sale financial assets		26		71,167			53,048			13,579			(537	)
Net change in other comprehensive income of investments in associates and joint ventures		26		23,435			27,880			(52,638	)		(53,469	)
Net change in unrealized fair value of derivatives		21,26		(32,321	)		(20,673	)		(23,433	)		(18,813	)
Foreign currency translations differences for foreign operations		26		8,288			9,419			(12,023	)		(10,416	)

Other comprehensive income (loss) for the period, net of taxes				76,096			66,582			(82,356	)		(95,229	)

Total comprehensive income			￦	473,984			907,217			415,283			669,719

Total comprehensive income attributable to:
Owners of the Parent Company			￦	469,790			904,733			417,499			674,619
Non-controlling interests				4,194			2,484			(2,216	)		(4,900	)

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity

For the six-month periods ended June 30, 2015 and 2014


(In millions of won)
	Controlling Interest														Non-controlling interests			Total equity
	Share capital		Capital surplus (deficit) and other capital adjustments			Retained earnings			Reserves			Sub-total			Non-controlling interests			Total equity
Balance, January 1, 2014	￦	44,639		317,508			13,102,495			(12,270	)		13,452,372			714,185			14,166,557
Cash dividends		—		—			(595,865	)		—			(595,865	)		(170	)		(596,035	)
Total comprehensive income
Profit (loss) for the period		—		—			768,350			—			768,350			(3,402	)		764,948
Other comprehensive loss		—		—			(11,937	)		(81,794	)		(93,731	)		(1,498	)		(95,229	)

		—		—			756,413			(81,794	)		674,619			(4,900	)		669,719
Interest on hybrid bond		—		—			(8,420	)		—			(8,420	)		—			(8,420	)
Business combination under common control		—		(28,641	)		—			—			(28,641	)		—			(28,641	)
Changes in ownership in subsidiaries		—		(141	)		—			—			(141	)		141			—

Balance, June 30, 2014	￦	44,639		288,726			13,254,623			(94,064	)		13,493,924			709,256			14,203,180


Balance, January 1, 2015	￦	44,639		277,998			14,188,591			(4,489	)		14,506,739			741,531			15,248,270
Cash dividends		—		—			(595,865	)		—			(595,865	)		(143	)		(596,008	)
Total comprehensive income
Profit for the period		—		—			840,334			—			840,334			301			840,635
Other comprehensive income (loss)		—		—			(2,765	)		67,164			64,399			2,183			66,582

		—		—			837,569			67,164			904,733			2,484			907,217
Interest on hybrid bond		—		—			(8,420	)		—			(8,420	)		—			(8,420	)
Treasury stock		—		412,072			—			—			412,072			—			412,072
Changes in consolidation scope		—		—			—			—			—			(5,226	)		(5,226	)
Changes in ownership in subsidiaries		—		(27,615	)		(832	)		(3,286	)		(31,733	)		(608,585	)		(640,318	)

Balance, June 30, 2015	￦	44,639		662,455			14,421,043			59,389			15,187,526			130,061			15,317,587

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the six-month periods ended June 30, 2015 and 2014


(In millions of won)	Note		June 30, 2015			June 30, 2014
Cash flows from operating activities:
Cash generated from operating activities
Profit for the period			￦	840,635			764,948
Adjustments for income and expenses		36		1,479,292			1,528,742
Changes in assets and liabilities related to operating activities		36		(786,942	)		(710,051	)

Sub-total				1,532,985			1,583,639
Interest received				25,052			23,348
Dividends received				59,349			10,567
Interest paid				(137,412	)		(141,322	)
Income tax paid				(65,923	)		(100,204	)

Net cash provided by operating activities				1,414,051			1,376,028

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net				27,448			—
Decrease in short-term investment securities, net				—			55,007
Collection of short-term loans				203,599			73,766
Decrease in long-term financial instruments				3			11
Proceeds from disposal of long-term investment securities				116,256			47,431
Proceeds from disposal of investments in associates and joint ventures				176,037			4
Proceeds from disposal of property and equipment				13,772			4,049
Proceeds from disposal of intangible assets				1,101			1,441
Proceeds from disposal of assets held for sale				990			1,056
Collection of long-term loans				1,501			2,398
Decrease of deposits				10,618			4,136
Proceeds from disposal of other non-current assets				2,548			90
Increase in cash due to acquisition of a subsidiary				10,148			—

Sub-total				564,021			189,389
Cash outflows for investing activities:
Increase in short-term financial instruments, net				—			(9,379	)
Increase in short-term investment securities, net				(69,842	)		—
Increase in short-term loans				(155,582	)		(88,101	)
Increase in long-term loans				(10,583	)		(2,450	)
Increase in long-term financial instruments				(5	)		—
Acquisition of long-term investment securities				(232,887	)		(19,805	)
Acquisition of investments in associates and joint ventures				(20,570	)		(29,809	)
Acquisition of property and equipment				(1,103,196	)		(1,331,556	)
Acquisition of intangible assets				(39,935	)		(38,114	)
Increase in deposits				(11,037	)		(2,643	)
Increase in other non-current assets				(436	)		—
Acquisition of business, net of cash acquired				(13,957	)		(118,667	)

Sub-total				(1,658,030	)		(1,640,524	)

Net cash used in investing activities			￦	(1,094,009	)		(1,451,135	)

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Cash Flows, Continued

For the six-month periods ended June 30, 2015 and 2014


(In millions of won)	June 30, 2015			June 30, 2014
Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings, net	￦	562,700			608,000
Proceeds from issuance of debentures		507,799			627,970
Proceeds from long-term borrowings		—			13,552
Cash inflows from settlement of derivatives		189			119

Sub-total		1,070,688			1,249,641
Cash outflows for financing activities:
Repayments of long-term account payables-other		(190,603	)		(207,668	)
Repayments of debentures		(370,000	)		(406,149	)
Repayments of long-term borrowings		(14,953	)		(11,916	)
Cash outflows from settlement of derivatives		(474	)		(373	)
Payments of finance lease liabilities		(1,789	)		(10,250	)
Payments of dividends		(595,865	)		(595,865	)
Payments of interest on hybrid bond		(8,420	)		(8,420	)
Decrease in cash from the consolidated capital transaction		(218,394	)		—

Sub-total		(1,400,498	)		(1,240,641	)

Net cash provided by (used in) financing activities		(329,810	)		9,000

Net decrease in cash and cash equivalents		(9,768	)		(66,107	)
Cash and cash equivalents at beginning of the period		834,429			1,398,639
Effects of exchange rate changes on cash and cash equivalents		4,998			(1,269	)

Cash and cash equivalents at end of the period	￦	829,659			1,331,263

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

1.	Reporting Entity

(1) General

SK Telecom Co., Ltd. (“the Parent Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to engage in providing cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications in Korea. The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of June 30, 2015, the Parent Company’s total issued shares are held by the following:


	Number of shares		Percentage of total shares issued (%)
SK Holdings Co., Ltd.		20,363,452		25.22
National Pension Service, other institutional investors and other minority stockholders		52,265,708		64.73
Treasury stock		8,116,551		10.05

Total number of shares		80,745,711		100.00

These condensed consolidated interim financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individuals as “Group entities”). SK Holdings Co., Ltd. is the ultimate controlling entity of the Parent Company.

(2) List of subsidiaries

The list of subsidiaries as of June 30, 2015 and December 31, 2014 is as follows:

Ownership (%)

Subsidiary

Location

Primary business

June 30,
2015

December 31,
2014

SK Telink Co., Ltd.

Korea

Telecommunication and MVNO service

83.5

M&Service Co., Ltd.

Korea

Data base and internet website service

100.0

SK Communications Co., Ltd.

Korea

Internet website services

64.6

Stonebridge Cinema Fund

Korea

Investment association

55.2

56.0

Commerce Planet Co., Ltd.

Korea

Online shopping mall operation agency

100.0

SK Broadband Co., Ltd.(*1)

Korea

Telecommunication services

100.0

50.6

K-net Culture and Contents Venture Fund

Korea

Investment association

59.0

Fitech Focus Limited Partnership II

Korea

Investment association

66.7

Open Innovation Fund

Korea

Investment association

98.9

PS&Marketing Corporation

Korea

Communications device retail business

100.0

Service Ace Co., Ltd.

Korea

Customer center management service

100.0

Service Top Co., Ltd.

Korea

Customer center management service

100.0

Network O&S Co., Ltd.

Korea

Base station maintenance service

100.0

BNCP Co., Ltd.

Korea

Internet website services

100.0

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

1.	Reporting Entity, Continued

(2) List of subsidiaries, Continued

The list of subsidiaries as of June 30, 2015 and December 31, 2014 is as follows, Continued:

Ownership (%)

Subsidiary

Location

Primary business

June 30,
2015

December 31,
2014

Iconcube Holdings, Inc.

Korea

Investment association

100.0

Iconcube, Inc.

Korea

Internet website services

100.0

SK Planet Co., Ltd.

Korea

Telecommunication service

100.0

Neosnetworks Co., Ltd.(*2)

Korea

Guarding of facilities

83.9

66.7

IRIVER LIMITED(*3)

Korea

Manufacturing digital audio players and other portable media devices.

49.0

Iriver CS Co., Ltd.(*4)

Korea

After-sales service and logistics agency

—

100.0

iriver Enterprise Ltd.

Hong Kong

Management of Chinese subsidiary

100.0

iriver America Inc.

USA

Marketing and sales in North America

100.0

iriver Inc.

USA

Marketing and sales in North America

100.0

iriver China Co., Ltd.

China

Sales and manufacturing MP3,4 in China

100.0

Dongguan iriver Electronics Co., Ltd.

China

Sales and manufacturing e-book in China

100.0

Groovers JP Ltd.(*4)

Japan

Digital music contents sourcing and distribution service

100.0

—

SK Telecom China Holdings Co., Ltd.

China

Investment association

100.0

Shenzhen E-eye High Tech Co., Ltd.(*4)

China

Manufacturing

—

65.5

SK Global Healthcare Business Group., Ltd.

Hong Kong

Investment association

100.0

SK Planet Japan, K. K.

Japan

Digital contents sourcing service

100.0

SKT Vietnam PTE. Ltd.

Singapore

Telecommunication service

73.3

SK Planet Global PTE. Ltd.

Singapore

Digital contents sourcing service

100.0

SKP GLOBAL HOLDINGS PTE. LTD.

Singapore

Investment association

100.0

SKT Americas, Inc.

USA

Information gathering and consulting

100.0

SKP America LLC.

USA

Digital contents sourcing service

100.0

YTK Investment Ltd.

Cayman

Investment association

100.0

Atlas Investment

Cayman

Investment association

100.0

Technology Innovation Partners, LP.

USA

Investment association

100.0

SK Telecom China Fund I L.P.

Cayman

Investment association

100.0

shopkick Management Company, Inc.

USA

Investment association

95.2

shopkick, Inc.

USA

Mileage-based online transaction application development

100.0

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

1.	Reporting Entity, Continued

(2) List of subsidiaries, Continued

(*1)

On March 20, 2015, the Board of Directors of the Parent Company decided to grant 0.0168936 share of its treasury stock in exchange for 1 share of SK Broadband Co., Ltd., a subsidiary of the Parent Company, to the shareholders of SK Broadband Co., Ltd. as of June 9, 2015. After the stock exchange, SK Broadband Co., Ltd. became a wholly-owned subsidiary of the Parent Company.

(*2)

Due to the shareholders’ agreement which grants put option to the non-controlling shareholders, this entity is consolidated as a wholly owned subsidiary in the consolidated financial statements. The Parent Company newly acquired 50,377 and 326,748 shares of Neosnetworks Co., Ltd. by participating in the capital increase and capital increase without consideration respectively during the six-month period ended June 30, 2015.

(*3)	Although the Group has less than 50% of the voting rights of IRIVER LIMITED, it is considered to have de facto control since the Group holds significantly more voting rights than any other vote holder or organized group of vote holders, and the other shareholdings are widely dispersed.

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

In accordance with the Group’s accounting policy relating to the scope of consolidation, small-sized subsidiaries including IM Shopping Inc. were excluded from the list of subsidiaries as the effects on the Group’s consolidated financial statements are not material considering both individual and overall quantitative and qualitative effects.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

1.	Reporting Entity, Continued

(3) Condensed financial information of subsidiaries

Condensed financial information of subsidiaries as of and for the six-month period ended June 30, 2015 is as follows:


(In millions of won)
Subsidiary	Total assets		Total liabilities		Total equity (deficit)			Revenue		Profit (loss)
SK Telink Co., Ltd.	￦	338,182		159,654		178,528			218,424		40,041
M&Service Co., Ltd.		73,574		29,054		44,520			62,655		2,398
SK Communications Co., Ltd.		168,285		38,866		129,419			41,408		(5,667	)
Stonebridge Cinema Fund		11,344		399		10,945			—		2,729
Commerce Planet Co., Ltd.		31,693		32,049		(356	)		44,068		836
SK Broadband Co., Ltd.		3,178,193		2,083,091		1,095,102			1,314,981		(4,079	)
K-net Culture and Contents Venture Fund		13,377		—		13,377			—		(212	)
Fitech Focus Limited Partnership II		18,576		—		18,576			—		(735	)
Open Innovation Fund		20,829		—		20,829			—		(948	)
PS&Marketing Corporation		518,410		310,136		208,274			896,876		184
Service Ace Co., Ltd.		68,214		37,400		30,814			104,181		2,407
Service Top Co., Ltd.		65,282		42,037		23,245			97,674		3,668
Network O&S Co., Ltd.		64,441		36,097		28,344			93,513		2,769
BNCP Co., Ltd.		5,701		5,417		284			5,366		(614	)
Iconcube Holdings, Inc.(*1)		1,202		448		754			836		(143	)
SK Planet Co., Ltd.		2,663,395		735,693		1,927,702			767,803		(9,704	)
Neosnetworks Co., Ltd.		69,365		13,157		56,208			25,945		(2,104	)
IRIVER LIMITED(*2)		63,949		16,011		47,938			28,386		503
SK Telecom China Holdings Co., Ltd.		33,811		1,103		32,708			3,919		(12,890	)
SK Global Healthcare Business Group., Ltd.		24,620		—		24,620			—		(1,254	)
SK Planet Japan, K. K.		3,656		253		3,403			283		(2,263	)
SKT Vietnam PTE. Ltd.		4,338		1,315		3,023			—		—
SK Planet Global PTE. Ltd.		1,809		180		1,629			1		(2,324	)
SKP GLOBAL HOLDINGS PTE. LTD.		36,384		9		36,375			—		(8,511	)
SKT Americas, Inc.		43,029		860		42,169			4,457		(370	)
SKP America LLC.		347,454		82		347,372			—		(102	)
YTK Investment Ltd.		15,651		—		15,651			—		(3,118	)
Atlas Investment(*3)		69,476		136		69,340			—		(1,170	)
shopkick Management Company, Inc.		279,214		6		279,208			—		(2,384	)
shopkick, Inc.		35,305		30,859		4,446			13,761		(24,535	)

(*1)	The condensed financial information of Iconcube Holdings, Inc. includes financial information of Iconcube, Inc., a subsidiary of Iconcube Holdings, Inc.

(*2)	The condensed financial information of IRIVER LIMITED includes financial information of iriver Enterprise Ltd., iriver America Inc., iriver Inc., iriver China Co., Ltd., Dongguan iriver Electronics Co., Ltd. and Groovers JP Ltd. subsidiaries of IRIVER LIMITED.

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

1.	Reporting Entity, Continued

(3) Condensed financial information of subsidiaries, Continued

Condensed financial information of subsidiaries as of and for the year ended December 31, 2014 is as follows:


(In millions of won)
Subsidiary	Total assets		Total liabilities		Total equity (deficit)			Revenue		Profit (loss)
SK Telink Co., Ltd.	￦	324,028		184,074		139,954			465,463		13,073
M&Service Co., Ltd.		78,826		36,817		42,009			133,789		7,492
SK Communications Co., Ltd.		176,168		41,987		134,181			93,910		(18,386	)
Stonebridge Cinema Fund		11,137		320		10,817			—		383
Commerce Planet Co., Ltd.		26,078		27,259		(1,181	)		64,509		933
SK Broadband Co., Ltd.		3,109,991		1,988,379		1,121,612			2,654,381		4,307
K-net Culture and Contents Venture Fund		21,094		4		21,090			—		4,920
Fitech Focus Limited Partnership II		19,301		—		19,301			—		(2,055	)
Open Innovation Fund		21,765		—		21,765			—		(6,266	)
PS&Marketing Corporation		544,292		336,221		208,071			1,627,217		2,817
Service Ace Co., Ltd.		66,336		37,770		28,566			207,427		3,570
Service Top Co., Ltd.		57,032		36,723		20,309			188,835		3,503
Network O&S Co., Ltd.		71,348		45,770		25,578			211,916		3,823
BNCP Co., Ltd.		6,785		5,887		898			12,869		(1,505	)
Iconcube Holdings, Inc.(*1)		1,415		515		900			630		(2,284	)
SK Planet Co., Ltd.		2,579,286		746,832		1,832,454			1,512,492		1,593
Neosnetworks Co., Ltd.		31,633		13,251		18,382			33,302		(1,989	)
IRIVER LIMITED(*2)		61,945		14,392		47,553			53,192		2,345
SK Telecom China Holdings Co., Ltd.		37,877		2,335		35,542			12,420		1,058
Shenzhen E-eye High Tech Co., Ltd.		15,566		408		15,158			3,637		(1,143	)
SK Global Healthcare Business Group., Ltd.		25,874		—		25,874			—		(689	)
SK Planet Japan, K. K.		5,222		1,638		3,584			93		(4,561	)
SKT Vietnam PTE. Ltd.		4,242		1,286		2,956			—		(73	)
SK Planet Global PTE. Ltd.		4,215		64		4,151			87		(2,543	)
SKP GLOBAL HOLDINGS PTE. LTD.		29,529		11		29,518			—		(9,716	)
SKT Americas, Inc.		42,159		554		41,605			9,100		(5	)
SKP America LLC.		297,981		67		297,914			—		(2,370	)
YTK Investment Ltd.		27,944		—		27,944			—		(15,259	)
Atlas Investment(*3)		66,825		94		66,731			—		(6,626	)
shopkick Management Company, Inc.		230,925		—		230,925			—		—
shopkick, Inc.		28,216		13,698		14,518			—		—

(*1)	The condensed financial information of Iconcube Holdings, Inc. includes financial information of Iconcube, Inc., a subsidiary of Iconcube Holdings, Inc.

(*2)	The condensed financial information of IRIVER LIMITED includes financial information of iriver CS Co. Ltd., iriver Enterprise Ltd., iriver America Inc., iriver Inc., iriver China Co., Ltd., and Dongguan iriver Electronics Co., Ltd., subsidiaries of IRIVER LIMITED.

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

1.	Reporting Entity, Continued

(4) Changes in subsidiaries

The list of subsidiaries that were newly included in consolidation during the six-month period ended June 30, 2015 is as follows:


Subsidiary		Reason
Groovers JP Ltd.		Established by IRIVER LIMITED during the six-month period ended June 30, 2015.

The list of subsidiaries that were excluded from subsidiaries during the six-month period ended June 30, 2015 is as follows:


Subsidiary		Reason
Iriver CS Co., Ltd.		Merged into IRIVER LIMITED during the six-month period ended June 30, 2015.

Shenzhen E-eye High Tech Co., Ltd.		Disposed during the six-month period ended June 30, 2015.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

1.	Reporting Entity, Continued

(5) The information of significant non-controlling interests of the Group as of and for the six-month period ended June 30, 2015, and as of and for the year ended December 31, 2014 is as follows. There were no dividends paid during the six-month period ended June 30, 2015 and year ended December 31, 2014 by subsidiaries of which non-controlling interests are significant.


(In millions of won)
	June 30, 2015
	SK Communications Co., Ltd.
Ownership of non-controlling interests (%)		35.4

Current assets	￦	83,445
Non-current assets		84,840
Current liabilities		(36,248	)
Non-current liabilities		(2,618	)
Net assets		129,419
Net assets of consolidated entities		129,419
Carrying amount of non-controlling interests		45,889

Revenue	￦	41,408
Loss for the period		(5,667	)
Loss of the consolidated entities		(5,667	)
Total comprehensive loss		(4,761	)
Loss attributable to non-controlling interests		(2,009	)

Net cash used in operating activities	￦	(1,635	)
Net cash provided by investing activities		14,324
Net cash provided by financing activities		—
Net increase in cash and cash equivalents		12,689

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

1.	Reporting Entity, Continued


(In millions of won)
	December 31, 2014
	SK Communications Co., Ltd.			SK Broadband Co., Ltd.
Ownership of non-controlling interests (%)		35.4			49.4

Current assets	￦	89,135			463,764
Non-current assets		87,033			2,646,227
Current liabilities		(41,252	)		(881,886	)
Non-current liabilities		(735	)		(1,106,493	)
Net assets		134,181			1,121,612
Adjustment for fair value		—			111,561
Net assets of consolidated entities		134,181			1,233,173
Carrying amount of non-controlling interests		47,577			609,638

Revenue	￦	93,910			2,654,381
Profit (loss) for the period		(18,386	)		4,307
Amortization of fair value adjustment		—			(1,916	)
Profit (loss) of the consolidated entities		(18,386	)		2,391
Total comprehensive income (loss)		530			(10,324	)
Profit (loss) attributable to non-controlling interests		(6,519	)		1,182

Net cash provided by (used in) operating activities	￦	(5,962	)		431,760
Net cash used in investing activities		(17,927	)		(599,016	)
Net cash provided by financing activities		—			119,484
Net decrease in cash and cash equivalents		(23,889	)		(47,772	)

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

2.	Basis of Preparation

(1) Statement of compliance

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

These condensed consolidated interim financial statements were prepared in accordance with K-IFRS No. 1034, ‘Interim Financial Reporting’ as part of the period covered by the Group’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended December 31, 2014. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

(2) Use of estimates and judgments

1) Critical judgments, assumptions and estimation uncertainties

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

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2014.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

2.	Basis of Preparation, Continued

(2) Use of estimates and judgments, Continued

2) Fair value measurement

Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the finance executive.

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

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

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

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

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

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Information about assumptions used for fair value measurements are included in Note 33.

(3) Common control transactions

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

3.	Significant Accounting Policies

Except as described below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2014. The following changes in accounting policy are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2015.

(1) Changes in accounting policies

The following amendment to existing standards has been published and are mandatory for the Group for annual periods beginning on or after July 1, 2014.

1) K-IFRS 1019 ‘Employee Benefits’ – Employee contributions Amendments to K-IFRS 1019 introduced a practical expedient to accounting for defined benefit plan, when employees or third parties pay contributions if certain criteria are met. According to the amendments, the entity is permitted to recognize those contributions as a reduction of the service cost in the period in which the related service is rendered, instead of forecast future contributions from employees or third parties and attribute them to periods or service as negative benefits.

There is no material impact of the application of this amendment on the consolidated financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

4.	Operating Segments

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

(1) Details of the segment information as of and for the six-month period ended June 30, 2015 are as follows:


(In millions of won)
	Cellular Services		Fixed-line Telecommunication services		Others			Sub-total		Consolidation adjustments			Consolidated amount
Total revenue	￦	7,469,465		1,533,405		997,767			10,000,637		(1,504,612	)		8,496,025
Inter-segment revenue		847,372		301,176		356,064			1,504,612		(1,504,612	)		—
External revenue		6,622,093		1,232,229		641,703			8,496,025		—			8,496,025
Depreciation and amortization		1,066,285		261,845		68,317			1,396,447		—			1,396,447
Operating income (loss)		815,120		42,805		(42,399	)		815,526		—			815,526

Finance income and costs, net														(109,738	)
Gain related to investments in subsidiaries, associates and joint ventures, net														452,323
Other non-operating income and expense, net														(82,506	)

Profit before income tax														1,075,605

Total assets		23,580,421		3,516,376		3,214,927			30,311,724		(2,270,218	)		28,041,506
Total liabilities		9,483,378		2,242,744		897,624			12,623,746		100,173			12,723,919

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

4.	Operating Segments, Continued

(2) Details of the segment information as of and for the six-month period ended June 30, 2014 are as follows:


(In millions of won)
	Cellular Services		Fixed-line Telecommunication services		Others			Sub-total		Consolidation adjustments			Consolidated amount
Total revenue	￦	7,520,742		1,517,777		878,927			9,917,446		(1,410,158	)		8,507,288
Inter-segment revenue		745,251		289,670		375,237			1,410,158		(1,410,158	)		—
External revenue		6,775,491		1,228,107		503,690			8,507,288		—			8,507,288
Depreciation and amortization		1,035,809		247,530		40,924			1,324,263		—			1,324,263
Operating income (loss)		788,831		25,865		(16,206	)		798,490		—			798,490

Finance income and costs, net														(124,537	)
Gain related to investments in subsidiaries, associates and joint ventures, net														294,702
Other non-operating income and expense, net														(28,072	)

Profit before income tax														940,583

Total assets		23,386,690		3,325,776		3,089,274			29,801,740		(2,774,091	)		27,027,649
Total liabilities		9,958,215		2,067,197		866,318			12,891,730		(67,261	)		12,824,469

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

No single customer contributed 10% or more to the Group’s total revenue for the six-month periods ended June 30, 2015 and 2014.

5.	Restricted Deposits

Deposits which are restricted in use as of June 30, 2015 and December 31, 2014 are summarized as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Short-term financial instruments(*)	￦	89,525		90,321
Long-term financial instruments(*)		607		612
Guarantee deposits		280		280

	￦	90,412		91,213

(*)	Financial instruments include charitable trust fund established by the Group. Profits from the fund are donated to charitable institutions. As of June 30, 2015, the funds cannot be withdrawn.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

6.	Trade and Other Receivables

(1) Details of trade and other receivables as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)	June 30, 2015
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable—trade	￦	2,677,060		(233,558	)		2,443,502
Short-term loans		32,414		(219	)		32,195
Accounts receivable—other		777,090		(79,987	)		697,103
Accrued income		10,264		—			10,264
Others		4,685		—			4,685

		3,501,513		(313,764	)		3,187,749
Non-current assets:
Long-term loans		85,882		(27,131	)		58,751
Long-term accounts receivable—other		3,658		—			3,658
Guarantee deposits		296,436		—			296,436
Long-term accounts receivable—trade		66,698		(1,704	)		64,994

		452,674		(28,835	)		423,839

	￦	3,954,187		(342,599	)		3,611,588


(In millions of won)	December 31, 2014
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable—trade	￦	2,614,059		(221,909	)		2,392,150
Short-term loans		75,199		(687	)		74,512
Accounts receivable—other		769,115		(78,588	)		690,527
Accrued income		10,134		—			10,134
Others		3,865		—			3,865

		3,472,372		(301,184	)		3,171,188
Non-current assets:
Long-term loans		82,735		(27,007	)		55,728
Long-term accounts receivable—other		3,596		—			3,596
Guarantee deposits		285,144		—			285,144
Long-term accounts receivable—trade		68,536		—			68,536

		440,011		(27,007	)		413,004

	￦	3,912,383		(328,191	)		3,584,192

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

6.	Trade and Other Receivables, Continued

(2)

Changes in allowances for doubtful accounts of trade and other receivables during the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Balance at January 1	￦	328,191			323,984
Increase of bad debt allowances		39,069			31,678
Write-offs		(38,911	)		(38,532	)
Others		14,250			12,898

Balance at June 30	￦	342,599			330,028

(3)

Details of overdue but not impaired, and impaired trade and other receivables as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015						December 31, 2014
	Accounts receivable - trade			Other receivables			Accounts receivable - trade			Other receivables
Neither overdue nor impaired	￦	1,901,690			1,061,411			1,831,243			1,089,001
Overdue but not impaired		77,171			5,146			76,671			3,481
Impaired		764,897			143,872			774,681			137,306

		2,743,758			1,210,429			2,682,595			1,229,788
Allowances for doubtful accounts		(235,262	)		(107,337	)		(221,909	)		(106,282	)

	￦	2,508,496			1,103,092			2,460,686			1,123,506

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

(4)

The aging of overdue but not impaired accounts receivable as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015				December 31, 2014
	Accounts receivable - trade		Other receivables		Accounts receivable - trade		Other receivables
Less than 1 month	￦	26,992		1,721		25,254		1,795
1 ~ 3 months		23,080		1,849		26,469		213
3 ~ 6 months		11,108		92		11,641		608
More than 6 months		15,991		1,484		13,307		865

	￦	77,171		5,146		76,671		3,481

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

7.	Inventories

Details of inventories as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015							December 31, 2014
	Acquisition cost		Write-down of inventory			Carrying amount		Acquisition cost		Write-down of inventory			Carrying amount
Merchandise	￦	255,690		(5,758	)		249,932		252,063		(5,325	)		246,738
Finished goods		2,553		(131	)		2,422		1,930		(216	)		1,714
Work in process		1,212		(102	)		1,110		1,144		(131	)		1,013
Raw materials and supplies		30,469		(1,062	)		29,407		19,242		(1,040	)		18,202
	￦	289,924		(7,053	)		282,871		274,379		(6,712	)		267,667

8.	Investment Securities

(1)

Details of short-term investment securities as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Beneficiary certificates(*)	￦	267,140		277,003
Current installments of long-term investment securities		75,655		3,158

	￦	342,795		280,161

(*)	The distributions arising from beneficiary certificates as of June 30, 2015 were accounted for as accrued income.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

8.	Investment Securities, Continued

(2)

Details of long-term investment securities as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015			December 31, 2014
Equity securities:
Marketable equity securities	￦	912,704			657,286
Unlisted equity securities(*1)		65,601			56,236
Equity investments(*2)		198,418			209,120

		1,176,723			922,642
Debt securities:
Public bonds(*3)		—			158
Investment bonds(*4)		48,251			36,638

		48,251			36,796

Total		1,224,974			959,438
Less current installments of long-term investment securities		(75,655	)		(3,158	)

Long-term investment securities	￦	1,149,319			956,280

(*1)	Unlisted equity securities whose fair value cannot be measured reliably are recorded at cost.

(*2)	Equity investments are recorded at cost.

(*3)	Details of maturity for the public bonds as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Less than 1 year	￦	—		158

(*4)

During the six-month period ended June 30, 2015, the Parent Company exercised the conversion right for the convertible bonds of Health Connect Co., Ltd., which were classified as available-for-sale financial assets. Health Connect Co., Ltd. has been classified as investments in associates (￦5,900 million) as the Parent Company obtained significant influence over the company. As a result of this transaction, investments in associates have increased by ￦5,900 million and the remaining convertible bonds of ￦560 million was fully redeemed.

9.	Assets and Liabilities Classified as Held for Sale

During the year ended December 31, 2014, the Group entered into a disposal contract regarding the Group’s ownership interests in Shenzhen E-eye High Tech Co., Ltd., the Parent Company’s subsidiary. Assets and liabilities of the subsidiary amounting to ￦10,510 million and ￦408 million, were reclassified to assets and liabilities held for sale, respectively, and the carrying amount in excess of the fair value less cost to sell was recognized as impairment loss. The ownership interests of Shenzhen E-eye High Tech Co., Ltd. were disposed during the six-month period ended June 30, 2015.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

10.

Business Combinations

(1)

General information

On April 1, 2015, Neosnetworks Co., Ltd., a subsidiary of the Parent Company, acquired an unmanned machine security business of Joeun Safe Co., Ltd., which manages facility guarding services, in order to expand infrastructure and enhance competitiveness of its security business.

The Group recognized the acquired assets and liabilities as fair value and the difference between the consideration and fair value of net assets as goodwill.

(2)

Consideration paid and assets and liabilities transferred

Consideration paid and assets in succession recognized at the acquisition date are as follows:


(In millions of won)
	2015
Consideration paid
Cash and cash equivalents	￦	13,957
Accounts payable—other		2,302

	￦	16,259

Assets transferred
Property and equipment	￦	3,641
Intangible assets		8,219
Other assets		2,525

	￦	14,385

The fair value of such intangible assets transferred has been provisionally recorded and subject to change since the independent valuation process of the intangible assets has not been completed as of June 30, 2015.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Investments in Associates and Joint Ventures

(1)

Investments in associates and joint ventures accounted for using the equity method as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)		June 30, 2015				December 31, 2014
	Country	Ownership percentage		Carrying amount		Ownership percentage		Carrying amount
Investments in associates
SK China Company Ltd.(*1)	China		9.6	￦	38,560		9.6	￦	35,817
Korea IT Fund(*2)	Korea		63.3		242,170		63.3		240,676
KEB HanaCard Co., Ltd.(*1,3)	Korea		15.0		253,707		25.4		425,140
Candle Media Co., Ltd.	Korea		35.1		19,766		35.1		19,486
NanoEnTek, Inc.	Korea		26.0		35,854		26.0		36,527
SK Industrial Development China Co., Ltd.	Hongkong		21.0		80,661		21.0		79,394
Packet One Network(*1)	Malaysia		13.6		44,391		13.6		53,670
SK Technology Innovation Company	Cayman		49.0		44,888		49.0		44,052
HappyNarae Co., Ltd.	Korea		42.5		16,268		42.5		15,551
SK hynix Inc.	Korea		20.1		5,293,292		20.1		4,849,159
SK MENA Investment B.V.	Netherlands		32.1		14,326		32.1		14,015
SKY Property Mgmt. Ltd.	Virgin Island		33.0		256,897		33.0		248,534
Xinan Tianlong Science and Technology Co., Ltd.	China		49.0		24,620		49.0		25,874
Daehan Kanggun BcN Co., Ltd. and others	—		—		160,491		—		158,725

Sub-total					6,525,891				6,246,620

Investments in joint ventures
Dogus Planet, Inc.(*4)	Turkey		50.0		8,995		50.0		11,441
PT. Melon Indonesia	Indonesia		49.0		3,806		49.0		3,564
Television Media Korea Ltd.	Korea		51.0		6,712		51.0		6,944
Celcom Planet	Malaysia		51.0		12,449		51.0		16,605
PT XL Planet Digital(*4)	Indonesia		50.0		23,914		50.0		12,914

Sub-total					55,876				51,468

Total				￦	6,581,767			￦	6,298,088

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures accounted for using the equity method as of June 30, 2015 and December 31, 2014 are as follows, Continued:

(*1)	Classified as investments in associates as the Group can exercise significant influence through its participation on the board of directors even though the Group has less than 20% of equity interests.

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

(*3)	During the six-month period ended June 30, 2015, the Group disposed of 27,725,264 shares of KEB HanaCard Co., Ltd.

(*4)	There were additional investments in associates and joint ventures during the six-month period ended June 30, 2015.

(2)

The market price of investments in listed associates as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, except for share data)
	June 30, 2015						December 31, 2014
	Market value per share (In won)		Number of shares		Market price		Market value per share (In won)		Number of shares		Market price
Candle Media Co., Ltd.	￦	892		21,620,360		19,285		734		21,620,360		15,869
NanoEnTek, Inc.		9,200		5,870,290		54,007		5,710		5,870,290		33,519
SK hynix Inc.		42,300		146,100,000		6,180,030		47,750		146,100,000		6,976,275

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Investments in Associates and Joint Ventures, Continued

(3)

The financial information of the significant investees as of and for the six-month period ended June 30, 2015 and as of and for the year ended December 31, 2014 are as follows:


(In millions of won)	As of and for the six-month period ended June 30, 2015
	SK hynix Inc.		KEB HanaCard Co., Ltd.			SKY Property Mgmt. Ltd.			Korea IT Fund
Current assets	￦	9,656,987		6,344,737			158,150			122,165
Non-current assets		18,806,717		779,000			676,461			260,364
Current liabilities		5,268,876		1,317,903			235,268			—
Non-current liabilities		2,899,276		4,466,298			37,401			—
Revenue		9,456,920		746,127			43,601			16,935
Profit for the period		2,403,866		11,002			11,043			10,869
Other comprehensive income (loss)		73,785		(5,074	)		(249	)		—
Total comprehensive income		2,477,651		5,928			10,794			10,869


(In millions of won)	As of and for the year ended December 31, 2014
	SK hynix Inc.			KEB HanaCard Co., Ltd.(*)			SKY Property Mgmt. Ltd.			Korea IT Fund
Current assets	￦	10,363,514			6,716,612			172,775			122,026
Non-current assets		16,519,764			568,065			667,560			258,144
Current liabilities		5,765,304			848,140			62,868			—
Non-current liabilities		3,081,671			5,109,888			242,116			—
Revenue		17,125,566			305,756			81,502			18,883
Profit (loss) for the period		4,195,169			(11,196	)		15,006			5,470
Other comprehensive income (loss)		(52,360	)		(734	)		(6,090	)		4,837
Total comprehensive income (loss)		4,142,809			(11,930	)		8,916			10,307

(*)	Revenue and net profit of Hana SK Card Co., Ltd. for pre-merger period, amounting to ￦853,506 million and ￦3,521 million, respectively, were not included.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Investments in Associates and Joint Ventures, Continued

(4)

The condensed financial information of joint ventures as of and for the six-month period ended June 30, 2015 and as of and for the year ended December 31, 2014 are as follows:


(In millions of won)	As of and for the six-month period ended June 30, 2015
	Television Media Korea Ltd.			Dogus Planet, Inc.			PT. Melon Indonesia			PT XL Planet Digital			Celcom Planet
Current assets	￦	15,178			21,262			9,939			25,819			21,416
Cash and cash equivalents		2,383			2			5,116			22,344			19,371
Non-current assets		3,697			15,706			2,692			29,129			3,483
Current liabilities		6,185			18,901			4,674			7,633			7,900
Account payable, other payables and provisions		5,737			4,626			4,674			5,252			5,889
Non-current liabilities		—			75			139			424			—
Account payable, other payables and provisions		—			—			—			—			—
Revenue		9,136			15,404			7,550			1,717			221
Depreciation and amortization		(1,642	)		(1,628	)		(71	)		(1,279	)		(420	)
Interest income		96			308			152			—			197
Interest expense		—			—			—			—			—
Income tax benefit		—			—			—			2,940			—
Profit (loss)		(455	)		(8,338	)		845			(8,512	)		(8,311	)
Total comprehensive income (loss)		(455	)		(8,338	)		845			(8,512	)		(8,311	)


(In millions of won)	As of and for the year ended December 31, 2014
	Television Media Korea Ltd.			Dogus Planet, Inc.			PT. Melon Indonesia			PT XL Planet Digital			Celcom Planet
Current assets	￦	16,252			38,641			10,022			9,241			30,407
Cash and cash equivalents		5,104			6			4,763			6,710			30,400
Non-current assets		4,543			13,011			3,094			14,589			3,343
Current liabilities		7,188			28,406			5,689			4,198			1,182
Account payable, other payables and provisions		265			3,648			—			—			—
Non-current liabilities		464			377			102			124			—
Account payable, other payables and provisions		464			377			—			124			—
Revenue		16,403			23,897			11,826			1,019			—
Depreciation and amortization		(3,732	)		(2,402	)		(928	)		(1,452	)		(1	)
Interest income		254			1,154			268			—			—
Interest expense		—			(6	)		—			—			—
Income tax expense		—			—			—			(5,334	)		—
Profit (loss)		(3,361	)		(37,146	)		523			(15,596	)		(1,479	)
Total comprehensive income (loss)		(3,361	)		(37,146	)		523			(15,596	)		(1,479	)

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Investments in Associates and Joint Ventures, Continued

(5)

Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)	June 30, 2015
	Net assets		Ownership interests (%)		Net assets attributable to the ownership interests		Cost-book value differentials		Carrying amount
Associates:
SK hynix Inc.(*)	￦	20,295,754		20.1		4,073,077		1,220,215		5,293,292
KEB HanaCard Co., Ltd.		1,339,536		15.0		200,931		52,776		253,707
SKY Property Mgmt. Ltd.(*)		554,016		33.0		182,825		74,072		256,897
Korea IT Fund		382,529		63.3		242,170		—		242,170


(In millions of won)	December 31, 2014
	Net assets		Ownership interests (%)		Net assets attributable to the ownership interests		Cost-book value differentials		Carrying amount
Associates:
SK hynix Inc.(*)	￦	18,036,453		20.1		3,619,666		1,229,493		4,849,159
KEB HanaCard Co., Ltd.		1,326,649		25.4		337,266		87,874		425,140
SKY Property Mgmt. Ltd.(*)		527,479		33.0		174,068		74,466		248,534
Korea IT Fund		380,170		63.3		240,676		—		240,676

(*)	These entities prepare consolidated financial statements and net assets of these entities represent net assets attributable to owners of the Parent Company.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Investments in Associates and Joint Ventures, Continued

(6)

Details of changes in investments in associates and joint ventures accounted for using the equity method for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended June 30, 2015
	Beginning balance		Acquisition and Disposal			Share of profits (losses)			Other comprehensive income (loss)			Other increase (decrease)			Ending balance
Investments in associates
SK China Company Ltd.	￦	35,817		—			(1,093	)		3,836			—			38,560
Korea IT Fund(*)		240,676		—			5,041			(1,444	)		(2,103	)		242,170
KEB HanaCard Co., Ltd.		425,140		(174,475	)		2,481			561			—			253,707
Candle Media Co., Ltd.		19,486		—			259			21			—			19,766
NanoEnTek, Inc.		36,527		—			(848	)		175			—			35,854
SK Industrial Development China Co., Ltd.		79,394		—			(587	)		1,854			—			80,661
Packet One Network		53,670		—			(8,714	)		(565	)		—			44,391
SK Technology Innovation Company		44,052		—			(1,970	)		2,806			—			44,888
HappyNarae Co., Ltd.		15,551		—			808			(91	)		—			16,268
SK hynix Inc.(*)		4,849,159		—			473,132			14,831			(43,830	)		5,293,292
SK MENA Investment B.V.		14,015		—			(1	)		312			—			14,326
SKY Property Mgmt. Ltd.		248,534		—			3,939			4,424			—			256,897
Xian Tianlong Science and Technology Co., Ltd.		25,874		—			(1,254	)		—			—			24,620
Others(*)		158,725		840			(7,678	)		720			7,884			160,491

Sub-total		6,246,620		(173,635	)		463,515			27,440			(38,049	)		6,525,891
Investments in joint ventures
Dogus Planet, Inc.		11,441		4,389			(7,516	)		681			—			8,995
PT. Melon Indonesia		3,564		—			414			(172	)		—			3,806
Television Media Korea Ltd.		6,944		—			(232	)		—			—			6,712
Celcom Planet		16,605		—			(4,156	)		—			—			12,449
PT XL Planet Digital		12,914		15,341			(4,341	)		—			—			23,914

Sub-total		51,468		19,730			(15,831	)		509			—			55,876

Total	￦	6,298,088		(153,905	)		447,684			27,949			(38,049	)		6,581,767

(*)	Dividends paid by the associate are deducted from the carrying amount during the six-month period ended June 30, 2015.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Investments in Associates and Joint Ventures, Continued

(6)

Details of changes in investments in associates and joint ventures accounted for using the equity method for the six-month periods ended June 30, 2015 and 2014 are as follows, Continued:


(In millions of won)	For the six-month period ended June 30, 2014
	Beginning balance		Acquisition and Disposal		Share of profits (losses)			Other comprehensive income (loss)			Impairment loss			Other increase (decrease)			Ending balance
Investments in associates
SK China Company Ltd.	￦	37,434		—		(988	)		(1,714	)		—			—			34,732
Korea IT Fund		231,402		—		4,370			(2,554	)		—			—			233,218
Etoos Co., Ltd		12,029		—		346			—			—			(12,375	)		—
HanaSK Card Co., Ltd.		378,616		—		(1,156	)		(643	)		—			—			376,817
Candle Media Co., Ltd.		21,241		—		(1,710	)		(41	)		(491	)		—			18,999
NanoEnTek, Inc.		9,312		7,778		7			2			—			19,180			36,279
SK Industrial Development China Co., Ltd.		77,517		—		2,381			(5,178	)		—			—			74,720
Packet One Network		60,706		—		(12,050	)		4,924			—			—			53,580
SK Technology Innovation Company		53,874		—		(1,514	)		(2,036	)		—			—			50,324
HappyNarae Co., Ltd.		13,935		—		970			(71	)		—			—			14,834
SK hynix Inc.		3,943,232		—		322,120			(41,092	)		—			—			4,224,260
SK MENA Investment B.V.		13,477		—		(3	)		(519	)		—			—			12,955
SKY Property Mgmt. Ltd.		238,278		—		502			(6,523	)		—			—			232,257
Xian Tianlong Science and Technology Co., Ltd.		26,562		—		(16	)		—			—			—			26,546
Others		164,976		2,354		(7,818	)		1,634			—			(966	)		160,180

Sub-total		5,282,591		10,132		305,441			(53,811	)		(491	)		5,839			5,549,701
Investments in joint ventures
Dogus Planet, Inc.		10,105		19,677		(6,636	)		935			—			—			24,081
PT. Melon Indonesia		3,230		—		190			(116	)		—			—			3,304
Television Media Korea Ltd.		8,659		—		(1,143	)		—			—			—			7,516
PT XL Planet Digital		20,712		—		(2,780	)		(397	)		—			—			17,535

Sub-total		42,706		19,677		(10,369	)		422			—			—			52,436

Total	￦	5,325,297		29,809		295,072			(53,389	)		(491	)		5,839			5,602,137

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Investments in Associates and Joint Ventures, Continued

(7)

As the Group discontinued the application of the equity method due to the carrying amount of the Group’s share being reduced to zero, the unrecognized accumulated equity losses as of June 30, 2015 are as follows:


(In millions of won)	Unrealized loss				Unrealized change in equity
	Period ended June 30, 2015		Accumulated		Period ended June 30, 2015		Accumulated
Wave City Development Co., Ltd.	￦	2,658		4,302		—		—
Gemini and others		1,673		6,990		—		365

	￦	4,331		11,292		—		365

12.

Property and Equipment

Changes in property and equipment for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)
	For the six-month period ended June 30, 2015
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Business combination		Ending balance
Land	￦	766,780		2,198		(2,025	)		4,874			—			—		771,827
Buildings		933,867		4,360		(6,838	)		23,333			(24,581	)		—		930,141
Structures		352,789		761		(33	)		11,911			(17,044	)		—		348,384
Machinery		7,310,815		179,819		(2,858	)		594,637			(1,045,697	)		3,641		7,040,357
Other		499,050		435,518		(2,574	)		(308,958	)		(69,688	)		—		553,348
Construction in progress		704,400		295,862		—			(391,821	)		—			—		608,441

	￦	10,567,701		918,518		(14,328	)		(66,024	)		(1,157,010	)		3,641		10,252,498


(In millions of won)
	For the six-month period ended June 30, 2014
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Impairment			Others		Business acquisition		Ending balance
Land	￦	732,206		3,406		—			14,568			—			—			1,493		608		752,281
Buildings		956,691		3,902		(383	)		6,816			(24,329	)		—			2,678		947		946,322
Structures		364,951		124		—			3,483			(16,287	)		—			—		—		352,271
Machinery		6,847,059		140,326		(4,514	)		828,158			(1,011,543	)		(2,929	)		—		7,741		6,804,298
Other		533,181		551,456		(1,474	)		(340,107	)		(64,800	)		—			4,743		129		683,128
Construction in progress		762,519		316,178		(980	)		(558,912	)		—			—			—		—		518,805

	￦	10,196,607		1,015,392		(7,351	)		(45,994	)		(1,116,959	)		(2,929	)		8,914		9,425		10,057,105

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

13.

Investment Property

Changes in investment property for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended June 30, 2015
	Beginning balance		Transfer		Depreciation			Ending balance
Land	￦	10,418		886		—			11,304
Buildings		4,579		385		(121	)		4,843

	￦	14,997		1,271		(121	)		16,147


(In millions of won)	For the six-month period ended June 30, 2014
	Beginning balance		Transfer		Depreciation			Ending balance
Land	￦	10,822		249		—			11,071
Buildings		4,989		116		(123	)		4,982

	￦	15,811		365		(123	)		16,053

14.

Goodwill

(1)

Goodwill as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Goodwill related to acquisition of Shinsegi Telecomm, Inc.	￦	1,306,236		1,306,236
Goodwill related to acquisition of SK Broadband Co., Ltd.		358,443		358,443
Other goodwill		265,526		252,916

	￦	1,930,205		1,917,595

(2)	Changes in goodwill for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Beginning balance	￦	1,917,595			1,733,261
Impairment loss on goodwill		(1,976	)		—
Others		14,586			17,814

	￦	1,930,205			1,751,075

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

15.

Intangible Assets

(1)

Changes in intangible assets for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)
	For the six-month period ended June 30, 2015
	Beginning balance		Acquisition		Disposal			Transfer			Amortization			Business combination		Ending balance
Frequency use rights	￦	1,384,044		—		—			—			(140,264	)		—		1,243,780
Land use rights		25,353		4,647		(148	)		—			(4,608	)		—		25,244
Industrial rights		107,760		9,334		—			1,089			(3,105	)		—		115,078
Development costs		8,331		1,262		—			32			(2,278	)		—		7,347
Facility usage rights		52,636		515		(12	)		271			(4,216	)		—		49,194
Customer relations		6,404		—		—			(29	)		(1,939	)		8,219		12,655
Memberships		94,119		549		(804	)		67			—			—		93,931
Other		805,347		23,929		(106	)		76,794			(154,619	)		—		751,345

	￦	2,483,994		40,236		(1,070	)		78,224			(311,029	)		8,219		2,298,574


(In millions of won)
	For the six-month period ended June 30, 2014
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Impairment			Others		Business acquisition		Ending balance
Frequency use rights	￦	1,664,571		—		—			—		(140,264	)		—			—		—		1,524,307
Land use rights		16,590		8,990		(33	)		—		(3,808	)		—			2,258		—		23,997
Industrial rights		58,763		2,804		(8	)		—		(2,269	)		(2	)		—		—		59,288
Development costs		10,127		158		(25	)		62		(1,955	)		—			—		—		8,367
Facility usage rights		58,828		615		(16	)		379		(4,190	)		—			—		—		55,616
Customer relations		6,333		272		—			—		(1,731	)		—			692		1,702		7,268
Memberships		128,452		2,690		(44	)		—		—			—			—		267		131,365
Other		807,118		22,585		(597	)		75,631		(149,349	)		(235	)		1,146		92		756,391

	￦	2,750,782		38,114		(723	)		76,072		(303,566	)		(237	)		4,096		2,061		2,566,599

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

15.

Intangible Assets, Continued

(2)

The carrying amount and residual useful lives of frequency usage rights as of June 30, 2015 are as follows, all of which are depreciated on a straight-line basis:

(In millions of won)

Amount

Description

Commencement
of amortization

Completion of
amortization

W-CDMA license

￦

150,691

Frequency use rights relating to W-CDMA service

Dec. 2003

Dec. 2016

W-CDMA license

24,466

Frequency use rights relating to W-CDMA service

Oct. 2010

Dec. 2016

800MHz license

243,264

Frequency use rights relating to CDMA and LTE service

Jul. 2011

Jun. 2021

1.8GHz license

816,530

Frequency use rights relating to LTE service

Sep. 2013

Dec. 2021

WiBro license

8,829

WiBro service

Mar. 2012

Mar. 2019

￦

1,243,780

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

16.

Borrowings and Debentures

(1)	Short-term borrowings as of June 30, 2015 and December 31, 2014 are as follows:

(In millions of won)

Lender

Annual
interest
rate (%)

June 30,
2015

December 31,
2014

Commercial Paper

Woori Investment Bank Co., Ltd., etc.

1.64~2.37

￦

630,000

206,000

Short-term borrowings

Korea Development Bank, etc.

2.11~3.08

299,300

160,600

￦

929,300

366,600

(2)	Long-term borrowings as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)	Maturity		June 30, 2015			December 31, 2014
Shinhan Bank	2.39		Jun. 15, 2015	￦	—			1,712
Kookmin Bank	2.13		Jun. 15, 2016		3,250			4,874
Kookmin Bank	2.13		Mar. 15, 2017		3,498			4,496
Kookmin Bank	2.13		Mar. 15, 2018		7,883			8,600
Shinhan Bank (*1)	6M bank debenture rate + 1.58		Apr. 30, 2016		10,000			10,000
Korea Development Bank	3.32		Jul. 30 ,2019		39,000			39,000
Korea Development Bank	2.94		Jul. 30 ,2019		10,000			10,000
Export Kreditnamnden (*2)	1.7		Apr. 29, 2022		90,577			94,903
					(USD 80,577	)		(USD 86,338	)

Sub-total					164,208			173,585
Less present value discount on long-term borrowings					(2,352	)		(2,623	)

					161,856			170,962
Less current installments of long-term borrowings					(30,554	)		(21,242	)

Long-term borrowings				￦	131,302			149,720

(*1)	As of June 30, 2015, the 6M bank debenture rate of Shinhan Bank is 1.75%.

(*2)	For the years ended December 31, 2014 and 2013, the Group obtained long-term borrowings from Export Kreditnamnden, an export credit agency. The long-term borrowings are redeemed by installments on an annual basis from 2014 to 2022.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

16.

Borrowings and Debentures, Continued

(3)

Debentures as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, thousands of U.S. dollars and thousands of other currencies)
	Purpose	Maturity	Annual interest rate (%)	June 30, 2015			December 31, 2014
Unsecured private bonds	Refinancing fund	2016	5.00	￦	200,000			200,000
Unsecured private bonds	Other fund	2015	5.00		—			200,000
Unsecured private bonds		2018	5.00		200,000			200,000
Unsecured private bonds		2016	5.54		40,000			40,000
Unsecured private bonds		2016	5.92		230,000			230,000
Unsecured private bonds	Operating fund	2016	3.95		110,000			110,000
Unsecured private bonds		2021	4.22		190,000			190,000
Unsecured private bonds	Operating and refinancing fund	2019	3.24		170,000			170,000
Unsecured private bonds		2022	3.30		140,000			140,000
Unsecured private bonds		2032	3.45		90,000			90,000
Unsecured private bonds	Operating fund	2023	3.03		230,000			230,000
Unsecured private bonds		2033	3.22		130,000			130,000
Unsecured private bonds		2019	3.30		50,000			50,000
Unsecured private bonds		2024	3.64		150,000			150,000
Unsecured private bonds(*5,6)		2029	4.73		—			55,188
Unsecured private bonds(*5)		2029	4.72		55,351			55,177
Unsecured private bonds	Refinancing fund	2019	2.53		160,000			160,000
Unsecured private bonds		2021	2.66		150,000			150,000
Unsecured private bonds		2024	2.82		190,000			190,000
Unsecured private bonds	Operating and refinancing fund	2022	2.40		100,000			—
Unsecured private bonds		2025	2.49		150,000			—
Unsecured private bonds		2030	2.61		50,000			—
Unsecured private bonds(*1)	Operating fund	2015	4.62		10,000			10,000
Unsecured private bonds(*2)		2015	4.09		—			110,000
Unsecured private bonds(*2)		2015	4.14		110,000			110,000
Unsecured private bonds(*2)		2017	4.28		100,000			100,000
Unsecured private bonds(*2)		2015	3.14		130,000			130,000
Unsecured private bonds(*2)		2017	3.27		120,000			120,000
Unsecured private bonds(*2)		2016	3.05		80,000			80,000
Unsecured private bonds(*2)		2019	3.49		210,000			210,000
Unsecured private bonds(*2)		2019	2.76		130,000			130,000
Unsecured private bonds(*2)		2018	2.23		50,000			—
Unsecured private bonds(*2)		2020	2.49		160,000			—
Unsecured private bonds(*3)		2015	3.12		—			10,000
Unsecured private bonds(*3)		2016	3.24		10,000			10,000
Unsecured private bonds(*3)		2017	3.48		20,000			20,000
Foreign global bonds		2027	6.63		449,640			439,680
					(USD 400,000	)		(USD 400,000	)
Swiss unsecured private bonds		2017	1.75		364,257			333,429
					(CHF 300,000	)		(CHF 300,000	)
Foreign global bonds		2018	2.13		786,870			769,440
					(USD 700,000	)		(USD 700,000	)
Australia unsecured private bonds		2017	4.75		258,858			269,727
					(AUD 300,000	)		(AUD 300,000	)
Floating rate notes(*4)		2020	3M Libor + 0.88		337,230			329,760
					(USD 300,000	)		(USD 300,000	)

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

16.

Borrowings and Debentures, Continued

(3)

Debentures as of June 30, 2015 and December 31, 2014 are as follows, Continued:


(In millions of won, thousands of U.S. dollars and thousands of other currencies)
	Purpose	Maturity	Annual interest rate (%)	June 30, 2015			December 31, 2014
Foreign global bonds(*2)	Operating fund	2018	2.88		337,230			329,760
					(USD 300,000	)		(USD 300,000	)

Sub-total					6,449,436			6,252,161
Less discounts on bonds					(31,856	)		(33,531	)

					6,417,580			6,218,630
Less current installments of bonds					(529,777	)		(569,472	)

				￦	5,887,803			5,649,158

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

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

(*3)	Unsecured private bonds were issued by PS&Marketing Corporation, a subsidiary of the Parent Company.

(*4)	As of June 30, 2015, 3M Libor rate is 0.28%.

(*5)	The Group settled the difference of the measurement bases of accounting profit or loss between the bonds and related derivatives by designating the structured bonds as financial liabilities at fair value through profit or loss.

The difference between the carrying amount of the designated financial liabilities at fair value through profit or loss and the amount required to pay at maturity is ￦5,351 million as of June 30, 2015.

(*6)	As of December 31, 2014, the principal amount and the fair value of the structured bonds were ￦50,000 million and ￦55,188 million, respectively. The entire bonds were early redeemed during the six-month period ended June 30, 2015.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

17.

Long-term Payables—other

(1)

Long-term payables—other as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Payables related to acquisition of W-CDMA licenses	￦	545,013		657,001
Other(*)		32,393		27,566

	￦	577,406		684,567

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

(2)

As of June 30, 2015 and December 31, 2014, long-term payables—other which consist of payables related to the acquisition of W-CDMA licenses for 800MHz, 2.3GHz and 1.8GHz frequencies are as follows (See Note 15):


(In millions of won)
	Period of repayment	Coupon rate	Annual effective interest rate(*)	June 30, 2015			December 31, 2014
800MHz	2013~2015	3.51%	5.69%	￦	—			69,416
2.3GHz	2014~2016	3.00%	5.80%		2,882			5,766
1.8GHz	2012~2021	2.43~3.00%	4.84~5.25%		707,006			824,841

					709,888			900,023
Present value discount on long-term payables—other					(45,920	)		(53,633	)

					663,968			846,390
Current installments of long-term payables—other					(118,955	)		(189,389	)

Carrying amount at period end				￦	545,013			657,001

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

(3)

The repayment schedule of long-term payables—other related to acquisition of W-CDMA licenses as of June 30, 2015 is as follows:


(In millions of won)
	Amount
Less than 1 year	￦	120,718
1~3 years		235,669
3~5 years		235,669
More than 5 years		117,832

	￦	709,888

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

18.

Provisions

Changes in provisions for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)
	For the six-month period ended June 30, 2015														As of June 30, 2015
	Beginning balance		Increase		Utilization			Reversal			Other		Ending balance		Current		Non-current
Provision for handset subsidy	￦	26,799		—		(2,696	)		(18,173	)		—		5,930		3,368		2,562
Provision for restoration		59,727		1,844		(375	)		(962	)		868		61,102		34,658		26,444
Other provisions		562		1,921		(323	)		—			—		2,160		1,259		901

	￦	87,088		3,765		(3,394	)		(19,135	)		868		69,192		39,285		29,907


(In millions of won)
	For the six-month period ended June 30, 2014															As of June 30, 2014
	Beginning balance		Increase		Utilization			Reversal			Other			Ending balance		Current		Non-current
Provision for handset subsidy	￦	53,923		86,249		(49,206	)		—			—			90,966		58,043		32,923
Provision for restoration		40,507		1,528		(347	)		(909	)		(145	)		40,634		17,812		22,822
Other provisions		451		—		(99	)		—			(45	)		307		—		307

	￦	94,881		87,777		(49,652	)		(909	)		(190	)		131,907		75,855		56,052

The Group has provided handset subsidy to subscribers who purchase handsets on an installment basis and recognized provision for subsidy amounts which the Group is expected to pay in future periods.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

19.

Finance Lease Liabilities

(1)

Finance Lease

The Group has leased telecommunication equipment under finance lease agreements with Cisco Systems Capital Korea Ltd. Finance lease liabilities as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Finance Lease Liabilities
Current installments of long-term finance lease liabilities	￦	1,744		3,804
Long-term finance lease liabilities		—		26

	￦	1,744		3,830

The Group’s related interest and principal as of June 30, 2015, December 31, 2014 are as follows:


(In millions of won)	June 30, 2015					December 31, 2014
	Minimum lease payment		Present value			Minimum lease payment		Present value
Less than 1 year	￦	1,775		1,744			3,909		3,804
1~5 years		—		—			26		26

Sub-total		1,775		1,744			3,935		3,830

Current installments of long-term finance lease liabilities				(1,744	)				(3,804	)

Long-term finance lease liabilities	￦			—					26

(2)

Operating Lease

The Group entered into operating lease and sublease agreements in relation to rented office space and the expected future lease payments and lease revenues as of June 30, 2015 are as follows:


(In millions of won)
	Lease payments		Lease revenues
Less than 1 year	￦	28,935		3,496
1~5 years		75,089		1,026
More than 5 years		41,481		641

	￦	145,505		5,163

(3)

Sale and Leaseback

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

20.

Defined Benefit Liabilities

(1)

Details of defined benefit liabilities as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015			December 31, 2014
Present value of defined benefit obligations	￦	471,040			437,844
Fair value of plan assets		(349,311	)		(346,257	)

	￦	121,729			91,587

(2)

Principal actuarial assumptions as of June 30, 2015 and December 31, 2014 are as follows:


	June 30, 2015	December 31, 2014
Discount rate for defined benefit obligations	2.13%~3.70%	2.23%~3.70%
Expected rate of salary increase	2.51%~7.39%	2.51%~7.39%

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

(3)

Changes in defined benefit obligations for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Beginning balance	￦	437,844			312,494
Current service cost		52,278			64,192
Interest cost		5,957			5,126
Remeasurement
- Demographic assumption		(6	)		—
- Financial assumption		760			—
- Adjustment based on experience		3,522			14,600
Benefit paid		(33,513	)		(33,361	)
Others(*)		4,198			4,078

Ending balance	￦	471,040			367,129

(*)

Others for the six-month period ended June 30, 2015 include the liabilities of ￦4,491 million and ￦1,289 million succeeded due to transfer of employees from associates, and transfer to construction in progress, etc. Others for the six-month period ended June 30, 2014 include the liabilities of ￦3,151 million succeeded due to transfer of employees from associates, and transfer to construction in progress, etc.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

20.

Defined Benefit Liabilities, Continued

(4)

Changes in plan assets for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Beginning balance	￦	346,257			238,293
Interest income		4,721			4,596
Actuarial loss		(2,567	)		(214	)
Contributions by employer directly to plan assets		29,033			6,415
Benefit paid		(30,334	)		(8,830	)
Others		2,201			1,040

Ending balance	￦	349,311			241,300

(5)

Expenses recognized in profit and loss for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015		June 30, 2014
Current service cost	￦	52,278		64,192
Net interest cost		1,236		530

	￦	53,514		64,722

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

21.

Derivative Instruments

(1)

Currency swap contracts under cash flow hedge accounting as of June 30, 2015 are as follows:

(In thousands of foreign currencies)


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)	Foreign currency risk	Currency swap	Morgan Stanley and five other banks	Jul. 20, 2007 ~ Jul. 20, 2027
Jun. 12, 2012	Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000)	Foreign currency risk	Currency swap	Citibank and five other banks	Jun. 12, 2012 ~ Jun.12, 2017
Nov. 1, 2012	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000)	Foreign currency risk	Currency swap	Barclays and nine other banks	Nov. 1, 2012 ~ May 1, 2018
Jan. 17, 2013	Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000)	Foreign currency risk	Currency swap	BNP Paribas and three other banks	Jan. 17, 2013 ~ Nov. 17, 2017
Mar. 7, 2013	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	DBS Bank	Mar. 7, 2013 ~ Mar. 7, 2020
Oct. 29, 2013	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000)	Foreign currency risk	Currency swap	Korea Development Bank and others	Oct.29, 2013 ~ Oct. 26, 2018
Dec. 16, 2013	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 80,577)	Foreign currency risk	Currency swap	Deutsche bank	Dec.16, 2013 ~ Apr. 29, 2022

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

21.

Derivative Instruments, Continued

(2)

As of June 30, 2015, fair values of above derivatives recorded in assets or liabilities and details of derivative instruments are as follows:

(In millions of won and thousands of foreign currencies)


	Fair value
	Cash flow hedge											Held for trading purpose		Total
Hedged item	Accumulated gain (loss) on valuation of derivatives			Tax effect			Accumulated foreign currency translation (gain) loss			Others *()**		Held for trading purpose		Total
Non-current assets:
Structured bond (face value of KRW 50,000)	￦	—			—			—			—		5,380		5,380
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)		(55,930	)		(17,856	)		(7,724	)		129,806		—		48,296
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)		(5,992	)		(1,913	)		12,112			—		—		4,207
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000)		(8,992	)		—			18,603			—		—		9,611

Total assets														￦	67,494

Non-current liabilities:
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000)	￦	(6,361	)		(2,031	)		749			—		—		(7,643	)
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000)		(22,835	)		(7,290	)		23,372			—		—		(6,753	)
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000)		2,149			686			(76,321	)		—		—		(73,486	)
Fixed-to-fixed long-term borrowings (U.S. dollar denominated bonds face value of USD 80,577)		(4,640	)		(1,482	)		5,506			—		—		(616	)

Total liabilities														￦	(88,498	)

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

22.

Share Capital and Capital Surplus and Other Capital Adjustments

The Parent Company’s outstanding share capital consists entirely of common stock with a par value of ￦500. The number of authorized, issued and outstanding common shares and capital surplus and other capital adjustments as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, except for share data)
	June 30, 2015			December 31, 2014
Authorized shares		220,000,000			220,000,000
Issued shares(*1)		80,745,711			80,745,711
Share capital
Common stock	￦	44,639			44,639
Capital surplus and other capital adjustments:
Paid-in surplus		2,915,887			2,915,887
Treasury stock (Note 23)		(1,770,434	)		(2,139,683	)
Loss on disposal of treasury stock		—			(18,087	)
Hybrid bond (Note 24)		398,518			398,518
Others(*2)		(881,516	)		(878,637	)

	￦	662,455			277,998

(*1)

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

There were no changes in share capital for the six-month period ended June 30, 2015 and the year ended December 31, 2014 and details of shares outstanding as of June 30, 2015 and 2014 are as follows:


(In shares)	June 30, 2015							June 30, 2014
	Issued shares		Treasury stock			Outstanding shares		Issued shares		Treasury stock		Outstanding shares
Beginning issued shares		80,745,711		9,809,375			70,936,336		80,745,711		9,809,375		70,936,336
Disposal of treasury stock		—		(1,692,824	)		1,692,824		—		—		—

Ending issued shares		80,745,711		8,116,551			72,629,160		80,745,711		9,809,375		70,936,336

(*2)

Others primarily consist of the excess of the consideration paid by the Group over the carrying values of net assets acquired from common control transactions with entities within the control of the Ultimate Controlling Entity.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

23.

Treasury Stock

The Parent Company acquired treasury stock to provide stock dividends, issue new stocks, merge with Shinsegi Telecom, Inc. and SK IMT Co, Ltd., increase shareholder value and to stabilize its stock prices when needed.

Treasury stock as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, shares)
	June 30, 2015		December 31, 2014
Number of shares		8,116,551		9,809,375
Amount	￦	1,770,434		2,139,683

On June 9, 2015, the Parent Company granted 1,692,824 shares of its treasury stock in order to acquire shares of SK Broadband Co., Ltd.

24.

Hybrid Bond

Hybrid bonds classified as equity as of June 30, 2015 are as follows:

(In millions of won)

Type

Issuance date

Maturity

Annual
interest
rate(%)

Amount

Private hybrid bonds

Blank coupon unguaranteed subordinated bond

June 7, 2013

June 7, 2073

(*1)

4.21

(*2)

￦

400,000

Issuance costs

(1,482

)

￦

398,518

Hybrid bonds issued by the Parent Company are classified as equity as there is no contractual obligation for delivery of financial assets to the bond holders. These are subordinated bonds which rank before common shareholders in the event of a liquidation or reorganization of the Parent Company.

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

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

25.

Retained Earnings

(1)

Retained earnings as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Appropriated:
Legal reserve	￦	22,320		22,320
Reserve for research & manpower development		87,300		151,533
Reserve for business expansion		9,671,138		9,476,138
Reserve for technology development		2,616,300		2,416,300

		12,397,058		12,066,291
Unappropriated		2,023,985		2,122,300

	￦	14,421,043		14,188,591

(2)

Legal reserve

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

(3)

Reserve for research & manpower development

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

26.

Reserves

(1)

Details of reserves, net of taxes, as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015			December 31, 2014
Unrealized fair value of available-for-sale financial assets	￦	288,101			235,385
Other comprehensive loss of investments in associates and joint ventures		(135,931	)		(163,808	)
Unrealized fair value of derivatives		(102,602	)		(77,531	)
Foreign currency translations differences for foreign operations		9,821			1,465

	￦	59,389			(4,489	)

(2)

Change in reserves for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	Unrealized fair value of available-for- sale financial assets			Other comprehensive loss of investment in associates			Unrealized fair value of derivatives			Foreign currency translations differences for foreign operations			Total
Balance at January 1, 2014	￦	208,529			(172,117	)		(35,429	)		(13,253	)		(12,270	)
Changes		(4,718	)		(53,527	)		(23,095	)		(10,038	)		(91,378	)
Tax effect		4,088			167			5,329			—			9,584

Balance at June 30, 2014	￦	207,899			(225,477	)		(53,195	)		(23,291	)		(94,064	)

Balance at January 1, 2015	￦	235,385			(163,808	)		(77,531	)		1,465			(4,489	)
Changes		69,215			27,946			(29,988	)		8,356			75,529
Tax effect		(16,499	)		(69	)		4,917			—			(11,651	)

Balance at June 30, 2015	￦	288,101			(135,931	)		(102,602	)		9,821			59,389

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

27.

Other Operating Expenses

Details of other operating expenses for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Other Operating Expenses:
Communication expenses	￦	11,512		24,051		14,828		29,132
Utilities		60,476		126,608		51,936		114,734
Taxes and dues		8,114		16,468		6,522		14,760
Repair		79,975		145,832		69,872		134,481
Research and development		77,952		147,422		104,054		204,960
Training		7,128		14,569		9,017		16,594
Bad debt for accounts receivable—trade		21,982		34,995		17,362		23,553
Travel		7,154		13,965		7,806		14,563
Supplies and other		38,003		83,707		54,867		108,196

	￦	312,296		607,617		336,264		660,973

28.

Other Non-operating Income and Expenses

(1)

Details of other non-operating income and expenses for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Other Non-operating Income:
Fees revenues	￦	201		323		4,449		5,964
Gain on disposal of property and equipment and intangible assets		1,842		2,765		1,385		3,411
Others		5,133		12,275		10,897		27,199

	￦	7,176		15,363		16,731		36,574

Other Non-operating Expenses:
Loss on impairment of property and equipment and intangible assets	￦	953		1,976		237		3,166
Loss on disposal of property and equipment and intangible assets		1,281		3,290		1,696		3,980
Donations		24,937		30,769		18,663		27,052
Bad debt for accounts receivable—other		6,226		4,074		5,154		8,125
Loss on disposal of investment securities		—		—		7		7
Loss on impairment of investment assets		9,398		18,668		—		127
Others(*)		9,096		39,092		2,957		22,189

	￦	51,891		97,869		28,714		64,646

(*)	Others for the six-month periods ended June 30, 2015 and 2014 primarily consists of penalties amounting to ￦28.3 billion and ￦16.7 billion, respectively.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

29.

Finance Income and Costs

(1)

Details of finance income and costs for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Finance Income:
Interest income	￦	12,380		25,181		14,274		29,756
Dividends		43		13,339		939		10,567
Gain on foreign currency transactions		2,815		6,288		2,364		6,663
Gain on foreign currency translations		3,243		4,024		14,400		15,926
Gain on disposal of long-term investment securities		3,606		6,252		1,223		6,114
Gain on valuation of derivatives		—		1,030		1,967		6,017
Gain on settlement of derivatives		—		—		—		119
Gain on relating to financial liabilities at fair value through profit or loss		6,966		5,188		—		—

	￦	29,053		61,302		35,167		75,162


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Finance Costs:
Interest expense	￦	74,706		150,222		82,593		161,229
Loss on foreign currency transactions		2,880		8,193		5,526		9,552
Loss on foreign currency translations		2,088		3,132		117		5,186
Loss on disposal of long-term investment securities		1,649		1,651		—		2,112
Loss on valuation of derivatives		699		—		12,135		12,135
Loss on settlement of derivatives		4,517		4,517		335		335
Loss relating to financial assets at fair value through profit or loss		—		—		2,419		1,352
Loss relating to financial liabilities at fair value through profit or loss		—		174		7,794		7,798
Other finance costs		3,151		3,151		—		—

	￦	89,690		171,040		110,919		199,699

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

29.

Finance Income and Costs, Continued

(2)

Details of interest income included in finance income for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Interest income on cash equivalents and deposits	￦	5,010		10,393		8,602		18,250
Interest income on installment receivables and others		7,370		14,788		5,672		11,506

	￦	12,380		25,181		14,274		29,756

(3)

Details of interest expense included in finance costs for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Interest expense on bank overdrafts and borrowings	￦	8,536		12,722		8,735		13,994
Interest expense on debentures		56,610		116,514		61,749		122,035
Interest on finance lease liabilities		19		47		149		349
Others		9,541		20,939		11,960		24,851

	￦	74,706		150,222		82,593		161,229

(4)

Details of impairment losses for financial assets for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Available-for-sale financial assets	￦	3,151		3,151		—		—
Accounts receivable—trade		21,982		34,995		17,304		23,494
Other receivables		6,226		4,074		5,154		8,125

	￦	31,359		42,220		22,458		31,619

30.

Income Tax Expense

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

31.

Earnings per Share

(1)

Basic earnings per share

1) Basic earnings per share for the three and six-month periods ended June 30, 2015 and 2014 are calculated as follows:


(In millions of won, shares)	2015						2014
	Three-month period ended June 30			Six-month period ended June 30			Three-month period ended June 30			Six-month period ended June 30
Basic earnings per share attributable to owners of the Parent Company:
Profit attributable to owners of the Parent Company on common shares	￦	395,839			840,334			498,536			768,350
Interest on hybrid bonds		(8,420	)		(8,420	)		(8,420	)		(8,420	)
Profit for the period on common shares		387,419			831,914			490,116			759,930
Weighted average number of common shares outstanding		71,326,988			71,132,741			70,936,336			70,936,336

Basic earnings per share (In won)	￦	5,432			11,695			6,909			10,713

The weighted average number of common shares outstanding for the three and six-month periods ended June 30, 2015 and 2014 are calculated as follows:


(In shares)	Number of shares			Weighted number of shares
	Number of shares			Three-month period ended June 30			Six-month period ended June 30
Outstanding common shares at January 1, 2015		80,745,711			80,745,711			80,745,711
Effect of treasury stock		(8,116,551	)		(9,418,723	)		(9,612,970	)

Weighted average number of common shares outstanding at June 30, 2015		72,629,160			71,326,988			71,132,741


(In shares)	Number of shares			Weighted number of shares
	Number of shares			Three-month period ended June 30			Six-month period ended June 30
Outstanding common shares at January 1, 2014		80,745,711			80,745,711			80,745,711
Effect of treasury stock		(9,809,375	)		(9,809,375	)		(9,809,375	)

Weighted average number of common shares outstanding at June 30, 2014		70,936,336			70,936,336			70,936,336

(2)

Diluted earnings per share

For the six-month periods ended June 30, 2015 and 2014, there were no potentially dilutive shares. Therefore, diluted earnings per share for the six-month periods ended June 30, 2015 and 2014 are the same as basic earnings per share.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

32.

Categories of Financial Instruments

(1)

Financial assets by categories as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	￦	—		—		829,659		—		829,659
Financial instruments		—		—		286,218		—		286,218
Short-term investment securities		—		342,795		—		—		342,795
Long-term investment securities		—		1,149,319		—		—		1,149,319
Accounts receivable—trade		—		—		2,508,496		—		2,508,496
Loans and other receivables(*)		—		—		1,103,092		—		1,103,092
Derivative financial assets		5,380		—		—		62,114		67,494

	￦	5,380		1,492,114		4,727,465		62,114		6,287,073


(In millions of won)
	December 31, 2014
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	￦	—		—		834,429		—		834,429
Financial instruments		—		—		313,699		—		313,699
Short-term investment securities		—		280,161		—		—		280,161
Long-term investment securities		7,817		948,463		—		—		956,280
Accounts receivable—trade		—		—		2,460,686		—		2,460,686
Loans and other receivables(*)		—		—		1,123,507		—		1,123,507
Derivative financial assets		8,713		—		—		61,322		70,035

	￦	16,530		1,228,624		4,732,321		61,322		6,038,797

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

32.

Categories of Financial Instruments, Continued

(1)

Financial assets by categories as of June 30, 2015 and December 31, 2014 are as follows, Continued:

(*)	Details of loans and other receivables as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Short-term loans	￦	32,195		74,512
Accounts receivable – other		697,103		690,527
Accrued income		10,264		10,134
Other current assets		4,685		3,866
Long-term loans		58,751		55,728
Long-term accounts receivable – other		3,658		3,596
Guarantee deposits		296,436		285,144

	￦	1,103,092		1,123,507

(2)

Financial liabilities by categories as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)	June 30, 2015
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Accounts payable – trade	￦	—		291,316		—		291,316
Derivative financial liabilities		—		—		88,498		88,498
Borrowings		—		1,091,156		—		1,091,156
Debentures(*1)		55,351		6,362,229		—		6,417,580
Accounts payable—other and others(*2)		—		2,577,647		—		2,577,647

	￦	55,351		10,322,348		88,498		10,466,197


(In millions of won)	December 31, 2014
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Accounts payable – trade	￦	—		275,495		—		275,495
Derivative financial liabilities		—		—		130,889		130,889
Borrowings		—		537,562		—		537,562
Debentures(*1)		110,365		6,108,265		—		6,218,630
Accounts payable—other and others(*2)		—		3,241,615		—		3,241,615

	￦	110,365		10,162,937		130,889		10,404,191

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

32.

Categories of Financial Instruments, Continued

(2)

Financial liabilities by categories as of June 30, 2015 and December 31, 2014 are as follows, Continued:

(*1)

Bonds classified as financial liabilities at fair value through profit or loss as of June 30, 2015 and December 31, 2014 are structured bonds and they were designated as financial liabilities at fair value through profit or loss in order to settle the difference of the measurement bases of accounting profit or loss between the related derivatives and bonds.

(*2)	Details of accounts payable and other payables as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Accounts payable – other	￦	1,066,880		1,381,850
Withholdings		1,914		1,760
Accrued expenses		786,418		952,418
Current installments of long-term payables—other		120,699		193,193
Long-term payables – other		577,406		684,567
Finance lease liabilities		—		26
Other non-current liabilities		24,330		27,801

	￦	2,577,647		3,241,615

33.

Financial Risk Management

(1)

Financial risk management

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

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

Market risk

(i)

Currency risk

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

33.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Market risk, Continued

(i)

Currency risk, Continued

Monetary foreign currency assets and liabilities as of June 30, 2015 are as follows:

(In millions of won, thousands of U.S. dollars, thousands of Euros, thousands of Japanese Yen, thousands of other currencies)


	Assets				Liabilities
	Foreign currencies		Won translation		Foreign currencies		Won translation
USD		181,643	￦	210,357		1,885,459	￦	2,119,442
EUR		10,841		13,995		28		36
JPY		35,507		326		1,897		17
AUD		—		—		298,776		257,802
CHF		—		—		299,163		363,241
Others		1,411		487		1		1

			￦	225,165			￦	2,740,539

In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (See Note 21)

As of June 30, 2015, effects on income (loss) before income tax as a result of change in exchange rate by 10% are as follows:


(In millions of won)
	If increased by 10%		If decreased by 10%
USD	￦	7,049		(7,049	)
EUR		1,363		(1,363	)
JPY		31		(31	)
Others		48		(48	)

	￦	8,491		(8,491	)

(ii)

Equity price risk

The Group has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of June 30, 2015, available-for-sale equity instruments measured at fair value amount to ￦1,097,621 million.

(iii) Interest rate risk

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

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

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

33.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Market risk, Continued

(iii) Interest rate risk, Continued

The Group’s interest rate risk arises from floating-rate borrowings and debentures. As of June 30, 2015, floating-rate borrowings and debentures amount to ￦29,300 million and ￦337,230 million respectively, the Group has entered into interest rate swaps to hedge interest rate risk related to floating-rate debentures. (See Note 21) If interest rate only increases (decreases) by 1%, income before income taxes for the six-month period ended June 30, 2015 would have been changed ￦293 million due to the interest expense from floating-rate borrowings.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet his/her contractual obligations. The maximum credit exposure as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Cash and cash equivalents	￦	829,462		833,129
Financial instruments		286,218		313,699
Available-for-sale financial assets		30,805		15,498
Accounts receivable—trade		2,508,496		2,460,686
Loans and receivables		1,103,092		1,123,507
Derivative financial assets		67,494		70,035
Financial assets at fair value through profit or loss		—		7,817

	￦	4,825,567		4,824,371

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

For the six-month period ended June 30, 2015, the Group has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Group believes that the possibility of default is remote. Also, the Group’s credit risk can rise due to transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Group has a policy to deal with high credit worthy financial institutions. The amount of maximum exposure to credit risk of the Group is the carrying amount of financial assets as of June 30, 2015.

In addition, the aging of trade and other receivables that are overdue at the end of the reporting period but not impaired is stated in Note 6 and the analysis of financial assets that are individually determined to be impaired at the end of the reporting period is stated in Note 29.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

33.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Liquidity risk

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

Contractual maturities of financial liabilities as of June 30, 2015 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 - 5 years		More than 5 years
Accounts payable-trade	￦	291,316		291,317		291,317		—		—
Borrowings(*1)		1,091,156		1,108,746		967,561		114,659		26,526
Debentures(*1)		6,417,580		7,685,893		746,696		4,382,877		2,556,320
Accounts payable-other and others(*2)		2,577,647		2,644,084		1,932,024		584,515		127,545

	￦	10,377,699		11,730,040		3,937,598		5,082,051		2,710,391

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

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

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

As of June 30, 2015, periods which cash flows from cash flow hedge derivatives are expected to occur are as follows:


(In millions of won)
	Carrying amount			Contractual cash flows			Less than 1 year			1 - 5 years			More than 5 years
Assets	￦	62,114			60,232			3,253			57,930			(951	)
Liabilities		(88,498	)		(91,506	)		(10,258	)		(80,648	)		(600	)

	￦	(26,384	)		(31,274	)		(7,005	)		(22,718	)		(1,551	)

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

33.

Financial Risk Management, Continued

(2)

Capital management

The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity balance. The overall strategy of the Group is the same as that of the group as of and for the year ended December 31, 2014.

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

Debt-equity ratio as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015			December 31, 2014
Liabilities	￦	12,723,919			12,692,963
Equity		15,317,587			15,248,270

Debt-equity ratio		83.07	%		83.24	%

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

33.

Financial Risk Management, Continued

(3)

Fair value

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of June 30, 2015 are as follows:


(In millions of won)
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that can be measured at fair value
Financial assets at fair value through profit or loss	￦	5,380		—		5,380		—		5,380
Derivative financial assets		62,114		—		62,114		—		62,114
Available-for-sale financial assets		1,097,621		912,704		47,140		137,777		1,097,621

	￦	1,165,115		912,704		114,634		137,777		1,165,115

Financial assets that cannot be measured at fair value
Cash and cash equivalents(*1)	￦	829,659		—		—		—		—
Available-for-sale financial assets(*1,2)		394,493		—		—		—		—
Accounts receivable – trade and others(*1)		3,611,588		—		—		—		—
Financial instruments(*1)		286,218		—		—		—		—

	￦	5,121,958		—		—		—		—

Financial liabilities that can be measured at fair value
Financial liabilities at fair value through profit or loss	￦	55,351		—		55,351		—		55,351
Derivative financial liabilities		88,498		—		88,498		—		88,498

	￦	143,849		—		143,849		—		143,849

Financial liabilities that cannot be measured at fair value
Accounts payable – trade(*1)	￦	291,316		—		—		—		—
Borrowings		1,091,156		—		1,095,444		—		1,095,444
Debentures		6,362,229		—		6,791,982		—		6,791,982
Accounts payable—other and others(*1)		2,577,647		—		—		—		—

	￦	10,322,348		—		7,887,426		—		7,887,426

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

33.

Financial Risk Management, Continued

(3)

Fair value, Continued

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2014 are as follows:


(In millions of won)
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that can be measured at fair value
Financial assets at fair value through profit or loss	￦	16,530		—		8,713		7,817		16,530
Derivative financial assets		61,322		—		61,322		—		61,322
Available-for-sale financial assets		846,614		657,286		47,002		142,326		846,614

	￦	924,466		657,286		117,037		150,143		924,466

Financial assets that cannot be measured at fair value
Cash and cash equivalents(*1)	￦	834,429		—		—		—		—
Available-for-sale financial assets(*1,2)		382,010		—		—		—		—
Accounts receivable – trade and others(*1)		3,584,193		—		—		—		—
Financial instruments(*1)		313,699		—		—		—		—

	￦	5,114,331		—		—		—		—

Financial liabilities that can be measured at fair value
Financial liabilities at fair value through profit or loss	￦	110,365		—		110,365		—		110,365
Derivative financial liabilities		130,889		—		130,889		—		130,889

	￦	241,254		—		241,254		—		241,254

Financial liabilities that cannot be measured at fair value
Accounts payable – trade(*1)	￦	275,495		—		—		—		—
Borrowings		537,562		—		549,083		—		549,083
Debentures		6,108,265		—		6,514,832		—		6,514,832
Accounts payable—other and others(*1)		3,241,615		—		—		—		—

	￦	10,162,937		—		7,063,915		—		7,063,915

(*1)

Does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are closed to the reasonable approximate fair values.

(*2)

Equity instruments which do not have quoted price in an active market for the identical instruments (inputs for Level 1) are measured at cost in accordance with K-IFRS 1039 as such equity instruments cannot be reliably measured using other methods.

Fair value of the financial instruments that are traded in an active market (available-for-sale financial assets, financial liabilities at fair value through profit or loss, etc.) is measured based on the bid price at the end of the reporting date.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

33.

Financial Risk Management, Continued

(3)

Fair value, Continued

The Group uses various valuation methods for valuation of fair value of financial instruments that are not traded in an active market. Fair value of available-for-sale securities is determined using the market approach methods and financial assets through profit or loss are measured using the option pricing model. In addition, derivative financial contracts and long-term liabilities are measured using the present value methods. Inputs used to such valuation methods include swap rate, interest rate, and risk premium, and the Group performs valuation using the inputs which are consistent with natures of assets and liabilities being evaluated.

Interest rates used by the Group for the fair value measurement as of June 30, 2015 are as follows:


	Interest rate
Derivative instruments		1.57 ~ 1.87	%
Borrowings and debentures		2.33 ~ 2.48	%

There have been no transfers from Level 2 to Level 1 for the six-month period ended June 30, 2015 and changes of financial assets classified as Level 3 for the six-month period ended June 30, 2015 are as follows:


(In millions of won)
	Balance at January 1		Acquisition		Other comprehensive loss			Balance at June 30
Available-for-sale financial assets	￦	142,326		2,544		(7,093	)		137,777

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

33.

Financial Risk Management, Continued

(4)

Enforceable master netting agreement or similar agreement

Carrying amount of financial instruments recognized of which offset agreements are applicable as of June 30, 2015 are as follows:


(In millions of won)
	Gross financial instruments recognized		Gross offset financial instruments recognized			Net financial instruments presented on the statements of financial position		Relevant amount not offset on the statements of financial position
	Gross financial instruments recognized		Gross offset financial instruments recognized					Financial instruments			Cash collaterals received		Net amount
Financial assets:
Derivatives(*)	￦	37,578		—			37,578		(36,494	)		—		1,084
Accounts receivable—trade and others		115,214		(106,599	)		8,615		—			—		8,615

	￦	152,792		(106,599	)		46,193		(36,494	)		—		9,699

Financial liabilities:
Derivatives(*)	￦	36,494		—			36,494		(36,494	)		—		—
Accounts payable—trade and others		106,599		(106,599	)		—		—			—		—

	￦	143,093		(106,599	)		36,494		(36,494	)		—		—

Carrying amount of financial instruments recognized of which offset agreements are applicable as of December 31, 2014 are as follows:


(In millions of won)
	Gross financial instruments recognized		Gross offset financial instruments recognized			Net financial instruments presented on the statements of financial position		Relevant amount not offset on the statements of financial position
	Gross financial instruments recognized		Gross offset financial instruments recognized					Financial instruments			Cash collaterals received		Net amount
Financial assets:
Derivatives(*)	￦	48,057		—			48,057		(45,892	)		—		2,165
Accounts receivable—trade and others		128,794		(117,568	)		11,226		—			—		11,226

	￦	176,851		(117,568	)		59,283		(45,892	)		—		13,391

Financial liabilities:
Derivatives(*)	￦	45,892		—			45,892		(45,892	)		—		—
Accounts payable—trade and others		117,568		(117,568	)		—		—			—		—

	￦	163,460		(117,568	)		45,892		(45,892	)		—		—

(*)

The amount is applicable by enforceable master netting agreement according to ISDA (International Swap and Derivatives Association).

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

34.

Transactions with Related Parties

(1)

List of related parties


Relationship		Company
Ultimate Controlling Entity		SK Holding Co., Ltd.
Subsidiaries		SK Planet Co., Ltd. and 38 others (See Note 1)
Joint ventures		Dogus Planet, Inc. and four others
Associates		SK hynix Inc. and 51 others
Affiliates		The Ultimate Controlling Entity’s investee under equity method, the Ultimate Controlling Entity’s subsidiaries and associates, etc.

(2)

Compensation for the key management

The Parent Company considers registered directors who have substantial role and responsibility in planning, operating, and controlling of the business as key management. The compensation given to such key management for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30, 2015		Six-month period ended June 30, 2015		Three-month period ended June 30, 2014		Six-month period ended June 30, 2014
Salaries	￦	203		1,560		287		1,626
Provision for retirement benefits		421		542		113		681

	￦	624		2,102		400		2,307

Compensation for the key management includes salaries, non-monetary salaries and contributions made in relation to the pension plan.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

34.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)		2015
		Operating revenue and others				Operating expense and others				Acquisition of property and equipment				Loans
Scope	Company	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Ultimate Controlling Entity	SK Holding Co., Ltd.(*1)	￦	1,090		1,244		9,240		189,121		—		—		—		—
Associates	F&U Credit information Co., Ltd.		662		1,331		10,127		22,366		—		—		—		—
	HappyNarae Co., Ltd.		68		139		2,001		2,959		2,481		2,869		—		—
	SK hynix Inc.(*2)		2,627		50,178		2,194		2,199		—		—		—		—
	SK Wyverns Baseball Club Co., Ltd.		1,278		3,130		1,606		11,435		—		—		—		—
	KEB HanaCard Co., Ltd.		5,418		10,850		2,496		8,223		—		—		—		—
	Xian Tianlong Science and Technology Co., Ltd.		—		—		—		—		—		—		121		7,153
	Others(*3)		3,663		5,056		4,995		9,512		11		1,141		—		500

			13,716		70,684		23,419		56,694		2,492		4,010		121		7,653

Other	SK Engineering & Construction Co., Ltd.		1,177		4,759		11,077		13,057		73,059		125,394		—		—
	SK C&C Co., Ltd.		3,438		7,379		79,359		160,928		49,150		90,384		—		—
	SK Networks Co., Ltd.		4,318		6,023		255,918		620,717		—		—		—		—
	SK Networks service Co., Ltd.		2,483		4,830		24,893		37,774		522		526		—		—
	SK Telesys Co., Ltd.		110		212		9,659		21,101		12,342		73,359		—		—
	SK Energy Co., Ltd.		1,877		3,015		227		443		—		—		—		—
	SK Gas Co., Ltd.		813		1,885		—		—		—		—		—		—
	Others		6,628		13,094		10,180		19,660		4,214		4,563		—		—

			20,844		41,197		391,313		873,680		139,287		294,226		—		—

Total		￦	35,650		113,125		423,972		1,119,495		141,779		298,236		121		7,653

(*1) Operating expense and others include ￦171,053 million of dividends paid by the Parent Company.

(*2) Operating revenue and others include ￦43,830 million of dividends paid by SK hynix Inc. and deducted from the investment in associates.

(*3) Operating revenue and others include ￦2,103 million and ￦227 million of dividends paid by Korea IT Fund and UniSK, respectively, and deducted from the investment in associates.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

34.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the three and six-month periods ended June 30, 2015 and 2014 are as follows, Continued:


(In millions of won)		2014
		Operating revenue and others				Operating expense and others				Acquisition of property and equipment				Loans
Scope	Company	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Ultimate Controlling Entity	SK Holding Co., Ltd.(*1)	￦	130		255		8,954		188,694		—		—		—		—
Associates	F&U Credit information Co., Ltd.		470		993		9,740		21,982		—		—		—		—
	HappyNarae Co., Ltd.		74		129		1,072		2,617		3,157		4,050		—		—
	SK hynix Inc.		2,208		4,922		—		879		—		—		—		—
	SK Wyverns Baseball Club Co., Ltd.		180		228		120		9,041		—		—		—		—
	HanaSK Card Co., Ltd.(*2)		11,179		21,436		1,078		2,297		—		—		—		—
	Others		2,138		3,433		5,133		8,602		—		—		45		45

			16,249		31,141		17,143		45,418		3,157		4,050		45		45

Other	SK Engineering & Construction Co., Ltd.		821		1,669		23,544		23,544		70,063		100,126		—		—
	SK C&C Co., Ltd.		4,689		8,595		71,056		154,140		25,364		51,409		—		—
	SK Networks Co., Ltd.		6,229		12,354		551,082		928,615		2,452		3,251		—		—
	SK Networks service Co., Ltd.		5,359		5,423		22,880		41,511		716		716		—		—
	SK Telesys Co., Ltd.		80		202		25,677		46,113		54,873		78,838		—		—
	SK Energy Co., Ltd.		7,834		11,848		221		443		—		—		—		—
	SK Gas Co., Ltd.		786		3,952		—		—		—		—		—		—
	Others		5,636		10,534		5,184		14,718		4,623		5,150		—		—

			31,434		54,577		699,644		1,209,084		158,091		239,490		—		—

Total		￦	47,813		85,973		725,741		1,443,196		161,248		243,540		45		45

(*1) Operating expense and others include ￦171,053 million of dividends paid by the Parent Company.

(*2) During the year ended December 31, 2014, due to the merger with Hana SK Card Co., Ltd., the Parent Company’s associate and KEB Card Co., Ltd., the Group exchanged 57,647,058 shares of Hana SK Card Co., Ltd., with 67,627,587 shares of the surviving company, KEB HanaCard Co., Ltd.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

34.

Transactions with Related Parties, Continued

(4)

Account balances as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)		June 30, 2015
		Accounts receivable				Accounts payable
Scope	Company	Loans		Accounts receivable-trade, and others		Accounts payable-trade, and others
Ultimate Controlling Entity	SK Holding Co., Ltd.	￦	—		433		—
Associates	HappyNarae Co., Ltd.		—		13		959
	F&U Credit information Co., Ltd.		—		39		1,439
	SK hynix Inc.		—		1,346		2,414
	SK Wyverns Baseball Club Co., Ltd.		1,221		303		435
	Wave City Development Co., Ltd.		1,700		38,412		—
	Daehan Kanggun BcN Co., Ltd.		22,148		—		—
	KEB HanaCard Co., Ltd.		—		1,869		4,868
	Xian Tianlong Science and Technology Co., Ltd.		7,153		—		—
	Others		—		817		1,847

			32,222		42,799		11,962

Other	SK Engineering & Construction Co., Ltd.		—		3,847		20,363
	SK C&C Co., Ltd.		—		1,416		65,032
	SK Networks. Co., Ltd.		—		5,691		174,880
	SK Networks Services Co., Ltd.		—		15		2,921
	SK Telesys Co., Ltd.		—		231		9,341
	SK Innovation Co., Ltd.		—		1,761		282
	SK Energy Co., Ltd.		—		1,624		62
	SK Gas Co., Ltd.		—		59		9
	Others		—		2,129		14,399

			—		16,773		287,289

Total		￦	32,222		60,005		299,251

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

34.

Transactions with Related Parties, Continued

(4)

Account balances as of June 30, 2015 and December 31, 2014 are as follows, Continued:


(In millions of won)		December 31, 2014
		Accounts receivable				Accounts payable
Scope	Company	Loans		Accounts receivable-trade, and others		Accounts payable-trade, and others
Ultimate Controlling Entity	SK Holding Co., Ltd.	￦	—		90		—
Associates	HappyNarae Co., Ltd.		—		13		2,650
	F&U Credit information Co., Ltd.		—		148		797
	SK hynix Inc.		—		2,800		2,840
	SK Wyverns Baseball Club Co., Ltd.		1,221		—		—
	Wave City Development Co., Ltd.		1,200		38,412		—
	Daehan Kanggun BcN Co., Ltd.		22,148		—		—
	KEB HanaCard Co., Ltd.		—		1,998		59
	Others		—		543		1,285

			24,569		43,914		7,631

Other	SK Engineering & Construction Co., Ltd.		—		897		27,282
	SK C&C Co., Ltd.		—		1,393		121,145
	SK Networks. Co., Ltd.		—		2,608		238,351
	SK Networks Services Co., Ltd.		—		16		2,922
	SK Telesys Co., Ltd.		—		321		3,037
	SK Innovation Co., Ltd.		—		1,641		271
	SK Energy Co., Ltd.		—		4,781		79
	SK Gas Co., Ltd.		—		2,143		47
	Others		—		2,813		9,342

			—		16,613		402,476

Total		￦	24,569		60,617		410,107

(5)

As of June 30, 2015, collateral and guarantee provided by the Group for the related parties’ financing purposes are as follows. There are no collateral or guarantee provided by related parties to the Group nor the Group to related parties.

(6)

M&Service Co., Ltd., a subsidiary of the Parent Company, entered into performance agreement with SK Energy Co., Ltd. and provides a blank note to SK Energy Co., Ltd., with regard to this transaction.

(7)

During the year ended December 31, 2014, the Group acquired convertible bonds with a face value of ￦6,000 million from Health Connect Co., Ltd. at the face value. During the six-month period ended June 30, 2015, the Parent Company exercised the conversion right for the convertible bonds of Health Connect Co., Ltd. As a result of this transaction, investments in associates have increased by ￦5,900 million.

(8)

There were additional investments in associates and joint ventures during the six-month period ended June 30, 2015. (See Note 11)

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

35.

Commitments and Contingencies

(1)

Collateral assets and commitments

SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount of ￦16,102 million as of June 30, 2015.

SK Broadband Co., Ltd., has guaranteed for employees’ borrowings relating to employee stock ownership and provided short-term financial instruments amounting to ￦1,775 million as collateral as of June 30, 2015.

(2)

Contingencies

As of June 30, 2015, the claim amount of pending litigations of SK Communications Co., Ltd., a subsidiary of the Parent Company, amounts to ￦1,440 million. The ultimate outcome of such litigation is not expected to have a material effect on the Group’s financial position or performance results.

(3)

Guarantee provided

PS&Marketing Corporation, a subsidiary of the Parent Company, obtained ￦3,000 million of payment guarantees from Shinhan Bank, in relation to handsets purchased from the Apple Computer Korea Ltd.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

36.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Interest income	￦	(25,181)			(29,756	)
Dividends		(13,339	)		(10,567	)
Gain on foreign currency translation		(4,024	)		(15,926	)
Gain on disposal of long-term investments assets		(6,252	)		(6,114	)
Gain on valuation of derivatives		(1,030	)		(6,017	)
Gain on settlement of derivatives		—			(119	)
Gain related to investments in subsidiaries, associates and joint ventures, net		(452,323	)		(294,702	)
Gain on disposal of property, equipment and intangible assets		(2,765	)		(3,411	)
Gain on relating to financial liabilities at fair value through profit or loss		(5,188	)		—
Other income		(131	)		(6	)
Interest expenses		150,222			161,229
Loss on foreign currency translation		3,132			5,186
Loss on disposal of long-term investments securities		1,651			2,112
Other finance costs		3,151			—
Loss on valuation of derivatives		—			12,135
Loss on settlement of derivatives		4,517			335
Income tax expense		234,970			175,635
Provision for retirement benefits		53,514			64,722
Depreciation and amortization		1,468,160			1,420,648
Bad debt expenses		34,995			23,553
Loss on disposal of property and equipment and intangible assets		3,290			3,980
Loss on impairment of property and equipment and intangible assets		1,976			3,166
Loss relating to financial assets at fair value through profit or loss		—			1,352
Loss relating to financial liabilities at fair value through profit or loss		174			7,798
Bad debt for accounts receivable—other		4,074			8,125
Loss on disposal of investments assets		—			7
Loss on impairment of investment assets		18,668			127
Other expenses		7,031			5,250

	￦	1,479,292			1,528,742

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

36.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Accounts receivable—trade	￦	(79,987	)		(195,944	)
Accounts receivable—other		(42,198	)		(106,246	)
Accrued income		—			57
Advance payments		(34,860	)		(31,938	)
Prepaid expenses		(14,154	)		(14,301	)
V.A.T. refund receivable		27			7,949
Inventories		(16,676	)		(142,872	)
Guarantee deposits		(12,118	)		(5,876	)
Accounts payable—trade		36,889			118,439
Accounts payable—other		(132,104	)		(491,376	)
Advanced receipts		(3,289	)		11,668
Withholdings		(178,717	)		218,630
Deposits received		(7,475	)		(1,275	)
Accrued expenses		(162,490	)		(35,025	)
V.A.T. payable		13,419			8,019
Unearned revenue		(71,067	)		(56,921	)
Provisions		(29,665	)		4,710
Long-term provisions		(9,137	)		32,304
Plan assets		1,301			2,415
Retirement benefit payment		(33,513	)		(33,361	)
Others		(11,128	)		893

	￦	(786,942	)		(710,051	)

(3)

Significant non-cash transactions for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Transfer of other property and equipment and others to construction in progress	￦	720,259			943,978
Transfer of construction in progress to property and equipment, and intangible assets		328,438			364,744
Decrease of accounts payable—other related to acquisition of property and equipment and intangible assets		(184,377	)		(316,164	)
Increase of accounts receivable—other related to disposal of property and equipment and intangible assets		—			2,015

37.

Subsequent Events

(1)

Interim dividends

On July 23, 2015, the Board of Directors of the Parent Company resolved to pay interim cash dividends of ￦1,000 per share totaling ￦72,629 million (Market dividend rate: 0.40%). The ex-dividend date was June 30, 2015 and the interim dividends are expected to be paid within twenty days after the date of the Board of Directors’ resolution.

SK TELECOM CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

June 30, 2015 and 2014

(With Independent Auditors’ Review Report Thereon)

Contents


	Page

Independent Auditors’ Review Report		1

Condensed Separate Statements of Financial Position		3

Condensed Separate Statements of Income		5

Condensed Separate Statements of Comprehensive Income		6

Condensed Separate Statements of Changes in Equity		7

Condensed Separate Statements of Cash Flows		8

Notes to the Condensed Separate Interim Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To The Board of Directors and Shareholders

SK Telecom Co., Ltd.:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of SK Telecom Co., Ltd. (the “Company”), which comprise the condensed separate statement of financial position as of June 30, 2015, the related condensed separate statements of income and comprehensive income for the three and six-month periods ended June 30, 2015 and 2014, the condensed separate interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2015 and 2014, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

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

Auditors’ responsibility

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

Conclusion

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

Other matters

The separate statement of financial position of the Company as of December 31, 2014, and the related separate statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated February 23, 2015, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2014, presented for comparative purposes, is not different from that audited by us in all material respects.

The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.

KPMG Samjong Accounting Corp.

Seoul, Korea

August 7, 2015

This report is effective as of August 7, 2015, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

SK TELECOM CO., LTD.

Condensed Separate Statements of Financial Position

As of June 30, 2015 and December 31, 2014


(In millions of won)	Note		June 30, 2015		December 31, 2014
Assets
Current Assets:
Cash and cash equivalents		26,27	￦	155,687		248,311
Short-term financial instruments		4,26,27		133,000		143,000
Short-term investment securities		6,26,27		267,140		197,161
Accounts receivable—trade, net		5,26,27,28		1,597,007		1,559,281
Short-term loans, net		5,26,27,28		21,758		67,989
Accounts receivable—other, net		5,26,27,28		300,037		305,990
Prepaid expenses				82,509		86,070
Inventories, net				34,401		23,694
Advanced payments and other		5,26,27		94,336		58,417

Total Current Assets				2,685,875		2,689,913

Non-Current Assets:
Long-term financial instruments		4,26,27		69		69
Long-term investment securities		6,26,27		731,379		608,797
Investments in subsidiaries and associates		7		8,674,128		8,181,769
Property and equipment, net		8,28		7,423,274		7,705,906
Goodwill		9		1,306,236		1,306,236
Intangible assets, net		10		1,755,891		1,928,169
Long-term loans, net		5,26,27,28		34,874		38,457
Long-term prepaid expenses				29,847		28,551
Guarantee deposits		4,5,26,27,28		163,891		156,807
Long-term derivative financial assets		15,26,27		57,883		67,728
Other non-current assets				98		60

Total Non-Current Assets				20,177,570		20,022,549

Total Assets			￦	22,863,445		22,712,462

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Financial Position, Continued

As of June 30, 2015 and December 31, 2014


(In millions of won)	Note		June 30, 2015			December 31, 2014
Liabilities and Equity
Current Liabilities:
Short-term borrowings		11,26,27	￦	770,000			200,000
Current installments of debentures and long-term borrowings, net		11,26,27		282,297			211,863
Current installments of long-term payables—other		12,26,27		118,955			189,389
Accounts payable—other		26,27,28		848,511			1,086,485
Withholdings		26,27		640,045			801,119
Accrued expenses		26,27		434,316			615,488
Income tax payable		24		219,152			91,315
Unearned revenue				49,081			92,783
Provisions		13		37,576			50,456
Advanced receipts				56,113			39,148

Total Current Liabilities				3,456,046			3,378,046

Non-Current Liabilities:
Debentures, excluding current installments, net		11,26,27		4,686,412			4,655,137
Long-term borrowings, excluding current installments		11,26,27		75,786			80,147
Long-term payables—other		12,26,27		545,013			657,001
Long-term unearned revenue				4,503			19,544
Defined benefit liabilities		14		12,862			15,555
Long-term derivative financial liabilities		15,26,27		88,498			130,889
Long-term provisions		13		20,497			27,676
Deferred tax liabilities		24		109,910			144,876
Other non-current liabilities		26,27		57,551			61,370

Total Non-Current Liabilities				5,601,032			5,792,195

Total Liabilities				9,057,078			9,170,241

Equity
Share capital		1,16		44,639			44,639
Capital surplus and other capital adjustments		16,17,18		845,966			433,894
Retained earnings		19		12,917,835			12,996,790
Reserves		20		(2,073	)		66,898

Total Equity				13,806,367			13,542,221

Total Liabilities and Equity			￦	22,863,445			22,712,462

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Income

For the three and six-month periods ended June 30, 2015 and 2014


(In millions of won except for per share data)
			June 30, 2015						June 30, 2014
	Note		Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Operating revenue:		28
Revenue			￦	3,143,766			6,277,222			3,264,610			6,528,313
Operating expense:		28
Labor cost				249,706			423,033			147,178			313,216
Commissions paid				1,228,049			2,571,119			1,305,216			2,894,331
Depreciation and amortization				531,639			1,056,576			518,153			1,027,207
Network interconnection				182,446			352,367			219,888			434,763
Leased line				85,383			181,586			92,490			189,352
Advertising				58,398			91,028			57,108			96,546
Rent				95,663			193,593			92,520			185,243
Cost of products that have been resold				110,599			224,108			121,630			235,573
Other operating expenses		21		205,793			379,896			182,762			373,123

				2,747,676			5,473,306			2,736,945			5,749,354

Operating income				396,090			803,916			527,665			778,959
Finance income		23		19,735			82,519			15,102			40,706
Finance costs		23		(67,890	)		(133,598	)		(86,279	)		(152,387	)
Other non-operating income		22		3,737			6,969			13,569			28,592
Other non-operating expenses		22		(32,291	)		(61,664	)		(25,622	)		(55,491	)

Profit before income tax				319,381			698,142			444,435			640,379

Income tax expense		24		87,384			170,359			81,061			123,472


Profit for the period			￦	231,997			527,783			363,374			516,907


Earnings per share		25
Basic earnings per share (in won)			￦	3,135			7,301			5,004			7,168

Diluted earnings per share (in won)			￦	3,135			7,301			5,004			7,168

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Comprehensive Income

For the three and six-month periods ended June 30, 2015 and 2014


(In millions of won)			June 30, 2015						June 30, 2014
	Note		Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended

Profit for the period			￦	231,997			527,783			363,374			516,907

Other comprehensive loss
Items that will never be reclassified to profit or loss, net of taxes:
Remeasurement of defined benefit liabilities		14		(410	)		(2,453	)		(6,467	)		(9,585	)
Items that are or may be reclassified subsequently to profit or loss, net of taxes:
Net change in unrealized fair value of available-for-sale financial assets		20		(28,520	)		(53,569	)		(9,136	)		(51,431	)
Net change in unrealized fair value of derivatives		15,20		(24,802	)		(15,402	)		(21,064	)		(16,693	)

Other comprehensive loss for the period, net of taxes				(53,732	)		(71,424	)		(36,667	)		(77,709	)

Total comprehensive income			￦	178,265			456,359			326,707			439,198

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Changes in Equity

For the six-month periods ended June 30, 2015 and 2014


(In millions of won)
	Share capital		Capital surplus (deficit) and other capital adjustments													Retained earnings			Reserves			Total equity
	Share capital		Paid-in surplus		Treasury stock			Loss on disposal of treasury stock			Hybrid bond		Other			Retained earnings			Reserves			Total equity
Balance, January 1, 2014	￦	44,639		2,915,887		(2,139,683	)		(18,087	)		398,518		(722,741	)		12,665,699			171,176			13,315,408
Cash dividends		—		—		—			—			—		—			(595,865	)		—			(595,865	)
Total comprehensive income
Profit for the period		—		—		—			—			—		—			516,907			—			516,907
Other comprehensive loss		—		—		—			—			—		—			(9,585	)		(68,124	)		(77,709	)

		—		—		—			—			—		—			507,322			(68,124	)		439,198
Interest on hybrid bond		—		—		—			—			—		—			(8,420	)		—			(8,420	)

Balance, June 30, 2014	￦	44,639		2,915,887		(2,139,683	)		(18,087	)		398,518		(722,741	)		12,568,736			103,052			13,150,321

Balance, January 1, 2015	￦	44,639		2,915,887		(2,139,683	)		(18,087	)		398,518		(722,741	)		12,996,790			66,898			13,542,221
Cash dividends		—		—		—			—			—		—			(595,865	)		—			(595,865	)
Total comprehensive income
Profit for the period		—		—		—			—			—		—			527,783			—			527,783
Other comprehensive loss		—		—		—			—			—		—			(2,453	)		(68,971	)		(71,424	)

		—		—		—			—			—		—			525,330			(68,971	)		456,359
Treasury stock		—		—		369,249			18,087			—		24,736			—			—			412,072
Interest on hybrid bond		—		—		—			—			—		—			(8,420	)		—			(8,420	)

Balance, June 30, 2015	￦	44,639		2,915,887		(1,770,434	)		—			398,518		(698,005	)		12,917,835			(2,073	)		13,806,367

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Cash Flows

For the six-month periods ended June 30, 2015 and 2014


(In millions of won)	Note		June 30, 2015			June 30, 2014
Cash flows from operating activities:
Cash generated from operating activities
Profit for the period			￦	527,783			516,907
Adjustments for income and expenses		30		1,383,546			1,361,390
Changes in assets and liabilities related to operating activities		30		(647,987	)		(452,702	)

Sub-total				1,263,342			1,425,595
Interest received				11,819			9,065
Dividends received				56,561			10,567
Interest paid				(111,951	)		(115,795	)
Income tax paid				(68,359	)		(96,712	)

Net cash provided by operating activities				1,151,412			1,232,720

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term investment securities, net				—			55,002
Decrease in short-term financial instruments, net				10,000			10,000
Collection of short-term loans				199,853			69,413
Proceeds from disposal of long-term investment securities				5,235			44,572
Proceeds from disposal of investments in subsidiaries and associates				185,557			—
Proceeds from disposal of property and equipment				5,739			9,350
Proceeds from disposal of intangible assets				72			275
Proceeds from disposal of assets held for sale				—			1,056
Collection of long-term loans				—			1,988
Proceeds from disposal of other non-current assets				—			90

Sub-total				406,456			191,746
Cash outflows for investing activities:
Increase in short-term investment securities, net				(69,842	)		—
Increase in short-term loans				(150,164	)		(85,960	)
Acquisition of long-term investment securities				(202,424	)		(8,357	)
Acquisition of investments in subsidiaries and associates				(246,271	)		(146,536	)
Acquisition of property and equipment				(789,708	)		(1,024,367	)
Acquisition of intangible assets				(9,859	)		(23,489	)
Increase in other non-current assets				(38	)		—
Increase in long-term loans				—			(45	)

Sub-total				(1,468,306	)		(1,288,754	)

Net cash used in investing activities			￦	(1,061,850	)		(1,097,008	)

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Cash Flows, Continued

For the six-month periods ended June 30, 2015 and 2014


(In millions of won)	June 30, 2015			June 30, 2014
Cash flows from financing activities:
Cash inflows from financing activities:
Increase in short-term borrowings, net	￦	570,000			440,000
Proceeds from long-term borrowings		—			3,552
Proceeds from issuance of debentures		298,718			299,354
Cash inflows from settlement of derivatives		175			118

Sub-total		868,893			743,024
Cash outflows for financing activities:
Repayments of long-term borrowings		(6,407	)		(6,407	)
Repayments of long-term account payables—other		(190,134	)		(207,668	)
Repayments of debentures		(250,000	)		(96,151	)
Payments of cash dividends		(595,865	)		(595,865	)
Payments of interest on hybrid bonds		(8,420	)		(8,420	)
Cash outflows from settlement of derivatives		(329	)		(335	)

Sub-total		(1,051,155	)		(914,846	)

Net cash used in financing activities		(182,262	)		(171,822	)

Net decrease in cash and cash equivalents		(92,700	)		(36,110	)
Cash and cash equivalents at beginning of the period		248,311			448,459
Effects of exchange rate changes on cash and cash equivalents		76			(155	)
Cash and cash equivalents at end of the period	￦	155,687			412,194

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

1.	Reporting Entity

SK Telecom Co., Ltd. (“the Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to engage in providing cellular telephone communication services in Korea. The Company mainly provides wireless telecommunications in Korea. The Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of June 30, 2015, the Company’s total issued shares are held by the following:


	Number of shares		Percentage of total shares issued (%)
SK Holdings Co., Ltd.		20,363,452		25.22
National Pension Service, other institutional investors and other minority stockholders		52,265,708		64.73
Treasury stock		8,116,551		10.05

Total number of shares		80,745,711		100.00

2.	Basis of Preparation

(1)

Statement of compliance

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

These condensed separate interim financial statements were prepared in accordance with K-IFRS No. 1034, ‘Interim Financial Reporting’ as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as at and for the year ended December 31, 2014. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.

These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No.1027, ‘Separate Financial Statements’ presented by a parent, an investor with joint control of, of significant influence over, an investee, in which the investments are accounted for at cost.

(2)

Use of estimates and judgments

1) Critical judgments, assumptions and estimation uncertainties

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

In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as of and for the year ended December 31, 2014.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

2.	Basis of Preparation, Continued

(2)

Use of estimates and judgments, Continued

2) Fair value measurement

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the finance executive.

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

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

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

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

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Information about assumptions used for fair value measurements are included in Note 27.

(3)

Common control transactions

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

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

3.	Significant Accounting Policies

Except as described below, the accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2014. The following changes in accounting policy are also expected to be reflected in the Company’s separate financial statements as at and for the year ending December 31, 2015.

(1)

Changes in accounting policies

The following amendment to existing standards has been published and are mandatory for the Company for annual periods beginning on or after July 1, 2014.

1) K-IFRS 1019 ‘Employee Benefits’—Employee contributions

Amendments to K-IFRS 1019 introduced a practical expedient to accounting for defined benefit plan, when employees or third parties pay contributions if certain criteria are met. According to the amendments, the entity is permitted to recognize those contributions as a reduction of the service cost in the period in which the related service is rendered, instead of forecast future contributions from employees or third parties and attribute them to periods or service as negative benefits.

There is no material impact of the application of this amendment on the Company’s financial statements.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

4.	Restricted Deposits

Deposits which are restricted in use as of June 30, 2015 and December 31, 2014 are summarized as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Short-term financial instruments(*)	￦	85,500		85,500
Long-term financial instruments(*)		69		69
Guarantee deposits		280		280

	￦	85,849		85,849

(*)	Financial instruments include charitable trust fund established by the Company. Profits from the fund are donated to charitable institutions. As of June 30, 2015, the funds cannot be withdrawn.

5.	Trade and Other Receivables

(1)

Details of trade and other receivables as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)	June 30, 2015
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable—trade	￦	1,718,223		(121,216	)		1,597,007
Short-term loans		21,978		(220	)		21,758
Accounts receivable—other		362,204		(62,167	)		300,037
Accrued income		6,924		—			6,924

		2,109,329		(183,603	)		1,925,726
Non-current assets:
Long-term loans		56,511		(21,637	)		34,874
Guarantee deposits		163,891		—			163,891

		220,402		(21,637	)		198,765

	￦	2,329,731		(205,240	)		2,124,491


(In millions of won)	December 31, 2014
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable—trade	￦	1,665,941		(106,660	)		1,559,281
Short-term loans		68,676		(687	)		67,989
Accounts receivable—other		366,821		(60,831	)		305,990
Accrued income		6,354		—			6,354

		2,107,792		(168,178	)		1,939,614
Non-current assets:
Long-term loans		60,130		(21,673	)		38,457
Guarantee deposits		156,807		—			156,807

		216,937		(21,673	)		195,264

	￦	2,324,729		(189,851	)		2,134,878

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

5.	Trade and Other Receivables, Continued

(2)

Changes in allowances for doubtful accounts of trade and other receivables during the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Balance at January 1	￦	189,851			174,480
Increase of bad debt allowances		27,697			24,157
Write-offs		(22,319	)		(25,391	)
Collection of receivables previously written-off		10,011			9,578

Balance at June 30	￦	205,240			182,824

(3)

Details of overdue but not impaired, and impaired trade and other receivables as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)	June 30, 2015						December 31, 2014
	Accounts receivable - trade			Other receivables			Accounts receivable - trade			Other receivables
Neither overdue nor impaired	￦	1,215,386			499,520			1,182,627			553,014
Overdue but not impaired		51,496			—			47,663			—
Impaired		451,341			111,988			435,651			105,774

		1,718,223			611,508			1,665,941			658,788
Allowances for doubtful accounts		(121,216	)		(84,024	)		(106,660	)		(83,191	)

	￦	1,597,007			527,484			1,559,281			575,597

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

(4)

The aging of overdue but not impaired accounts receivable as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Less than 1 month	￦	9,900		12,045
1 ~ 3 months		16,852		15,222
3 ~ 6 months		9,854		8,591
More than 6 months		14,890		11,805

	￦	51,496		47,663

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

6.	Investment Securities

(1)

Details of short-term investment securities as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Beneficiary certificates(*)	￦	267,140		197,003
Current installments of long-term investment securities		—		158

	￦	267,140		197,161

(*)	The distributions arising from beneficiary certificates as of June 30, 2015, were accounted for as accrued income.

(2)

Details of long-term investment securities as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Equity securities:
Marketable equity securities	￦	607,306		490,741
Unlisted equity securities(*1)		42,877		28,696
Equity investments(*2)		72,039		73,054

		722,222		592,491
Debt securities:
Public bonds(*3)		—		158
Investment bonds(*4)		9,157		16,306

		9,157		16,464

Total		731,379		608,955
Less current installments of long-term investment securities		—		(158	)

Long-term investment securities	￦	731,379		608,797

(*1)	Unlisted equity securities whose fair value cannot be measured reliably are recorded at cost.

(*2)	Equity investments are recorded at cost.

(*3)	Details of maturity for the public bonds as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Less than 1 year	￦	—		158

(*4)

During the six-month period ended June 30, 2015, the Company exercised the conversion right for the convertible bonds of Health Connect Co., Ltd., which were classified as available-for-sale financial assets. Health Connect Co., Ltd. has been classified as investments in associates (￦5,900 million) as the Company obtained significant influence over the investee. As a result of this transaction, investments in associates have increased by ￦5,900 million and the remaining convertible bonds of ￦560 million was fully redeemed. Also, the Company classified the convertible bonds of IRIVER LIMITED, amounting to ￦7,128 million, as financial assets at fair value through profit or loss and the difference between carrying amount and fair value was accounted for as gain or loss relating to financial assets at fair value through profit or loss.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

7.	Investments in Subsidiaries and Associates

(1)

Investments in subsidiaries and associates as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Investments in subsidiaries	￦	4,287,049		3,614,750
Investments in associates		4,387,079		4,567,019

	￦	8,674,128		8,181,769

(2)

Details of investments in subsidiaries as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, except for share data)	June 30, 2015						December 31, 2014
	Number of shares		Ownership (%)		Carrying amount		Carrying amount
SK Telink Co., Ltd.		1,082,272		83.5	￦	144,740		144,740
SK Broadband Co., Ltd.(*1)		295,959,080		100.0		1,860,398		1,242,247
PS&Marketing Corporation		66,000,000		100.0		313,934		313,934
Service Ace Co., Ltd.		4,385,400		100.0		21,927		21,927
Service Top Co., Ltd.		2,856,200		100.0		14,281		14,281
Network O&S Co., Ltd.		3,000,000		100.0		15,000		15,000
SK Planet Co., Ltd.		72,927,317		100.0		1,538,020		1,538,020
Neosnetworks Co., Ltd.(*2)		408,435		83.9		63,967		23,968
IRIVER LIMITED		15,202,039		49.0		54,503		54,503
SK Telecom China Holdings Co., Ltd.		—		100.0		38,652		29,116
SKT Vietnam PTE. Ltd.		180,476,700		73.3		2,364		2,364
SKT Americas, Inc.		122		100.0		83,871		83,871
YTK Investment Ltd.		—		100.0		18,693		27,945
Atlas Investment		—		100.0		77,050		77,050
SK Global Healthcare Business Group Ltd.		—		100.0		39,649		25,784

					￦	4,287,049		3,614,750

(*1)

On March 20, 2015, the Board of Directors of the Company decided to grant 0.0168936 share of its treasury stock in exchange for 1 share of SK Broadband Co., Ltd., a subsidiary of the Company, to the shareholders of SK Broadband Co., Ltd. as of June 9, 2015. After the stock exchange, SK Broadband Co., Ltd. became a wholly-owned subsidiary of the Company.

(*2)	The Company newly acquired 50,377 and 326,748 shares of Neosnetworks Co., Ltd. by participating in the capital increase and capital increase without consideration respectively during the six-month period ended June 30, 2015.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

7.	Investments in Subsidiaries and Associates, Continued

(3)

Details of investments in associates as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, except for share data)	June 30, 2015						December 31, 2014
	Number of shares		Ownership percentage (%)		Carrying amount		Carrying amount
SK China Company Ltd.(*1)		720,000		9.6	￦	47,830		47,830
HappyNarae Co., Ltd.		680,000		42.5		12,250		12,250
Korea IT Fund(*2)		190		63.3		220,957		220,957
Wave City Development Co., Ltd.(*1)		393,460		19.1		1,532		1,532
KEB HanaCard Co., Ltd.(*1,3)		39,902,323		15.0		253,739		430,044
Daehan Kanggun BcN Co., Ltd.		1,675,126		29.0		8,340		8,340
NanoEnTek, Inc.		5,870,290		26.0		37,959		37,959
SK Industrial Development China Co., Ltd.		77,762,360		21.0		83,691		83,691
Packet One Network(*1)		2,265,944		13.6		60,706		60,706
SK Technology Innovation Company		14,700		49.0		45,864		45,864
SK hynix Inc.		146,100,000		20.1		3,374,725		3,374,725
SK MENA Investment B.V.		9,772,686		32.1		14,485		14,485
SK Latin America Investment S.A.		9,448,937		32.1		14,243		14,243
SKY Property Mgmt. Ltd.		12,639		33.0		145,656		145,656
SK Wyverns Baseball Club Co., Ltd. and others		—		—		65,102		68,737

					￦	4,387,079		4,567,019

(*1)	Classified as investments in associates as the Company can exercise significant influence through its participation on the board of directors even though the Company has less than 20% of equity interests.

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

(*3)	During the six-month period ended June 30, 2015, the Company disposed of 27,725,264 shares of KEB HanaCard Co., Ltd.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

7.	Investments in Subsidiaries and Associates, Continued

(4)

The market price of investments in listed subsidiaries as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, except for share data)	June 30, 2015						December 31, 2014
	Market value per share (In won)		Number of shares		Market price		Market value per share (In won)		Number of shares		Market price
IRIVER LIMITED	￦	5,590		15,202,039		84,979		6,370		15,202,039		96,837
SK Broadband Co., Ltd.(*)		—		295,959,080		—		4,380		149,638,354		655,416

(*)	Due to the voluntary delisting of SK Broadband Co., Ltd. during the six-month period ended June 30, 2015, the market price is not disclosed as of June 30, 2015.

8.	Property and Equipment

Changes in property and equipment for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)
	For the six-month period ended June 30, 2015
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	￦	448,255		828		(328	)		5,155			—			453,910
Buildings		568,874		782		(4,131	)		21,997			(17,409	)		570,113
Structures		350,915		761		(33	)		11,911			(17,013	)		346,541
Machinery		5,277,929		22,013		(689	)		525,155			(791,819	)		5,032,589
Other		430,478		421,932		(1,730	)		(309,165	)		(54,630	)		486,885
Construction in progress		629,455		200,553		—			(296,772	)		—			533,236

	￦	7,705,906		646,869		(6,911	)		(41,719	)		(880,871	)		7,423,274


(In millions of won)
	For the six-month period ended June 30, 2014
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	￦	416,991		3,372		—			14,221			—			434,584
Buildings		585,375		428		(101	)		5,967			(17,177	)		574,492
Structures		363,093		125		—			3,406			(16,257	)		350,367
Machinery		4,945,088		30,095		(709	)		729,287			(772,697	)		4,931,064
Other		472,832		533,525		(1,140	)		(339,991	)		(51,053	)		614,173
Construction in progress		676,607		178,473		(9,438	)		(431,598	)		—			414,044

	￦	7,459,986		746,018		(11,388	)		(18,708	)		(857,184	)		7,318,724

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

9.	Goodwill

Goodwill as of June 30, 2015 and December 31, 2014 is as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Goodwill related to acquisition of Shinsegi Telecom, Inc.	￦	1,306,236		1,306,236

10.

Intangible Assets

(1)

Changes in intangible assets for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)
	For the six-month period ended June 30, 2015
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Ending balance
Frequency use rights	￦	1,384,044		—		—			—		(140,264	)		1,243,780
Land use rights		14,016		1,412		—			—		(2,431	)		12,997
Industrial rights		10,583		3,507		(2	)		—		(2,109	)		11,979
Facility usage rights		15,843		515		(12	)		271		(1,276	)		15,341
Memberships		63,465		62		—			—		—			63,527
Other		440,218		4,363		(5	)		50,721		(87,030	)		408,267

	￦	1,928,169		9,859		(19	)		50,992		(233,110	)		1,755,891


(In millions of won)
	For the six-month period ended June 30, 2014
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Ending balance
Frequency use rights	￦	1,664,571		—		—			—		(140,264	)		1,524,307
Land use rights		9,752		4,000		—			—		(2,038	)		11,714
Industrial rights		9,113		2,796		—			—		(1,717	)		10,192
Facility usage rights		16,155		615		(16	)		379		(1,250	)		15,883
Memberships		82,815		—		—			—		—			82,815
Other		456,761		16,078		(330	)		31,600		(81,137	)		422,972

	￦	2,239,167		23,489		(346	)		31,979		(226,406	)		2,067,883

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

10.

Intangible Assets, Continued

(2)

The carrying amount and residual useful lives of frequency usage rights as of June 30, 2015 are as follows, all of which are depreciated on a straight-line basis:

(In millions of won)

Amount

Description

Commencement
of amortization

Completion of
amortization

W-CDMA license

￦

150,691

Frequency use rights relating to W-CDMA service

Dec. 2003

Dec. 2016

W-CDMA license

24,466

Frequency use rights relating to W-CDMA service

Oct. 2010

Dec. 2016

800MHz license

243,264

Frequency use rights relating to CDMA and LTE service

Jul. 2011

Jun. 2021

1.8GHz license

816,530

Frequency use rights relating to LTE service

Sep. 2013

Dec. 2021

WiBro license

8,829

WiBro service

Mar. 2012

Mar. 2019

￦

1,243,780

11.

Borrowings and Debentures

(1)

Short-term borrowings as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
Lender	Annual interest rate (%)		Maturity		June 30, 2015		December 31, 2014
Korea Development Bank		2.48		Apr. 30, 2015	￦	—		100,000
		2.11		Sep. 30, 2015		100,000		—
		2.11		Oct. 30, 2015		100,000		—
Kookmin Bank		2.56		Jul. 17, 2015		70,000		—
CP		2.37		Jan. 15, 2015		—		100,000
		1.80		Jul. 16, 2015		300,000		—
		1.64		Jul. 17, 2015		200,000		—

					￦	770,000		200,000

(2)

Long-term borrowings as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)	Maturity	June 30, 2015			December 31, 2014
Export Kreditnamnden(*)	1.70	Apr. 29, 2022		￦90,577 (USD 80,577	)		94,903 (USD 86,338	)

Less present value discount on long-term borrowings				90,577 (2,352	)		94,903 (2,623	)

				88,225			92,280
Less current installments of long-term borrowings				(12,439	)		(12,133	)

				￦75,786			80,147

(*)	For the years ended December 31, 2014 and 2013, the Company obtained long-term borrowings from Export Kreditnamnden, an export credit agency. The long-term borrowings are redeemed by installments on an annual basis from 2014 to 2022.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Borrowings and Debentures, Continued

(3)

Debentures as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, thousands of U.S. dollars, and thousands of other currencies)
	Purpose	Maturity		Annual interest rate (%)		June 30, 2015			December 31, 2014
Unsecured private bonds	Refinancing fund		2016		5.00	￦	200,000			200,000
Unsecured private bonds	Other fund		2015		5.00		—			200,000
Unsecured private bonds			2018		5.00		200,000			200,000
Unsecured private bonds			2016		5.54		40,000			40,000
Unsecured private bonds			2016		5.92		230,000			230,000
Unsecured private bonds	Operating fund		2016		3.95		110,000			110,000
Unsecured private bonds			2021		4.22		190,000			190,000
Unsecured private bonds	Operating and refinancing fund		2019		3.24		170,000			170,000
Unsecured private bonds			2022		3.30		140,000			140,000
Unsecured private bonds			2032		3.45		90,000			90,000
Unsecured private bonds	Operating fund		2023		3.03		230,000			230,000
Unsecured private bonds			2033		3.22		130,000			130,000
Unsecured private bonds			2019		3.30		50,000			50,000
Unsecured private bonds			2024		3.64		150,000			150,000
Unsecured private bonds(*2, 3)			2029		4.73		—			55,188
Unsecured private bonds(*2)			2029		4.72		55,351			55,177
Unsecured private bonds	Refinancing fund		2019		2.53		160,000			160,000
Unsecured private bonds			2021		2.66		150,000			150,000
Unsecured private bonds			2024		2.82		190,000			190,000
Unsecured private bonds	Operating and refinancing fund		2022		2.40		100,000			—
Unsecured private bonds			2025		2.49		150,000			—
Unsecured private bonds			2030		2.61		50,000			—
Foreign global bonds	Operating fund		2027		6.63		449,640			439,680
							(USD 400,000	)		(USD 400,000	)
Swiss unsecured private bonds			2017		1.75		364,257			333,429
							(CHF 300,000	)		(CHF 300,000	)
Foreign global bonds			2018		2.13		786,870			769,440
							(USD 700,000	)		(USD 700,000	)
Australian unsecured private bonds			2017		4.75		258,858			269,727
							(AUD 300,000	)		(AUD 300,000	)
Floating rate notes(*1)			2020		3M Libor + 0.88		337,230			329,760
							(USD 300,000	)		(USD 300,000	)

Sub-total							4,982,206			4,882,401
Less discounts on bonds							(25,936	)		(27,534	)

							4,956,270			4,854,867
Less current installments of bonds							(269,858	)		(199,730	)

						￦	4,686,412			4,655,137

(*1)	As of June 30, 2015, 3M Libor rate is 0.28%.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

11.

Borrowings and Debentures, Continued

(3)

Debentures as of June 30, 2015 and December 31, 2014 are as follows, Continued:

(*2)	The Company settled the difference of the measurement bases of accounting profit or loss between the bonds and related derivatives by designating the structured bonds as financial liabilities at fair value through profit or loss.

(*3)	As of December 31, 2014, the principal amount and the fair value of the structured bonds were ￦50,000 million and ￦55,188 million, respectively. The entire bonds were early redeemed during the six-month period ended June 30, 2015.

12.

Long-term Payables—other

(1)


(In millions of won)
	Period of repayment		Coupon rate			Annual effective interest rate(*)			June 30, 2015			December 31, 2014
800MHz		2013~2015		3.51	%		5.69	%	￦	—			69,416
2.3GHz		2014~2016		3.00	%		5.80	%		2,882			5,766
1.8GHz		2012~2021		2.43~3.00	%		4.84~5.25	%		707,006			824,841

										709,888			900,023
Present value discount on long-term payables—other										(45,920	)		(53,633	)

										663,968			846,390
Less current installments of long-term payables—other										(120,718	)		(190,134	)
Current installments of present value discount on long-term payables—other										1,763			745

Carrying amount at period end									￦	545,013			657,001

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

(2)

The repayment schedule of long-term payables—other as of June 30, 2015 is as follows:


(In millions of won)	Amount
Less than 1 year	￦	120,718
1~3 years		235,669
3~5 years		235,669
More than 5 years		117,832

	￦	709,888

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

13.

Provisions

Changes in provisions for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended June 30, 2015												As of June 30, 2015
	Beginning balance		Increase		Utilization			Reversal			Ending balance		Current		Non- current
Provision for handset subsidy	￦	26,799		—		(2,696	)		(18,173	)		5,930		3,368		2,562
Provision for restoration		51,333		2,116		(344	)		(962	)		52,143		34,208		17,935

	￦	78,132		2,116		(3,040	)		(19,135	)		58,073		37,576		20,497


(In millions of won)	For the six-month period ended June 30, 2014												As of June 30, 2014
	Beginning balance		Increase		Utilization			Reversal			Ending balance		Current		Non- current
Provision for handset subsidy	￦	53,923		86,249		(49,206	)		—			90,966		58,043		32,923
Provision for restoration		32,173		1,528		(180	)		(884	)		32,637		17,590		15,047

	￦	86,096		87,777		(49,386	)		(884	)		123,603		75,633		47,970

The Company has provided handset subsidy to subscribers who purchase handsets on an installment basis and recognized a provision for subsidy amounts which the Company is expected to pay in future periods.

14.

Defined Benefit Liabilities

(1)

Details of defined benefit liabilities as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015			December 31, 2014
Present value of defined benefit obligations	￦	197,898			195,130
Fair value of plan assets		(185,036	)		(179,575	)

	￦	12,862			15,555

(2)

Principal actuarial assumptions as of June 30, 2015 and December 31, 2014 are as follows:


	June 30, 2015			December 31, 2014
Discount rate for defined benefit obligations		2.91	%		2.91	%
Expected rate of salary increase		3.80	%		3.80	%

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

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

14.

Defined Benefit Liabilities, Continued

(3)

Changes in defined benefit obligations for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Beginning balance	￦	195,130			154,460
Current service cost		17,610			16,294
Interest cost		2,707			2,990
Remeasurement
- Demographic assumption		16			—
- Adjustment based on experience		834			12,086
Benefit paid		(20,266	)		(10,710	)
Others(*)		1,867			1,437

Ending balance	￦	197,898			176,557

(*)	Others for the six-month periods ended June 30, 2015 and 2014 include transfer to construction in progress and liabilities in relation to executives transferred from affiliates.

(4)

Changes in plan assets for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Beginning balance	￦	179,575			131,574
Interest income		2,491			2,480
Actuarial loss		(2,387	)		(560	)
Contributions by employer directly to plan assets		25,000			4,000
Benefit paid		(19,643	)		(3,116	)

Ending balance	￦	185,036			134,378

(5)

Expenses recognized in profit and loss for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015		June 30, 2014
Current service cost	￦	17,610		16,294
Net Interest cost		216		510

	￦	17,826		16,804

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

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

15.

Derivative Instruments

(1)

Currency swap contracts under cash flow hedge accounting as of June 30, 2015 are as follows:


(In thousands of foreign currencies)
Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)	Foreign currency risk	Currency swap	Morgan Stanley and five other banks	Jul. 20, 2007 ~ Jul. 20, 2027
Jun. 12, 2012	Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000)	Foreign currency risk	Currency swap	Citibank and five other banks	Jun. 12, 2012 ~ Jun. 12, 2017
Nov. 1, 2012	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000)	Foreign currency risk	Currency swap	Barclays and nine other banks	Nov. 1, 2012 ~ May. 1, 2018
Jan. 17, 2013	Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000)	Foreign currency risk	Currency swap	BNP Paribas and three other banks	Jan. 17, 2013 ~ Nov. 17, 2017
Mar. 7, 2013	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	DBS Bank	Mar. 7, 2013 ~ Mar. 7, 2020
Dec. 16, 2013	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 80,577)	Foreign currency risk	Currency swap	Deutsche bank	Dec. 16, 2013 ~ Apr. 29, 2022

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

15.

Derivative Instruments, Continued

(2)

As of June 30, 2015, fair values of the above derivatives recorded in assets or liabilities and details of derivative instruments are as follows:


(In millions of won and thousands of foreign currencies)		Fair value
		Cash flow hedge											Held for trading purpose		Total
Hedged item		Accumulated gain (loss) on valuation of derivatives			Tax effect			Accumulated (gain) loss on foreign currency translation			*Others()**		Held for trading purpose		Total
Non-current assets:
Structured bond (face value of KRW 50,000)	￦		—			—			—			—		5,380		5,380
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)			(55,930	)		(17,856	)		(7,724	)		129,806		—		48,296
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)			(5,992	)		(1,913	)		12,112			—		—		4,207

Total assets															￦	57,883


Non-current liabilities:
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000)	￦		(6,361	)		(2,031	)		749			—		—		(7,643	)
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000)			(22,835	)		(7,290	)		23,372			—		—		(6,753	)
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000)			2,149			686			(76,321	)		—		—		(73,486	)
Fixed-to-fixed long-term borrowings (U.S. dollar denominated bonds face value of USD 80,577)			(4,640	)		(1,482	)		5,506			—		—		(616	)

Total liabilities															￦	(88,498	)

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

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

16.

Share Capital and Capital Surplus and Other Capital Adjustments

The Company’s outstanding share capital consists entirely of common stock with a par value of ￦500. The number of authorized, issued and outstanding common shares and capital surplus and other capital adjustments as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, except for share data)
	June 30, 2015			December 31, 2014
Authorized shares		220,000,000			220,000,000
Issued shares(*)		80,745,711			80,745,711
Share capital
Common stock	￦	44,639			44,639
Capital surplus and other capital adjustments:
Paid-in surplus		2,915,887			2,915,887
Treasury stock (Note 17)		(1,770,434	)		(2,139,683	)
Loss on disposal of treasury stock		—			(18,087	)
Hybrid bond (Note 18)		398,518			398,518
Others		(698,005	)		(722,741	)

	￦	845,966			433,894

(*)

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

There were no changes in share capital for the six-month period ended June 30, 2015 and the year ended December 31, 2014 and details of shares outstanding as of June 30, 2015 and 2014 are as follows:


(In shares)	June 30, 2015							June 30, 2014
	Issued shares		Treasury stock			Outstanding shares		Issued shares		Treasury stock		Outstanding shares
Beginning issued shares		80,745,711		9,809,375			70,936,336		80,745,711		9,809,375		70,936,336
Disposal of treasury stock		—		(1,692,824	)		1,692,824		—		—		—

Ending issued shares		80,745,711		8,116,551			72,629,160		80,745,711		9,809,375		70,936,336

17.

Treasury Stock

The Company acquired treasury stock to provide stock dividends, issue new stocks, merge with Shinsegi Telecom, Inc. and SK IMT Co, Ltd., increase shareholder value and to stabilize its stock prices when needed.

Treasury stock as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won, shares)
	June 30, 2015		December 31, 2014
Number of shares		8,116,551		9,809,375
Amount	￦	1,770,434		2,139,683

On June 9, 2015, the Company granted 1,692,824 shares of its treasury stock (acquisition cost: ￦369,249 million) in order to acquire shares of SK Broadband Co., Ltd.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

18.

Hybrid Bond

Hybrid bonds classified as equity as of June 30, 2015 are as follows:

(In millions of won)

Type

Issuance date

Maturity

Annual
interest
rate (%)

Amount

Private hybrid bonds

Blank coupon
unguaranteed subordinated
bond

June 7, 2013

June 7, 2073

(*1)

4.21

(*2)

￦

400,000

Issuance costs

(1,482

)

￦

398,518

Hybrid bonds issued by the Company are classified as equity as there is no contractual obligation for delivery of financial assets to the bond holders. These are subordinated bonds which rank before common shareholders in the event of a liquidation or reorganization of the Company.

(*1)

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

(*2)

Annual interest rate is adjusted after five years from the issuance date.

19.

Retained Earnings

(1)

Retained earnings as of June 30, 2015 and December 31 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Appropriated:
Legal reserve	￦	22,320		22,320
Reserve for research & manpower development		87,300		151,534
Reserve for business expansion		9,671,138		9,476,138
Reserve for technology development		2,616,300		2,416,300

		12,397,058		12,066,292
Unappropriated		520,777		930,498

	￦	12,917,835		12,996,790

(2)

Legal reserve

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

(3)

Reserve for research & manpower development

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

20.

Reserves

(1)

Details of reserves, net of taxes, as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015			December 31, 2014
Unrealized fair value of available-for-sale financial assets	￦	91,537			145,106
Unrealized fair value of derivatives		(93,610	)		(78,208	)

	￦	(2,073	)		66,898

(2)

Changes in reserves for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended June 30, 2015
	Unrealized fair value of available-for-sale financial assets			Unrealized fair value of derivatives			Total
Balance at January 1, 2015	￦	145,106			(78,208	)		66,898
Changes		(70,672	)		(20,319	)		(90,991	)
Tax effect		17,103			4,917			22,020

Balance at June 30, 2015	￦	91,537			(93,610	)		(2,073	)


(In millions of won)	For the six-month period ended June 30, 2014
	Unrealized fair value of available-for-sale financial assets			Unrealized fair value of derivatives			Total
Balance at January 1, 2014	￦	211,209			(40,033	)		171,176
Changes		(67,851	)		(22,022	)		(89,873	)
Tax effect		16,420			5,329			21,749

Balance at June 30, 2014	￦	159,778			(56,726	)		103,052

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

21.

Other Operating Expenses

Details of other operating expenses for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Other Operating Expenses:
Communication expenses	￦	8,475		18,058		10,671		21,863
Utilities		45,979		95,260		37,588		83,713
Taxes and dues		5,116		9,509		4,043		8,809
Repair		53,017		91,491		45,074		86,517
Research and development		62,071		110,954		57,254		108,358
Training		4,421		10,161		5,751		11,968
Bad debt for accounts receivable—trade		16,347		23,612		12,039		16,034
Other		10,367		20,851		10,342		35,861

	￦	205,793		379,896		182,762		373,123

22.

Other Non-operating Income and Expenses

Details of other non-operating income and expenses for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Other Non-operating Income:
Gain on disposal of property and equipment and intangible assets	￦	866		937		489		600
Others		2,871		6,032		13,080		27,992

	￦	3,737		6,969		13,569		28,592

Other Non-operating Expenses:
Loss on disposal of property and equipment and intangible assets	￦	884		2,056		1,146		2,709
Donations		18,116		23,562		18,581		26,560
Bad debt for accounts receivable—other		6,239		4,085		5,153		8,123
Others(*)		7,052		31,961		742		18,099

	￦	32,291		61,664		25,622		55,491

(*)

Others for the six-month period ended June 30, 2015 and 2014 primarily consists of penalties amounting to ￦28.3 billion and ￦16.7 billion, respectively.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

23.

Finance Income and Costs

(1)

Details of finance income and costs for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Finance Income:
Interest income	￦	5,465		11,160		5,999		12,827
Dividends		2,308		56,731		939		10,567
Gain on foreign currency transactions		2,308		4,484		1,212		5,211
Gain on foreign currency translation		1,197		1,098		—		115
Gain relating to financial liabilities at fair value through profit or loss		6,965		5,188		—		—
Gain on disposal of long-term investment securities		1,492		2,828		935		5,851
Gain on valuation of derivatives		—		1,030		6,017		6,017
Gain on settlement of derivatives		—		—		—		118

	￦	19,735		82,519		15,102		40,706

Finance Costs:
Interest expense	￦	59,906		121,132		68,473		132,372
Loss on foreign currency transactions		2,378		7,027		5,148		8,783
Loss on foreign currency translation		—		25		2,106		1,741
Loss on disposal of long-term investment securities		—		2		5		6
Loss on valuation of derivatives		699		—		—		—
Loss on settlement of derivatives		4,517		4,517		335		335
Loss relating to financial assets at fair value through profit or loss		358		689		2,419		1,352
Loss relating to financial liabilities at fair value through profit or loss		—		174		7,793		7,798
Other finance costs		32		32		—		—

	￦	67,890		133,598		86,279		152,387

(2)

Details of interest income included in finance income three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Interest income on cash equivalents and deposits	￦	1,668		3,483		3,128		6,674
Interest income on installment receivables and others		3,797		7,677		2,871		6,153

	￦	5,465		11,160		5,999		12,827

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

23.

Finance Income and Costs, Continued

(3)

Details of interest expense included in finance costs for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Interest expense on bank overdrafts and borrowings	￦	6,981		10,010		7,648		11,983
Interest expense on debentures		44,050		91,353		49,378		96,536
Others		8,875		19,769		11,447		23,853

	￦	59,906		121,132		68,473		132,372

(4)

Details of impairment losses for financial assets for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Accounts receivable—trade	￦	16,347		23,612		12,039		16,034
Other receivables		6,239		4,085		5,153		8,123
Available-for-sale financial assets		32		32		—		—

	￦	22,618		27,729		17,192		24,157

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

24.

Income Tax Expense

25.

Earnings per Share

(1)

Basic earnings per share

Basic earnings per share for the three and six-month periods ended June 30, 2015 and 2014 are calculated as follows:


(In millions of won, shares)	2015						2014
	Three-month period ended June 30			Six-month period ended June 30			Three-month period ended June 30			Six-month period ended June 30
Profit for the period	￦	231,997			527,783			363,374			516,907
Interest on hybrid bond		(8,420	)		(8,420	)		(8,420	)		(8,420	)
Profit for the period on common shares		223,577			519,363			354,954			508,487
Weighted average number of common shares outstanding		71,326,988			71,132,741			70,936,336			70,936,336

Basic earnings per share (In won)	￦	3,135			7,301			5,004			7,168

The weighted average number of common shares outstanding for the three and six-month periods ended June 30, 2015 and 2014 are calculated as follows:


(In shares)	Number of shares			Weighted number of shares
	Number of shares			Three-month period ended June 30			Six-month period ended June 30
Outstanding common shares at January 1, 2015		80,745,711			80,745,711			80,745,711
Effect of treasury stock		(8,116,551	)		(9,418,723	)		(9,612,970	)

Weighted average number of common shares outstanding at June 30, 2015		72,629,160			71,326,988			71,132,741


(In shares)	Number of shares			Weighted number of shares
	Number of shares			Three-month period ended June 30			Six-month period ended June 30
Outstanding common shares at January 1, 2014		80,745,711			80,745,711			80,745,711
Effect of treasury stock		(9,809,375	)		(9,809,375	)		(9,809,375	)

Weighted average number of common shares outstanding at June 30, 2014		70,936,336			70,936,336			70,936,336

(2)

Diluted earnings per share

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

26.

Categories of Financial Instruments

(1)

Financial assets by categories as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	￦	—		—		155,687		—		155,687
Financial instruments		—		—		133,069		—		133,069
Short-term investment securities		—		267,140		—		—		267,140
Long-term investment securities(*1)		7,128		724,251		—		—		731,379
Accounts receivable—trade		—		—		1,597,007		—		1,597,007
Loans and other receivables(*2)		—		—		527,484		—		527,484
Derivative financial assets		5,380		—		—		52,503		57,883

	￦	12,508		991,391		2,413,247		52,503		3,469,649


(In millions of won)
	December 31, 2014
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	￦	—		—		248,311		—		248,311
Financial instruments		—		—		143,069		—		143,069
Short-term investment securities		—		197,161		—		—		197,161
Long-term investment securities(*1)		7,817		600,980		—		—		608,797
Accounts receivable—trade		—		—		1,559,281		—		1,559,281
Loans and other receivables(*2)		—		—		575,597		—		575,597
Derivative financial assets		8,713		—		—		59,015		67,728

	￦	16,530		798,141		2,526,258		59,015		3,399,944

(*1)	Long-term investment securities were designated as financial assets at fair value through profit of loss since the embedded derivative (conversion right option), which should be separated from the host contract, could not be separately measured.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

26.

Categories of Financial Instruments, Continued

(1)

Financial assets by categories as of June 30, 2015 and December 31, 2014 are as follows, Continued:

(*2)	Details of loans and other receivables as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Short-term loans	￦	21,758		67,989
Accounts receivable—other		300,037		305,990
Accrued income		6,924		6,354
Long-term loans		34,874		38,457
Guarantee deposits		163,891		156,807

	￦	527,484		575,597

(2)

Financial liabilities by categories as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Derivative financial liabilities	￦	—		—		88,498		88,498
Borrowings		—		858,225		—		858,225
Debentures(*1)		55,351		4,900,919		—		4,956,270
Accounts payable—other and others(*2)		—		1,978,004		—		1,978,004

	￦	55,351		7,737,148		88,498		7,880,997


(In millions of won)
	December 31, 2014
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Derivative financial liabilities	￦	—		—		130,889		130,889
Borrowings		—		292,280		—		292,280
Debentures(*1)		110,365		4,744,502		—		4,854,867
Accounts payable—other and others(*2)		—		2,582,608		—		2,582,608

	￦	110,365		7,619,390		130,889		7,860,644

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

26.

Categories of Financial Instruments, Continued

(2)

Financial liabilities by categories as of June 30, 2015 and December 31, 2014 are as follows, Continued:

(*1)

(*2)	Details of accounts payable and other payables as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Accounts payable—other	￦	848,511		1,086,485
Withholdings		—		3
Accrued expenses		434,316		615,488
Current installments of long-term payables—other		118,955		189,389
Long-term payables—other		545,013		657,001
Other non-current liabilities		31,209		34,242

	￦	1,978,004		2,582,608

27.

Financial Risk Management

(1)

Financial risk management

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

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

1) Market risk

(i) Currency risk

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

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

27.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

1) Market risk, Continued

(i) Currency risk, Continued

Monetary foreign currency assets and liabilities as of June 30, 2015 are as follows:

(In millions of won, thousands of U.S. dollars, thousands of Euros, thousands of Japanese Yen, thousands of other currencies)


	Assets				Liabilities
	Foreign currencies		Won translation		Foreign currencies		Won translation
USD		59,027	￦	72,525		1,472,341	￦	1,655,058
EUR		10,716		13,837		19		24
JPY		33,489		307		—		—
AUD		—		—		298,776		257,802
CHF		—		—		299,163		363,241
Others		1,411		487		—		—

			￦	87,156			￦	2,276,125

In addition, the Company has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (See Note 15)

As of June 30, 2015, effects on income (loss) before income tax as a result of change in exchange rate by 10% are as follows:


(In millions of won)
	If increased by 10%		If decreased by 10%
USD	￦	5,981		(5,981	)
EUR		1,348		(1,348	)
JPY		31		(31	)
Others		48		(48	)

	￦	7,408		(7,408	)

(ii) Equity price risk

The Company has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of June 30, 2015, available-for-sale equity instruments measured at fair value amount to ￦696,010 million.

(iii) Interest rate risk

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

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

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

27.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

1) Market risk, Continued

(iii) Interest rate risk, Continued

The Company’s interest rate risk arises from floating-rate borrowings and payables. As of June 30, 2015, floating-rate debentures amount to ￦337,230 million and the Company has entered into interest rate swaps to hedge interest rate risk related to floating-rate borrowings and debentures (See Note 15). If interest rate only increases (decreases) by 1%, income before income taxes for the six-month period ended June 30, 2015 would not have been changed due to the interest expense from floating-rate borrowings and debentures.

2) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet his/her contractual obligations. The maximum credit exposure as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015		December 31, 2014
Cash and cash equivalents	￦	155,657		248,281
Financial instruments		133,069		143,069
Available-for-sale financial assets		2,030		8,648
Accounts receivable - trade		1,597,007		1,559,281
Loans and receivables		527,484		575,597
Derivative financial assets		57,883		67,728
Financial assets at fair value through profit or loss		7,128		7,817

	￦	2,480,258		2,610,421

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

For the six-month period ended June 30, 2015, the Company has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Company believes that the possibility of default is remote. Also, the Company’s credit risk can rise due to transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Company has a policy to deal with high credit worthy financial institutions. The amount of maximum exposure to credit risk of the Company is the carrying amount of financial assets as of June 30, 2015.

In addition, the aging of trade and other receivables that are overdue at the end of the reporting period but not impaired is stated in Note 5 and the analysis of financial assets that are individually determined to be impaired at the end of the reporting period is stated in Note 23.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

27.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

3) Liquidity risk

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

Contractual maturities of financial liabilities as of June 30, 2015 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 - 5 years		More than 5 years
Borrowings (*1)	￦	858,225		870,166		787,590		56,050		26,526
Debentures (*1)		4,956,270		6,085,519		444,044		3,085,155		2,556,320
Accounts payable - other and others (*2)		1,978,004		2,045,116		1,375,465		548,532		121,119

	￦	7,792,499		9,000,801		2,607,099		3,689,737		2,703,965

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

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

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

As of June 30, 2015, periods which cash flows from cash flow hedge derivatives are expected to occur are as follows:


(In millions of won)
	Carrying amount			Contractual cash flows			Less than 1 year			1 - 5 years			More than 5 years
Assets	￦	52,503			52,226			5,187			47,990			(951	)
Liabilities		(88,498	)		(91,506	)		(10,258	)		(80,648	)		(600	)

	￦	(35,995	)		(39,280	)		(5,071	)		(32,658	)		(1,551	)

(2)

Capital management

The Company manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity balance. The overall strategy of the Company is the same as that of the Company as of and for the year ended December 31, 2014.

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

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

27.

Financial Risk Management, Continued

(2)

Capital management, Continued

Debt-equity ratio as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)
	June 30, 2015			December 31, 2014
Liabilities	￦	9,057,078			9,170,241
Equity		13,806,367			13,542,221

Debt-equity ratio		65.60	%		67.72	%

(3)

Fair value

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of June 30, 2015 are as follows:


(In millions of won)
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that can be measured at fair value
Financial assets at fair value through profit or loss	￦	12,508		—		5,380		7,128		12,508
Derivative financial assets		52,503		—		52,503		—		52,503
Available-for-sale financial assets		696,010		607,306		47,140		41,564		696,010

	￦	761,021		607,306		105,023		48,692		761,021

Financial assets that cannot be measured at fair value
Cash and cash equivalents(*1)	￦	155,687		—		—		—		—
Available-for-sale financial assets(*1,2)		295,381		—		—		—		—
Accounts receivable—trade and others(*1)		2,124,491		—		—		—		—
Financial instruments(*1)		133,069		—		—		—		—

	￦	2,708,628		—		—		—		—

Financial liabilities that can be measured at fair value
Financial liabilities at fair value through profit or loss	￦	55,351		—		55,351				55,351
Derivative financial liabilities		88,498		—		88,498		—		88,498

	￦	143,849		—		143,849		—		143,849

Financial liabilities that cannot be measured at fair value
Borrowings	￦	858,225		—		859,322		—		859,322
Debentures		4,900,919		—		5,267,575		—		5,267,575
Accounts payable—other and others(*1)		1,978,004		—		—		—		—

	￦	7,737,148		—		6,126,897		—		6,126,897

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

27.

Financial Risk Management, Continued

(3)

Fair value, Continued

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2014 are as follows:


(In millions of won)
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that can be measured at fair value
Financial assets at fair value through profit or loss	￦	16,530		—		8,713		7,817		16,530
Derivative financial assets		59,015		—		59,015		—		59,015
Available-for-sale financial assets		586,675		490,741		47,002		48,932		586,675

	￦	662,220		490,741		114,730		56,749		662,220

Financial assets that cannot be measured at fair value
Cash and cash equivalents(*1)	￦	248,311		—		—		—		—
Available-for-sale financial assets(*1,2)		211,466		—		—		—		—
Accounts receivable—trade and others(*1)		2,134,878		—		—		—		—
Financial instruments(*1)		143,069		—		—		—		—

	￦	2,737,724		—		—		—		—

Financial liabilities that can be measured at fair value
Financial liabilities at fair value through profit or loss	￦	110,365		—		110,365		—		110,365
Derivative financial liabilities		130,889		—		130,889		—		130,889

	￦	241,254		—		241,254		—		241,254

Financial liabilities that cannot be measured at fair value
Borrowings	￦	292,280		—		300,048		—		300,048
Debentures		4,744,502		—		5,103,527		—		5,103,527
Accounts payable—other and others(*1)		2,582,608		—		—		—		—

	￦	7,619,390		—		5,403,575		—		5,403,575

(*1)	Does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are closed to the reasonable approximate fair values.

(*2)	Equity instruments which do not have quoted price in an active market for the identical instruments (inputs for Level 1) are measured at cost in accordance with K-IFRS 1039 as such equity instruments cannot be reliably measured using other methods.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

27.

Financial Risk Management, Continued

(3)

Fair value, Continued

The Company uses various valuation methods for valuation of fair value of financial instruments that are not traded in an active market. Fair value of available-for-sale securities is determined using the market approach methods and financial assets through profit or loss are measured using the option pricing model. In addition, derivative financial contracts and long-term liabilities are measured using the present value methods. Inputs used to such valuation methods include swap rate, interest rate, and risk premium, and the Company performs valuation using the inputs which are consistent with natures of assets and liabilities being evaluated.

Interest rates used by the Company for the fair value measurement as of June 30, 2015 are as follows:


		Interest rate
Derivative instruments		1.57 ~ 1.87%
Borrowings and debentures		2.33 ~ 2.48%


(In millions of won)
	Balance at January 1		Loss for the period			Other comprehensive loss			Balance at June 30
Financial assets at fair value through profit or loss	￦	7,817		(689	)		—			7,128
Available-for-sale financial assets		48,932		—			(7,368	)		41,564

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

27.

Financial Risk Management, Continued

(4)

Enforceable master netting agreement or similar agreement

Carrying amount of financial instruments recognized of which offset agreements are applicable as of June 30, 2015 are as follows:


(In millions of won)	Gross financial instruments recognized		Gross offset financial instruments recognized			Net financial instruments presented on the statements of financial position		Relevant amount not offset on the statements of financial position					Net amount
	Gross financial instruments recognized		Gross offset financial instruments recognized					Financial instruments			Cash collaterals received		Net amount
Financial assets:
Derivatives(*)	￦	37,578		—			37,578		(36,494	)		—		1,084
Accounts receivable – trade and others		115,214		(106,599	)		8,615		—			—		8,615

	￦	152,792		(106,599	)		46,193		(36,494	)		—		9,699

Financial liabilities:
Derivatives(*)	￦	36,494		—			36,494		(36,494	)		—		—
Accounts payable – other and others		106,599		(106,599	)		—		—			—		—

	￦	143,093		(106,599	)		36,494		(36,494	)		—		—

Carrying amount of financial instruments recognized of which offset agreements are applicable as of December 31, 2014 are as follows:


(In millions of won)	Gross financial instruments recognized		Gross offset financial instruments recognized			Net financial instruments presented on the statements of financial position		Relevant amount not offset on the statements of financial position					Net amount
	Gross financial instruments recognized		Gross offset financial instruments recognized					Financial instruments			Cash collaterals received		Net amount
Financial assets:
Derivatives(*)	￦	48,057		—			48,057		(45,892	)		—		2,165
Accounts receivable – trade and others		128,794		(117,568	)		11,226		—			—		11,226

	￦	176,851		(117,568	)		59,283		(45,892	)		—		13,391

Financial liabilities:
Derivatives(*)	￦	45,892		—			45,892		(45,892	)		—		—
Accounts payable – other and others		117,568		(117,568	)		—		—			—		—

	￦	163,460		(117,568	)		45,892		(45,892	)		—		—

(*)	The amount is applicable by enforceable master netting agreement according to ISDA (International Swap and Derivatives Association).

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

28.

Transactions with Related Parties

(1)

List of related parties


Relationship		Company
Ultimate Controlling Entity		SK Holding Co., Ltd.
Subsidiaries		SK Planet Co., Ltd. and 38 others(*)
Joint ventures		Dogus Planet, Inc. and four others
Associates		SK hynix Inc. and 51 others
Affiliates		The Ultimate Controlling Entity’s investor using the equity method and the Ultimate Controlling Entity’s subsidiaries and associates, etc.

(*)	As of June 30, 2015, subsidiaries of the Company are as follows:


Company	Ownership percentage (%)		Types of business
SK Telink Co., Ltd.		83.5	Telecommunication and MVNO service
M&Service Co., Ltd.		100.0	Data base and internet website service
SK Communications Co., Ltd.		64.6	Internet website services
Stonebridge Cinema Fund		55.2	Investment association
Commerce Planet Co., Ltd.		100.0	Online shopping mall operation agency
SK Broadband Co., Ltd.		100.0	Telecommunication services
K-net Culture and Contents Venture Fund		59.0	Investment association
Fitech Focus Limited Partnership II		66.7	Investment association
Open Innovation Fund		98.9	Investment association
PS&Marketing Corporation		100.0	Communications device retail business
Service Ace Co., Ltd.		100.0	Customer center management service
Service Top Co., Ltd.		100.0	Customer center management service
Network O&S Co., Ltd.		100.0	Base station maintenance service
BNCP Co., Ltd.		100.0	Internet website services
Icon Cube Holdings Co., Ltd.		100.0	Investment association
Icon Cube Co., Ltd.		100.0	Internet website services
SK Planet Co., Ltd.		100.0	Telecommunication service
Neosnetworks Co., Ltd.		83.9	Guarding of facilities
IRIVER LIMITED		49.0	Manufacturing of media and sound equipment
iriver Enterprise Ltd.		100.0	Management of Chinese subsidiary
iriver America Inc.		100.0	Sales and marketing in North America
iriver Inc.		100.0	Sales and marketing in North America
iriver China Co., Ltd.		100.0	Manufacturing of MP3,4 and domestic sales in China
Dongguan iriver Electronics Co., Ltd.		100.0	Manufacturing of e-book and domestic sales in China
Groovers JP Ltd.		100.0	Digital music contents sourcing and distribution service
SK Telecom China Holdings Co., Ltd.		100.0	Investment association
SK Global Healthcare Business Group., Ltd.		100.0	Investment association
SK Planet Japan, K. K.		100.0	Digital contents sourcing service
SKT Vietnam PTE. Ltd.		73.3	Telecommunication service
SK Planet Global PTE. Ltd.		100.0	Digital contents sourcing service
SKP GLOBAL HOLDINGS PTE. LTD.		100.0	Investment association
SKT Americas, Inc.		100.0	Information gathering and consulting
SKP America LLC.		100.0	Digital contents sourcing service
YTK Investment Ltd.		100.0	Investment association
Atlas Investment		100.0	Investment association
Technology Innovation Partners, L.P.		100.0	Investment association
SK Telecom China Fund I L.P.		100.0	Investment association
shopkick Management Company, Inc.		95.2	Investment association
shopkick, Inc.		100.0	Mileage-based online transaction application development

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

28.

Transactions with Related Parties, Continued

(2)

Compensation for the key management

The Company considers registered directors who have substantial role and responsibility in planning, operating, and controlling of the business as key management. The compensation given to such key management for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	2015				2014
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Salaries	￦	203		1,560		287		1,626
Provision for retirement benefits		421		542		113		681

	￦	624		2,102		400		2,307

Compensation for the key management includes salaries, non-monetary salaries and contributions made in relation to the pension plan.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

28.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the three and six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)		2015
		Operating revenue and others				Operating expense and others				Acquisition of property and equipment				Loans
Scope	Company	Three- month period ended June 30		Six- month period ended June 30		Three- month period ended June 30		Six- month period ended June 30		Three- month period ended June 30		Six- month period ended June 30		Three- month period ended June 30		Six- month period ended June 30
Ultimate Controlling Entity	SK Holding Co., Ltd.(*1)	￦	206		347		6,847		184,576		—		—		—		—
Subsidiaries	SK Broadband Co., Ltd.		38,684		64,378		133,507		260,899		1,977		2,000		—		—
	PS&Marketing Corporation		2,995		5,621		170,365		416,028		249		315		—		—
	Network O&S Co., Ltd.		656		1,559		47,674		79,673		—		—		—		—
	SK Planet Co., Ltd.		16,013		27,183		134,795		266,743		1,640		1,720		—		—
	SK Telink Co., Ltd.		16,242		30,296		5,575		13,507		—		—		—		—
	Service Ace Co., Ltd.		1,907		3,805		35,472		75,406		—		—		—		—
	Service Top Co., Ltd.		2,138		4,121		39,238		78,122		—		—		—		—
	Others		3,206		6,235		7,149		15,040		72		150		—		—

			81,841		143,198		573,775		1,205,418		3,938		4,185		—		—

Associates	F&U Credit information Co., Ltd.		404		853		9,205		20,718		—		—		—		—
	HappyNarae Co., Ltd.		16		34		1,340		1,755		2,323		2,643		—		—
	SK hynix Inc.(*2)		1,610		48,198		2,194		2,199		—		—		—		—
	SK Wyverns Baseball Club Co., Ltd.		279		561		1,302		10,908		—		—		—		—
	KEB HanaCard Co., Ltd.		5,418		10,850		2,837		8,223		—		—		—		—
	Others(*3)		2,429		2,544		1,715		3,437		11		11		—		500

			10,156		63,040		18,593		47,240		2,334		2,654		—		500

Other	SK Engineering & Construction Co., Ltd.		764		4,138		7,594		8,590		56,071		83,615		—		—
	SK C&C Co., Ltd.		806		2,026		63,560		121,686		34,720		63,442		—		—
	SK Networks Co., Ltd.		3,506		4,446		4,368		8,276		—		—		—		—
	SK Networks service Co., Ltd.		2,433		4,731		14,282		17,160		423		427		—		—
	SK Telesys Co., Ltd.		46		95		1,639		3,854		8,830		47,948		—		—
	Others		3,785		6,331		6,898		12,734		1,575		1,882		—		—

			11,340		21,767		98,341		172,300		101,619		197,314		—		—

Total		￦	103,543		228,352		697,556		1,609,534		107,891		204,153		—		500

(*1)	Operating expense and others include ￦171,053 million of dividends paid by the Company.

(*2)	Operating revenue and others include ￦43,830 million of dividends received from SK hynix Inc.

(*3)	Operating revenue and others include ￦2,103 million and ￦227 million of dividends received from Korea IT Fund and UniSK, respectively.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

28.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the three and six-month periods ended June 30, 2015 and 2014 are as follows, Continued:


(In millions of won)		2014
		Operating revenue and others				Operating expense and others				Acquisition of property and equipment				Loans
Scope	Company	Three- month period ended June 30		Six- month period ended June 30		Three- month period ended June 30		Six- month period ended June 30		Three- month period ended June 30		Six- month period ended June 30		Three- month period ended June 30		Six- month period ended June 30
Ultimate Controlling Entity	SK Holding Co., Ltd.(*1)	￦	123		234		6,936		184,425		—		—		—		—
Subsidiaries	SK Broadband Co., Ltd.		41,146		72,100		135,525		255,641		46		46		—		—
	PS&Marketing Corporation		4,090		6,785		181,452		341,566		841		841		—		—
	Network O&S Co., Ltd.		623		1,272		38,256		70,143		—		—		—		—
	SK Planet Co., Ltd.		15,325		28,188		156,730		298,062		545		1,045		—		—
	SK Telink Co., Ltd.		11,910		23,129		3,679		11,352		224		227		—		—
	Service Ace Co., Ltd.		1,792		3,542		32,629		69,559		—		—		—		—
	Service Top Co., Ltd.		1,661		3,303		35,509		75,200		—		—		—		—
	Others		2,602		3,708		5,543		13,014		50		50		—		—

			79,149		142,027		589,323		1,134,537		1,706		2,209		—		—

Associates	F&UCredit information Co., Ltd.		415		893		9,354		21,018		—		—		—		—
	HappyNarae Co., Ltd.		—		—		599		1,502		2,725		3,492		—		—
	SK hynix Inc.		1,312		3,171		—		879		—		—		—		—
	SK Wyverns Baseball Club Co., Ltd.		5		8		—		8,921		—		—		—		—
	HanaSK Card Co., Ltd.(*2)		6,448		13,419		744		1,512		—		—		—		—
	Others		1,223		1,299		2,595		4,338		—		—		45		45

			9,403		18,790		13,292		38,170		2,725		3,492		45		45

Other	SK Engineering & Construction Co., Ltd		670		1,296		11,474		11,474		55,586		55,586		—		—
	SK C&C Co., Ltd.		1,167		1,853		56,382		112,694		13,736		37,092		—		—
	SK Networks Co., Ltd.		5,171		9,994		51,334		195,274		2,452		2,454		—		—
	SK Networks service Co., Ltd.		5,293		5,293		9,400		14,279		435		435		—		—
	SK Telesys Co., Ltd.		25		81		1,708		1,976		36,200		57,399		—		—
	Others		3,133		5,379		1,860		6,711		3,490		3,847		—		—

			15,459		23,896		132,158		342,408		111,899		156,813		—		—

Total		￦	104,134		184,947		741,709		1,699,540		116,330		162,514		45		45

(*1)	Operating expense and others include ￦171,053 million of dividends paid by the Company.

(*2)	During the year ended December 31, 2014, due to the merger with Hana SK Card Co., Ltd., the Company’s associate and KEB Card Co., Ltd., the Company exchanged 57,647,058 shares of Hana SK Card Co., Ltd., with 67,627,587 shares of the surviving company, KEB HanaCard Co., Ltd.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

28.

Transactions with Related Parties, Continued

(4)

Account balances as of June 30, 2015 and December 31, 2014 are as follows:


(In millions of won)		June 30, 2015
		Accounts receivable				Accounts payable
Scope	Company	Loans		Accounts receivable-trade, and others		Accounts payable– trade, and others
Ultimate Controlling Entity	SK Holding Co., Ltd.	￦	—		284		—
Subsidiaries	SK Broadband Co., Ltd.		—		1,487		12,328
	PS&Marketing Corporation		—		2,331		87,533
	Network O&S Co., Ltd.		—		90		23,456
	SK Planet Co., Ltd.		—		9,243		33,217
	SK Telink Co., Ltd.		—		9,676		3,258
	Service Ace Co., Ltd.		—		—		20,624
	Service Top Co., Ltd.		—		—		21,638
	Others		—		4,865		13,645

			—		27,692		215,699

Associates	HappyNarae Co., Ltd.		—		—		666
	SK hynix Inc.		—		1,346		2,413
	SK Wyverns Baseball Club., Ltd.		1,221		265		2
	Wave City Development Co., Ltd.		1,700		38,412		—
	Daehan Kanggun BcN Co., Ltd.		22,147		—		—
	KEB HanaCard Co., Ltd.		—		1,869		4,051
	Others		—		109		1,065

			25,068		42,001		8,197

Other	SK Engineering and Construction Co., Ltd.		—		3,092		13,680
	SK C&C Co., Ltd.		—		903		34,633
	SK Networks Co., Ltd.		—		4,133		1,066
	SK Networks Services Co., Ltd.		—		12		2,674
	SK Telesys Co., Ltd.		—		220		1,258
	SK Innovation Co., Ltd.		—		1,623		265
	Others		—		1,683		9,357

			—		11,666		62,933

Total		￦	25,068		81,643		286,829

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

28.

Transactions with Related Parties, Continued

(4)

Account balances as of June 30, 2015 and December 31, 2014 are as follows, Continued:


(In millions of won)		December 31, 2014
		Accounts receivable				Accounts payable
Scope	Company	Loans		Accounts receivable-trade, and others		Accounts payable– trade, and others
Ultimate Controlling Entity	SK Holding Co., Ltd.	￦	—		89		—
Subsidiaries	SK Broadband Co., Ltd.		—		3,236		38,432
	PS&Marketing Corporation		—		566		101,431
	Network O&S Co., Ltd.		—		1,201		12,981
	SK Planet Co., Ltd.		—		9,711		51,991
	SK Telink Co., Ltd.		—		10,306		5,665
	Service Ace Co., Ltd.		—		436		19,972
	Service Top Co., Ltd.		—		887		21,386
	Others		—		8,890		15,042

			—		35,233		266,900

Associates	HappyNarae Co., Ltd.		—		—		1,780
	SK hynix Inc.		—		2,561		2,763
	SK Wyverns Baseball Club., Ltd.		1,221		—		—
	Wave City Development Co., Ltd.		1,200		38,412		—
	Daehan Kanggun BcN Co., Ltd.		22,147		—		—
	KEB HanaCard Co., Ltd.		—		1,867		38
	Others		—		226		840

			24,568		43,066		5,421

Other	SK Engineering and Construction Co., Ltd.		—		359		3,754
	SK C&C Co., Ltd.		—		718		76,777
	SK Networks Co., Ltd.		—		2,027		4,766
	SK Networks Services Co., Ltd.		—		12		2,004
	SK Telesys Co., Ltd.		—		282		1,559
	SK Innovation Co., Ltd.		—		1,510		247
	Others		—		2,592		6,108

			—		7,500		95,215

Total		￦	24,568		85,888		367,536

(5)

As of June 30, 2015, there are no collateral or guarantee provided by related parties to the Company, nor by the Company to related parties.

(6)

For the year ended December 31, 2014, the Company acquired convertible bonds with a face value of ￦5,000 million and ￦6,000 million, respectively, from IRIVER LIMITED and Health Connect Co., Ltd. at the face value. During the six-month period ended June 30, 2015, the Company exercised the conversion right for the convertible bonds of Health Connect Co., Ltd. As a result of this transaction, investments in associates have increased by ￦5,900 million.

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

29.

Sale and Leaseback

For the year ended December 31, 2012, the Company disposed a portion of its property and equipment and investment property, and entered into lease agreements with respect to those assets. This sale and leaseback transaction is accounted for as an operating lease and the gain on disposal of the property and equipment is recognized as profit or loss.

The Company recognized lease payment of ￦7,270 million and ￦7,038 million, respectively, in relation to the above operating lease agreement and lease revenue of ￦4,770 million and ￦4,516 million, respectively, in relation to the sublease agreement for the six-month periods ended June 30, 2015 and 2014. Future lease payments and lease revenue from the above operating lease agreement and sublease agreement are as follows:


(In millions of won)	Lease payments		Lease revenue
Less than 1 year	￦	14,757		9,540
1~5 years		54,718		31,180
More than 5 years		34,144		16,870

	￦	103,619		57,590

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

30.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Interest income	￦	(11,160	)		(12,827	)
Dividends		(56,731	)		(10,567	)
Gain on foreign currency translation		(1,098	)		(115	)
Gain relating to financial liabilities at fair value through profit or loss		(5,188	)		—
Gain on disposal of long-term investment securities		(2,828	)		(5,851	)
Gain on disposal of property and equipment and intangible assets		(937	)		(600	)
Gain on valuation of derivatives		(1,030	)		(6,017	)
Gain on settlement of derivatives		—			(118	)
Loss on foreign currency translation		25			1,741
Bad debt for accounts receivable—trade		23,612			16,034
Bad debt for accounts receivable—other		4,085			8,123
Loss on disposal of long-term investments securities		2			6
Loss relating to financial assets at fair value through profit or loss		689			1,352
Other finance costs		32			—
Depreciation and amortization		1,113,981			1,083,590
Loss on disposal of property and equipment and intangible assets		2,056			2,709
Interest expenses		121,132			132,372
Loss relating to financial liabilities at fair value through profit or loss		174			7,798
Loss on settlement of derivatives		4,517			335
Provision for retirement benefits		17,826			16,804
Income tax expense		170,359			123,472
Other expenses		4,028			3,149

	￦	1,383,546			1,361,390

SK TELECOM CO., LTD.

Notes to the Condensed Separate Interim Financial Statements

For the six-month periods ended June 30, 2015 and 2014

30.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Accounts receivable—trade	￦	(61,178	)		(100,450	)
Accounts receivable—other		2,495			40,419
Advance payments		(32,173	)		(22,336	)
Prepaid expenses		3,561			4,888
Inventories		(11,100	)		2,426
Long-term prepaid expenses		(1,296	)		(4,905	)
Guarantee deposits		(8,397	)		3,202
Accounts payable—other		(95,177	)		(485,253	)
Advanced receipts		16,966			7,281
Withholdings		(161,073	)		184,824
Deposits received		(7,164	)		(462	)
Accrued expenses		(189,574	)		(53,559	)
Unearned revenue		(58,743	)		(56,706	)
Provisions		(11,476	)		4,710
Long-term provisions		(9,393	)		32,880
Plan assets		(5,357	)		(884	)
Retirement benefit payment		(20,266	)		(10,710	)
Others		1,358			1,933

	￦	(647,987	)		(452,702	)

(3)

Significant non-cash transactions for the six-month periods ended June 30, 2015 and 2014 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2015			June 30, 2014
Transfer of other property and equipment and others to construction in progress	￦	327,678			363,931
Transfer of construction in progress to property and equipment and intangible assets		624,450			795,529
Decrease of accounts payable—other related to acquisition of property and equipment and intangible assets		(142,839	)		(278,349	)

31.

Subsequent Events

(1)

Interim dividends

On July 23, 2015, the Board of Directors of the Company resolved to pay interim cash dividends of ￦1,000 per share totaling ￦72,629 million (Market dividend rate: 0.40%). The ex-dividend date was June 30, 2015 and the interim dividends are expected to be paid within twenty days after the date of the Board of Directors’ resolution.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


SK TELECOM CO., LTD. (Registrant)

By: /s/ Yong Hwan Lee
(Signature)
Name:		Yong Hwan Lee
Title:		Chief Financial Officer

Date: September 17, 2015