SKM 0001193125-22-170566 6-K as filed: Jun 9, 2022

Attendance

Method

Key Matters Discussed

February 22, 2022

Audit Committee: 4

Independent Auditor: 1

Report on 2021 critical audit matters and results of audit of financial statements; report on results of 2021 internal accounting management system audit

April 27, 2022

Audit Committee: 4

Independent Auditor: 1

Report on 2021 Public Company Accounting Oversight Board audit results; report on 2022 audit plan and selection of critical audit matters

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF JUNE 2022

COMMISSION FILE NUMBER: 333-04906

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

65, Eulji-ro, Jung-gu

Seoul 04539, Korea

(Address of principal executive office)

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

Form 20-F ☒ Form 40-F ☐

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

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

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

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

QUARTERLY BUSINESS REPORT

(From January 1, 2022 to March 31, 2022)

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

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

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

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

I. COMPANY OVERVIEW

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

II. BUSINESS

1. Business Overview

Each company in the consolidated entity is a separate legal entity providing independent services and products. The Company’s 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 commercial retail data broadcasting channel business, among others.

Set forth below is a summary description of the business of each company within the Company’s consolidation scope of material consolidated subsidiaries.


Classification	Company name	Description of business
Wireless	SK Telecom Co., Ltd.	Wireless voice and data telecommunications services via digital wireless networks
	PS&Marketing Co., Ltd.	Sale of fixed-line and wireless telecommunications products through wholesale, retail and online distribution channels
	SK O&S Co., Ltd.	Maintenance of switching stations
	Service Ace Co., Ltd.	Management and operation of customer centers
	SK M&Service Co., Ltd.	Database and online information services
Fixed-line	SK Broadband Co., Ltd.	High-speed Internet, TV, telephone, commercial data and other fixed-line services and management of the transmission system for online digital contents Various media-related services, such as channel management services including VOD
	Home & Service Co., Ltd.	System maintenance of high-speed Internet, IPTV and fixed-line services
	SK Telink Co., Ltd.	International wireless direct-dial “00700” services, voice services using Internet protocol and MVNO business
Other business	SK stoa Co., Ltd.	Operation of commercial retail data broadcasting channel services
	Atlas Investment	Investments
	SK Telecom Innovation Fund, L.P.	Investments

[Wireless Business]

Wireless telecommunications companies provide services based on competitive strengths in handheld devices, affordable pricing, network coverage and an extensive contents library. The Company continues to maintain its reputation as the unparalleled premium network operator in the 3G, 4G and 5G markets on the basis of its technological leadership and network management technology. With the world’s first commercialization of 5G technology in 2019, the Company continues to maintain its position as the top network operator in the 5G era and strives to provide differentiated services to its customers.

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

The Company plans to maintain stable growth in the sales of its wireless business based on a solid expansion in the number of 5G subscribers, while continuously enhancing profitability by pursuing efficient investments in, and operation of, its wireless networks and the stabilization of market competition.

A. Industry Characteristics

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

The Korean mobile communication market is considered to have reached its maturation stage with more than a 100% penetration rate. However, the Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology and the development of highly advanced smartphones which enable the provision of New ICT services for advanced multimedia contents, mobile commerce, mobility and other related services. In addition, the ultra-low latency and high capacity characteristics of 5G networks as well as the advancement of AI are expected to accelerate the introduction of new services and the growth of IoT-based B2B businesses.

B. Growth Potential


				(Unit: in 1,000 persons)
Classification		As of March 31,		As of December 31,
		2022		2021		2020
Number of subscribers	SK Telecom		29,832		29,696		29,089
	Others (KT, LG U+)		32,083		31,869		31,341
	MVNO		10,995		10,355		9,111
	Total		72,910		71,920		69,541

*	Source: Wireless telecommunications service data from the MSIT as of March 31, 2022.

C. Domestic and Overseas Market Conditions

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

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

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

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

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

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

(Unit: in percentages)

Classification

As of March 31,

As of December 31,

2022

2021

2020

Mobile communication services

48.2

48.1

*	Source: Wireless telecommunications service data from the MSIT as of March 31, 2022.

D. Competitive Strengths

The Company successfully completed the Spin-off of SK Square Co., Ltd. (“SK Square”) from SK Telecom (the “Spin-off”) in 2021 to maximize shareholder value and launched “SKT 2.0.” Concurrently, the Company reorganized its business to center around five major business segments and is seeking maximization of overall corporate value by establishing and executing strategies optimized for each business segment and pursuing growth in each segment. For the three months ended March 31, 2022, the Company recorded Won 4.28 trillion in operating revenue and Won 4.32 trillion in operating profit on a consolidated basis and Won 3.08 trillion in operating revenue and Won 0.36 trillion in operating profit for the period on a separate basis. The Company is continuing to improve sales growth and profit margin by leveraging its competitiveness in the 5G market and secured 10.88 million 5G subscribers as of March 31, 2022. The Company was also ranked as the top service provider in the MNO service sector in the National Customer Satisfaction Index (“NCSI”) in April 2022 and became the first across all industries in Korea to rank first for 25 consecutive years since the commencement of NCSI in 1998. The Company is actively striving to achieve tangible growth in new businesses in addition to maintaining its competitiveness in the fixed-line and wireless businesses.

SK Telink Co., Ltd. (“SK Telink”), a consolidated subsidiary of the Company, operates its MVNO service, “SK 7Mobile,” which is offered at reasonable rates and provides excellent quality. SK Telink is increasing its efforts to develop low-cost distribution channels and create niche markets through targeted marketing towards customers including foreign workers, middle-aged adults and students.

SK O&S, a subsidiary of the Company responsible for the operation of the Company’s base stations and related transmission and power facilities, offers quality fixed-line and wireless network services to customers, including mobile office products to business customers. In addition, Service Ace is developing its competence as a marketing company while providing top-quality customer service.

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

[Fixed-line Business]

For the three months ended March 31, 2022, SK Broadband Co., Ltd. (“SK Broadband”) recorded Won 1.03 trillion in revenue on a consolidated basis, which represented a 6.1% increase from Won 967.0 billion for the three months ended March 31, 2021. The sales growth was primarily attributable to continued expansion of the subscriber base, increase in sales of media platforms including home shopping and advertisements, business acquisition of SK Telink and growth of our B2B business.

The Company’s business is divided into the media business segment, which provides IPTV and cable TV services, and the fixed-line business segment, which provides high-speed Internet, telecommunications and Internet data center services. For the three months ended March 31, 2022, the media business segment recorded Won 470.4 billion in revenue, which represented a 3.9% increase compared to the three months ended March 31, 2021. For the three months ended March 31, 2022, the fixed-line business segment recorded Won 555.6 billion in revenue, which represented an 8% increase compared to the three months ended March 31, 2021.

A. Industry Characteristics

The domestic telecommunication service industry displays the typical characteristics of a domestic industry given that its coverage area is limited to Korea. As a result, the size of the industry is greatly affected by the domestic economic factors including the domestic user population and the level of telecommunication service expenditures in light of the domestic income level. Domestic telecommunication companies may expand overseas through acquisitions or direct expansion, but the overseas telecommunication service industries are subject to inherently different industry characteristics from the domestic one, depending on the regulatory and demand characteristics of each country.

The broadcasting business involves the planning, programming or production of broadcasting programs and transmission to viewers through telecommunication facilities. The broadcasting market can be categorized into terrestrial broadcasting, fixed-line TV broadcasting, satellite broadcasting and programming-providing businesses, in each case pursuant to the Broadcasting Act, as well as Internet multimedia broadcasting business pursuant to the Internet Multimedia Broadcast Services Act. The Company engages in the fixed-line TV broadcasting business, which is defined as the business of managing and operating fixed-line TV broadcasting stations (including their facilities and employees for the purpose of providing multi-channel broadcasting) and providing broadcasts through transmission and line facilities. The Internet multimedia broadcasting refers to the broadcasting of programs through a combination of various contents including data, video, voice, sound and/or e-commerce, including real-time broadcasting, while guaranteeing a consistent service quality through a bidirectional Internet protocol using a broadband integrated information network.

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

In addition, the Korean fixed-line services industry is marked by a high level of market concentration, as the government is highly selective in granting telecommunications business licenses. While the competitive landscape of the fixed-line and wireless services markets is dominated by its three leading operators, the Company (including SK Broadband), KT and LG U+, the intensity of competition is growing as digitalization of communication technologies and devices leads to the convergence of fixed-line and wireless services, as well as broadcasting and telecommunications, and technology for faster data communication services is developed.

In the high-speed Internet services market, the demand for faster and more reliable premium Giga Internet services is increasing due to the growth in usage of home mobile networks using Wi-Fi and an increased consumption of high-definition large media content.

With the mergers and acquisitions among IPTV service providers and multiple service operators, the paid broadcasting market has reorganized around IPTV operators, and companies are moving away from competition based on subscriber base expansion to competition based on media platform services. The transition to a contactless service society due to COVID-19 has led to increased consumption of paid content by viewers, accelerating competition through the ability to source unique contents. The Company expects new growth in the home platform domain by providing customized services using ICT convergence technologies such as AI and big data in addition to differentiated contents.

In the corporate business market, the Company is continuing its efforts to generate stable returns by securing growth drivers in new service areas such as cloud computing, while also strengthening its competitiveness in the traditional fixed line-based business through expansion of core infrastructure including Internet data centers, which have seen an increase in market demand recently.

B. Growth Potential


				(Unit: in persons)
Classification		As of March 31,		As of December 31,
		2022		2021		2020
Fixed-line Subscribers	High-speed Internet		23,117,451		22,944,268		22,330,182
	Fixed-line telephone		12,055,057		12,211,954		12,859,279
	IPTV		19,003,970		19,003,970		17,872,297
	Cable TV		13,044,615		13,044,615		13,305,796

*	Source: MSIT website.

*	High-speed Internet and fixed-line telephone subscribers represent the number of subscribers as of March 31, 2022, while IPTV and cable TV subscribers represent the average number of subscribers in the first half of 2021.

C. Cyclical Nature and Seasonality

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

D. Domestic and Overseas Market Conditions

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


			(Unit: in percentages)
Classification	As of March 31,		As of December 31,
	2022		2021		2020
High-speed Internet (including resales)		28.6		28.7		29.0
Fixed-line telephone (including Voice over Internet Protocol (“VoIP”)		17.6		17.5		16.8
IPTV		30.5		30.5		30.3
Cable TV		22.2		22.2		22.5

*	Source: MSIT website.

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

*	Market shares of High-speed Internet and Fixed-line telephone represent the market shares as of March 31, 2022 and market shares of IPTV and Cable TV represent the average market shares in the first half of 2021.

SK Broadband is engaged in a number of business areas including high-speed Internet, home telephone, corporate business, IPTV and cable TV pursuant to the relevant communications regulations such as the Telecommunications Business Act, the Internet Multimedia Broadcast Services Act and the Broadcasting Act. In each of its principal business areas, SK Broadband principally competes on the basis of price, service quality and speed. In the IPTV business, the ability to offer complex services and differentiated contents are becoming increasingly important. General telecommunications businesses operate in a licensed industry with a high barrier of entry, which is dominated by SK Broadband, KT and LG U+.

[Other Businesses]

The commercial retail data broadcasting channel business offers an interactive service that integrates television home shopping and data shopping services. Such service allows television viewers to use video-on-demand (“VOD”) services to purchase products sold on television home shopping channels, which were previously only available for purchase in real-time when such relevant programming was being broadcast.

In order to secure core competencies at an early stage and achieve differentiation, the Company has been actively searching for high-efficiency television channels while increasing the competitiveness of its content production capacity by building the Company’s own media center and adopting a media wall with the objective of transforming it into an eco-friendly digital studio. In addition to enhancing the convenience of shopping experience by offering various media content on its mobile live platform, the Company was the first in the industry to launch a cloud-based television application service, “Stoa ON,” which provides personalized digital television shopping services. Furthermore, the Company has been establishing itself as a leading shopping channel service provider by securing a diverse product portfolio and engaging in product development in areas ranging from fashion to health food. Within three years following the spin-off of SK stoa Co., Ltd. (“SK Stoa”) into a separate entity, its commercial retail data broadcasting channel business has attained a leading position in the television commerce (“T-commerce”) market. In 2021, sales of the Company’s commercial retail data broadcasting channel business amounted to Won 316.2 billion.

2. Updates on Major Products and Services

(Unit: in millions of Won and percentages)

Business

Major Companies

Item

Major
Trademarks

Consolidated
Sales Amount

Ratio

Wireless

SK Telecom Co., Ltd.,

PS&Marketing Co., Ltd.,

Service Ace Co., Ltd.

SK O&S Co., Ltd.

Mobile communication

service,

wireless data service,

ICT service

T, 5GX, T Plan and others

3,216,145

75.2

Fixed-line

SK Broadband Co., Ltd.,

SK Telink Co., Ltd.

Home & Service Co., Ltd.

Fixed-line phone,

high-speed Internet,

data and network lease service

B tv, 00700

international

call, 7mobile

and others

947,557

22.2

Other

SK stoa Co., Ltd.

Commercial retail data

broadcasting channel services

and others

Stoa ON

113,506

2.7

Total

4,277,208

100

3. Price Trends for Major Products

[Wireless Business]

As of March 31, 2022, based on the Company’s standard monthly subscription plan, the basic service fee was Won 12,100 and the usage fee was Won 1.98 per second. Among the 4G-based plans, the “T-Plan Safe 4G” provides 4 GB of data and unlimited voice calls at Won 50,000 per month (including value-added tax). Among the 5G-based plans, the “Slim Plan” provides 10 GB of data and unlimited voice calls at Won 55,000 per month (including value-added tax). The Company provides a variety of other subscription plans catered to subscriber demand.

[Fixed-line Business]

In January 2022, SK Broadband launched “PlayZ,” an all-in-one Playbox that allows users to access various over-the-top (“OTT”) streaming apps and entertainment contents in both the fixed-line and wireless environments, similar to smart TVs. The product features an integrated search of OTT contents and allows users to enjoy other forms of entertainment, such as games and karaoke, on a larger screen. “PlayZ” is available for purchase for single payment of Won 79,000 or at Won 2,200 per month for 36-month installments.

In February 2022, SK Broadband launched a “rechargeable smart remote control” that can control smart TVs and “B tv” set-up boxes in an integrated manner. The product is available for rent at Won 440 per month based on a 60-month subscription period.

In addition, SK Broadband expanded its lineup of tablet products by launching “B tv air2 Samsung,” which allows users to access IPTV services anywhere in the house, as a follow-on product of “B tv air Lenovo,” which was launched in June 2021. The product is available for purchase for single payment of Won 316,800 or at Won 8,800 per month for 36-month installments.

SK Broadband also provides a variety of other subscription plans.

4. Investment Status

[Wireless Business]

A. Investment in Progress

(Unit: in billions of Won)

Business

Classification

Investment
period

Subject of
investment

Investment effect

Expected
investment
amount

Amount
already
invested

Future
investment

Network/Common

Upgrade/

New installation

Year ended
December 31,
2022

Network,
systems and
others

Capacity increase and
quality improvement;
systems improvement

To be
determined

197

—

Total

To be
determined

197

—

B. Future Investment Plan

(Unit: in billions of Won)

Business

Expected investment amount

Expected investment for each year

Investment effect

Asset type

Amount

2022

2023

2024

Network/Common

Network, systems and others

To be determined

Upgrades to the existing services and

expanded provision of network

services including 5G

Total

To be determined

*	The Company indicated during the earnings conference call held on February 9, 2022 that the level of capital expenditures for 2022 is expected to be similar to that of 2021.

[Fixed-line Business]

A. Investment in Progress and Future Investment Plan


(Unit: in billions of Won)
Purpose of investment	Subject of investment	Investment period	Amount already invested	Future investment	Investment effect
Coverage expansion, upgrade of media platform	Network, systems, Internet data center and others	Three months ended March 31, 2022	82.3	To be determined	Quality and system improvement

5. Revenues


		(Unit: in millions of Won)
Business	Sales type	Item		For the three months ended March 31, 2022		For the year ended December 31, 2021		For the year ended December 31, 2020
Wireless	Services	Mobile communication, wireless data, information communication	Export		29,633		143,149		152,518
			Domestic		3,186,512		12,575,324		12,195,445
			Subtotal		3,216,145		12,718,473		12,347,963
Fixed-line	Services	Fixed-line, high-speed Internet, data, lease line service	Export		43,170		139,846		127,618
			Domestic		904,387		3,537,860		3,304,600
			Subtotal		947,557		3,677,706		3,432,218
Other	Services	Commercial retail data broadcasting channel services	Export		—		—		—
			Domestic		113,506		352,406		307,566
			Subtotal		113,506		352,406		307,566
			Export		72,803		251,502		280,136

Total			Domestic		4,204,405		16,497,083		15,807,611

			Total		4,277,208		16,748,585		16,087,747


	(Unit: in millions of Won)
For the three months ended March 31, 2022	Wireless		Fixed-line		Other		Sub total		Internal transaction			After consolidation
Total sales		3,588,021		1,209,798		120,332		4,918,151		(640,943	)		4,277,208
Internal sales		371,876		262,241		6,826		640,943		(640,943	)		—
External sales		3,216,145		947,557		113,506		4,277,208		—			4,277,208
Depreciation and amortization		689,065		248,270		3,846		941,181		(30,297	)		910,884
Operating profit (loss)		360,669		82,169		3,494		446,332		(13,939	)		432,393
Finance profit (loss)													(68,774	)
Gain from investments in associates and joint ventures													(38,445	)
Other non-operating profit (loss)													1,834
Profit before income tax													327,008

6. Derivative Transactions

A. Current Swap Contract Applying Cash Flow Risk Hedge Accounting

Currency and interest rate swap contracts under cash flow hedge accounting as of March 31, 2022 are as follows:

[SK Telecom]

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


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
July 20, 2007	Fixed rate foreign currency denominated bonds	Foreign currency risk	Cross currency swap	Morgan Stanley and four other banks	July 20, 2007 – July 20, 2027
Dec. 16, 2013	Fixed rate foreign currency denominated borrowings	Foreign currency risk	Cross currency swap	Deutsche Bank	Dec. 16, 2013 – Apr. 29, 2022
Dec. 21, 2017	Floating rate Korean Won denominated borrowings	Interest rate risk	Interest rate swap	The Korea Development Bank	Dec. 21, 2017 – Dec. 21, 2022
Apr. 16, 2018	Fixed rate foreign currency denominated bonds	Foreign currency risk	Cross currency swap	The Export-Import Bank of Korea and three other banks	Apr. 16, 2018 – Apr. 16, 2023
Aug. 13, 2018	Fixed rate foreign currency denominated bonds	Foreign currency risk	Cross currency swap	Citibank	Aug. 13, 2018 – Aug. 13, 2023
Dec. 19, 2018	Floating rate Korean Won denominated borrowings	Interest rate risk	Interest rate swap	Credit Agricole CIB	Mar. 19, 2019 – Dec. 14, 2023
Mar. 4, 2020	Floating rate foreign currency denominated bonds	Foreign currency and interest rate risks	Cross currency interest rate swap	Citibank	Mar. 4, 2020 – June 4, 2025

[SK Broadband]


Borrowing date	Hedged item	Hedged risk	Contract type	Financial institution	Duration of contract
Dec. 21, 2017	Floating rate Korean Won denominated borrowings	Interest rate risk	Interest rate swap	The Korea Development Bank	Dec. 5, 2017 – Dec. 21, 2022
Aug. 13, 2018	Non-guaranteed foreign currency denominated bonds (face value of USD 300,000)	Foreign currency risk	Cross currency swap	Citibank Korea	Aug. 13, 2018 – Aug. 13, 2023
Dec. 19, 2018	Floating rate Korean Won denominated borrowings	Interest rate risk	Interest rate swap	Credit Agricole CIB	Mar. 19, 2019 – Dec. 14, 2023

7. Major Contracts

None.

8. R&D Investments

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


					(Unit: in millions of Won except percentages)
Category		For the three months ended March 31, 2022			For the year ended December 31, 2021			For the year ended December 31, 2020			Remarks
Raw material			3			48			54			—
Labor			20,929			122,445			122,906			—
Depreciation			35,458			147,249			169,872			—
Commissioned service			8,788			55,917			35,939			—
Others			15,031			48,048			35,209			—
Total R&D costs			80,209			373,707			363,980			—
Government Subsidies			—			—			—			—
Accounting	Sales and administrative expenses		78,081			347,711			353,198			—
Accounting	Development expenses (Intangible assets)		2,128			25,996			10,782			—
R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100)			1.88	%		2.23	%		2.26	%		—

9. Other information relating to investment decisions

A. Trademark Policies

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

B. Business-related Intellectual Property

[SK Telecom]

As of March 31, 2022, the Company held 3,352 Korean-registered patents and 1,376 foreign-registered patents. The Company holds 734 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “T” representing its brand. The designed alphabet “T” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to constant change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.

[SK Broadband]

As of March 31, 2022, SK Broadband held 288 Korean-registered patents and 142 foreign-registered patents (including those held jointly with other companies). It also holds 293 Korean-registered trademarks and owns intellectual property rights to its proprietary graphic design of the alphabet “B” representing its brand. The designed alphabet “B” is registered in all business categories for trademarks (total of 45). The number of registered patents and trademarks is subject to continual change due to the acquisition of new rights, expiration of terms, abandonments and dispositions.

C. Business-related Pollutants and Environmental Protection

[SK Telecom]

The Company does not directly engage in any manufacturing and therefore does not undertake any industrial processes that emit pollutants into the air or industrial processes in which hazardous materials are used. Nevertheless, the Company is committed to fulfilling its social obligations with a sense of responsibility for its impact on the society and the environment on a company-wide basis. Under the vision of “realizing a sustainable future based on ICT,” the Company is making efforts to (1) preemptively respond to climate change, (2) improve its environmental management system and (3) create an eco-friendly green culture. To this end, in December 2020, the Company was one of the first companies in Korea to join the RE100 (Renewable Energy 100%) initiative, which aims to source 100% of its energy needs from renewable energy sources by 2050. In addition, the Company leads in energy savings and environmental protections based on ICT technology, and recently became the first company in the telecommunications industry to obtain carbon emission rights by reducing greenhouse gas through integration of telecommunications equipment and technology upgrades.

[SK Broadband]

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

III. FINANCIAL INFORMATION

1. Summary Financial Information (Consolidated and Separate)

A. Summary Financial Information (Consolidated)

Below is the summary consolidated financial information of the Company as of March 31, 2022, December 31, 2021 and December 31, 2020 and for the three months ended March 31, 2022 and 2021 and the years ended December 31, 2021 and 2020. The Company’s consolidated financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021, which are prepared in accordance with K-IFRS, are attached hereto.


(Unit: in millions of Won except number of companies)
	As of March 31, 2022			As of December 31, 2021			As of December 31, 2020
Assets
Current Assets		6,544,841			6,352,665			8,775,086
• Cash and Cash Equivalents		894,661			872,731			1,369,653
• Accounts Receivable – Trade, net		1,981,245			1,913,511			2,188,893
• Accounts Receivable – Other, net		621,062			548,362			979,044
• Others		3,047,873			3,018,061			4,237,496
Non-Current Assets		24,029,827			24,558,612			39,131,871
• Long-Term Investment Securities		1,636,311			1,715,078			1,648,837
• Investments in Associates and Joint Ventures		2,218,636			2,197,351			14,354,113
• Property and Equipment, net		12,571,404			12,871,259			13,377,077
• Goodwill		2,075,009			3,869,769			4,436,194
• Intangible Assets, net		3,683,997			2,072,493			3,357,524
• Others		1,844,470			1,832,662			1,958,126

Total Assets		30,574,668			30,911,277			47,906,957

Liabilities
Current Liabilities		6,935,288			6,960,435			8,177,967
Non-Current Liabilities		11,369,913			11,615,704			15,332,747
Total Liabilities		18,305,201			18,576,139			23,510,714
Equity
Equity Attributable to Owners of the Parent Company		11,505,561			11,579,346			23,743,894
Share Capital		30,493			30,493			44,639
Capital Surplus (Deficit) and Other Capital Adjustments		(11,560,041	)		(11,623,726	)		677,203
Retained Earnings		22,297,108			22,437,341			22,981,913
Reserves		738,001			735,238			40,139
Non-controlling Interests		763,906			755,792			652,349

Total Equity		12,269,467			12,335,138			24,396,243

Total Liabilities and Equity		30,574,668			30,911,277			47,906,957

Total Number of Consolidated Subsidiaries		26			23			49

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


	For the three months ended March 31, 2022		For the three months ended March 31, 2021		For the year ended December 31, 2021		For the year ended December 31, 2020
Operating Revenue		4,277,208		4,113,097		16,748,585		16,087,747
Operating Profit		432,393		374,216		1,387,162		1,248,578
Profit Before Income Tax		327,008		486,550		1,718,191		905,218
Profit for the Period		220,345		571,975		2,418,989		1,500,538
Profit for the Period Attributable to Owners of the Parent Company		211,253		558,265		2,407,523		1,504,352
Profit for the Period Attributable to Non-controlling Interests		9,092		13,710		11,466		(3,814	)
Basic Earnings Per Share (Won)		953		1,559		7,191		4,093
Diluted Earnings Per Share (Won)		952		1,558		7,187		4,092

B. Summary Financial Information (Separate)

Below is the summary separate financial information of the Company as of March 31, 2022, December 31, 2021 and December 31, 2020 and for the three months ended March 31, 2022 and 2021 and the years ended December 31, 2021 and 2020. The Company’s unaudited separate financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021 and for the years ended December 31, 2021 and 2020, which are prepared in accordance with K-IFRS, are attached hereto.


	(Unit: in millions of Won)
	As of March 31, 2022			As of December 31, 2021			As of December 31, 2020
Assets
Current Assets		4,767,302			4,681,493			5,047,115
• Cash and Cash Equivalents		77,923			158,823			329,208
• Accounts Receivable – Trade, net		1,515,770			1,514,260			1,503,552
• Accounts Receivable – Other, net		598,897			520,956			434,713
• Others		2,574,712			2,487,454			2,779,642
Non-Current Assets		21,323,479			21,707,572			26,939,336
• Long-Term Investment Securities		1,405,103			1,476,361			983,688
• Investments in Subsidiaries and Associates		4,910,050			4,841,139			11,357,504
• Property and Equipment, net		9,093,711			9,318,408			9,157,548
• Goodwill		1,306,236			1,306,236			1,306,236
• Intangible Assets, net		3,027,801			3,203,330			2,665,083
• Others		1,580,578			1,562,098			1,469,277

Total Assets		26,090,781			26,389,065			31,986,451

Liabilities
Current Liabilities		5,570,836			5,426,477			5,076,404
Non-Current Liabilities		9,738,615			10,099,732			9,560,189
Total Liabilities		15,309,451			15,526,209			14,636,593
Equity
Share Capital		30,493			30,493			44,639
Capital Surplus and Other Capital Adjustments		(4,499,135	)		(4,576,271	)		289,134
Retained Earnings		14,672,285			14,770,618			16,684,640
Reserves		577,687			638,016			331,445

Total Equity		10,781,330			10,862,856			17,349,858

Total Liabilities and Equity		26,090,781			26,389,065			31,986,451


	(Unit: in millions of Won except per share data)
	For the three months ended March 31, 2022		For the three months ended March 31, 2021		For the year ended December 31, 2021		For the year ended December 31, 2020
Operating Revenue		3,077,393		2,980,718		12,102,830		11,746,630
Operating Profit		356,941		307,302		1,144,323		1,023,067
Profit Before Income Tax		338,627		580,865		1,369,347		941,455
Profit for the Period		252,018		466,013		1,073,823		758,792
Basic Earnings Per Share (Won)		1,140		1,299		3,183		2,044
Diluted Earnings Per Share (Won)		1,139		1,299		3,181		2,044

2. Dividends and Others

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

3. Use of Direct Financing

A. Use of Proceeds from Public Offerings

[SK Telecom]


(As of March 31, 2022)		(Unit: in millions of Won)

Category

Bond
Series

Payment Date

Planned Use of Proceeds

Actual Use of Proceeds

Reasons for
Difference

Use

Amount

Use

Amount

Corporate bond

78th

January 14, 2020

Repayment of
debt

60,000

Repayment of
debt

60,000

—

Corporate bond

78th

January 14, 2020

Working
capital

360,000

Working
capital

360,000

—

Corporate bond

79th

October 19, 2020

Repayment of
debt

290,000

Repayment of
debt

290,000

—

Corporate bond

80th

January 15, 2021

Repayment of
debt

310,000

Repayment of
debt

310,000

—

Corporate bond

81st

October 28, 2021

Repayment of
debt

200,000

Repayment of
debt

200,000

—

[SK Broadband]


(As of March 31, 2022)		(Unit: in millions of Won)

Category

Bond
Series

Payment Date

Planned Use of Proceeds

Actual Use of Proceeds

Reasons for
Difference

Use

Amount

Use

Amount

Corporate bond

Series
49-1

June 11, 2020

Repayment of
debt

100,000

Repayment of
debt

100,000

—

Corporate bond

Series
49-2

June 11, 2020

Repayment of
debt

59,200

Repayment of
debt

59,200

—

Corporate bond

Series
49-2

June 11, 2020

Working
capital

40,800

Working
capital

40,800

—

Corporate bond

Series
50

September 25, 2020

Repayment of
debt

160,000

Repayment of
debt

160,000

—

Corporate bond

Series
51

July 13, 2021

Repayment of
debt

100,000

Repayment of
debt

100,000

—

Corporate bond

Series
52-1

January 25, 2022

Repayment of
debt

100,000

Repayment of
debt

100,000

—

Corporate bond

Series
52-2

January 25, 2022

Repayment of
debt

50,000

Repayment of
debt

50,000

—

Series 52-2 issued as of January 25, 2022 is an ESG bond (green bond). Series 52-2 was issued for the purpose of repayment of funds raised to be invested in the conversion of hybrid fiber-coaxial (“HFC”) network to fiber-to-the-home (“FTTH”) network, which has a positive impact on the environment, and the proceeds from the bond offering were used for the intended purpose. See the ESG bond report published in the socially responsible investment bond segment of the Korea Exchange for more information on the use of proceeds from this ESG bond offering.

B.	Use of Proceeds from Private Offerings

[SK Telecom]

None.

[SK Broadband]

None.

C.	Operation of Unused Proceeds

[SK Telecom]

None.

[SK Broadband]

None.

4. Other Matters Related to Financial Information

A.	Restatement of the Financial Statements

Pursuant to the resolution of the general meeting of shareholders on October 12, 2021, the Company conducted the Spin-off effective as of November 1, 2021. Profit and loss of the spun-off divisions were separately presented as income from discontinued operations, and the consolidated statement of profit and loss for the three months ended March 31, 2021 was restated as such.

B.	Loss Allowance

(1)

Loss Allowance of Trade and Other Receivables


	(Unit: in millions of Won)
	For the three months ended March 31, 2022
	Gross amount		Loss Allowance		Percentage
Accounts receivable – trade		2,240,786		249,273		11	%
Loans		142,466		45,204		32	%
Accounts receivable – other		940,726		47,056		5	%
Accrued income		665		—		0	%
Guarantee deposits		283,194		300		0	%

Total		3,607,837		341,833		9	%


	(Unit: in millions of Won)
	For the year ended December 31, 2021
	Gross amount		Loss Allowance		Percentage
Accounts receivable – trade		2,160,498		238,881		11	%
Loans		138,181		45,385		33	%
Accounts receivable – other		870,225		46,625		5	%
Accrued income		762		—		0	%
Guarantee deposits		278,759		0		0	%

Total		3,448,425		330,891		10	%


	(Unit: in millions of Won)
	For the year ended December 31, 2020
	Gross amount		Loss Allowance		Percentage
Accounts receivable – trade		2,478,851		264,498		11	%
Loans		182,721		45,024		25	%
Accounts receivable – other		1,366,922		55,075		4	%
Accrued income		3,418		166		5	%
Guarantee deposits		285,507		300		0	%

Total		4,317,419		365,063		8	%

(2) Movements in Loss Allowance of Trade and Other Receivables


			(Unit: in millions of Won)
	For the three months ended March 31, 2022		For the year ended December 31, 2021			For the year ended December 31, 2020
Beginning balance		330,891		365,063			346,399
Effect of change in accounting policy		—		—			—
Increase of loss allowance		9,300		37,547			59,184
Reversal of loss allowance		—		—			—
Write-offs		1,247		(57,215	)		(57,575	)
Other		395		(14,504	)		17,055
Ending balance		341,833		330,891			365,063

(3) Policies for Loss Allowance

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

(4) Aging of Accounts Receivable


							(Unit: in millions of Won)
	As of March 31, 2022
	Six months or less			From six months to one year			From one year to three years			More than three years			Total

Accounts receivable – general		2,008,824			47,607			139,047			45,308			2,240,786
Percentage		89.6	%		2.1	%		6.2	%		2.0	%		100.0	%

C. Inventories

(1) Detailed Categories of Inventories


	(Unit: in millions of Won)
Account Category	For the three months ended March 31, 2022			For the year ended December 31, 2021			For the year ended December 31, 2020
Merchandise		206,272			201,126			162,196
Goods in transit		—			—			—
Other inventories		17,137			3,511			9,247

Total		223,409			204,637			171,443

Percentage of inventories to total assets [Inventories / Total assets]		0.73	%		0.66	%		0.36	%
Inventory turnover [Cost of sales / { ( Beginning balance of inventories + Ending balance of inventories ) / 2}]		5.75			6.20			7.60

(2) Reporting of Inventories

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

D. Fair Value Measurement

See notes 2 and 30 of the notes to the Company’s consolidated financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021 for more information.

E. Key Terms of Debt Securities

[SK Telecom]

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


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 62-2	Aug. 28, 2012	Aug. 28, 2022	140,000	Aug. 22, 2012	Meritz Securities Co., Ltd.
Unsecured Bond – Series 62-3	Aug. 28, 2012	Aug. 28, 2032	90,000	Aug. 22, 2012	Meritz Securities Co., Ltd.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed Won 2 trillion
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Not applicable
Restriction on Changes of Ownership Structure	Compliance Status	Not applicable
Submission of Compliance Certificate	Compliance Status	Submitted on March 23, 2022


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 63-1	Apr. 23, 2013	Apr. 23, 2023	230,000	Apr. 17, 2013	Korea Securities Finance Corp.
Unsecured Bond – Series 63-2	Apr. 23, 2013	Apr. 23, 2033	130,000	Apr. 17, 2013	Korea Securities Finance Corp.
Unsecured Bond – Series 64-2	May 14, 2014	May 14, 2024	150,000	April 29, 2014	Korea Securities Finance Corp.
Unsecured Bond – Series 65-3	Oct. 28, 2014	Oct. 28, 2024	190,000	Oct. 16, 2014	Korea Securities Finance Corp.
Unsecured Bond – Series 66-2	Feb. 26, 2015	Feb. 26, 2025	150,000	Feb. 11, 2015	Korea Securities Finance Corp.
Unsecured Bond – Series 66-3	Feb. 26, 2015	Feb. 26, 2030	50,000	Feb. 11, 2015	Korea Securities Finance Corp.
Unsecured Bond – Series 67-2	July 17, 2015	July 17, 2025	70,000	July 9, 2015	Korea Securities Finance Corp.
Unsecured Bond – Series 67-3	July 17, 2015	July 17, 2030	90,000	July 9, 2015	Korea Securities Finance Corp.
Unsecured Bond – Series 68-2	Nov. 30, 2015	Nov. 30, 2025	100,000	Nov. 18, 2015	Korea Securities Finance Corp.
Unsecured Bond – Series 68-3	Nov. 30, 2015	Nov. 30, 2035	70,000	Nov. 18, 2015	Korea Securities Finance Corp.
Unsecured Bond – Series 69-3	Mar. 4, 2016	Mar. 4, 2026	90,000	Feb. 22, 2016	Korea Securities Finance Corp.
Unsecured Bond – Series 69-4	Mar. 4, 2016	Mar. 4, 2036	80,000	Feb. 22, 2016	Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 100% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed Won 2 trillion
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Not applicable
Restriction on Changes of Ownership Structure	Compliance Status	Not applicable
Submission of Compliance Certificate	Compliance Status	Submitted on March 23, 2022


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 70-3	June 3, 2016	June 3, 2026	120,000	May 24, 2016	Korea Securities Finance Corp.
Unsecured Bond – Series 70-4	June 3, 2016	June 3, 2031	50,000	May 24, 2016	Korea Securities Finance Corp.
Unsecured Bond – Series 71-2	April 25, 2017	Apr. 25, 2022	120,000	Apr. 13, 2017	Korea Securities Finance Corp.
Unsecured Bond – Series 71-3	Apr. 25, 2017	Apr. 25, 2027	100,000	Apr. 13, 2017	Korea Securities Finance Corp.
Unsecured Bond – Series 71-4	Apr. 25, 2017	Apr. 25, 2032	90,000	Apr. 13, 2017	Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed Won 5 trillion
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Not applicable
Restriction on Changes of Ownership Structure	Compliance Status	Not applicable
Submission of Compliance Certificate	Compliance Status	Submitted on March 23, 2022


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 72-2	Nov. 10, 2017	Nov. 10, 2022	80,000	Oct. 31, 2017	Korea Securities Finance Corp.
Unsecured Bond – Series 72-3	Nov. 10, 2017	Nov. 10, 2027	100,000	Oct. 31, 2017	Korea Securities Finance Corp.
Unsecured Bond – Series 73-2	Feb. 20, 2018	Feb. 20, 2023	100,000	Feb. 6. 2018	Korea Securities Finance Corp.
Unsecured Bond – Series 73-3	Feb. 20, 2018	Feb. 20, 2028	200,000	Feb. 6. 2018	Korea Securities Finance Corp.
Unsecured Bond – Series 73-4	Feb. 20, 2018	Feb. 20, 2038	90,000	Feb. 6. 2018	Korea Securities Finance Corp.
Unsecured Bond – Series 74-2	Sept. 17, 2018	Sept. 17, 2023	150,000	Sept. 5, 2018	Korea Securities Finance Corp.
Unsecured Bond – Series 74-3	Sept. 17, 2018	Sept. 17, 2038	50,000	Sept. 5, 2018	Korea Securities Finance Corp.
Unsecured Bond – Series 75-2	Mar. 6, 2019	Mar. 6, 2024	120,000	Feb. 21, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 75-3	Mar. 6, 2019	Mar. 6, 2029	50,000	Feb. 21, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 75-4	Mar. 6, 2019	Mar. 6, 2039	50,000	Feb. 21, 2019	Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed 50% of total assets
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Restriction of cross-shareholding Exclusion from corporate group
Restriction on Changes of Ownership Structure	Compliance Status	Compliant
Submission of Compliance Certificate	Compliance Status	Submitted on March 23, 2022


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 76-1	July 29, 2019	July 29, 2022	120,000	July 17, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 76-2	July 29, 2019	July 29, 2024	60,000	July 17, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 76-3	July 29, 2019	July 29, 2029	120,000	July 17, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 76-4	July 29, 2019	July 29, 2039	50,000	July 17, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 76-5	July 29, 2019	July 29, 2049	50,000	July 17, 2019	Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed 50% of total assets
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Restriction of cross-shareholding Exclusion from corporate group
Restriction on Changes of Ownership Structure	Compliance Status	Compliant
Submission of Compliance Certificate	Compliance Status	Submitted on March 23, 2022


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 77-1	Oct. 22, 2019	Oct. 21, 2022	230,000	Oct. 10, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 77-2	Oct. 22, 2019	Oct. 22, 2024	70,000	Oct. 10, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 77-3	Oct. 22, 2019	Oct. 22, 2029	40,000	Oct. 10, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 77-4	Oct. 22, 2019	Oct. 22, 2039	60,000	Oct. 10, 2019	Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed 50% of total assets
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Restriction of cross-shareholding Exclusion from corporate group
Restriction on Changes of Ownership Structure	Compliance Status	Compliant
Submission of Compliance Certificate	Compliance Status	Submitted on March 23, 2022


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 78-1	Jan. 14, 2020	Jan. 13, 2023	170,000	Dec. 31, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 78-2	Jan. 14, 2020	Jan. 14, 2025	130,000	Dec. 31, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 78-3	Jan. 14, 2020	Jan. 14, 2030	50,000	Dec. 31, 2019	Korea Securities Finance Corp.
Unsecured Bond – Series 78-4	Jan. 14, 2020	Jan. 14, 2040	70,000	Dec. 31, 2019	Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed 50% of total assets
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Restriction of cross-shareholding Exclusion from corporate group
Restriction on Changes of Ownership Structure	Compliance Status	Compliant
Submission of Compliance Certificate	Compliance Status	Submitted on March 23, 2022


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 79-1	Oct. 19, 2020	Oct. 19, 2025	140,000	Oct. 6, 2020	Korea Securities Finance Corp.
Unsecured Bond – Series 79-2	Oct. 19, 2020	Oct. 19, 2030	40,000	Oct. 6, 2020	Korea Securities Finance Corp.
Unsecured Bond – Series 79-3	Oct. 19, 2020	Oct. 19, 2040	110,000	Oct. 6, 2020	Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed 50% of total assets
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Restriction of cross-shareholding Exclusion from corporate group
Restriction on Changes of Ownership Structure	Compliance Status	Compliant
Submission of Compliance Certificate	Compliance Status	Submitted on March 23, 2022


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 80-1	Jan. 15, 2021	Jan. 14, 2024	80,000	Jan. 5, 2021	Korea Securities Finance Corp.
Unsecured Bond – Series 80-2	Jan. 15, 2021	Jan. 15, 2026	80,000	Jan. 5, 2021	Korea Securities Finance Corp.
Unsecured Bond – Series 80-3	Jan. 15, 2021	Jan. 15, 2031	50,000	Jan. 5, 2021	Korea Securities Finance Corp.
Unsecured Bond – Series 80-4	Jan. 15, 2021	Jan. 15, 2041	100,000	Jan. 5, 2021	Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed 50% of total assets
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Restriction of cross-shareholding Exclusion from corporate group
Restriction on Changes of Ownership Structure	Compliance Status	Compliant
Submission of Compliance Certificate	Compliance Status	Submitted on March 23, 2022


Name	Issue Date	Maturity Date	Principal Amount (millions of Won)	Date of Fiscal Agency Agreement	Fiscal Agent
Unsecured Bond – Series 81-1	Oct. 28, 2021	Oct. 28, 2024	90,000	Oct. 18, 2021	Korea Securities Finance Corp.
Unsecured Bond – Series 81-2	Oct. 28, 2021	Oct. 28, 2026	70,000	Oct. 18, 2021	Korea Securities Finance Corp.
Unsecured Bond – Series 81-3	Oct. 28, 2021	Oct. 28, 2041	40,000	Oct. 18, 2021	Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 300%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 150% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed 50% of total assets
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Restriction of cross-shareholding Exclusion from corporate group
Restriction on Changes of Ownership Structure	Compliance Status	Compliant
Submission of Compliance Certificate	Compliance Status	Submitted on March 31, 2022

[SK Broadband]

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

Name

Issue Date

Maturity Date

Principal Amount
(millions of Won)

Date of Fiscal
Agency

Agreement

Fiscal Agent

Unsecured Bond – Series 45-2

Oct. 11, 2017

Oct. 11, 2022

140,000

Sept. 20, 2017

Korea Securities

Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 400%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed 70% of total assets
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	—
Restriction on Changes of Ownership Structure	Compliance Status	—
Submission of Compliance Certificate	Compliance Status	Submitted on April 18, 2022

Name

Issue Date

Maturity Date

Principal Amount
(millions of Won)

Date of Fiscal
Agency
Agreement

Fiscal Agent

Unsecured Bond – Series 46-2

Feb. 1, 2018

Feb. 1, 2023

80,000

Jan. 19, 2018

Korea Securities Finance Corp.

Unsecured Bond –

Series 47-1

Mar. 26, 2019

Mar. 26, 2022

50,000

Mar. 14, 2019

Korea Securities Finance Corp.

Unsecured Bond –

Series 47-2

Mar. 26, 2019

Mar. 26, 2024

160,000

Mar. 14, 2019

Korea Securities Finance Corp.

Unsecured Bond –

Series 48-1

Sept. 24, 2019

Sept. 23, 2022

80,000

Sept. 10, 2019

Korea Securities Finance Corp.

Unsecured Bond –

Series 48-2

Sept. 24, 2019

Sept. 24, 2024

100,000

Sept. 10, 2019

Korea Securities Finance Corp.

Unsecured Bond –

Series 48-3

Sept. 24, 2019

Sept. 23, 2026

50,000

Sept. 10, 2019

Korea Securities Finance Corp.

Unsecured Bond –

Series 49-1

June 11, 2020

June 9, 2023

100,000

June 1, 2020

Korea Securities Finance Corp.

Unsecured Bond –

Series 49-2

June 11, 2020

June 11, 2025

100,000

June 1, 2020

Korea Securities Finance Corp.

Unsecured Bond – Series 50

Sept. 25, 2020

Sept. 25, 2025

160,000

Sept. 15, 2020

Korea Securities Finance Corp.

Unsecured Bond – Series 51

July 13, 2021

July 12, 2024

100,000

July 1, 2021

Korea Securities Finance Corp.

Unsecured Bond – Series 52-1

Jan. 25, 2022

Jan. 24, 2025

100,000

Jan. 13, 2022

Korea Securities Finance Corp.

Unsecured Bond – Series 52-2

Jan. 25, 2022

Jan. 25, 2032

50,000

Jan. 13, 2022

Korea Securities Finance Corp.


Maintenance of Financial Ratio	Key Term	Debt ratio no greater than 400%
Maintenance of Financial Ratio	Compliance Status	Compliant
Restriction on Liens	Key Term	The total amount of secured debt not to exceed 200% of share capital as of the end of the previous fiscal year
Restriction on Liens	Compliance Status	Compliant
Restriction on Disposition of Assets	Key Term	Disposal of assets per fiscal year not to exceed 70% of total assets
Restriction on Disposition of Assets	Compliance Status	Compliant
Restriction on Changes of Ownership Structure	Key Term	Restriction on changes of ownership structure
Restriction on Changes of Ownership Structure	Compliance Status	Compliant

Submission of Compliance Certificate	Compliance Status	Submitted on April 18, 2022

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

*	Compliance certificates for Series 52-1 and Series 52-2 issued as of January 25, 2022 are expected to be submitted after the submission of the semi-annual business report for the first six months of fiscal year 2022.

IV. MANAGEMENT’S DISCUSSION AND ANALYSIS

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

V. AUDITOR’S OPINION

1. Independent Auditors and Audit Opinions

A. Independent Auditor and Audit Opinion (Separate and Consolidated)


Period	Independent auditor	Audit opinion	Emphasis of Matter	Critical Audit Matters
Three months ended March 31, 2022	Ernst & Young Han Young	—	Although not affecting our review opinion, users of this review report should pay special attention to notes 3 and 36 of the notes to the Company’s consolidated financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021. Pursuant to the resolution of the general meeting of shareholders on October 12, 2021, the Company conducted the Spin-off effective as of November 1, 2021. Profit and loss of the spun-off divisions were separately presented as income from discontinued operations, and the consolidated statement of profit and loss for the three months ended March 31, 2021 was restated as such. See notes 3 and 36 of the notes to the Company’s consolidated financial statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021 for more information.	N/A
Year ended December 31, 2021	KPMG Samjong Accounting Corp.	Unqualified	Spin-off and disclosure of discontinued operations in the consolidated financial statements	Revenue recognition; assessment of impairment of cash-generating unit of fixed-line telecommunication services
Year ended December 31, 2020	KPMG Samjong Accounting Corp.	Unqualified	Retroactive application of change in accounting policy related to change to determination of lease period	Revenue recognition; assessment of impairment of cash-generating unit of security services, assessment of fair value of customer relationship

Note: All consolidated subsidiaries of the Company that are subject to audits and whose audits have been completed received unqualified audit opinions.

B. Audit Services Contracts with Independent Auditors

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

Period

Auditors

Contents

Audit Contract

Actual
Performance

Fee

Total
number
of hours

Fee

Total
number
of hours

Three months ended March 31, 2022

Ernst & Young Han Young

Quarterly review/Consolidated financial statements review

2,700

24,100

241

2,800

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Internal accounting system audit

Year ended December 31, 2021

KPMG Samjong Accounting Corp.

Quarterly review

2,450

24,500

2,450

24,500

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Internal accounting system audit

Year ended December 31, 2020

KPMG Samjong Accounting Corp.

Quarterly review

2,360

23,600

2,360

23,600

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Internal accounting system audit

C. Non-Audit Services Contracts with Independent Auditors


(Unit: in millions of Won)
Period	Contract date	Service provided	Service duration	Fee
Three months ended March 31, 2022	—	—	—		—
Year ended December 31, 2021	May 17, 2021	Confirmation of financial information in connection with frequency reallocation application	May 17, 2021 – May 24, 2021		2
	May 26, 2021	Audit and review of financial statements of the newly established company and subsidiaries involved in the Spin-off	May 26, 2021 – July 28, 2021		1,143
	August 5, 2021	Review of carve-out financial statements in connection with the Spin-off	August 5, 2021 – August 13,2021		10
Year ended December 31, 2020	July 23, 2020	Confirmation of financial information	July 23, 2020 – July 30, 2020		30
	December 8, 2020	Confirmation of financial information	December 8, 2020 – December 10, 2020		30
	December 30, 2020	Consulting services for new business group model research project	December 31, 2020 – February 12, 2021		90

D. Discussions between Audit Committee and Independent Auditors

VI. CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS

1. Board of Directors

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

2. Audit System

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

3. Shareholders’ Exercise of Voting Rights

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

VII. SHAREHOLDERS

1. Shareholdings of the Largest Shareholder and Related Persons

A. Shareholdings of the Largest Shareholder and Related Persons


(As of March 31, 2022)					(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 Inc.	Largest Shareholder	Common share		65,668,397		30.01		65,668,397		30.01
Tae Won Chey	Officer of affiliated company	Common share		303		0.00		303		0.00
Dong Hyun Jang	Officer of affiliated company	Common share		762		0.00		762		0.00
Jung Ho Park	Officer of the Company	Common share		10,932		0.00		21,530		0.00
Young Sang Ryu	Officer of the Company	Common share		3,340		0.00		7,340		0.00
Yong-Hak Kim	Officer of the Company	Common share		303		0.00		303		0.00
Seok-Dong Kim	Officer of the Company	Common share		303		0.00		303		0.00
Youngmin Yoon	Officer of the Company	Common share		303		0.00		303		0.00
Jung Ho Ahn	Officer of the Company	Common share		303		0.00		303		0.00
Junmo Kim	Officer of the Company	Common share		303		0.00		303		0.00
Kyu-nam Choi	Officer of the Company	Common share		455		0.00		455		0.00
Poong Young Yoon	Officer of the Company	Common share		2,733		0.00		2,733		0.00
Jong Ryeol Kang	Officer of the Company	Common share		0		0.00		3,484		0.00

Total		Common share		65,688,437		30.02		65,706,519		30.03

B. Overview of the Largest Shareholder

As of March 31, 2022, the Company’s largest shareholder was SK Inc. SK Inc. was established on April 13, 1991 and was made public on the securities market on November 11, 2009 under the identification code “034730.” SK Inc. is located at 26, Jong-ro, Jongno-gu, Seoul, Korea. SK Inc.’s telephone number is +82-2-2121-5114 and its website is https://www.sk-inc.com/.

VIII. EMPLOYEES AND DIRECTORS

1. Directors and Officers

A. Directors

(As of March 31, 2022)

Name

Gender

Date of Birth

Position

Professional Background

Duration of
Term

End of Current
Term

Young Sang Ryu

Male

May 1970

Chief Executive Officer; Representative Director; Inside Director

Director, SK Telecom MNO business

4 years and 1 month

Mar. 24, 2024

Jong Ryeol Kang

Male

Oct. 1964

Representative Director; Head of ICT Infrastructure Center (CSPO); Inside Director

Head, Corporate Culture Division

1 month

Mar. 24, 2025

Kyu-Nam Choi

Male

Apr. 1964

Non-executive Director

Head of Investment 1 Team; Head of Environment Task Force; Head of Future Business Team, SUPEX Council

6 months

Mar. 24, 2024

Yong-Hak Kim

Male

Jan. 1953

Independent Director

President (Professor Emeritus), Yonsei University

2 years and 1 month

Mar. 25, 2023

Seok-Dong Kim

Male

May 1953

Independent Director

Chairman, Financial Services Commission

3 years and 1 month

Mar. 24, 2025

Jung Ho Ahn

Male

Feb. 1978

Independent Director

Professor, Graduate School of Convergence Science and Technology at Seoul National University

5 years and 1 month

Mar. 25, 2023

Youngmin Yoon

Female

Dec. 1963

Independent Director

Professor, Department of Media and Communication at Korea University

4 years and 1 month

Mar. 24, 2024

Junmo Kim

Male

Sep. 1976

Independent Director

Professor, Department of Electrical Engineering at Korea Advanced Institute of Science and Technology

2 years and 1 month

Mar. 25, 2023

*	At the 38th General Meeting of Shareholders held on March 25, 2022, Jong Ryeol Kang was newly appointed as an inside director and Seok-Dong Kim was re-elected as an independent director and a member of the audit committee.

2. Compensation of Directors and Officers

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

IX. RELATED PARTY TRANSACTIONS

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

None.

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

Purchase and Dispositions of Investments


				(Unit: in millions of Won)
		Purchase and Dispositions of Investments
(As of March 31, 2022) Name (Corporate name)				Transaction Details
(As of March 31, 2022) Name (Corporate name)	Relationship	Type of Investment		Beginning		Increase		Decrease		Ending		Remarks
Start-up Win-win Fund	Affiliate		Shares		5,676		—		4,850		826	Principal distribution
Smart SKT Infinitum Game Fund	Affiliate		Shares		3,000		1,000		—		4,000	Capital increase
UCT Kakao-SK Telecom ESG Fund	Affiliate		Shares		2,000		2,000		—		4,000	Capital increase
Atlas Investment	Subsidiary		Shares		155,656		2,286		—		157,942	Capital increase
Quantum Innovation Fund I	Subsidiary		Shares		11,935		240		—		12,175	Capital increase
SAPEON Korea Inc.	Subsidiary		Shares		—		19,108		—		19,108	New acquisition
SAPEON Inc.	Subsidiary		Shares		—		48,228		—		48,228	New acquisition
SK Square (listed)	Subsidiary		Shares		51,371		—		307		51,064	Disposal
CMES Inc.	Affiliate		Preferred Shares		—		10,000		—		10,000	Acquisition of preferred shares

3. Transactions with the Largest Shareholder and Related Parties


(Unit: in millions of Won)
Counterparty	Relationship with Counterparty	Type	Transaction Period	Transaction Details	Transaction Amount
PS&Marketing	Affiliate	Purchase	January 1, 2022 – March 31, 2022	Marketing fees, etc.	338,738

X. OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS

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

On February 9, 2022, the Company announced its strategic direction and sales target in the “Future Business and Management Plan” fair disclosure report. See “II.1. Business Overview” for more information on business progress and “III. Financial Information” for more information on business performance.

On March 30, 2022, the Company announced that SK Broadband will merge with Broadband Nowon Co., Ltd. in its “Decision on Merger” report. Such filing is currently pending and has not been completed.

2. Contingent Liabilities

A. Legal Proceedings

[SK Telecom]

As of March 31, 2022, the Company is involved in various pending legal proceedings and the provisions recognized for these proceedings are not material. The management of the Company has determined that there are currently no present obligations in connection with proceedings for which no provision has been recognized. The management has also determined that the outcome of these proceedings will not have a significant impact on the Company’s financial position and operating performance.

[SK Broadband]

As of March 31, 2022, there were 32 pending lawsuits against SK Broadband (aggregate amount of claims of Won 13,834 million), and provisions in the amount of Won 10,928 million in connection with such lawsuits were recognized.

B. Other Contingent Liabilities

[SK Telecom]

None.

[SK Broadband]

As of March 31, 2022, SK Broadband has entered into revolving credit facilities with a limit of Won 192 billion with two financial institutions including Hana Bank in relation to its loans.

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

SK Broadband has provided “geun” mortgage amounting to Won 1,513 million on certain of its buildings, including Gyeyang Guksa, in connection with leasing of such buildings.

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

As of March 31, 2022, Seoul Guarantee Insurance Company has provided a performance guarantee of Won 24,286 million to SK Broadband in connection with the performance of certain contracts and the repair of any defects, and Korea Content Financial Cooperative has provided a performance guarantee of Won 33,857 million in connection with the performance of certain contracts.

[SK Stoa]

As of March 31, 2022, Kookmin Bank has provided a payment guarantee of Won 1.5 billion in connection with e-commerce transaction payables.

3. Status of Sanctions, etc.

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

4. Material Events Subsequent to the Reporting Period

(1) On April 28, 2022, the Board of Directors resolved to dispose the Company’s treasury shares as follows:


Classification		Content
Type and number of shares		29,311 common shares
Disposal price		Won 56,800 per share
Amount of disposal		Won 1,665 million
Period of disposal		April 29, 2022 - May 20, 2022
Purpose of disposal		Bonus payment
Method of disposal		Over-the-counter

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/ Heejun Chung
(Signature)

Name:		Heejun Chung
Title:		Senior Vice President

Date: June 9, 2022

SK TELECOM CO., LTD. AND ITS SUBSIDIARIES

Interim Consolidated Financial Statements

(Unaudited)

For the Three-Month Period ended March 31, 2022

(With Independent Auditor’s Review Report Thereon)

SK TELECOM CO., LTD. AND ITS SUBSIDIARIES

Contents


Report on review of interim consolidated financial statements			Page

Interim Consolidated Financial Statements

Interim Consolidated Statements of Financial Position			1

Interim Consolidated Statements of Profit or Loss			3

Interim Consolidated Statements of Comprehensive Income			4

Interim Consolidated Statements of Changes in Equity			5

Interim Consolidated Statements of Cash Flows			6

Notes to the Interim Consolidated Financial Statements			8

LOGO

Report on review of interim consolidated financial statements

The Shareholders and Board of Directors

SK Telecom Co., Ltd.

Report on the financial statements

We have reviewed the accompanying interim consolidated financial statements of SK Telecom Co., Ltd. and its subsidiaries (the “Group”), which comprise the interim consolidated statement of financial position as of March 31, 2022, and the related interim consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the three-month period then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the interim consolidated financial statements

Management is responsible for the preparation and fair presentation of these interim consolidated financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1034 Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of interim consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on these interim consolidated financial statements based on our review.

We conducted our review in accordance with the review standards for interim financial statements in the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Auditing Standards (“KGAAS”) 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 review, nothing has come to our attention that causes us to believe that the accompanying interim consolidated financial statements are not prepared fairly, in all material respects, in accordance with K-IFRS 1034 Interim Financial Reporting.

Emphasis of matter

We draw to attention to Notes 3 and 36, which describes that pursuant to the resolution of shareholders’ meeting held on October 12, 2021, the SK Telecom Co., Ltd. completed the spin-off of certain businesses as of November 1, 2021. The businesses spun off are presented as discontinued operations, and the comparative interim consolidated statement of profit or loss for the three-month period ended March 31, 2021 and related notes have been restated to present the discontinued operations separately from continuing operations. Our conclusion is not modified in respect of this matter.

A member firm of Ernst & Young Global Limited

LOGO

Other matters

The interim consolidated statement of profit or loss, interim consolidated statement of comprehensive income, interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the three-month period ended March 31, 2021, prepared in accordance with K-IFRS 1034 and presented for comparative purpose, have been reviewed by KPMG Samjong Accounting Corp. whose review report dated May 14, 2021 expressed an unqualified review conclusion.

Moreover, the consolidated statement of financial position as of December 31, 2021, and the related consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended which have been audited by KPMG Samjong Accounting Corp., in accordance with KGAAS (not presented herein), whose report dated March 10, 2022 expressed an unqualified opinion. The accompanying consolidated statement of financial position as of December 31, 2021 presented for comparative purpose is not different, in all material respects, from the above audited consolidated statement of financial position.

LOGO

May 13, 2022

This report is effective as of May 13, 2022, the independent auditor’s review report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the independent auditor’s review report date to the time this review report is used. Such events and circumstances could significantly affect the accompanying interim consolidated financial statements and may result in modification to this review report.

A member firm of Ernst & Young Global Limited

SK TELECOM CO., LTD. (the “Parent Company”) AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2022 AND DECEMBER 31, 2021 AND

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2022 AND 2021

The accompanying interim consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Parent Company.

Ryu, Young-Sang

Chief Executive Officer

SK TELECOM CO., LTD.

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Financial Position

As of March 31, 2022 and December 31, 2021


(In millions of won)	*Note*		March 31, 2022 (Unaudited)		December 31, 2021
Assets
Current Assets:
Cash and cash equivalents		29,30	W	894,661		872,731
Short-term financial instruments		29,30		491,576		508,677
Short-term investment securities		9,29,30		—		5,010
Accounts receivable – trade, net		5,29,30,31		1,981,245		1,913,511
Short-term loans, net		5,29,30,31		73,031		70,817
Accounts receivable – other, net		5,29,30,31,32		621,062		548,362
Contract assets		7,30		74,399		76,698
Prepaid expenses		6		2,019,981		1,987,503
Current tax assets		27		107		77
Derivative financial assets		29,30		30,007		30,110
Inventories, net		8		223,409		204,637
Non-current assets held for sale		35		8,734		8,734
Advanced payments and others		5,29,30,31		126,629		125,798

			6,544,841		6,352,665

Non-Current Assets:
Long-term financial instruments		29,30		375		375
Long-term investment securities		9,29,30		1,636,311		1,715,078
Investments in associates and joint ventures		11		2,218,636		2,197,351
Investment property, net		13		23,416		23,034
Property and equipment, net		12,14,31,32		12,571,404		12,871,259
Goodwill		10		2,075,009		2,072,493
Intangible assets, net		15		3,683,997		3,869,769
Long-term contract assets		7,30		39,389		41,580
Long-term loans, net		5,29,30,31		24,231		21,979
Long-term accounts receivable – other, net		5,29,30,31,32		272,608		275,238
Long-term prepaid expenses		6		1,063,719		1,069,148
Guarantee deposits, net		5,29,30,31		186,902		186,713
Long-term derivative financial assets		29,30		211,675		187,484
Deferred tax assets		27		128		128
Defined benefit assets		19		10,929		18,427
Other non-current assets		5,29,30		11,098		8,556

			24,029,827		24,558,612

Total Assets			W	30,574,668		30,911,277

(Continued)

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Financial Position, Continued

As of March 31, 2022 and December 31, 2021


(In millions of won)	*Note*		March 31, 2022 (Unaudited)			December 31, 2021
Liabilities and Equity
Current Liabilities:
Accounts payable – trade		29,30,31	W	151,052			190,559
Accounts payable – other		29,30,31		2,006,674			2,071,870
Withholdings		29,30,31		952,650			790,489
Contract liabilities		7		164,289			166,436
Accrued expenses		29,30		1,119,899			1,295,404
Current tax liabilities		27		249,524			192,221
Derivative financial liabilities		29,30		16			52
Provisions		18,34		67,295			61,656
Short-term borrowings		16,29,30		167,998			12,998
Current installments of long-term debt, net		16,29,30		1,300,526			1,430,324
Current installments of long-term payables – other		17,29,30		393,920			398,823
Lease liabilities		29,30,31		361,397			349,568
Other current liabilities				48			35

			6,935,288			6,960,435

Non-Current Liabilities:
Debentures, excluding current installments, net		16,29,30		6,876,379			7,037,424
Long-term borrowings, excluding current installments, net		16,29,30		546,845			353,122
Long-term payables – other		17,29,30		1,223,821			1,611,010
Long-term lease liabilities		29,30,31		1,238,900			1,184,714
Long-term contract liabilities		7		35,294			36,531
Defined benefit liabilities		19		31,606			13,157
Long-term derivative financial liabilities		29,30		321,025			321,084
Long-term provisions		18		61,540			65,339
Deferred tax liabilities		27		978,667			941,301
Other non-current liabilities		29,30,31		55,836			52,022

			11,369,913			11,615,704

Total Liabilities				18,305,201			18,576,139

Equity:
Share capital		1,20		30,493			30,493
Capital surplus and others		20,21		(11,560,041	)		(11,623,726	)
Retained earnings		22		22,297,108			22,437,341
Reserves		23		738,001			735,238

Equity attributable to owners of the Parent Company				11,505,561			11,579,346
Non-controlling interests				763,906			755,792

Total Equity				12,269,467			12,335,138

Total Liabilities and Equity			W	30,574,668			30,911,277

The accompanying notes are an integral part of the interim consolidated financial statements.

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Profit or Loss

For the three-month periods ended March 31, 2022 and 2021


(In millions of won, except for earnings per share)	*Note*		2022 (Unaudited)			2021 (Unaudited/ Restated)
Continuing operations
Operating revenue:		4,31
Revenue			W	4,277,208			4,113,097

Operating expenses:		31
Labor				637,113			580,997
Commissions		6		1,310,239			1,303,339
Depreciation and amortization		4		910,884			909,106
Network interconnection				189,390			193,937
Leased lines				67,624			74,385
Advertising				49,237			31,085
Rent				42,081			45,857
Cost of goods sold		8		307,615			279,403
Others		24		330,632			320,772

				3,844,815			3,738,881

Operating profit		4		432,393			374,216
Finance income		4,26		24,317			59,549
Finance costs		4,26		(93,091	)		(79,337	)
Gain (loss) relating to investments in associates and joint ventures, net		4,11		(38,445	)		127,734
Other non-operating income		4,25		15,741			12,585
Other non-operating expenses		4,25		(13,907	)		(8,197	)

Profit before income tax		4		327,008			486,550
Income tax expense		27		106,663			130,727

Profit from continuing operations				220,345			355,823
Profit of discontinued operations, net of taxes		36		—			216,152

Profit for the period			W	220,345			571,975

Attributable to:
Owners of the Parent Company			W	211,253			558,265
Non-controlling interests				9,092			13,710
Earnings per share		28
Basic earnings per share (in won)			W	953			1,559
Basic earnings per share—continuing operations (in won)				953			963
Diluted earnings per share (in won)				952			1,558
Diluted earnings per share—continuing operations (in won)				952			962

The accompanying notes are an integral part of the interim consolidated financial statements.

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Comprehensive Income

For the three-month periods ended March 31, 2022 and 2021


(In millions of won)	*Note*		2022 (Unaudited)			2021 (Unaudited)
Profit for the period			W	220,345			571,975
Other comprehensive income (loss):
Items that will never be reclassified to profit or loss, net of taxes:
Remeasurement of defined benefit plans		19		12,690			(18,782	)
Net change in other comprehensive loss of investments in associates and joint ventures		11,23		—			(1,503	)
Valuation gain (loss) on financial assets at fair value through other comprehensive income		23		(55,524	)		169,679
Items that are or may be reclassified subsequently to profit or loss, net of taxes:
Net change in other comprehensive income of investments in associates and joint ventures		11,23		62,694			114,619
Net change in unrealized fair value of derivatives		23		(10,066	)		(3,103	)
Foreign currency translation differences for foreign operations		23		3,927			16,131

Other comprehensive income for the period, net of taxes				13,721			277,041

Total comprehensive income			W	234,066			849,016

Total comprehensive income attributable to:
Owners of the Parent Company			W	227,408			835,904
Non-controlling interests				6,658			13,112

The accompanying notes are an integral part of the interim consolidated financial statements.

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Changes in Equity

For the three-month periods ended March 31, 2022 and 2021


(In millions of won)
			Attributable to owners of the Parent Company
	*Note*		Share capital		Capital surplus and others			Retained earnings			Reserves		Sub-total			Non-controlling interests			Total equity
Balance as of January 1, 2021			W	44,639		677,203			22,981,913			40,139		23,743,894			652,349			24,396,243
Total comprehensive income:
Profit for the period				—		—			558,265			—		558,265			13,710			571,975
Other comprehensive income (loss)		11,19,23		—		—			(18,723	)		296,362		277,639			(598	)		277,041

				—		—			539,542			296,362		835,904			13,112			849,016

Transactions with owners:
Annual dividends				—		—			(641,944	)		—		(641,944	)		(5,763	)		(647,707	)
Share option		21		—		47			—			—		47			216			263
Interest on hybrid bonds				—		—			(3,692	)		—		(3,692	)		—			(3,692	)
Acquisition of treasury shares		20		—		(72,982	)		—			—		(72,982	)		—			(72,982	)
Disposal of treasury shares		20		—		29,642			—			—		29,642			—			29,642
Changes in ownership in subsidiaries, etc.				—		6,305			—			—		6,305			12,011			18,316

				—		(36,988	)		(645,636	)		—		(682,624	)		6,464			(676,160	)

Balance as of March 31, 2021 (Unaudited)			W	44,639		640,215			22,875,819			336,501		23,897,174			671,925			24,569,099

Balance as of January 1, 2022			W	30,493		(11,623,726	)		22,437,341			735,238		11,579,346			755,792			12,335,138
Total comprehensive income:
Profit for the period				—		—			211,253			—		211,253			9,092			220,345
Other comprehensive income (loss)		11,19,23		—		—			13,392			2,763		16,155			(2,434	)		13,721

				—		—			224,645			2,763		227,408			6,658			234,066

Transactions with owners:
Annual dividends				—		—			(361,186	)		—		(361,186	)		—			(361,186	)
Share option		21		—		74,246			—			—		74,246			—			74,246
Interest on hybrid bonds				—		—			(3,692	)		—		(3,692	)		—			(3,692	)
Disposal of treasury shares		20		—		2,891			—			—		2,891			—			2,891
Changes in ownership in subsidiaries, etc.				—		(13,452	)		—			—		(13,452	)		1,456			(11,996	)

				—		63,685			(364,878	)		—		(301,193	)		1,456			(299,737	)

Balance as of March 31, 2022 (Unaudited)			W	30,493		(11,560,041	)		22,297,108			738,001		11,505,561			763,906			12,269,467

The accompanying notes are an integral part of the interim consolidated financial statements.

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Cash Flows

For the three-month periods ended March 31, 2022 and 2021


(In millions of won)	*Note*		2022 (Unaudited)			2021 (Unaudited)
Cash flows from operating activities:
Cash generated from operating activities:
Profit for the period			W	220,345			571,975
Adjustments for income and expenses		33		1,301,819			937,576
Changes in assets and liabilities related to operating activities		33		(144,067	)		(522,978	)

				1,378,097			986,573
Interest received				8,497			9,034
Dividends received				23			23
Interest paid				(70,154	)		(69,616	)
Income tax paid				(21,763	)		(34,913	)

Net cash provided by operating activities				1,294,700			891,101

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net				—			77,894
Decrease in short-term investment securities, net				69,733			41,367
Collection of short-term loans				32,817			43,047
Proceeds from disposals of long-term investment securities				8,768			14,681
Proceeds from disposals of investments in associates and joint ventures				6,880			100,334
Proceeds from disposals of property and equipment				2,058			2,401
Proceeds from disposals of intangible assets				4,870			1,130
Collection of long-term loans				121			1,246
Decrease in guarantee deposits				1,636			1,879
Proceeds from settlement of derivatives				443			403

				127,326			284,382
Cash outflows for investing activities:
Increase in short-term financial instruments, net				(47,297	)		—
Increase in short-term loans				(34,290	)		(16,070	)
Increase in long-term loans				(3,170	)		(3,155	)
Acquisitions of long-term investment securities				(13,479	)		(15,018	)
Acquisitions of investments in associates and joint ventures				(3,007	)		(8,135	)
Acquisitions of property and equipment				(747,510	)		(755,139	)
Acquisitions of intangible assets				(10,857	)		(8,945	)
Increase in guarantee deposits				(6,009	)		(1,677	)
Cash outflow for business combinations, net				(62,312	)		—

				(927,931	)		(808,139	)

Net cash used in investing activities			W	(800,605	)		(523,757	)

(Continued)

SK TELECOM CO., LTD. and its Subsidiaries

Interim Consolidated Statements of Cash Flows, Continued

For the three-month periods ended March 31, 2022 and 2021


(In millions of won)	*Note*	2022 (Unaudited)			2021 (Unaudited)
Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings		W	155,000			—
Proceeds from issuance of debentures			149,302			308,757
Proceeds from long-term borrowings			200,000			50,000
Transactions with non-controlling shareholders			168			30,511

			504,470			389,268
Cash outflows for financing activities:
Repayments of long-term payables – other			(400,245	)		(426,220	)
Repayments of debentures			(480,000	)		(280,000	)
Repayments of long-term borrowings			(6,250	)		(9,342	)
Payments of interest on hybrid bonds			(3,692	)		—
Repayments of lease liabilities			(87,847	)		(97,813	)
Acquisition of treasury shares			—			(72,982	)
Transactions with non-controlling shareholders			—			(13,503	)

			(978,034	)		(899,860	)

Net cash used in financing activities			(473,564	)		(510,592	)

Net increase (decrease) in cash and cash equivalents			20,531			(143,248	)
Cash and cash equivalents at beginning of the period			872,731			1,369,653
Effects of exchange rate changes on cash and cash equivalents			1,399			4,934
			1,399			4,934

Cash and cash equivalents at end of the period		W	894,661			1,231,339

The accompanying notes are an integral part of the interim consolidated financial statements.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

1.	Reporting Entity

(1)

General

SK Telecom Co., Ltd. (“the Parent Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications services in Korea. The head office of the Parent Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.

The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of March 31, 2022, the Parent Company’s total issued shares are held by the following shareholders:


	Number of shares		Percentage of total shares issued (%)
SK Inc.		65,668,397		30.01
National Pension Service		20,389,153		9.32
Institutional investors and other shareholders		128,098,793		58.53
Kakao Corp.		3,846,487		1.76
Treasury shares		830,314		0.38

		218,833,144		100.00

These interim consolidated financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individually as “Group entity”). SK Inc. is the ultimate controlling entity of the Parent Company.

On November 1, 2021, the date of spin-off, the Parent Company completed the spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments. (See note 36)

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

1.	Reporting Entity, Continued

(2)

List of consolidated subsidiaries

The

list of consolidated subsidiaries as of March 31, 2022 and December 31, 2021 is as follows:


				*Ownership (%)(1)**
Subsidiary		Location	Primary business	Mar. 31, 2022	Dec. 31, 2021
Subsidiaries owned by the Parent Company	SK Telink Co., Ltd.	Korea	Telecommunication and Mobile Virtual Network Operator service	100.0	100.0
	SK Communications Co., Ltd.	Korea	Internet website services	100.0	100.0
	SK Broadband Co., Ltd.	Korea	Telecommunication services	74.3	74.3
	PS&Marketing Corporation	Korea	Communications device retail business	100.0	100.0
	SERVICE ACE Co., Ltd.	Korea	Call center management service	100.0	100.0
	SERVICE TOP Co., Ltd.	Korea	Call center management service	100.0	100.0
	SK O&S Co., Ltd.	Korea	Base station maintenance service	100.0	100.0
	SK Telecom China Holdings Co., Ltd.	China	Investment (Holdings company)	100.0	100.0
	SK Global Healthcare Business Group Ltd.	Hong Kong	Investment	100.0	100.0
	YTK Investment Ltd.	Cayman Islands	Investment association	100.0	100.0
	Atlas Investment	Cayman Islands	Investment association	100.0	100.0
	SKT Americas, Inc.	USA	Information gathering and consulting	100.0	100.0
	Quantum Innovation Fund I	Korea	Investment	59.9	59.9
	SK Telecom Japan Inc.	Japan	Information gathering and consulting	100.0	100.0
	Happy Hanool Co., Ltd.	Korea	Service	100.0	100.0
	SK stoa Co., Ltd.	Korea	Other telecommunication retail business	100.0	100.0
	Broadband Nowon Co., Ltd.	Korea	Cable broadcasting services	100.0	100.0
	SAPEON Korea Inc.(*2,3)	Korea	Manufacturing non-memory and other electronic integrated circuits	100.0	—
	SAPEON Inc.(*2,3)	USA	Manufacturing non-memory and other electronic integrated circuits	100.0	—
Subsidiaries owned by SK Broadband Co., Ltd.	Home & Service Co., Ltd.	Korea	Operation of information and communication facility	100.0	100.0
	Media S Co., Ltd.	Korea	Production and supply services of broadcasting programs	100.0	100.0
Subsidiaries owned by PS&Marketing Corporation	SK m&service Co., Ltd.(*2,4)	Korea	Database and Internet website service	100.0	—
Subsidiary owned by Quantum Innovation Fund I	PanAsia Semiconductor Materials LLC.	Korea	Investment	66.4	66.4
Subsidiary owned by SK Telecom Japan Inc.	SK Planet Japan, K. K.	Japan	Digital contents sourcing service	79.8	79.8
Others(*5)	SK Telecom Innovation Fund, L.P.	USA	Investment	100.0	100.0
	SK Telecom China Fund I L.P.	Cayman Islands	Investment	100.0	100.0

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

1.	Reporting Entity, Continued

(2)

List of consolidated subsidiaries, Continued

The list of consolidated subsidiaries as of March 31, 2022 and December 31, 2021 is as follows, Continued:

(*1)

The ownership interest represents direct ownership interest in subsidiaries either by the Parent Company or subsidiaries of the Parent Company.

(*2)

Details of changes in the consolidation scope for the three-month period ended March 31, 2022 are presented in note 1-(4).

(*3)

The Parent Company newly established SAPEON Korea Inc. and SAPEON Inc. for the three-month period ended March 31, 2022.

(*4)

PS&Marketing Corporation acquired 3,099,112 shares (100%) of SK m&service Co., Ltd. at W72,859 million in cash for the three-month period ended March 31, 2022 in order to strengthen the distribution competitiveness and improve the synergy within SKT ICT Family.

(*5)

Others are owned by Atlas Investment and another subsidiary of the Parent Company.

(3)

Condensed financial information of subsidiaries

Condensed financial information of significant consolidated subsidiaries as of and for the three-month period ended March 31, 2022 is as follows:


(In millions of won)
	As of March 31, 2022						For the three-month period ended March 31, 2022
Subsidiary	Total assets		Total liabilities		Total equity		Revenue		Profit
SK Telink Co., Ltd.	W	181,021		55,861		125,160		76,413		6,303
SK Broadband Co., Ltd.		5,914,094		2,995,092		2,919,002		1,028,246		49,489
PS&Marketing Corporation		459,500		242,812		216,688		355,011		1,400
SERVICE ACE Co., Ltd.		86,444		62,877		23,567		50,029		427
SERVICE TOP Co., Ltd.		76,295		54,081		22,214		44,513		994
SK O&S Co., Ltd.		84,284		50,628		33,656		61,075		542
Home & Service Co., Ltd.		123,461		80,386		43,075		101,313		1,495
SK stoa Co., Ltd.		99,626		48,195		51,431		89,479		3,392

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

1.	Reporting Entity, Continued

(3)

Condensed financial information of subsidiaries, Continued

Condensed financial information of significant consolidated subsidiaries as of and for the year ended December 31, 2021 is as follows:


(In millions of won)
	As of December 31, 2021						2021
Subsidiary	Total assets		Total liabilities		Total equity		Revenue		Profit
SK Telink Co., Ltd.	W	174,837		52,821		122,016		313,404		8,846
SK Broadband Co., Ltd.		5,971,505		3,091,837		2,879,668		4,058,997		213,468
PS&Marketing Corporation		478,745		263,457		215,288		1,445,540		3,179
SERVICE ACE Co., Ltd.		99,059		66,496		32,563		197,146		2,519
SERVICE TOP Co., Ltd.		72,026		46,067		25,959		185,452		2,066
SK O&S Co., Ltd.		95,748		58,870		36,878		285,591		69
Home & Service Co., Ltd.		131,947		90,775		41,172		405,255		550
SK stoa Co., Ltd.		107,943		59,931		48,012		316,249		19,163

(4) Changes in subsidiaries

The list of subsidiaries that were newly included in consolidation for the three-month period ended March 31, 2022 is as follows:


Subsidiary		Reason
SAPEON Korea Inc.		Established by the Parent Company
SAPEON Inc.		Established by the Parent Company
SK m&service Co., Ltd.		Acquired by PS&Marketing Corporation

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

1.	Reporting Entity, Continued

(5)

The financial information of significant non-controlling interests of the Group as of and for the three-month period ended March 31, 2022 and as of and for the year ended December 31, 2021 are as follows:


(In millions of won)
	SK Broadband Co., Ltd.
Ownership of non-controlling interests (%)		25.1

	As of March 31, 2022
Current assets	W	1,284,100
Non-current assets		4,629,994
Current liabilities		(1,231,685	)
Non-current liabilities		(1,763,407	)
Net assets		2,919,002
Fair value adjustment and others		(33,230	)
Net assets on the consolidated financial statements		2,885,772
Carrying amount of non-controlling interests		725,194

	For the three-month period ended March 31, 2022
Revenue	W	1,028,246
Profit for the period		49,489
Depreciation of the fair value adjustment and others		—
Profit for the period on the consolidated financial statements		49,489
Total comprehensive income		39,333
Profit attributable to non-controlling interests		12,437
Net cash provided by operating activities	W	209,641
Net cash used in investing activities		(81,596	)
Net cash used in financing activities		(90,230	)
Effects of exchange rate changes on cash and cash equivalents		90
Net increase in cash and cash equivalents		37,905
Dividends paid to non-controlling interests for the three-month period ended March 31, 2022	W	—

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

1.	Reporting Entity, Continued

(5)


(In millions of won)
	SK Broadband Co., Ltd.
Ownership of non-controlling interests (%)		24.9


	As of December 31, 2021
Current assets	W	1,208,535
Non-current assets		4,762,970
Current liabilities		(1,410,823	)
Non-current liabilities		(1,681,014	)
Net assets		2,879,668
Fair value adjustment and others		(23,000	)
Net assets on the consolidated financial statements		2,856,668
Carrying amount of non-controlling interests		725,540


	2021
Revenue	W	4,058,997
Profit for the year		213,468
Depreciation of the fair value adjustment and others		—
Profit for the period on the consolidated financial statements		213,468
Total comprehensive income		224,107
Profit attributable to non-controlling interests		53,645
Net cash provided by operating activities	W	1,064,638
Net cash used in investing activities		(624,191	)
Net cash used in financing activities		(237,241	)
Effects of exchange rate changes on cash and cash equivalents		(59	)
Net increase in cash and cash equivalents		203,147
Dividends paid to non-controlling interests for the year ended December 31, 2021	W	—

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

2.	Basis of Preparation

(1)

Statement of compliance

These interim condensed consolidated financial statements were prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) 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 December 31, 2021. These interim consolidated financial statements do not include all of the disclosures required for full annual financial statements.

(2)

Use of estimates and judgments

1) Critical judgments, assumptions and estimation uncertainties

The preparation of the interim consolidated 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 interim consolidated 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, 2021.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

2.	Basis of Preparation, Continued

(2)

Use of estimates and judgments, Continued

2) Fair value measurement

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has established policies and processes with respect to the measurement of fair values, including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.

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

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


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

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

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

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

Information about assumptions used for fair value measurements are included in note 30.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

3.	Significant Accounting Policies

The significant accounting policies applied by the Group in these interim consolidated 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, 2021. The Group has not early applied the new and revised K-IFRS and interpretations that have been issued but are not yet effective.

The following new and amended K-IFRS and interpretations are effective from January 1, 2022, initially, but these amended standards are not expected to have a significant impact on the Group’s interim consolidated financial statements.

•

Onerous Contracts – Cost of Fulfilling a Contract (Amendments to K-IFRS 1037).

•

Reference to Conceptual Framework (Amendments to K-IFRS 1103).

•

Property, Plant and Equipment: Proceeds before Intended Use (Amendments to K-IFRS 1016).

•

Annual Improvements to K-IFRS 2018-2020.

Meanwhile, as described in note 36, the Parent Company carried out spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments pursuant to the resolution of the Board of Directors on June 10, 2021 and approval of shareholders’ meeting on October 12, 2021. The Group has applied K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations, and accordingly, presented profit or loss of the spin-off business as discontinued operations. The comparative interim consolidated statement of profit or loss for the three-month period ended March 31, 2021 and related notes have been restated to present the discontinued operations separately from continuing operations.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

4.	Operating Segments

The Group’s operating segments have been identified to be each business unit, by which the Group provides different services and merchandise. The Group’s reportable segments include: cellular services, which include cellular voice service, wireless data service and wireless internet services; fixed-line telecommunication services, which include telephone services, internet services, and leased line services; and all other businesses, which include providing shopping channel and digital platform for selling products and other immaterial operations, each of which does not meet the quantitative threshold to be considered as a reportable segment and are presented collectively as others.

(1)

Segment information for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2022
	Cellular services		Fixed-line telecommunication services		Others		Sub-total		Adjustments			Total
Total revenue	W	3,588,021		1,209,798		120,332		4,918,151		(640,943	)		4,277,208
Inter-segment revenue		371,876		262,241		6,826		640,943		(640,943	)		—
External revenue		3,216,145		947,557		113,506		4,277,208		—			4,277,208
Depreciation and amortization		689,065		248,270		3,846		941,181		(30,297	)		910,884
Operating profit		360,669		82,169		3,494		446,332		(13,939	)		432,393
Finance income and costs, net													(68,774	)
Loss relating to investments in associates and joint ventures, net													(38,445	)
Other non-operating income and expense, net													1,834
Profit before income tax													327,008


(In millions of won)
	For the three-month period ended March 31, 2021 (Restated)
	Continuing operations															Discontinued operations
	Cellular services		Fixed-line telecommunication services		Others *()**			Sub-total		Adjustments			Total			Discontinued operations
Total revenue	W	3,505,198		1,162,627		83,638			4,751,463		(638,366	)		4,113,097			786,495
Inter-segment revenue		374,653		261,711		2,002			638,366		(638,366	)		—			119,131
External revenue		3,130,545		900,916		81,636			4,113,097		—			4,113,097			667,364
Depreciation and amortization		700,105		232,436		2,300			934,841		(25,735	)		909,106			87,376
Operating profit (loss)		309,025		81,169		(380	)		389,814		(15,598	)		374,216			14,565
Finance income and costs, net														(19,788	)		(14,055	)
Gain relating to investments in associates and joint ventures, net														127,734			194,721
Other non-operating income and expense, net														4,388			2,056
Profit before income tax														486,550			197,287

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

4.	Operating Segments, Continued

(1)

Segment information for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued:

(*) The Parent Company carried out spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments for the year ended December 31, 2021. Accordingly, the Group reclassified SK stoa Co., Ltd. from Commerce Services segment to Others segment.

The Group has restated the previously reported segment information for the three-month period ended March 31, 2021 to reflect reclassification of operating segments due to the spin-off.

Since there are no intersegment sales of inventories or depreciable assets, there is no unrealized intersegment profit to be eliminated on consolidation. The Group principally operates its businesses in Korea, and the revenue amounts earned outside of Korea are immaterial. Therefore, no entity-wide geographical information is presented.

No single customer contributed 10% or more to the Group’s total revenue for the three-month periods ended March 31, 2022 and 2021.

(2)

Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows:


(In millions of won)		For the three-month period ended
		March 31, 2022		March 31, 2021 (Restated)
Goods and Services transferred at a point in time:
Cellular revenue	Goods and others(*1)	W	241,070		237,921
Fixed-line telecommunication revenue	Goods and others		18,872		20,081
Other revenue	Others(*2)		103,995		76,002

			363,937		334,004

Goods and Services transferred over time:
Cellular revenue	Wireless service(*3)		2,526,450		2,486,028
	Cellular interconnection		129,911		121,108
	Other(*4)		316,242		285,488
Fixed-line telecommunication revenue	Fixed-line service		46,173		53,107
	Cellular interconnection		6,606		18,829
	Internet Protocol Television(*5)		449,959		436,087
	International calls		43,998		41,535
	Internet service and miscellaneous(*6)		381,949		331,277
Other revenue	Miscellaneous(*2)		11,983		5,634

			3,913,271		3,779,093

Discontinued operations			—		667,364

		W	4,277,208		4,780,461

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

4.	Operating Segments, Continued

(2)

Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows, Continued:

(*1)

Cellular revenue includes revenue from sales of handsets and other electronic accessories.

(*2)

Miscellaneous other revenue includes revenue from considerations received for the product sales-type data broadcasting channel use and sales of goods through data broadcasting.

(*3)

Wireless service includes revenue from wireless voice and data transmission services principally derived from usage charges to wireless subscribers.

(*4)

Other revenue includes revenue from billing and collection services as well as other miscellaneous services.

(*5)

IPTV service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers.

(*6)

Internet service includes revenue from the high speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

5.	Trade and Other Receivables

(1)

Details of trade and other receivables as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)	March 31, 2022
	Gross amount		Loss allowance			Carrying amount
Current assets:
Accounts receivable – trade	W	2,230,488		(249,243	)		1,981,245
Short-term loans		73,700		(669	)		73,031
Accounts receivable – other(*)		666,240		(45,178	)		621,062
Accrued income		665		—			665
Guarantee deposits (Other current assets)		95,992		—			95,992

		3,067,085		(295,090	)		2,771,995
Non-current assets:
Long-term loans		68,766		(44,535	)		24,231
Long-term accounts receivable – other(*)		274,486		(1,878	)		272,608
Guarantee deposits		187,202		(300	)		186,902
Long-term accounts receivable – trade (Other non-current assets)		10,298		(30	)		10,268

		540,752		(46,743	)		494,009

	W	3,607,837		(341,833	)		3,266,004

(*)	Gross and carrying amounts of accounts receivable – other as of March 31, 2022 include W458,426 million of financial instruments classified as FVTPL.


(In millions of won)	December 31, 2021
	Gross amount		Loss allowance			Carrying amount
Current assets:
Accounts receivable – trade	W	2,152,358		(238,847	)		1,913,511
Short-term loans		71,750		(933	)		70,817
Accounts receivable – other(*)		593,109		(44,747	)		548,362
Accrued income		762		—			762
Guarantee deposits (Other current assets)		92,046		—			92,046

		2,910,025		(284,527	)		2,625,498
Non-current assets:
Long-term loans		66,431		(44,452	)		21,979
Long-term accounts receivable – other(*)		277,116		(1,878	)		275,238
Guarantee deposits		186,713		—			186,713
Long-term accounts receivable – trade (Other non-current assets)		8,140		(34	)		8,106

		538,400		(46,364	)		492,036

	W	3,448,425		(330,891	)		3,117,534

(*)	Gross and carrying amounts of accounts receivable – other as of December 31, 2021 include W459,959 million of financial instruments classified as FVTPL.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

5.	Trade and Other Receivables, Continued

(2)

Changes in the loss allowance on trade and other receivables measured at amortized cost for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	January 1, 2022		Impairment		*Write-offs()**			Collection of receivables previously written- off		Business combination		March 31, 2022
Accounts receivable – trade	W	238,881		9,195		(1,909	)		3,103		3		249,273
Accounts receivable – other, etc.		92,010		105		(52	)		105		392		92,560

	W	330,891		9,300		(1,961	)		3,208		395		341,833


(In millions of won)
	January 1, 2021		Impairment			*Write-offs()**			Collection of receivables previously written- off		March 31, 2021
Accounts receivable – trade	W	264,498		7,475			(4,686	)		855		268,142
Accounts receivable – other, etc.		100,565		(55	)		(297	)		5,660		105,873

	W	365,063		7,420			(4,983	)		6,515		374,015

(*)	The Group writes off trade and other receivables that are determined to be uncollectable due to reasons, such as termination of operations or bankruptcy.

(3)

The Group applies the practical expedient that allows the Group to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Group uses its historical credit loss experience over the past three years and classifies accounts receivable – trade by their credit risk characteristics and days overdue.

As the Group is a wireless and fixed-line telecommunications service provider, the Group’s financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.

Receivables related to other revenue mainly consist of receivables from corporate customers. The Group transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Group is not exposed to significant credit concentration risk as the Group regularly assesses their credit risk by monitoring their credit ratings. While the contract assets are subject to the impairment requirements, no significant expected credit loss has been identified.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

6.	Prepaid Expenses

The Group pays commissions to its retail stores and authorized dealers, primarily for wireless and fixed-line telecommunication services. The Group capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Group expects to maintain its customers.

(1)

Details of prepaid expenses as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Current assets:
Incremental costs of obtaining contracts	W	1,896,552		1,886,680
Others		123,429		100,823

	W	2,019,981		1,987,503

Non-current assets:
Incremental costs of obtaining contracts	W	982,476		977,236
Others		81,243		91,912

	W	1,063,719		1,069,148

(2)	Incremental costs of obtaining contracts

The amortization and impairment losses in connection with incremental costs of obtaining contracts recognized for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		*March 31, 2021()**
Amortization and impairment losses recognized	W	625,230		654,241

(*)	Includes amounts related to discontinued operations.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

7.	Contract Assets and Liabilities

In case of providing both wireless telecommunication services and sales of handsets, the Group allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Group recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.

(1)

Details of contract assets and liabilities as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Contract assets:
Allocation of consideration between performance obligations	W	113,788		118,278
Contract liabilities:
Wireless service contracts		18,674		18,397
Customer loyalty programs		11,200		12,699
Fixed-line service contracts		126,985		118,600
Others		42,724		53,271

	W	199,583		202,967

(2)	The amount of revenue recognized for the three-month periods ended March 31, 2022 and 2021 related to the contract liabilities carried forward from the prior period are W43,165 million and W67,245 million, respectively.

8.	Inventories

(1)

Details of inventories as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022							December 31, 2022
	Acquisition cost		Valuation allowance			Carrying amount		Acquisition cost		Valuation allowance			Carrying amount
Merchandise	W	210,926		(4,654	)		206,272		204,545		(3,419	)		201,126
Supplies		17,137		—			17,137		3,511		—			3,511

	W	228,063		(4,654	)		223,409		208,056		(3,419	)		204,637

(2)

Cost of inventories recognized as operating expenses for the three-month periods ended March 31, 2022 and 2021 are W307,615 million and W343,367 million, respectively, which are included in cost of goods sold. In addition, valuation losses on inventories which are included in cost of goods sold amount to W574 million and W403 million for the three-month periods ended March 31, 2022 and 2021, respectively. Write-downs included in other operating expenses for the three-month periods ended March 31, 2022 and 2021 are W1,962 million and W358 million, respectively. Those amounts include profit or loss of discontinued operations for the three-month period ended March 31, 2021.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

9.	Investment Securities

(1)

Details of short-term investment securities as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	Category	March 31, 2022		December 31, 2021
Beneficiary certificates	FVTPL	W	—		5,010

(2)

Details of long-term investment securities as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	Category			March 31, 2022		December 31, 2021
Equity instruments		FVOCI	(*)	W	1,431,043		1,510,428
		FVTPL			52,652		57,830

					1,483,695		1,568,258
Debt instruments		FVOCI			1,202		1,177
		FVTPL			151,414		145,643

					152,616		146,820

				W	1,636,311		1,715,078

(*)	The Group designated investments in equity instruments that are not held for trading as financial assets at FVOCI, and the amounts of those equity instruments as of March 31, 2022 and December 31, 2021 are W1,431,043 million and W1,510,428 million, respectively.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

10.

Business Combinations

(1)

2022

Acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation:

PS&Marketing Corporation obtained control over SK m&service Co., Ltd. by acquiring its 3,099,112 shares (100%) for the three-month period ended March 31, 2022. As this transaction is a business combination under common control, the assets acquired and liabilities assumed were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements, and the difference between the consideration transferred and the carrying amounts of net assets was recognized as capital surplus and others. Subsequent to the acquisition of control, SK m&service Co., Ltd. recognized revenue of W18,777 million and net profit of W619 million. Meanwhile, assuming that business combination has occurred as of January 1, 2022, the Group would have recognized revenue of W57,804 million and net profit of W1,157 million.

(i)

Summary of the acquiree


		Information of Acquiree
Corporate name		SK m&service Co., Ltd.

Location		16^th floor, 34, Supyo-ro, Jung-gu, Seoul, Korea

CEO		Park, Jeong-Min

Industry		Database and Internet website service

(ii)	Considerations transferred and identifiable assets acquired and liabilities assumed at the acquisition date are as follows:


(In millions of won)
	Amounts
I. Consideration transferred:
Cash and cash equivalents	W	72,859
II. Fair value of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		10,547
Accounts receivable – trade and other, net		76,035
Inventories		3,349
Property and equipment, net		27,138
Intangible assets, net		12,462
Goodwill		2,515
Other assets		10,395
Accounts payable – trade and other		(53,894	)
Income tax payable		(399	)
Lease liabilities		(6,503	)
Provisions		(991	)
Defined benefit liabilities		(2,739	)
Other liabilities		(18,337	)

		59,578

III. Capital surplus and others(I - II)	W	13,281

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

10.

Business Combinations, Continued

(2)

2021

Merger of ADT CAPS Co., Ltd. by SK Shieldus Co., Ltd.(Formerly, ADT CAPS Co, Ltd., at the time of merger, SK Infosec Co., Ltd.):

On March 4, 2021, SK Infosec Co., Ltd. merged with ADT CAPS Co., Ltd., a subsidiary of SK Infosec Co., Ltd., to improve management efficiency. As this transaction is a business combination under common control, the assets acquired and liabilities assumed were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements, and there is no effect on the assets and liabilities of the consolidated financial statements. After the date of the merger, SK Infosec Co., Ltd. changed its name to ADT CAPS Co., Ltd. and then again, in October 2021, ADT CAPS Co., Ltd. changed its name to SK Shieldus Co., Ltd.

Identifiable assets acquired and liabilities assumed were transferred to the spin-off company.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

10.

Business Combinations, Continued

(2)

2021, Continued

2) Acquisition of Studio Dolphin Co., Ltd. by DREAMUS COMPANY:

DREAMUS COMPANY obtained control over Studio Dolphin Co., Ltd. by acquiring its 10,000 shares(100%) for the year ended December 31, 2021. The consideration transferred was W1,500 million in cash, and the difference between the fair value of net assets acquired and the consideration transferred amounting to W1,465 million was recognized as goodwill.

Identifiable assets acquired and liabilities assumed and goodwill were transferred to the spin-off company.

(i)

Summary of the acquiree


		Information of Acquiree

Corporate name		Studio Dolphin Co., Ltd.

Location		3^rd floor, 10, Jandari-ro 7an-gil, Mapo-gu, Seoul, Korea

CEO		Kim, Dong-Hee

Industry		Music and sound recording business

(ii)

Considerations transferred and identifiable assets acquired and liabilities assumed at the acquisition date are as follows:


(In millions of won)
	Amounts
I. Consideration transferred:
Cash and cash equivalents	W	1,500
II. Fair value of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		20
Accounts receivable – trade and other, net		31
Other assets		7
Accounts payable – trade and other		(4	)
Short-term borrowings		(2	)
Other liabilities		(17	)

		35

III. Goodwill(I - II)	W	1,465

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

10.

Business Combinations, Continued

(2)

2021, Continued

3) Acquisition of YLP Inc. by T map Mobility Co., Ltd.:

T map Mobility Co., Ltd. obtained control over YLP Inc. by acquiring its 168,012 shares(100%). during the year ended December 31, 2021. The consideration transferred was W79,000 million, among which W55,598 million was paid in cash to acquire 118,242 shares(70.4%) and on June 29, 2021, T map Mobility Co., Ltd. issued 267,700 of its new common shares (with a fair value of W23,402 million) to the shareholders of YLP Inc. in exchange for the remaining 49,770 shares(29.6%) owned by those shareholders. The difference between the fair value of net assets acquired and the consideration transferred amounting to W69,516 million was recognized as goodwill.

Identifiable assets acquired and liabilities assumed and goodwill were transferred to the spin-off company.

(i)

Summary of the acquiree


		Information of Acquiree

Corporate name		YLP Inc.

Location		1740, Cheongwon-ro, Pyeongtaek-si, Gyeonggi-do, Korea

CEO		Lee, Hyeok-Ju

Industry		Freight forwarders and cargo agents

(ii)

Considerations transferred and identifiable assets acquired and liabilities assumed at the acquisition date are as follows:


(In millions of won)
	Amounts
I. Consideration transferred:
Cash and cash equivalents	W	55,598
Fair value of shares of T map Mobility Co., Ltd.		23,402
II. Fair value of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		1,897
Financial instruments		4,000
Accounts receivable – trade and other, net		4,480
Property and equipment, net		431
Intangible assets, net		3,595
Other assets		325
Borrowings		(1,000	)
Accounts payable – trade and other		(3,542	)
Lease liabilities		(327	)
Other liabilities		(48	)
Deferred tax liabilities		(327	)

		9,484

III. Goodwill(I - II)	W	69,516

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

10.

Business Combinations, Continued

(2)

2021, Continued

4) Acquisition of Rokmedia Co., Ltd. by One Store Co., Ltd.:

One Store Co., Ltd. obtained control over Rokmedia Co., Ltd. by acquiring its 60,000 shares(100%) for the year ended December 31, 2021. The consideration transferred was W40,000 million in cash, and the difference between the fair value of net assets acquired and the consideration transferred amounting to W33,641 million was recognized as goodwill.

Identifiable assets acquired and liabilities assumed and goodwill were transferred to the spin-off company.

(i)

Summary of the acquiree


		Information of Acquiree
Corporate name		Rokmedia Co., Ltd.

Location		3^rd floor, 330, Seongam-ro, Mapo-gu, Seoul, Korea

CEO		Kang, Jun-Gyu / Kim, Jeong-Su

Industry		Publishing and telecommunications retail business

(ii)

Considerations transferred and identifiable assets acquired and liabilities assumed at the acquisition date are as follows:


(In millions of won)
	Amounts
I. Consideration transferred:
Cash and cash equivalents	W	40,000
II. Fair value of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		719
Financial instruments		2,170
Accounts receivable – trade and other, net		1,374
Inventories		933
Other assets		3,212
Short-term loans, net		30
Property and equipment, net		792
Intangible assets, net		2,677
Accounts payable – trade and other		(1,885	)
Contract liabilities		(1,401	)
Borrowings		(1,485	)
Provisions		(385	)
Lease liabilities		(56	)
Other liabilities		(111	)
Deferred tax liabilities		(135	)
Income tax payable		(90	)

		6,359

III. Goodwill(I - II)	W	33,641

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

10.

Business Combinations, Continued

(2)

2021, Continued

5) Acquisition of GOOD SERVICE Co., Ltd. by T map Mobility Co., Ltd.:

T map Mobility Co., Ltd. obtained control by acquiring 2,000 shares (100%) of GOOD SERVICE Co., Ltd. for the year ended December 31, 2021. The consideration transferred was W10,000 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting to W4,844 million was recognized as goodwill.

Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.

(i)

Summary of the acquiree


		Information of Acquiree

Corporate name		GOOD SERVICE Co., Ltd.

Location		4^th floor, 54, Daeheung-ro, Mapo-gu, Seoul, Korea

CEO		Kim, Seung-Wook

Industry		Surrogate driving service business and related business

(ii)

Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows:


(In millions of won)
	Amounts
I. Consideration transferred:
Cash and cash equivalents	W	10,000
II. Fair value of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		1,328
Financial instruments		116
Accounts receivable – trade and other, net		1,881
Property and equipment, net		116
Intangible assets, net		3,492
Accounts payable – trade and other		(883	)
Other liabilities		(85	)
Deferred tax liabilities		(696	)
Lease liabilities		(113	)

		5,156

III. Goodwill(I - II)	W	4,844

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

11.

Investments in Associates and Joint Ventures

(1)

Investments in associates and joint ventures accounted for using the equity method as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)			March 31, 2022				December 31, 2021
	Country		Ownership (%)		Carrying amount		Ownership (%)		Carrying amount
	Country		Ownership (%)		Carrying amount		Ownership (%)		Carrying amount
Investments in associates:
SK China Company Ltd.		China		27.3	W	828,647		27.3	W	793,754
Korea IT Fund(*1)		Korea		63.3		340,002		63.3		339,976
HanaCard Co., Ltd.(*2)		Korea		15.0		358,163		15.0		349,866
UniSK		China		49.0		20,180		49.0		19,156
SK Technology Innovation Company		Cayman Islands		49.0		65,617		49.0		86,301
SK MENA Investment B.V.		Netherlands		32.1		15,633		32.1		15,343
SK Latin America Investment S.A.		Spain		32.1		14,020		32.1		14,004
SK South East Asia Investment Pte. Ltd.		Singapore		20.0		359,564		20.0		348,782
Pacific Telecom Inc.(*2)		USA		15.0		45,151		15.0		43,789
S.M. Culture & Contents Co., Ltd.		Korea		23.1		58,962		23.1		60,261
Digital Games International Pte. Ltd.		Singapore		33.3		2,191		33.3		2,208
Invites Healthcare Co., Ltd.		Korea		27.1		15,942		27.1		26,474
Nam Incheon Broadcasting Co., Ltd.		Korea		27.3		12,783		27.3		12,525
Home Choice Corp.(*2)		Korea		17.8		2,917		17.8		3,052
CMES Inc.(*2,3)		Korea		7.7		900		—		—
12CM JAPAN and others(*2,4)		—		—		68,430		—		72,605

					2,209,102				2,188,096

Investments in joint ventures:
Finnq Co., Ltd. (*6)		Korea		49.0		5,609		49.0		7,255
UTC Kakao-SK Telecom ESG Fund(*5,6)		Korea		48.2		3,925		48.2		2,000

						9,534				9,255

					W2,218,636				2,197,351

(*1)	Investment in Korea IT Fund was classified as investment in associates as the Group does not have control over the investee under the contractual agreement with other shareholders.

(*2)	These investments were classified as investments in associates as the Group can exercise significant influence through its right to appoint the members of the Board of Directors even though the Group has less than 20% of equity interests.

(*3)	As the Group obtained significant influence over the investee, W900 million of financial assets at FVOCI are reclassified to investments in associates for the three-month period ended March 31, 2022.

(*4)

The Group additionally contributed W1,000 million in cash to Smart SKT Infinitum Game Fund for the three-month period ended March 31, 2022, but there is no change in the ownership interest. In addition, the Group disposed the shares of Start-up Win-Win Fund (W4,850 million) at W5,800 million in cash from which it recognized W950 million of gain relating to investments in associates and disposed the shares of Daekyo Wipoongdangdang Contents Korea Fund (W1,080 million) at W1,080 million in cash the for the three-month period ended March 31, 2022.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

11.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures accounted for using the equity method as of March 31, 2022 and December 31, 2021 are as follows, Continued:

(*5)

The Group additionally contributed W2,000 million in cash for the three-month period ended March 31, 2022, but there is no change in the ownership interest.

(*6)

These investments were classified as investments in joint ventures as the Group has a joint control pursuant to the agreement with the other shareholders.

(2)

The market value of investments in listed associates as of March 31, 2022 and December 31, 2021 are as follows:

(In millions of won, except for share data)

March 31, 2022

December 31, 2021

Market price
per share
(in won)

Number of
shares

Market
value

Market price
per share
(in won)

Number of
shares

Market
value

S.M.Culture & Contents Co.,Ltd.

5,200

22,033,898

114,576

4,485

22,033,898

98,822

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

11.

Investments in Associates and Joint Ventures, Continued

(3)

The financial information of significant associates as of and for the three-month period ended March 31, 2022 and as of and for the year ended December 31, 2021 are as follows:


(In millions of won)
	HanaCard Co., Ltd.		Korea IT Fund			SK China Company Ltd.			SK South East Asia Investment Pte. Ltd.

	As of March 31, 2022
Current assets	W	9,263,558		120,426			1,076,812			78,362
Non-current assets		444,735		416,419			2,040,459			3,008,286
Current liabilities		2,189,626		—			47,094			421,807

Non-current liabilities		5,430,168		—			337,976			—


	For the three-month period ended March 31, 2022
Revenue	W	293,141		—			13,245			45
Profit (loss) for the period		54,594		41			(7,692	)		(4,004	)
Other comprehensive income		3,344		—			—			—

Total comprehensive income (loss)		57,938		41			(7,692	)		(4,004	)


(In millions of won)
	HanaCard Co., Ltd.		Korea IT Fund			SK China Company Ltd.			SK South East Asia Investment Pte. Ltd.

	As of December 31, 2021
Current assets	W	9,130,044		117,172			1,124,219			133,110
Non-current assets		465,333		419,632			1,849,102			2,853,184
Current liabilities		1,281,783		—			53,199			412,962

Non-current liabilities		6,284,587		—			316,470			—


	2021
Revenue	W	1,270,568		58,741			80,241			9,945
Profit (loss) for the year		250,484		50,107			933,475			(188,678	)
Other comprehensive income (loss)		909		(6,847	)		326,661			304,700

Total comprehensive income		251,393		43,260			1,260,136			116,022

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

11.

Investments in Associates and Joint Ventures, Continued

(4)

Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022
	Net assets		Ownership interests (%)		Net assets attributable to the ownership interests		Cost-book value differentials		Carrying amount
KEB HanaCard Co., Ltd.	W	2,088,498		15.0		313,275		44,888		358,163
Korea IT Fund		536,845		63.3		340,002		—		340,002
SK China Company Ltd.(*)		2,731,880		27.3		745,017		83,630		828,647
SK South East Asia Investment Pte. Ltd.(*)		1,797,820		20.0		359,564		—		359,564


(In millions of won)
	December 31, 2021
	Net assets		Ownership interests (%)		Net assets attributable to the ownership interests		Cost-book value differentials		Carrying amount
KEB HanaCard Co., Ltd.	W	2,029,007		15.0		304,351		45,515		349,866
Korea IT Fund		536,804		63.3		339,976		—		339,976
SK China Company Ltd.(*)		2,603,336		27.3		709,961		83,793		793,754
SK South East Asia Investment Pte. Ltd.(*)		1,743,908		20.0		348,782		—		348,782

(*)	Net assets of these entities represent net assets excluding those attributable to their non-controlling interests.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

11.

Investments in Associates and Joint Ventures, Continued

(5)

Changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended March 31, 2022
	Beginning balance		Acquisition and Disposal			Share of profits (losses)			Other compre- hensive income (loss)			Other increase		Ending balance


Investments in associates:
SK China Company Ltd.	W	793,754		—			(14,053	)		48,946			—		828,647
Korea IT Fund		339,976		—			26			—			—		340,002
KEB HanaCard Co., Ltd.		349,866		—			7,560			737			—		358,163
UniSK		19,156		—			647			377			—		20,180
SK Technology Innovation Company		86,301		—			(22,219	)		1,535			—		65,617
SK MENA Investment B.V.		15,343		—			(1	)		291			—		15,633
SK Latin America Investment S.A.		14,004		—			29			(13	)		—		14,020
SK South East Asia Investment Pte. Ltd.		348,782		—			(523	)		11,305			—		359,564
Pacific Telecom Inc.		43,789		—			782			580			—		45,151
S.M. Culture & Contents Co., Ltd.		60,261		—			(1,328	)		—			29		58,962
Digital Games International Pte. Ltd.		2,208		—			(49	)		32			—		2,191
Invites Healthcare Co., Ltd.		26,474		—			(10,500	)		(32	)		—		15,942
Nam Incheon Broadcasting Co., Ltd.		12,525		—			258			—			—		12,783
Home Choice Corp.		3,052		—			(136	)		1			—		2,917
CMES Inc.(*1)		—		—			—			—			900		900
12CM JAPAN and others(*2)		72,605		(4,923	)		2,006			(1,258	)		—		68,430

		2,188,096		(4,923	)		(37,501	)		62,501			929		2,209,102
Investments in joint ventures:
Finnq Co., Ltd.		7,255		—			(1,848	)		202			—		5,609
UTC Kakao-SK Telecom ESG Fund		2,000		2,000			(75	)		—			—		3,925

		9,255		2,000			(1,923	)		202			—		9,534

	W	2,197,351		(2,923	)		(39,424	)		62,703			929		2,218,636

(*1)	As the Group obtained significant influence over the investee, W900 million of financial assets at FVOCI are reclassified to investments in associates for the three-month period ended March 31, 2022.

(*2)

The acquisition for the three-month period ended March 31, 2022 includes W1,000 million of cash investment in Smart SKT Infinitum Game Fund and W7 million of cash investment in VENTURE CAPITAL, LLC. The disposal for the three-month period ended March 31, 2022 includes W4,850 million relating to disposal of the part of shares of Start-up Win-Win Fund and W1,080 million relating to disposal of the part of shares of Daekyo Wipoongdangdang Contents Korea Fund.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

11.

Investments in Associates and Joint Ventures, Continued

(5)

Changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued:


(In millions of won)	For the three-month period ended March 31, 2021
	Beginning balance		Acquisition and Disposal		Share of profits *(losses)(4)**			Other compre- hensive income (loss)			Other increase (decrease)			Ending balance


Investments in associates:
SK China Company Ltd.	W	555,133		—		32			32,146			—			587,311
Korea IT Fund		323,294		—		15			—			—			323,309
KEB HanaCard Co., Ltd.		314,930		—		10,259			(195	)		—			324,994
SK Telecom CS T1 Co., Ltd.		53,010		—		(3,699	)		(76	)		—			49,235
NanoEnTek, Inc.		43,190		—		836			30			—			44,056
UniSK		15,700		—		335			471			—			16,506
SK Technology Innovation Company		41,579		—		17,314			1,832			—			60,725
SK MENA Investment B.V.		14,043		—		(1	)		531			—			14,573
SK hynix Inc.(*1)		12,251,861		—		208,154			58,926			(170,937	)		12,348,004
SK Latin America Investment S.A.		13,930		—		(36	)		(103	)		—			13,791
Grab Geo Holdings PTE. LTD.		30,063		—		—			—			—			30,063
SK South East Asia Investment Pte. Ltd.		311,990		—		4,235			20,834			—			337,059
Pacific Telecom Inc.		39,723		—		—			984			—			40,707
S.M. Culture & Contents Co., Ltd.		62,248		—		(2,095	)		268			—			60,421
Contents Wavve Co., Ltd.		75,803		—		(6,728	)		—			—			69,075
Hello Nature Co., Ltd.(*2)		11,969		—		(2,665	)		—			(1,730	)		7,574
Digital Games International Pte. Ltd.		6,449		—		(1,583	)		123			—			4,989
Invites Healthcare Co., Ltd.		25,536		7,000		(2,617	)		4			—			29,923
Nam Incheon Broadcasting Co., Ltd.		10,902		—		570			—			—			11,472
NANO-X IMANGING LTD.		28,484		—		—			—			1,192			29,676
Home Choice Corp.		3,585		—		(151	)		—			—			3,434
Carrot General Insurance Co., Ltd.		13,469		—		(2,500	)		(125	)		—			10,844
12CM JAPAN and others(*3)		65,750		2,007		970			(958	)		340			68,109

		14,312,641		9,007		220,645			114,692			(171,135	)		14,485,850
Investments in joint ventures:
Dogus Planet, Inc.		15,071		—		611			(1,424	)		—			14,258
Finnq Co., Ltd.		13,342		—		(1,669	)		(118	)		—			11,555
NEXTGEN BROADCAST SERVICES CO., LLC		5,850		5,570		—			—			342			11,762
NEXTGEN ORCHESTRATION, LLC		1,600		—		—			—			67			1,667
Techmaker GmbH		5,609		—		—			—			—			5,609

		41,472		5,570		(1,058	)		(1,542	)		409			44,851

	W	14,354,113		14,577		219,587			113,150			(170,726	)		14,530,701

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

11.

Investments in Associates and Joint Ventures, Continued

(5)	Changes in investments in associates and joint ventures accounted for using the equity method for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued:

(*1)	Other increase (decrease) includes the dividends declared by SK hynix Inc. for the three-month period ended March 31, 2021.

(*2)	The Group recognized W1,730 million of impairment loss for the investments in Hello Nature Co., Ltd. for the three-month period ended March 31, 2021.

(*3)

The acquisition for the three-month period ended March 31, 2021 includes W1,000 million of cash investment in Studio Yesone Co., Ltd., W1,000 million of cash investment in SONNORI Corp. and W334 million relating to contribution of WALDEN SKT VENTURE FUND. The disposal for the three-month period ended March 31, 2021 includes W334 million relating to disposal of the part of shares of KDX Korea Data Exchange.

(*4)	Includes amounts related to discontinued operations.

(6)	The Group discontinued the application of equity method to the following investees due to their carrying amounts being reduced to zero. The details of cumulative unrecognized equity method losses as of March 31, 2022 are as follows:


(In millions of won)	Unrecognized loss				Unrecognized change in equity
	For the three-month period ended March 31, 2022		Cumulative loss		For the three-month period ended March 31, 2022		Cumulative loss
Wave City Development Co., Ltd.	W	30		8,573		—		—
Daehan Kanggun BcN Co., Ltd. and others		—		5,780		—		(124	)

	W	30		14,353		—		(124	)

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

12.

Property and Equipment

Changes in property and equipment for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2022
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Business *combination()**		Ending balance
Land	W	972,800		—		(3	)		3,055			—			2,789		978,641
Buildings		794,453		137		(100	)		13,240			(13,479	)		8,583		802,834
Structures		291,279		1		—			6,826			(9,505	)		—		288,601
Machinery		7,997,927		58,491		(910	)		322,304			(575,956	)		—		7,801,856
Other		487,716		86,709		(286	)		(59,053	)		(24,422	)		8,554		499,218
Right-of-use assets		1,559,333		167,149		(16,098	)		(7,007	)		(99,792	)		6,331		1,609,916
Construction in progress		767,751		115,306		(237	)		(293,363	)		—			881		590,338

	W	12,871,259		427,793		(17,634	)		(13,998	)		(723,154	)		27,138		12,571,404

(*)	Includes assets from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company.


(In millions of won)
	For the three-month period ended March 31, 2021
	Beginning balance		Acquisition		Disposal			Transfer			*Depreciation()**			Reclassified as held for sale			Ending balance
Land	W	1,039,323		—		—			5,836			—			(20,507	)		1,024,652
Buildings		858,606		280		(158	)		15,498			(13,824	)		(8,669	)		851,733
Structures		317,403		524		(1	)		7,723			(9,365	)		(6,104	)		310,180
Machinery		8,376,212		47,345		(6,000	)		368,505			(604,038	)		—			8,182,024
Other		653,616		107,708		(181	)		(89,973	)		(49,320	)		—			621,850
Right-of-use assets		1,472,035		192,210		(83,916	)		—			(110,294	)		—			1,470,035
Construction in progress		659,882		122,243		(86	)		(342,041	)		—			—			439,998

	W	13,377,077		470,310		(90,342	)		(34,452	)		(786,841	)		(35,280	)		12,900,472

(*)	Includes amounts related to discontinued operations.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

13.

Investment Property

(1)

Changes in investment property for the three-month period ended March 31, 2022 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2022
	Beginning balance		Transfer		Depreciation			Ending balance
	Beginning balance		Transfer		Depreciation			Ending balance
Land	W	6,071		181		—			6,252
Buildings		7,353		231		(181	)		7,403
Right-of-use assets		9,610		516		(365	)		9,761

	W	23,034		928		(546	)		23,416

(2)

The Group recognized lease income of W1,261 million for the three-month period ended March 31, 2022 from investment property.

14.

Leases

(1)

Details of the right-of-use assets as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Land, buildings and structures	W	1,425,129		1,392,925
Others		184,787		166,408

	W	1,609,916		1,559,333

(2)

Details of amounts recognized in the interim consolidated statements of profit or loss for the three-month periods ended March 31, 2022 and 2021 as a lessee are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022		*March 31, 2021()**
Depreciation of right-of-use assets:
Land, buildings and structures	W	84,110		90,175
Others		15,682		20,119

		99,792		110,294

Interest expense on lease liabilities	W	6,557		5,470

(*)	Includes amounts related to discontinued operations.

Expenses related to short-term leases and leases of low-value assets the Group recognized are not material.

(3)

The total cash outflows due to lease payments for the three-month periods ended March 31, 2022 and 2021 amounted to W96,747 million and W111,058 million, respectively. Meanwhile, the amounts for the three-month period ended March 31, 2021 include cash flows from discontinued operations.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

15.

Intangible Assets

(1)

Changes in intangible assets for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2022
	Beginning balance		Acquisition		Disposal			Transfer			Amortization			Business combination(*)		Ending balance
Frequency usage rights	W	2,559,689		—		—			—			(119,195	)		—		2,440,494
Land usage rights		2,732		—		—			—			(457	)		—		2,275
Industrial rights		55,954		2,014		—			(105	)		(1,170	)		3		56,696
Development costs		200		—		—			—			(77	)		657		780
Facility usage rights		17,874		204		(1	)		34			(1,341	)		—		16,770
Customer relations		327,257		—		—			—			(6,772	)		—		320,485
Club memberships(*1)		88,494		1,719		(4,655	)		—			—			1,389		86,947
Other(*2)		817,569		6,374		—			18,749			(93,555	)		10,413		759,550

	W	3,869,769		10,311		(4,656	)		18,678			(222,567	)		12,462		3,683,997

(*)	Includes assets from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company.


(In millions of won)
	For the three-month period ended March 31, 2021
	Beginning balance		Acquisition		Disposal			Transfer			*Amortization(3)**			Ending balance
	Beginning balance		Acquisition		Disposal			Transfer			*Amortization(3)**			Ending balance
Frequency usage rights	W	1,932,765		—		—			—			(124,527	)		1,808,238
Land usage rights		4,720		—		—			—			(594	)		4,126
Industrial rights		71,442		1,655		(1	)		(119	)		(1,555	)		71,422
Development costs		9,364		83		—			—			(952	)		8,495
Facility usage rights		21,880		180		(3	)		2			(1,526	)		20,533
Customer relations		919,863		—		(56	)		—			(15,072	)		904,735
Club memberships(*1)		106,865		1,334		(418	)		—			—			107,781
Brands(*1)		374,096		—		—			—			—			374,096
Other(*2)		995,199		3,330		(4	)		44,437			(102,512	)		940,450

	W	4,436,194		6,582		(482	)		44,320			(246,738	)		4,239,876

(*1)	Club memberships and brands are classified as intangible assets with indefinite useful lives and are not amortized.

(*2)	Other intangible assets primarily consist of computer software and others.

(*3)	Includes amounts related to discontinued operations.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

15.

Intangible Assets, Continued

(2)

Details of frequency usage rights as of March 31, 2022 are as follows:

(In millions of won)

Amount

Description

Commencement of
amortization

Completion of
amortization

800MHz license

186,641

LTE service

Jul. 2021

Jun. 2026

1.8GHz license

493,654

LTE service

Dec. 2021

Dec. 2026

2.6GHz license

576,735

LTE service

Sept. 2016

Dec. 2026

2.1GHz license

371,007

W-CDMA and LTE service

Dec. 2021

Dec. 2026

3.5GHz license

802,924

5G service

Apr. 2019

Nov. 2028

28GHz license

9,533

5G service

Jan. 2021

Nov. 2023

2,440,494

16.

Borrowings and Debentures

(1)

Short-term borrowings as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	Lender	Annual interest rate (%)		March 31, 2022		December 31, 2021
Short-term borrowings	Woori Bank		2.59	W	50,000		—
	KIWOOM Securities Co., Ltd.		1.81		50,000		—
	Shinhan Investment Corp.		1.81		50,000		—
	Hana Financial Investment Co., Ltd.		4.20		4,642		4,642
	DB Financial Investment Co., Ltd.		4.00		2,785		2,785
	Shinhan Investment Corp.		4.20		5,571		5,571
	Shinhan Bank		3.30		5,000		—

				W	167,998		12,998

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

16.

Borrowings and Debentures, Continued

(2)

Changes in long-term borrowings for the three-month period ended March 31, 2022 are as follows:

(In millions of won, thousands of other currencies)

Lender

Annual
interest rate (%)

Maturity

Book value

Current

41,065

Non-current

353,122

As of January 1, 2022

394,187

New long-term borrowings:

DBS Bank Ltd.

2.68

Mar. 10, 2025

200,000

Repayments of long-term borrowings:

Korea Development Bank(*1)

3M CD + 0.71

Dec. 21, 2022

(3,125

)

Credit Agricole CIB(*1)

3M CD + 0.82

Dec. 14, 2023

(3,125

)

(6,250

)

Other changes(*2)

166

Current(*3)

41,258

Non-current(*3)

546,845

As of March 31, 2022

588,103

(*1)	As of March 31, 2022, 3M CD rate is 1.51%.

(*2)	Other changes include the effects on foreign currency translation of long-term borrowings and changes in present value discount for the three-month period ended March 31, 2022.

(*3)	W6,286 million were reclassified from non-current to current for the three-month period ended March 31, 2022.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

16.

Borrowings and Debentures, Continued

(3)

Changes in debentures for the three-month period ended March 31, 2022 are as follows:


(In millions of won)
	Purpose		Annual interest rate (%)		Maturity		Face value			Book value
Current							W	1,390,000			1,389,259
Non-current								7,058,250			7,037,424

As of January 1, 2022								8,448,250			8,426,683
Debentures newly issued:
Unsecured corporate bonds(*1)		Refinancing fund		2.58		Jan. 24, 2025		100,000			99,545
				2.92		Jan. 25, 2032		50,000			49,757

								150,000			149,302

Debentures repaid:
Unsecured corporate bonds		Operating and refinancing fund		2.40		Feb. 26, 2022		(100,000	)		(100,000	)
Unsecured corporate bonds		Operating fund		2.03		Mar. 6, 2022		(180,000	)		(180,000	)
Unsecured corporate bonds(*1)		Operating fund		2.26		Feb. 3, 2022		(150,000	)		(150,000	)
Unsecured corporate bonds(*1)		Refinancing fund		2.00		Mar. 26, 2022		(50,000	)		(50,000	)

								(480,000	)		(480,000	)

Other changes(*2)								37,950			39,662
Current(*3)								1,260,000			1,259,268
Non-current(*3)								6,896,200			6,876,379

As of March 31, 2022							W	8,156,200			8,135,647

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

(*2)	Other changes include the effects on foreign currency translation of debentures and changes in discount on issuance of debentures for the three-month period ended March 31, 2022.

(*3)	W350,010 million were reclassified from non-current to current for the three-month period ended March 31, 2022.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

17.

Long-term Payables – other

(1)

As of March 31, 2022 and December 31, 2021, details of long-term payables – other which consist of payables related to the acquisition of frequency usage rights are as follows (See note 15):


(In millions of won)
	March 31, 2022			December 31, 2021
Long-term payables - other	W	1,690,470			2,090,715
Present value discount on long-term payables – other		(72,729	)		(80,882	)
Current installments of long-term payables – other		(393,920	)		(398,823	)

Carrying amount at December 31	W	1,223,821			1,611,010

(2)

The principal amounts of long-term payables – other repaid for the three-month periods ended March 31, 2022 and 2021 are W400,245 and W425,349 million, respectively. The repayment schedule of the principal amount of long-term payables – other related to acquisition of frequency usage rights as of March 31, 2022 is as follows:


(In millions of won)
	Amount
Less than 1 year	W	400,245
1~3 years		738,300
3~5 years		460,538
More than 5 years		91,387

	W	1,690,470

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

18.

Provisions

Changes in provisions for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2022																	As of March 31, 2022
	Beginning balance		Increase		Utilization			Reversal			Other			Business combination		Ending balance		Current		Non-current
Provision for restoration	W	114,731		1,343		(1,623	)		(62	)		35			991		115,415		64,804		50,611
Emission allowance		1,885		722		—			(666	)		—			—		1,941		1,941		—
Other provisions		10,379		1,130		(1	)		(11	)		(18	)		—		11,479		550		10,929

	W	126,995		3,195		(1,624	)		(739	)		17			991		128,835		67,295		61,540


(In millions of won)
	For the three-month period ended March 31, 2021														As of March 31, 2021
	Beginning balance		Increase		Utilization			Reversal			Other		Ending balance		Current		Non-current
Provision for restoration	W	113,653		3,655		(1,568	)		(318	)		31		115,453		48,690		66,763
Emission allowance		7,424		271		—			(712	)		—		6,983		6,983		—
Other provisions(*)		29,800		1,061		(7,405	)		(6	)		—		23,450		12,176		11,274

	W	150,877		4,987		(8,973	)		(1,036	)		31		145,886		67,849		78,037

(*)	W11,312 million of current provisions are included in other provisions relating to SK Planet Co., Ltd.’s onerous contracts.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

19.

Defined Benefit Liabilities (Assets)

(1)

Details of defined benefit liabilities (assets) as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022			December 31, 2021
Present value of defined benefit obligations	W	1,061,950			1,035,016
Fair value of plan assets		(1,041,273	)		(1,040,286	)

Defined benefit assets(*)		(10,929	)		(18,427	)

Defined benefit liabilities		31,606			13,157

(*)

Since the Group entities neither have legally enforceable right nor intention to settle the defined benefit obligations of the Group entities with defined benefit assets of other Group entities, defined benefit assets of the Group entities have been separately presented from defined benefit liabilities.

(2)

Changes in present value of defined benefit obligations for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022			March 31, 2021
Beginning balance	W	1,035,016			1,278,550
Current service cost		34,233			48,245
Interest cost		6,555			7,184
Remeasurement - Demographic assumption		(5,672	)		—
- Financial assumption		(31,830	)		—
- Adjustment based on experience		14,779			22,166
Business combinations		29,357			—
Benefit paid		(24,202	)		(30,582	)
Others		3,714			(2,960	)

Ending balance	W	1,061,950			1,322,603

(3)

Changes in fair value of plan assets for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022			March 31, 2021
Beginning balance	W	1,040,286			1,127,163
Interest income		6,521			6,288
Remeasurement		(4,495	)		(1,901	)
Contributions		7,534			12,002
Benefit paid		(38,398	)		(37,991	)
Business combinations		26,618			—
Others		3,207			(4,133	)

Ending balance	W	1,041,273			1,101,428

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

19.

Defined Benefit Liabilities (Assets), Continued

(4)

Total cost of defined benefit plan, which is recognized in profit or loss (included in labor in the interim consolidated statements of profit or loss) and capitalized into construction-in-progress, for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		*March 31, 2021()**
Current service cost	W	34,233		48,245
Net interest cost		34		896

	W	34,267		49,141

(*)	Includes amounts related to discontinued operations.

20.

Share Capital and Capital Surplus and Others

(1)

The Parent Company’s outstanding share capital consists entirely of common shares with a par value of W100. The number of authorized, issued and outstanding common shares and the details of capital surplus and others as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won, except for share data)
	March 31, 2022			December 31, 2021
Number of authorized shares		670,000,000			670,000,000
Number of issued shares(*1)		218,833,144			218,833,144
Share capital:
Common share(*2)	W	30,493			30,493
Capital surplus and others:
Paid-in surplus		1,771,000			1,771,000
Treasury shares		(38,041	)		(57,314	)
Hybrid bonds(*3)		398,759			398,759
Share option(Note 21)		1,992			47,166
Others(*4)		(13,693,751	)		(13,783,337	)

	W	(11,560,041	)		(11,623,726	)

(*1)

As a result of stock split and spin-off for the year ended December 31, 2021, the number of shares that the Parent Company is allowed to issue under article of incorporation changed from 220,000,000 shares with a par value of W500 to 670,000,000 shares with a par value of W100.

(*2)

The Parent Company’s share capital decreased by W14,146 million as a result of spin-off for the year ended December 31, 2021. In addition, the Parent Company retired 8,685,568 treasury shares with reduction of its retained earnings before appropriation; as a result, the Parent Company’s issued shares have decreased without change in share capital for the year ended December 31, 2021. Meanwhile, in 2002 and 2003, the Parent Company retired treasury shares with reduction of its retained earnings before appropriation. As a result, the Parent Company’s issued shares have decreased without change in share capital.

(*3)

As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Group classified the hybrid bonds as equity. When in liquidation or bankruptcy, these hybrid bonds are senior only to common shares.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

20.

Share Capital and Capital Surplus and Others, Continued

(1)

(*4)

Others primarily consist of the excess of the consideration paid by the Group over the carrying amount of net assets acquired from entities under common control.

(2)

There were no changes in share capital for the three-month periods ended March 31, 2022 and 2021, and details of shares outstanding as of March 31, 2022 and 2021 are as follows:

(In shares)

March 31, 2022

March 31, 2021

Issued
shares

Treasury
shares

Outstanding
shares

Issued
shares

Treasury
shares

Outstanding
shares

Shares outstanding

218,833,144

830,314

218,002,830

80,745,711

9,585,568

71,160,143

(3)

Details of treasury shares as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won, except for share data)
	March 31, 2022		December 31, 2021
Number of shares(*)		830,314		1,250,992
Acquisition cost	W	38,041		57,314

(*)	The Parent Company distributed 420,678 treasury shares (acquisition cost: W19,273 million) as bonus payment to the employees, resulting in gain on disposal of treasury shares of W4,393 million for the three-month period ended March 31, 2022.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

21.

Share-based Payment

(1)

The terms and conditions related to the grants of the share-based payment arrangement are as follows:

Equity-settled share-based payment arrangement

Parent Company

Series

1-2

1-3

5(*2)

6(*2)

Grant date

March 24,

2017

February 20,
2018

February 22,
2019

March 26,

2019

March 26,

2020

March 25,

2021

Types of shares to be issued

Registered common shares

Grant method

Reissue of treasury shares, Cash settlement

Number of shares(*1) (in share)

67,320

4,124

12,685

5,266

381,937

94,657

Exercise price(*1) (in won)

53,298

57,562

50,824

53,052

50,862

38,452

50,276

Exercise period

Mar. 25, 2020

Mar. 25, 2021

Feb. 21, 2020

Feb. 23, 2021

Mar. 27, 2021

Mar. 27, 2023

Mar. 26, 2023

Mar. 24, 2023

Mar. 24, 2024

Feb. 20, 2023

Feb. 22, 2024

Mar. 26, 2024

Mar. 26, 2027

Mar. 25, 2026

Vesting conditions

3 years’ service
from the grant
date

4 years’

service from the
grant date

2 years’

service from the
grant date

2 years’

service from the
grant date

2 years’

service from the
grant date

3 years’

service from the
grant date

2 years’

service from the
grant date


	Parent Company
	Series
	7-1	7-2
Grant date	March 25, 2022
Types of shares to be issued	Registered common shares
Grant method	Reissue of treasury shares, Cash settlement
Number of shares (in share)	295,275	120,441
Exercise price (in won)	56,860	56,860
Exercise period	Mar. 26, 2025	Mar. 26, 2024
	~	~
	Mar. 25, 2029	Mar. 25, 2027
Vesting conditions	3 years’ service from the grant date	2 years’ service from the grant date

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

21.

Share-based Payment, Continued

(1)

The terms and conditions related to the grants of the share-based payment arrangement are as follows, Continued:

Cash-settled share-based payment arrangement


	Share appreciation rights of *SK Telecom Co., Ltd.(3)**		Share appreciation rights of *SK Square Co., Ltd.(3)**

Grant date		January 1, 2021
Grant method		Cash settlement
Number of shares (in shares)(*1)		207,686		134,253
Exercise price (in won)(*1)		50,276
Exercise period		Jan. 1, 2023 ~ Mar. 28, 2024
Vesting conditions		2 years’ service from the grant date

(*1)	Number of shares granted and exercise price are adjusted as a result of stock split and spin-off for the year ended December 31, 2021, and the remaining part of 1-1st share option was fully exercised for the three-month period ended March 31, 2022.

(*2)	Parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2021.

(*3)

The Parent Company newly established the long-term incentive policy as part of the compensation related to the growth of corporate value on the beginning of the prior year and granted cash settled share appreciation rights to executives. Meanwhile, parts of the grant that have not met the vesting conditions have been forfeited for the three-month period ended March 31, 2022.

As a result of spin-off during the year ended December 31, 2021, there are no share options granted by subsidiaries of the Parent Company as of March 31, 2022.

(2)	Share compensation expense recognized for the three-month period ended March 31, 2022 and the remaining share compensation expense to be recognized in subsequent periods are as follows:


(In millions of won)
	Share compensation expense
As of December 31, 2021	W	76,979
For the three-month period ended March 31, 2022		74,246
In subsequent periods		5,135

	W	156,360

As of March 31, 2022, the carrying amount of liabilities recognized by the Group in relation to the cash-settled share-based payment arrangement is W2,257 million.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

21.

Share-based Payment, Continued

(3)

The Parent Company used binomial option pricing model in the measurement of the fair value of the share options at grant date, and the inputs used in the model are as follows:

Equity-settled share-based payment arrangement


(In won)	Parent Company
	1-2			1-3			2			3			4			5			6			7-1			7-2
Risk-free interest rate		1.95	%		2.07	%		2.63	%		1.91	%		1.78	%		1.52	%		1.55	%		2.80	%		2.68	%
Estimated option’s life		6 years			7 years			5 years			5 years			5 years			7 years			5 years			5 years			5 years
Share price (Closing price on the preceding day)(*)		52,500			52,500			48,700			51,800			50,600			34,900			49,800			57,300			57,300
Expected volatility		13.38	%		13.38	%		16.45	%		8.30	%		7.70	%		8.10	%		25.70	%		24.20	%		24.20	%
Expected dividends		3.80	%		3.80	%		3.70	%		3.80	%		3.90	%		5.70	%		4.00	%		3.40	%		3.40	%
Exercise price(*)		53,298			57,562			50,824			53,052			50,862			38,452			50,276			56,860			56,860
Per-share fair value of the option(*)		4,048			3,096			4,798			1,720			1,622			192			8,142			11,772			10,435

Cash-settled share-based payment arrangement


(In won)	Share appreciation rights of SK Telecom Co., Ltd.			Share appreciation rights of SK Square Co., Ltd.
Risk-free interest rate		2.37	%		2.37	%
Estimated option’s life		3.25 years			3.25 years
Share price on the remeasurement date		56,900			56,800
Expected volatility		24.20	%		24.20	%
Expected dividends		3.50	%		0.00	%
Exercise price(*)		50,276			50,276
Per-share fair value of the option		9,591			12,231

(*)	Share price (closing price on the preceding day), exercise price and per-share fair value of the option are adjusted as a result of stock split and spin-off during the year ended December 31, 2021.

Meanwhile, the Board of Directors of the Parent Company resolved to dispose its treasury shares for the purpose of allotment of shares as bonus payment on October 12, 2021. The transaction is equity-settled share-based payment transactions in accordance with K-IFRS 1102, and 505,350 shares (before stock split) were granted on October 12, 2021(grant date). 7,700 shares (before stock split) out of 505,350 shares (before stock split) were transferred to the spin-off company on November 1, 2021. Vesting conditions are 6 months from the grant date, and per-share fair value on the grant date are measured at W300,500 that is closing price of common shares on the grant date before stock split and spin-off. The fair value of these share-based payment on the grant date is W151,858 million, among which the awards with a fair value of W9,935 million were transferred to the spin-off company.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

22.

Retained Earnings

Retained earnings as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Appropriated:
Legal reserve	W	22,320		22,320
Reserve for business expansion		9,631,138		11,631,138
Reserve for technology development		4,365,300		4,365,300

		13,996,438		15,996,438
Unappropriated retained earnings		8,278,350		6,418,583

	W	22,297,108		22,437,341

23.

Reserves

(1) Details of reserves, net of taxes, as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Valuation gain on financial assets at FVOCI	W	577,716		633,240
Other comprehensive income of investments in associates and joint ventures		116,464		53,770
Valuation gain on derivatives		25,600		33,918
Foreign currency translation differences for foreign operations		18,221		14,310

	W	738,001		735,238

(2) Changes in reserves for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	Valuation gain on financial assets at FVOCI			Other comprehensive income (loss) of investments in associates and joint ventures			Valuation gain on derivatives			Foreign currency translation differences for foreign operations			Total
	Valuation gain on financial assets at FVOCI						Valuation gain on derivatives						Total
Balance at January 1, 2021	W	438,979			(392,333	)		17,615			(24,122	)		40,139
Changes, net of taxes		169,679			113,115			(2,733	)		16,301			296,362
Balance at March 31, 2021	W	608,658			(279,218	)		14,882			(7,821	)		336,501
Balance at January 1, 2022	W	633,240			53,770			33,918			14,310			735,238
Changes, net of taxes		(55,524	)		62,694			(8,318	)		3,911			2,763

Balance at March 31, 2022	W	577,716			116,464			25,600			18,221			738,001

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

24.

Other Operating Expenses

Details of other operating expenses for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		March 31, 2021 (Restated)
Communication	W	7,549		8,504
Utilities		95,213		87,497
Taxes and dues		7,899		6,524
Repair		96,272		95,985
Research and development		78,081		83,499
Training		7,050		6,164
Bad debt expenses		9,195		6,876
Travel		2,753		1,563
Supplies and other		26,620		24,160

	W	330,632		320,772

25.

Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		March 31, 2021 (Restated)
Other Non-operating Income:
Gain on disposal of property and equipment and intangible assets	W	4,923		2,529
Others		10,818		10,056

	W	15,741		12,585

Other Non-operating Expenses:
Loss on disposal of property and equipment and intangible assets	W	2,119		2,363
Donations		5,250		3,567
Other bad debt expenses		108		84
Others		6,430		2,183

	W	13,907		8,197

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

26.

Finance Income and Costs

(1)

Details of finance income and costs for the three-month periods ended December 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		March 31, 2021 (Restated)
Finance Income:
Interest income	W	9,810		8,515
Gain on sale of accounts receivable – other		1,043		7,921
Dividend income		1,517		1,039
Gain on foreign currency transactions		1,351		854
Gain on foreign currency translations		2,704		5,914
Gain relating to financial assets at FVTPL		7,892		35,306

	W	24,317		59,549

Finance Costs:
Interest expenses	W	73,925		68,365
Loss on sale of accounts receivable – other		2,837		—
Loss on foreign currency transactions		1,145		519
Loss on foreign currency translations		9,999		5,398
Loss relating to financial assets at FVTPL		5,185		5,055

	W	93,091		79,337

(2)

Details of interest income included in finance income for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		*March 31, 2021()**
Interest income on cash equivalents and financial instruments	W	3,676		5,210
Interest income on loans and others		6,134		7,040

	W	9,810		12,250

(*) Includes amounts related to discontinued operations.

(3) Details of interest expenses included in finance costs for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		*March 31, 2021()**
Interest expense on borrowings	W	3,222		18,416
Interest expense on debentures		52,438		56,056
Others		18,265		12,023

	W	73,925		86,495

(*)	Includes amounts related to discontinued operations.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

26.

Finance Income and Costs, Continued

(4)

Details of impairment losses for financial assets for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		*March 31, 2021()**
Accounts receivable – trade	W	9,195		7,475
Other receivables		105		(55	)

	W	9,300		7,420

(*)	Includes amounts related to discontinued operations.

27.

Income Tax Expense

Income tax expense was calculated by considering current tax expense, adjusted to changes in estimates related to prior periods, and deferred tax expense due to origination and reversal of temporary differences.

28.

Earnings per Share

The Parent Company carried out stock split on October 28, 2021. Basic and diluted earnings per share for the three-month period ended March 31, 2021 has been retroactively adjusted to reflect the effect of the stock split.

(1)

Basic earnings per share

Basic earnings per share for the three-month periods ended March 31, 2022 and 2021 are calculated as follows:


(In millions of won, except for share data and basic earnings per share)	For the three-month periods ended
	March 31, 2022			March 31, 2021 (Restated)
Basic earnings per share attributable to owners of the Parent Company:
Profit from continuing operations attributable to owners of the Parent Company	W	211,253			346,056
Interest on hybrid bonds		(3,692	)		(3,692	)

Profit from continuing operation attributable to owners of the Parent Company on common shares		207,561			342,364
Profit of discontinued operations attributable to owners of the Parent Company on common shares		—			212,209
Weighted average number of common shares outstanding		217,892,622			355,828,900

Basic earnings per share (in won) Continuing operations	W	953			963
Discontinued operations		—			596

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Earnings per Share, Continued

2) The weighted average number of common shares outstanding for the three-month periods ended March 31, 2022 and 2021 are calculated as follows:


(In shares)	For the three-month period ended March 31, 2022
	Number of common shares			Weighted average number of common shares
	Number of common shares			Weighted average number of common shares
Issued shares at January 1, 2022		218,833,144			218,833,144
Treasury shares at January 1, 2022		(1,250,992	)		(1,250,992	)
Disposal of treasury shares		420,678			310,470

		218,002,830			217,892,622


(In shares)	For the three-month period ended March 31, 2021
	Number of common shares			Weighted average number of common shares
	Number of common shares			Weighted average number of common shares
Issued shares at January 1, 2021		403,728,555			403,728,555
Treasury shares at January 1, 2021		(47,092,790	)		(47,092,790	)
Acquisition of treasury shares		(1,440,000	)		(1,190,000	)
Disposal of treasury shares		604,950			383,135

		355,800,715			355,828,900

(2)

Diluted earnings per share

Diluted earnings per share for the three-month periods ended March 31, 2022 and 2021 are calculated as follows:


(In millions of won, except for share data and diluted earnings per share)	For the three-month periods ended
	March 31, 2022		March 31, 2021 (Restated)
Profit from continuing operations attributable to owners of the Parent Company on common shares	W	207,561		342,364
Profit of discontinued operations attributable to owners of the Parent Company on common shares		—		212,209

Adjusted weighted average number of common shares outstanding		218,032,957		355,982,035

Diluted earnings per share (in won)
Continuing operations	W	952		962
Discontinued operations		—		596

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Earnings per Share, Continued

The adjusted weighted average number of common shares outstanding for the three-month periods ended March 31, 2022 and 2021 are calculated as follows:

(2)

Diluted earnings per share, Continued


(In shares)	For the three-month periods ended
	March 31, 2022		March 31, 2021
Outstanding shares at January 1		217,582,152		356,635,765
Effect of treasury shares		310,470		(806,865	)
Effect of share option		140,335		153,135

Adjusted weighted average number of common shares outstanding		218,032,957		355,982,035

29.

Categories of Financial Instruments

(1)

Financial assets by category as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)	March 31, 2022
	Financial assets at FVTPL		Equity instruments at FVOCI		Debt instruments at FVOCI		Financial assets at amortized cost		Derivatives hedging instrument		Total
Cash and cash equivalents	W	508,136		—		—		386,525		—		894,661
Financial instruments		376,400		—		—		115,551		—		491,951
Long-term investment securities(*)		204,066		1,431,042		1,203		—		—		1,636,311
Accounts receivable – trade		—		—		—		1,991,513		—		1,991,513
Loans and other receivables		458,426		—		—		816,065		—		1,274,491
Derivative financial assets		34,490		—		—		—		207,192		241,682

	W	1,581,518		1,431,042		1,203		3,309,654		207,192		6,530,609

(*) The Group designated W1,431,042 million of equity instruments that are not held for trading as financial assets at FVOCI.


(In millions of won)	December 31, 2021
	Financial assets at FVTPL		Equity instruments at FVOCI		Debt instruments at FVOCI		Financial assets at amortized cost		Derivatives hedging instrument		Total
Cash and cash equivalents	W	505,578		—		—		367,153		—		872,731
Financial instruments		389,368		—		—		119,684		—		509,052
Short-term investment securities		5,010		—		—		—		—		5,010
Long-term investment securities(*)		203,473		1,510,428		1,177		—		—		1,715,078
Accounts receivable – trade		—		—		—		1,921,617		—		1,921,617
Loans and other receivables		459,959		—		—		735,958		—		1,195,917
Derivative financial assets		34,933		—		—		—		182,661		217,594

	W	1,598,321		1,510,428		1,177		3,144,412		182,661		6,436,999

(*)	The Group designated W1,510,428 million of equity instruments that are not held for trading as financial assets at FVOCI.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Categories of Financial Instruments, Continued

(2)

Financial liabilities by category as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)	March 31, 2022
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivatives hedging instrument		Total
Accounts payable – trade	W	—		151,052		—		151,052
Derivative financial liabilities		321,025		—		16		321,041
Borrowings		—		756,101		—		756,101
Debentures		—		8,135,647		—		8,135,647
Lease liabilities(*)		—		1,600,297		—		1,600,297
Accounts payable - other and others		—		4,994,017		—		4,994,017

	W	321,025		15,637,114		16		15,958,155


(In millions of won)	December 31, 2021
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivatives hedging instrument		Total
Accounts payable – trade	W	—		190,559		—		190,559
Derivative financial liabilities		321,025		—		111		321,136
Borrowings		—		407,185		—		407,185
Debentures		—		8,426,683		—		8,426,683
Lease liabilities(*)		—		1,534,282		—		1,534,282
Accounts payable - other and others		—		5,524,692		—		5,524,692

	W	321,025		16,083,401		111		16,404,537

(*)	Lease liabilities are not applicable on category of financial liabilities but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

30.

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 and interest rates. The Group implements a risk management system to monitor and manage these specific risks.

The Group’s financial assets consist of cash and cash equivalents, financial instruments, investment securities and accounts receivable – trade and other receivables, etc. Financial liabilities consist of accounts payable – trade and other, borrowings, debentures, lease liabilities and others.

Market risk

(i)

Currency risk

The Group incurs exchange position due to revenue and expenses from its global operations. Major foreign currencies where the currency risk occur are USD, EUR and JPY. The Group determines the currency risk management policy after considering the nature of business and the presence of methods that mitigate the currency risk for each Group entities. Currency risk occurs on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of each Group entity. The Group manages currency risk arising from business transactions by using currency forwards, etc.

Monetary assets and liabilities denominated in foreign currencies as of March 31, 2022 are as follows:


(In millions of won, thousands of foreign currencies)
	Assets				Liabilities
	Foreign currencies		Won equivalent		Foreign currencies		Won equivalent
USD		63,343	W	76,696		1,537,651	W	1,861,787
EUR		5,445		7,356		—		—
Others		—		171		—		105

			W	84,223			W	1,861,892

In addition, the Group has entered into currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.

As of March 31, 2022, a hypothetical change in exchange rates by 10% would have increased (decreased) the Group’s profit before income tax as follows:


(In millions of won)
	If increased by 10%		If decreased by 10%
USD	W	3,036		(3,036	)
EUR		736		(736	)
Others		7		(7	)

	W	3,779		(3,779	)

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

30.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Market risk, Continued

(ii)

Interest rate risk

The interest rate risk of the Group arises from borrowings, debentures and long-term payables – other. Since the Group’s interest bearing assets are mostly fixed-interest bearing assets, the Group’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.

The Group performs various analysis to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Group takes various measures such as refinancing, renewal, alternative financing and hedging.

As of March 31, 2022, floating-rate borrowings and debentures amount to W31,250 million and W363,240 million, respectively, and the Group has entered into interest rate swaps to hedge interest rate risk related to the floating-rate borrowings and debentures. Therefore, profit before income taxes for the three-month period ended March 31, 2022 would not have been affected by the changes in interest rates of floating-rate borrowings and debentures.

As of March 31, 2022, the floating-rate long-term payables – other are W1,690,470 million. If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the three-month period ended March 31, 2022, would change by W4,226 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.

Interest rate benchmark reform and associated risks

A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). Especially, in the case of LIBOR, all of the calculations were suspended as of December 31, 2021, except for the overnight, one month, three months, six months, and 12 months of USD LIBOR, and the aforementioned five USD LIBORs will also be suspended as of June 30, 2023. The alternative interest rate benchmark of USD LIBOR is the Secured Overnight Financing Rate(“SOFR”). Meanwhile, in case of Korean CD rate, the alternative interest rate benchmark has selected as Korea Overnight Financing Repo Rate(“KOFR”), and as part of interest rate benchmark reform, the interest rate has been disclosed through Korea Securities Depository since November 26, 2021. KOFR is calculated using the overnight RP rate as collateral for government bonds and monetary stabilization bonds. However, unlike LIBOR, calculation of CD rate will not be suspended, it is unclear when and how the transition to KOFR will take place.

The Group plans to include fallback clauses into financial instruments relating to LIBOR to which calculation has not been suspended yet or change their LIBOR directly to alternative interest rates before the calculation is suspended.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

30.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Market risk, Continued

(ii)

Interest rate risk, Continued

The Group’s financial instruments exposed to the risk arising from interest rate benchmark reform as of March 31, 2022 are indexed to the USD LIBOR. The Group is exposed to legal risk to amend the terms of contracts on the financial instruments subject to interest rate benchmark reform as well as process and operation risks to manage such amendments. In addition, the Group is exposed to the risk of monitoring the market trend regarding the alternative interest rate and establishing the corresponding risk management strategy. If the IBOR is designated as the hedged item, the Group is required to replace it to an alternative benchmark interest and review the effects on the hedging relationship. In addition, the Group is exposed to the risk of minimizing hedge ineffectiveness by aligning the method and timing of the transition to the alternative benchmark interest applied to the hedged item and the hedging instrument.

The Group evaluates the extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of IBOR reform and how to manage communication about IBOR reform with counterparties.

Non-derivative financial liabilities

The Parent Company’s non-derivative financial liabilities subject to interest rate benchmark reform as of December 31, 2021 were floating-rate bonds indexed to USD LIBOR. As explained above, the Group is discussing with the counterparty about including the fallback clauses as of March 31, 2022.

Derivatives

The Group’s most derivative instruments designated as cash flow hedge are governed by contracts based on the International Swaps and Derivatives Association (ISDA)’s master agreements. As part of interest rate benchmark reform, ISDA has included a new fallback clause regarding which alterative benchmark interest rate to be applied when the calculation of major IBOR is suspended in the master agreement. The master agreement is applied to derivative contracts after January 25, 2021, and the transaction parties is required to adhere to ISDA protocol to include the same fallback clause to derivative contracts before January 25, 2021. The Group has adhered to ISDA protocol for transition to the alternative benchmark interest rate, and the fallback clause will be included when counterparties adhere to the protocol to include. The Group’s counterparties have adhered to ISDA protocol and agreed to include the fallback clause.

Hedge accounting

The Group’s hedged items and hedging instruments as of March 31, 2022 are indexed to USD LIBOR. These benchmark rates are quoted each day, and the IBOR cash flows are exchanged with counterparties as usual.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

30.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Credit risk

The maximum credit exposure as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Cash and cash equivalents	W	894,457		872,550
Financial instruments		491,951		509,052
Investment securities		2,102		2,077
Accounts receivable – trade		1,991,513		1,921,617
Contract assets		113,788		118,278
Loans and other receivables		1,274,491		1,195,917
Derivative financial assets		241,682		217,594

	W	5,009,984		4,837,085

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. 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.

The Group establishes a loss allowance in respect of accounts receivable – trade. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Also, the Group’s credit risk can arise from transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Group has a policy to deal only with financial institutions with high credit ratings. The amount of maximum exposure to credit risk of the Group is the carrying amount of financial assets as of March 31, 2022.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

30.

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 and cash equivalents balances and have enough liquidity through various committed credit lines. The Group maintains enough liquidity within credit lines through active operating activities.

Contractual maturities of financial liabilities as of March 31, 2022 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	W	151,052		151,052		151,052		—		—
Borrowings(*)		756,101		784,415		220,239		564,176		—
Debentures(*)		8,135,647		9,175,084		1,475,319		4,739,384		2,960,381
Lease liabilities		1,600,297		1,699,941		377,129		1,076,900		245,912
Accounts payable – other and others(*)		4,994,017		5,056,117		3,731,593		1,232,691		91,833

	W	15,637,114		16,866,609		5,955,332		7,613,151		3,298,126

(*)	Includes interest payables.

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

As of March 31, 2022, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:


(In millions of won)
	Carrying amount			Contractual cash flows			Less than 1 year			1 - 5 years		More than 5 years
Assets	W	207,192			217,907			32,463			157,609		27,835
Liabilities		(16	)		(16	)		(16	)		—		—

	W	207,176			217,891			32,447			157,609		27,835

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

30.

Financial Risk Management, Continued

(2)

Capital management

The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Group is the same as that of the Group as of and for the year ended December 31, 2021.

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

Debt-equity ratio as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022			December 31, 2021
Total liabilities	W	18,305,201			18,576,139
Total equity		12,269,467			12,335,138

Debt-equity ratios		149.19	%		150.60	%

(3)

Fair value

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of March 31, 2022 are as follows:


(In millions of won)	March 31, 2022
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that are measured at fair value:
FVTPL	W	1,581,811		41,030		1,341,274		199,507		1,581,811
Derivative hedging instruments		207,192		—		207,192		—		207,192
FVOCI		1,432,245		1,263,550		—		168,695		1,432,245

	W	3,221,248		1,304,580		1,548,466		368,202		3,221,248

Financial liabilities that are measured at fair value:
FVTPL	W	321,025		—		—		321,025		321,025
Derivative hedging instruments		16		—		16		—		16

	W	321,041		—		16		321,025		321,041

Financial liabilities that are not measured at fair value:
Borrowings	W	756,101		—		734,507		—		734,507
Debentures		8,135,647		—		8,108,937		—		8,108,937
Long-term payables – other		1,617,741		—		1,621,909		—		1,621,909

	W	10,509,489		—		10,465,353		—		10,465,353

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

30.

Financial Risk Management, Continued

(3)

Fair value, Continued

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2021 are as follows:


(In millions of won)	December 31, 2021
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that are measured at fair value:
FVTPL	W	1,598,321		55,455		1,359,915		182,951		1,598,321
Derivative hedging instruments		182,661		—		182,661		—		182,661
FVOCI		1,511,605		1,344,434		—		167,171		1,511,605

	W	3,292,587		1,399,889		1,542,576		350,122		3,292,587

Financial liabilities that are measured at fair value:
FVTPL	W	321,025		—		—		321,025		321,025
Derivative hedging instruments		111		—		111		—		111

	W	321,136		—		111		321,025		321,136

Financial liabilities that are not measured at fair value:
Borrowings	W	407,185		—		392,237		—		392,237
Debentures		8,426,683		—		8,679,472		—		8,679,472
Long-term payables – other		2,009,833		—		2,010,852		—		2,010,852

	W	10,843,701		—		11,082,561		—		11,082,561

The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.

Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI and financial assets at FVTPL) is measured based on the bid price at the end of the reporting date.

The Group uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods, such as discounted cash flow and market approach. Inputs used to such valuation methods include swap rate, interest rate, and risk premium, and the Group performs valuation using the inputs which are consistent with natures of assets and liabilities measured.

Interest rates used by the Group for the fair value measurement as of March 31, 2022 are as follows:


		Interest rate
Derivative instruments		0.32% ~ 3.59%
Borrowings and debentures		1.74% ~ 3.30%
Long-term payables – other		2.43% ~ 3.16%

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

30.

Financial Risk Management, Continued

(3)

Fair value, Continued

There have been no transfers between Level 2 and Level 1 for the three-month period ended March 31, 2022. The changes of financial assets classified as Level 3 for the three-month period ended March 31, 2021 are as follows:


(In millions of won)
	Balance at January 1, 2022			Profit or loss			OCI		Acquisition		Disposal			Transfer			Balance at March 31, 2022
Financial assets
FVTPL	W	182,951			(5,185	)		—		12,999		(7,539	)		16,281			199,507
FVOCI		167,171			—			2,424		—		—			(900	)		168,695

	W	350,122			(5,185	)		2,424		12,999		(7,539	)		15,381			368,202

Financial liabilities
FVTPL	W	(321,025	)		—			—		—		—			—			(321,025	)

(4)

Enforceable master netting agreement or similar agreement

Carrying amounts of financial instruments recognized of which offset agreements are applicable as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)	March 31, 2022
	Gross financial instruments recognized		Amount offset			Net financial instruments presented on the interim consolidated statement of financial position
Financial assets:
Accounts receivable – trade and others	W	205,116		(195,742	)		9,374
Financial liabilities:
Accounts payable – other and others	W	201,928		(195,742	)		6,186


(In millions of won)	December 31, 2021
	Gross financial instruments recognized		Amount offset			Net financial instruments presented on the consolidated statement of financial position
Financial assets:
Accounts receivable – trade and others	W	197,828		(189,424	)		8,404
Financial liabilities:
Accounts payable – other and others	W	200,849		(189,424	)		11,425

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

31.

Transactions with Related Parties

(1)

List of related parties


Relationship		Company
Ultimate Controlling Entity		SK Inc.
Joint ventures		Finnq Co., Ltd. and another
Associates		SK China Company Ltd. and 43 others
Others		The Ultimate Controlling Entity’s subsidiaries and associates, etc.

For the periods presented, the Group belongs to SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act of the Republic of Korea. All of the other entities included in SK Group are considered related parties of the Group.

(2)

Compensation for the key management

The Parent Company considers registered directors (3 executive and 5 non-executive directors) who have substantial role and responsibility in planning, operations, and relevant controls of the business as key management. The compensation given to such key management for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		March 31, 2021
Salaries	W	1,439		3,480
Retirement benefits		313		1,815
Share compensation expense		67		32

	W	1,819		5,327

Compensation for the key management includes salaries, non-monetary salaries, and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

31.

Transactions with Related Parties, Continued

(3) Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)		For the three-month period ended March 31, 2022
Scope	Company	Operating revenue and others		Operating expenses and others(*1)		Acquisition of property and equipment and others
Ultimate Controlling Entity Associates	SK Inc.(*2)	W	4,745		197,864		3,795

	F&U Credit information Co., Ltd.		741		12,062		—
	HanaCard Co., Ltd.		5,610		1,085		2
	Daehan Kanggun BcN Co., Ltd.		2,445		—		—
	Others		51		1,064		—

			8,847		14,211		2

Others	SK Innovation Co., Ltd.		2,786		4,951		—
	SK Networks Co., Ltd.(*3)		975		238,361		—
	SK Networks Service Co., Ltd.		1,539		16,961		75
	SK Energy Co., Ltd.		830		24		—
	Content Wavve Co., Ltd.		3		23,516		—
	SK Shieldus Co., Ltd.		6,335		38,096		1,684
	Eleven Street Co., Ltd.		7,063		6,507		—
	SK Planet Co., Ltd.		3,058		22,845		586
	SK hynix Inc.		10,149		39		—
	DREAMUS COMPANY		769		23,234		—
	One Store Co., Ltd.		4,148		2		—
	T map Mobility Co., Ltd.		4,065		1,261		—
	UbiNS Co., Ltd.		23		10,944		4,329
	SK Geo Centric Co., Ltd.		148		—		—
	SK Ecoplant Co., Ltd.		631		—		—
	SK RENT A CAR Co., Ltd.		1,865		3,815		—
	SK Magic Co., Ltd.		588		267		—
	Others		4,964		5,642		3,307

			49,939		396,465		9,981

		W	63,531		608,540		13,778

(*1)	Operating expenses and others include lease payments by the Group.

(*2)	Operating expenses and others include W109,010 million of dividends declared to be paid by the Parent Company.

(*3)	Operating expenses and others include costs for handset purchases amounting to W225,935 million.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

31.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued:


(In millions of won)		For the three-month period ended March 31, 2021
Scope	Company	Operating revenue and others		Operating expenses and others(*1)		Acquisition of property and equipment and others
Ultimate Controlling Entity Associates	SK Inc. (*2)	W	9,092		285,366		2,168

	F&U Credit information Co., Ltd.		786		12,715		—
	SK hynix Inc.(*3)		200,383		134		—
	HanaCard Co., Ltd.		20		842		—
	SK Wyverns Co., Ltd.(*4)		202		8,203		—
	Content Wavve Co., Ltd.		19		695		—
	Others		13,272		432		—

			214,682		23,021		—

Others	SK Ecoplant Co., Ltd.		2,761		—		—
	SK Innovation Co., Ltd.		12,101		4,631		—
	SK Networks Co., Ltd.(*5)		2,985		301,471		24
	SK Networks Services Co., Ltd.		1,746		17,225		12
	SK Telesys Co., Ltd.		70		1,366		1,562
	SK TNS Co., Ltd.		59		4,337		22,378
	SK Energy Co., Ltd.		2,410		408		—
	SK hynix Semiconductor (China) Ltd.		15,923		—		—
	SK Battery Hungary Kft.		9,304		—		—
	SK Geo Centric Co., Ltd.		2,779		8		—
	SK Global Chemical International Trading (Shanghai) Co., Ltd.		3,506		—		—
	Happy Narae Co., Ltd.		2,081		4,604		4,941
	Others		31,699		37,824		5,593

			87,424		371,874		34,510

		W	311,198		680,261		36,678

(*1)	Operating expenses and others include lease payments by the Group.

(*2)	Operating expenses and others include W194,617 million of dividends declared to be paid by the Parent Company.

(*3)	Operating revenue and others include W170,937 million of dividends declared by SK hynix Inc. which was deducted from the investment in associates.

(*4)	Transactions with SK Wyverns Co., Ltd. occurred before disposal.

(*5)	Operating expenses and others include costs for handset purchases amounting to W289,418 million.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

31.

Transactions with Related Parties, Continued

(4)

Account balances with related parties as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)		March 31, 2022
		Receivables				Payables
Scope	Company	Loans		Accounts receivable – trade, etc.		Accounts payable –other, etc.
Ultimate Controlling Entity Associates	SK Inc.	W	—		1,064		145,795
	F&U Credit information Co., Ltd.		—		—		5,164
	Wave City Development Co., Ltd.(*1)		—		2,623		—
	Daehan Kanggun BcN Co., Ltd.(*2)		22,148		2,534		—
	HanaCard Co., Ltd.		—		1,733		13,160
	SK USA, Inc.		—		—		2,265
	Others		—		1		60

			22,148		6,891		20,649

	SK hynix Inc.		—		9,809		107
	SK Planet Co., Ltd.		—		2,040		32,752
	Eleven Street Co., Ltd.		—		3,518		13,209
	SK Shieldus Co., Ltd.		—		3,609		22,839
	SK Innovation Co., Ltd.		—		4,796		34,891
	SK Networks Co., Ltd.		—		431		171,205
	SK RENT A CAR Co., Ltd.		—		785		22,851
	Incross Co., Ltd.		—		2,623		10,073
	UbiNS Co., Ltd.		—		2		11,272
	Mintit Co., Ltd.		—		18,451		38
	Happy Narae Co., Ltd.		—		20		5,397
	Content Wavve Co., Ltd.		—		154		30,695
	Others		—		7,927		51,776

			—		54,165		407,105

		W	22,148		62,120		573,549

(*1)	As of March 31, 2022, the Parent Company recognized loss allowance amounting to W1,102 million on accounts receivable – trade.

(*2)	As of March 31, 2022, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

31.

Transactions with Related Parties, Continued

(4)

Account balances with related parties as of March 31, 2022 and December 31, 2021 are as follows, Continued:


(In millions of won)		December 31, 2021
		Receivables				Payables
Scope	Company	Loans		Accounts receivable – trade, etc.		Accounts payable –other, etc.
Ultimate Controlling Entity Associates	SK Inc.	W	—		2,092		69,652
	F&U Credit information Co., Ltd.		—		4		5,265
	Wave City Development Co., Ltd.(*1)		—		2,623		—
	Daehan Kanggun BcN Co., Ltd.(*2)		22,147		3,857		—
	HanaCard Co., Ltd.		—		529		48,020
	Others		—		84		1,197

			22,147		7,097		54,482

Others	SK Innovation Co., Ltd.		—		3,022		38,022
	SK Networks Co., Ltd.		—		241		198,631
	Mintit Co., Ltd.		—		17,929		131
	SK hynix Inc.		—		11,526		166
	Happy Narae Co., Ltd.		—		6		49,349
	SK m&service Co., Ltd.		—		1,453		18,921
	SK Shieldus Co., Ltd.		—		2,649		24,593
	Content Wavve Co., Ltd.		—		183		9,873
	Incross Co., Ltd.		—		3,610		11,829
	Eleven Street Co., Ltd.		—		2,851		7,782
	SK Planet Co., Ltd.		—		668		31,652
	SK RENT A CAR Co., Ltd.		—		116		16,715
	UbiNS Co., Ltd.		—		24		14,932
	Others		—		8,307		29,106

			—		52,585		451,702

		W	22,147		61,774		575,836

(*1)	As of December 31, 2021, the Parent Company recognized loss allowance amounting to W1,102 million on accounts receivable – trade.

(*2)	As of December 31, 2021, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd.

(5)

The Group has granted SK REIT Co., Ltd. the right of first offer regarding the disposal of real estate owned by the Group. Whereby, the negotiation period is within 3 to 5 years from June 30, 2021, date of agreement, and the Group has been granted the right by SK REIT Co., Ltd. to lease the real estate in preference to a third party if SK REIT Co., Ltd. purchases the real estate from the Group.

(6)	The details of additional investments and disposal of associates and joint ventures for the three-month period ended March 31, 2022 are as presented in note 11.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

32.

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 W1,513 million as of March 31, 2022.

(2)

Legal claims and litigations

As of March 31, 2022, the Group is involved in various legal claims and litigation. Provision recognized in relation to these claims and litigation is immaterial. In connection with those legal claims and litigation for which no provision was recognized, management does not believe the Group has a present obligation, nor is it expected any of these claims or litigation will have a significant impact on the Group’s financial position or operating results in the event an outflow of resources is ultimately necessary.

(3)

Accounts receivable from sale of handsets

The sales agents of the Parent Company sell handsets to the Parent Company’s subscribers on an installment basis. The Parent Company entered into comprehensive agreements to purchase accounts receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special purpose companies which were established with the purpose of liquidating receivables, respectively.

Accounts receivable from sales of handsets amounting to W495,860 million and W493,277 million as of March 31, 2022 and December 31, 2021, respectively, which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

33.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
(In millions of won)
	March 31, 2022			March 31, 2021
Interest income	W	(9,810	)		(12,250	)
Dividend income		(1,517	)		(1,039	)
Gain on foreign currency translations		(2,704	)		(8,427	)
Gain on sale of accounts receivable – other		(1,043	)		(7,921	)
Loss (gain) relating to investments in associates and joint ventures, net		38,445			(322,455	)
Gain on disposal of property and equipment and intangible assets		(4,923	)		(2,738	)
Gain relating to financial instruments at FVTPL		(7,892	)		(40,341	)
Other income		(1,929	)		(6,405	)
Interest expenses		73,925			86,495
Loss on foreign currency translations		9,999			6,231
Loss on sale of accounts receivable – other		2,837			—
Income tax expense		106,663			111,862
Expense related to defined benefit plan		34,267			49,141
Share compensation expense		74,729			1,045
Bonus paid by treasury shares		24,338			29,642
Depreciation and amortization		946,267			1,033,579
Bad debt expenses		9,195			7,475
Loss on disposal of property and equipment and intangible assets		2,119			6,029
Other bad debt expenses (reversal)		105			(55	)
Loss relating to financial instruments at FVTPL		5,185			5,775
Other expenses		3,563			1,933

	W	1,301,819			937,576

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

33.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022			March 31, 2021
Accounts receivable – trade	W	(39,361	)		(21,364	)
Accounts receivable – other		(59,175	)		8,928
Advanced payments		6,899			(25,429	)
Prepaid expenses		(31,842	)		(53,064	)
Inventories		(46,952	)		(50,572	)
Long-term accounts receivable – other		12,391			46,059
Contract assets		2,376			(16,689	)
Guarantee deposits		4,775			474
Accounts payable – trade		(29,616	)		(32,512	)
Accounts payable – other		90,924			(395,361	)
Withholdings		120,086			130,954
Contract liabilities		(11,219	)		14,912
Deposits received		88			2,910
Accrued expenses		(205,514	)		(126,783	)
Provisions		(100	)		(7,415	)
Long-term provisions		(39	)		1,477
Plan assets		30,864			25,989
Retirement benefits paid		(24,202	)		(30,582	)
Others		35,550			5,090

	W	(144,067	)		(522,978	)

(3)

Significant non-cash transactions for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022			March 31, 2021
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets	W	(487,412	)		(479,402	)
Increase of right-of-use assets		167,149			192,210
Contribution in kind for investments		—			7,000

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

34.

Emissions Liabilities

(1)

The quantity of emissions rights allocated free of charge for each implementation year as of March 31, 2022 are as follows:


(In tCO2-eQ)
	Quantities allocated in 2020		Quantities allocated in 2021		Quantities allocated in 2022		Total
Emissions rights allocated free of charge		814,842		1,033,764		1,013,006		2,861,612

(2)

Changes in emissions rights quantities the Parent Company held are as follows:


(In tCO2-eQ)
	Quantities allocated in 2020			Quantities allocated in 2021			Quantities allocated in the three-month period ended March 31, 2022			Total
Beginning		(60,977	)		—			—			(60,977	)
Allocation at no cost		814,842			1,033,764			1,013,006			2,861,612
Additional allocation		217,643			—			—			217,643
Purchase		68,471			—			—			68,471
Surrender or shall be surrendered		(1,039,979	)		(1,087,455	)		(1,140,316	)		(3,267,750	)

Ending		—			(53,691	)		(127,310	)		(181,001	)

(3)

As of March 31, 2022, the estimated annual greenhouse gas emissions quantities of the Parent Company are 1,140,316 tCO2-eQ.

35.

Non-current Assets Held for Sale

On February 25, 2021, the Parent Company has decided to dispose of the investments in an associate engaged in mobility business to T map Mobility Co., Ltd. pursuant to the approval of the Board of Directors and reclassified entire shares of the investments in associates as non-current assets held for sale. The disposal is expected to take place in 2022 after approval by the Financial Services Commission.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

36.

Spin-off

(1)

In accordance with the resolution of the Board of Directors held on June 10, 2021 and shareholders’ meeting held on October 12, 2021, the Parent Company completed the spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments on November 1, 2021, and the registration of the spin-off was completed as of November 2, 2021. The details of the spin-off are as follows:


Method of spin-off		Horizontal spin-off
Company		SK Telecom Co., Ltd. (Surviving Company)
Company		SK Square Co., Ltd. (Spin-off Company)
Effective date of spin-off		November 1, 2021

(2)

The details of financial information due to the spin-off of its businesses of managing investments in semiconductor, New ICT and other business and making new investments are as follows:

Statements of Profit or Loss

The details of profit or loss of discontinued operations for the three-month period ended March 31, 2021 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2021
Operating revenue	W	667,364
Operating expenses:		652,799
Labor		235,412
Commission		88,075
Depreciation and amortization		87,376
Network interconnection		243
Advertising		44,132
Rent		160
Cost of goods sold		109,245
Others		88,156

Operating profit		14,565
Finance income		6,981
Finance costs		21,036
Gain relating to investments in associates and joint ventures,		194,721
Other non-operating income		7,453
Other non-operating expenses		5,397

Profit before income tax		197,287
Income tax benefit		(18,865	)
Profit for the period	W	216,152

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Interim Consolidated Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

36.

Spin-off, Continued

(2)

The details of financial information due to the spin-off of its businesses of managing investments in semiconductor, New ICT and other business and making new investments are as follows, Continued:

Statements of Cash Flows

The details of cash flows from discontinued operations for the three-month period ended March 31, 2021 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2021
Cash flows from operating activities	W	(24,347	)
Cash flows from investing activities		2,528
Cash flows from financing activities		18,448

(3)

Subsequent to the spin-off, the Parent Company lost control over the related businesses. The spin-off was accounted for by derecognizing all related assets and liabilities. The net assets of the spin-off business as of spin-off date was recognized in capital surplus and others. The details of assets and liabilities derecognized from the consolidated financial statements due to the spin-off of its businesses of managing investments in semiconductor, New ICT and other business and making new investments are as follows:


(In millions of won)
	December 31, 2021
Current assets	W	2,608,601
Non-current assets		19,269,615

Total assets	W	21,878,216
Current liabilities	W	2,161,458
Non-current liabilities		4,676,324

Total liabilities	W	6,837,782

Net assets	W	15,040,434

(4)

The Parent Company has obligation to jointly and severally reimburse the Parent Company’s liabilities incurred prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act.

37.

Subsequent Events

The Board of Directors of the Parent Company resolved to pay interim dividend at the Board’s meeting on April 28, 2022, and the details are as follows:


Classification		Description
Interim dividend amount		W830 per share (Total amount: W180,942 million)
Dividend rate		1.44%
Dividend date		March 31, 2022
Date of distribution		According to Article 165 of Capital Market and Financial Investment Business Act 12-3, the Parent Company plans to distribute dividends by May 18, 2022.

SK TELECOM CO., LTD.

Interim Separate Financial Statements

(Unaudited)

For the Three-Month Period ended March 31, 2022

(With Independent Auditor’s Review Report Thereon)

SK TELECOM CO., LTD.

Contents


	Page
Report on review of interim separate financial statements

Interim Separate Financial Statements

Interim Separate Statements of Financial Position		1

Interim Separate Statements of Profit or Loss		3

Interim Separate Statements of Comprehensive Income		4

Interim Separate Statements of Changes in Equity		5

Interim Separate Statements of Cash Flows		6

Notes to the Interim Separate Financial Statements		8

LOGO

Report on review of interim separate financial statements

The Shareholders and Board of Directors

SK Telecom Co., Ltd.

Report on financial statements

We have reviewed the accompanying interim separate financial statements of SK Telecom Co., Ltd. (the “Company”), which comprise the interim separate statement of financial position as of March 31, 2022, and the related interim separate statements of profit or loss, comprehensive income, changes in equity and cash flows for the three-month period then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the interim separate financial statements

Management is responsible for the preparation and fair presentation of these interim separate financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1034 Interim Financial Reporting, and for such internal controls as management determines is necessary to enable the preparation of interim separate financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on these interim separate financial statements based on our review.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim separate financial statements are not prepared fairly, in all material respects, in accordance with K-IFRS 1034 Interim Financial Reporting.

A member firm of Ernst & Young Global Limited

LOGO

Other matters

The interim separate statement of profit or loss, interim separate statement of comprehensive income, interim separate statement of changes in equity and interim separate statement of cash flows for the three-month period ended March 31, 2021, prepared in accordance with K-IFRS 1034 and presented for comparative purpose, have been reviewed by KPMG Samjong Accounting Corp. whose review report dated May 14, 2021 expressed an unqualified review conclusion.

Moreover, the separate statement of financial position as of December 31, 2021, and the related separate statement of profit or loss, separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended which have been audited by KPMG Samjong Accounting Corp., in accordance with KGAAS (not presented herein), whose report dated March 10, 2022 expressed an unqualified opinion. The accompanying separate statement of financial position as of December 31, 2021 presented for comparative purpose is not different, in all material respects, from the above audited separate statement of financial position.

LOGO

May 13, 2022

This report is effective as of May 13, 2022, the independent auditor’s review report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the independent auditor’s review report date to the time this review report is used. Such events and circumstances could significantly affect the accompanying interim separate financial statements and may result in modification to this review report.

A member firm of Ernst & Young Global Limited

SK TELECOM CO., LTD. (the “Company”)

INTERIM SEPARATE FINANCIAL STATEMENTS

AS OF MARCH 31, 2022 AND DECEMBER 31, 2021 AND

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2022 AND 2021

The accompanying interim separate financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Company.

Ryu, Young-Sang

Chief Executive Officer

SK TELECOM CO., LTD.

SK TELECOM CO., LTD.

Interim Separate Statements of Financial Position

As of March 31, 2022 and December 31, 2021


(In millions of won)
	*Note*		March 31, 2022 (Unaudited)		December 31, 2021
Assets
Current Assets:
Cash and cash equivalents		27,28	W	77,923		158,823
Short-term financial instruments		27,28		425,400		379,000
Accounts receivable – trade, net		4,27,28,29		1,515,770		1,514,260
Short-term loans, net		4,27,28,29		66,193		62,724
Accounts receivable – other, net		4,27,28,29,30		598,897		520,956
Contract assets		6,28		10,768		10,078
Prepaid expenses		5		1,939,344		1,913,419
Guarantee deposits		4,27,28,29		49,556		51,739
Derivative financial assets		27,28		25,558		25,428
Inventories, net				26,111		8,962
Non-current assets held for sale		33		20,000		20,000
Advanced payments and others		4,27,28		11,782		16,104

			4,767,302		4,681,493

Non-Current Assets:
Long-term financial instruments		27,28		354		354
Long-term investment securities		7,27,28		1,405,103		1,476,361
Investments in subsidiaries, associates and joint ventures		8,33		4,910,050		4,841,139
Property and equipment, net		9,11,29		9,093,711		9,318,408
Investment property, net		10		57,185		45,100
Goodwill				1,306,236		1,306,236
Intangible assets, net		12		3,027,801		3,203,330
Long-term loans, net		4,27,28,29		815		201
Long-term accounts receivable – other		4,27,28,30		281,491		287,179
Long-term contract assets		6,28		19,741		19,399
Long-term prepaid expenses		5		939,553		951,441
Guarantee deposits		4,27,28,29		105,217		106,091
Long-term derivative financial assets		27,28		175,973		152,084
Other non-current assets				249		249

			21,323,479		21,707,572

Total Assets			W	26,090,781		26,389,065

(Continued)

SK TELECOM CO., LTD.

Interim Separate Statements of Financial Position, Continued

As of March 31, 2022 and December 31, 2021


(In millions of won)
	*Note*		March 31, 2022 (Unaudited)			December 31, 2021
Liabilities and Equity
Current Liabilities:
Accounts payable – other		27,28,29	W	1,992,665			2,072,195
Contract liabilities		6		65,017			72,624
Withholdings		27,28		725,042			608,069
Accrued expenses		27,28		651,469			764,863
Current tax liabilities		25		217,064			158,837
Provisions		15,32		58,831			54,137
Short-term borrowings		13,27,28		150,000			—
Current installments of long-term debt, net		13,27,28		966,333			976,195
Lease liabilities		27,28,29		333,538			316,169
Current installments of long-term payables – other		14,27,28		393,920			398,823
Other current liabilities		27,28		16,957			4,565

			5,570,836			5,426,477

Non-Current Liabilities:
Debentures, excluding current installments, net		13,27,28		5,596,966			5,835,400
Long-term borrowings, excluding current installments, net		13,27,28		500,000			300,000
Long-term payables – other		14,27,28		1,223,821			1,611,010
Long-term contract liabilities		6		8,570			9,149
Long-term derivative financial liabilities		27,28		321,025			321,025
Long-term lease liabilities		27,28,29		1,091,178			1,045,926
Long-term provisions		15		37,602			42,432
Deferred tax liabilities		25		922,402			883,311
Defined benefit liabilities		16		5,266			6,902
Other non-current liabilities		27,28		31,785			44,577

			9,738,615			10,099,732

Total Liabilities				15,309,451			15,526,209

Equity:
Share capital		1,17		30,493			30,493
Capital surplus and others		17,18		(4,499,135	)		(4,576,271	)
Retained earnings		19		14,672,285			14,770,618
Reserves		20		577,687			638,016

Total Equity				10,781,330			10,862,856

Total Liabilities and Equity			W	26,090,781			26,389,065

The accompanying notes are an integral part of the interim separate financial statements.

SK TELECOM CO., LTD.

Interim Separate Statements of Profit or Loss

For the three-month periods ended March 31, 2022 and 2021


(In millions of won, except for earnings per share)
	*Note*		2022 (Unaudited)			2021 (Unaudited)
Operating revenue:		21,29
Revenue			W	3,077,393			2,980,718
Operating expenses:		29
Labor				291,863			247,545
Commissions		5		1,154,732			1,173,360
Depreciation and amortization				677,864			688,368
Network interconnection				144,046			141,269
Leased lines				45,882			54,996
Advertising				16,879			13,202
Rent				28,095			29,555
Cost of goods sold				125,027			102,897
Others		22		236,064			222,224

				2,720,452			2,673,416

Operating profit				356,941			307,302
Finance income		24		45,732			233,910
Finance costs		24		(67,250	)		(58,431	)
Other non-operating income		23		13,631			3,529
Other non-operating expenses		23		(11,377	)		(5,445	)
Gain relating to investments in subsidiaries, associates and joint ventures, net		8		950			100,000

Profit before income tax				338,627			580,865
Income tax expense		25		86,609			114,852

Profit for the period			W	252,018			466,013

Earnings per share:		26
Basic earnings per share (in won)			W	1,140			1,299
Diluted earnings per share (in won)				1,139			1,299

The accompanying notes are an integral part of the interim separate financial statements.

SK TELECOM CO., LTD.

Interim Separate Statements of Comprehensive Income

For the three-month periods ended March 31, 2022 and 2021


(In millions of won)	*Note*		2022 (Unaudited)			2021 (Unaudited)
Profit for the period			W	252,018			466,013
Other comprehensive income (loss):
Items that will never be reclassified to profit or loss, net of taxes:
Remeasurement of defined benefit plans		16		14,527			(16,729	)
Valuation gain (loss) on financial assets at fair value through other comprehensive income		20		(57,221	)		171,320
Items that are or may be reclassified subsequently to profit or loss, net of taxes:
Net change in unrealized fair value of derivatives		20		(3,108	)		(1,630	)

Other comprehensive income (loss) for the period, net of taxes				(45,802	)		152,961

Total comprehensive income			W	206,216			618,974

The accompanying notes are an integral part of the interim separate financial statements.

SK TELECOM CO., LTD.

Interim Separate Statements of Changes in Equity

For the three-month periods ended March 31, 2022 and 2021


(In millions of won)			Share capital		Capital surplus and others																Retained earnings			Reserves			Total equity
	*Note*		Share capital		Paid-in surplus		Treasury shares			Hybrid bonds		Share option			Other			Sub-total			Retained earnings			Reserves			Total equity
Balance as of January 1, 2021			W	44,639		2,915,887		(2,123,661	)		398,759		1,481			(903,332	)		289,134			16,684,640			331,445			17,349,858
Total comprehensive income:
Profit for the period				—		—		—			—		—			—			—			466,013			—			466,013
Other comprehensive income (loss)		16,20		—		—		—			—		—			—			—			(16,729	)		169,690			152,961

				—		—		—			—		—			—			—			449,284			169,690			618,974

Transactions with owners:
Annual dividends				—		—		—			—		—			—			—			(641,944	)		—			(641,944	)
Share option		18		—		—		—			—		47			—			47			—			—			47
Interest on hybrid bonds				—		—		—			—		—			—			—			(3,692	)		—			(3,692	)
Acquisition of treasury shares		17		—		—		(72,982	)		—		—			—			(72,982	)		—			—			(72,982	)
Disposal of treasury shares		17		—		—		26,983			—		—			2,659			29,642			—			—			29,642

				—		—		(45,999	)		—		47			2,659			(43,293	)		(645,636	)		—			(688,929	)

Balance as of March 31, 2021 (Unaudited)			W	44,639		2,915,887		(2,169,660	)		398,759		1,528			(900,673	)		245,841			16,488,288			501,135			17,279,903

Balance as of January 1, 2022			W	30,493		1,771,000		(57,314	)		398,759		47,166			(6,735,882	)		(4,576,271	)		14,770,618			638,016			10,862,856
Total comprehensive income:
Profit for the period				—		—		—			—		—			—			—			252,018			—			252,018
Other comprehensive income (loss)		16,20		—		—		—			—		—			—			—			14,527			(60,329	)		(45,802	)

				—		—		—			—		—			—			—			266,545			(60,329	)		206,216

Transactions with owners:
Annual dividends				—		—		—			—		—			—			—			(361,186	)		—			(361,186	)
Share option		18		—		—		—			—		45,888			28,358			74,246			—			—			74,246
Interest on hybrid bonds				—		—		—			—		—			—			—			(3,692	)		—			(3,692	)
Transactions of treasury shares		17,18		—		—		19,273			—		(91,062	)		74,679			2,890			—			—			2,890

				—		—		19,273			—		(45,174	)		103,037			77,136			(364,878	)		—			(287,742	)

Balance as of March 31, 2022 (Unaudited)			W	30,493		1,771,000		(38,041	)		398,759		1,992			(6,632,845	)		(4,499,135	)		14,672,285			577,687			10,781,330

The accompanying notes are an integral part of the interim separate financial statements.

SK TELECOM CO., LTD.

Interim Separate Statements of Cash Flows

For the three-month periods ended March 31, 2022 and 2021


(In millions of won)
	*Note*		2022 (Unaudited)			2021 (Unaudited)
Cash flows from operating activities:
Cash generated from operating activities:
Profit for the period			W	252,018			466,013
Adjustments for income and expenses		31		934,816			610,058
Changes in assets and liabilities related to operating activities		31		(34,254	)		(285,507	)

				1,152,580			790,564
Interest received				5,819			5,567
Interest paid				(58,399	)		(54,959	)
Income tax paid				(498	)		(370	)

Net cash provided by operating activities				1,099,502			740,802

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net				—			57,000
Collection of short-term loans				29,830			41,580
Proceeds from disposals of long-term investment securities				—			5,312
Proceeds from disposals of investments in subsidiaries, associates and joint ventures				5,800			100,000
Proceeds from disposals of property and equipment				1,369			734

				36,999			204,626
Cash outflows for investing activities:
Increase in short-term financial instruments, net				(46,400	)		—
Increase in short-term loans				(33,954	)		(15,733	)
Acquisitions of long-term investment securities				(10,000	)		(10,000	)
Acquisitions of investments in subsidiaries, associates and joint ventures				(62,660	)		(88,820	)
Acquisitions of property and equipment				(653,996	)		(554,501	)
Acquisitions of intangible assets				(2,690	)		(2,160	)

				(809,700	)		(671,214	)

Net cash used in investing activities			W	(772,701	)		(466,588	)

(Continued)

SK TELECOM CO., LTD.

Interim Separate Statements of Cash Flows, Continued

For the three-month periods ended March 31, 2022 and 2021


(In millions of won)
	*Note*	2022 (Unaudited)			2021 (Unaudited)
Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings		W	150,000			—
Proceeds from long-term borrowings			200,000			—
Proceeds from issuance of debentures			—			308,757

			350,000			308,757
Cash outflows for financing activities:
Repayments of long-term payables – other			(400,245	)		(425,349	)
Repayments of debentures			(280,000	)		(210,000	)
Payments of interest on hybrid bonds			(3,692	)		—
Repayments of lease liabilities			(73,759	)		(73,215	)
Acquisition of treasury shares			—			(72,982	)

			(757,696	)		(781,546	)

Net cash used in financing activities			(407,696	)		(472,789	)

Net decrease in cash and cash equivalents			(80,895	)		(198,575	)
Cash and cash equivalents at beginning of the period			158,823			329,208
Effects of exchange rate changes on cash and cash equivalents			(5	)		2

Cash and cash equivalents at end of the period		W	77,923			130,635

The accompanying notes are an integral part of the interim separate financial statements.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

1.	Reporting Entity

SK Telecom Co., Ltd. (“the Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The Company mainly provides wireless telecommunications services in Korea. The head office of the Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.

The Company’s common shares and depositary receipts(“DRs”) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of March 31, 2022, the Company’s total issued shares are held by the following shareholders:


	Number of shares		Percentage of total shares issued (%)
SK Inc.		65,668,397		30.01
National Pension Service		20,389,153		9.32
Institutional investors and other shareholders		128,098,793		58.53
Kakao Corp.		3,846,487		1.76
Treasury shares		830,314		0.38

		218,833,144		100.00

On November 1, 2021, the date of spin-off, the Company completed the spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments.

2.	Basis of Preparation

(1)

Statement of compliance

These interim condensed separate financial statements were prepared in accordance with Korean International Financial Reporting Standard (“K-IFRS”) 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 December 31, 2021. These interim separate financial statements do not include all of the disclosures required for full annual financial statements.

These interim financial statements are interim separate financial statements prepared in accordance with K-IFRS 1027 Separate Financial Statements presented by a parent, an investor with joint control of or significant influence over an investee, in which the investments are accounted for at cost.

(2)

Use of estimates and judgments

1) Critical judgments, assumptions and estimation uncertainties

The preparation of the interim separate 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 interim separate 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 separate financial statements as of and for the year ended December 31, 2021.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

2.	Basis of Preparation, Continued

(2)

Use of estimates and judgments, Continued

2) Fair value measurement

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has established policies and processes with respect to the measurement of fair values, including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.

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

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

•

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

•

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

•

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

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

Information about assumptions used for fair value measurements are included in note 28.

3.	Significant Accounting Policies

The significant accounting policies applied by the Company in these interim separate 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, 2021, except for the adoption of new and revised K-IFRS applied from January 1, 2022, which are summarized below. The Company has not early applied the new and revised K-IFRS and interpretations that have been issued but are not yet effective.

•

Onerous Contracts – Cost of Fulfilling a Contract (Amendments to K-IFRS 1037).

•

Reference to Conceptual Framework (Amendments to K-IFRS 1103).

•

Property, Plant and Equipment: Proceeds before Intended Use (Amendments to K-IFRS 1016).

•

Annual Improvements to K-IFRS 2018-2020.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

4.	Trade and Other Receivables

(1)

Details of trade and other receivables as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)	March 31, 2022
	Gross amount		Loss allowance			Carrying amount
Current assets:
Accounts receivable – trade	W	1,616,774		(101,004	)		1,515,770
Short-term loans		66,862		(669	)		66,193
Accounts receivable – other(*)		634,287		(35,390	)		598,897
Guarantee deposits		49,556		—			49,556
Accrued income		173		—			173

		2,367,652		(137,063	)		2,230,589
Non-current assets:
Long-term loans		41,858		(41,043	)		815
Long-term accounts receivable – other(*)		281,491		—			281,491
Guarantee deposits		105,217		—			105,217

		428,566		(41,043	)		387,523

	W	2,796,218		(178,106	)		2,618,112

(*)	Gross and carrying amounts of accounts receivable – other as of March 31, 2022 include W458,426 million of financial instruments classified as fair value through profit or loss (“FVTPL”).


(In millions of won)	December 31, 2021
	Gross amount		Loss allowance			Carrying amount
Current assets:
Accounts receivable – trade	W	1,607,022		(92,762	)		1,514,260
Short-term loans		63,358		(634	)		62,724
Accounts receivable – other(*)		556,141		(35,185	)		520,956
Guarantee deposits		51,739		—			51,739
Accrued income		331		—			331

		2,278,591		(128,581	)		2,150,010
Non-current assets:
Long-term loans		41,238		(41,037	)		201
Long-term accounts receivable – other(*)		287,179		—			287,179
Guarantee deposits		106,091		—			106,091

		434,508		(41,037	)		393,471

	W	2,713,099		(169,618	)		2,543,481

(*)	Gross and carrying amounts of accounts receivable – other as of December 31, 2021 include W459,959 million of financial instruments classified as fair value through profit or loss (“FVTPL”).

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

4.	Trade and Other Receivables, Continued

(2)

Changes in the loss allowance on trade and other receivables measured at amortized cost for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	January 1, 2022		Impairment			*Write-offs()**			Collection of receivables previously written-off		March 31, 2022
Accounts receivable – trade	W	92,762		5,894			(216	)		2,564		101,004
Accounts receivable – other, etc.		76,856		(91	)		(54	)		391		77,102

	W	169,618		5,803			(270	)		2,955		178,106


(In millions of won)
	January 1, 2021		Impairment		*Write-offs()**			Collection of receivables previously written-off		March 31, 2021
Accounts receivable – trade	W	102,308		2,088		(205	)		2,807		106,998
Accounts receivable – other, etc.		76,170		109		(244	)		424		76,459

	W	178,478		2,197		(449	)		3,231		183,457

(*)	The Company writes off trade and other receivables that are determined to be uncollectable due to reasons such as termination of operations or bankruptcy.

(3)

The Company applies the practical expedient that allows the Company to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Company uses its historical credit loss experience over the past three years and classifies accounts receivable – trade by their credit risk characteristics and days overdue.

As the Company is a wireless telecommunications service provider, the Company’s financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.

Receivables related to other revenue mainly consist of receivables from corporate customers. The Company transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Company is not exposed to significant credit concentration risk as the Company regularly assesses their credit risk by monitoring their credit ratings. While the contract assets are subject to the impairment requirements, no significant expected credit loss has been identified.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

5.	Prepaid Expenses

The Company pays commissions to its retail stores and authorized dealers for wireless telecommunications services. The Company capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Company expects to maintain its customers.

(1)

Details of prepaid expenses as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Current assets:
Incremental costs of obtaining contracts	W	1,889,200		1,878,149
Others		50,144		35,270

	W	1,939,344		1,913,419

Non-current assets:
Incremental costs of obtaining contracts	W	921,706		931,655
Others		17,847		19,786

	W	939,553		951,441

(2)

Incremental costs of obtaining contracts

The amortization in connection with incremental costs of obtaining contracts recognized for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended
	March 31, 2022		March 31, 2021
Amortization recognized	W	604,797		640,540

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

6.	Contract Assets and Liabilities

In case of providing both wireless telecommunication services and sales of handsets, the Company allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Company recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.

(1)

Details of contract assets and liabilities as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Contract assets:
Allocation of consideration between performance obligations	W	30,509		29,477
Contract liabilities:
Wireless service contracts		18,674		18,397
Customer loyalty programs		11,200		12,699
Others		43,713		50,677

	W	73,587		81,773

(2)

The amount of revenue recognized for the three-month periods ended March 31, 2022 and 2021 related to the contract liabilities carried forward from the prior periods are W15,418 million and W28,713 million, respectively.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

7.	Investment Securities

(1)

There were no short-term investment securities as of March 31, 2022 and December 31, 2021.

(2)

Details of long-term investment securities as of March 31, 2022 and December 31, 2021 are as follows:

(In millions of won)

Category

March 31, 2022

December 31, 2021

Equity instruments

FVOCI(*)

1,301,973

1,383,223

Debt instruments

FVTPL

103,130

93,138

1,405,103

1,476,361

(*)	The Company designated investments in equity instruments that are not held for trading as financial assets at FVOCI, and the amounts of those equity instruments as of March 31, 2022 and December 31, 2021 are W1,301,973 million and W1,383,223 million, respectively.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

8.	Investments in Subsidiaries, Associates and Joint Ventures

(1)

Investments in subsidiaries, associates and joint ventures as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Investments in subsidiaries	W	3,218,602		3,148,741
Investments in associates and joint ventures		1,691,448		1,692,398

	W	4,910,050		4,841,139

(2)

Details of investments in subsidiaries as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won, except for share data)
	March 31, 2022						December 31, 2021
	Number of shares		Ownership (%)		Carrying amount		Carrying amount
SK Telink Co., Ltd.		1,432,627		100.0	W	243,988		243,988
SK Broadband Co., Ltd.		298,460,212		74.3		2,195,452		2,195,452
SK Communications Co., Ltd.		43,427,530		100.0		24,927		24,927
PS&Marketing Corporation		66,000,000		100.0		313,934		313,934
SERVICE ACE Co., Ltd.		4,385,400		100.0		21,927		21,927
SK Telecom China Holdings Co., Ltd.		—		100.0		48,096		48,096
SKT Americas, Inc.		122		100.0		31,203		31,203
Atlas Investment(*1)		—		100.0		157,942		155,656
SK stoa Co., Ltd.		3,631,355		100.0		40,029		40,029
Broadband Nowon Co., Ltd.		1,140,000		100.0		19,975		19,975
Quantum Innovation Fund I(*1)		—		59.9		12,174		11,935
SAPEON Korea Inc.(*2)		200,000		100.0		19,108		—
SAPEON Inc.(*2)		4,000		100.0		48,228		—
SK O&S Co., Ltd. and others		—		—		41,619		41,619

					W	3,218,602		3,148,741

(*1)	The Company additionally acquired shares for the three-month period ended March 31, 2022, but there is no change in the ownership interest.

(*2)	The Company newly established SAPEON Korea Inc. and SAPEON Inc. for the three-month period ended March 31, 2022.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

8.	Investments in Subsidiaries, Associates and Joint Ventures, Continued

(3)

Details of investments in associates and joint ventures as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won, except for share data)
	March 31, 2022						December 31, 2021
	Number of shares		Ownership (%)		Carrying amount		Carrying amount
Investments in associates:
SK China Company Ltd.		10,928,921		27.3	W	601,192		601,192
Korea IT Fund(*1)		190		63.3		220,957		220,957
HanaCard Co., Ltd.(*2)		39,902,323		15.0		253,739		253,739
SK Technology Innovation Company		14,700		49.0		45,864		45,864
S.M. Culture & Contents Co., Ltd.		22,033,898		23.1		65,341		65,341
SK South East Asia Investment Pte. Ltd.		300,000,000		20.0		344,240		344,240
Pacific Telecom Inc.(*2)		1,734,109		15.0		36,487		36,487
Digital Games International Pte. Ltd.		10,000,000		33.3		4,539		4,539
Invites Healthcare Co., Ltd.		489,999		27.1		35,000		35,000
CMES Inc.(*2,3)		42,520		7.7		900		—
12CM JAPAN and others(*2,4)		—		—		72,014		75,864

						1,680,273		1,683,223

Investments in joint ventures:
Finnq Co., Ltd.(*6)		6,370,000		49.0		7,175		7,175
UTC Kakao-SK Telecom ESG Fund(*5,6)		—		48.2		4,000		2,000

						11,175		9,175

					W	1,691,448		1,692,398

(*1)	Investments in Korea IT Fund was classified as investment in associates as the Company does not have control over the investee under the contractual agreement with other shareholders.

(*2)	These investments were classified as investments in associates as the Company can exercise significant influence through its right to appoint the members of the Board of Directors even though the Company has less than 20% of equity interests.

(*3)	As the Company obtained significant influence over the investee, W900 million of financial assets at FVOCI are reclassified to investments in associates for the three-month period ended March 31, 2022.

(*4)

The Company additionally contributed W1,000 million in cash to Smart SKT-Infinitum Game Fund for the three-month period ended March 31, 2022. In addition, the Company disposed the shares of Start-up Win-Win Fund (W4,850 million) at W5,800 million in cash from which it recognized W950 million of gain relating to investments in associates for the three-month period ended March 31, 2022.

(*5)	The Company additionally contributed W2,000 million in cash for the three-month period ended March 31, 2022, but there is no change in the ownership interest.

(*6)	These investments were classified as investments in joint ventures as the Company has a joint control pursuant to the agreement with the other shareholders.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

8.	Investments in Subsidiaries, Associates and Joint Ventures, Continued

(4)

The market value of investments in listed associates as of March 31, 2022 and December 31, 2021 are as follows:

(In millions of won, except for share data)

March 31, 2022

December 31, 2021

Market price
per share
(in won)

Number of
shares

Market
value

Market price
per share
(in won)

Number of
shares

Market
value

S.M.Culture & Contents Co., Ltd.

5,200

22,033,898

114,576

4,485

22,033,898

98,822

9.	Property and Equipment

Changes in property and equipment for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2022
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	W	621,614		—		(3	)		3,514			—			625,125
Buildings		564,976		137		(100	)		13,727			(10,175	)		568,565
Structures		290,813		1		—			6,828			(9,500	)		288,142
Machinery		5,331,485		3,665		(120	)		302,611			(398,237	)		5,239,404
Right-of-use assets		1,370,897		151,518		(11,278	)		(14,801	)		(87,565	)		1,408,771
Other		439,982		82,713		(262	)		(59,345	)		(18,774	)		444,314
Construction in progress		698,641		94,524		(237	)		(273,538	)		—			519,390

	W	9,318,408		332,558		(12,000	)		(21,004	)		(524,251	)		9,093,711


(In millions of won)
	For the three-month period ended March 31, 2021
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Reclassified as held for sale			Ending balance
Land	W	638,371		—		—			5,837			—			(20,507	)		623,701
Buildings		587,958		280		(106	)		15,668			(10,420	)		(8,669	)		584,711
Structures		316,895		5		—			7,718			(9,352	)		(6,104	)		309,162
Machinery		5,354,992		6,857		(114	)		325,666			(396,445	)		—			5,290,956
Right-of-use assets		1,323,111		108,704		(22,006	)		—			(91,608	)		—			1,318,201
Other		405,140		82,611		(137	)		(90,240	)		(20,562	)		—			376,812
Construction in progress		531,081		63,968		—			(282,986	)		—			—			312,063

	W	9,157,548		262,425		(22,363	)		(18,337	)		(528,387	)		(35,280	)		8,815,606

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

10.

Investment Property

(1)

Changes in investment property for the three-month period ended March 31, 2022 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2022
	Beginning balance		Transfer			Depreciation			Ending balance
Land	W	17,084		(278	)		—			16,806
Buildings		21,768		(194	)		(496	)		21,078
Right-of-use assets		6,248		14,853			(1,800	)		19,301

	W	45,100		14,381			(2,296	)		57,185

(2)

The Company recognized lease income of W5,587 million for the three-month period ended March 31, 2022 from investment property.

11.

Leases

(1)

Details of the right-of-use assets as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Land, buildings and structures	W	1,159,086		1,139,024
Others		249,685		231,873

	W	1,408,771		1,370,897

(2)

Details of amounts recognized in the interim separate statements of profit or loss for the three-month periods ended March 31, 2022 and 2021 as a lessee are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Depreciation of right-of-use assets:
Land, buildings and structures	W	69,315		72,693
Others		18,250		18,915

	W	87,565		91,608

Interest expense on lease liabilities	W	5,472		4,122

Expenses related to short-term leases and leases of low-value assets the Company recognized are not material.

(3)

The total cash outflows due to lease payments for the three-month periods ended March 31, 2022 and 2021 amounted to W79,250 million and W77,358 million, respectively.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

12.

Intangible Assets

(1)

Changes in intangible assets for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended March 31, 2022
	Beginning balance		Acquisition		Disposal			Transfer			Amortization			Ending balance
Frequency usage rights	W	2,559,689		—		—			—			(119,195	)		2,440,494
Land usage rights		2,449		—		—			—			(404	)		2,045
Industrial rights		10,934		2,014		—			(111	)		(1,170	)		11,667
Facility usage rights		14,355		204		(1	)		38			(695	)		13,901
Club memberships(*1)		51,356		11		—			—			—			51,367
Other(*2)		564,547		461		—			8,630			(65,311	)		508,327

	W	3,203,330		2,690		(1	)		8,557			(186,775	)		3,027,801


(In millions of won)
	For the three-month period ended March 31, 2021
	Beginning balance		Acquisition		Transfer		Amortization			Ending balance
Frequency usage rights	W	1,932,765		—		—		(124,527	)		1,808,238
Land usage rights		4,103		—		—		(465	)		3,638
Industrial rights		9,659		1,631		—		(686	)		10,604
Facility usage rights		15,061		180		1		(664	)		14,578
Club memberships(*1)		50,698		33		—		—			50,731
Other(*2)		652,797		316		27,443		(68,498	)		612,058

	W	2,665,083		2,160		27,444		(194,840	)		2,499,847

(*1)	Club memberships are classified as intangible assets with indefinite useful lives and are not amortized.

(*2)	Other intangible assets primarily consist of computer software and others.

(2)

Details of frequency usage rights as of March 31, 2022 are as follows:

(In millions of won)

Amount

Description

Commencement of
amortization

Completion of
amortization

800 MHz license

186,641

LTE service

Jul. 2021

Jun. 2026

1.8 GHz license

493,654

LTE service

Dec. 2021

Dec. 2026

2.6 GHz license

576,735

LTE service

Sept. 2016

Dec. 2026

2.1 GHz license

371,007

W-CDMA and LTE service

Dec. 2021

Dec. 2026

3.5 GHz license

802,924

5G service

Apr. 2019

Nov. 2028

28 GHz license

9,533

5G service

Jan. 2021

Nov. 2023

2,440,494

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

13.

Borrowings and Debentures

(1)

Short-term borrowings as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
Lender	Annual interest rate (%)		March 31, 2022		December 31, 2021
Woori Bank		2.59	W	50,000		—
KIWOOM Securities Co., Ltd.		1.81		50,000		—
Shinhan Investment Corp.		1.81		50,000		—

			W	150,000		—

(2)

Changes in long-term borrowings for the three-month period ended March 31, 2022 are as follows:

(In millions of won)

Lender

Annual interest
rate (%)

Maturity

Book value

Current

6,728

Non-current

300,000

As of January 1, 2022

306,728

New long-term borrowings:

DBS Bank Ltd.

2.68

Mar. 10, 2025

200,000

Other changes(*)

157

Current

6,885

Non-current

500,000

As of March 31, 2022

506,885

(*)	Other changes include the effects on foreign currency translation of long-term borrowings and changes in present value discount on long-term borrowings for the three-month period ended March 31, 2022.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

13.

Borrowings and Debentures, Continued

(3)

Changes in debentures for the three-month period ended March 31, 2022 are as follows:


(In millions of won)
	Purpose		Annual interest rate (%)		Maturity		Face value			Book value
Current							W	970,000			969,467
Non-current								5,852,600			5,835,400

As of January 1, 2022								6,822,600			6,804,867

Debentures repaid:
Unsecured corporate bonds		Operating and refinancing fund		2.40		Feb. 26, 2022		(100,000	)		(100,000	)
		Operating fund		2.03		Mar. 6, 2022		(180,000	)		(180,000	)

								(280,000	)		(280,000	)

Other changes(*1)								30,360			31,547
Current(*2)								960,000			959,448
Non-current(*2)								5,612,960			5,596,966

As of March 31, 2022							W	6,572,960			6,556,414

(*1)	Other changes include the effects on foreign currency translation of debentures and changes in discount on issuance of debentures for the three-month period ended March 31, 2022.

(*2)	W269,981 million were reclassified from non-current to current for the three-month period ended March 31, 2022.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

14.

Long-Term Payables – Other

(1)

As of March 31, 2022 and December 31, 2021, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 12):


(In millions of won)
	March 31, 2022			December 31, 2021
Long-term payables – other	W	1,690,470			2,090,715
Present value discount on long-term payables – other		(72,729	)		(80,882	)
Current installments of long-term payables – other		(393,920	)		(398,823	)

Carrying amount at period end	W	1,223,821			1,611,010

(2)

The principal amount of long-term payables – other repaid for the three-month periods ended March 31, 2022 and 2021 are W400,245 million and W425,349 million, respectively. The repayment schedule of the principal amount of long-term payables – other as of March 31, 2022 is as follows:


(In millions of won)
	Amount
Less than 1 year	W	400,245
1 ~ 3 years		738,300
3 ~ 5 years		460,538
More than 5 years		91,387

	W	1,690,470

15.

Provisions

Changes in provisions for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)	For the three-month period ended March 31, 2022												As of March 31, 2022
	Beginning balance		Increase		Utilization			Reversal			Ending balance		Current		Non-current
Provision for restoration	W	94,684		1,333		(1,525	)		—			94,492		56,890		37,602
Emission allowance		1,885		722		—			(666	)		1,941		1,941		—

	W	96,569		2,055		(1,525	)		(666	)		96,433		58,831		37,602


(In millions of won)	For the three-month period ended March 31, 2021												As of March 31, 2021
	Beginning balance		Increase		Utilization			Reversal			Ending balance		Current		Non-current
Provision for restoration	W	91,966		2,170		(1,511	)		—			92,625		42,710		49,915
Emission allowance		7,424		271		—			(712	)		6,983		6,983		—

	W	99,390		2,441		(1,511	)		(712	)		99,608		49,693		49,915

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

16.

Defined Benefit Liabilities

(1)

Details of defined benefit liabilities as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022			December 31, 2021
Present value of defined benefit obligations	W	471,789			483,001
Fair value of plan assets		(466,523	)		(476,099	)

	W	5,266			6,902

(2)

Changes in present value of defined benefit obligations for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022			March 31, 2021
Beginning balance	W	483,001			464,846
Current service cost		13,383			14,086
Interest cost		2,862			2,725
Remeasurement
- Demographic assumption		(5,672	)		—
- Financial assumption		(31,830	)		—
- Adjustment based on experience		14,842			22,280
Benefit paid		(8,195	)		(11,107	)
Others		3,398			1,760

Ending balance	W	471,789			494,590

(3)

Changes in fair value of plan assets for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022			March 31, 2021
Beginning balance	W	476,099			457,425
Interest income		2,752			2,680
Remeasurement		(2,552	)		304
Contribution		5,000			10,000
Benefit paid		(17,805	)		(17,111	)
Others		3,029			1,328

Ending balance	W	466,523			454,626

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

16.

Defined Benefit Liabilities, Continued

(4)

Total cost of defined benefit plan, which is recognized in profit or loss (included in labor in the interim separate statements of profit or loss) and capitalized into construction-in-progress, for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Current service cost	W	13,383		14,086
Net interest cost		110		45

	W	13,493		14,131

17.

Share Capital and Capital Surplus and Others

(1)

The Company’s outstanding share capital consists entirely of common shares with a par value of W100. The number of authorized, issued and outstanding common shares and the details of capital surplus and others as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won, except for share data)
	March 31, 2022			December 31, 2021
Number of authorized shares		670,000,000			670,000,000
Number of issued shares(*1)		218,833,144			218,833,144
Share capital:
Common share(*2)	W	30,493			30,493
Capital surplus and others:
Paid-in surplus		1,771,000			1,771,000
Treasury shares		(38,041	)		(57,314	)
Hybrid bonds(*3)		398,759			398,759
Share option(Note 18)		1,992			47,166
Others		(6,632,845	)		(6,735,882	)

	W	(4,499,135	)		(4,576,271	)

(*1)	As a result of stock split and the spin-off for the year ended December 31, 2021, the number of shares that the Company is allowed to issue under its article of incorporation has changed from 220,000,000 shares with a par value of W500 to 670,000,000 shares with a par value of W100.

(*2)

The Company’s share capital decreased by W14,146 million as a result of the spin-off for the year ended December 31, 2021. In addition, the Company retired 8,685,568 treasury shares with reduction of its retained earnings before appropriation, as a result, the Company’s issued shares have decreased without change in share capital for the year ended December 31, 2021. Meanwhile, in 2002 and 2003, the Company retired treasury shares with reduction of its retained earnings before appropriation. As a result, the Company’s issued shares have decreased without change in share capital.

(*3)	As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Company classified the hybrid bonds as equity. When in liquidation or bankruptcy, these hybrid bonds are senior only to common shares.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

17.

Share Capital and Capital Surplus and Others, Continued

(2)

There were no changes in share capital for the three-month periods ended March 31, 2022 and 2021, and details of shares outstanding as of March 31, 2022 and 2021 are as follows:

(In shares)

March 31, 2022

March 31, 2021

Issued shares

Treasury
shares

Outstanding
shares

Issued shares

Treasury
shares

Outstanding
shares

Shares outstanding

218,833,144

830,314

218,002,830

80,745,711

9,585,568

71,160,143

(3)

Treasury shares as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won, except for share data)
	March 31, 2022		December 31, 2021
Number of shares(*)		830,314		1,250,992
Acquisition cost	W	38,041		57,314

(*)	The Company distributed 420,678 treasury shares (acquisition cost: W19,273 million) as bonus payment to the employee, resulting in gain on disposal of treasury shares of W4,393 million for the three-month period ended March 31, 2022.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

18.

Share-based Payment

(1)

The terms and conditions related to the grants of the share-based payment arrangement are as follows:

Equity-settled share-based payment arrangement

Series

1-2

1-3

5(*2)

6(*2)

Grant date

March 24, 2017

February 20,
2018

February 22,
2019

March 26,

2019

March 26,

2020

March 25,

2021

Types of shares to be issued

Registered common shares

Grant method

Reissue of treasury shares, Cash settlement

Number of shares(*1) (in share)

67,320

4,124

12,685

5,266

381,937

94,657

Exercise price(*1) (in won)

53,298

57,562

50,824

53,052

50,862

38,452

50,276

Exercise period

Mar. 25, 2020

Mar. 25, 2021

Feb. 21, 2020

Feb. 23, 2021

Mar. 27, 2021

Mar. 27, 2023

Mar. 26, 2023

Mar. 24, 2023

Mar. 24, 2024

Feb. 20, 2023

Feb. 22, 2024

Mar. 26, 2024

Mar. 26, 2027

Mar. 25, 2026

Vesting conditions

3 years’
service from
the grant date

4 years’

service from
the grant date

2 years’

service from
the grant date

2 years’

service from
the grant date

2 years’

service from
the grant date

3 years’

service from

the grant date

2 years’

service from

the grant date


	Series
	7-1	7-2
Grant date	March 25, 2022
Types of shares to be issued	Registered common shares
Grant method	Reissue of treasury shares, Cash settlement
Number of shares (in share)	295,275	120,441
Exercise price (in won)	56,860	56,860
Exercise period	Mar. 26, 2025	Mar. 26, 2024
	~	~
	Mar. 25, 2029	Mar. 25, 2027
Vesting conditions	3 years’ service from the grant date	2 years’ service from the grant date

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

18.

Share-based Payment, Continued

(1)

The terms and conditions related to the grants of the share-based payment arrangement are as follows, Continued:

Cash-settled share-based payment arrangement


	Share appreciation rights of *SK Telecom Co., Ltd.(3)**		Share appreciation rights of *SK Square Co., Ltd.(3)**

Grant date		January 1, 2021
Grant method		Cash settlement
Number of shares(*1) (in share)		207,686		134,253
Exercise price(*1) (in won)		50,276
Exercise period		Jan. 1, 2023 ~ Mar. 28, 2024
Vesting conditions		2 years’ service from the grant date

(*1)	Number of shares granted and exercise price are adjusted as a result of stock split and the spin-off for the year ended December 31, 2021, and the remaining part of 1-1st share option was fully exercised for the three-month period ended March 31, 2022.

(*2)	Parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2021.

(*3)

The Company newly established the long-term incentive policy as part of the compensation related to the growth of corporate value on the beginning of the prior year and granted cash settled share appreciation rights to executives. Meanwhile, parts of the grant that have not met the vesting conditions have been forfeited for the three-month period ended March 31, 2022.

(2)

Share compensation expense recognized for the three-month period ended March 31, 2022 and the remaining share compensation expense to be recognized in subsequent periods are as follows:


(In millions of won)
	Share compensation expense
As of December 31, 2021	W	76,979
For the three-month period ended March 31, 2022		74,246
In subsequent periods		5,135

	W	156,360

As of March 31, 2022, the carrying amount of liabilities recognized by the Company in relation to the cash-settled share-based payment arrangement is W2,257 million.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

18.

Share-based Payment, Continued

(3)

The Company used binomial option-pricing model in the measurement of the fair value of share options at the grant date, and the inputs used in the model are as follows:

Equity-settled share-based payment arrangement


(In won)	Series
	1-2			1-3			2			3			4			5			6
Risk-free interest rate		1.95	%		2.07	%		2.63	%		1.91	%		1.78	%		1.52	%		1.55	%
Estimated option’s life		6 years			7 years			5 years			5 years			5 years			7 years			5 years
Share price
(Closing price on the preceding day)(*)		52,500			52,500			48,700			51,800			50,600			34,900			49,800
Expected volatility		13.38	%		13.38	%		16.45	%		8.30	%		7.70	%		8.10	%		25.70	%
Expected dividends		3.80	%		3.80	%		3.70	%		3.80	%		3.90	%		5.70	%		4.00	%
Exercise price(*)		53,298			57,562			50,824			53,052			50,862			38,452			50,276
Per-share fair value of the option(*)		4,048			3,096			4,798			1,720			1,622			192			8,142


(In won)	Series
	7-1			7-2
Risk-free interest rate		2.80	%		2.68	%
Estimated option’s life		5 years			5 years
Share price
(Closing price on the preceding day)		57,300			57,300
Expected volatility		24.20	%		24.20	%
Expected dividends		3.40	%		3.40	%
Exercise price		56,860			56,860
Per-share fair value of the option		11,772			10,435

Cash-settled share-based payment arrangement


(In won)	Share appreciation rights of SK Telecom Co., Ltd.			Share appreciation rights of SK Square Co., Ltd.
Risk-free interest rate		2.37	%		2.37	%
Estimated option’s life		3.25 years			3.25 years
Share price on the remeasurement date		56,900			56,800
Expected volatility		24.20	%		24.20	%
Expected dividends		3.50	%		0.00	%
Exercise price(*)		50,276			50,276
Per-share fair value of the option		9,591			12,231

(*)	Share price (closing price on the preceding day), exercise price and per-share fair value of the option are adjusted as a result of stock split and spin-off for the year ended December 31, 2021.

Meanwhile, the Board of Directors of the Company resolved to dispose its treasury shares for the purpose of allotment of shares as bonus payment on October 12, 2021. The transaction is equity-settled share-based payment transactions in accordance with K-IFRS 1102, and 505,350 shares (before stock split) were granted on October 12, 2021(grant date). 7,700 shares (before stock split) out of 505,350 shares (before stock split) were transferred to the spin-off company on November 1, 2021. Vesting conditions are 6 months from the grant date and per-share fair value on the grant date are measured at W300,500 that is closing price of common shares on the grant date before stock split and spin-off. The fair value of these share-based payment on the grant date is W151,858 million, among which the awards with a fair value of W9,935 million were transferred to the spin-off company.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

19.

Retained Earnings

Retained earnings as of as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Appropriated:
Legal reserve	W	22,320		22,320
Reserve for business expansion		9,631,138		11,631,138
Reserve for technology development		4,365,300		4,365,300

		13,996,438		15,996,438
Unappropriated retained earnings		653,527		(1,248,140	)

	W	14,672,285		14,770,618

20.

Reserves

(1)

Details of reserves, net of taxes, as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Valuation gain on financial assets at FVOCI	W	555,789		613,010
Valuation gain on derivatives		21,898		25,006

	W	577,687		638,016

(2)

Changes in reserves for the three-month periods ended March 31, 2022 and 2021 as follows:


(In millions of won)
	Valuation gain on financial assets at FVOCI			Valuation gain on derivatives			Total
Balance at January 1, 2021	W	323,246			8,199			331,445
Changes, net of taxes		171,320			(1,630	)		169,690

Balance at March 31, 2021		494,566			6,569			501,135

Balance at January 1, 2022		613,010			25,006			638,016
Changes, net of taxes		(57,221	)		(3,108	)		(60,329	)

Balance at March 31, 2022	W	555,789			21,898			577,687

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

21.

Operating Revenue

Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Company’s revenue and future cash flows is as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Products transferred at a point in time:
Product sales	W	23,424		9,914
Services transferred over time:
Wireless service revenue(*1)		2,587,076		2,531,758
Cellular interconnection revenue		132,388		127,750
Others(*2)		334,505		311,296

		3,053,969		2,970,804

	W	3,077,393		2,980,718

(*1)	Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through usage charges collected from the wireless subscribers.

(*2)	Other revenue includes revenue from billing and collection services as well as other miscellaneous services.

The Company has a right to consideration from a customer in an amount that corresponds directly with the value to the subscriber of the Company’s performance completed; thus, as a practical expedient, the Company recognizes revenue in the amount to which the Company has a right to invoice.

Most of the Company’s transactions are occurring in Korea as it principally operates its businesses in Korea.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

22.

Other Operating Expenses

Details of other operating expenses for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Communication	W	6,650		7,096
Utilities		72,011		65,516
Taxes and dues		2,520		2,227
Repair		54,352		48,779
Research and development		78,081		83,499
Training		4,959		4,311
Bad debt expenses		5,894		2,088
Other		11,597		8,708

	W	236,064		222,224

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

23.

Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022			March 31, 2021
Other Non-operating Income:
Gain on disposal of property and equipment and intangible assets	W	4,353			725
Others		9,278			2,804

	W	13,631			3,529

Other Non-operating Expenses:
Loss on disposal of property and equipment and intangible assets	W	1,729			1,118
Donations		5,000			3,249
Other bad debt expenses (reversal)		(91	)		109
Others		4,739			969

	W	11,377			5,445

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

24.

Finance Income and Costs

(1)

Details of finance income and costs for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Finance Income:
Interest income	W	6,357		6,880
Gain on sale of accounts receivable – other		1,043		7,921
Dividend income		37,227		184,599
Gain on foreign currency transactions		821		581
Gain on foreign currency translations		284		192
Gain relating to financial instruments at FVTPL		—		33,737

	W	45,732		233,910

Finance Costs:
Interest expenses	W	63,515		58,047
Loss on sale of accounts receivable – trade		2,837		—
Loss on foreign currency transactions		722		325
Loss on foreign currency translations		169		15
Loss relating to financial instruments at FVTPL		7		44

	W	67,250		58,431

(2)

Details of interest income included in finance income for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Interest income on cash equivalents and short-term financial instruments	W	1,420		962
Interest income on loans and others		4,937		5,918

	W	6,357		6,880

(3)

Details of interest expenses included in finance costs income for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Interest expense on borrowings	W	3,567		801
Interest expense on debentures		43,551		47,001
Others		16,397		10,245

	W	63,515		58,047

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

24.

Finance Income and Costs, Continued

(4)

Details of impairment losses for financial assets for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022			March 31, 2021
Accounts receivable – trade	W	5,894			2,088
Other receivables		(91	)		109

	W	5,803			2,197

25.

Income Tax Expense

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

26.

Earnings per Share

The Company carried out stock split on October 28, 2021. Basic and diluted earnings per share for the three-month period ended March 31, 2021 has been retroactively adjusted to reflect the effect of the stock split.

(1)

Basic earnings per share

Basic earnings per share for the three-month periods ended March 31, 2022 and 2021 are calculated as follows:


(In millions of won, except for share data and basic earnings per share)
	For the three-month period ended
	March 31, 2022			March 31, 2021
Profit for the period	W	252,018			466,013
Interest on hybrid bonds		(3,692	)		(3,692	)

Profit for the period on common shares		248,326			462,321
Weighted average number of common shares outstanding		217,892,622			355,828,900

Basic earnings per share (in won)	W	1,140			1,299

The weighted average number of common shares outstanding for the three-month periods ended March 31, 2022 and 2021 are calculated as follows:


(In shares)	For the three-month period ended March 31, 2022
	Number of common shares			Weighted average number of common shares
Issued shares at January 1, 2022		218,833,144			218,833,144
Treasury shares at January 1, 2022		(1,250,992	)		(1,250,992	)
Disposal of treasury shares		420,678			310,470

		218,002,830			217,892,622


(In shares)	For the three-month period ended March 31, 2021
	Number of common shares			Weighted average number of common shares
Issued shares at January 1, 2021		403,728,555			403,728,555
Treasury shares at January 1, 2021		(47,092,790	)		(47,092,790	)
Acquisition of treasury shares		(1,440,000	)		(1,190,000	)
Disposal of treasury shares		604,950			383,135

		355,800,715			355,828,900

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

26.

Earnings per Share, Continued

(2)

Diluted earnings per share

Diluted earnings per share for the three-month periods ended March 31, 2022 and 2021 are calculated as follows:


(In millions of won, except for share data and diluted earnings per share)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Profit for the period on common shares	W	248,326		462,321
Adjusted weighted average number of common shares outstanding		218,032,957		355,982,035

Diluted earnings per share (in won)	W	1,139		1,299

The adjusted weighted average number of common shares outstanding for the three-month periods ended March 31, 2022 and 2021 are calculated as follows:


(In shares)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Outstanding shares at January 1		217,582,152		356,635,765
Effect of treasury shares		310,470		(806,865	)
Effect of share option		140,335		153,135

Adjusted weighted average number of common shares outstanding		218,032,957		355,982,035
		218,032,957		355,982,035

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

27.

Categories of Financial Instruments

(1)

Financial assets by category as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022
	Financial assets at FVTPL		Equity instruments at FVOCI		Financial assets at amortized cost		Derivatives hedging instrument		Total
Cash and cash equivalents	W	3,600		—		74,323		—		77,923
Financial instruments		336,400		—		89,354		—		425,754
Long-term investment securities(*)		103,130		1,301,973		—		—		1,405,103
Accounts receivable – trade		—		—		1,515,770		—		1,515,770
Loans and other receivables		458,426		—		643,916		—		1,102,342
Derivative financial assets		25,001		—		—		176,530		201,531

	W	926,557		1,301,973		2,323,363		176,530		4,728,423

(*)	The Company designated W1,301,973 million of equity instruments that are not held for trading as financial assets at FVOCI.


(In millions of won)
	December 31, 2021
	Financial assets at FVTPL		Equity instruments at FVOCI		Financial assets at amortized cost		Derivatives hedging instrument		Total
Cash and cash equivalents	W	25,000		—		133,823		—		158,823
Financial instruments		290,000		—		89,354		—		379,354
Long-term investment securities(*)		93,138		1,383,223		—		—		1,476,361
Accounts receivable – trade		—		—		1,514,260		—		1,514,260
Loans and other receivables		459,959		—		569,262		—		1,029,221
Derivative financial assets		25,001		—		—		152,511		177,512

	W	893,098		1,383,223		2,306,699		152,511		4,735,531

(*)	The Company designated W1,383,223 million of equity instruments that are not held for trading as financial assets at FVOCI.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

27.

Categories of Financial Instruments, Continued

(2)

Financial liabilities by category as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Total
Derivative financial liabilities	W	321,025		—		321,025
Borrowings		—		656,885		656,885
Debentures		—		6,556,414		6,556,414
Lease liabilities(*)		—		1,424,716		1,424,716
Accounts payable – other and others		—		4,597,878		4,597,878

	W	321,025		13,235,893		13,556,918


(In millions of won)
	December 31, 2021
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Total
Derivative financial liabilities	W	321,025		—		321,025
Borrowings		—		306,728		306,728
Debentures		—		6,804,867		6,804,867
Lease liabilities(*)		—		1,362,095		1,362,095
Accounts payable – other and others		—		5,070,674		5,070,674

	W	321,025		13,544,364		13,865,389

(*)	Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Financial Risk Management

(1)

Financial risk management

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

The Company’s financial assets consist of cash and cash equivalents, financial instruments, investment securities, accounts receivable – trade and other receivables, etc. Financial liabilities consist of accounts payable – other, borrowings, debentures, lease liabilities and others.

1) Market risk

(i) Currency risk

The Company is exposed to currency risk mainly on exchange fluctuations on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Company.

Monetary assets and liabilities denominated in foreign currencies as of March 31, 2022 are as follows:


(In millions of won, thousands of foreign currencies)
	Assets				Liabilities
	Foreign currencies		Won equivalent		Foreign currencies		Won equivalent
USD		18,979	W	22,980		1,215,438	W	1,471,652
EUR		110		148		—		—
Others		—		171		—		21

			W	23,299			W	1,471,673

In addition, the Company has entered into currency swaps to hedge against currency risk related to foreign currency borrowings and debentures.

As of March 31, 2022, a hypothetical change in exchange rates by 10% would have increased (decreased) the Company’s profit before income tax as follows:


(In millions of won)
	If increased by 10%		If decreased by 10%
USD	W	483		(483	)
EUR		15		(15	)
Others		15		(15	)

	W	513		(513	)

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

1) Market risk, Continued

(ii) Interest rate risk

The interest rate risk of the Company arises from borrowings, debentures and long-term payables – other. Since the Company’s interest-bearing assets are mostly fixed-interest bearing assets, the Company’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.

The Company performs various analysis to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Company takes various measures, such as refinancing, renewal, alternative financing and hedging.

As of March 31, 2022, floating-rate debentures amount to W363,240 million, and the Company has entered into interest rate swaps to hedge interest rate risk related to the floating-rate debentures. Therefore, profit before income taxes for the three-month period ended March 31, 2022 would not have been affected by the changes in interest rates of floating-rate debentures.

Interest rate benchmark reform and associated risks

The Company plans to include fallback clauses into financial instruments relating to LIBOR to which calculation has not been suspended yet or change their LIBOR directly to alternative interest rates before the calculation is suspended.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

1) Market risk, Continued

(ii) Interest rate risk, Continued

Interest rate benchmark reform and associated risks, Continued

The Company’s financial instruments exposed to the risk arising from interest rate benchmark reform as of March 31, 2022 are indexed to the USD LIBOR. The Company is exposed to legal risk to amend the terms of contracts on the financial instruments subject to interest rate benchmark reform as well as process and operation risks to manage such amendments. In addition, the Company is exposed to the risk of monitoring the market trend regarding the alternative interest rate and establishing the corresponding risk management strategy. If the IBOR is designated as the hedged item, the Company is required to replace it to an alternative benchmark interest and review the effects on the hedging relationship. In addition, the Company is exposed to the risk of minimizing hedge ineffectiveness by aligning the method and timing of the transition to the alternative benchmark interest applied to the hedged item and the hedging instrument.

The Company evaluates the extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of IBOR reform and how to manage communication about IBOR reform with counterparties.

Non-derivative financial liabilities

The Company’s non-derivative financial liabilities subject to interest rate benchmark reform as of December 31, 2021 were floating-rate bonds indexed to USD LIBOR. As explained above, the Company is discussing with the counterparty about including the fallback clauses as of March 31, 2022.

Derivatives

The Company’s derivative instruments designated as cash flow hedge are governed by contracts based on the International Swaps and Derivatives Association (ISDA)’s master agreements. As part of interest rate benchmark reform, ISDA has included a new fallback clause regarding which alterative benchmark interest rate to be applied when the calculation of major IBOR is suspended in the master agreement. The master agreement is applied to derivative contracts after January 25, 2021, and the transaction parties is required to adhere to ISDA protocol to include the same fallback clause to derivative contracts before January 25, 2021. The Company has adhered to ISDA protocol for transition to the alternative benchmark interest rate, and the fallback clause will be included when counterparties adhere to the protocol to include. The Company’s counterparties have adhered to ISDA protocol and agreed to include the fallback clause.

Hedge accounting

The Company’s hedged items and hedging instruments as of March 31, 2022 are indexed to USD LIBOR. These benchmark rates are quoted each day, and the IBOR cash flows are exchanged with counterparties as usual.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

2) Credit risk

The maximum credit exposure as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022		December 31, 2021
Cash and cash equivalents	W	77,886		158,791
Financial instruments		425,754		379,354
Investment securities		900		900
Accounts receivable – trade		1,515,770		1,514,260
Contract assets		30,509		29,477
Loans and other receivables		1,102,342		1,029,221
Derivative financial assets		201,531		177,512

	W	3,354,692		3,289,515

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. 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.

The Company establishes a loss allowance in respect of accounts receivable – trade. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Also, the Company’s credit risk can arise from transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivatives. To minimize such risk, the Company has a policy to deal only with financial institutions with high credit ratings.

The Company’s maximum exposure to credit risk is equal to each financial asset’s carrying amount as of March 31, 2022.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

3) Liquidity risk

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

Contractual maturities of financial liabilities as of March 31, 2022 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 – 5 years		More than 5 years
Borrowings(*)	W	656,885		682,437		166,399		516,038		—
Debentures(*)		6,556,414		7,517,735		1,144,713		3,470,308		2,902,714
Lease liabilities		1,424,716		1,513,427		335,751		958,745		218,931
Accounts payable -other and others(*)		4,597,878		4,659,575		3,341,099		1,226,643		91,833

	W	13,235,893		14,373,174		4,987,962		6,171,734		3,213,478

(*)	Includes interest payables.

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

As of March 31, 2022, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:

(In millions of won)

Carrying
amount

Contractual
cash flows

Less than
1 year

1 – 5
years

More than
5 years

Assets

176,530

186,094

26,072

132,187

27,835

(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 structure. The overall strategy of the Company is the same as that for the year ended December 31, 2021.

The Company monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity from the separate financial statements.

Debt-equity ratio as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022			December 31, 2021
Total liabilities	W	15,309,451			15,526,209
Total equity		10,781,330			10,862,856
Debt-equity ratios		142.00	%		142.93	%

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Financial Risk Management, Continued

(3)

Fair value

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)	March 31, 2022
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that are measured at fair value:
FVTPL	W	926,557		—		798,426		128,131		926,557
Derivative hedging instruments		176,530		—		176,530		—		176,530
FVOCI		1,301,973		1,260,441		—		41,532		1,301,973

	W	2,405,060		1,260,441		974,956		169,663		2,405,060

Financial liabilities that are measured at fair value:
Derivative financial liabilities	W	321,025		—		—		321,025		321,025
Financial liabilities that are not measured at fair value:
Borrowings	W	656,885		—		645,504		—		645,504
Debentures		6,556,414		—		6,561,142		—		6,561,142
Long-term payables – other		1,617,741		—		1,621,909		—		1,621,909

	W	8,831,040		—		8,828,555		—		8,828,555


(In millions of won)	December 31, 2021
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that are measured at fair value:
FVTPL	W	893,098		—		774,960		118,138		893,098
Derivative hedging instruments		152,511		—		152,511		—		152,511
FVOCI		1,383,223		1,340,791		—		42,432		1,383,223

	W	2,428,832		1,340,791		927,471		160,570		2,428,832

Financial liabilities that are measured at fair value:
Derivative financial liabilities	W	321,025		—		—		321,025		321,025
Financial liabilities that are not measured at fair value:
Borrowings	W	306,728		—		301,232		—		301,232
Debentures		6,804,867		—		7,058,585		—		7,058,585
Long-term payables – other		2,009,833		—		2,010,852		—		2,010,852

	W	9,121,428		—		9,370,669		—		9,370,669

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Financial Risk Management, Continued

(3)

Fair value, Continued

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of March 31, 2022 and December 31, 2021 are as follows, Continued:

The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.

Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI) is measured based on the bid price at the end of the reporting date.

The Company uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods, such as discounted cash flow and market approach. Inputs used to such valuation methods include swap rate, interest rate and risk premium, and the Company performs valuation using the inputs which are consistent with natures of assets and liabilities measured.

Interest rates used by the Company for the fair value measurement as of March 31, 2022 are as follows:


		Interest rate
Derivative instruments		0.32% ~ 3.23%
Borrowings and debentures		1.74% ~ 3.11%
Long-term payables – other		2.43% ~ 3.16%

There have been no transfers between Level 2 and Level 1 for the three-month period ended March 31, 2022. The changes of financial assets and liabilities classified as Level 3 for the three-month period ended March 31, 2022 are as follows:


(In millions of won)
	Balance at January 1, 2022			Profit or loss			Acquisition		Transfer			Balance at March 31, 2022
	Balance at January 1, 2022			Profit or loss			Acquisition		Transfer			Balance at March 31, 2022
Financial assets:
FVTPL	W	118,138			(7	)		10,000		—			128,131
FVOCI		42,432			—			—		(900	)		41,532

	W	160,570			(7	)		10,000		(900	)		169,663

Financial liabilities:
FVTPL	W	(321,025	)		—			—		—			(321,025	)

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

28.

Financial Risk Management, Continued

(4)

Enforceable master netting agreement or similar agreement

Carrying amount of financial instruments recognized of which offset agreements are applicable as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)
	March 31, 2022
	Gross financial instruments recognized		Amount offset			Net financial instruments presented on the interim separate statement of financial position
Financial assets:
Accounts receivable – trade and others	W	78,782		(78,697	)		85
Financial liabilities:
Accounts payable – other and others	W	78,697		(78,697	)		—


(In millions of won)
	December 31, 2021
	Gross financial instruments recognized		Amount offset			Net financial instruments presented on the separate statement of financial position
Financial assets:
Accounts receivable – trade and others	W	86,838		(86,838	)		—
Financial liabilities:
Accounts payable – other and others	W	91,522		(86,838	)		4,684

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Transactions with Related Parties

(1)

List of related parties


Relationship		Company
Ultimate Controlling Entity		SK Inc.
Subsidiaries		SK Broadband Co., Ltd. and 25 others(*)
Joint ventures		Finnq Co., Ltd. and another
Associates		SK China Company Ltd. and 43 others
Others		The Ultimate Controlling Entity’s subsidiaries and associates, etc.

(*)	As of March 31, 2022, subsidiaries of the Company are as follows:


Subsidiary		Ownership *percentage(%)(1)**	Primary business
Subsidiaries owned by the Company	SK Telink Co., Ltd.	100.0	Telecommunication and Mobile Virtual Network Operator service
	SK Communications Co., Ltd.	100.0	Internet website services
	SK Broadband Co., Ltd.	74.3	Telecommunication services
	PS&Marketing Corporation	100.0	Communications device retail business
	SERVICE ACE Co., Ltd.	100.0	Call center management service
	SERVICE TOP Co., Ltd.	100.0	Call center management service
	SK O&S Co., Ltd.	100.0	Base station maintenance service
	SK Telecom China Holdings Co., Ltd.	100.0	Investment (Holdings company)
	SK Global Healthcare Business Group., Ltd.	100.0	Investment
	YTK Investment Ltd.	100.0	Investment association
	Atlas Investment	100.0	Investment association
	SKT Americas, Inc.	100.0	Information gathering and consulting
	Quantum Innovation Fund I	59.9	Investment
	SK Telecom Japan Inc.	100.0	Information gathering and consulting
	Happy Hanool Co., Ltd.	100.0	Service
	SK stoa Co., Ltd.	100.0	Other telecommunication retail business
	Broadband Nowon Co., Ltd.	100.0	Cable broadcasting services
	SAPEON Korea Inc.(*2)	100.0	Manufacturing non-memory and other electronic integrated circuits
	SAPEON Inc.(*2)	100.0	Manufacturing non-memory and other electronic integrated circuits
Subsidiaries owned by SK Broadband Co., Ltd.	Home & Service Co., Ltd.	100.0	Operation of information and communication facility
Subsidiaries owned by SK Broadband Co., Ltd.	Media S Co., Ltd.	100.0	Production and supply services of broadcasting programs
Subsidiary owned by PS&Marketing Corporation	SK m&service Co., Ltd.(*3)	100.0	Database and internet website service
Subsidiary owned by Quantum Innovation Fund I	PanAsia Semiconductor Materials LLC.	66.4	Investment
Subsidiary owned by SK Telecom Japan Inc.	SK Planet Japan, K. K.	79.8	Digital Contents sourcing service
Others(*4)	SK Telecom Innovation Fund, L.P.	100.0	Investment
	SK Telecom China Fund I L.P.	100.0	Investment

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Transactions with Related Parties, Continued

(1)

List of related parties, Continued:

(*1)

The ownership interest represents direct ownership interest in subsidiaries either by the Company or subsidiaries of the Company.

(*2)

The Company newly established SAPEON Korea Inc. and SAPEON Inc. for the three-month period ended March 31, 2022.

(*3)

PS&Marketing Corporation acquired shares (100%) of SK m&service Co., Ltd. for the three-month period ended March 31, 2022.

(*4)

Others are owned by Atlas Investment and another subsidiary of the Company.

As of March 31, 2022, the Company is included in SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act. All of the other entities included in SK Group are considered related parties of the Company.

(2)

Compensation for the key management

The Company considers registered directors (3 executive and 5 non-executive directors) who have substantial role and responsibility in planning, operations and relevant controls of the business as key management. The compensation given to such key management for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022		March 31, 2021
Salaries	W	1,439		3,480
Retirement benefits		313		1,815
Share compensation expense		67		32

	W	1,819		5,327

Compensation for the key management includes salaries, non-monetary salaries and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)		For the three-month period ended March 31, 2022
Scope	Company	Operating revenue and others		Operating expenses *and others (1)**		Acquisition of property and equipment and others
Ultimate Controlling Entity	SK Inc.(*2)	W	2,693		178,175		1,769

Subsidiaries	SK Broadband Co., Ltd.		27,881		140,409		—
	PS&Marketing Corporation(*3)		2,391		336,347		—
	SK O&S Co., Ltd.(*4)		3,847		57,920		1,275
	SK Telink Co., Ltd.(*5)		27,755		5,245		—
	SERVICE ACE Co., Ltd.(*6)		10,885		31,427		—
	SERVICE TOP Co., Ltd.(*7)		10,174		31,314		—
	SK Communications Co., Ltd.		355		558		293
	Broadband Nowon Co., Ltd.(*8)		13,721		—		—
	Others		918		6,965		—

			97,927		610,185		1,568

Associates	F&U Credit information Co., Ltd.		190		10,534		—
	SK USA, Inc.		—		1,009		—
	HanaCard Co., Ltd.		2,525		739		2
	Daehan Kanggun BcN Co., Ltd.		2,445		—		—

			5,160		12,282		2

Others	SK Innovation Co., Ltd.		1,695		3,473		—
	SK Networks Co., Ltd.		256		3,861		—
	SK Networks Service Co., Ltd.		196		10,249		—
	SK Energy Co., Ltd.		524		10		—
	Content Wavve Co., Ltd.		3		23,516		—
	Happy Narae Co., Ltd.		26		2,683		2,913
	SK Shieldus Co., Ltd.		4,693		24,284		1,519
	Eleven Street Co., Ltd.		1,502		6,014		—
	SK Planet Co., Ltd.		1,735		19,880		110
	SK hynix Inc.		8,289		39		—
	DREAMUS COMPANY		727		23,095		—
	One Store Co., Ltd.		4,012		—		—
	T map Mobility Co., Ltd.		2,398		1,249		—
	UbiNS Co., Ltd.		—		135		3,080
	Others		5,122		3,513		196

			31,178		122,001		7,818

		W	136,958		922,643		11,157

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued:

(*1)	Operating expenses and others include lease payments by the Company.

(*2)	Operating expenses and others include W109,010 million of dividends declared to be paid by the Company.

(*3)	Operating expenses and others include W184,648 million paid to PS&Marketing Corporation relating to purchase of accounts receivable resulting from sale of handsets.

(*4)	Operating revenue and others include W3,000 million of dividend income recognized.

(*5)	Operating revenue and others include W3,009 million of dividend income recognized.

(*6)	Operating revenue and others include W8,003 million of dividend income recognized.

(*7)	Operating revenue and others include W8,000 million of dividend income recognized.

(*8)	Operating revenue and others include W13,721 million of dividend income recognized.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued:


(In millions of won)		For the three-month period ended March 31, 2021
Scope	Company	Operating revenue and others		Operating expenses *and others(1)**		Acquisition of property and equipment and others
Ultimate Controlling Entity	SK Inc.(*2)	W	3,175		263,876		1,450

Subsidiaries	SK Broadband Co., Ltd.		23,388		135,122		—
	PS&Marketing Corporation(*3)		3,349		350,088		16
	SK O&S Co., Ltd.		845		55,696		805
	SK Planet Co., Ltd.		1,080		20,742		—
	SK Telink Co., Ltd.(*4)		20,535		10,211		—
	SERVICE ACE Co., Ltd.		2,938		31,878		—
	SERVICE TOP Co., Ltd.		2,103		35,225		—
	Eleven Street Co., Ltd.		909		3,273		—
	One Store Co., Ltd.		3,635		—		—
	SK Shieldus Co., Ltd.(*5)		13,967		16,337		328
	DREAMUS COMPANY		699		21,581		—
	Others		2,258		6,532		39

			75,706		686,685		1,188

Associates	F&U Credit information Co., Ltd.		190		10,757		—
	SK hynix Inc.(*6)		178,798		39		—
	HanaCard Co., Ltd.		20		842		—
	SK Wyverns Co., Ltd.(*7)		199		8,203		—
	Content Wavve Co., Ltd.		7		695		—
	Others		7,117		138		—

			186,331		20,674		—

Others	SK Ecoplant Co., Ltd. (Formerly, SK Engineering & Construction Co., Ltd.)		480		—		—
	SK Innovation Co., Ltd.		2,201		3,509		—
	SK Networks Co., Ltd.		377		2,111		24
	SK Networks Service Co., Ltd.		169		9,037		—
	SK Telesys Co., Ltd.		33		76		980
	SK TNS Co., Ltd.		39		3,479		19,956
	SK Energy Co., Ltd.		374		20		—
	SKC Infra Service Co., Ltd.		4		2,578		—
	SK ENS Co., Ltd.		404		—		—
	UbiNS Co., Ltd.		—		196		778
	Happy Narae Co., Ltd.		28		3,720		4,422
	Others		2,357		3,090		117

			6,466		27,816		26,277

		W	271,678		999,051		28,915

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the three-month periods ended March 31, 2022 and 2021 are as follows, Continued:

(*1)	Operating expenses and others include lease payments by the Company.

(*2)	Operating expenses and others include W194,617 million of dividends declared to be paid by the Company.

(*3)	Operating expenses and others include W183,708 million paid to PS&Marketing Corporation relating to purchase of accounts receivable resulting from sale of handsets.

(*4)	Operating revenue and others include W3,009 million of dividend income recognized.

(*5)	Operating revenue and others include W9,637 million of dividend income recognized.

(*6)	Operating revenue and others include W170,937 million of dividend income recognized.

(*7)	Transactions with SK Wyverns Co., Ltd. occurred before disposal.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Transactions with Related Parties, Continued

(4)

Account balances with related parties as of March 31, 2022 and December 31, 2021 are as follows:


(In millions of won)		March 31, 2022
		Receivables				Payables
Scope	Company	Loans		Accounts receivable – trade, etc.		Accounts payable – other, etc.
Ultimate Controlling Entity	SK Inc.	W	—		1,025		139,413

Subsidiaries	SK Broadband Co., Ltd.		—		8,326		259,938
	PS&Marketing Corporation		—		1,305		68,262
	SK O&S Co., Ltd.		—		3,049		25,561
	SK Telink Co., Ltd.		—		19,684		21,707
	Broadband Nowon Co., Ltd.		—		13,721		—
	SERVICE ACE Co., Ltd.		—		8,627		18,368
	SERVICE TOP Co., Ltd.		—		8,006		17,150
	SK Communications Co., Ltd.		—		25		11,963
	Others		—		1,060		20,243

			—		63,803		443,192

Associates	F&U Credit information Co., Ltd.		—		—		4,308
	Wave City Development Co., Ltd.(*1)		—		2,623		—
	Daehan Kanggun BcN Co., Ltd.(*2)		22,148		2,534		—
	HanaCard Co., Ltd.		—		1,204		8,283
	SK USA, Inc.		—		—		2,265

			22,148		6,361		14,856

Others	SK hynix Inc.		—		9,809		107
	SK Planet Co., Ltd.		—		1,663		20,986
	Eleven Street Co., Ltd.		—		453		6,620
	One Store Co., Ltd.		—		368		13,132
	SK Shieldus Co., Ltd.		—		1,817		14,931
	SK Innovation Co., Ltd.		—		2,688		34,302
	SK Networks Co., Ltd.		—		180		33,176
	SK Networks Services Co., Ltd.		—		—		5,101
	SK RENT A CAR Co., Ltd.		—		45		11,091
	Incross Co., Ltd.		—		1,271		9,225
	UbiNS Co., Ltd.		—		—		3,385
	Mintit Co., Ltd.		—		17,840		—
	Happy Narae Co., Ltd.		—		—		5,092
	Content Wavve Co., Ltd.		—		154		30,687
	DREAMUS COMPANY		—		184		29,405
	Others		—		5,034		2,237

			—		41,506		219,477

		W	22,148		112,695		816,938

(*1)	As of March 31, 2022, the Company recognized loss allowance amounting to W1,102 million on accounts receivable – trade.

(*2)	As of March 31, 2022, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Transactions with Related Parties, Continued

(4)

Account balances with related parties as of March 31, 2022 and December 31, 2021 are as follows, Continued:


(In millions of won)		December 31, 2021
		Receivables				Payables
Scope	Company	Loans		Accounts receivable – trade, etc.		Accounts payable – other, etc.
Ultimate Controlling Entity	SK Inc.	W	—		2,059		50,054

Subsidiaries	SK Broadband Co., Ltd.		—		7,374		273,875
	PS&Marketing Corporation		—		1,247		66,097
	SK O&S Co., Ltd.		—		59		52,609
	SK Telink Co., Ltd.		—		15,765		20,826
	SERVICE ACE Co., Ltd.		—		466		24,791
	SERVICE TOP Co., Ltd.		—		2		24,859
	SK Communications Co., Ltd.		—		28		12,113
	Others		—		39		2,324

			—		24,980		477,494

Associates	F&U Credit information Co., Ltd.		—		3		4,394
	Wave City Development Co., Ltd.(*1)		—		2,623		—
	Daehan Kanggun BcN Co., Ltd.(*2)		22,147		3,857		—
	HanaCard Co., Ltd.		—		433		42,110
	Others		—		71		1,104

			22,147		6,987		47,608

Others	SK hynix Inc.		—		11,526		166
	SK Planet Co., Ltd.		—		661		25,337
	Eleven Street Co., Ltd.		—		486		7,555
	One Store Co., Ltd.		—		8		13,325
	SK m&service Co., Ltd.		—		1,363		17,754
	SK Shieldus Co., Ltd.		—		1,068		16,172
	SK Innovation Co., Ltd.		—		3,020		37,136
	SK Networks Co., Ltd.		—		108		33,613
	SK Networks Services Co., Ltd.		—		—		7,374
	SK RENT A CAR Co., Ltd.		—		116		11,069
	Incross Co., Ltd.		—		1,687		10,904
	UbiNS Co., Ltd.		—		1		9,886
	Mintit Co., Ltd.		—		17,868		131
	Happy Narae Co., Ltd.		—		—		48,484
	Content Wavve Co., Ltd.		—		183		9,865
	Others		—		7,529		7,198

			—		45,624		255,969

		W	22,147		79,650		831,125

(*1)	As of December 31, 2021, the Company recognized loss allowance amounting to W1,102 million on accounts receivable – trade.

(*2)	As of December 31, 2021, the Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

29.

Transactions with Related Parties, Continued

(5)

The Company has granted SK REIT Co., Ltd. the right of first offer regarding the disposal of real estate owned by the Company. Whereby, the negotiation period is within 3 to 5 years from June 30, 2021, date of agreement, and the Company has been granted the right by SK REIT Co., Ltd. to lease the real estate in preference to a third party if SK REIT Co., Ltd. purchases the real estate from the Company.

(6)

There were additional investments and disposal transactions in subsidiaries, associates and joint ventures for the three-month period ended March 31, 2022 are as presented in note 8.

30. Commitments and Contingencies

(1)

Accounts receivable from sale of handsets

The sales agents of the Company sell handsets to the Company’s subscribers on an installment basis. The Company entered into comprehensive agreements to purchase accounts receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special-purpose companies which were established with the purpose of liquidating receivables, respectively.

Accounts receivable from sales of handsets amounting to W495,860 million and W493,277 million as of March 31, 2022 and December 31, 2021, respectively, which the Company purchased according to the relevant comprehensive agreement, are recognized as accounts receivable – other and long-term accounts receivable – other.

(2)

Legal claims and litigations

As of March 31, 2022, the Company is involved in various legal claims and litigations. Provision recognized in relation to these claims and litigations is immaterial. In connection with those legal claims and litigations for which no provision was recognized, management does not believe the Company has a present obligation, nor is it expected that any of these claims or litigations will have a significant impact on the Company’s financial position or operating results in the event an outflow of resources is ultimately necessary.

(3)

Obligation relating to spin-off

The Company carried out the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments on November 1, 2021. The Company has obligation to jointly and severally reimburse the Company’s liabilities incurred prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

31.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022			March 31, 2021
Gain on foreign currency translations	W	(284	)		(192	)
Interest income		(6,357	)		(6,880	)
Dividend income		(37,227	)		(184,599	)
Gain relating to investments in subsidiaries, associates and joint ventures		(950	)		(100,000	)
Gain relating to financial instruments at FVTPL		—			(33,737	)
Gain on disposal of property and equipment and intangible assets		(4,353	)		(725	)
Gain on sale of accounts receivable – other		(1,043	)		(7,921	)
Other income		(1,525	)		—
Loss on foreign currency translations		169			15
Bad debt expenses		5,894			2,088
Other Bad debt expenses(reversal)		(91	)		109
Loss relating to financial instruments at FVTPL		7			44
Depreciation and amortization		713,322			723,227
Loss on disposal of property and equipment and intangible assets		1,729			1,118
Loss on sale of accounts receivable – other		2,837			—
Interest expense		63,515			58,047
Expense related to defined benefit plan		13,493			14,131
Bonus paid by treasury shares		23,666			29,642
Share compensation expense		74,729			47
Income tax expense		86,609			114,852
Other expenses		676			792

	W	934,816			610,058

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

31.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022			March 31, 2021
Accounts receivable – trade	W	(7,257	)		(219	)
Accounts receivable – other		(33,194	)		35,519
Advanced payments		4,833			(2,362	)
Prepaid expenses		(25,924	)		(1,256	)
Inventories		(17,149	)		(4,989	)
Long-term accounts receivable – other		5,675			40,726
Long-term prepaid expenses		11,083			(36,123	)
Guarantee deposits		4,020			2,633
Contract assets		(1,032	)		(999	)
Accounts payable – other		31,573			(343,775	)
Withholdings		116,973			62,626
Deposits received		662			1,179
Accrued expenses		(119,655	)		(33,800	)
Plan assets		12,805			7,111
Retirement benefits paid		(8,195	)		(11,107	)
Contract liabilities		(8,186	)		952
Others		(1,286	)		(1,623	)

	W	(34,254	)		(285,507	)

(3)

Significant non-cash transactions for the three-month periods ended March 31, 2022 and 2021 are as follows:


(In millions of won)
	For the three-month period ended
	March 31, 2022			March 31, 2021
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets	W	(472,956	)		(400,780	)
Increase of right-of-use assets		151,518			108,704
Contribution in kind for investments		—			7,000
Transfer from property and equipment to investment property		14,381			—

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

32.

Emissions Liabilities

(1)

The quantity of emissions rights allocated free of charge for each implementation year as of March 31, 2022 are as follows:


(In tCO2-eQ)
	Quantities allocated in 2020		Quantities allocated in 2021		Quantities allocated in 2022		Total
Emissions rights allocated free of charge		814,842		1,033,764		1,013,006		2,861,612

(2)

Changes in emissions rights quantities the Company held are as follows:


(In tCO2-eQ)
	Quantities allocated in 2020			Quantities allocated in 2021			Quantities allocated in the three- month period ended March 31, 2022			Total
Beginning		(60,977	)		—			—			(60,977	)
Allocation at no cost		814,842			1,033,764			1,013,006			2,861,612
Additional allocation		217,643			—			—			217,643
Purchase		68,471			—			—			68,471
Surrendered or shall be surrendered		(1,039,979	)		(1,087,455	)		(1,140,316	)		(3,267,750	)

Ending		—			(53,691	)		(127,310	)		(181,001	)

(3)

As of March 31, 2022, the estimated annual greenhouse gas emissions quantities of the Company are 1,140,316 tCO2-eQ.

SK TELECOM CO., LTD.

Notes to the Interim Separate Financial Statements

For the three-month periods ended March 31, 2022 and 2021 (Unaudited)

33.

Non-current Assets Held for Sale

On February 25, 2021, the Company has decided to dispose of the investments in an associate engaged in mobility business to T map Mobility Co., Ltd. pursuant to the approval of the Board of Directors and reclassified entire shares of the investments in associates as non-current assets held for sale.

34.

Subsequent Events

The Board of Directors of the Company resolved to pay interim dividend at the Board’s meeting on April 28, 2022, and the details are as follows:


Classification		Description
Interim dividend amount		W830 per share (Total amount: W180,942 million)
Dividend rate		1.44%
Dividend date		March 31, 2022
Date of distribution		According to Article 165 of Capital Market and Financial Investment Business Act 12-3, the Company plans to distribute dividends by May 18, 2022.