FORM 6-K

6-K 1 d596047d6k.htm FORM 6-K 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 2013

COMMISSION FILE NUMBER 333-04906

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

11, Euljiro2-ga, Jung-gu

Seoul 100-999, Korea

(Address of principal executive offices)

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

Form 20-F x Form 40-F ¨

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

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): ¨

SEMI-ANNUAL BUSINESS REPORT

(From January 1, 2013 to June 30, 2013)

THIS IS A SUMMARY OF THE SEMI-ANNUAL BUSINESS REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION.

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

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

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

I. COMPANY OVERVIEW

1. Company Overview

Starting in the first quarter of 2011, the Company prepares and reports its financial statements under K-IFRS. The transition date of the Company and its consolidated subsidiaries to K-IFRS is January 1, 2010 and the adoption date is January 1, 2011. The Company’s semi-annual business report for the six months ended June 30, 2013 includes the following consolidated subsidiaries:


Name	Date of Establishment	Principal Business	Total Assets as of Dec. 31, 2012 (millions of Won)		Material Subsidiary*
SK Telink Co., Ltd.	Apr. 9, 1998	Telecommunication services		241,977	Material
SK Communications Co., Ltd.	Sep. 19, 1996	Internet portal and other Internet information services		265,819	Material
Loen Entertainment, Inc.	Jul. 7, 1982	Music and audio publication		173,079	Material
Stonebridge Cinema Fund	Sep. 30, 2005	Investment partnership		10,965
Commerce Planet Co., Ltd.	Jul. 1, 1997	Online shopping mall operation services		34,007
SK Broadband Co., Ltd.	Sep. 26, 1997	Fixed-line telecommunication services, multimedia and IPTV services		3,035,657	Material
K-net Culture and Contents Venture Fund	Nov. 24, 2008	Investment partnership		43,779
Hwaitec Focus Investment Partnership 2	Dec. 12, 2008	Investment partnership		22,547
Open Innovation Fund	Dec. 22, 2008	Investment partnership		43,394
PS&Marketing Co., Ltd.	Apr. 3, 2009	Sale of telecommunication devices		317,613	Material
Service Ace Co., Ltd.	Jul. 1, 2010	Customer center management services		48,956
Service Top Co., Ltd.	Jul 1, 2010	Customer center management services		43,332
Network O&S Co., Ltd.	Jul. 1, 2010	Network maintenance services		165,818	Material
BNCP Co., Ltd.	Dec. 7, 2009	Internet services		24,000
SK Planet Co., Ltd.	Oct. 1,2011	Telecommunication and platform services		1,647,965	Material
M&Service Co., Ltd.	Feb. 10, 2000	Online information services		48,493
SK Planet Japan, K.K.	Mar. 14, 2012	Software development and digital contents sourcing services		47
SK Planet Global PTE, LTD.	Aug. 14, 2012	Software development and digital contents sourcing services		636
SK Planet America LLC	Dec. 27, 2012	Software development and digital contents sourcing services		6,669
SK Global Healthcare Business Group	Sep. 14, 2012	Investment		25,784
Technology Innovation Partners, L.P.	Jun. 24, 2011	Investment		34,120
SK Telecom China Fund I L.P.	Sep. 14, 2011	Investment		3,454
SK Telecom China Holdings Co., Ltd.	Jul. 12, 2007	Investment		35,233
Shenzhen E-eye High Tech Co., Ltd.	Apr. 1, 2000	Telematics manufacturing		18,915


Name	Date of Establishment	Principal Business	Total Assets as of Dec. 31, 2012 (millions of Won)		Material Subsidiary*
SKT Vietnam PTE., Ltd.	Apr. 5, 2000	Telecommunication services		38,331
SKT Americas, Inc.	Dec. 29, 1995	Information collection and management consulting services		36,378
YTK Investment Ltd.	Jul. 1, 2010	Investment		64,036	Material
Atlas Investment	Jun. 24, 2011	Investment		51,065	Material

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

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

B. Date of Incorporation: March 29, 1984

C. Location of Headquarters

(1) Address: 11 Euljiro 2-ga, Jung-gu, Seoul, Korea

(2) Phone: +82-2-6100-2114

(3) Website: http://www.sktelecom.com

D. Major Businesses

(1) Wireless business

The Company provides wireless telecommunications services, characterized by its competitive strengths in handheld devices, affordable pricing, network coverage and an extensive contents library. Since the introduction of services employing LTE technology in July 2011, the telecommunications market for such services has grown as demand for fast data transfer speeds and differentiated services has increased. Having reached one million subscribers by January 2012 and over 10 million subscribers by April 2013, the Company has solidified its leadership position in LTE services as it has done with its 3G services. In June 2013, the Company became the first telecommunications service provider in the world to provide commercial LTE-Advanced (“LTE-A”) services using carrier aggregation technology. The Company is also improving the profitability of its wireless business through efficient capital expenditures and marketing and enhancement of marketing network and products. In the business-to-business area, the Company is strengthening its solutions business through the implementation of five main solution products: Smart Store, Smart Work, Smart Cloud, Green & Safety and M–Ad & Payment. As of June 30, 2013, the Company had 570,000 paying subscribers for our mobile IPTV services, which commercially launched in October 2012. The Company is the first telecommunications services provider in the world to provide full high definition streaming services using its LTE-A network. With increasing video on demand usage and the potential to expand into other business areas such as advertising and shopping, the Company expects that the mobile IPTV services business will grow in the mid- to long-term.

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

(2) Fixed-line business

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

(3) Other businesses

In the digital contents business area, the Company provides high-quality digital contents in its leading mobile contents marketplace, T Store, which had 20.6 million subscribers as of June 30, 2013 and which the Company plans to expand globally. With respect to the Company’s commerce business, 11th Street, which continues to gain market share, is a platform service that connects various sellers and purchasers online. In the loyalty marketing business area, the Company provides an increasing number of products involving OK Cashbag points in order to attract new customers and retain existing customers. Since its inception in 1999, OK Cashbag, owned by SK Planet Co., Ltd. (“SK Planet”) continues to be Korea’s largest loyalty mileage program with 36 million members. In the location-based services business area, users of the Company’s T-Map Navigation service reached 17.6 million as of June 30, 2013. T-Map Navigation provides real time traffic information and various local information. Utilizing location-based service technology in other services, including leisure, logistics and travel services, the Company provides increased convenience and added value to customers. In the media business area, the Company provides “Hoppin” service that enables subscribers to access various multimedia contents through personal computers, mobile devices and other digital devices. In the advertising business area, the Company is engaged in advertisement production, promotion services and research and consulting services to substantively help businesses increase their value in a rapidly evolving business environment.

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

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

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

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

E. Credit Ratings

(1) Corporate bonds


Credit rating date	Subject of rating	Credit rating	Credit rating entity (Credit rating range)	Rating classification
May 27, 2011	Corporate bond	AAA	Korea Ratings	Regular rating
June 13, 2011	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
June 23, 2011	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
December 12, 2011	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
December 13, 2011	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating
December 16, 2011	Corporate bond	AAA	Korea Ratings	Current rating
June 21, 2012	Corporate bond	AAA	Korea Ratings	Regular rating
June 22, 2012	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
June 29, 2012	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
August 10, 2012	Corporate bond	AAA	Korea Ratings	Current rating
August 14, 2012	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
August 14, 2012	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating
April 11, 2013	Corporate bond	AAA	Korea Ratings	Current rating
April 11, 2013	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
April 11, 2013	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating
April 11, 2013	Corporate bond	AAA	Korea Ratings	Regular rating
April 11, 2013	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
April 11, 2013	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating

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

(2) Commercial paper (“CP”)


Credit rating date	Subject of rating	Credit rating	Credit rating entity (Credit rating range)	Rating classification
May 27, 2011	CP	A1	Korea Ratings	Current rating
June 13, 2011	CP	A1	NICE Investors Service Co., Ltd.	Current rating
June 23, 2011	CP	A1	Korea Investors Service, Inc.	Current rating
December 12, 2011	CP	A1	Korea Investors Service, Inc.	Regular rating
December 13, 2011	CP	A1	NICE Investors Service Co., Ltd.	Regular rating
December 16, 2011	CP	A1	Korea Ratings	Regular rating
June 21, 2012	CP	A1	Korea Ratings	Current rating
June 22, 2012	CP	A1	Korea Investors Service, Inc.	Current rating
June 29, 2012	CP	A1	NICE Investors Service Co., Ltd.	Current rating
December 18, 2012	CP	A1	Korea Ratings.	Regular rating
December 14, 2012	CP	A1	Korea Investors Service, Inc.	Regular rating
December 18, 2012	CP	A1	NICE Investors Service Co., Ltd.	Regular rating
April 11, 2013	CP	A1	Korea Ratings	Current rating
April 11, 2013	CP	A1	Korea Investors Service, Inc.	Current rating
April 11, 2013	CP	A1	NICE Investors Service Co., Ltd.	Current rating

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

(3) International credit ratings


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

2. Company History

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

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

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

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

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

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

A. Location of Headquarters

•

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

•

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

•

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

•

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

•

11 Euljiro 2-ga, Jung-gu, Seoul (December 13, 2004)

B. Significant Changes in Management

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

C. Change in Company Name

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

D. Mergers, Acquisitions and Restructuring

[SK Telecom]

(1) Spin-off

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


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

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


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

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


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

•

Changes in shareholding, including majority shareholder

•

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

•

Appraisal rights of shareholders

•

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

•

Protection of creditors

•

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

•

Allocation of new shares

•

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

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

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

[SK Broadband]

(1) Merger

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

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

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

[SK Planet]

(1) Merger

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

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

[SK Telink]

(1) Merger

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

[SK Communications]

(1) Disposition and acquisition of businesses

1. Disposition of publishing business division

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

2. Acquisition of the “KUKU” division

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

3. Disposition of the Spicus division

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

(2) Disposition of shares

1. Disposition of shares of Etoos

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

2. Disposition of shares of SK i-Media

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

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

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

4. Disposition of shares of Service-In

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

E. Other Important Matters related to Management Activities

[SK Telecom]

(1) Issuance of bonds

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

(2) Issuance of hybrid securities

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

(3) Conversion of convertible notes

On April 7, 2009, the Company issued convertible notes with a maturity of five years in the principal amount of US$332,528,000 with an annual interest rate of 1.75%. During the six-month period ended June 30, 2013, holders exercised their conversion rights with respect to an aggregate principal amount of US$111,731,000 of the convertible notes and the Company delivered 813,483 treasury shares upon conversion. In connection with such conversion, the Company recognized Won 37,364 million in financial costs during the six-month period of June 30, 2013. As of June 30, 2013, 1,607,584 common shares are available for conversion upon the holders’ exercise of their conversion rights.

[SK Broadband]

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

[SK Communications]

Leak of personal information

In July 2011, there was a leak of personal information of subscribers of NATE and Cyworld websites operated by SK Communications. As of June 30, 2013, twenty lawsuits were filed against SK Communications, alleging that the leak was caused by its poor management of subscribers’ personal information and seeking damages of approximately Won 5.5 billion. With respect to a few of the lawsuits, the relevant district courts have rendered judgments for the relevant plaintiffs’ claims in part and SK Communications has appealed such judgments to the applicable high courts, where the cases are currently pending. Other cases remain pending at various district courts in Korea.

3. Total Number of Shares

A. Total Number of Shares


(As of June 30, 2013)		(Unit: in shares)


	Share type
Classification	Common shares			Total		Remarks
I. Total number of authorized shares		220,000,000	—		220,000,000		—
II. Total number of shares issued to date		89,278,946	—		89,278,946		—
III. Total number of shares retired to date		8,533,235	—		8,533,235		—
a. reduction of capital		—	—		—		—
b. retirement with profit		8,533,235	—		8,533,235		—
c. redemption of redeemable shares		—	—		—		—
d. others		—	—		—		—
IV. Total number of shares (II-III)		80,745,711	—		80,745,711		—
V. Number of treasury shares		10,237,229	—		10,237,229		—
VI. Number of shares outstanding (IV-V)		70,508,482	—		70,508,482		—

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

B. Treasury Shares

(1) Acquisitions and dispositions of treasury shares


(As of June 30, 2013)		(Unit: in shares)



Acquisition methods			Type of shares		At the beginning of period		Changes							At the end of period
Acquisition methods			Type of shares		At the beginning of period		Acquired (+)		Disposed (-)			Retired (-)		At the end of period
Acquisition pursuant to the Financial Investment Services and Capital Markets Act of Korea (“FSCMA”)	Direct acquisition	Direct acquisition from market		Common shares		7,086,028		—		—			—		7,086,028
		Direct acquisition from market		Preferred shares		—		—		—			—		—
		Direct over-the- counter acquisition		Common shares		—		—		—			—		—
		Direct over-the- counter acquisition		Preferred shares		—		—		—			—		—
		Tender offer		Common shares		—		—		—			—		—
		Tender offer		Preferred shares		—		—		—			—		—
		Sub-total		Common shares		7,086,028		—		—			—		7,086,028
		Sub-total		Preferred shares		—		—		—			—		—
	Acquisition through trust and other agreements	Held by trustee		Common shares		—		—		—			—		—
		Held by trustee		Preferred shares		—		—		—			—		—
		Held in actual stock		Common shares		3,886,710		—		—			—		3,886,710
		Held in actual stock		Preferred shares		—		—		—			—		—
		Sub-total		Common shares		3,886,710		—		—			—		3,886,710
		Sub-total		Preferred shares		—		—		—			—		—
Other acquisition				Common shares		77,974		—		813,483	*		—		(735,509	)
Other acquisition				Preferred shares		—		—		—			—		—
Total				Common shares		11,050,712		—		813,483			—		10,237,229
Total				Preferred shares		—		—		—			—		—

During the first half of 2013, 813,483 common shares were delivered to bondholders upon conversion of the Company’s convertible notes. Of the 10,237,229 treasury shares held by the Company as of June 30, 2013, [1,607,594] shares are deposited with the Korea Securities Depository for delivery upon conversion of the Company’s convertible notes.

4. Status of Voting Rights


(As of June 30, 2013)		(Unit: in shares)


Classification		Number of shares		Remarks
Total shares (A)	Common share		80,745,711		—
Total shares (A)	Preferred share		—		—
Number of shares without voting rights (B)	Common share		10,237,229		Treasury shares
Number of shares without voting rights (B)	Preferred share		—		—
Shares without voting rights pursuant to the Company’s articles of incorporation (the “Articles of Incorporation”) (C)	Common share		—		—
	Preferred share		—		—
Shares with restricted voting rights pursuant to Korean law (D)	Common share		—		—
	Preferred share		—		—
Shares with reestablished voting rights (E)	Common share		—		—
Shares with reestablished voting rights (E)	Preferred share		—		—
The number of shares with exercisable voting right s (F = A - B - C - D + E)	Common share		70,508,482		—
	Preferred share		—		—

5. Dividends and Others

A. Dividends

(1)

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

•

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

(2)

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

(3)

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

•

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

(4)

Distribution of interim dividends of Won 1,000 was approved during the 344th Board of Directors’ Meeting on July 25, 2012.

(5)

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

•

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

(6)

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

B. Dividends for the Last Three Fiscal Years

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



Classification		As of and for the six months ended June 30, 2013		As of and for the year ended December 31, 2012		As of and for the year ended December 31, 2011
Par value per share (Won)			500		500		500
Net income			615,609		1,242,767		1,694,363
Net income per share (Won)			8,806		17,832		24,002
Total cash dividend			70,508		655,133		656,533
Total stock dividends			—		—		—
Percentage of cash dividend to available income (%)			11.5		52.7		38.7
Cash dividend yield ratio (%)	Common share		0.5		6.2		6.6
Cash dividend yield ratio (%)	Preferred share		—		—		—
Stock dividend yield ratio (%)	Common share		—		—		—
Stock dividend yield ratio (%)	Preferred share		—		—		—
Cash dividend per share (Won)	Common share		1,000		9,400		9,400
Cash dividend per share (Won)	Preferred share		—		—		—
Stock dividend per share (share)	Common share		—		—		—
Stock dividend per share (share)	Preferred share		—		—		—

*	The above figures were prepared based on separate financial statements. Net income per share means basic net income per share.

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

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

II. BUSINESS

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

1. Business Overview

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


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

[Wireless Business]

A. Industry Characteristics

As of June 30, 2013, the Korean mobile communication market can be considered to have reached its maturation stage with more than a 100% penetration rate. However, the Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology and the development of highly advanced LTE 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 advanced high speed packet access (HSPA+) network commercialized in October 2010 and the LTE network introduced in July 2011, B2B businesses, such as the corporate “connected workforce” business which can directly contribute to an enhancement in productivity, are expected to grow rapidly.

B. Growth Potential


			(Unit: in 1,000 persons)

Classification		As of June 30, 2013		As of December 31,
Classification		As of June 30, 2013		2012		2011		2010		2009
Number of subscribers	SK Telecom		27,140		26,961		26,553		25,750		24,270
	Others (KT, LGU+)		26,960		26,663		25,954		25,062		23,675
	Total		54,100		53,624		52,507		50,767		47,944

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

C. Domestic and Overseas Market Conditions

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

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

(Unit: in percentages)

Classification

As of June
30, 2013

As of December 31,

2012

2011

2010

2009

Mobile communication services

50.2

50.3

50.6

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

D. Business Overview and Competitive Strengths

The Company is seeking to transform itself from a telecommunications service provider into a comprehensive ICT service provider. It has continued to expand the scope of its services and achieved strong growth in subscribers amid fierce competition and rate cuts. As of June 30, 2012, the Company recorded Won 8.28 trillion in revenue and Won 960 billion in operating income on a consolidated basis and Won 6.32 trillion in revenue and Won 950 billion in operating income on a separate basis.

The number of subscribers as of June 30, 2013 was 27.14 million, an increase of approximately 110,000 from the previous quarter. In particular, the number of smartphone subscribers as of June 30, 2013 was 17.30 million, an increase of approximately 650,000 from the previous quarter, including 11 million LTE subscribers, solidifying the Company’s market leadership. Following the launch of commercial LTE services in July 2011, the Company became the first telecommunications service provider in the world to launch commercial LTE-A services on June 26, 2013. By launching various high quality services utilizing the LTE-A network such as group video conference call services, full high definition mobile IPTV streaming services, and ‘T Baseball Multiview,’ which allows users to watch multiple baseball games on one screen, the Company plans to provide an innovative user experience, enhance customer satisfaction and increase profitability.

The Company has proved that it has superior network quality compared to its competitors according to the Korea Communications Commission quality evaluations. The Company has also proved to be the leader in Korea’s top three customer satisfaction indices: according to the National Customer Satisfaction Index, Korean Customer Satisfaction Index and Korean Standard Service Quality Index, the Company has continued to hold the leading position for 16 years, 15 years and 14 years, respectively.

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

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

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

[Fixed-line Business]

A. Industry Characteristics

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

The number of subscribers of the Company’s IPTV services has reached over 7 million since the Company launched this service over four years ago and the Company continues to strengthen its position in the pay television market. In addition, with the increase in the number of smartphones, tablet PCs and other mobile devices, new services such as mobile IPTV and N-screen services are expected to grow significantly in the future.

B. Growth Potential

(Unit: in 1,000 persons)


				As of December 31,
Classification		As of June 30, 2013		2012		2011
Fixed-line Subscribers	High-speed Internet		18,530		18,254		17,860
	Fixed-line telephone		17,972		18,459		18,633
	IPTV (real-time)		7,378		6,310		3,591

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

C. Cyclical Nature and Seasonality

High-speed Internet, fixed-line telephone and IPTV services are mature markets that are generally not sensitive to cyclical economic changes due to the easing of competition resulting from the decrease in differentiation between service providers and the nature of the respective services. The accelerated transition to digital TV services as a result of the termination of analog open air TV broadcasting, as well as the entrance of Google Inc. (“Google”) and Apple Inc. (“Apple”) into the television market with their introduction of smart TV products, present opportunities by expanding the market size and increasing consumers’ interests. The Company is strengthening its competitiveness in the TV business by expanding its popular channels, including a new kids’ channel offered exclusively by it and channels broadcasting live MLB games, as well as providing full high definition live broadcasts through its mobile IPTV services using its new LTE-A network.

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


		(Unit: in percentages)

Classification	As of		As of December 31,
Classification	June 30, 2013		2012		2011
High-speed Internet (include resales)	24.1			24.1		23.5
Fixed-line telephone (include VOIP)	16.7			16.5		14.6
IPTV (real-time)	23.1			22.2		19.3

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

D. Business Overview and Competitive Strengths

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

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

[Other Business]

A. Industry Characteristics

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

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

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

B. Growth Potential

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

C. Domestic and Overseas Market Conditions

(1) Digital contents

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

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

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

(2) Commerce markets

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

D. Business Overview and Competitive Strengths

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

(1) Digital contents

T Store, launched in September 2009, reached 20.59 million subscribers and cumulative downloads of 1.3 billion as of June 2013, solidifying its leadership position in the Korean application market and plans to widen its services to tablets and navigation devices. The Company intends to further develop T Store into a global service platform by evolving it into a personalized gateway and mobile playground through expansion of the scope of serviceable devices, reinforcement of digital content offerings and enhancement of search services, among other things.

The Company’s “Hoppin” service, which provides N-screen media service enabling subscribers to enjoy video on demand through a number of N-screen compatible devices, including smartphones, tablets and PCs. Through continual service improvements and stable service provision, Hoppin has become the leading mobile video on demand service.

(2) Commerce (Open Market, OK Cashbag)

11th Street, an online marketplace, has continued its growth through effective marketing and customer satisfaction. Despite its later entry into the online commerce market (launched in 2008) which was already divided between Auction and G-Market, it is leading the domestic e-commerce market and is also firmly establishing its position as the leader in the mobile commerce market. Growth plans involving overseas joint ventures based on 11th Street’s business expertise have resulted in the successful launch of an open online commerce market in Turkey in partnership with Doğuş Group in March 2013.

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

(3) Location-based services

T-Map Navigation provides map, local information, real-time traffic information and navigation services. With cumulative subscribers of 17.64 million as of June 30, 2013, T-Map Navigation is one of the leading location-based service platforms in Korea. The Company is broadening the range of its location-based services by also providing “infotainment” systems to commercial vehicle businesses as well as providing localized content on its products, such as region-specific information and advertisements. The Company plans to further develop the T-Map Navigation platform by initiating open application programming interface-based services, providing services to more diverse types of devices and providing local area-based services.

(4) Music business

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

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

“CyWorld” service, the Company’s social networking website in Korea, had 26 million cumulative subscribers, 12 million monthly net users and 400 million page views as of June 30, 2013. The Company’s instant messenger service, “Nate-On,” had the largest market share of 72.1% in the instant messenger market in Korea with 7 million net users as of June 30, 2013. The Company’s Internet search portal service, “Nate,” had a market share of 5.7% as of June 30, 2013. (Source: Korean Click and Company’s internal data)

•

Satellite DMB service

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

2. Major Products & Services

A. Updates on Major Products and Services

(Unit: in millions of Won and percentages)


Business	Major Companies	Item	Major Trademarks	Consolidated Sales Amount (ratio)
Wireless	SK Telecom Co., Ltd., PS&Marketing Co., Ltd., Service Ace Co., Ltd., Service Top Co. Ltd., Network O&S Co., Ltd.	Mobile communication service, wireless data service, ICT service	T and others		6,570,302	(79.4%)
Fixed- line	SK Broadband Co., Ltd., SK Telink Co., Ltd.	Fixed-line phone, high speed Internet, data and network lease service	B tv , 00700 international call, 7Mobile and others		1,148,936	(13.9%)
Other	SK Planet Co., Ltd , Commerce Planet Co., Ltd , SK Communications Co., Ltd., Loen Entertainment, Inc., YTK Investment Ltd., Atlas Investment	Internet portal service and investment	OK Cashbag, NATE, 11th Street, T Store, T-Map Navigation, MelOn, Cyworld and others		557,621	(6.7%)
Total					8,276,859	(100%)

[Wireless Business]

In the past, based on the Company’s basic monthly subscription plan, the basic service fee was Won 13,000 per month and the usage fee was Won 20 per 10 seconds (daytime calls) and based on the Company’s standard monthly subscription plan, the basic service fee was Won 12,000 per month and the usage fee was Won 18 per 10 seconds. As of June 30, 2013, based on the Company’s standard monthly subscription plan, the basic service fee was Won 11,000 per month and the usage fee was Won 1.8 per second.

[Fixed-line Business]

SK Broadband provides broadband Internet access service, telephony, TV, corporate data services and other services for both individual and corporate customers. As of June 30, 2013, broadband Internet and TV services comprised 50.3% of SK Broadband’s revenue, telephony service 24.0%, corporate data services 25.1% and other telecommunications services 0.6%. Price fluctuations in the different services provided by SK Broadband are due to discounts provided for long-term contracts, changes in equipment costs and competition between companies.

[Other Business]

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


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

3. Investment Status

[Wireless Business]

A. Investment in Progress

(Unit: in 100 millions of Won)

Business

Classification

Investment
period

Subject of
investment

Investment effect

Expected
investment
amount

Amount
already
invested

Future
investment

Network/Common

Upgrade/
New installation

2013

Network,
systems and
others

Capacity increase and
quality improvement;
systems improvement

21,000

6,442

To be
determined

Total

21,000

6,442

To be
determined

B. Future Investment Plan

(Unit: in 100 millions of Won)

Business

Expected investment amount

Expected investment for each year

Investment effect

Asset type

Amount

2013

2014

2015

Network/Common

Network,
systems
and others

21,000

To be
determined

Upgrades to the existing
services and provision
of new services
including LTE Multi-
Carrier and LTE-A

Total

21,000

To be
determined

[Fixed-line Business]

A. Investment in Progress

(Unit: in 100 millions of Won)

Business

Classification

Investment
period

Subject of
investment

Investment effect

Total
investments

Amount
already
invested

Future
investment

High-speed Internet

Upgrade/
New installation

First half
of 2013

Backbone and
subscriber
network /
others

Expand subscriber
networks and facilities

1,202

337

To be
determined

Telephone

Television

158

Corporate Data

Increase leased-line
and integrated
information system

517

Others

Expand networks and
required space

168

Total

1,202

4. Revenues

(Unit: in millions of Won)


Business	Sales type	Item		For the six months ended June 30, 2013			For the year ended December 31, 2012		For the year ended December 31, 2011
Wireless	Services	Mobile communication	Export		1,907			14,202		1,331
			Domestic		6,568,396			13,204,702		13,074,936
			Subtotal		6,570,303			13,218,904		13,076,267
Fixed-line	Services	Fixed-line, B2B data, High-speed Internet, TV	Export		12,773			29,883		28,070
			Domestic		1,136,163			2,163,978		2,103,879
			Subtotal		1,148,936			2,193,861		2,131,949
Other	Services	Display and Search ad., Content	Export		6,971			4,698		12,036
			Domestic		550,650			883,016		706,217
			Subtotal		557,621			887,714		718,253
Total			Export		21,651			48,783		41,437
			Domestic		8,255,210			16,251,696		15,885,032
			Total		[8,276,859	]		16,300,479		15,926,469

(Unit: in millions of Won)


For the six months ended June 30, 2013	Wireless		Fixed		Other			Sub total		Internal transaction		After consolidation
Total sales		7,150,041		1,426,555		919,481			9,496,077		1,219,218		8,276,859
Internal sales		579,738		277,619		361,861			1,219,218		1,219,218		—
External sales		6,570,303		1,148,936		557,620			8,276,859		—		8,276,859
Operating income (loss)		960,838		22,598		(19,358	)		964,078		—		964,078
Total assets		22,626,393		3,094,795		3,122,979			28,844,168		3,407,759		25,436,408
Total liabilities		9,553,776		1,856,430		953,417			12,363,623		303,668		12,059,955

5. Derivative Transactions

A. Current Swap Contract Applying Cash Flow Risk Hedge Accounting

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


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Oct. 10, 2006	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of US$ 100,000,000)	Foreign currency risk and interest rate risk	Cross currency interest rate swap	Credit Agricole Corporate & Investment Bank	Oct. 10, 2006 – Oct. 10, 2013
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$ 400,000,000)	Foreign currency risk	Cross currency swap	Morgan Stanley and five other banks	Jul. 20, 2007 – Jul. 20, 2027
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of US$ 250,000,000)	Foreign currency risk and interest rate risk	Cross currency interest rate swap	DBS Bank and Citibank	Dec. 15, 2011 – Dec. 12, 2014
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD 65,000,000)	Foreign currency risk and interest rate risk	Cross currency interest rate swap	United Overseas Bank	Dec. 15, 2011 – Dec. 12, 2014
Jun. 12, 2012	Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of 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

B. Treatment of Derivative Instruments on the Balance Sheet

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

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


Hedged item	Fair value
	Cash flow hedge											Trading purposes		Total
	Accumulated gain (loss) on valuation of derivatives			Tax effect			Foreign currency translation gain (loss)			*Others^(1)**		Trading purposes		Total
Current assets:
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of US$100,000,000)		(1,546	)		7			20,170			—		—		18,631
Convertible option^(*2) (face amounts of Won 50,000 million)		—			—			—			—		404		404
Non-current assets:
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$400,000,000)		(66,735	)		(21,306	)		2,329			129,806		—		44,094
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of US$250,000,000)		4,707			1,503			(2,137	)		—		—		4,073
Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD 65,000,000)		(357	)		(113	)		1,480			—		—		1,010
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of US$700,000,000)		(30,017	)		(9,583	)		40,928			—		—		1,328
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of US$300,000,000 )		(6,156	)		(1,965	)		19,731			—		—		11,610
Convertible option^(*2) (face amounts of Won 50,000 million)		—			—			—			—		87		87

Total assets															81,237

Non-current liabilities:
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000,000)		(14,800	)		(4,725	)		1,296			—		—		(18,229	)
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000,000)		(1,015	)		(324	)		(15,942	)		—		—		(17,281	)

Total liabilities															(35,510	)

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

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

6. Major Contracts

[SK Telecom]

(Unit: in 100 millions of Won)


Category	Vendor	Start Date	Completion Date	Contract Title	Contract Amount
Service	SK Planet Co., Ltd.	February 25, 2013	December 31, 2013	B2B contents purchase contract for ‘Smart Safe’ and ‘Phone Safe 40’	206
Service	SK Planet Co., Ltd.	February 25, 2013	March 31, 2013	Contract for 2012 production of above-the-line advertisements (former SK M&C)	58
Construction	Dongwon Construction Industry Corporation	March 1, 2013	May 20, 2014	Construction of SK Dream Park	146
Real Estate	Woori Bank*	—	December 26, 2012	Disposal of Namsan Green Building	1,972
Real Estate	Woori Bank*	—	December 26, 2012	Disposal of Guro Offices	400
Real Estate	Individual	January 1, 2013	June 30, 2013	Purchase of regional centers (23 centers)	150
Subtotal					2,932

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

[SK Broadband]

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


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

[SK Planet]


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

[SK Communications]


Counterparty	Purpose	Contract Period	Contract Amount
Daum Communications	Cost-per-click Internet search advertisement	—	Amount determined based on the number of clicks
SK Planet Co., Ltd.	Sale of asset in construction (Pangyo office building)	—	Sold for Won 69.5 billion on June 11, 2013
SK Planet Co., Ltd.	Operation of shopping business at nate.com website	From Jul. 1, 2011 to Dec. 31, 2013	Minimum guarantee of Won 18.4 billion for the period from Jul. 1, 2011 to Dec. 31, 2011; Amounts for 2012 and 2013 are to be determined depending on the NATE shopping revenues and other factors

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

7. R&D Investments

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

(Unit: in millions of Won except percentages)


Category		For the six months ended June 30, 2013			For the year ended December 31,						Remarks
Category		For the six months ended June 30, 2013			2012			2011			Remarks
Raw material			14			42			45			—
Labor			50,713			59,050			48,656			—
Depreciation			76,775			163,295			149,850			—
Commissioned service			10,047			62,399			40,257			—
Others			30,451			61,546			57,118			—
Total R&D costs			168,000			346,332			295,927			—
Accounting	Sales and administrative expenses		162,211			304,557			289,979			—
Accounting	Development expenses (Intangible assets)		5,789			41,775			5,948			—
R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100)			2.03	%		2.12	%		1.85	%		—

8. Other information relating to investment decisions

A. Trademark Policies

The Company manages its corporate brand and other product brands such as “T” in a comprehensive way to protect and increase their value. The Company’s Brand Management Council in charge of overseeing its systematic corporate branding operates full-time to execute decisions involving major brands and operates “Brandnet,” an intranet system to manage corporate brands which provides solutions including licensing of the brands and downloading of the Company logos.

B. Business-related Intellectual Property

[SK Telecom]

The Company holds 4,864 Korean-registered patents, 279 U.S.-registered patents, 193 Chinese-registered patents (all including patents held jointly with other companies) and more patents with other countries. The Company holds 835 Korean-registered trademarks and owns intellectual property rights to the design of the alphabet “T”. The designed alphabet “T” is registered in all business categories for trademarks (total of 45) and is being used as the primary brand of the Company.

[SK Broadband]

SK Broadband holds 396 Korean-registered patents relating to high-speed Internet, telephone and IPTV service. In addition, SK Broadband has applied for a patent relating to two-way broadcasting system. SK Broadband also holds a number of trademarks and service marks relating to its service and brand.

[SK Planet]

As of June 30, 2013, SK Planet held 2,163 registered patents, 92 registered design marks, 1,102 registered trademarks and one copyright (including those held jointly with other companies) in Korea. It also holds 24 U.S.-registered patents, 35 Chinese-registered patents, 8 Japanese-registered patents, 15 E.U.-registered patents (all including patents held jointly with other companies) and 137 registered trademarks, along with a number of other intellectual property rights, in other countries.

[SK Communications]

As of June 30, 2013, SK Communications held 70 registered patents, 26 registered design rights and 716 registered trademarks in Korea.

C. Business-related Pollutants and Environmental Protection

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

III. FINANCIAL INFORMATION

1. Summary Financial Information (Consolidated)

A. Summary Financial Information (Consolidated)


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

	As of June 30, 2013			As of December 31, 2012			As of December 31, 2011			As of December 31,2010
Current Assets		5,230,665,922			5,294,420,978			6,117,478,958			6,653,991,923
• Cash and Cash Equivalents		1,282,743,311			920,124,810			1,650,793,876			659,404,935
• Accounts Receivable – Trade, net		2,266,083,440			1,954,920,332			1,823,169,889			1,949,397,279
• Accounts Receivable – Other, net		669,997,467			582,098,398			908,836,454			2,531,847,155
• Others		1,011,841,704			1,837,277,438			1,734,678,739			1,513,342,554
Non-Current Assets		20,205,742,772			20,301,138,645			18,248,557,471			16,478,397,157
• Long-Term Investment Securities		923,628,883			953,712,512			1,537,945,216			1,680,582,091
• Investments in Associates and Joint Ventures		5,101,081,677			4,632,477,315			1,384,605,401			1,204,691,805
• Property and Equipment, net		9,386,775,314			9,712,718,716			9,030,998,201			8,153,412,683
• Intangible Assets, net		2,569,800,387			2,689,657,645			2,995,803,300			1,884,955,652
• Goodwill		1,733,668,358			1,744,483,009			1,749,932,878			1,736,649,137
• Others		490,788,153			568,089,448			1,549,272,475			1,818,105,789
Total Assets		25,436,408,694			25,595,559,623			24,366,036,429			23,132,389,080
Current Liabilities		5,688,502,832			6,174,895,434			6,673,589,809			6,202,170,452
Non-Current Liabilities		6,371,453,034			6,565,881,872			4,959,737,573			4,522,219,358
Total Liabilities		12,059,955,866			12,740,777,306			11,633,327,382			10,724,389,810
Equity Attributable to Owners of the Parent Company		12,592,345,006			11,854,777,781			11,661,880,863			11,329,990,900
Share Capital		44,639,473			44,639,473			44,639,473			44,639,473
Capital Surplus (Deficit) and Other Capital Adjustments		221,864,336			(288,882,796	)		(285,347,419	)		(78,952,875	)
Retained Earnings		12,353,371,681			12,124,657,526			11,642,525,267			10,721,249,327
Reserves		(27,530,484	)		(25,636,422	)		260,063,542			643,054,975
Non-controlling Interests		784,107,822			1,000,004,536			1,070,828,184			1,078,008,370
Total Equity		13,376,452,828			12,854,782,317			12,732,709,047			12,407,999,270
Number of Companies Consolidated		28			32			31			32


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

	For the six months ended June 30, 2013			For the year ended December 31, 2012			For the year ended December 31, 2011			For the year ended December 31, 2010
Operating Revenue		8,276,859,122			16,300,479,280			15,926,468,674			15,489,373,747
Operating Income		964,078,256			1,760,171,449			2,295,613,330			2,555,781,816
Profit Before Income Tax		1,028,602,880			1,550,887,182			2,240,689,573			2,373,223,839
Profit for the Period		813,644,689			1,115,662,553			1,582,073,280			1,766,834,754
Profit for the Period Attributable to Owners of the Parent Company		820,798,365			1,151,704,905			1,612,889,086			1,841,612,790
Profit for the Period Attributable to Non-controlling Interests		(7,153,676	)		(36,042,352	)		(30,815,806	)		(74,778,036	)
Basic Earnings Per Share (Won)		11,747			16,525			22,848			25,598
Diluted Earnings Per Share (Won)		11,747			16,141			22,223			24,942

B. Changes to Accounting Standards Adopted During 2012

(1) Financial Instruments: Disclosures

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

(2) Presentation of Financial Statements

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

C. Changes to Accounting Standards Adopted During 2013

(1) Presentation of Financial Statements

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

(2) Consolidated Financial Statements

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

(3) Joint Arrangements

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

(4) Disclosure of Interests in Other Entities

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

(5) Employee Benefits

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

(6) Fair Value Measurement

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

D. Impact of Changes in Accounting Policies

(1) Consolidated Financial Statements

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

(2) Presentation of Financial Statements

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

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


(Unit: in millions of Won)

	For the three months ended June 30, 2012			For the six months ended June 30, 2012
Operating income before adoption of the amendment		384,617			849,800
Differences:
Other non-operating income
Fees revenues		(497	)		(961	)
Gain on disposal of property and equipment and intangible assets		(1,821	)		(2,832	)
Others		(5,600	)		(14,068	)
		(7,918	)		(17,861	)
Other non-operating expense
Impairment loss on property and equipment and intangible assets		441			3,869
Loss on disposal of property and equipment and intangible assets		2,962			4,956
Donations		28,101			41,008
Bad debt for accounts receivable – other		3,353			23,040
Others		4,006			10,044
		38,863			82,917
Operating income after adoption of the amendment		415,562			914,856

2. Summary Financial Information (Separate)

A. Summary Financial Information (Separate)


		(Unit: in thousands of Won)

	As of June 30, 2013		As of December 31, 2012			As of December 31, 2011			As of December 31, 2010
Current Assets		2,809,927,157		2,589,699,186			3,948,077,706			5,316,976,799
• Cash and Cash Equivalents		505,803,861		256,576,827			895,557,654			357,469,908
• Accounts Receivable – Trade, net		1,481,361,905		1,407,205,772			1,282,233,900			1,453,060,673
• Accounts Receivable – Other, net		427,782,112		383,048,424			774,221,266			2,499,969,010
• Others		394,979,279		542,868,163			996,064,886			1,006,477,208
Non-Current Assets		19,337,512,407		19,659,803,155			16,572,449,699			14,410,149,512
• Long-Term Investment Securities		666,566,983		733,893,220			1,312,437,834			1,517,029,011
• Investments in Subsidiaries and Associates		8,119,589,781		7,915,546,670			4,647,505,583			3,584,394,790
• Property and Equipment, net		6,865,983,172		7,119,090,098			6,260,168,675			5,469,747,495
• Intangible Assets, net		2,044,946,453		2,187,872,109			2,364,795,182			1,424,968,542
• Goodwill		1,306,236,299		1,306,236,299			1,306,236,299			1,308,422,097
• Others		334,189,719		397,164,759			681,306,126			1,105,587,577
Total Assets		22,147,439,564		22,249,502,341			20,520,527,405			19,727,126,311
Current Liabilities		3,655,961,966		4,343,086,486			4,467,005,877			4,561,013,611
Non-Current Liabilities		5,628,363,871		5,529,367,602			4,087,219,816			3,585,155,050
Total Liabilities		9,284,325,837		9,872,454,088			8,554,225,693			8,146,168,661
Share Capital		44,639,473		44,639,473			44,639,473			44,639,473
Capital Surplus and Other Capital Adjustments		338,442,682		(236,160,479	)		(236,016,201	)		(24,643,471	)
Retained Earnings		12,437,777,342		12,413,981,340			11,837,184,788			10,824,355,758
Reserves		42,254,230		154,587,919			320,493,652			736,605,890
Total Equity		12,863,113,727		12,377,048,253			11,966,301,712			11,580,957,650


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

	For the six months ended June 30, 2013		For the year ended December 31, 2012		For the year ended December 31, 2011		For the year ended December 31, 2010
Operating Revenue		6,321,152,332		12,332,719,444		12,551,255,630		12,514,520,922
Operating Income		952,348,612		1,675,388,351		2,184,498,641		2,530,954,768
Profit Before Income Tax		777,080,031		1,546,719,635		2,274,421,558		2,503,637,367
Profit for the Period		615,608,978		1,242,767,480		1,694,363,093		1,947,007,919
Basic Earnings Per Share (Won)		8,806		17,832		24,002		27,063
Diluted Earnings Per Share (Won)		8,806		17,406		23,343		26,366

B. Changes to Accounting Standards Adopted During 2012

(1) Financial Instruments: Disclosures

(2) Presentation of Financial Statements

C. Changes to Accounting Standards Adopted During 2013

(1) Presentation of Financial Statements

(2) Consolidated Financial Statements

(3) Joint Arrangements

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

(4) Disclosure of Interests in Other Entities

(5) Employee Benefits

(6) Fair Value Measurement

D. Impact of Changes in Accounting Policies

(1) Consolidated Financial Statements

(2) Presentation of Financial Statements

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


(Unit: in millions of Won)

	For the three months ended June 30, 2012			For the six months ended June 30, 2012
Operating income before adoption of the amendment		345,559			803,260
Differences:
Other non-operating income
Gain on disposal of property and equipment and intangible assets		(128	)		(358	)
Others		(1,171	)		(5,647	)
		(1,299	)		(6,005	)
Other non-operating expense
Loss on disposal of property and equipment and intangible assets		15,438			15,438
Impairment loss on property and equipment and intangible assets		1,323			2,085
Donations		28,213			40,482
Bad debt for accounts receivable – other		3,411			19,371
Others		653			1,332
		49,038			78,708
Operating income after adoption of the amendment		393,298			875,963

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

•

Transition to K-IFRS

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

IV. AUDITOR’S OPINION

1. Auditor (Consolidated)

Six months ended June 30,

2013

Year ended December 31,
2012

Year ended December 31,
2011

KPMG Samjong Accounting Corp.

Deloitte Anjin LLC

2. Audit Opinion (Consolidated)


Period	Auditor’s opinion	Issues noted
Six months ended June 30, 2013	—	—
Year ended December 31, 2012	Unqualified	—
Year ended December 31, 2011	Unqualified	—

3. Auditor (Separate)

Six months ended June 30,

2013

Year ended December 31,
2012

Year ended December 31,
2011

KPMG Samjong Accounting Corp.

Deloitte Anjin LLC

4. Audit Opinion (Separate)


Period	Auditor’s opinion	Issues noted
Six months ended June 30, 2013	—	—
Year ended December 31, 2012	Unqualified	—
Year ended December 31, 2011	Unqualified	—

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

A. Audit Contracts

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

Fiscal Year

Auditors

Contents

Fee

Total
number of
hours
accumulated
for the fiscal
year

Year ended December 31, 2013

KPMG Samjong
Accounting Corp.

Semi-annual review

1,250,000

17,796

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Year ended December 31, 2012

KPMG Samjong
Accounting Corp.

Semi-annual review

1,220,000

19,583

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Year ended December 31, 2011

Deloitte Anjin LLC

Semi-annual review

1,364,000

14,033

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

B. Non-Audit Services Contract with External Auditors

(Unit: in thousands of Won)

Period

Contract date

Service provided

Service
duration

Fee

Six months ended June 30, 2013

N/A

Year ended December 31, 2012

N/A

Year ended December 31, 2011

April 11, 2011

Tax consulting

30 days

45,000

April 28, 2011

Tax consulting

30 days

45,000

6. Change of Independent Auditors

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

V. MANAGEMENT’S DISCUSSION AND ANALYSIS

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

VI. CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS AND AFFILIATED COMPANIES

1. Board of Directors

A. Overview of the Composition of the Board of Directors

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


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

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

B. Significant Activities of the Board of Directors


Meeting	Date	Agenda	Approval
351th (the 1st meeting of 2013)	February 7, 2013	• Financial statement as of and for the year ended December 31, 2012 • Annual business report as of and for the year ended December 31, 2012 • Bond offering • Report of internal accounting management • Report for subsequent events following 4Q 2012	Approved as proposed Approved as proposed Approved as proposed — —

352th (the 2nd meeting of 2013)	February 21, 2013	• 2013 transaction of goods, services and assets with SK Planet • Convocation of the 29th annual general meeting of shareholders • Result of internal accounting management system evaluation	Approved as proposed Approved as proposed —

353th (the 3rd meeting of 2013)	March 22, 2013	• Election of chairman of the Board of Directors • Election of committee members • Financial transactions with affiliated company (SK Securities)	Approved as proposed Approved as proposed Approved as proposed

354th (the 4th meeting of 2013)	April 25, 2013	• Sublease transaction of advisor offices • Budget and operation plans for 2013 SUPEX conferences • Report for the period after the first quarter of 2013	Approved as proposed Approved as proposed —

355^th (the 5th meeting of 2013)	May 23, 2013	• Landscaping at Future Management Institute • Issuance of hybrid securities • Issuance of asset-backed short-term bonds • Report of compliance review and validity evaluation	Approved as proposed Approved as proposed Approved as proposed —

356^th (the 6th meeting of 2013)	June 20, 2013	• Financial transactions with affiliated company (SK Securities) • Service transactions with SK Telecom China Holdings Co., Ltd.	Approved as proposed Approved as proposed

357^th (the 7th meeting of 2013)	July 25, 2013	• Payment of interim dividends • Incurrence of long-term debt • Additional procurement of LTE network frequency • Financial results for the first six months of 2013 • Post-second quarter of 2013 report	Approved as proposed Approved as proposed Approved as proposed — —

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

C. Committees within Board of Directors

(1) Committee structure (as of August 8, 2013)

(a) Compensation Review Committee


Total number of persons	Members		Task
Total number of persons	Inside Directors	Independent Directors	Task
5	—	Rak Yong Uhm, Dae Shick Oh, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho	Review CEO remuneration system and amount

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

(b) Capex Review Committee


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

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


Total number of persons	Members		Task
Total number of persons	Inside Directors	Independent Directors	Task
5	Dong Seob Jee	Rak Yong Uhm, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho	Review guidelines on corporate social responsibility (“CSR”) programs, etc.

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

(d) Independent Director Nomination Committee


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

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

(e) Audit Committee


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

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

2. Audit System

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

Major activities of the Audit Committee as of August 8, 2013 are set forth below.


Meeting	Date	Agenda	Approval
The 1st meeting of 2013	February 6, 2013	• Construction of mobile phone facilities for 2013 • Construction of transmission network facilities for 2013 • Evaluation of internal accounting controls based on the opinion of the members of the Audit Committee • Review business and audit results for the second half of 2012 and business and audit plan for 2013 • Report of internal accounting management system	Approved as proposed Approved as proposed Approved as proposed — —
The 2nd meeting of 2013	February 20, 2013	• Report on 2012 IFRS audit • Report on review of 2012 internal accounting management system • Evaluation of internal accounting management system operation • Agenda and document review for the 29th annual general meeting of shareholders • Auditor’s report for fiscal year 2012 • IT service management contract for 2013	— — Approved as proposed Approved as proposed Approved as proposed Approved as proposed
The 3rd meeting of 2013	March 21, 2013	• Transactions with SK C&C in the second quarter of 2013 • Plans for financial transactions with affiliated company (SK Securities)	Approved as proposed —
The 4th meeting of 2013	April 24, 2013	• Election of chairman • Purchase of maintenance, repair and operations items from Happynarae Co., Ltd. • Service contract for SK Telecom China Holdings Co., Ltd. • Remuneration for outside auditor for fiscal year 2013 • Outside auditor service plan for fiscal year 2013 • Audit plan for fiscal year 2013	Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed —
The 5th meeting of 2013	June 19, 2013	• Transactions with SK C&C in the third quarter of 2013 • Myshop solution supply agreement with the Company’s Thailand branch • Plans for financial transactions with affiliated company (SK Securities)	Approved as proposed Approved as proposed —
The 6th meeting of 2013	July 24, 2013	• Construction of mobile phone facilities for 2013 • Construction of transmission network facilities for 2013 • Report on the 2013 first half IFRS review	Approved as proposed Approved as proposed —

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

3. Shareholders’ Exercise of Voting Rights

A. Voting System and Exercise of Minority Shareholders’ Rights

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


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

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

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

4. Affiliated Companies

A. Capital Investments between Affiliated Companies

(As of June 30, 2013)


	Invested companies
Investing company	SK Corporation			SK Innovation			SK Energy			SK Global Chemical			SK Telecom			SK Networks			SKC			SK E&C			SK Shipping			SK Securities
SK Holdings					33.4	%								25.2	%		39.1	%		42.5	%		40.0	%		83.1	%
SK Innovation								100.0	%		100.0	%
SK Energy
SK Global Chemical
SK Networks
SK Telecom
SK Chemicals																	0.02	%					25.4	%
SKC
SK E&C
SK Gas
SK C&C		31.8	%																										10.0	%
SK E&S
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet
SK Hynix
Ko-one Energy
SK Seentec
Total affiliated companies		31.8	%		33.4	%		100.0	%		100.0	%		25.2	%		39.2	%		42.5	%		65.4	%		83.1	%		10.0	%


	Invested companies
Investing company	SK E&S			SK Gas			DOPCO			CCE			YN Energy			Ko-one Energy Service			SK Sci-tech			SK Telink			Busan City Gas			Jeonnam City Gas
SK Holdings		94.1	%
SK Innovation								41.0	%
SK Energy
SK Global Chemical
SK Networks
SK Telecom																							83.5	%
SK Chemicals					45.5	%														50.0	%
SKC
SK E&C
SK Gas
SK C&C		5.9	%
SK E&S											100.0	%		100.0	%		99.8	%								40.0	%		100.0	%
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet
SK Hynix
Ko-one Energy Service
SK Seentec					10.0	%
Total affiliated companies		100.0	%		55.5	%		41.0	%		100.0	%		100.0	%		99.8	%		50.0	%		83.5	%		40.0	%		100.0	%


	Invested companies
Investing company	Gangwon City Gas			JBES			M & Service			SK Wyverns			Infosec			Happynarae			SK Telesys			Gimcheon Energy			F&U Credit Info			Hanam Energy Service
SK Holdings
SK Innovation																	42.5	%
SK Energy
SK Global Chemical
SK Networks
SK Telecom											100.0	%					42.5	%								50.0	%
SK Chemicals
SKC																				50.0	%
SK E&C
SK Gas																	5.0	%
SK C&C														100.0	%		5.0	%
SK E&S		100.0	%		100.0	%																	50.0	%
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet								100.0	%
SK Hynix
Ko-one Energy Service																													100.0	%
SK Seentec
Total affiliated companies		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		95.0	%		50.0	%		50.0	%		50.0	%		100.0	%


	Invested companies
Investing company	SK D&D			Natruck			Loen Entertainment			Speed Motor			SK Mobile Energy			SK Petrochemical			SK Communications			SK Planet			SKC Air Gas			SKN service
SK Holdings
SK Innovation														100.0	%
SK Energy					100.0	%
SK Global Chemical																	100.0	%
SK Networks											100.0	%																	86.5	%
SK Telecom																							100.0	%
SK Chemicals
SKC																										80.0	%
SK E&C		40.4	%
SK Gas
SK C&C
SK E&S
SK Communications
SK Broadband
SK D&D
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet								67.6	%											64.5	%
SK Hynix
Ko-one Energy Service
SK Seentec
Total affiliated companies		40.4	%		100.0	%		67.6	%		100.0	%		100.0	%		100.0	%		64.5	%		100.0	%		80.0	%		86.5	%


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


	Invested companies
Investing company	Jeju United FC			MKS Guarantee			SK Forest			SK Lubricants			SKC Lighting			Bizen			SK HY ENG			HYSTEC			Silicon File			Ami Power
SK Holdings								100.0	%
SK Innovation											100.0	%
SK Energy		100.0	%
SK Global Chemical
SK Networks
SK Telecom
SK Chemicals
SKC														72.2	%
SK E&C
SK Gas
SK C&C																	99.0	%
SK E&S
SK Communications
SK Broadband
SK D&D					100.0	%
SK Continental E-Motion
SK Lubricants
SK Shipping
SK Planet
SK Hynix																				100.0	%		100.0	%		27.9	%		100.0	%
Ko-one Energy Service
SK Seentec
Total affiliated companies		100.0	%		100.0	%		100.0	%		100.0	%		72.2	%		99.0	%		100.0	%		100.0	%		27.9	%		100.0	%


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


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

*	Change in company names:

Ulsan Aromatics changed its name from Arochemi

Happynarae changed its name from MRO Korea

Bizen changed its name from Telsk

SK Hystec changed its name from Hystec

SK HY ENG changed its name from Hynix Engineering

VII. SHAREHOLDERS

1. Shareholdings of the Largest Shareholder and Related Persons

A. Shareholdings of the Largest Shareholder and Related Persons


(As of June 30, 2013)	(Unit: in shares and percentages)

Name	Relationship	Type of share	Number of shares owned and ownership ratio
			Beginning of Period				End of Period
			Number of shares		Ownership ratio		Number of shares		Ownership ratio
SK Holdings Co., Ltd.	Largest Shareholder	Common share		20,363,452		25.22		20,363,452		25.22
Tae Won Chey	Officer of affiliated company	Common share		100		0.00		100		0.00
Shin Won Chey	Officer of affiliated company	Common share		2,000		0.00		2,000		0.00
Sung Min Ha	Officer of affiliated company	Common share		738		0.00		738		0.00
Bang Hyung Lee*	Officer of affiliated company	Common share		200		0.00		0		0.00
Total-		Common share		20,366,490		25.22		20,366,290		25.22

*	Resigned on January 31, 2012.

B. Overview of the Largest Shareholder

SK Holdings Co., Ltd. (“SK Holdings”) is a holding company and as of June 30, 2013, has nine subsidiaries: SK Innovation Co., Ltd., SK Telecom Co., Ltd., SK Networks Co., Ltd., SKC Co., Ltd., SK Shipping Co., Ltd., SK E&C Co., Ltd., SK E&S Co., Ltd., SK Biofarm Co., Ltd. and SK Forest Co., Ltd.

Details of the subsidiaries of SK Holdings are as follows:


		(Unit: in millions of Won)

Affiliates	Share Holdings			Book Value (million Won)		Industry	Description
SK Innovation Co., Ltd.		33.4	%		3,944,657	Energy and Petrochemical		Publicly Listed
SK Telecom Co., Ltd.		25.2	%		3,091,125	Telecommunication		Publicly Listed
SK Networks Co., Ltd.		39.1	%		1,165,759	Trading, Energy Sale		Publicly Listed
SKC Co., Ltd.		42.5	%		254,632	Synthetic Resin Manufacturing		Publicly Listed
SK E&C Co., Ltd.		40.0	%		485,171	Construction		Privately Held
SK Shipping Co., Ltd.		83.1	%		607,643	Ocean Freight		Privately Held
SK E&S Co., Ltd.		94.1	%		1,026,307	Gas Company Holdings and Power Generation		Privately Held
SK Biofarm Co., Ltd.		100.0	%		228,702	Biotechnology		Privately Held
SK Forest Co., Ltd.		100.0	%		61,387	Forestry and landscaping		Privately Held

*	The above shareholdings are based on common share holdings as of June 30, 2013.

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

The rule is applicable to subsidiaries whose book value of the holding company’s shareholding exceeds 10% of its total assets based on the financial statements as of December 31, 2012. SK Innovation Co., Ltd., SK Telecom Co., Ltd. and SK Networks Co., Ltd. are three such subsidiaries.

2. Changes in Shareholdings of the Largest Shareholder

Changes in shareholdings of the largest shareholder are as follows.

(As of June 30, 2013)

(Unit: in shares and percentages)

Largest
Shareholder

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

Shares
Held

Holding Ratio

Remarks

SK Corporation

March 11, 2011

18,750,490

23.22

Man Won Jung, SK Telecom’s CEO, resigned

Shin Bae Kim, SK C&C’s CEO, resigned

April. 5, 2011

18,749,990

23.22

Dal Sup Shim, an Independent Director, disposed 500 shares

July 8, 2011

18,749,990

23.22

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

August 5, 2011

18,750,490

23.22

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

August 23, 2011

18,751,490

23.22

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

December 21, 2011

20,366,490

25.22

SK Holdings purchased 1,615,000 shares

January 31, 2012

20,366,290

25.22

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

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

3. Distribution of Shares

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


(As of June 30, 2013)			(Unit: in shares and percentages)

Rank	Name (title)	Common share
Rank	Name (title)	Number of shares		Ownership ratio		Remarks
1	Citibank ADR		14,345,852		17.77		—
2	SK Holdings		20,363,452		25.22		—
3	SK Telecom		10,237,229		12.68		Treasury shares
4	National Pension Service		4,928,904		6.10		As of February 6, 2013
Shareholdings under the Employee Stock Ownership Program			148,961		0.18		As of June 30, 2013

B. Shareholder Distribution


(As of June 30, 2013)		(Unit: in shares and percentages)

Classification	Number of shareholders		Ratio (%)			Number of shares		Ratio (%)			Remarks
Total minority shareholders*		26,885		99.76	%		29,869,979		36.99	%		—

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

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

A. Domestic Securities Market


(Unit: in Won and shares)

Types		June 2013		May 2013		April 2013		March 2013		February 2013		January 2013
Common stock	Highest		226,500		125,500		196,000		185,500		181,500		173,500
	Lowest		200,500		204,500		172,000		176,500		170,000		150,000
Monthly transaction volume			4,627,223		5,682,439		5,003,456		4,078,714		5,273,834		4,963,152

B. Foreign Securities Market


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

Types		June 2013		May 2013		April 2013		March 2013		February 2013		January 2013
Depository Receipt	Highest		21.43		22.37		19.49		18.69		18.45		17.98
	Lowest		19.13		19.31		17.05		17.63		17.14		15.69
Monthly transaction volume			35,332,275		44,906,511		30,418,749		26,144,041		45,507,772		42,451,234

VIII. EMPLOYEES AND DIRECTORS

1. Employees


(As of June 30, 2013)		(Unit: in persons and thousands of Won)

	Number of employees								Average		Aggregate wage for the year ended		Average
Classification	Regular employees		Contract employees		Others		Total		service year		December 31, 2012		wage per person		Remarks
Male		3,522		106		—		3,628		12.7		269,965,781		73,380		—
Female		527		99		—		626		10.2		32,233,700		51,246		—
Total		4,049		205		—		4,254		12.3		302,199,481		70,148		—

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

2. Compensation of Directors

A. Amount Approved at the Shareholders’ Meeting


(Unit: in millions of Won)

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

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

B. Amount Paid


(As of June 30, 2013)		(Unit: in millions of Won)

Classification	Number of Directors		Aggregate Amount Paid		Average Amount Paid Per Director
Insider Directors		3		2,197		732
Independent Directors*		1		44		44
Audit Committee Members		4		170		43
Total		8		2,411		301

*	Excludes independent directors who are Audit Committee members.

IX. RELATED PARTY TRANSACTIONS

1. Loans to the Largest Shareholder and Related Persons

None

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

A. Investment and Disposition of Investment

None.

B. Transfer of Assets

None.

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

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

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Account category

Change details

Accrued
interest

Remarks

Beginning

Increase

Decrease

Ending

Midus and others

Agency

Long-term and short-term loans

89,491

166,593

170,110

85,974

—

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Account category

Change details

Accrued
interest

Remarks

Beginning

Increase

Decrease

Ending

Daehan Kanggun BcN Co., Ltd.

Investee

Long-term

loans

22,102

—

22,102

—

X. OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS

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

A. Status and Progress of Major Management Events

None.

B. Summary Minutes of the General Meeting of Shareholders


Date	Agenda	Resolution
27^th Fiscal Year Meeting of Shareholders (March 11, 2011)	1. Approval of the financial statements for the year ended December 31, 2010 2. Approval of Remuneration Limit for Directors 3. Amendment to Company Regulation on Executive Compensation 4. Election of Directors • Election of inside directors • Election of independent directors • Election of independent directors as Audit Committee member	Approved (Cash dividend, Won 8,400 per share) Approved 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)
1^st Extraordinary Meeting of Shareholders of 2011 (August 31, 2011)	1. Approval of the Spin-off Plan 2. Election of Directors	Approved (Spin-off of SK Planet) Approved (Jun Ho Kim)
28^th Fiscal Year Meeting of Shareholders (March 23, 2012)	1. Approval of the financial statements for the year ended December 31, 2011 2. Amendment to Articles of Incorporation 3. Election of Directors • Election of inside directors • Election of inside directors • Election of independent directors 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)
29^th 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)

2. Contingent Liabilities

[SK Telecom]

A. Material Legal Proceedings

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

On May 7, 2010, Korea Music Copyright Association (“KOMCA”) filed a lawsuit with the court demanding that the Company pay KOMCA license fees for the Company’s “Coloring” services. The court rendered a judgment against the Company ordering the Company to pay Won 570 million to KOMCA, which was affirmed by the appellate court on October 26, 2011. The Company filed an appeal at the Supreme Court of Korea and the judgment was overturned on July 11, 2013. The case was remanded down to the appellate court and the Company plans to fortify its arguments and vigorously defend itself. While the Company does not expect this litigation to have an immediate impact on the Company’s business or results of operation as the final outcome of this litigation has not been determined, the Company may be required to pay increased annual license fees to KOMCA if the final judgment is rendered against the Company.

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

B. Other Matters

(1) Pledged assets and covenants

SK Broadband has provided “geun” mortgage amounting to Won 14.8 billion to others, including Ilsan Guksa, on a part of its buildings in connection with the leasing of the buildings.

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

(2) Payment guarantee by the Company

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

[SK Broadband]

A. Material Legal Proceedings

(1) SK Broadband as the plaintiff


	(Unit: in thousands of Won)

Description of Proceedings	Date of Commencement of Proceedings	Amount of Claim		Status
Claim for Cancellation of Korea Fair Trade Commission’s Penalty Reassessment	September 2009		1,810,000	Pending before Supreme Court
Claim relating to Gangnamgu District Office Cable-Burying Project	March 2010		345,271	Pending before Supreme Court
Administrative Proceeding relating to Gangnamgu District Office	April 2010		703,440	Pending before Administrative Court
Damages Claims against Golden Young and Others	April 2011		454,267	Pending before District Court
Damages Claim relating to Hyundai Construction	December 2010		561,282	Pending before Appellate Court
Other claims and proceedings	—		52,000	—
Total	—		3,926,261	—

(2) SK Broadband as the defendant


	(Unit: in thousands of Won)

Description of Proceedings	Date of Commencement of Proceedings	Amount of Claim		Status
Damage Claim by Sun Technology and One Other	October 2011		1,223,778	Pending before Appellate Court
Damages Claim by Haein Networks	March 2013		101,000	Pending before District Court
Damages Claim by On-nuri Co., Ltd.	December 2011		101,000	Pending before District Court
Damages Claim by Mac Telecom and Five Other Companies	January 2012		606,000	Pending before District Court
Other claims and proceedings	—		232,290	—
Total	—		2,267,349	—

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

[SK Communications]

A. Material Legal Proceedings

As of June 30, 2013, the aggregate amount of claims was Won 4.3 billion. The management cannot reasonably forecast the outcome of the pending cases.

B. Other Contingent Liabilities

The material payment guarantees provided by third parties to SK Communications as of June 30, 2013 are set forth in the table below.


(Unit: in thousands of Won)

Financial Institution	Guarantee	Amount
Seoul Guarantee Insurance Company	Prepaid coverage payment guarantee		700,000
Seoul Guarantee Insurance Company	Provisional deposit guarantee insurance for bonds		912,572
Seoul Guarantee Insurance Company	Contractual payment guarantee related to the Pangyo office building		404,148

[SK Planet]

A. Material Legal Proceedings

As of June 30, 2013, there were three pending proceedings with SK Planet as the defendant and the aggregate amount of the claims was Won 1.2 billion. The management cannot reasonably forecast the outcome of the pending cases and no amount in connection with these proceedings were recognized on the Company’s financial statements.

3. Status of sanctions, etc.

[SK Telecom]

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

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

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

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

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

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

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

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

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

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

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

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

[SK Broadband]

(1) Violation of accounting rules

•

Date: December 13, 2012

•

Subject Company: SK Broadband

•

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

•

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

•

Status of Implementation: Paid the fine.

•

Company’s plan: Will improve accounting management system.

(2) Violation of the Telecommunications Business Act

•

Date: May 18, 2012

•

Subject Company: SK Broadband

•

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

•

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

•

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

•

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

(3) Violation of accounting rules

•

Date: January 20, 2012

•

Subject Company: SK Broadband

•

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

•

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

•

Status of Implementation: Paid the fine.

•

Company’s Plan: Will improve accounting management system.

(4) Violation of the Telecommunication Business Act

•

Date: November 23, 2011

•

Subject Company: SK Broadband

•

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

•

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

•

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

•

Company’s Plan: Will improve operating procedures.

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

•

Date: July 14, 2011

•

Subject: SK Broadband and a former officer of SK Broadband

•

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

•

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

•

Status of Implementation: Paid the fine.

•

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

(6) Violation of the Telecommunication Business Act

•

Date: February 21, 2011

•

Subject Company: SK Broadband

•

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

•

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

•

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

•

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

(7) Violation of the Telecommunication Business Act

•

Date: June 5, 2013

•

Subject Company: SK Broadband

•

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

•

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

•

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

•

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

4. Important Matters That Occurred After June 30, 2013

[SK Telecom]

On July 25, 2013, the Company’s Board of Directors resolved to pay out interim dividends as set forth below.


Classification		Description
Dividend Amount		Won 1,000 per share (Total dividend amount: Won 70,508,482,000)
Dividend Yield		0.49%
Record Date		June 30, 2013
Payment Date of Dividends		Within 20 days of the date of resolution of the Board of Directors

[SK Planet]

(1) Sale of shares of Loen Entertainment

On July 18, 2013, the board of directors of SK Planet resolved to sell 52.6% of the ownership interests (13,249,369 shares) in its subsidiary, Loen Entertainment to SIH Star Invest Holdings Limited for Won 265.9 billion. Upon completion of the sale, the Company’s remaining interest in Loen Entertainment will be 15%, on a consolidated basis.

5. Use of Proceeds

A. Use of Proceeds from Public Offerings

•

Not applicable.

B. Use of Proceeds from Private Offerings

(Unit: in millions of Won)


Classification	Closing Date	Proceeds	Planned Use of Proceeds	Actual Use of Proceeds	Reasons for Change
Convertible Bonds	April 7, 2009	437,673	Refinancing of convertible bonds issued in May 2004	Refinancing and working capital	—

SK TELECOM CO., LTD.

Condensed Consolidated Interim Financial Statements

(Unaudited)

June 30, 2013 and 2012

(With Independent Auditors’ Review Report Thereon)

Contents


	Page

Independent Auditors’ Review Report		1

Condensed Consolidated Statements of Financial Position		3

Condensed Consolidated Statements of Income		5

Condensed Consolidated Statements of Comprehensive Income		6

Condensed Consolidated Statements of Changes in Equity		7

Condensed Consolidated Statements of Cash Flows		8

Notes to the Condensed Interim Consolidated Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To The Board of Directors and Shareholders

SK Telecom Co., Ltd.:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of SK Telecom Co., Ltd. and its subsidiaries (the “Group”), which comprise the condensed consolidated statement of financial position as of June 30, 2013, the related condensed consolidated statements of income and comprehensive income for the three-month and six-month periods ended June 30, 2013 and 2012, the condensed consolidated interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2013 and 2012, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

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

Auditors’ responsibility

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

We did not review the financial statements of SK Broadband Co., Ltd., a domestic subsidiary, and an associate, whose financial statements constitute 20.3% of the Group’s consolidated total assets as of June 30, 2013, 11.7% of the Group’s consolidated operating revenue and 23.2% of the Group’s profit before income tax for the six-month period ended June 30, 2013 and the financial statements of SK Broadband Co., Ltd., and two other domestic subsidiaries and an associate, whose financial statements constitute 15.6% of the Group’s consolidated operating revenue for the six-month period ended June 30, 2012. Other auditors reviewed those financial statements and our report, insofar as it relates to the amounts included for these entities, is based solely on the reports of other auditors.

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

Conclusion

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

Highlights

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

Other matters

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

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

KPMG Samjong Accounting Corp.

Seoul, Korea

August 7, 2013

This report is effective as of August 7, 2013, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Financial Position

As of June 30, 2013 and December 31, 2012


(In millions of won)	Note		June 30, 2013		December 31, 2012
Assets

Current Assets:
Cash and cash equivalents		10,32,33	￦	1,282,743		920,125
Short-term financial instruments		5,10,32,33		395,715		514,417
Short-term investment securities		8,10,32,33		146,947		60,127
Accounts receivable—trade, net		6,10,32,33,34		2,266,083		1,954,920
Short-term loans, net		6,32,33,34		77,905		84,908
Accounts receivable—other, net		6,32,33,34		669,997		582,098
Prepaid expenses		10		105,114		102,572
Derivative financial assets		21,32,33		19,035		9,656
Inventories, net		7,10,35		179,640		242,146
Assets classified as held for sale		9		2,143		775,556
Advanced payments and other		6,10,32,33		85,344		47,896

Total Current Assets				5,230,666		5,294,421

Non-Current Assets:
Long-term financial instruments		5,10,32,33		641		144
Long-term investment securities		8,10,32,33		923,629		953,712
Investments in associates and joint ventures		10,11		5,101,082		4,632,477
Property and equipment, net		10,12,35		9,386,775		9,712,719
Investment property, net		13		15,931		27,479
Goodwill		14		1,733,668		1,744,483
Intangible assets, net		10,15		2,569,800		2,689,658
Long-term loans, net		6,10,32,33		63,654		69,299
Long-term prepaid expenses		35		30,733		31,341
Guarantee deposits		5,6,10,32,33		240,121		236,242
Long-term derivative financial assets		21,32,33		62,202		52,992
Deferred tax assets		10,30		42,436		124,098
Other non-current assets		6,32,33		35,070		26,494

Total Non-Current Assets				20,205,742		20,301,138

Total Assets			￦	25,436,408		25,595,559

See accompany notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Condensed Consolidated Statements of Financial Position, Continued

As of June 30, 2013 and December 31, 2012


(In millions of won)	Note		June 30, 2013			December 31, 2012
Liabilities and Equity

Current Liabilities:
Short-term borrowings		16,32,33	￦	60,500			600,245
Current portion of long-term debt, net		10,16,19,32,33		1,553,067			892,867
Accounts payable—trade		10,32,33		275,004			253,884
Accounts payable—other		10,32,33,34		1,340,797			1,811,038
Withholdings		10,32,33		656,408			717,170
Accrued expenses		10,32,33		954,551			890,863
Income tax payable		30		89,102			60,253
Unearned revenue		10		498,720			258,691
Provisions		18		145,999			287,307
Advanced receipts and other		10,32,33		114,354			108,272
Liabilities classified as held for sale		9		—			294,305

Total Current Liabilities				5,688,502			6,174,895

Non-Current Liabilities:
Debentures, net, excluding current portion		16,32,33		5,407,550			4,979,220
Long-term borrowings, excluding current portion		16,32,33		24,020			369,237
Long-term payables—other		17,32,33		558,148			715,508
Long-term unearned revenue				98,885			160,821
Finance lease liabilities		19,32,33		12,981			22,036
Defined benefit liabilities		10,20		119,755			86,521
Long-term derivative financial liabilities		21,32,33		35,510			63,599
Long-term provisions		18		52,821			106,561
Other non-current liabilities		32,33		61,783			62,379

Total Non-Current Liabilities				6,371,453			6,565,882

Total Liabilities				12,059,955			12,740,777

Equity
Share capital		1,22		44,639			44,639
Capital surplus and other capital adjustments		10,22,23,24		221,864			(288,883	)
Retained earnings		25		12,353,372			12,124,657
Reserves		26		(27,530	)		(25,636	)

Equity attributable to owners of the Parent Company				12,592,345			11,854,777
Non-controlling interests				784,108			1,000,005

Total Equity				13,376,453			12,854,782

Total Liabilities and Equity			￦	25,436,408			25,595,559

See accompanying notes to the condensed consolidated interim financial statements.

SK TELECOM CO., LTD. and Subsidiaries

Unaudited Condensed Consolidated Statements of Income

For the three and six-month periods ended June 30, 2013 and 2012


(In millions of won except for per share data)
			June 30, 2013						June 30, 2012
	Note		Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Continuing operations
Operating revenue:		4,34
Revenue			￦	4,164,223			8,276,859			4,007,863			7,977,574
Operating expense:		34
Labor cost				363,930			812,549			292,918			648,450
Commissions paid				1,386,242			2,837,000			1,548,229			2,962,672
Depreciation and amortization		4		674,104			1,314,943			575,620			1,155,880
Network interconnection				252,293			504,842			273,467			569,619
Leased lines				116,602			230,230			112,824			231,759
Advertising				110,389			175,295			99,651			169,554
Rent				111,366			222,232			100,393			207,268
Cost of products that have been resold				306,688			627,361			299,334			570,770
Other operating expenses		27		289,163			588,329			289,865			546,746

Sub-total				3,610,777			7,312,781			3,592,301			7,062,718

Operating income		3,4		553,446			964,078			415,562			914,856
Finance income		4,29		28,025			65,475			54,491			117,992
Finance costs		4,29		(162,830	)		(311,592	)		(110,621	)		(216,871	)
Gain (losses) related to investments in subsidiaries, associates and joint ventures, net		4,9,11		189,351			350,676			(18,014	)		(45,597	)
Other non-operating income		3,4,28		24,382			38,246			7,918			17,861
Other non-operating expense		3,4,28		(31,677	)		(78,280	)		(38,863	)		(82,917	)

Profit before income tax		4		600,697			1,028,603			310,473			705,324
Income tax expense from continuing operations		30		132,987			214,958			66,106			150,683

Profit from continuing operations				467,710			813,645			244,367			554,641
Discontinued Operation
Loss from discontinued operation, net of income taxes		36		—			—			(123,810	)		(133,704	)

Profit for the period			￦	467,710			813,645			120,557			420,937

Attributable to :
Owners of the Parent Company			￦	466,644			820,799			143,396			449,820
Non-controlling interests				1,066			(7,154	)		(22,839	)		(28,883	)
Earnings per share (in won)
Basic earnings per share		31	￦	6,663			11,747			2,057			6,454

Diluted earnings per share		31	￦	6,663			11,747			1,909			6,221

Earnings per share—Continuing operations (in won)
Basic earnings per share		31		6,663			11,747			3,569			8,101

Diluted earnings per share		31		6,663			11,747			3,372			7,815

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, 2013 and 2012


(In millions of won)	Note		June 30, 2013						June 30, 2012
(In millions of won)			Three- month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Profit for the period			￦	467,710			813,645			120,557			420,937

Other comprehensive loss
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit obligations		20		(2,522	)		(5,605	)		(1,254	)		(4,945	)
Items that may be reclassified subsequently to profit or loss:
Net change in unrealized fair value of available-for-sale financial assets		26,29		(32,169	)		(51,405	)		(36,267	)		(50,500	)
Net change in other comprehensive income of investments in associates and joint ventures		26		50,514			99,478			742			7,177
Net change in unrealized fair value of derivatives		26,29		(56,641	)		(64,092	)		17,087			(894	)
Foreign currency translation differences for foreign operations		26		7,847			14,055			7,821			(2,496	)

				(32,971	)		(7,569	)		(11,871	)		(51,658	)

Total comprehensive income			￦	434,739			806,076			108,686			369,279

Total comprehensive income (loss) attributable to:
Owners of the Parent Company			￦	434,440			813,317			129,098			400,730
Non-controlling interests				299			(7,241	)		(20,412	)		(31,451	)

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, 2013 and 2012


(In millions of won)
	Controlling Interest
	Share capital		Capital surplus and other capital adjustments			Retained earnings			Reserves			Sub-total			Non-controlling interests			Total equity
Balance, January 1, 2012	￦	44,639		(285,347	)		11,642,525			260,064			11,661,881			1,070,828			12,732,709
Cash dividends		—		—			(585,438	)		—			(585,438	)		(2,144	)		(587,582	)
Total comprehensive income
Profit (loss) for the period		—		—			449,820			—			449,820			(28,883	)		420,937
Other comprehensive loss		—		—			(5,954	)		(43,136	)		(49,090	)		(2,568	)		(51,658	)
Changes in ownership in subsidiaries		—		(5,341	)		—			—			(5,341	)		(8,421	)		(13,762	)

Balance, June 30, 2012	￦	44,639		(290,688	)		11,500,953			216,928			11,471,832			1,028,812			12,500,644


Balance, January 1, 2013		44,639		(288,883	)		12,124,657			(25,636	)		11,854,777			1,000,005			12,854,782
Cash dividends		—		—			(585,438	)		—			(585,438	)		(2,242	)		(587,680	)
Total comprehensive income
Profit (loss) for the period		—		—			820,799			—			820,799			(7,154	)		813,645
Other comprehensive loss		—		—			(5,588	)		(1,894	)		(7,482	)		(87	)		(7,569	)
Issuance of hybrid bond		—		398,518			—			—			398,518			—			398,518
Interest on hybrid bond		—		—			(1,058	)		—			(1,058	)		—			(1,058	)
Treasury stock		—		176,085			—			—			176,085			—			176,085
Business combination under common control		—		(61,854	)		—			—			(61,854	)		—			(61,854	)
Changes in ownership in subsidiaries		—		(2,002	)		—			—			(2,002	)		(206,414	)		(208,416	)

Balance, June 30, 2013	￦	44,639		221,864			12,353,372			(27,530	)		12,592,345			784,108			13,376,453

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, 2013 and 2012


(In millions of won)	Note		June 30, 2013			June 30, 2012
Cash flows from operating activities:
Cash generated from operating activities
Profit for the period			￦	813,645			420,937
Adjustments for income and expenses		37		1,615,747			1,744,239
Changes in assets and liabilities related to operating activities		37		(885,694	)		197,401

Sub-total				1,543,698			2,362,577
Interest received				30,806			52,141
Dividends received				10,197			22,947
Interest paid				(161,347	)		(186,757	)
Income tax paid				(48,777	)		(248,509	)

Net cash provided by operating activities				1,374,577			2,002,399

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net				145,242			464,201
Decrease in short-term investment securities, net				—			50,179
Collection of short-term loans				173,811			141,971
Proceeds from disposal of long-term financial instruments				15			—
Proceeds from disposal of long-term investment securities				175,788			55,055
Proceeds from disposal of investments in associates and joint ventures				1,250			1,850
Proceeds from disposal of property and equipment				6,782			6,089
Proceeds from disposal of intangible assets				1,068			5,429
Proceeds from disposal of assets held for sale				190,393			—
Collection of long-term loans				9,577			5,748
Decrease of guarantee deposits				7,274			3,921
Proceeds from disposal of other non-current assets				1,197			47
Proceeds from disposal of a subsidiary				7,221			88,641

Sub-total				719,618			823,131
Cash outflows for investing activities:
Increase in short-term investment securities, net				(5,006	)		(2,000	)
Increase in short-term loans				(168,592	)		(121,122	)
Increase in long-term loans				(1,647	)		(1,907	)
Increase in long-term financial instruments				(4	)		(9	)
Acquisition of long-term investment securities				(10,463	)		(18,913	)
Acquisition of investments in associates and joint ventures				(66,532	)		(3,109,475	)
Acquisition of property and equipment				(1,085,500	)		(1,213,409	)
Acquisition of intangible assets				(46,563	)		(50,224	)
Increase in guarantee deposits				(13,758	)		(7,477	)
Increase in other non-current assets				(6,645	)		(752	)
Acquisition of business, net of cash acquired				(94,805	)		(11,867	)

Sub-total				(1,499,515	)		(4,537,155	)

Net cash used in investing activities			￦	(779,897	)		(3,714,024	)

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, 2013 and 2012


(In millions of won)	Note	June 30, 2013			June 30, 2012
Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings		￦	44,000			895,404
Issuance of debentures			1,014,859			688,666
Proceeds from long-term borrowings			8,600			2,060,180
Issuance of hybrid bond			398,518			—
Cash inflows from settlement of derivatives			2,267			1,517
Cash inflows from other financial activities			—			48

Sub-total			1,468,244			3,645,815
Cash outflows for financing activities:
Repayment of short-term borrowings			(583,745	)		(810,965	)
Repayment of current portion of long-term debt			(161,575	)		(98,278	)
Repayment of debentures			—			(888,124	)
Repayment of long-term borrowings			(355,122	)		(5,387	)
Cash outflows from settlement of derivatives			—			(5,415	)
Payment of finance lease liabilities			(10,389	)		(10,061	)
Payment of dividends			(587,680	)		(587,582	)
Cash outflows from other financial activities			—			(41	)
Cash paid for transactions with non-controlling interest			(3,871	)		(1,025	)

Sub-total			(1,702,382	)		(2,406,878	)

Net cash provided by (used in) financing activities			(234,138	)		1,238,937

Net increase (decrease) in cash and cash equivalents			360,542			(472,688	)
Cash and cash equivalents at beginning of the period			920,125			1,650,794
Effects of exchange rate changes on cash and cash equivalents			2,076			(1,158	)

Cash and cash equivalents at end of the period		￦	1,282,743			1,176,948

See accompanying notes to the condensed consolidated interim financial statements.

1.	Reporting Entity

(1) General

SK Telecom Co., Ltd. (“the Parent Company”) was incorporated in March 1984 under the laws of Republic of Korea (“Korea”) to engage in providing cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications in Korea. The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of June 30, 2013, the Parent Company’s total issued shares are held by the following:


	Number of shares		Percentage of total shares issued (%)
SK Holdings Co., Ltd.		20,363,452		25.22	%
National Pension		2,652,949		3.29	%
Institutional investors and other minority stockholders		47,492,081		58.81	%
Treasury stock		10,237,229		12.68	%

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, 2013 and December 31, 2012 is as follows:

Ownership(%)

Subsidiary

Location

Primary business

June 30,
2013

December 31,
2012

SK Telink Co., Ltd.

Korea

Telecommunication service

83.5

M&Service Co., Ltd.(*)

Korea

Data base and online information agency

100.0

—

SK Communications Co., Ltd.

Korea

Internet website services

64.6

PAXNet Co., Ltd.(*)

Korea

Internet website services

—

59.7

Loen Entertainment, Inc.

Korea

Release of music disc.

67.6

Stonebridge Cinema Fund

Korea

Investment association

54.1

57.0

Commerce Planet Co., Ltd.

Korea

Online shopping mall operation agency

100.0

SK Broadband Co., Ltd.

Korea

Telecommunication services

50.6

Broadband Media Co., Ltd.(*)

Korea

Multimedia TV portal services

—

100.0

K-net Culture and Contents Venture Fund

Korea

Investment association

59.0

Fitech Focus Limited Partnership II

Korea

Investment association

66.7

Open Innovation Fund

Korea

Investment association

98.9

PS&Marketing Corporation

Korea

Communications device retail business

100.0

Service Ace Co., Ltd.

Korea

Customer center management service

100.0

Service Top Co., Ltd.

Korea

Customer center management service

100.0

Network O&S Co., Ltd.

Korea

Base station maintenance service

100.0

1.	Reporting Entity, Continued

(2) List of subsidiaries, Continued

Ownership(%)

Subsidiary

Location

Primary business

June 30,
2013

December 31,
2012

BNCP Co., Ltd.

Korea

Internet website services

100.0

SK Planet Co., Ltd.

Korea

Telecommunication service and new media business

100.0

Madsmart, Inc. (*)

Korea

Application software production

—

100.0

SK Telecom China Holdings Co., Ltd.

China

Investment association

100.0

SKY Property Mgmt. Ltd.(*)

Virgin Island

Real estate investment

—

60.0

Shenzhen E-eye High Tech Co., Ltd.

China

Manufacturing

65.5

SK Global Healthcare Business Group., Ltd.

China

Investment association

100.0

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

Hong Kong

Real estate investment

—

99.4

SK Planet Japan

Japan

Digital contents sourcing service

100.0

SKT Vietnam PTE. Ltd.

Singapore

Telecommunication service

73.3

SK Planet Global PTE. Ltd.

Singapore

Digital contents sourcing service

100.0

SKT Americas, Inc.

USA

Information gathering and consulting

100.0

SKP America LLC.

USA

Digital contents sourcing service

100.0

YTK Investment Ltd.

Cayman

Investment association

100.0

Atlas Investment

Cayman

Investment association

100.0

Technology Innovation Partners, L.P.

USA

Investment association

100.0

SK Telecom China Fund I L.P.

Cayman

Investment association

100.0

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

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

1.	Reporting Entity, Continued

(3) Condensed financial information of subsidiaries

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


(In millions of won)
Subsidiary	Total assets		Total liabilities		Total equity			Revenue		Profit (loss)
SK Telink Co., Ltd.	￦	244,712		124,517		120,195			209,119		9,623
M&Service Co., Ltd.		68,768		34,225		34,543			61,762		2,894
SK Communications Co., Ltd.		251,719		64,280		187,439			68,927		(8,162	)
Loen Entertainment, Inc.		189,619		54,091		135,528			105,307		11,903
Stonebridge Cinema Fund		11,335		363		10,972			1		910
Commerce Planet Co., Ltd.		26,210		27,209		(999	)		29,850		657
SK Broadband Co., Ltd.		2,850,083		1,731,913		1,118,170			1,217,436		8,404
K-net Culture and Contents Venture Fund		24,799		9		24,790			—		(13,974	)
Fitech Focus Limited Partnership II		22,205		285		21,920			—		(695	)
Open Innovation Fund		28,885		431		28,454			—		(14,938	)
PS&Marketing Corporation		315,426		181,304		134,122			561,135		(2,223	)
Service Ace Co., Ltd.		56,231		29,264		26,967			90,972		2,514
Service Top Co., Ltd.		49,108		28,830		20,278			77,807		2,910
Network O&S Co., Ltd.		60,605		32,469		28,136			98,974		3,207
BNCP Co., Ltd.		12,467		6,814		5,653			7,379		(8,980	)
SK Planet Co., Ltd.		2,262,135		751,072		1,511,063			630,275		(13,226	)
SK Telecom China Holdings Co., Ltd.		38,838		2,982		35,856			9,276		1,262
Shenzhen E-eye High Tech Co., Ltd.		19,127		1,560		17,567			4,111		(479	)
SK Global Healthcare Business Group., Ltd.		25,784		—		25,784			—		—
SK Planet Japan		798		95		703			331		(584	)
SKT Vietnam PTE. Ltd.		40,881		9,625		31,256			—		(1,346	)
SK Planet Global PTE. Ltd.		1,577		52		1,525			221		(531	)
SKT Americas, Inc.		39,407		402		39,005			3,157		(3,205	)
SKP America LLC.		8,071		1,556		6,515			—		—
YTK Investment Ltd.		68,735		—		68,735			—		—
Atlas Investment(*)		42,921		70		42,851			—		(7,916	)

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

1.	Reporting Entity, Continued

(3) Condensed financial information of subsidiaries, Continued

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


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

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

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

1.	Reporting Entity, Continued

(4) Changes in subsidiaries

1) The list of subsidiary that was newly included during the six-month period ended June 30, 2013 is as follows:


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

2) The list of subsidiaries that were excluded during the six-month period ended June 30, 2013 is as follows:


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

(5) The information of significant non-controlling interests of consolidated entities as of and for the six-month period ended June 30, 2013, and as of and for the year ended December 31, 2012 is as follows:


(In millions of won)
	June 30, 2013
	SK Communications Co., Ltd.			SK Broadband Co., Ltd.
Ownership of non-controlling interests (%)		35.4			49.4

Current assets	￦	134,960			541,085
Non-current assets		116,759			2,308,998
Current liabilities		(57,498	)		(962,688	)
Non-current liabilities		(6,782	)		(769,225	)
Net assets		187,439			1,118,170
Adjustment for fair value		—			128,967
Net assets of consolidated entities		187,439			1,247,137
Carrying amount of non-controlling interests		66,397			616,541

Revenue	￦	68,927			1,217,436
Profit (loss) for the period		(8,162	)		8,404
Amortization of adjustment for fair value		—			(15,488	)
Loss of the consolidated entities		(8,162	)		(7,084	)
Total comprehensive loss		(7,916	)		(7,029	)
Loss attributable to non-controlling interests		(2,893	)		(3,503	)

Net cash provided by (used in) operating activities	￦	(11,190	)		215,091
Net cash provided by investing activities		22,330			47,046
Net cash provided by (used in) financing activities		19			(218,302	)
Net increase in cash and cash equivalents		11,159			43,835

1.	Reporting Entity, Continued


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

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

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

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

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

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

There were no dividends received for the six-month period ended June 30, 2013 and for the year ended December 31, 2012.

2.	Basis of Preparation

(1) Statement of compliance

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

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

(2) Use of estimates and judgments

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

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

(3) Common control transactions

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

3.	Significant Accounting Policies

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

(1) Changes in accounting policies

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

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

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

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

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

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

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

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

3.	Significant Accounting Policies, Continued

(1) Changes in accounting policies, Continued

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

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

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

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

(2) Impact of changes in accounting policies

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

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

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

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

3.	Significant Accounting Policies, Continued

(2) Impact of changes in accounting policies, Continued

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


(In millions of won)
	June 30, 2012
	Three-month period ended			Six-month period ended
Operating income before adoption of the amendment	￦	384,617			849,800
Differences:
Other non-operating income
Fees revenues		(497	)		(961	)
Gain on disposal of property and equipment and intangible assets		(1,821	)		(2,832	)
Others		(5,600	)		(14,068	)

		(7,918	)		(17,861	)
Other non-operating expense
Loss on impairment of property and equipment and intangible assets		441			3,869
Loss on disposal of property and equipment and intangible assets		2,962			4,956
Donations		28,101			41,008
Bad debt for accounts receivable – other		3,353			23,040
Others		4,006			10,044

		38,863			82,917

Operating income after adoption of the amendment	￦	415,562			914,856

(3) New standards and interpretations not yet adopted

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

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

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

4.	Operating Segments

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

(1) Details of the segment information as of and for the six-month period ended June 30, 2013 are as follows:


(In millions of won)
	Cellular Services		Fixed-line Telecommunication services		Other			Sub-total		Consolidation adjustments			Consolidated amount
Total revenue	￦	7,150,041		1,426,555		919,481			9,496,077		(1,219,218	)		8,276,859
Internal revenue		579,738		277,619		361,861			1,219,218		(1,219,218	)		—
External revenue		6,570,303		1,148,936		557,620			8,276,859		—			8,276,859
Depreciation and amortization		988,647		260,760		65,536			1,314,943		—			1,314,943
Operating income		960,838		22,598		(19,358	)		964,078		—			964,078

Finance income and costs, net														(246,117	)
Gain related to investments in subsidiaries, associates and joint ventures, net														350,676
Other non-operating income and expense, net														(40,034	)

Profit from continuing operations before income tax														1,028,603

Total assets		22,626,393		3,094,795		3,122,979			28,844,167		(3,407,759	)		25,436,408
Total liabilities		9,553,776		1,856,430		953,417			12,363,623		(303,668	)		12,059,955

4.	Operating Segments, Continued

(2) Details of the segment information as of and for the six-month period ended June 30, 2012 are as follows:


(In millions of won)
	Cellular Services		Fixed-line Telecommunication services		Other		Sub-total		Consolidation Adjustments			Consolidated amount
Total revenue	￦	6,994,937		1,412,931		807,762		9,215,630		(1,238,056	)		7,977,574
Internal revenue		554,199		321,679		362,178		1,238,056		(1,238,056	)		—
External revenue		6,440,738		1,091,252		445,584		7,977,574		—			7,977,574
Depreciation and amortization		806,286		288,979		60,615		1,155,880		—			1,155,880
Operating income(*)		860,665		32,736		21,455		914,856		—			914,856

Finance income and costs, net													(98,879	)
Loss related to investments in subsidiaries, associates and joint ventures, net													(45,597	)
Other non-operating income and expense, net													(65,056	)

Profit from continuing operations before income tax													705,324

Total assets		22,763,618		3,347,834		3,339,487		29,450,939		(3,677,548	)		25,773,391
Total liabilities		10,662,153		2,154,859		842,107		13,659,119		(386,372	)		13,272,747

(*)

As further described in note 3, the Group adopted amendments to K-IFRS 1001 regarding the presentation of consolidated operating income from the interim period ended September 30, 2012, and retrospectively applied this change in accounting policy for the six-month period ended June 30, 2012. The measurement of segment operating income reported to the Group’s chief operating decision maker has also been changed to be consistent with the way consolidated operating income is now being determined and reported. Consequently, the segment operating income for the six-month period ended June 30, 2012 presented above has been restated to reflect the current basis for determining segment operating income.

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, 2013 and 2012.

5.	Restricted Deposits

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


(In millions of won)
	June 30, 2013		December 31, 2012
Short-term financial instruments(*)	￦	87,156		241,587
Long-term financial instruments(*)		95		106
Guarantee deposits		40		40

	￦	87,291		241,733

(*)	Financial instruments include charitable trust fund established by the Group (profits from this charitable fund are donated to charitable institutions and the funds cannot be withdrawn as of June 30, 2013) and guarantees for loans and other similar instruments.

6.	Trade and Other Receivables

(1) Details of trade and other receivables as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won)	June 30, 2013
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable—trade	￦	2,488,979		(222,896	)		2,266,083
Short-term loans		79,653		(1,748	)		77,905
Accounts receivable—other		738,083		(68,086	)		669,997
Accrued income		10,761		(171	)		10,590
Others		1,447		—			1,447

		3,318,923		(292,901	)		3,026,022
Non-current assets:
Long-term loans		92,402		(28,748	)		63,654
Guarantee deposits		240,121		—			240,121
Long-term accounts receivable—trade		14,455		—			14,455

		346,978		(28,748	)		318,230

	￦	3,665,901		(321,649	)		3,344,252


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

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

		348,902		(29,984	)		318,918

	￦	3,250,658		(300,668	)		2,949,990

(2)

The movements in allowances for doubtful accounts of trade and other receivables during the six-month periods ended June 30, 2013 and 2012 were as follows:


(In millions of won)	For the six-month period ended
	June 30, 2013			June 30, 2012
Balance at January 1	￦	300,668			318,820
Increase of bad debt		46,967			41,136
Write-off		(39,337	)		(66,347	)
Others(*)		13,351			17,876

Balance at June 30	￦	321,649			311,485

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

6.	Trade and Other Receivables, Continued

(3)

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


(In millions of won)
	June 30, 2013						December 31, 2012
	Accounts receivable - trade			Other receivables			Accounts receivable - trade			Other receivables
Neither overdue nor impaired	￦	1,886,111			991,043			1,589,911			976,882
Overdue but not impaired		39,499			1,484			38,590			1,588
Impaired		577,824			169,940			552,816			90,871

		2,503,434			1,162,467			2,181,317			1,069,341
Allowance for doubtful accounts		(222,896	)		(98,753	)		(213,020	)		(87,648	)

	￦	2,280,538			1,063,714			1,968,297			981,693

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

(4)

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


(In millions of won)
	June 30, 2013				December 31, 2012
	Accounts receivable - trade		Accounts receivable - other		Accounts receivable - trade		Accounts receivable - other
Less than 1 month	￦	5,001		270		4,067		171
1 ~ 3 months		6,888		299		10,264		673
3 ~ 6 months		4,346		266		10,507		101
More than 6 months		23,264		649		13,752		643

	￦	39,499		1,484		38,590		1,588

7.	Inventories

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


(In millions of won)
	June 30, 2013							December 31, 2012
	Acquisition cost		Write-down of inventory			Carrying amount		Acquisition cost		Write-down of inventory			Carrying amount
Merchandise	￦	175,416		(1,971	)		173,445		230,640		(1,784	)		228,856
Finished goods		3,097		(434	)		2,663		3,525		(962	)		2,563
Work in process		158		—			158		309		—			309
Raw materials and supplies		3,452		(78	)		3,374		10,487		(69	)		10,418

	￦	182,123		(2,483	)		179,640		244,961		(2,815	)		242,146

8.	Investment Securities

(1)

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


(In millions of won)
	June 30, 2013		December 31, 2012
Beneficiary certificates(*)	￦	144,834		56,160
Current portion of long-term investment securities		2,113		3,967

	￦	146,947		60,127

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

(2)

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


(In millions of won)
	June 30, 2013			December 31, 2012
Equity securities:
Marketable equity securities	￦	514,035			584,035
Unlisted equity securities		94,392			99,643
Equity investments		269,762			223,370

		878,189			907,048
Debt securities:
Public bonds(*1)		369			377
Investment bonds(*2)		47,184			50,254

		47,553			50,631

Total		925,742			957,679
Less current portion of long-term investment securities		(2,113	)		(3,967	)

Long-term investment securities	￦	923,629			953,712

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


(In millions of won)
	June 30, 2013		December 31, 2012
Less than 1 year	￦	3		8
1 ~ 5 years		366		369

	￦	369		377

(*2)	The Group classified convertible bonds of NanoEnTek, Inc. (carrying amount as of June 30, 2013: ￦18,721 million) as financial assets at fair value through profit or loss. The difference between acquisition cost and fair value is accounted for as finance income (loss).

9.	Assets and Liabilities Classified as Held for Sale

(1)

Subsidiary

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

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


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

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

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

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

(2)

Investments in associates

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

10.

Business combination

(1)

General information

In January 2013, the Parent Company acquired the ownership interest of 50% of SK Marketing & Company Co., Ltd., advertising and e-commerce agency, from SK Innovation Co., Ltd., a related party under common control, through additional purchase of shares and obtained the control over SK Marketing & Company Co., Ltd., and its subsidiary, M&Service Co., Ltd.

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

As the business combination occurred during the six-month period ended June 30, 2013 was a business combination between entities under common control, the difference between the consideration and book value of net assets was recognized as capital deficit and other capital adjustments.

(2)

Consideration paid and identifiable assets and liabilities transferred


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

		332,139

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

	￦	270,285

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

11.

Investments in Associates and Joint Ventures

(1)

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


(In millions of won)		June 30, 2013				December 31, 2012
	Country	Ownership percentage		Carrying amount		Ownership percentage		Carrying amount
Investments in associates
SK Marketing & Company Co., Ltd.(*1)	Korea		—	￦	—		50.0	￦	145,333
SK China Company Ltd.(*2)	China		9.6		39,660		9.6		37,628
SK USA, Inc.	USA		49.0		5,014		49.0		4,580
F&U Credit information Co., Ltd.	Korea		50.0		3,655		50.0		4,011
Korea IT Fund(*3)	Korea		63.3		231,528		63.3		230,016
JYP Entertainment Corporation	Korea		25.5		5,705		25.5		4,232
Konan Technology	Korea		29.5		4,404		29.5		4,835
Etoos Co., Ltd. (*2)	Korea		15.6		12,247		15.6		12,037
Wave City Development Co., Ltd. (*2)	Korea		19.1		—		19.1		—
HanaSK Card Co., Ltd.	Korea		49.0		381,051		49.0		378,457
Daehan Kanggun BcN Co., Ltd.	Korea		29.0		7,982		29.0		7,982
Candle Media Co., Ltd.	Korea		40.9		21,068		40.9		21,935
NanoEnTek, Inc. (*2)	Korea		9.3		9,308		9.3		9,276
UNISK(Beijing) Information Technology Co., Ltd.	China		49.0		7,510		49.0		6,589
SK Industrial Development China Co., Ltd.	Hong Kong		35.0		82,857		35.0		77,967
Packet One Network	Malaysia		27.0		90,486		28.2		88,389
Mobile Money Venture, LLC	USA		50.0		848		50.0		826
SK Technology Innovation Company	Cayman		49.0		65,393		49.0		63,559
LightSquared Inc. (*2)	USA		3.3		—		3.3		—
ViKi, Inc.	USA		24.8		14,515		26.3		15,667
HappyNarae Co., Ltd.	Korea		42.5		13,313		42.5		13,113
SK Hynix Inc.	Korea		21.0		3,616,678		21.1		3,328,245
SK MENA Investment B.V.	Netherlands		32.1		14,651		32.1		13,666
SK Latin America Investment	Spain		32.1		14,608		32.1		13,685
Gemini	Singapore		20.0		4,627		20.0		7,139
SKY Property Mgmt. Ltd.(*4)	Virgin Island		33.0		253,453		—		—
Xinan Tianlong Science and Technology Co., Ltd. (*5)	China		49.0		26,982		—		—
TR Entertainment and others	—		—		137,887		—		121,101

Sub-total					5,065,430				4,610,268

Investments in joint ventures
Dogus Planet, Inc.	Turkey		50.0		20,656		50.0		6,005
PT. Melon Indonesia	Indonesia		49.0		4,347		49.0		4,447
Television Media Korea Ltd.	Korea		51.0		10,649		51.0		11,757

Sub-total					35,652				22,209

Total				￦	5,101,082			￦	4,632,477

11.

Investments in Associates and Joint Ventures, Continued

(*1)	SK Marketing & Company Co., Ltd. was merged into SK Planet Co., Ltd., a subsidiary of the Parent Company during the six-month period ended June 30, 2013 (Note 10).

(*2)

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

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

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

(*5)	The Group newly acquired this investment during the six-month period ended June 30, 2013.

(2)

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


(In millions of won, except for share and per share data)
	June 30, 2013						December 31, 2012
	Market value per share		Number of shares		Market price		Market value per share		Number of shares		Market price
Candle Media Co., Ltd.	￦	957		21,620,360		20,691		858		21,620,360		18,550
NanoEnTek, Inc.		4,940		1,807,130		8,927		3,915		1,807,130		7,075
SK hynix Inc.		31,200		146,100,000		4,558,320		25,750		146,100,000		3,762,075

11.

Investments in Associates and Joint Ventures, Continued

(3)

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


(In millions of won)	As of and for the six-month period ended June 30, 2013
	SK Hynix Inc.			HanaSK Card Co., Ltd.		SKY Property Mgmt. Ltd.		Korea IT Fund		Packet One Network
Current assets	￦	6,643,860			5,987,868		94,379		158,169		56,418
Non-current assets		13,631,536			297,821		758,161		207,498		232,035
Current liabilities		3,969,989			5,145,399		143,464		—		124,488
Non-current liabilities		5,147,715			449,594		177,113		—		91,470
Revenue		6,713,794			434,887		38,390		2,797		55,277
Profit (loss) from continuing operations		1,125,474			5,309		8,147		2,327		(23,255	)
Other comprehensive income (loss)		(201,298	)		1,160		—		—		—
Total comprehensive income (loss)		924,176			6,469		8,147		2,327		(23,255	)


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

11.

Investments in Associates and Joint Ventures, Continued

(4)

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


(In millions of won)	As of and for six-month period ended June 30, 2013
	Television Media Korea Ltd.			Dogus Planet, Inc.			PT. Melon Indonesia
Current assets	￦	20,578			41,538			9,088
Cash and cash equivalents		16,251			38,108			6,834
Non-current assets		4,891			8,514			2,152
Current liabilities		4,786			8,636			2,236
Account payable, other payables and provisions		4,305			7,858			2,236
Non-current liabilities		273			104			81
Account payable, other payables and provisions		—			104			—
Revenue		7,000			1,748			2,977
Depreciation and amortization		(5	)		(718	)		(211	)
Interest income		222			923			148
Interest expense		—			(18	)		—
Loss from continuing operations		(2,117	)		(12,674	)		(599	)
Total comprehensive loss		(2,117	)		(12,674	)		(599	)


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

11.

Investments in Associates and Joint Ventures, Continued

(5)

Details of changes in investments in associates and joint ventures accounted for using the equity method for the six-month periods ended June 30, 2013 and 2012 are as follows:


(In millions of won)	For the six-month period ended June 30, 2013
	Beginning balance		Acquisition and Disposal		Share of profits (losses)			Other comprehensive income			Other increase (decrease)			Ending balance
Investments in associates
SK Marketing & Company Co., Ltd.(*1)	￦	145,333		190,606		(3,955	)		155			(332,139	)		—
SK China Company Ltd.		37,628		—		(8,706	)		10,738			—			39,660
SK USA, Inc.		4,580		—		94			340			—			5,014
F&U Credit information Co., Ltd.		4,011		—		28			(384	)		—			3,655
Korea IT Fund		230,016		—		1,474			38			—			231,528
JYP Entertainment Corporation		4,232		—		1,073			400			—			5,705
Konan Technology		4,835		—		(431	)		—			—			4,404
Etoos Co., Ltd.		12,037		—		210			—			—			12,247
Wave City Development Co., Ltd.		—		—		—			—			—			—
HanaSK Card Co., Ltd.		378,457		—		2,010			584			—			381,051
Daehan Kanggun BcN Co., Ltd.		7,982		—		—			—			—			7,982
Candle Media Co., Ltd.		21,935		—		(933	)		(22	)		88			21,068
NanoEnTek, Inc.		9,276		—		98			(66	)		—			9,308
UNISK(Beijing) Information Technology Co., Ltd.		6,589		—		2,338			(1,417	)		—			7,510
Packet One Network		88,389		—		1,024			1,073			—			90,486
Mobile Money Venture, LLC		826		—		(20	)		39			3			848
SK Technology Innovation Company		63,559		—		(2,711	)		4,545			—			65,393
LightSquared Inc.		—		—		—			—			—			—
ViKi, Inc.		15,667		—		(995	)		(157	)		—			14,515
SK Industrial Development China Co., Ltd.		77,967		—		(797	)		5,687			—			82,857
HappyNarae Co., Ltd.		13,113		—		198			2			—			13,313
SK Hynix Inc.		3,328,245		—		230,004			58,429			—			3,616,678
SK MENA Investment B.V.		13,666		—		—			985			—			14,651
SK Latin America Investment		13,685		—		142			781			—			14,608
Gemini		7,139		—		(2,682	)		170			—			4,627
SKY Property Mgmt. Ltd.(*2)		—		—		3,905			16,845			232,703			253,453
Xinan Tianlong Science and Technology Co., Ltd.		—		26,982		—			—			—			26,982
TR Entertainment and others		121,101		16,871		(3,622	)		875			2,662			137,887

Sub-total		4,610,268		234,459		217,746			99,640			(96,683	)		5,065,430

Investments in joint ventures
Dogus Planet, Inc.		6,005		21,428		(6,423	)		(354	)		—			20,656
PT. Melon Indonesia		4,447		—		(293	)		193			—			4,347
Television Media Korea Ltd.		11,757		—		(1,108	)		—			—			10,649

Sub-total		22,209		21,428		(7,824	)		(161	)		—			35,652

Total	￦	4,632,477		255,887		209,922			99,479			(96,683	)		5,101,082

11.

Investments in Associates and Joint Ventures, Continued

(*1)	The entity was merged into SK Planet Co., Ltd., a subsidiary of the Parent Company during the six-month period ended June 30, 2013 (note 10).

(*2)	The Group reclassified the investments in SKY Property Mgmt. Ltd. as investments in associates during the six-month period ended June 30, 2013.


(In millions of won)	For the six-month period ended June 30, 2012
	Beginning balance		Acquisition and Disposal			Share of profits (losses)			Other comprehensive income			Impairment loss			Other increase (decrease)			Ending balance
Investments in associates
SK Marketing & Company Co., Ltd.	￦	128,320		—			4,897			(266	)		—			—			132,951
SK China Company Ltd.		48,488		—			(715	)		(204	)		—			—			47,569
SK USA, Inc.		4,534		—			260			64			—			—			4,858
F&U Credit information Co., Ltd.		3,565		—			1,129			—			—			—			4,694
Korea IT Fund		230,980		—			(4,253	)		320			—			—			227,047
JYP Entertainment Corporation		4,008		—			250			(57	)		—			—			4,201
Konan Technology		4,760		—			(850	)		—			—			—			3,910
Etoos Co., Ltd.		13,928		—			(1,278	)		—			—			—			12,650
Wave City Development Co., Ltd.		1,124		—			(1,124	)		—			—			—			—
HanaSK Card Co., Ltd.		396,553		—			(1,448	)		14			—			—			395,119
Candle Media Co., Ltd.		11,814		7,412			(1,070	)		174			—			—			18,330
NanoEnTek, Inc.		10,470		—			(864	)		90			—			—			9,696
UNISK(Beijing) Information Technology Co., Ltd.		5,886		—			747			(239	)		—			—			6,394
Packet One Network		103,408		—			(9,999	)		20			—			—			93,429
Mobile Money Venture, LLC		982		—			(18	)		—			—			(11	)		953
SK Technology Innovation Company		75,974		—			(3,246	)		(25	)		—			—			72,703
LightSquared Inc.		49,441		—			(10,571	)		1,513			(40,383	)		—			—
SK Hynix Inc.		—		3,374,726			(37,865	)		6,928			—			—			3,343,789
SK MENA Investment B.V.		—		14,485			7			200			—			—			14,692
TR Entertainment and others		269,782		37,086			(4,317	)		(1,162	)		—			(12,269	)		289,120

Sub-total		1,364,017		3,433,709			(70,328	)		7,370			(40,383	)		(12,280	)		4,682,105
Investments in joint ventures
PT. Melon Indonesia		5,326		—			(304	)		(201	)		—			—			4,821
Television Media Korea Ltd.		15,262		(1,387	)		—			—			—			13,875			27,750

Sub-total		20,588		(1,387	)		(304	)		(201	)		—			13,875			32,571

Total	￦	1,384,605		3,432,322			(70,632	)		7,169			(40,383	)		1,595			4,714,676

11.

Investments in Associates and Joint Ventures, Continued

(6)

As the Group discontinued the application of the equity method due to the carrying amount of the Group’s share being reduced to zero, the unrecognized accumulated equity losses as of June 30, 2013 are as follows:


(In millions of won)	Unrealized loss					Unrealized change in equity
	Period ended June 30, 2013			Accumulated		Period ended June 30, 2013		Accumulated
ULand Company Limited	￦	—			1,703		—		127
Wave City Development Co., Ltd.		(1,169	)		579		—		—
Cyworld Holdings Hong Kong and others		—			2,937		—		334

	￦	(1,169	)		5,219		—		461

12.

Property and Equipment

(1)

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


(In millions of won)
	June 30, 2013										December 31, 2012
	Acquisition cost		Accumulated depreciation			Accumulated impairment loss			Carrying amount		Carrying Amount
Land	￦	719,560		—			—			719,560		704,908
Buildings		1,411,483		(531,511	)		—			879,972		886,371
Structures		688,904		(335,956	)		—			352,948		363,484
Machinery		23,846,068		(17,482,707	)		(1,698	)		6,361,663		6,316,192
Other		1,475,614		(920,852	)		(761	)		554,001		637,212
Construction in progress		518,631		—			—			518,631		804,552

	￦	28,660,260		(19,271,026	)		(2,459	)		9,386,775		9,712,719

(2)

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


(In millions of won)
	For the six-month period ended June 30, 2013
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Change of consolidation scope		Ending balance
Land	￦	704,908		4,597		(14	)		4,877			—			5,192		719,560
Buildings		886,371		45		(99	)		11,277			(22,647	)		5,025		879,972
Structures		363,484		985		(7	)		6,025			(17,539	)		—		352,948
Machinery		6,316,192		109,177		(6,914	)		920,779			(983,917	)		6,346		6,361,663
Other		637,212		443,890		(2,192	)		(468,165	)		(63,630	)		6,886		554,001
Construction in progress		804,552		219,548		(5,695	)		(508,064	)		—			8,290		518,631

	￦	9,712,719		778,242		(14,921	)		(33,271	)		(1,087,733	)		31,739		9,386,775

12.

Property and Equipment, Continued


(In millions of won)
	For the six-month period ended June 30, 2012
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Impairment *()**			Change of consolidation scope			Ending balance
Land	￦	730,361		2		(956	)		5,232			—			—			—			734,639
Buildings		989,078		340		(1,178	)		5,455			(26,558	)		—			—			967,137
Structures		301,115		2,808		(4	)		5,615			(17,539	)		—			—			291,995
Machinery		5,493,572		112,916		(3,638	)		904,156			(856,145	)		(107,999	)		—			5,542,862
Other		711,461		743,763		(1,422	)		(714,884	)		(61,228	)		(448	)		(1,555	)		675,687
Construction in progress		805,411		353,580		(811	)		(595,113	)		—			(4,239	)		—			558,828

	￦	9,030,998		1,213,409		(8,009	)		(389,539	)		(961,470	)		(112,686	)		(1,555	)		8,771,148

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

13.

Investment Property

(1)

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


(In millions of won)
	June 30, 2013							December 31, 2012
	Acquisition cost		Accumulated depreciation			Carrying amount		Carrying amount
Land	￦	2,906		—			2,906		12,638
Buildings		15,572		(2,547	)		13,025		14,841

	￦	18,478		(2,547	)		15,931		27,479

(2)

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


(In millions of won)	For the six-month period ended June 30, 2013
	Beginning balance		Transfer			Depreciation			Ending balance
Land	￦	12,638		(9,732	)		—			2,906
Buildings		14,841		(1,351	)		(465	)		13,025

	￦	27,479		(11,083	)		(465	)		15,931


(In millions of won)	For the six-month period ended June 30, 2012
	Beginning balance		Transfer			Depreciation			Ending balance
Land	￦	23,153		29			—			23,182
Buildings		247,933		(2,627	)		(3,787	)		241,519

	￦	271,086		(2,598	)		(3,787	)		264,701

14.

Goodwill

(1)

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


(In millions of won)
	June 30, 2013		December 31, 2012
Goodwill related to acquisition of Shinsegi Telecomm, Inc.	￦	1,306,236		1,306,236
Goodwill related to acquisition of SK Broadband Co., Ltd.		358,443		358,443
Other goodwill		68,989		79,804

	￦	1,733,668		1,744,483

(2)

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


(In millions of won)	For the six-month period ended
	June 30, 2013			June 30, 2012
Beginning balance	￦	1,744,483			1,749,933
Change of consolidation scope		1,660			(9,685	)
Impairment loss on goodwill		(9,982	)		—
Other decrease		(2,493	)		3

	￦	1,733,668			1,740,251

15.

Intangible Assets

(1)

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


(In millions of won)	June 30, 2013										December 31, 2012
	Acquisition cost		Accumulated depreciation			Accumulated impairment			Carrying amount		Carrying amount
Frequency use rights	￦	2,829,204		(1,261,642	)		—			1,567,562		1,693,868
Land use rights		43,324		(29,295	)		—			14,029		16,062
Industrial rights		86,123		(26,778	)		—			59,345		60,104
Development costs		171,665		(147,381	)		(11,714	)		12,570		13,420
Facility usage rights		142,895		(81,080	)		—			61,815		65,340
Customer relations		53,075		(24,456	)		—			28,619		48,886
Memberships(*1)		130,288		—			(733	)		129,555		118,954
Other(*2)		2,237,337		(1,534,784	)		(6,248	)		696,305		673,024

	￦	5,693,911		(3,105,416	)		(18,695	)		2,569,800		2,689,658

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

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

15.

Intangible Assets, Continued

(2)

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


(In millions of won)
	For the six-month period ended June 30, 2013
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Impairment			Change of consolidation scope			Ending balance
Frequency use rights	￦	1,693,868		—		—			—		(126,306	)		—			—			1,567,562
Land use rights		16,062		1,460		(178	)		—		(3,315	)		—			—			14,029
Industrial rights		60,104		1,243		(75	)		—		(1,859	)		—			(68	)		59,345
Development costs		13,420		409		—			—		(2,764	)		(635	)		2,140			12,570
Facility usage rights		65,340		662		(49	)		—		(4,138	)		—			—			61,815
Customer relations		48,886		283		—			—		(20,550	)		—			—			28,619
Memberships		118,954		2,755		(664	)		—		—			—			8,510			129,555
Other		673,024		39,751		(270	)		101,435		(144,629	)		(628	)		27,622			696,305

	￦	2,689,658		46,563		(1,236	)		101,435		(303,561	)		(1,263	)		38,204			2,569,800


(In millions of won)
	For the six-month period ended June 30, 2012
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Impairment *()**			Change of consolidation scope			Ending balance
Frequency use rights	￦	1,889,102		16,659		—			—		(82,680	)		(2,907	)		—			1,820,174
Land use rights		19,327		2,382		(80	)		—		(3,418	)		—			—			18,211
Industrial rights		59,473		3,659		—			477		(2,295	)		(6	)		(48	)		61,260
Development costs		20,961		755		—			—		(3,785	)		—			—			17,931
Facility usage rights		69,491		385		(41	)		13		(4,062	)		—			—			65,786
Customer relations		141,819		145		—			—		(46,756	)		—			—			95,208
Memberships		117,711		2,500		(2,942	)		—		—			—			(784	)		116,485
Other		677,919		31,747		(2,570	)		84,455		(141,613	)		(9,260	)		(1,709	)		638,969

	￦	2,995,803		58,232		(5,633	)		84,945		(284,609	)		(12,173	)		(2,541	)		2,834,024

(*)	The Group recognized ￦12,101 million of impairment loss on intangible assets in relation to the frequency use rights of the discontinuance of Digital Multimedia Broadcasting service and included the amount in profit (loss) from discontinued operation.

15.

Intangible Assets, Continued

(3)

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


(In millions of won)
	Amount		Description	Residual useful lives
W-CDMA license	￦	342,097	Frequency use rights relating to W-CDMA service	(*1)
W-CDMA license		57,088	Frequency use rights relating to W-CDMA service	(*2)
800MHz license		324,352	Frequency use rights relating to CDMA and LTE service	(*3)
1.8GHz license		830,498	Frequency use rights relating to LTE service	(*4)
WiBro license		13,527	WiBro service	(*5)
Customer relationships		14,078	Customer relationships related to acquisition of SK Broadband Co., Ltd.	3 months

	￦	1,581,640

(*1)

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

(*2)

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

(*3)

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

(*4)

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

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

16.

Borrowings and Debentures

(1)	Short-term borrowings as of June 30, 2013 and December 31, 2012 are as follows:

(In millions of won)

Lender

Annual
interest
rate (%)

June 30,
2013

December 31,
2012

Commercial Paper

Meritz Securities Co., Ltd., etc

2.69~3.10

￦

60,000

130,000

Short-term borrowings

Kookmin Bank, etc.

3.65~6.20

—

470,245

Business cooperation borrowings

The Contents Company Co., Ltd.

6.00

500

—

￦

60,500

600,245

(2)	Long-term borrowings as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)	Maturity	June 30, 2013			December 31, 2012
Bank of Communications (*)	6M Libor + 0.29	Oct. 10, 2013	￦	34,491 (USD 30,000	)		32,133 (USD 30,000	)
Bank of China (*)	6M Libor + 0.29	Oct. 10, 2013		22,994 (USD 20,000	)		21,422 (USD 20,000	)
DBS Bank (*)	6M Libor + 0.29	Oct. 10, 2013		28,743 (USD 25,000	)		26,778 (USD 25,000	)
SMBC (*)	6M Libor + 0.29	Oct. 10, 2013		28,743 (USD 25,000	)		26,778 (USD 25,000	)
Kookmin Bank and 13 others	4.48	Feb. 14, 2015		—			350,000
Korea Development Bank	2.89	Jun. 17, 2013		—			1,762
Korea Development Bank	2.84	Jun. 16, 2014		3,295			4,942
Shinhan Bank	2.84	Jun. 15, 2015		6,848			8,561
Kookmin Bank	2.84	Jun. 15, 2016		9,749			9,749
Kookmin Bank	2.84	Mar. 15, 2017		5,996			5,996
Kookmin Bank	2.84	Mar. 15, 2018		8,600			—

Sub-total				149,459			488,121
Less present value discount on long-term borrowings				—			(1,667	)

				149,459			486,454
Less current portion of long-term borrowings				(125,439	)		(117,217	)

Long-term borrowings			￦	24,020			369,237

(*)	As of June 30, 2013, 6M Libor rate is 0.41%.

16.

Borrowings and Debentures, Continued

(3)

Debentures as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won, thousands of U.S. dollars and thousands of other currencies)

	Purpose	Maturity	Annual interest rate (%)	June 30, 2013			December 31, 2012
Unsecured private bonds	Refinancing fund	2016	5.00	￦	200,000			200,000
Unsecured private bonds		2013	4.00		200,000			200,000
Unsecured private bonds		2014	5.00		200,000			200,000
Unsecured private bonds	Other fund	2015	5.00		200,000			200,000
Unsecured private bonds		2018	5.00		200,000			200,000
Unsecured private bonds		2013	6.92		250,000			250,000
Unsecured private bonds		2016	5.54		40,000			40,000
Unsecured private bonds		2016	5.92		230,000			230,000
Unsecured private bonds	Operating fund	2016	3.95		110,000			110,000
Unsecured private bonds		2021	4.22		190,000			190,000
Unsecured private bonds	Operating and 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			—
Unsecured private bonds		2033	3.22		130,000			—
Unsecured private bonds(*1)		2014	4.86		20,000			20,000
Unsecured private bonds(*1)		2015	4.62		10,000			10,000
Unsecured private bonds(*2)		2013	3.99		150,000			150,000
Unsecured private bonds(*2)		2014	4.53		290,000			290,000
Unsecured private bonds(*2)		2014	4.40		100,000			100,000
Unsecured private bonds(*2)		2015	4.09		110,000			110,000
Unsecured private bonds(*2)		2015	4.14		110,000			110,000
Unsecured private bonds(*2)		2017	4.28		100,000			100,000
Unsecured private bonds(*2)		2015	3.14		130,000			130,000
Unsecured private bonds(*2)		2017	3.27		120,000			120,000
Foreign global bonds		2027	6.63		459,880 (USD 400,000	)		428,440 (USD 400,000	)
Exchangeable bonds(*5)	Refinancing fund	2014	1.75		336,605 (USD 220,797	)		405,678 (USD 332,528	)
Floating rate notes(*3)	Operating fund	2014	3M Libor + 1.60		287,425 (USD250,000	)		267,775 (USD 250,000	)
Floating rate notes(*4)		2014	SOR rate + 1.20		58,950 (SGD 65,000	)		56,906 (SGD 65,000	)
Swiss unsecured private bonds		2017	1.75		364,848 (CHF 300,000	)		351,930 (CHF 300,000	)
Foreign global bonds		2018	2.13		804,790 (USD 700,000	)		749,770 (USD 700,000	)
Australia unsecured private bonds		2017	4.75		319,575 (AUD 300,000	)		— —
Floating rate notes(*3)		2020	3M Libor + 0.88		344,910 (USD 300,000	)		— —

Sub-total					6,696,983			5,620,499
Less discounts on bonds					(44,151	)		(43,500	)

					6,652,832			5,576,999
Less current portion of bonds					(1,245,282	)		(597,779	)

				￦	5,407,550			4,979,220

16.

Borrowings and Debentures, Continued

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

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

(*3)	As of June 30, 2013, 3M Libor rate is 0.27%.

(*4)	As of June 30, 2013, SOR rate is 0.23%.

(*5)

On April 7, 2009, the Group issued exchangeable bonds with a maturity of five years in the principal amount of USD 332,528,000 for USD 326,397,463 with a coupon rate of 1.75%. As of June 30, 2013, fair value of the exchangeable bonds is USD 292,776,822. The exchange price could be adjusted and the exchange price is ￦ 190,006 with the exchange rate of ￦ 1,383.40 per USD 1.

The Group may redeem the principal amount after 3 years from the issuance date if the market price exceeds 130% of the exchange price during a predetermined period. The exchange right may be exercised during the period from May 18, 2009 to March 24, 2014 and the number of common shares that can be exchanged as of June 30, 2013 is 1,607,584 shares.

Exchange of notes to common shares may be prohibited under the Telecommunications Law or other legal restrictions which restrains foreign governments, individuals and entities from owning more than 49% of the Group’s voting stock. If such 49% ownership limitation is violated due to the exercise of exchange rights, the Group will pay the bond holder a cash settlement which will be determined at the average price of one day after a holder exercises its exchange right or the weighted average price for the following five or twenty business days. Unless either previously redeemed or exchanged, the notes are redeemable at 100% of the principal amount at maturity.

In accordance with a resolution of the general shareholder’s meeting on March 22, 2013, the exchange price has changed from ￦ 197,760 to ￦ 190,006 and the number of common shares that can be exchanged was changed from 2,326,149 shares to 2,421,077 shares due to the payment of periodic dividends. During the six-month period ended June 30, 2013, exchange of bonds in the principal amount of USD 111,731,000 were claimed and the Group granted 813,483 shares of treasury stock. The Group recognized ￦ 37,364 million of financial costs in relation to the exchanged bonds for the six-month period ended June 30, 2013. As of June 30, 2013, the number of common shares that can be exchanged is 1,607,584.

17.

Long-term Payables—other

(1)

Long-term payables as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	June 30, 2013		December 31, 2012
Payables related to acquisition of W-CDMA licenses	￦	547,441		705,605
Other(*)		10,707		9,903

	￦	558,148		715,508

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

(2)

As of June 30, 2013 and December 31, 2012, long-term payables consist of payables related to acquisition of W-CDMA licenses for 2.1GHz, 800MHZ, 1.8GHz and 2.3GHz frequency and other details are as follows:


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

Present value of long-term payables—other at the time of acquisition		49,363			197,190			679,453			8,009			934,015
Nominal value		35,067			208,250			671,625			8,650			923,592
Present value discount on long-term payables—other		(3,076	)		(10,179	)		(64,230	)		(641	)		(78,126	)
Current portion of long-term payables—other		(17,533	)		(69,417	)		(74,625	)		—			(161,575	)
Accumulated amortization of present value discount at December 31, 2012		2,693			5,955			12,911			155			21,714

Carrying amount as of December 31, 2012		17,151			134,609			545,681			8,164			705,605
Amortization of present value discount		267			1,663			5,572			105			7,607
Current portion of amortization of present value discount		(161	)		(882	)		(2,571	)		—			(3,614	)
Less current portion of long-term payables—other		(17,257	)		(68,413	)		(73,656	)		(2,831	)		(162,157	)

Carrying amount at June 30, 2013	￦	—			66,977			475,026			5,438			547,441

17.

Long-term Payables—other, Continued

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

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

(2)

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


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

	￦	762,016

18.

Provisions

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


(In millions of won)
	For the six-month period ended June 30, 2013														As of June 30, 2013
	Beginning balance		Increase		Utilization			Reversal			Others		Ending balance		Current		Non- current
Provision for handset subsidy	￦	353,383		2,412		(200,072	)		—			—		155,723		136,489		19,234
Provision for restoration		39,895		2,744		(194	)		(760	)		911		42,596		9,454		33,142
Other provisions		590		—		(90	)		(17	)		18		501		56		445

	￦	393,868		5,156		(200,356	)		(777	)		929		198,820		145,999		52,821


(In millions of won)
	For the six-month period ended June 30, 2012															As of June 30, 2012
	Beginning balance		Increase		Utilization			Reversal			Others			Ending balance		Current		Non- current
Provision for handset subsidy	￦	762,238		262,346		(374,143	)		—			—			650,441		568,298		82,143
Provision for restoration		36,379		1,652		(360	)		—			7,345			45,016		5,176		39,840
Other provisions		942		18		(156	)		(87	)		(107	)		610		69		541

	￦	799,559		264,016		(374,659	)		(87	)		7,238			696,067		573,543		122,524

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

19.

Finance Lease Liabilities

(1)

Finance Lease

The Group has leased telecommunication equipment under the finance lease agreement with Cisco Capital Korea and display equipment under the finance lease agreement with Hana Capital. Finance lease liabilities as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	June 30, 2013		December 31, 2012
Finance Lease Liabilities
Current portion of long-term finance lease liabilities	￦	20,189		19,904
Long-term finance lease liabilities		12,981		22,036

	￦	33,170		41,940

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


(In millions of won)	June 30, 2013					December 31, 2012
	Minimum lease payment		Present value			Minimum lease payment		Present value
Less than 1 year	￦	21,335		20,189			21,375		19,904
1~5 years		13,348		12,981			22,744		22,036

Sub-total		34,683		33,170			44,119		41,940

Current portion of long-term finance lease liabilities				(20,189	)				(19,904	)

Long-term finance lease liabilities				12,981					22,036

(2)

Operating Lease

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


(In millions of won)
	Lease payments		Lease revenues
Less than 1 year	￦	29,123		399
1~5 years		66,345		940
More than 5 years		59,738		1,154

	￦	155,206		2,493

(3)

Sales and Leaseback

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

20.

Defined Benefit Liabilities

(1)

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


(In millions of won)
	June 30, 2013			December 31, 2012
Present value of defined benefit obligations	￦	293,644			244,866
Fair value of plan assets		(173,889	)		(158,345	)

	￦	119,755			86,521

(2)

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


	June 30, 2013	December 31, 2012
Discount rate for defined benefit obligations	3.28%~4.75%	3.28%~4.75%
Expected rate of salary increase	3.00%~5.81%	3.00%~5.81%

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

(3)

Changes in defined benefit obligations for the six-month periods ended June 30, 2013 and 2012 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2013			June 30, 2012
Beginning balance	￦	244,866			188,120
Current service cost		43,731			37,169
Interest cost		4,478			4,101
Remeasurement - Adjustment based on experience		7,852			7,160
Benefit paid		(25,249	)		(27,410	)
Others(*)		17,966			(2,422	)

Ending balance	￦	293,644			206,718

(*)

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

20.

Defined Benefit Liabilities, Continued

(4)

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


(In millions of won)	For the six-month period ended
	June 30, 2013			June 30, 2012
Beginning balance	￦	158,345			102,179
Expected return on plan assets		3,066			1,864
Remeasurement factor of plan assets		958			620
Contributions by employer directly to plan assets		8,016			3,988
Benefit paid		(9,472	)		(4,177	)
Others(*)		12,976			(78	)

Ending balance	￦	173,889			104,396

(*)	Others include assets of ￦ 14,334 million transferred due to business combination and effects of changes in consolidation scope of ￦ (1,312) million during the six-month period ended June 30, 2013.

(5)

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


(In millions of won)	For the six-month period ended
	June 30, 2013		June 30, 2012
Current service cost	￦	43,731		37,169
Interest cost, net		1,412		2,237

	￦	45,143		39,406

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

(6)

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


(In millions of won)
	June 30, 2013		December 31, 2012
Equity instruments	￦	4,851		1,221
Debt instruments		36,782		34,269
Short-term financial instruments, etc.		132,256		122,855

	￦	173,889		158,345

Actual return on plan assets for the six-month periods ended June 30, 2013 and 2012 amounted to ￦ 4,024 million and ￦ 2,484 million, respectively.

21.

Derivative Instruments

(1)

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


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Oct. 10, 2006	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of USD 100,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	Credit Agricole Corporate & Investment Bank	Oct. 10, 2006 ~ Oct. 10, 2013
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000,000)	Foreign currency risk	Currency swap	Morgan Stanley and five other banks	Jul. 20, 2007 ~ Jul. 20, 2027
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 250,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	DBS Bank and Citi Bank	Dec. 15, 2011 ~ Dec. 12, 2014
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD 65,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	United Overseas Bank	Dec. 15, 2011 ~ Dec. 12, 2014
Jun. 12, 2012	Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000,000)	Foreign currency risk	Currency swap	Citibank and five other banks	Jun. 12, 2012 ~ Jun. 12, 2017
Nov. 1, 2012	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000,000)	Foreign currency risk	Currency swap	Barclays and nine other banks	Nov. 1, 2012~ May. 1, 2018
Jan. 17, 2013	Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000,000)	Foreign currency risk	Currency swap	BNP Paribas and three other banks	Jan. 17, 2013 ~ Nov. 17, 2017
Mar. 7, 2013	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	DBS Bank	Mar. 7, 2013 ~ Mar. 7, 2020

21.

Derivative Instruments, Continued

(2)

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

(In millions of won and thousands of foreign currencies)


	Fair value
	Cash flow hedge											Trading purposes		Total
Hedged item	Accumulated gain (loss) on valuation of derivatives			Tax effect			Foreign currency translation gain (loss)			Others *(1)**		Trading purposes		Total
Current assets:
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of USD 100,000,000)	￦	(1,546	)		7			20,170			—		—		18,631
Convertible option(*2) (face amounts of ￦ 50,000 million)		—			—			—			—		404		404
Non-current assets:
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000,000)		(66,735	)		(21,306	)		2,329			129,806		—		44,094
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 250,000,000)		4,707			1,503			(2,137	)		—		—		4,073
Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD 65,000,000)		(357	)		(113	)		1,480			—		—		1,010
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000,000)		(30,017	)		(9,583	)		40,928			—		—		1,328
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000,000 )		(6,156	)		(1,965	)		19,731			—		—		11,610
Convertible option(*2) (face amounts of ￦ 50,000 million)		—			—			—			—		87		87

Total assets															81,237

Non-current liabilities:
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000,000)		(14,800	)		(4,725	)		1,296			—		—		(18,229	)
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000,000)		(1,015	)		(324	)		(15,942	)		—		—		(17,281	)

Total liabilities	￦														(35,510	)

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

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

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, 2013 and December 31, 2012 are as follows:


(In millions of won, except for share data)
	June 30, 2013			December 31, 2012
Authorized shares	￦	220,000,000			220,000,000
Issued shares(*1)		80,745,711			80,745,711
Share capital
Common stock		44,639			44,639
Capital surplus and other capital adjustments:
Paid-in surplus		2,915,887			2,915,887
Treasury stock		(2,233,009	)		(2,410,451	)
Loss on disposal of treasury stock		(20,212	)		(18,855	)
Hybrid bond(Note 24)		398,518			—
Others(*2)		(839,320	)		(775,464	)

	￦	221,864			(288,883	)

(*1)

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

(*2)

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

There were no changes in share capital for the six-month period ended June 30, 2013 and the year ended December 31, 2012.

23.

Treasury Stock

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

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

In addition, the Parent Company granted 813,483 shares of treasury stock for ￦ 177,442 million from May 14, 2013 to June 28, 2013 as a result of exercise of exchange rights by the holders of exchangeable bonds.

As a result of these treasury stock transactions, as of June 30, 2013, the Parent Company has 10,237,229 shares of treasury stock at ￦ 2,233,009 million.

24.

Hybrid Bond

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

(In millions of won)

Type

Issuance date

Maturity

Annual
interest
rate(%)

Amount

Private hybrid bond

Blank coupon
unguaranteed subordinated
bond

June 7, 2013

June 7, 2073(*1)

4.21

(*2)

400,000

Issuance costs

(1,482

)

398,518

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

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

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

25.

Retained Earnings

(1)

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


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

		11,825,525		11,249,758
Unappropriated		527,847		874,899

	￦	12,353,372		12,124,657

(2)

Legal reserve

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

(3)

Reserve for research & manpower development

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

26.

Reserves

(1)

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


(In millions of won)
	June 30, 2013			December 31, 2012
Net change in unrealized fair value of available-for-sale financial assets	￦	155,572			207,063
Net change in other comprehensive income of investments in associates and joint ventures		(75,689	)		(175,044	)
Net change in unrealized fair value of derivatives		(110,744	)		(46,652	)
Foreign currency translations differences for foreign operations		3,331			(11,003	)

	￦	(27,530	)		(25,636	)

(2)

Change in reserves for the six-month periods ended June 30, 2013 and 2012 are as follows:


(In millions of won)	Net change in unrealized fair value of available-for- sale financial assets			Net change in other comprehensive income of investment in associates and joint ventures			Net change in unrealized fair value of derivatives			Foreign currency translation differences for foreign operations			Total
Balance at January 1, 2012	￦	354,951			(93,598	)		(25,099	)		23,810			260,064
Changes		(65,359	)		6,866			1,797			(1,533	)		(58,229	)
Tax effect		15,707			269			(883	)		—			15,093

Balance at June 30, 2012		305,299			(86,463	)		(24,185	)		22,277			216,928

Balance at January 1, 2013		207,063			(175,044	)		(46,652	)		(11,003	)		(25,636	)
Changes		(66,893	)		99,329			(84,554	)		14,334			(37,784	)
Tax effect		15,402			26			20,462			—			35,890

Balance at June 30, 2013	￦	155,572			(75,689	)		(110,744	)		3,331			(27,530	)

27.

Other Operating Expenses

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


(In millions of won)	2013				2012
	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	￦	17,179		30,939		16,427		33,754
Utilities		50,723		105,421		44,222		88,673
Taxes and dues		5,912		13,582		32,365		63,486
Repair		60,308		124,724		60,884		121,664
Research and development		80,614		162,211		70,620		137,164
Training		8,252		14,640		8,992		15,068
Bad debt for accounts receivables—trade		18,361		30,425		16,874		18,478
Travel		8,641		15,167		7,710		14,795
Supplies and other		39,173		91,220		31,771		53,664

	￦	289,163		588,329		289,865		546,746

28.

Other Non-operating Income and Expenses

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


(In millions of won)	2013				2012
	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	￦	2,105		2,864		497		961
Gain on disposal of property and equipment and intangible assets		2,745		4,754		1,821		2,832
Others		19,532		30,628		5,600		14,068

	￦	24,382		38,246		7,918		17,861

Other Non-operating Expenses:
Loss on impairment of property and equipment and intangible assets	￦	628		11,245		441		3,869
Loss on disposal of property and equipment and intangible assets		7,683		13,061		2,962		4,956
Donations		10,493		22,654		28,101		41,008
Bad debt for accounts receivable—other		6,012		16,542		3,353		23,040
Others		6,861		14,778		4,006		10,044

	￦	31,677		78,280		38,863		82,917

29.

Finance Income and Costs

(1)

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


(In millions of won)	2013				2012
	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	￦	16,456		34,026		24,857		57,253
Dividends		48		10,197		613		22,947
Gain on foreign currency transactions		4,903		7,441		3,527		5,480
Gain on foreign currency translation		3,098		6,038		227		714
Gain on disposal of long-term investment securities		1,093		2,134		6,535		12,947
Gain on settlement of derivatives		—		2,274		8,402		12,694
Gain on valuation of financial asset at fair value through profit or loss		2,427		3,365		823		183
Gain relating to financial liability at fair value through profit or loss		—		—		9,507		5,774

	￦	28,025		65,475		54,491		117,992

29.

Finance Income and Costs, Continued


(In millions of won)	2013				2012
	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	￦	83,017		172,924		102,404		199,439
Loss on foreign currency transactions		4,249		7,283		4,333		5,516
Loss on foreign currency translation		1,351		5,326		—		527
Loss on disposal of long-term investment securities		4,523		4,713		1,629		9,134
Loss on valuation of derivatives		198		198		443		443
Loss on settlement of derivatives		—		—		1,232		1,232
Loss relating to financial liability at fair value through profit or loss(*)		66,513		104,600		—		—
Other finance costs		2,979		16,548		580		580

	￦	162,830		311,592		110,621		216,871

(*)

Loss relating to financial liability at fair value through profit or loss for the six-month period ended June 30, 2013 represents 1) valuation loss related to exchangeable bond (issue price of USD 326,397,463) as a result of increase in stock price of the Parent Company and increase in foreign exchange rate, and 2) loss on repayment of debentures upon the claim for exchange.

(2)

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


(In millions of won)	2013				2012
	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	￦	10,765		22,159		15,812		36,600
Interest income on installment receivables and others		5,691		11,867		9,045		20,653

	￦	16,456		34,026		24,857		57,253

(3)

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


(In millions of won)	2013				2012
	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	￦	7,307		23,059		44,746		60,293
Interest expense on debentures		66,135		128,299		47,844		100,199
Interest on finance lease liabilities		355		767		702		1,513
Others		9,220		20,799		9,112		37,434

	￦	83,017		172,924		102,404		199,439

29.

Finance Income and Costs, Continued

(4)

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


(In millions of won)	2013				2012
	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	￦	2,979		16,548		580		580
Accounts receivable—trade		18,361		30,425		16,369		18,096
Accounts receivable—other		6,012		16,542		3,353		23,040

	￦	27,352		63,515		20,302		41,716

30.

Income Tax Expense

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

31.

Earnings per Share

(1)

Basic earnings per share

1) Basic earnings per share for the three and six-month periods ended June 30, 2013 and 2012 are calculated as follows:


(In millions of won, shares)	2013						2012
	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 from continuing operation:
Profit attributable to owners of the Parent Company from continuing operations	￦	466,644			820,799			248,754		564,576
Dividend on hybrid bond		(1,058	)		(1,058	)		—		—
Profit for the period on common shares		465,586			819,741			248,754		564,576
Weighted average number of common shares outstanding		69,872,438			69,784,208			69,694,999		69,694,999

Basic earnings per share from continuing operations (In won)	￦	6,663			11,747			3,569		8,101

Basic earnings per share attributable to owners of the Parent Company:
Profit attributable to owners of the Parent Company	￦	466,644			820,799			143,396		449,820
Dividend on hybrid bond		(1,058	)		(1,058	)		—		—
Profit for the period on common shares		465,586			819,741			143,396		449,820
Weighted average number of common shares outstanding		69,872,438			69,784,208			69,694,999		69,694,999

Basic earnings per share (In won)	￦	6,663			11,747			2,057		6,454

31.

Earnings per Share, Continued

(1)

Basic earnings per share, Continued

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


(In millions of won)	2013				2012
	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 attributable to owners of the Parent Company	￦	466,644		820,799		143,396		449,820
Results of discontinued operation attributable to owners of the Parent Company		—		—		105,358		114,756

Profit attributable to owners of the Parent Company from continuing operation	￦	466,644		820,799		248,754		564,576

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


(In shares)	Number of shares			Weighted number of days				Weighted number of shares
	Number of shares			Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30			Six-month period ended June 30
Outstanding common shares at January 1, 2013		80,745,711			91/91		181/181		80,745,711			80,745,711
Effect of treasury stock		(11,050,712	)		91/91		181/181		(11,050,712	)		(11,050,712	)
Exchange of exchangeable bond		813,483			(*1)		(*2)		177,439			89,209

Number of shares at June 30, 2013		70,508,482							69,872,438			69,784,208

(*1)	During the three-month period ended June 30, 2013, 21 exchange transactions occurred and weighted number of days range from 3/91 to 48/91 based on each exchange date.

(*2)	During the six-month period ended June 30, 2013, 21 exchange transactions occurred and weighted number of days range from 3/181 to 48/181 based on each exchange date.


(In shares)	Number of shares			Weighted number of days				Weighted number of shares
	Number of shares			Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30			Six-month period ended June 30
Outstanding common shares at January 1, 2012		80,745,711			91/91		182/182		80,745,711			80,745,711
Effect of treasury stock		(11,050,712	)		91/91		182/182		(11,050,712	)		(11,050,712	)

Number of shares at June 30, 2012		69,694,999							69,694,999			69,694,999

31.

Earnings per Share, Continued

(2)

Diluted earnings per share

1) Diluted earnings per share for the three and six-month periods ended June 30, 2013 and 2012 are calculated as follows:


(In millions of won, shares)	*2013 ()**				2012
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Diluted earnings per share attributable to owners of the Parent Company from continuing operations:
Diluted profit attributable to owners of the Parent Company from continuing operations	￦	465,586		819,741		242,811		562,695
Weighted average number of common shares outstanding		69,872,438		69,784,208		72,003,405		72,003,405

Diluted earnings per share from continuing operations (In won)	￦	6,663		11,747		3,372		7,815

Diluted earnings per share attributable to owners of the Parent Company:
Diluted profit attributable to owners of the Parent Company	￦	465,586		819,741		137,453		447,939
Weighted average number of common shares outstanding		69,872,438		69,784,208		72,003,405		72,003,405

Diluted earnings per share (In won)	￦	6,663		11,747		1,909		6,221

(*)

The number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds is excluded from the diluted earnings per share calculation for the three and six-month periods ended June 30, 2013 as the effect of exchangeable bond would have been anti-dilutive (the weighted average number of diluted shares of 2,331,858); thus, diluted earnings per share for the three and six-month periods ended June 30, 2013 is the same as basic earnings per share.

Diluted profit attributable to owners of the Parent Company from continuing operations for the three and six-month periods ended June 30, 2013 and 2012 are calculated as follows:


(In millions of won)	2013
	Continuing operations				Total
	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 attributable to owners of the Parent Company	￦	465,586		819,741		465,586		819,741
Effect of exchangeable bonds		—		—		—		—

Diluted profit attributable to owners of the Parent Company	￦	465,586		819,741		465,586		819,741

31.

Earnings per Share, Continued

(2)

Diluted earnings per share, Continued


(In millions of won)	2012
	Continuing operations						Discontinued operation						Total
	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
Profit attributable to owners of the Parent Company	￦	248,754			564,576			(105,358	)		(114,756	)		143,396			449,820
Effect of exchangeable bonds		(5,943	)		(1,881	)		—			—			(5,943	)		(1,881	)

Diluted profit attributable to owners of the Parent Company	￦	242,811			562,695			(105,358	)		(114,756	)		137,453			447,939

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


(In shares)	2013				2012
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Weighted average number of common shares outstanding		69,872,438		69,784,208		69,694,999		69,694,999
Effect of exchangeable bonds(*)		—		—		2,308,406		2,308,406

Adjusted weighted average number of common shares outstanding		69,872,438		69,784,208		72,003,405		72,003,405

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

(3)

Basic loss per share from discontinued operation


(In millions of won, shares)	2013				2012
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Loss from discontinued operation attributable to owners of the Parent Company	￦	—		—		105,358		114,756
Weighted average number of common shares outstanding		69,872,438		69,784,208		69,694,999		69,694,999

Basic loss per share (In won)	￦	—		—		1,512		1,647

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

32.

Categories of Financial Instruments

(1)

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


(In millions of won)
	June 30, 2013
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedging instruments		Total
Cash and cash equivalents	￦	—		—		1,282,743		—		1,282,743
Financial instruments		—		—		396,356		—		396,356
Short-term investment securities		—		146,947		—		—		146,947
Long-term investment securities(*1)		18,721		904,908		—		—		923,629
Accounts receivable—trade		—		—		2,280,538		—		2,280,538
Loans and receivables(*2)		—		—		1,063,714		—		1,063,714
Derivative financial assets(*3)		491		—		—		80,746		81,237

	￦	19,212		1,051,855		5,023,351		80,746		6,175,164


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

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

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

32.

Categories of Financial Instruments, Continued

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


(In millions of won)
	June 30, 2013		December 31, 2012
Short-term loans	￦	77,905		84,908
Accounts receivable – other		669,997		582,098
Accrued income		10,590		8,715
Other current assets		1,447		431
Long-term loans		63,654		69,299
Guarantee deposits		240,121		236,242

	￦	1,063,714		981,693

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

(2)

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


(In millions of won)	June 30, 2013
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedging instruments		Total
Accounts payable – trade	￦	—		275,004		—		275,004
Derivative financial liabilities		—		—		35,510		35,510
Borrowings		—		209,959		—		209,959
Debentures(*1)		336,605		6,316,227		—		6,652,832
Accounts payable—other and other payables(*2)		—		3,077,999		—		3,077,999

	￦	336,605		9,879,189		35,510		10,251,304


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

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

32.

Categories of Financial Instruments, Continued

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

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


(In millions of won)
	June 30, 2013		December 31, 2012
Accounts payable – other	￦	1,340,397		1,811,038
Withholdings		2,079		1,840
Accrued expenses		954,551		890,863
Current portion of long-term payables—other		182,346		177,870
Long-term payables – other		558,148		715,508
Finance lease liabilities		12,981		22,036
Other non-current liabilities		27,497		27,331

	￦	3,077,999		3,646,486

33.

Financial Risk Management

(1)

Financial risk management

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

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

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.

33.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Monetary foreign currency assets and liabilities as of June 30, 2013 are as follows:

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


	Assets				Liabilities
	Foreign currencies		Won translation		Foreign Currencies		Won translation
USD		118,350		136,067		2,146,040		2,467,302
EUR		5,568		8,342		3		5
JPY		64,732		756		—		—
AUD		—		—		297,810		317,242
CHF		—		—		298,336		362,825
SGD		98		89		64,799		58,768
Others		63		48		114		59

				145,302				3,206,201

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

As of June 30, 2013, effects on income (loss) before income tax as a result of change in exchange rate by 10% are as follows:


(In millions of won)
	If increased by 10%			If decreased by 10%
USD	￦	(33,867	)		33,867
EUR		834			(834	)
JPY		76			(76	)
SGD		1			(1	)
Other		(1	)		1

	￦	(32,957	)		32,957

(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, 2013, available-for-sale equity instruments measured at fair value amount of ￦ 688,081 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.

33.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

The Group’s interest rate risk arises from floating-rate borrowings and payables. As of June 30, 2013, floating-rate borrowings and debentures amount to ￦ 691,285 million and ￦ 114,970 million respectively, the Group has entered into interest rate swaps to hedge interest rate risk related to floating-rate borrowings and debentures. (Refer to Note 21) If interest rate only increases (decreases) by 1%, income before income taxes for the six-month period ended June 30, 2013 would not have been changed due to the interest expense from floating-rate borrowings and debentures.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet his/her contractual obligations. The maximum credit exposure as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	June 30, 2013		December 31, 2012
Cash and cash equivalents	￦	1,282,743		920,125
Financial instruments		396,356		514,561
Available-for-sale financial assets		1,051,855		998,483
Accounts receivable—trade		2,280,538		1,968,297
Loans and receivables		1,063,714		981,693
Derivative financial assets		80,746		61,959
Financial assets at fair value through profit or loss		19,212		16,045

	￦	6,175,164		5,461,163

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

For the six-month period ended June 30, 2013, the Group has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Group believes that the possibility of default is remote. Also, the Group’s credit risk can rise due to transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivates. To minimize such risk, the Group has a policy to deal with high credit worthy financial institutions. The amount of maximum exposure to credit risk of the Group is the carrying amount of financial assets as of June 30, 2013.

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

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, 2013 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 - 5 years		More than 5 years
Accounts Payable-trade	￦	275,004		275,004		274,972		33		—
Derivative financial liabilities		35,510		38,631		2,537		36,094		—
Borrowings		209,959		212,640		187,584		25,056		—
Debentures(*1)		6,652,832		8,027,029		1,483,085		4,296,074		2,247,870
Accounts payable-other and others(*2)		3,077,999		3,277,940		2,539,308		507,207		231,425

	￦	10,251,304		11,831,244		4,487,486		4,864,464		2,479,295

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

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

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

(2)

Capital management

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

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

Debt-equity ratio as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	June 30, 2013			December 31, 2012
Liabilities	￦	12,059,955			12,740,777
Equity		13,376,453			12,854,782

Debt-equity ratio		90.16	%		99.11	%

33.

Financial Risk Management, Continued

(3)

Fair value

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

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

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

Interest rates used by the Group for the fair value measurement as of June 30, 2013 are as follows:


		Interest rate
Derivative instruments		2.37~3.84%
Borrowings and debentures		3.12~3.36%

Fair value and carrying amount

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


(In millions of won)
	June 30, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
Assets carried at fair value
Financial assets at fair value through profit or loss	￦	19,212		19,212		16,045		16,045
Derivative financial assets		80,746		80,746		61,959		61,959
Available-for-sale financial assets		688,081		688,081		765,759		765,759

	￦	788,039		788,039		843,763		843,763

Assets carried at amortized cost
Cash and cash equivalents		1,282,743		1,282,743		920,125		920,125
Available-for-sale financial assets		363,774		363,774		232,724		232,724
Accounts receivable – trade and others		3,344,252		3,344,252		2,949,990		2,949,990
Financial instruments		396,356		396,356		514,561		514,561

	￦	5,387,125		5,387,125		4,617,400		4,617,400

Liabilities carried at fair value
Financial liabilities at fair value through profit or loss		336,605		336,605		405,678		405,678
Derivative financial liabilities		35,510		35,510		63,599		63,599

	￦	372,115		372,115		469,277		469,277

33.

Financial Risk Management, Continued

(3)

Fair value, Continued


(In millions of won)
	June 30, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
Liabilities carried at amortized cost
Accounts payable – trade	￦	275,004		275,004		253,884		253,884
Borrowings		209,959		207,481		1,086,699		1,100,464
Debentures		6,316,227		6,460,076		5,171,321		5,461,142
Accounts payable—other and others		3,077,999		3,077,999		3,646,486		3,646,486

	￦	9,879,189		10,020,560		10,158,390		10,461,976

Fair value hierarchy

The different levels have been defined as follows:

•

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

•

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

•

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

The table below analyzes financial instruments carried at fair value, by fair value hierarchy as of June 30, 2013.


(In millions of won)
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss	￦	—		18,721		491		19,212
Derivative financial assets		—		80,746		—		80,746
Available-for-sale financial assets		514,035		46,174		127,872		688,081
Financial liabilities at fair value through profit or loss		336,605		—		—		336,605
Derivative financial liabilities		—		35,510		—		35,510

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


(In millions of won)
	Balance at Jan. 1		Acquisition		Profit (loss) for the period			Other comprehensive income		Disposal			Other		Balance at Jun. 30
Financial assets at fair value through profit or loss	￦	689		—		(198	)		—		—			—		491
Available-for-sale financial assets		125,572		1,924		(16,548	)		2,135		(11,664	)		26,453		127,872

34.

Transactions with Related Parties

Transactions among consolidated entities have been eliminated upon the consolidation and significant related party transactions of the Group for the three and six-month periods ended June 30, 2013 and 2012, and account balances as of June 30, 2013 and December 31, 2012 are as follows:

(1)

Transactions


(In millions of won)	Operating revenue and others
	2013				2012
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Parent Company	￦	746		1,320		202		302
Associates		8,512		14,306		46,008		96,891
Others		36,964		67,223		18,018		32,449

	￦	46,222		82,849		64,228		129,642


(In millions of won)	Operating expense and others
	2013				2012
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Parent Company	￦	8,668		188,534		8,404		166,340
Associates		51,616		71,254		129,622		263,428
Others		465,601		967,877		739,336		1,281,475

	￦	525,885		1,227,665		877,362		1,711,243

Please refer to Note 10 for details of business combination with entities under common control.

(2)

Account balances


(In millions of won)
	Accounts receivable and others				Accounts payable and others
	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
Parent Company	￦	699		310		—		23
Associates		72,880		68,768		7,360		164,783
Others		21,713		55,757		221,720		520,487

	￦	95,292		124,835		229,080		685,293

(3)

Compensation for the key management

The Parent Company considers registered directors who have substantial role and responsibility in planning, operating, and controlling of the business as key management. The compensations given to such key management for the three and six-month periods ended June 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	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	￦	340		1,594		297		8,287
Provision for retirement benefits		97		817		77		643

	￦	437		2,411		374		8,930

35.

Commitments and Contingencies

(1)

Collateral assets and commitments

SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount of ￦ 14,800 million as of June 30, 2013.

PS & Marketing Corporation, a subsidiary of the Parent Company, has obtained a line of credit for ￦ 40,000 million from Shinhan Bank for operational purposes. In relation to the line of credit, PS & Marketing Corporation pledged ￦ 52,000 million of inventory as collateral to Shinhan Bank as of June 30, 2013.

(2)

Guarantee provided

As of June 30, 2013, the Parent Company has participated in “Tactical Airship” program of the Defense Acquisition Program Administration with Joint Defense Corporation. For an advance receipt amounting to USD 3,897,196, which Joint Defense Corporation received from the Defense Acquisition Program Administration, the Parent Company provides payment guarantees to the Defense Acquisition Program Administration.

(3)

Contingencies

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

As of June 30, 2013, the claim amount of pending litigations of SK Communications Co., Ltd., a subsidiary of the Parent Company, amounts to ￦ 4,341 million and management does not believe that the ultimate result of these litigations will have a material impact on the Company’s results or financial position.

36.

Discontinued Operation

(1)

Discontinued operation

During the six-month period ended June 30, 2012, SK Telink Co., Ltd., a subsidiary of the Parent Company, ceased its broadcasting business due to the rapid decrease in satellite digital multimedia broadcasting subscribers along with the effects from smart phones, etc.

36.

Discontinued Operation, Continued

(2)

Results of discontinued operation

Results of discontinued operation included in the consolidated statements of income for the six-month period ended June 30, 2012 are as follows. The consolidated statement of income presented for comparative purposes was restated in order to present discontinued operation segregated from the continuing operations.


(In millions of won)
	June 30, 2012
Results of discontinued operation:
Revenue	￦	1,314
Expense		(147,678	)


Operating loss generated by discontinued operation		(146,364	)
Income tax benefit		12,660


Loss generated by discontinued operation	￦	(133,704	)


Attributable to :
Owners of the Parent Company		114,756
Non-controlling interests		18,948

(3)

Cash flows used in discontinued operation

Cash flows used in discontinued operation for the six-month period ended June 30, 2012 are as follows:


(In millions of won)
	June 30, 2012
Cash flow used in discontinued operation:
Net cash used in operating activities	￦	(1,840	)
Net cash provided by investing activities		1,593
Net cash used in financing activities		(29,574	)

Net cash used in discontinued operation	￦	(29,821	)

37.

Statements of Cash Flows

(1)

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


(In millions of won)
	June 30, 2013			June 30, 2012
Interest income	￦	(34,026	)		(57,253	)
Dividend		(10,197	)		(22,947	)
Gain on foreign currency translation		(6,038	)		(714	)
Gain on disposal of long-term investments securities		(2,134	)		(12,947	)
Gain on settlement of derivatives		(2,274	)		(12,694	)
Losses (gains) related to investments in subsidiaries, associates and joint ventures, net		(350,676	)		45,597
Gain on disposal of property, equipment and intangible assets		(4,754	)		(2,832	)
Gain on valuation of financial assets at fair value through profit or loss		(3,365	)		(183	)
Gain on valuation of financial liabilities at fair value through profit or loss		—			(5,774	)
Other income		(2,748	)		(1,216	)
Interest expenses		172,924			199,439
Loss on foreign currency translation		5,326			527
Loss on disposal of long-term investments securities		4,713			9,134
Other finance costs		16,548			580
Loss on valuation of derivatives		198			443
Loss on settlement of derivatives		—			1,232
Income tax expense		214,958			138,023
Provision for retirement benefits		45,143			39,406
Depreciation and amortization		1,391,759			1,249,866
Bad debt expenses for accounts receivable—trade		30,425			18,096
Loss on disposal of property and equipment and intangible assets		13,061			4,956
Loss on impairment of property, equipment and intangible assets		11,245			124,859
Loss on valuation of financial liabilities at fair value through profit or loss		104,600			—
Bad debt for accounts receivable—other		16,542			23,040
Other expenses		4,517			5,601

	￦	1,615,747			1,744,239

37.

Statements of Cash Flows, Continued

(2)

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


(In millions of won)
	June 30, 2013			June 30, 2012
Accounts receivable – trade	￦	(198,320	)		(46,986	)
Accounts receivable – other		(36,124	)		280,449
Accrued income		63			2,715
Advance payments		(46,357	)		20,902
Prepaid expenses		4,530			19,024
Proxy paid V.A.T.		(25,031	)		(570	)
Inventories		24,521			(46,269	)
Long-term accounts receivables—other		—			4,699
Guarantee deposits		9,857			13,837
Accounts payable – trade		25,642			143,264
Accounts payable – other		(323,833	)		(338,120	)
Advanced receipts		(10,963	)		(1,512	)
Withholdings		(98,016	)		120,170
Deposits received		(718	)		(4,097	)
Accrued expenses		62,214			187,666
Advanced V.A.T.		59,261			8,219
Unearned revenue		(83,609	)		(33,267	)
Provisions		(143,560	)		(88,311	)
Long-term provisions		(53,684	)		(18,377	)
Plan assets		1,456			189
Retirement benefit payment		(25,249	)		(27,410	)
Others		(27,774	)		1,186

	￦	(885,694	)		197,401

(3)

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


(In millions of won)
	June 30, 2013			June 30, 2012
Accounts payable—other related to acquisition of tangible assets and others	￦	(307,258	)		8,010
Transfer of other tangible assets to construction in progress		485,202			738,175
Transfer of construction in progress to property, equipment and investment in associates		993,267			1,333,288

38.

Subsequent Events

(1)

Interim dividends

On July 25, 2013, the Board of Directors of the Parent Company resolved to pay interim cash dividends of ￦ 1,000 per share totaling ￦ 70,508 million (Market dividend rate: 0.49%). The ex-dividend date was June 30, 2013 and the interim dividends are expected to be paid within twenty days after the date of the Board of Directors’ resolution.

(2)

Agreement of transfer of ownership interests in Loen Entertainment, Inc.

Pursuant to the resolution of the Board of Directors’ meeting held on July 18, 2013, SK Planet Co., Ltd., a subsidiary of the Parent Company entered into an agreement to transfer its ownership in 52.6% of ownership interests (13,294,369 shares) of Loen Entertainment, Inc., a subsidiary of SK Planet Co., Ltd., to Star Invest Holdings Limited. Consideration for the transfer amounts to ￦ 265,887 million and the Group’s ownership interests after the transfer will be 15.0%.

SK TELECOM CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

June 30, 2013 and 2012

(With Independent Auditors’ Review Report Thereon)

Contents


	Page

Independent Auditors’ Review Report		1

Condensed Separate Statements of Financial Position		3

Condensed Separate Statements of Income		5

Condensed Separate Statements of Comprehensive Income		6

Condensed Separate Statements of Changes in Equity		7

Condensed Separate Statements of Cash Flows		8

Notes to the Condensed Interim Separate Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To The Board of Directors and Shareholders

SK Telecom Co., Ltd.:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of SK Telecom Co., Ltd. (the “Company”), which comprise the condensed separate statement of financial position as of June 30, 2013, the related condensed separate statements of income, comprehensive income for the three and six-month periods ended June 30, 2013 and 2012, the changes in equity and cash flows for the six-month periods ended June 30, 2013 and 2012, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

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

Auditors’ responsibility

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

Conclusion

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

Highlights

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

Other matters

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

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

KPMG Samjong Accounting Corp.

Seoul, Korea

August 7, 2013

This report is effective as of August 7, 2013, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying condensed separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

SK TELECOM CO., LTD.

Condensed Separate Statements of Financial Position

As of June 30, 2013 and December 31, 2012


(In millions of won)	Note		June 30, 2013		December 31, 2012
Assets
Current Assets:
Cash and cash equivalents		27,28	￦	505,804		256,577
Short-term financial instruments		4,27,28		138,500		179,300
Short-term investment securities		6,27,28		61,417		56,401
Accounts receivable—trade, net		5,27,28,29		1,481,362		1,407,206
Short-term loans, net		5,27,28,29		68,359		75,449
Accounts receivable—other, net		5,27,28,29		427,782		383,048
Prepaid expenses				71,738		76,016
Derivative financial assets		16,27,28		18,631		9,656
Inventories, net				10,391		15,995
Non-current assets held for sale		7		2,143		121,337
Advanced payments and other		5,27,28		23,800		8,714

Total Current Assets				2,809,927		2,589,699

Non-Current Assets:
Long-term financial instruments		4,27,28		69		69
Long-term investment securities		6,27,28		666,567		733,893
Investments in subsidiaries and associates		8		8,119,590		7,915,547
Property and equipment, net		9,29		6,865,983		7,119,090
Goodwill		10		1,306,236		1,306,236
Intangible assets, net		11		2,044,946		2,187,872
Long-term loans, net		5,27,28,29		45,265		49,672
Long-term prepaid expenses				21,177		21,582
Guarantee deposits		4,5,27,28,29		142,616		149,373
Long-term derivative financial assets		16,27,28		62,115		52,303
Deferred tax assets		25		62,682		123,723
Other non-current assets				266		443

Total Non-Current Assets				19,337,512		19,659,803

Total Assets			￦	22,147,439		22,249,502

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Financial Position, Continued

As of June 30, 2013 and December 31, 2012


(In millions of won)	Note		June 30, 2013		December 31, 2012
Liabilities and Equity
Current Liabilities:
Short-term borrowings		12,27,28	￦	—		330,000
Current portion of long-term debt, net		12,13,27,28		1,062,859		713,072
Accounts payable—other		27,28,29		1,028,928		1,509,456
Withholdings		27,28		456,718		552,380
Accrued expenses		27,28		598,237		600,101
Income tax payable				83,295		52,267
Unearned revenue				230,807		252,298
Provisions		14		145,774		286,819
Advanced receipts				49,344		46,693

Total Current Liabilities				3,655,962		4,343,086

Non-Current Liabilities:
Debentures, net, excluding current portion		12,27,28		4,729,461		3,992,111
Long-term borrowings, excluding current portion		12,27,28		—		348,333
Long-term payables—other		13,27,28		547,441		705,605
Long-term unearned revenue				98,884		160,820
Defined benefit liabilities		15		49,494		34,951
Long-term derivative financial liabilities		16,27,28		35,510		63,599
Long-term provisions		14		44,038		99,355
Other non-current liabilities		27,28,29		123,536		124,594

Total Non-Current Liabilities				5,628,364		5,529,368

Total Liabilities				9,284,326		9,872,454

Equity
Share capital		1,17		44,639		44,639
Capital surplus and other capital adjustments		17,18,19		338,443		(236,160	)
Retained earnings		20		12,437,777		12,413,981
Reserves		21		42,254		154,588

Total Equity				12,863,113		12,377,048

Total Liabilities and Equity			￦	22,147,439		22,249,502

See accompanying notes to the condensed separate interim financial statements.

SK TELECOM CO., LTD.

Condensed Separate Statements of Income

For the three and six-month periods ended June 30, 2013 and 2012


(In millions of won except for per share data)
			June 30, 2013				June 30, 2012
	Note		Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Operating revenue:		29
Revenue			￦	3,209,053		6,321,152		3,068,575		6,076,014
Operating expense:		29
Labor cost				131,361		331,266		118,460		288,195
Commissions paid				1,301,196		2,670,696		1,449,868		2,721,222
Depreciation and amortization				506,354		982,718		400,316		801,272
Network interconnection				184,569		360,936		206,661		432,412
Leased lines				106,669		210,705		103,448		210,884
Advertising				75,409		110,078		61,683		97,881
Rent				88,669		174,955		80,967		161,855
Cost of products that have been resold				94,272		173,074		55,310		117,255
Other operating expenses		22		188,316		354,376		198,564		369,075

Sub-total				2,676,815		5,368,804		2,675,277		5,200,051

Operating income		3		532,238		952,348		393,298		875,963
Finance income		24		17,358		44,242		35,099		82,839
Finance costs		24		139,333		253,752		84,925		164,916
Other non-operating income		3,23		13,370		20,343		1,299		6,005
Other non-operating expenses		3,23		26,730		57,301		49,038		78,708
Gain on disposal of investments in subsidiaries and associates		8		—		71,200		—		80,482
Impairment loss on investments in associates		8		—		—		—		72,096

Profit before income tax				396,903		777,080		295,733		729,569

Income tax expense		25		83,472		161,471		64,367		153,231


Profit for the period			￦	313,431		615,609		231,366		576,338

Basic earnings per share (in won)		26	￦	4,471		8,806		3,320		8,269

Diluted earnings per share (in won)		26	￦	4,471		8,806		3,131		7,978

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, 2013 and 2012


(In millions of won)			June 30, 2013						June 30, 2012
	Note		Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended

Profit for the period			￦	313,431			615,609			231,366			576,338

Other comprehensive loss
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit obligations		15,20		(2,968	)		(5,317	)		(1,202	)		(5,887	)
Items that are or may be reclassified subsequently to profit or loss:
Net change in unrealized fair value of available-for-sale financial assets		21		(28,921	)		(48,242	)		(36,577	)		(48,276	)
Net change in unrealized fair value of derivatives		16,21		(56,642	)		(64,092	)		17,086			2,763

				(88,531	)		(117,651	)		(20,693	)		(51,400	)

Total comprehensive income			￦	224,900			497,958			210,673			524,938

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, 2013 and 2012


(In millions of won)
			Capital surplus and other capital adjustments													Retained earnings			Reserves			Total equity
	Share capital		Paid-in surplus		Treasury stock			Loss on disposal of treasury stock			Hybrid bond		Other			Retained earnings			Reserves			Total equity
Balance, January 1, 2012	￦	44,639		2,915,887		(2,410,451	)		(18,855	)		—		(722,597	)		11,837,185			320,494			11,966,302
Cash dividends		—		—		—			—			—		—			(585,438	)		—			(585,438	)
Transfer of business		—		—		—			—			—		(144	)		—			—			(144	)
Total comprehensive income
Profit for the period		—		—		—			—			—		—			576,338			—			576,338
Other comprehensive loss		—		—		—			—			—		—			(5,887	)		(45,513	)		(51,400	)

Balance, June 30, 2012	￦	44,639		2,915,887		(2,410,451	)		(18,855	)		—		(722,741	)		11,822,198			274,981			11,905,658

Balance, January 1, 2013	￦	44,639		2,915,887		(2,410,451	)		(18,855	)		—		(722,741	)		12,413,981			154,588			12,377,048
Cash dividends		—		—		—			—			—		—			(585,438	)		—			(585,438	)
Issuance of hybrid bond		—		—		—			—			398,518		—			—			—			398,518
Interest on hybrid bond		—		—		—			—			—		—			(1,058	)		—			(1,058	)
Treasury stock		—		—		177,442			(1,357	)		—		—			—			—			176,085
Total comprehensive income
Profit for the period		—		—		—			—			—		—			615,609			—			615,609
Other comprehensive loss		—		—		—			—			—		—			(5,317	)		(112,334	)		(117,651	)

Balance, June 30, 2013	￦	44,639		2,915,887		(2,233,009	)		(20,212	)		398,518		(722,741	)		12,437,777			42,254			12,863,113

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, 2013 and 2012


(In millions of won)	Note		June 30, 2013			June 30, 2012
Cash flows from operating activities:
Cash generated from operating activities
Profit for the period			￦	615,609			576,338
Adjustments for income and expenses		32		1,396,172			1,136,953
Changes in assets and liabilities related to operating activities		32		(710,472	)		119,367

Sub-total				1,301,309			1,832,658
Interest received				11,401			31,315
Dividends received				12,643			25,780
Interest paid				(133,545	)		(127,328	)
Income tax paid				(29,428	)		(227,427	)

Net cash provided by operating activities				1,162,380			1,534,998

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term investment securities, net				—			50,179
Decrease in short-term financial instruments, net				40,800			465,500
Collection of short-term loans				170,110			138,028
Proceeds from disposal of long-term investment securities				11,336			14,185
Proceeds from disposal of investments in subsidiaries and associates				—			88,602
Proceeds from disposal of property and equipment				1,511			763
Proceeds from disposal of intangible assets				635			2,195
Proceeds from disposal of non-current assets held for sale				190,393			—
Collection of long-term loans				8,810			5,348
Decrease in other non-current assets, net				177			—

Sub-total				423,772			764,800
Cash outflows for investing activities:
Increase in short-term investment securities, net				(5,000	)		—
Increase in short-term loans				(166,592	)		(120,000	)
Acquisition of long-term investment securities				(3,084	)		(3,305	)
Acquisition of investments in subsidiaries and associates				(204,043	)		(3,082,544	)
Acquisition of property and equipment				(927,770	)		(1,097,496	)
Acquisition of intangible assets				(19,229	)		(21,897	)
Increase in long-term loans				—			(22	)
Cash outflows from transfer of business				—			(3,387	)
Increase in other non-current assets, net				—			(19	)

Sub-total				(1,325,718	)		(4,328,670	)

Net cash used in investing activities				(901,946	)		(3,563,870	)

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, 2013 and 2012


(In millions of won)	Note	June 30, 2013			June 30, 2012
Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings		￦	40,000			700,000
Proceeds from long-term borrowings			—			1,986,800
Issuance of hybrid bond			398,518			—
Issuance of debenture			1,014,858			369,970
Cash inflows from settlement of derivatives			2,274			1,517

Sub-total			1,455,650			3,058,287
Cash outflows for financing activities:
Repayment of short-term borrowings			(370,000	)		(500,000	)
Repayment of long-term borrowings			(350,000	)		—
Repayment of current portion of long-term debt			(161,575	)		(92,158	)
Repayment of debentures			—			(372,539	)
Payment of cash dividends			(585,437	)		(585,437	)
Cash outflows from settlement of derivatives			—			(5,415	)

Sub-total			(1,467,012	)		(1,555,549	)

Net cash provided by (used in) financing activities			(11,362	)		1,502,738

Net increase in cash and cash equivalents			249,072			(526,134	)
Cash and cash equivalents at beginning of the period			256,577			895,558
Effects of exchange rate changes on cash and cash equivalents			155			(46	)

Cash and cash equivalents at end of the period		￦	505,804			369,378

See accompanying notes to the condensed separate interim financial statements.

1.	Reporting Entity

SK Telecom Co., Ltd. (“the Company”) was incorporated in March 1984 under the laws of Republic of Korea (“Korea”) to engage in providing cellular telephone communication services in Korea. The Company mainly provides wireless telecommunications in Korea. The Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of June 30, 2013, the Company’s total issued shares are held by the following:


	Number of shares		Percentage of total shares issued (%)
SK Holdings, Co., Ltd.		20,363,452		25.22
National Pension		2,652,949		3.29
Institutional investors and other minority stockholders		47,492,081		58.81
Treasury stock		10,237,229		12.68

Total number of shares		80,745,711		100.00

2.	Basis of Presentation

(1) Statement of compliance

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

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

These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No.1027, ‘Separate Financial Statements’ presented by a parent, an investor in an associate or a venturer in a jointly controlled entity, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

(2) Use of estimates and judgments

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

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

2.	Basis of Presentation, Continued

(3) Common control transactions

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

3.	Significant Accounting Policies

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

(1)

Changes in accounting policies

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

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

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

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

3.	Significant Accounting Policies, Continued

(1)

Changes in accounting policies, Continued

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

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

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

(2)

Impact of changes in accounting policies

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

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

3.	Significant Accounting Policies, Continued

(2)

Impact of changes in accounting policies, Continued

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


(In millions of won)
	June 30, 2012
	Three-month period ended			Six-month period ended
Operating income before adoption of the amendment	￦	345,559			803,260
Differences:
Other non-operating income		—
Gain on disposal of property and equipment and intangible assets		(128	)		(358	)
Others		(1,171	)		(5,647	)

		(1,299	)		(6,005	)
Other non-operating expense
Loss on disposal of property and equipment and intangible assets		1,323			2,085
Impairment loss on property and equipment and intangible assets		15,438			15,438
Donations		28,213			40,482
Bad debt for accounts receivable—other		3,411			19,371
Others		653			1,332

		49,038			78,708

Operating income after adoption of the amendment	￦	393,298			875,963

(3)

New standards and interpretations not yet adopted

The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Company for annual periods beginning after January 1, 2013. Impact of these new standards, interpretations and amendments to the separate interim financial statements cannot be measured as of June 30, 2013.

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

4.	Restricted Deposits

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


(In millions of won)
	June 30, 2013		December 31, 2012
Short-term financial instruments (*)	￦	83,500		83,500
Long-term financial instruments (*)		69		69
Deposit		40		40

	￦	83,609		83,609

(*)	Financial instruments include charitable trust fund established by the Company. Profits from this charitable fund are donated to charitable institutions. As of June 30, 2013 the funds cannot be withdrawn.

5.	Trade and Other Receivables

(1)

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


(In millions of won)	June 30, 2013
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable—trade	￦	1,577,060		(95,698	)		1,481,362
Short-term loans		69,348		(989	)		68,359
Accounts receivable—other		475,654		(47,872	)		427,782
Accrued income		5,302		—			5,302

		2,127,364		(144,559	)		1,982,805
Non-current assets:
Long-term loans		68,344		(23,079	)		45,265
Guarantee deposits		142,616		—			142,616

		210,960		(23,079	)		187,881

	￦	2,338,324		(167,638	)		2,170,686

5.	Trade and Other Receivables, Continued


(In millions of won)	December 31, 2012
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable—trade	￦	1,497,745		(90,539	)		1,407,206
Short-term loans		76,471		(1,022	)		75,449
Accounts receivable—other		421,695		(38,647	)		383,048
Accrued income		4,147		—			4,147

		2,000,058		(130,208	)		1,869,850
Non-current assets:
Long-term loans		72,801		(23,129	)		49,672
Guarantee deposits		149,373		—			149,373

		222,174		(23,129	)		199,045

	￦	2,222,232		(153,337	)		2,068,895

(2)

The movement in allowance for doubtful accounts of trade and other receivables during the six-month periods ended June 30, 2013 and 2012 were as follows:


(In millions of won )
	June 30, 2013			June 30, 2012
Balance at January 1	￦	153,337			171,639
Increase of bad debt allowances		32,691			27,925
Reversal of allowances for doubtful accounts		—			(4,475	)
Write-offs		(28,014	)		(51,203	)
Collection of receivables previously written-off		9,624			18,669

Balance at June 30	￦	167,638			162,555

(3)

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


(In millions of won)	June 30, 2013						December 31, 2012
	Accounts receivable - trade			Other receivables			Accounts receivable - trade			Other receivables
Neither overdue nor impaired	￦	1,172,345			651,870			1,093,481			636,291
Overdue but not impaired		26,891			—			25,502			—
Impaired		377,824			109,394			378,762			88,196

		1,577,060			761,264			1,497,745			724,487
Allowances for doubtful accounts		(95,698	)		(71,940	)		(90,539	)		(62,798	)

	￦	1,481,362			689,324			1,407,206			661,689

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

5.	Trade and Other Receivables, Continued

(4)

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


(In millions of won)
	June 30, 2013		December 31, 2012
Less than 1 month	￦	4,969		3,699
1 ~ 3 months		5,008		3,686
3 ~ 6 months		2,478		9,175
More than 6 months		14,436		8,942

	￦	26,891		25,502

6.	Investment Securities

(1)

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


(In millions of won)
	June 30, 2013		December 31, 2012
Beneficiary certificates (*)	￦	61,174		56,159
Current portion of long-term investment securities		240		242
Public bonds		3		—

	￦	61,417		56,401

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

(2)

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


(In millions of won)
	June 30, 2013			December 31, 2012
Equity securities:
Marketable equity securities	￦	514,035			584,029
Unlisted equity securities		19,111			18,814
Equity investments		114,127			115,120

		647,273			717,963
Debt securities:
Public bonds (*1)		353			356
Investment bonds (*2)		19,181			15,816

		19,534			16,172

Total		666,807			734,135
Less current portion of long-term investment securities		(240	)		(242	)

Long-term investment securities	￦	666,567			733,893

6.	Investment Securities, Continued

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


(In millions of won)
	June 30, 2013		December 31, 2012
1 ~ 5 years		353		356

(*2)	The Company classified convertible bonds of NanoEnTek, Inc. (carrying amount as of June 30, 2013: ￦ 18,721 million) as financial assets at fair value through profit or loss. The difference between acquisition cost and fair value is accounted for as finance income (loss).

7.	Non-current Assets Held for Sale

A disposal contract for the Company’s ownership interests in SK Fans Co., Ltd., an associate, has been entered into during the year ended December 31, 2012 and investment in the associate was reclassified to non-current assets held for sale.

Non-current assets held for sale as of June 30, 2013 and December 31, 2012 are as follows:


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

	￦	2,143		121,337

(*)	For the six-month period ended June 30, 2013, the Company disposed its ownership interests of 27% in SKY Property Mgmt. Ltd., a subsidiary, to SK Innovation Co., Ltd., a related party and recognized ￦ 71,200 million of disposal gain.

The assets classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

8.	Investments in Subsidiaries and Associates

(1)

Investments in subsidiaries and associates as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	June 30, 2013		December 31, 2012
Investments in subsidiaries	￦	3,476,663		3,315,205
Investments in associates		4,642,927		4,600,342

	￦	8,119,590		7,915,547

8.	Investments in Subsidiaries and Associates, Continued

(2)

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


(In millions of won)	June 30, 2013						December 31, 2012
	Number of shares		Ownership (%)		Carrying amount		Carrying amount
SK Telink Co., Ltd.		1,082,272		83.5	￦	144,740		144,740
SK Broadband Co., Ltd.		149,638,354		50.6		1,242,247		1,242,247
PS&Marketing Corporation		46,000,000		100.0		213,934		213,934
Service Ace Co., Ltd.		4,385,400		100.0		21,927		21,927
Service Top Co., Ltd.		2,856,200		100.0		14,281		14,281
Network O&S Co., Ltd.		3,000,000		100.0		15,000		15,000
SK Planet Co., Ltd.(*1)		72,927,317		100.0		1,538,020		1,234,884
SK Telecom China Holdings Co., Ltd.		—		100.0		29,116		29,116
SKY Property Mgmt. Ltd.(*2)		—		—		—		264,850
SKT Vietnam PTE. Ltd.		180,476,700		73.3		26,264		26,264
SKT Americas, Inc.		122		100.0		76,764		72,786
YTK Investment Ltd.		—		100.0		69,464		69,464
Atlas Investment		—		100.0		59,122		59,122
SK Global Healthcare Business Group Ltd.		—		100.0		25,784		25,784

						3,476,663		3,434,399

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

					￦	3,476,663		3,315,205

(*1)

The Company acquired additional 50% shares of SK Marketing & Company Co., Ltd., an associate, from SK Innovation Co., Ltd., a related party, and transferred its 100% shares of SK Marketing & Company Co., Ltd. to SK Planet Co., Ltd., and received 12,927,317 of new shares of SK Planet Co., Ltd. as a consideration. The additional interest in SK Planet Co., Ltd is measured at the carrying value of the Company’s investments in SK Marketing & Company Co., Ltd. at the date of transaction.

(*2)

The Company disposed its ownership interests of 27% in SKY Property Mgmt. Ltd., a subsidiary, to SK Innovation Co., Ltd., a related party and reclassified carrying value of the ownership interests of ￦ 145,656 million to investments in associates as the Company has less than 50% of the ownership interests.

8.	Investments in Subsidiaries and Associates, Continued

(3)

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


(In millions of won)	June 30, 2013						December 31, 2012
	Number of shares		Ownership percentage (%)		Carrying amount		Carrying amount
SK Marketing & Company Co., Ltd.(*1)		—		—		—		112,531
SK China Company Ltd.(*2)		720,000		9.6		47,830		47,830
SK USA, Inc.		49		49.0		5,498		5,498
HappyNarae Co., Ltd.		680,000		42.5		12,250		12,250
F&U Credit information Co., Ltd.		300,000		50.0		4,482		4,482
Korea IT Fund(*3)		190		63.3		220,957		220,957
Wave City Development Co., Ltd.(*2)		382,000		19.1		1,532		1,532
HanaSK Card Co., Ltd.		57,647,058		49.0		400,000		400,000
Daehan Kanggun BcN Co., Ltd.		1,675,126		29.0		8,340		8,340
NanoEnTek, Inc.(*2)		1,807,130		9.3		11,000		11,000
Health Connect Co., Ltd.		954,000		49.5		9,540		9,540
UNISK (Beijing) Information Technology Co., Ltd.		49		49.0		4,247		4,247
TR Entertainment		—		42.2		7,560		7,560
SK Industrial Development China Co., Ltd.		72,952,360		35.0		83,691		83,691
Packet One Network		1,153,674		27.0		140,139		140,139
SK Technology Innovation Company		9,800		49.0		85,873		85,873
Lightsquared Inc.(*2,4)		3,387,916		3.3		—		—
SK Hynix Inc.(*5)		146,100,000		21.0		3,374,725		3,374,725
SK MENA Investment B.V.		—		32.1		14,485		14,485
SK Latin America Investment S.A.		—		32.1		14,243		14,243
Gemini		—		20.0		6,108		6,108
SKY Property Mgmt. Ltd.		12,639		33.0		145,656		—
SK Wyverns Baseball Club Co., Ltd. and others		—		—		44,771		35,311

					￦	4,642,927		4,600,342

(*1)	Increased by ￦ 190,606 million as the Company acquired 50% shares from SK Innovation Co., Ltd., a related party, during the six-month period ended June 30, 2013, and the entire ownership interests has been provided to SK Planet Co., Ltd. as a consideration for the investment in kind.

(*2)	Classified as an investment in associate because the Company can exercise significant influence over the associate through participation on the associate’s board of directors.

(*3)	Classified as an investment in associate because the Company has less than 50% of the voting rights of the board of directors.

(*4)	Recognized the entire amount as impairment loss as recoverable amount is considered to be zero as of December 31, 2012.

8.	Investments in Subsidiaries and Associates, Continued

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

(4)

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

(In millions of won, except for share data)

June 30, 2013

December 31, 2012

Market
value per
share
(In won)

Number of
shares

Market
price

Market
value per
share
(In won)

Number of
shares

Market
price

SK Broadband Co., Ltd.

￦

5,080

149,638,354

760,163

4,665

149,638,354

698,063

9.	Property and Equipment

(1)

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


(In millions of won)
	June 30, 2013							December 31, 2012
	Acquisition cost		Accumulated depreciation			Carrying amount		Carrying amount
Land	￦	405,184		—			405,184		395,968
Buildings		1,005,743		(413,241	)		592,502		607,973
Structures		688,708		(335,918	)		352,790		363,364
Machinery		17,965,558		(13,291,668	)		4,673,890		4,532,811
Other		1,277,847		(782,082	)		495,765		579,448
Construction in progress		345,852		—			345,852		639,526

	￦	21,688,892		(14,822,909	)		6,865,983		7,119,090

(2)

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


(In millions of won)
	For the six-month period ended June 30, 2013
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	￦	395,968		4,596		(14	)		4,634			—			405,184
Buildings		607,973		34		(99	)		1,803			(17,209	)		592,502
Structures		363,364		946		(7	)		6,025			(17,538	)		352,790
Machinery		4,532,811		26,989		(5,335	)		869,288			(749,863	)		4,673,890
Other		579,448		434,801		(921	)		(468,169	)		(49,394	)		495,765
Construction in progress		639,526		152,426		(5,695	)		(440,405	)		—			345,852

	￦	7,119,090		619,792		(12,071	)		(26,824	)		(834,004	)		6,865,983

9.	Property and Equipment, Continued


(In millions of won)
	For the six-month period ended June 30, 2012
	Beginning balance		Acquisition (*1)		Disposal			Transfer			Depreciation			Impairment (*2)			Ending balance
Land	￦	409,696		3		(44	)		4,400			—			—			414,055
Buildings		676,095		340		(23	)		3,308			(20,125	)		—			659,595
Structures		300,995		2,808		(4	)		5,615			(17,539	)		—			291,875
Machinery		3,581,275		53,844		(442	)		833,129			(611,833	)		(12,531	)		3,843,442
Other		640,317		732,880		(1,068	)		(715,880	)		(46,561	)		—			609,688
Construction in progress		651,791		308,886		(810	)		(528,639	)		—			—			431,228

	￦	6,260,169		1,098,761		(2,391	)		(398,067	)		(696,058	)		(12,531	)		6,249,883

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

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

10.

Goodwill

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


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

11.

Intangible Assets

(1)

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


(In millions of won)
	June 30, 2013							December 31, 2012
	Acquisition cost		Accumulated depreciation			Carrying amount		Carrying amount
Frequency use rights	￦	2,829,205		(1,261,643	)		1,567,562		1,693,868
Land use rights		31,933		(23,480	)		8,453		9,815
Industrial rights		31,977		(22,495	)		9,482		9,769
Development costs		111,454		(111,253	)		201		665
Facility usage rights		42,250		(26,049	)		16,201		16,786
Memberships(*1)		83,083		—			83,083		81,518
Other(*2)		1,556,466		(1,196,502	)		359,964		375,451

	￦	4,686,368		(2,641,422	)		2,044,946		2,187,872

11.

Intangible Assets, Continued

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

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

(2)

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


(In millions of won)
	For the six-month period ended June 30, 2013
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Ending balance
Frequency use rights	￦	1,693,868		—		—			—		(126,306	)		1,567,562
Land use rights		9,815		913		(50	)		—		(2,225	)		8,453
Industrial rights		9,769		1,027		(74	)		—		(1,240	)		9,482
Development costs		665		—		—			—		(464	)		201
Facility usage rights		16,786		662		(49	)		—		(1,198	)		16,201
Memberships		81,518		2,066		(501	)		—		—			83,083
Other		375,451		14,561		—			39,984		(70,032	)		359,964

	￦	2,187,872		19,229		(674	)		39,984		(201,465	)		2,044,946


(In millions of won)
	For the six-month period ended June 30, 2012
	Beginning balance		Acquisition *(1)**		Disposal			Transfer		Amortization			Impairment loss(*2)			Ending balance
Frequency use rights	￦	1,889,102		16,659		—			—		(82,680	)		(2,907	)		1,820,174
Land use rights		12,739		1,140		(80	)		—		(2,440	)		—			11,359
Industrial rights		8,328		3,624		—			—		(1,483	)		—			10,469
Development costs		1,186		—		—			—		(1,142	)		—			44
Facility usage rights		15,058		385		(41	)		13		(1,122	)		—			14,293
Memberships		80,607		—		(742	)		—		—			—			79,865
Other		357,775		8,298		(1,430	)		53,140		(68,874	)		—			348,909

	￦	2,364,795		30,106		(2,293	)		53,153		(157,741	)		(2,907	)		2,285,113

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

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

11.

Intangible Assets, Continued

(3)

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


(In millions of won)
	Amount		Description	Residual useful lives
W-CDMA license	￦	342,097	Frequency use rights relating to W-CDMA service		(*1)
W-CDMA license		57,088	Frequency use rights relating to W-CDMA service		(*2)
800MHz license		324,352	Frequency use rights relating to CDMA and LTE service		(*3)
1.8GHz license		830,498	Frequency use rights relating to LTE service		(*4)
WiBro license		13,527	WiBro service		(*5)

	￦	1,567,562

(*1)

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

(*2)

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

(*3)

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

(*4)

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

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

12.

Borrowings and Debentures

(1)

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


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)		Maturity		June 30, 2013		December 31, 2012
Kookmin Bank		3.98		Jan. 10, 2013	￦	—		100,000
Woori Bank		4.20		Jan. 10, 2013		—		100,000
CP		2.98		Jan. 14, 2013		—		60,000
		3.05		Jan. 25, 2013		—		20,000
		3.10		Jan. 29, 2013		—		50,000

					￦	—		330,000

(2)

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


(In millions of won and thousands of U.S. dollars)
Lender	Annual interest rate (%)	Maturity	June 30, 2013			December 31, 2012
Bank of Communications (*)	6M Libor + 0.29	Oct. 10, 2013		￦34,491 (USD 30,000	)		32,133 (USD 30,000	)
Bank of China(*)	6M Libor + 0.29	Oct. 10, 2013		22,993 (USD 20,000	)		21,422 (USD 20,000	)
DBS Bank(*)	6M Libor + 0.29	Oct. 10, 2013		28,743 (USD 25,000	)		26,778 (USD 25,000	)
SMBC(*)	6M Libor + 0.29	Oct. 10, 2013		28,743 (USD 25,000	)		26,778 (USD 25,000	)
Kookmin Bank and 13 others	4.48	Feb. 14, 2015		—			350,000

				114,970			457,111
Less present value discount on long-term borrowings				—			(1,668	)

				114,970			455,443
Less current portion of bonds				(114,970	)		(107,110	)

				￦—			348,333

(*)	As of June 30, 2013, 6M Libor rate is 0.41%.

12.

Borrowings and Debentures, Continued

(3)

Debentures as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won, thousands of U.S. dollars, and thousands of other currencies)
	Purpose	Maturity	Annual interest rate (%)	June 30, 2013			December 31, 2012
Unsecured private bonds	Refinancing fund	2016	5.00	￦	200,000			200,000
Unsecured private bonds		2013	4.00		200,000			200,000
Unsecured private bonds		2014	5.00		200,000			200,000
Unsecured private bonds	Other fund	2015	5.00		200,000			200,000
Unsecured private bonds		2018	5.00		200,000			200,000
Unsecured private bonds		2013	6.92		250,000			250,000
Unsecured private bonds		2016	5.54		40,000			40,000
Unsecured private bonds		2016	5.92		230,000			230,000
Unsecured private bonds	Operating fund	2016	3.95		110,000			110,000
Unsecured private bonds		2021	4.22		190,000			190,000
Unsecured private bonds	Operating and 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			—
Unsecured private bonds		2033	3.22		130,000			—
Foreign global bonds		2027	6.63		459,880			428,440
					(USD 400,000	)		(USD 400,000	)
Exchangeable bonds(*3,4)	Refinancing fund	2014	1.75		336,606			405,678
					(USD 220,797	)		(USD 332,528	)
Floating rate notes(*1)	Operating fund	2014	3M Libor + 1.60		287,425			267,775
					(USD 250,000	)		(USD 250,000	)
Floating rate notes(*2)		2014	SOR rate + 1.20		58,949			56,906
					(SGD 65,000	)		(SGD 65,000	)
Swiss unsecured private bonds		2017	1.75		364,848			351,930
					(CHF 300,000	)		(CHF 300,000	)
Foreign global bonds		2018	2.13		804,790			749,770
					(USD 700,000	)		(USD 700,000	)
Australian unsecured private bonds		2017	4.75		319,575			—
					(AUD 300,000	)		—
Floating rate notes(*1)		2020	3M Libor + 0.88		344,910			—
					(USD 300,000	)		—

					5,556,983			4,480,499
Less discounts on bonds					(41,791	)		(40,392	)

					5,515,192			4,440,107
Less current portion of bonds					(785,731	)		(447,996	)

				￦	4,729,461			3,992,111

12.

Borrowings and Debentures, Continued

(*1)	As of June 30, 2013, 3M Libor rate is 0.27%.

(*2)	As of June 30, 2013, SOR rate is 0.23%.

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

(*4)

On April 7, 2009, the Company issued exchangeable bonds with a maturity of five years in the principal amount of USD 332,528,000 for USD 326,397,463 with a coupon rate of 1.75%. As of June 30, 2013, fair value of the exchangeable bonds is USD 292,776,822. The exchange price could be adjusted and the exchange price is ￦ 190,006 with the exchange rate of ￦ 1,383.40 per USD 1.

The Company may redeem the principal amount after three years from the issuance date if the market price exceeds 130% of the exchange price during a predetermined period. The exchange right may be exercised during the period from May 18, 2009 to March 24, 2014 and the number of common shares that can be exchanged as of June 30, 2013 is 2,421,077 shares.

Exchange of notes to common shares may be prohibited under the Telecommunications Law or other legal restrictions which restrains foreign governments, individuals and entities from owning more than 49% of the Company’s voting stock. If such 49% ownership limitation is violated due to the exercise of exchange rights, the Company will pay the bond holder a cash settlement which will be determined at the average price of one day after a holder exercises its exchange right or the weighted average price for the following five or twenty business days. Unless either previously redeemed or exchanged, the notes are redeemable at 100% of the principal amount at maturity.

In accordance with a resolution of the general shareholder’s meeting on March 22, 2013, the exchange price has changed from ￦ 197,760 to ￦ 190,006 and the number of common shares that can be exchanged was changed from 2,326,149 shares to 2,421,077 shares due to the payment of periodic dividends. During the six-month period ended June 30, 2013, exchange of bonds in the principal amount of USD 111,731,000 were claimed and the Company granted 813,483 shares of treasury stock. The Company recognized ￦ 37,364 million of financial costs in relation to the exchanged bonds for the six-month period ended June 30, 2013. As of June 30, 2013, the number of common shares that can be exchanged is 1,607,584.

13.

Long-term Payables—other

(1)

As of June 30, 2013 and December 31, 2012, long-term payables consist of payables related to the acquisition of W-CDMA licenses for 2.1GHz, 800MHZ, 1.8GHz and 2.3GHz frequencies as follows (Refer to Note 11):


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

Present value of long-term payables—other at the time of acquisition		49,363			197,190			679,453			8,009			934,015
Nominal value at December 31, 2012		35,067			208,250			671,625			8,650			923,591
Present value discount on long-term payables—other		(3,076	)		(10,179	)		(64,230	)		(641	)		(78,125	)
Current portion of long-term payables—other		(17,533	)		(69,417	)		(74,625	)		—			(161,575	)
Accumulated amortization of present value discount at December 31, 2012		2,693			5,955			12,911			155			21,714

Carrying amount as of December 31, 2012		17,151			134,609			545,681			8,164			705,605
Amortization of present value discount		267			1,663			5,572			105			7,607
Current portion of amortization of present value discount		(161	)		(882	)		(2,571	)		—			(3,614	)
Less current portion of long-term payables—other		(17,257	)		(68,413	)		(73,656	)		(2,831	)		(162,157	)

Carrying amount at June 30, 2013	￦	—			66,977			475,026			5,438			547,441

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

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

13.

Long-term Payables—other, Continued

(2)

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


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

	￦	762,016

14.

Provisions

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


(In millions of won)	For the six-month period ended June 30, 2013												As of June 30, 2013
	Beginning balance		Increase		Utilization			Reversal			Ending balance		Current		Non-current
Provision for handset subsidy	￦	353,383		2,413		(200,072	)		—			155,724		136,489		19,235
Provision for restoration		32,791		2,199		(144	)		(758	)		34,088		9,285		24,803

	￦	386,174		4,612		(200,216	)		(758	)		189,812		145,774		44,038


(In millions of won)	For the six-month period ended June 30, 2012									As of June 30, 2012
	Beginning balance		Increase		Utilization			Ending balance		Current		Non-current
Provision for handset subsidy	￦	762,238		262,346		(374,143	)		650,441		568,298		82,143
Provision for restoration		28,623		8,822		(132	)		37,313		4,707		32,606

	￦	790,861		271,168		(374,275	)		687,754		573,005		114,749

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

15.

Defined Benefit Liabilities

(1)

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


(In millions of won)
	June 30, 2013			December 31, 2012
Present value of defined benefit obligations	￦	150,251			133,098
Fair value of plan assets		(100,757	)		(98,147	)

	￦	49,494			34,951

(2)

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


	June 30, 2013			December 31, 2012
Discount rate for defined benefit obligations		3.56	%		3.56	%
Expected rate of salary increase		5.20	%		5.20	%

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

(3)

Changes in defined benefit obligations for the six-month periods ended June 30, 2013 and 2012 are as follows:


(In millions of won)	For the six-month period ended
	June 30, 2013			June 30, 2012
Beginning balance	￦	133,098			95,359
Current service cost		16,843			14,365
Interest cost		2,351			2,169
Remeasurement:
- Adjustment based on experience		8,045			8,380
Benefit paid		(13,554	)		(11,113	)
Others(*)		3,468			843

Ending balance	￦	150,251			110,003

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

15.

Defined Benefit Liabilities, Continued

(4)

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


(In millions of won)	For the six-month period ended
	June 30, 2013			June 30, 2012
Beginning balance	￦	98,147			68,619
Expected return on plan assets		1,653			1,044
Contributions to the plan		4,000			1,000
Remeasurement		1,031			614
Benefit paid		(4,074	)		(1,636	)
Others		—			189

Ending balance	￦	100,757			69,830

(5)

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


(In millions of won)	For the six-month period ended
	June 30, 2013		June 30, 2012
Current service cost	￦	16,843		14,365
Net interest cost		698		1,125

	￦	17,541		15,490

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

(6)

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


(In millions of won)
	June 30, 2013		December 31, 2012
Equity instruments	￦	3,424		55
Debt instruments		24,585		24,199
Short-term financial instruments, etc.		72,748		73,893

	￦	100,757		98,147

Actual return on plan assets for the six-month periods ended June 30, 2013 and 2012 amounted to ￦ 2,684 million and ￦ 1,658 million, respectively.

16.

Derivative Instruments

(1)

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


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Oct. 10, 2006	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of USD 100,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	Credit Agricole Corporate & Investment Bank	Oct. 10, 2006 ~ Oct. 10, 2013
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000,000)	Foreign currency risk	Currency swap	Morgan Stanley and five other banks	Jul. 20, 2007 ~ Jul. 20, 2027
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD 65,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	United Overseas Bank	Dec. 15, 2011 ~ Dec. 12, 2014
Dec. 15, 2011	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 250,000,000)	Foreign currency risk and the interest rate risk	Currency interest rate swap	DBS Bank and Citi Bank	Dec. 15, 2011 ~ Dec. 12, 2014
Jun. 12, 2012	Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000,000)	Foreign currency risk	Currency swap	Citibank and five other banks	Jun. 12, 2012 ~ Jun.12, 2017
Nov. 1, 2012	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000,000)	Foreign currency risk	Currency swap	Barclays and nine other banks	Nov. 1, 2012 ~ May. 1, 2018
Jan. 17, 2013	Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000,000)	Foreign currency risk	Currency swap	BNP Paribas and three other banks	Jan. 17, 2013 ~ Nov. 17, 2017
Mar. 7, 2013	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000,000)	Foreign currency risk and the interest rate risk	Currency swap	DBS Bank	Mar. 7, 2013 ~ Mar. 7, 2020

16.

Derivative Instruments, Continued

(2)

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


(In millions of won and thousands of foreign currencies)
	Fair value
Hedged item	Accumulated gain (loss) on valuation of derivatives			Tax effect			Foreign currency translation gain (loss)			*Others()**		Fair value
Current assets:
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated long-term borrowings face value of USD 100,000,000)		(1,546	)		7			20,170			—		18,631
Non-current assets:
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000,000)		(66,735	)		(21,306	)		2,329			129,806		44,094
Floating-to-fixed cross currency interest rate swap (Singapore dollar denominated bonds face value of SGD 65,000,000)		(357	)		(113	)		1,480			—		1,010
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 250,000,000)		4,707			1,503			(2,137	)		—		4,073
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 700,000,000)		(30,017	)		(9,583	)		40,928			—		1,328
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000,000 )		(6,156	)		(1,965	)		19,731			—		11,610

Total assets													80,746

Non-current liabilities:
Fixed-to-fixed cross currency swap (Swiss Franc denominated bonds face value of CHF 300,000,000)		(14,800	)		(4,725	)		1,296			—		(18,229	)
Fixed-to-fixed cross currency swap (Australia dollar denominated bonds face value of AUD 300,000,000)		(1,015	)		(324	)		(15,942	)		—		(17,281	)

Total liabilities													(35,510	)

(*)	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.

17.

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

The Company’s outstanding share capital consists entirely of common stock with a par value of ￦ 500. The number of authorized, issued and outstanding common shares and capital surplus (deficit) and other capital adjustments as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won, except for share data)
	June 30, 2013			December 31, 2012
Authorized shares		220,000,000			220,000,000
Issued shares(*1)		80,745,711			80,745,711
Share capital
Common stock	￦	44,639			44,639
Capital surplus (deficit) and other capital adjustments:
Paid-in surplus		2,915,887			2,915,887
Treasury stock		(2,233,009	)		(2,410,451	)
Loss on disposal of treasury stock		(20,212	)		(18,855	)
Hybrid bond(Note 19)		398,518			—
Others(*2)		(722,741	)		(722,741	)

	￦	338,443			(236,160	)

(*1)

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

(*2)

Others represent the difference between net assets and considerations paid in relation to the transfer of Imagine business from SK Planet Co., Ltd., a subsidiary.

There were no changes in share capital for the six-month period ended June 30, 2013 and the year ended December 31, 2012.

18.

Treasury Stock

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

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

In addition, the Company granted 813,483 shares of treasury stock for ￦ 177,442 million from May 14, 2013 to June 28, 2013 as a result of exercise of exchange rights by the holders of exchangeable bonds.

As a result of these treasury stock transactions, as of June 30, 2013, the Company has 10,237,229 shares of treasury stock at ￦ 2,233,009 million.

19.

Hybrid Bond

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

(In millions of won)

Type

Issuance date

Maturity

Annual
interest
rate (%)

Amount

Private hybrid bond

Blank coupon unguaranteed subordinated bond

June 7, 2013

June 7, 2073

(*1)

4.21

(*2)

400,000

Issuance costs

(1,482

)

398,518

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

(*1)

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

(*2)

Annual interest rate is adjusted after five years from the issuance date.

20.

Retained Earnings

(1)

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


(In millions of won)
	June 30, 2013		December 31, 2012
Appropriated:
Legal reserve	￦	22,320		22,320
Reserve for research & manpower development		155,766		220,000
Reserve for business expansion		9,376,138		9,106,138
Reserve for technology development		2,271,300		1,901,300

		11,825,524		11,249,758
Unappropriated		612,253		1,164,223

	￦	12,437,777		12,413,981

(2)

Legal reserve

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

(3)

Reserve for research & manpower development

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

21.

Reserves

(1)

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


(In millions of won)
	June 30, 2013			December 31, 2012
Unrealized fair value of available-for-sale financial assets	￦	158,172			206,414
Unrealized fair value of derivatives		(115,918	)		(51,826	)

	￦	42,254			154,588

(2)

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


(In millions of won)	For the six-month period ended June 30, 2013
	Net change in unrealized fair value of available-for-sale financial assets			Net change in unrealized fair value of derivatives			Total
Balance at January 1, 2013	￦	206,414			(51,826	)		154,588
Changes		(63,643	)		(84,554	)		(148,197	)
Tax effect		15,401			20,462			35,863

Balance at June 30, 2013	￦	158,172			(115,918	)		42,254


(In millions of won)	For the six-month period ended June 30, 2012
	Net change in unrealized fair value of available-for-sale financial assets			Net change in unrealized fair value of derivatives			Total
Balance at January 1, 2012	￦	352,616			(32,122	)		320,494
Changes		(63,689	)		3,645			(60,044	)
Tax effect		15,413			(882	)		14,531

Balance at June 30, 2012	￦	304,340			(29,359	)		274,981

22.

Other Operating Expenses

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


(In millions of won)	2013				2012
	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	￦	12,775		25,512		15,435			31,606
Utilities		37,401		76,991		33,316			65,316
Taxes and dues		3,395		7,702		30,003			57,413
Repair		48,798		86,850		44,891			84,128
Research and development		56,652		109,351		48,778			92,523
Training		5,350		9,952		6,436			11,195
Bad debt for accounts receivables—trade		11,190		16,365		8,264			8,554
Reversal of allowance for doubtful accounts		—		—		(173	)		(4,475	)
Other		12,755		21,653		11,614			22,815

	￦	188,316		354,376		198,564			369,075

23.

Other Non-operating Income and Expenses

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


(In millions of won)	2013				2012
	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	￦	510		858		128		358
Others		12,860		19,485		1,171		5,647

	￦	13,370		20,343		1,299		6,005

Other Non-operating Expenses:
Loss on disposal of property and equipment and intangible assets	￦	6,918		11,457		1,323		2,085
Impairment loss on property and equipment and intangible assets		—		—		15,438		15,438
Donations		9,424		21,288		28,213		40,482
Bad debt for accounts receivable—other		5,974		16,326		3,411		19,371
Others		4,414		8,230		653		1,332

	￦	26,730		57,301		49,038		78,708

24.

Finance Income and Costs

(1)

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


(In millions of won)	2013				2012
	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	￦	8,039		16,471		12,780		33,771
Dividends		65		12,643		613		25,780
Gain on foreign currency transactions		4,599		6,729		2,749		3,900
Gain on foreign currency translation		1,858		1,468		225		267
Gain on valuation of financial asset at fair value through profit or loss		2,427		3,365		823		183
Gain on disposal of long-term investment securities		370		1,292		—		470
Gain on settlement of derivatives		—		2,274		8,402		12,694
Gain on valuation of financial liability at fair value through profit or loss		—		—		9,507		5,774

	￦	17,358		44,242		35,099		82,839

Finance Costs:
Interest expense	￦	69,547		143,098		79,580		150,583
Loss on foreign currency transactions		3,271		5,852		2,477		3,850
Loss on foreign currency translation		—		128		7		117
Loss on disposal of long-term investment securities		1		73		1,629		9,134
Loss on settlement of derivatives		—		—		1,232		1,232
Loss on valuation of financial liability at fair value through profit or loss(*)		66,514		104,601		—		—

	￦	139,333		253,752		84,925		164,916

(*)

(2)

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


(In millions of won)	2013				2012
	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	￦	4,858		9,738		7,365		19,790
Interest income on installment receivables and others		3,181		6,733		5,415		13,981

	￦	8,039		16,471		12,780		33,771

24.

Finance Income and Costs, Continued

(3)

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


(In millions of won)	2013				2012
	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	￦	6,393		18,574		33,807		37,272
Interest expense on debentures		54,553		105,141		38,345		79,247
Others		8,601		19,383		7,428		34,064

	￦	69,547		143,098		79,580		150,583

(4)

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


(In millions of won)	2013				2012
	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	￦	11,190		16,365		8,264		8,554
Accounts receivable—other		5,974		16,326		3,411		19,371

	￦	17,164		32,691		11,675		27,925

25.

Income Tax Expense

26.

Earnings per Share

(1)

Basic earnings per share

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


(In millions of won, shares)	2013						2012
	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	￦	313,431			615,609			231,366		576,338
Dividend on hybrid bond		(1,058	)		(1,058	)		—		—
Profit for the period on common shares		312,373			614,551			231,366		576,338
Weighted average number of common shares outstanding		69,872,438			69,784,208			69,694,999		69,694,999

Basic earnings per share (In Won)	￦	4,471			8,806			3,320		8,269

26.

Earnings per Share, Continued

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


(In shares)	Number of shares			Weighted number of days				Weighted number of shares
	Number of shares			Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30			Six-month period ended June 30
Outstanding common shares at January 1, 2013		80,745,711			91/91		181/181		80,745,711			80,745,711
Effect of treasury stock		(11,050,712	)		91/91		181/181		(11,050,712	)		(11,050,712	)
Exchange of exchangeable bonds		813,483			(*1)		(*2)		177,439			89,209

Number of shares at June 30, 2013		70,508,482							69,872,438			69,784,208

(*1)	During the three-month period ended June 30, 2013, 21 exchange transactions occurred and weighted number of days range from 3/91 to 48/91 based on exchange date.

(*2)	During the six-month period ended June 30, 2013, 21 exchange transactions occurred and weighted number of days range from 3/181 to 48/181 based on exchange date.


(In shares)	Number of shares			Weighted number of days				Weighted number of shares
	Number of shares			Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30			Six-month period ended June 30
Outstanding common shares at January 1, 2012		80,745,711			91/91		182/182		80,745,711			80,745,711
Effect of treasury stock		(11,050,712	)		91/91		182/182		(11,050,712	)		(11,050,712	)

Number of shares at June 30, 2012		69,694,999							69,694,999			69,694,999

(2)

Diluted earnings per share

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


(In millions of won, shares)	*2013()**				2012
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Diluted profit for the period	￦	312,373		614,551		225,423		574,457
Diluted weighted average number of common shares outstanding		69,872,438		69,784,208		72,003,405		72,003,405

Diluted earnings per share (In won)	￦	4,471		8,806		3,131		7,978

(*)

The number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds is excluded from the diluted earnings per share calculation for the three and six-month periods ended June 30, 2013 as the effect of exchangeable bond is nil (the weighted average number of diluted shares of 2,331,858); thus, diluted earnings per share for the three and six-month periods ended June 30, 2013 are the same as basic earnings per share.

26.

Earnings per Share, Continued

Diluted profit for the three and six-month periods ended June 30, 2013 and 2012 are calculated as follows:


(In millions of won)	2013				2012
	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	￦	312,373		614,551		231,366			576,338
Loss related to exchangeable bonds		—		—		(5,943	)		(1,881	)

Diluted profit for the period	￦	312,373		614,551		225,423			574,457

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


(In shares)	2013				2012
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Weighted average number of common shares outstanding		69,872,438		69,784,208		69,694,999		69,694,999
Effect of exchangeable bonds(*)		—		—		2,308,406		2,308,406

Adjusted weighted average number of common shares outstanding		69,872,438		69,784,208		72,003,405		72,003,405

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

27.

Categories of Financial Instruments

(1)

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


(In millions of won)	June 30, 2013
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedging instruments		Total
Cash and cash equivalents	￦	—		—		505,804		—		505,804
Financial instruments		—		—		138,569		—		138,569
Short-term investment securities		—		61,417		—		—		61,417
Long-term investment securities(*1)		18,721		647,846		—		—		666,567
Accounts receivable—trade		—		—		1,481,362		—		1,481,362
Loans and other receivables(*2)		—		—		689,324		—		689,324
Derivative financial assets		—		—		—		80,746		80,746

	￦	18,721		709,263		2,815,059		80,746		3,623,789

27.

Categories of Financial Instruments, Continued


(In millions of won)	December 31, 2012
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedging instruments		Total
Cash and cash equivalents	￦	—		—		256,577		—		256,577
Financial instruments		—		—		179,369		—		179,369
Short-term investment securities		—		56,401		—		—		56,401
Long-term investment securities(*1)		15,356		718,537		—		—		733,893
Accounts receivable—trade		—		—		1,407,206		—		1,407,206
Loans and other receivables(*2)		—		—		661,689		—		661,689
Derivative financial assets		—		—		—		61,959		61,959

	￦	15,356		774,938		2,504,841		61,959		3,357,094

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

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


(In millions of won)
	June 30, 2013		December 31, 2012
Short-term loans	￦	68,359		75,449
Accounts receivable—other		427,782		383,048
Accrued income		5,302		4,147
Long-term loans		45,265		49,672
Guarantee deposits		142,616		149,373

	￦	689,324		661,689

27.

Categories of Financial Instruments, Continued

(2)

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


(In millions of won)
	June 30, 2013
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedging instruments		Total
Derivative financial liabilities	￦	—		—		35,510		35,510
Borrowings		—		114,970		—		114,970
Debentures (*1)		336,606		5,178,586		—		5,515,192
Accounts payable – other and others (*2)		—		2,437,037		—		2,437,037

	￦	336,606		7,730,593		35,510		8,102,709


(In millions of won)
	December 31, 2012
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedging instruments		Total
Derivative financial liabilities	￦	—		—		63,599		63,599
Borrowings		—		785,443		—		785,443
Debentures(*1)		405,678		4,034,429		—		4,440,107
Accounts payable – other and others(*2)		—		3,073,290		—		3,073,290

	￦	405,678		7,893,162		63,599		8,362,439

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

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


(In millions of won)
	June 30, 2013		December 31, 2012
Accounts payable—other	￦	1,028,928		1,509,456
Withholdings		3		18
Accrued expenses		598,237		600,101
Current portion of long-term payables—other		162,157		157,965
Long-term payables—other		547,441		705,605
Other non-current liabilities		100,271		100,145

	￦	2,437,037		3,073,290

28.

Financial Risk Management

(1)

Financial risk management

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

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

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.

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

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


	Assets				Liabilities
	Foreign currencies		Korean won equivalent		Foreign currencies		Korean won equivalent
USD		36,644		42,131		2,066,949		2,376,371
EUR		5,568		8,342		3		5
JPY		62,646		731		—		—
SGD		98		89		64,799		58,768
AUD		—		—		297,810		317,242
CHF		—		—		298,336		362,824
Others		63		48		113		59

			￦	51,341				3,115,269

In addition, the Company has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (Refer to Note 16)

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

As of June 30, 2013, effects on income (loss) before income tax as a result of change in exchange rate by 10% are as follows:


(In millions of won)
	If increased by 10%			If decreased by 10%
USD	￦	(34,167	)		34,167
EUR		833			(833	)
JPY		73			(73	)
SGD		1			(1	)
Other		(1	)		1

	￦	(33,261	)		33,261

(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, 2013, available-for-sale equity instruments measured at fair value amounts to ￦ 658,599 million.

(iii) Interest rate risk

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

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

The Company’s interest rate risk arises from floating-rate borrowings and payables. As of June 30, 2013, floating-rate debentures and borrowings amount to ￦ 691,284 million and ￦ 114,970 million, respectively, and the Company has entered into interest rate swaps to hedge interest rate risk related to floating-rate borrowings and debentures (Refer to Note 16). If interest rate only increases (decreases) by 1%, income before income taxes for the year ended June 30, 2013 would not have been changed due to the interest expense from floating-rate borrowings and debentures.

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

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, 2013 and December 31, 2012 are as follows:


(In millions of won)
	June 30, 2013		December 31, 2012
Cash and cash equivalents	￦	505,804		256,577
Financial instruments		138,569		179,369
Available-for-sale financial assets		709,263		774,938
Accounts receivable - trade		1,481,362		1,407,206
Loans and receivables		689,324		661,689
Derivative financial assets		80,746		61,959
Financial assets at fair value through profit or loss		18,721		15,356

	￦	3,623,789		3,357,094

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

For the six-month period ended June 30, 2013, the Company has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Company believes that the possibility of default is remote. Also, the Company’s credit risk can rise due to transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivates. To minimize such risk, the Company has a policy to deal with high credit worthy financial institutions. The amount of maximum exposure to credit risk of the Company is the carrying amount of financial assets as of June 30, 2013.

In addition, the aging of trade and other receivables that are overdue at the end of the reporting period but not impaired is stated in Note 5 and the analysis of financial assets that are individually determined to be impaired at the end of the reporting period is stated in Note 24.

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.

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Contractual maturities of financial liabilities as of June 30, 2013 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 - 5 years		More than 5 years
Derivative financial liabilities	￦	35,510		38,631		2,537		36,094		—
Borrowings		114,970		115,779		115,779		—		—
Debentures (*1)		5,515,192		6,804,874		983,415		3,573,589		2,247,870
Accounts payable - other and others (*2)		2,437,037		2,545,557		1,782,397		525,864		237,296

	￦	8,102,709		9,504,841		2,884,128		4,135,547		2,485,166

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

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

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

(2)

Capital management

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

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

Debt-equity ratio as of June 30, 2013 and December 31, 2012 are as follows:


(In millions of won)
	June 30, 2013			December 31, 2012
Liability	￦	9,284,326			9,872,454
Equity		12,863,113			12,377,048

Debt-equity ratio		72.18	%		79.76	%

28.

Financial Risk Management, Continued

(3)

Fair value

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

Interest rates used by the Company for the fair value measurement as of June 30, 2013 are as follows:


		Interest rate
Derivative instruments		2.37~3.84%
Borrowings and Debentures		3.36%

Fair value and carrying amount

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


(In millions of won)
	June 30, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
Assets carried at fair value
Financial assets at fair value through profit or loss	￦	18,721		18,721		15,356		15,356
Derivative financial assets		80,746		80,746		61,959		61,959
Available-for-sale financial assets		658,599		658,599		730,754		730,754

	￦	758,066		758,066		808,069		808,069

Assets carried at amortized cost
Cash and cash equivalents	￦	505,804		505,804		256,577		256,577
Available-for-sale financial assets		50,664		50,664		44,184		44,184
Accounts receivable – trade and others		2,170,686		2,170,686		2,068,895		2,068,895
Financial instruments		138,569		138,569		179,369		179,369

	￦	2,865,723		2,865,723		2,549,025		2,549,025

28.

Financial Risk Management, Continued

(3)

Fair value, Continued


(In millions of won)
	June 30, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
Liabilities carried at fair value
Financial liabilities at fair value through profit or loss	￦	336,606		336,606		405,678		405,678
Derivative financial liabilities		35,510		35,510		63,599		63,599

	￦	372,116		372,116		469,277		469,277

Liabilities carried at amortized cost
Borrowings	￦	114,970		114,970		785,443		798,908
Debentures		5,178,586		5,327,074		4,034,429		4,224,907
Accounts payable—other and others		2,437,037		2,437,037		3,073,290		3,073,290

	￦	7,730,593		7,879,081		7,893,162		8,097,105

Fair value hierarchy

The different levels have been defined as follows:

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

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

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

The table below analyzes financial instruments carried at fair value, by fair value hierarchy as of June 30, 2013.


(In millions of won)
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss	￦	—		18,721		—		18,721
Derivative financial assets		—		80,746		—		80,746
Available-for-sale financial assets		514,035		46,174		98,390		658,599
Financial liabilities at fair value through profit or loss		336,606		—		—		336,606
Derivative financial liabilities		—		35,510		—		35,510

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


(In millions of won)
	Balance at Jan. 1		Other comprehensive income		Disposal			Balance at Jun. 30
Available-for-sale financial assets	￦	100,566		6,336		(8,512	)		98,390

29.

Transactions with Related Parties

(1)

As of June 30, 2013, the parent company and subsidiaries of the Company are as follows:


Type	Company	Ownership percentage (%)			Types of business
Ultimate Controlling Entity(*1)	SK Holdings Co., Ltd.		25.2	(*2)	Holding company
Subsidiaries	SK Telink Co., Ltd.		83.5		Telecommunication service
	M&Service Co., Ltd.(*3,4)		100		Data base and internet website service
	SK Communications Co., Ltd.		64.6	(*4)	Internet website services
	PAXNet Co., Ltd.(*5)		—		Internet website services
	Loen Entertainment, Inc.		67.6	(*4)	Release of music disc
	Stonebridge Cinema Fund		57		Investment association
	Commerce Planet Co., Ltd.		100	(*4)	Online shopping mall operation agency
	SK Broadband Co., Ltd.		50.6		Telecommunication services
	Broadband Media Co., Ltd.(*6)		—		Multimedia TV portal service
	K-net Culture and Contents Venture Fund		59.0	(*4)	Investment association
	Fitech Focus Limited Partnership II		66.7	(*4)	Investment association
	Open Innovation Fund		98.9	(*4)	Investment association
	PS&Marketing Corporation		100		Communications device retail business
	Service Ace Co., Ltd.		100		Customer center management service
	Service Top Co., Ltd.		100		Customer center management service
	Network O&S Co., Ltd.		100		Base station maintenance service
	BNCP Co., Ltd.		100	(*4)	Internet website services
	SK Planet Co., Ltd.		100		Telecommunication services
	Madsmart, Inc.(*7)		—		Application software production
	SK Telecom China Holdings Co., Ltd.		100		Investment association
	SKY Property Mgmt. Ltd.(*5)		—		Investment association
	Shenzhen E-eye High Tech Co., Ltd.		65.5	(*4)	Manufacturing
	SK Global Healthcare Business Group., Ltd.		100		Investment
	SK China Real Estate Co., Ltd.(*5)		—		Investment association
	SK Planet Japan		100	(*4)	Digital contents sourcing service
	SKT Vietnam PTE. Ltd.		73.3		Telecommunication service
	SK Planet Global PTE. Ltd.		100.0	(*4)	Digital contents sourcing service
	SKT Americas, Inc.		100		Information gathering and consulting
	SKP America LLC.		100	(*4)	Digital contents sourcing service
	YTK Investment Ltd.		100		Investment association
	Atlas Investment		100		Investment association
	Technology Innovation Partners, L.P.		100	(*4)	Investment association
	SK Telecom China Fund I L.P.		100	(*4)	Investment association

29.

Transactions with Related Parties, Continued

(*1)	SK Holdings Co., Ltd. is the Ultimate Controlling Entity because of its de facto control over the Company.

(*2)	The ownership percentage represents parent company’s ownership over the Company.

(*3)	Newly included as subsidiaries during the six-month period ended June 30, 2013.

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

(*5)	Excluded as the ownership interests have been disposed for the six-month period ended June 30, 2013.

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

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

(2)

Transactions


(In millions of won)	Operating revenue and others
	2013				2012
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Parent Company	￦	306		502		184		283
Subsidiaries		58,921		99,679		64,701		128,847
Associates		1,490		4,889		44,498		94,516
Others		20,261		38,978		10,207		20,248

	￦	80,978		144,048		119,590		243,894


(In millions of won)	Operating expense and others
	2013				2012
	Three-month period ended June 30		Six-month period ended June 30		Three-month period ended June 30		Six-month period ended June 30
Parent Company	￦	6,479		184,419		6,471		162,871
Subsidiaries		487,093		973,128		537,114		923,285
Associates		33,251		50,328		116,591		241,446
Others		382,042		519,432		486,123		757,786

	￦	908,865		1,727,307		1,146,299		2,085,388

Operating revenue include commission received in relation to the interconnection charges and satellite lease. Operating expense include commission paid in relation to the service provided by related parties.

29.

Transactions with Related Parties, Continued

(3)

Account balances


(In millions of won)	Accounts receivable and others				Accounts payable and others
	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
Parent Company	￦	227		222		—		—
Subsidiaries		28,054		17,329		202,878		385,818
Associates		62,622		63,606		6,615		73,637
Others		11,364		15,122		31,963		189,659

	￦	102,267		96,279		241,456		649,114

(4)

Compensation for the key management

The Company considers registered directors who have substantial role and responsibility in planning, operating, and controlling of the business as key management. The compensations given to key management for the three and six-month periods ended June 30, 2013 and 2012 are as follows:


(In millions of won)	2013				2012
	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	￦	340		1,594		296		8,287
Provision for retirement benefits		97		817		78		643

	￦	437		2,411		374		8,930

30.

Commitments and Contingencies

As of June 30, 2013, the Company has participated in “Tactical Airship” program of the Defense Acquisition Program Administration with Joint Defense Corporation. For an advance receipt amounting to USD 3,897,196 which Joint Defense Corporation received from the Defense Acquisition Program Administration, the Company provides payment guarantees to the Defense Acquisition Program Administration.

31.

Sale and Leaseback

For the year ended December 31, 2012, the Company disposed a portion of its property and equipment and investment property, and entered into lease agreements with respect to those assets. This sale and leaseback transaction is considered as an operating lease.

For the six-month period ended June 30, 2013, the Company recognized lease payment of ￦ 6,851 million relating to the above operating lease agreement and lease revenue of ￦ 4,231 million through a sublease agreement. Future lease payments and lease revenue from the above operating lease agreement and sublease agreement are as follows:


(In millions of won)	Lease payments		Lease revenue
Less than 1 year	￦	13,910		8,462
1 ~ 5 years		58,208		32,543
More than 5 years		59,738		26,329

	￦	131,856		67,334

32.

Statements of Cash Flows

(1)

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


(In millions of won)
	2013			2012
Interest income	￦	(16,471	)		(33,771	)
Dividends		(12,643	)		(25,780	)
Gain on foreign currency translation		(1,468	)		(267	)
Gain on valuation of financial assets at fair value through profit or loss		(3,365	)		(183	)
Gain relating to financial liabilities at fair value through profit or loss		—			(5,774	)
Gain on disposal of long-term investments securities		(1,292	)		(470	)
Gain on settlement of derivatives		(2,274	)		(12,694	)
Gain on disposal of investments in subsidiaries and associates		(71,200	)		(80,482	)
Gain on disposal of property and equipment and intangible assets		(858	)		(358	)
Reversal of allowance for doubtful accounts		—			(4,475	)
Other income		(2,315	)		(667	)
Interest expenses		143,098			150,583
Loss on foreign currency translation		128			117
Loss on disposal of long-term investments securities		73			9,134
Loss on settlement of derivatives		—			1,232
Loss relating to financial liabilities at fair value through profit or loss		104,601			—
Impairment loss on investment in associates		—			72,096
Income tax expense		161,471			153,231
Provision for retirement benefits		17,541			15,490
Depreciation and amortization		1,035,469			854,543
Bad debt for accounts receivable—trade		16,365			8,554
Loss on disposal of property and equipment and intangible assets		11,457			2,085
Impairment loss on property and equipment and intangible assets		—			15,438
Bad debt for accounts receivable—other		16,326			19,371
Other expenses		1,529			—

	￦	1,396,172			1,136,953

32.

Statements of Cash Flows, Continued

(2)

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


(In millions of won)	2013			2012
Accounts receivable—trade	￦	(89,841	)		(57,941	)
Accounts receivable—other		(60,610	)		335,259
Advance payments		(25,960	)		23,878
Prepaid expenses		4,277			10,695
Inventories		5,604			(5,038	)
Long-term accounts receivables—other		—			4,699
Long-term prepaid expenses		404			—
Guarantee deposits		9,921			14,135
Accounts payable—other		(173,635	)		(278,841	)
Advanced receipts		2,650			(1,444	)
Withholdings		(95,661	)		102,216
Deposits received		(272	)		(2,162	)
Accrued expenses		4,483			119,296
Unearned revenue		(83,427	)		(31,209	)
Provisions		(143,489	)		(88,299	)
Long-term provisions		(53,775	)		(15,391	)
Plan assets		74			636
Retirement benefit payment		(13,554	)		(11,113	)
Others		2,339			(9	)

	￦	(710,472	)		119,367

(3)

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


(In millions of won)	2013			2012
Transfer of other property and equipment to construction in progress	￦	483,671			737,947
Transfer of construction in progress to property and equipment		924,076			1,266,586
Accounts payable—other related to acquisition of tangible assets and others		(307,978	)		8,010

33.

Subsequent Events

On July 25, 2013, the Board of Directors of the Company resolved to pay interim cash dividends of ￦ 1,000 per share totaling ￦ 70,508 million (Market dividend rate: 0.49%). The ex-dividend date was June 30, 2013 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/ Soo Cheol Hwang
(Signature)
Name:		Soo Cheol Hwang
Title:		Senior Vice President

Date: September 13, 2013