Edgar Filing: SK TELECOM CO LTD

Form 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF DECEMBER 2012

COMMISSION FILE NUMBER 333-04906

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

11, Euljiro2-ga, Jung-gu

Seoul 100-999, Korea

(Address of principal executive offices)

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

Form 20-F x Form 40-F ¨

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

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

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

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

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

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

QUARTERLY BUSINESS REPORT

(From January 1, 2012 to September 30, 2012)

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

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

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, OR K-IFRS, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

I.	COMPANY OVERVIEW

1.	Company Overview

Starting in the first quarter of 2011, SK Telecom Co., Ltd. (the “Company” or “SK Telecom”) prepares and reports its financial statements under the International Financial Reporting Standards as adopted for use in Korea (“K-IFRS”). The transition date of the Company and its consolidated subsidiaries to K-IFRS is January 1, 2010 and the adoption date is January 1, 2011. The Company’s quarterly business report for the nine months ended September 30, 2012 includes the following consolidated subsidiaries:


Name	Date of Establishment	Principal Business	Total Asset as of Dec. 31, 2011 (millions of Won)		Material Subsidiary*
SK Telink Co., Ltd.	Apr. 9, 1998	Telecommunication and satellite broadcasting services		420,829	Material
SK Communications Co., Ltd.	Sep. 19, 1996	Internet portal and other Internet information services		319,948	Material
PAXNet Co., Ltd.	May 18, 1999	Database and online information services		33,949
Loen Entertainment, Inc.	Jul. 7, 1982	Music and audio publication		157,104	Material
Stonebridge Cinema Fund	Sep. 30, 2005	Investment partnership		18,506
Commerce Planet Co., Ltd.	Jul. 1, 1997	Information technology and computer services		49,729
SK Broadband Co., Ltd.	Sep. 26, 1997	Multimedia and IP TV services		3,318,699	Material
Broadband Media Co., Ltd.	Aug. 25, 2005	Telemarketing services		90,018	Material
Broadband CS Co., Ltd.	Oct. 1, 1998	Call center operation		6,948
K-net Culture and Contents Venture Fund	Nov. 24, 2008	Investment partnership		48,057
Hwaitec Focus Investment Partnership 2	Dec. 12, 2008	Investment partnership		21,663
Open Innovation Fund	Dec. 22, 2008	Investment partnership		44,716
PS&Marketing Corporation	Apr. 3, 2009	Resale of telecommunication services		289,062	Material
Service Ace Co., Ltd.	Jul. 1, 2010	Call center operation and telemarketing services		43,447
Service Top Co., Ltd.	Jul 1, 2010	Call center operation and telemarketing services		37,165
Network O&S Co., Ltd.	Jul. 1, 2010	Wireless telecommunication services		80,249	Material
Service-In Co., Ltd.	Apr. 4, 2011	Internet services		3,247
BNCP Co., Ltd.	Dec. 7, 2009	Software development		28,631
SK Planet Co., Ltd.	Oct. 5,2011	Platform service		1,677,730	Material
SK Telecom China Holdings Co., Ltd.	Jul. 12, 2007	Investment		36,810
Sky Property Mgmt., Ltd.	Jun. 20, 2007	Real estate rental		820,639	Material
Shenzhen E-eye High Tech Co., Ltd.	Apr. 1, 2000	Telematics services		23,569
SK China Real Estate Co., Ltd.	Mar. 19, 2009	Real estate investment		295
SKT Vietnam PTE., Ltd.	Apr. 5, 2000	Wireless telecommunication services		42,539
SKT Americas, Inc.	Dec. 29, 1995	Management consulting and investment		42,681
YTK Investment Ltd.	Jul. 1, 2010	Investment		51,218	Material
Atlas Investment	Jun. 24, 2011	Investment		50,643	Material
Technology Innovation Partners, L.P.	Jun. 24, 2011	Investment		0
SK Telecom China Fund I L.P.	Sep. 14, 2011	Investment		687

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

**	Formerly known as 2nd Benex Focus Investment Fund.

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

B.	Date of Incorporation: March 29, 1984

C.	Location of Headquarters

(1)

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

(2)

Phone: +82-2-6100-2114

(3)

Website:http://www.sktelecom.com

D.	Major Businesses

(1)

Wireless Business

The Company provides wireless telecommunications services, characterized by its competitive strengths in handheld devices, affordable pricing, network coverage and an extensive contents library. Since the introduction of services employing LTE technology in July 2011, the telecommunications market for such services has grown as demand for fast data transfer speeds and differentiated services has increased. Having reached over six million LTE subscribers as of October 31, 2012, the Company is solidifying its leadership position in LTE services based on its technology and network operating expertise. The Company is also improving the profitability of its wireless business through efficient capital expenditures and marketing and enhancement of marketing network and products. In the business-to-business area, the Company is selling industry-specific solutions focused on healthcare and education through strategic alliances.

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

(2)

Fixed-line Business

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

(3)

Other Businesses

The Company is pursuing customer satisfaction by providing the best service and generating new values in diverse areas in contents delivery, location-based services, media and mobile commerce. In the contents delivery service business, the Company provides high-quality digital contents in its leading mobile contents marketplace, T Store, which had more than 17 million subscribers as of September 2012 and which the Company plans to expand globally.

In the location-based service business, users of the Company’s T-Map Navigation service surpassed 15.3 million as of September 2012. T-Map Navigation provides real time traffic information and various local information. In the media business, the Company provides “Hoppin” service that enables subscribers to access various multimedia contents through personal computers, mobile devices and other digital devices. In the commerce and advertising area, the Company’s 11th Street, which continues to gain market share, is a platform service that connects various sellers and purchasers on-line.

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

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

In order to find future growth engines and strengthen the Company’s competitiveness, the Company has made strategic investments in YTK Investment Ltd., an investment fund company, and SKY Property Management Ltd., which owns SK Tower in Beijing, China.

See “II. Business Overview” for more information.

E.	Credit Ratings

(1)

Corporate Bonds


Credit rating date	Subject of rating	Credit rating	Credit rating entity (Credit rating range)	Rating classification
February 20, 2008	Corporate bond	AAA	Korea Ratings	Current rating
February 21, 2008	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
February 21, 2008	Corporate bond	AAA	Korea Information Services, Inc.	Current rating
June 3, 2008	Corporate bond	AAA	Korea Ratings	Regular rating
June 17, 2008	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
June 30, 2008	Corporate bond	AAA	Korea Information Services, Inc.	Regular rating
October 20, 2008	Corporate bond	AAA	Korea Ratings	Current rating
October 20, 2008	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
October 20, 2008	Corporate bond	AAA	Korea Information Services, Inc.	Current rating
January 13, 2009	Corporate bond	AAA	Korea Ratings	Current rating
January 13, 2009	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
January 13, 2009	Corporate bond	AAA	Korea Information Services, Inc.	Current rating
February 23, 2009	Corporate bond	AAA	Korea Ratings	Current rating
February 23, 2009	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
February 23, 2009	Corporate bond	AAA	Korea Information Services, Inc.	Current rating
June 24, 2009	Corporate bond	AAA	Korea Information Services, Inc.	Regular rating
June 26, 2009	Corporate bond	AAA	Korea Ratings	Regular rating
June 30, 2009	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
June 22, 2010	Corporate bond	AAA	Korea Ratings	Regular rating
June 29, 2010	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
June 29, 2010	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
May 27, 2011	Corporate bond	AAA	Korea Ratings	Regular rating
June 13, 2011	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
June 23, 2011	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
December 12, 2011	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
December 13, 2011	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating
December 16, 2011	Corporate bond	AAA	Korea Ratings	Current rating
June 21, 2012	Corporate bond	AAA	Korea Ratings	Regular rating
June 22, 2012	Corporate bond	AAA	Korea Investors Service, Inc.	Regular rating
June 29, 2012	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Regular rating
August 10, 2012	Corporate bond	AAA	Korea Ratings	Current rating
August 14, 2012	Corporate bond	AAA	Korea Investors Service, Inc.	Current rating
August 28, 2012	Corporate bond	AAA	NICE Investors Service Co., Ltd.	Current rating

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

(2)

Commercial Paper (“CP”)


Credit rating date	Subject of rating	Credit rating	Credit rating entity (Credit rating range)	Rating classification
June 3, 2008	CP	A1	Korea Ratings	Current rating
June 16, 2008	CP	A1	Korea Information Services, Inc.	Current rating
June 17, 2008	CP	A1	Korea Investors Service, Inc.	Current rating
October 20, 2008	CP	A1	Korea Ratings	Regular rating
October 20, 2008	CP	A1	Korea Investors Service, Inc.	Regular rating
October 20, 2008	CP	A1	Korea Information Services, Inc.	Regular rating
June 24, 2009	CP	A1	Korea Information Services, Inc.	Current rating
June 26, 2009	CP	A1	Korea Ratings	Current rating
June 30, 2009	CP	A1	Korea Investors Service, Inc.	Current rating
December 15, 2009	CP	A1	Korea Ratings	Regular rating
December 30, 2009	CP	A1	Korea Investors Service, Inc.	Regular rating
December 30, 2009	CP	A1	Korea Information Services, Inc.	Regular rating
June 22, 2010	CP	A1	Korea Ratings	Current rating
June 29, 2010	CP	A1	Korea Investors Service, Inc.	Current rating
June 29, 2010	CP	A1	NICE Investors Service Co., Ltd.	Current rating
December 16, 2010	CP	A1	Korea Ratings	Regular rating
December 27, 2010	CP	A1	Korea Investors Service, Inc.	Regular rating
December 29, 2010	CP	A1	NICE Investors Service Co., Ltd.	Regular rating
May 27, 2011	CP	A1	Korea Ratings	Current rating
June 13, 2011	CP	A1	NICE Investors Service Co., Ltd.	Current rating
June 23, 2011	CP	A1	Korea Investors Service, Inc.	Current rating
December 12, 2011	CP	A1	Korea Investors Service, Inc.	Regular rating
December 13, 2011	CP	A1	NICE Investors Service Co., Ltd.	Regular rating
December 16, 2011	CP	A1	Korea Ratings	Regular rating
June 21, 2012	CP	A1	Korea Ratings	Current rating
June 22, 2012	CP	A1	Korea Investors Service, Inc.	Current rating
June 29, 2012	CP	A1	NICE Investors Service Co., Ltd.	Current rating

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

(3)

International Credit Ratings


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

2.	Company History

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

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

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

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

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

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

A.	Location of Headquarters

•

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

•

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

•

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

•

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

•

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

B.	Significant Changes in Management

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

C.	Change in Company Name

On September 22, 2008, SK Broadband, one of our material consolidated subsidiaries, changed its name to SK Broadband Co., Ltd. from Hanaro Telecom Co., Ltd. to facilitate the sharing of SK Group’s corporate culture and brand. Similarly, on September 22, 2008, Broadband Media Co., Ltd., another of our material consolidated subsidiaries, changed its name to Broadband Media Co., Ltd. from Hanaro Media Co., Ltd. On March 23, 2012, SK Hynix Inc., which became our subsidiary in February 2012, changed its name to SK Hynix Inc. from Hynix Semiconductor Inc. in accordance with a resolution at its annual shareholders’ meeting.

D.	Mergers, Acquisitions and Restructuring

[SK Telecom]

(1)

Spin-off

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


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

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


			(in millions of Won)
	Before the spin-off (As of September 30, 2011)		After the spin-off (As of October 1, 2011)
Description	SK Telecom Co., Ltd.		SK Telecom Co., Ltd.		SK Planet Co., Ltd.
Total Assets		19,400,114		19,084,651		1,545,537

Total Liabilities		7,673,828		7,358,365		315,463

Total Shareholders’ Equity		11,726,286		11,726,286		1,230,074

Schedule of spin-off


Category		Date
Board resolution on spin-off		July 19, 2011
Record Date for Determination of Shareholders for the Shareholders’ Meeting for Spin-off		August 4, 2011
Shareholders’ Meeting for Approval of Spin-off Plan		August 31, 2011
Date of Spin-off		October 1, 2011
Shareholders’ Meeting for Report of Spin-off and Inaugural Meeting of Shareholders		October 4, 2011
Registration of Spin-off		October 5, 2011

Others	Notice of closure of shareholders register Period of closure of shareholders register Public notice of shareholders’ meeting Dispatch of notice of shareholders’ meeting	July 20, 2011 August 5, 2011~ August 8, 2011 August 10, 2011 and August 12, 2011 August 12, 2011

•

Changes in shareholding, including majority shareholder

•

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

•

Appraisal rights of shareholders

•

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

•

Protection of creditors

•

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

•

Allocation of new shares

•

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

(2)

Acquisition of Shares of Hynix Semiconductor

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

[SK Broadband]

(1)

Merger

On July 26, 2012, the board of directors of SK Broadband resolved to merge Broadband D&M Co., Ltd., an unlisted company, into SK Broadband to strengthen its competitiveness and produce synergies with its existing business. The merger was effective as of September 26, 2012. In connection with this merger, SK Broadband did not issue any new shares.

[SK Telink]

(1)

Merger

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

[SK Communications]

(1)

Merger

On June 25, 2007, the board of directors of SK Communications resolved to cause SK Communications to merge into Empas Corp., effective as of November 1, 2007. We believe this merger helped to strengthen our competitiveness in the portal services market. In the merger, one share of the predecessor company of SK Communications was converted into 3.5732182 shares of Empas Corp.

(2)

Spin-off On

August 6, 2008, the board of directors of SK Communications resolved to spin off its video education business to create Etoos Co., Ltd. (“Etoos”), effective as of November 1, 2008. The spin-off was intended to help SK Communications to better focus on its core businesses and to give each of its business divisions greater autonomy in making operational decisions based on technical expertise specific to the respective business division.

(3)

Disposition and acquisition of businesses

1. Disposition of publishing business division

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

2. Acquisition of the “KUKU” division

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

3. Disposition of the Spicus division

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

(4)

Disposition of shares

1. Disposition of shares of Etoos

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

2. Disposition of shares of SK i-Media

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

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

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

E.	Other Important Matters related to Management Activities

[SK Telecom]

(1)

Bank loans

On February 14, 2012, the Company borrowed Won 2.5 trillion in a syndicated loan from a syndicate of Korean banks including Kookmin Bank and Woori Bank in order to finance the purchase of Hynix Semiconductor shares. Won 2 trillion of the loan matures in three years and Won 0.5 trillion of the loan matures in one year.

[SK Broadband]

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

[SK Communications]

(1)

Leak of personal information

In July 2011, a leak of personal information of subscribers of Nate and Cyworld websites operated by SK Communications, the Company’s consolidated subsidiary, occurred. Two lawsuits (total claim of Won 9 million) demanding compensation for damages from the leak were filed and five payment orders (total payment amount of Won 7 million) were issued by the courts against SK Communications in connection with the leak.

[SK Telink]

On August 23, 2012, the board of directors of SK Telink resolved to discontinue operations of its satellite Digital Multimedia Broadcasting (“DMB”) services due to the decrease in satellite DMB subscribers and the continued burden of fixed costs. Its DMB services were discontinued as of August 31, 2012.

3.	Total Number of Shares

A.	Total Number of Shares


(As of September 30, 2012)				(Unit: shares)
	Share type
Classification	Common shares			Total		Remarks
I. Total number of authorized shares		220,000,000	—		220,000,000		—

II. Total number of shares issued to date		89,278,946	—		89,278,946		—

III. Total number of shares retired to date		8,533,235	—		8,533,235		—

a. reduction of capital		—	—		—		—
b. retirement with profit		8,533,235	—		8,533,235		—
c. redemption of redeemable shares		—	—		—		—
d. others		—	—		—		—

IV. Total number of shares (II-III)		80,745,711	—		80,745,711		—

V. Number of treasury shares		11,050,712	—		11,050,712		—
VI. Number of shares outstanding (IV-V)		69,694,999	—		69,694,999		—

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

B.	Treasury Shares

(1)

Acquisitions and Dispositions of Treasury Shares


(As of September 30, 2012)										(Unit: Shares)
			Type of shares	At the beginning of period		Changes						At the end of period
Acquisition methods			Type of shares	At the beginning of period		Acquired (+)		Disposed (–)		Retired (–)		At the end of period
Acquisition pursuant to the Financial Investment Services and Capital Markets Act of Korea (“FSCMA”)	Direct acquisition	Direct acquisition from market	Common shares		7,086,028		—		—		—		7,086,028
		Direct acquisition from market	Preferred shares		—		—		—		—		—
		Direct over-the-counter acquisition	Common shares		—		—		—		—		—
		Direct over-the-counter acquisition	Preferred shares		—		—		—		—		—
		Tender offer	Common shares		—		—		—		—		—
		Tender offer	Preferred shares		—		—		—		—		—
		Sub-total	Common shares		7,086,028		—		—		—		7,086,028
		Sub-total	Preferred shares		—		—		—		—		—
	Acquisition through trust and other agreements	Held by trustee	Common shares		—		—		—		—		—
		Held by trustee	Preferred shares		—		—		—		—		—
		Held in actual stock	Common shares		3,886,710		—		—		—		3,886,710
		Held in actual stock	Preferred shares		—		—		—		—		—
		Sub-total	Common shares		3,886,710		—		—		—		3,886,710
		Sub-total	Preferred shares		—		—		—		—		—
Other acquisition			Common shares		77,974		—		—		—		77,974
Other acquisition			Preferred shares		—		—		—		—		—

Total			Common shares		11,050,712		—		—		—		11,050,712

			Preferred shares		—		—		—		—		—

*	Of the 11,050,712 shares acquired by the Company, 2,326,149 shares were deposited with the Korea Securities Depository as of September 30, 2012 for issuance upon conversion of the Company’s overseas convertible bonds.

4.	Status of Voting Rights


(As of September 30, 2012)		(Unit: shares)
Classification		Number of shares		Remarks
Total shares (A)	Common share		80,745,711		—
Total shares (A)	Preferred share		—		—
Number of shares without voting rights (B)	Common share		11,050,712		Treasury shares
Number of shares without voting rights (B)	Preferred share		—		—
Shares without voting rights pursuant to the Company’s articles of incorporation (C)	Common share		—		—
	Preferred share		—		—
Shares with restricted voting rights pursuant to Korean law (D)	Common share		—		—
	Preferred share		—		—
Shares with reestablished voting rights (E)	Common share		—		—
Shares with reestablished voting rights (E)	Preferred share		—		—
The number of shares with exercisable voting rights (F = A - B - C - D + E)	Common share		69,694,999		—
	Preferred share		—		—

5.	Dividends and Others

A.	Dividends

(1)

Distribution of cash dividends was approved during the 26th General Meeting of Shareholders held on March 12, 2010.

•

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

(2)

Distribution of interim dividends of Won 1,000 was approved during the 318th Board of Directors’ Meeting on July 22, 2010.

(3)

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

•

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

(4)

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

(5)

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

•

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

(6)

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

B.	Dividends for the Last 3 Fiscal Years


(Unit: in millions of Won, except per share value)
Classification		As of and for the nine months ended September 30, 2012		As of and for the year ended December 31, 2011		As of and for the year ended December 31, 2010
Par value per share (Won)			500		500		500
Net income			724,338		1,694,363		1,947,008
Net income per share (Won)			10,393		24,002		27,063

Total cash dividend			69,695		656,533		669,534

Total stock dividends			—		—		—

Percentage of cash dividend to available income (%)			9.6		38.7		34.4
Cash dividend yield ratio (%)	Common share		0.8		6.6		5.4
Cash dividend yield ratio (%)	Preferred share		—		—		—
Stock dividend yield ratio (%)	Common share		—		—		—
Stock dividend yield ratio (%)	Preferred share		—		—		—
Cash dividend per share (Won)	Common share		1,000		9,400		9,400
Cash dividend per share (Won)	Preferred share		—		—		—
Stock dividend per share (share)	Common share		—		—		—
Stock dividend per share (share)	Preferred share		—		—		—

Prepared based on separate financial statements. Net income per share means basic net income per share.

*	The total cash dividend of Won 669,534 million for the year ended December 31, 2010 includes the total interim dividend amount of Won 72,345 million, and the cash dividend amount per share of Won 9,400 includes the interim cash dividend amount per share of Won 1,000.

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

*	The total interim dividend amount for the nine months ended September 30, 2012 was Won 69,695 million, and the interim cash dividend amount per share was Won 1,000.

II.

BUSINESS

Each company in the consolidated entity is a separate legal entity providing independent services and products. The business is primarily separated into (1) the wireless telecommunication business consisting of mobile phone, wireless data, information telecommunication, (2) the fixed-line telecommunication business consisting of PSTN, high speed Internet, data and network lease services, among others, and (3) other businesses consisting of Internet portal service and game design, among others.

1.	Business Overview

Summary Business Description of Material Consolidated Subsidiaries


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

[Wireless Business]

A.	Industry Characteristics

As of September 30, 2012, the number of domestic mobile phone subscribers reached 53.28 million and, with more than a 100% penetration rate, the Korean mobile communication market can be considered to have reached its maturation stage. However, the penetration rate is expected to increase further due to increased use of mobile phones by corporate users resulting from the rapid growth of smartphone markets, as well as the increasing popularity of high-tech mobile devices based on wireless data services such as tablet computers.

The Korean mobile communications market continues to improve in the quality of services with the help of advances in network-related technology and the development of highly advanced LTE and 3G smartphones which enable the provision of convergence services for multimedia contents, mobile commerce, telematics, new media and other related services. In addition, through the HSPA+ network commercialized in October 2010 and the LTE network introduced in July 2011, B2B businesses, such as the corporate “connected workforce” business which can directly contribute to an enhancement in productivity, are expected to grow rapidly.

B.	Growth Potential


(Unit: 1,000 persons)
		As of September 30,		As of December 31,
Classification		2012		2011		2010		2009		2008
Number of subscribers	SK Telecom		26,778		26,553		25,705		24,270		23,032
	Others (KT, LGU+)		26,500		25,954		25,062		23,675		22,575

	Total		53,278		52,507		50,767		47,944		45,607

(Source: Korea Communications Commission website)

C.	Domestic and Overseas Market Conditions

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

Historical market share of the Company:

(Unit: %)

As of September 30,

As of December 31,

Classification

2012

2011

2010

2009

Mobile communication services

50.3

50.6

(Source: Korea Communications Commission website)

Comparative market share:

(As of September 30, 2012)

(Unit: %)

Classification

SK Telecom

LGU+

Market share

50.3

30.9

18.8

(Source: Korea Communications Commission website)

D.	Business Overview and Competitive Strengths

The Company is seeking to transform itself from a telecommunication service provider into a comprehensive information and communication technology (“ICT”) service provider. It has continued to expand the scope of its services and achieved strong growth in subscribers amid fierce competition and rate cuts. For the nine months ended September 30, 2012, the Company recorded Won 12.1 trillion in revenue and Won 1,220 billion in operating income on a consolidated basis and Won 9.17 trillion in revenue and Won 1,130 billion in operating income on a separate basis.

The number of subscribers as of September 30, 2012 was 26.78 million, an increase of approximately 119,000 from the previous quarter. In particular, the number of smartphone subscribers as of September 30, 2012 was 15.28 million, an increase of 1.28 million from the previous quarter, including 5.67 million LTE subscribers, solidifying the Company’s market leadership. The Company upgraded the quality of data services by providing commercial LTE services, enabling streaming of high-quality videos, high-definition voice services such as high-definition video conference calls and mobile on-line gaming services. The Company also plans to enhance customer satisfaction by improving network quality.

The Company has proved that it has superior network quality compared to its competitors according to the Korea Communications Commission quality evaluations. The Company has also proved to be the leader in Korea’s top three customer satisfaction indices: according to the National Customer Satisfaction Index, Korean Customer Satisfaction Index and Korean Standard Service Quality Index, the Company has continued to hold the leading position for 15 years, 15 years and 13 years, respectively.

SK Telink, a consolidated subsidiary of the Company, plans to expand its operations to the MVNO business based on its technical expertise and know-how obtained in its international telecommunications business. SK Telink launched its pre-paid MVNO service, 7Mobile, in June 2012 and plans to launch its post-pay service in January 2013. An MVNO leases the networks of a mobile network operator (“MNO”) and provides wireless telecommunication services under its own brand and fee structure, without owning telecommunication networks or frequencies.

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

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

[Fixed-line Business]

A.	Industry Characteristics

The Korean telecommunications industry is currently characterized by smartphones, tablet computers and other devices with enhanced mobility and cloud computing, mobile offices and other information and communications technology. In addition, mergers among fixed-line operators and wireless operators have accelerated the convergence within the telecommunications sector, creating a market structure in which groups with both fixed-line and wireless capabilities compete for greater market share to secure a more solid footing in the market. Spurred on by the introduction of various bundled products, growth in the market for IPTV services and a paradigm shift in the voice telephone market towards Internet-based telephone services, the broadband and fixed-line telecommunications market is playing a key role in the accelerated consolidation of the service providers as well as heightened competition in a growing market. The increased usage of smartphones and tablet computers, as well as the commercialization of the fourth generation LTE network, has greatly increased the demand for wireless data transmissions, thereby further emphasizing the importance of fixed-line networks.

We believe the transition to digital TV services will accelerate when analog open air TV broadcasting terminates at the end of 2012. With the introduction of new services such as smart TVs, we are seeing stronger competition in various convergence products, such as mobile IPTV and N-screen services employing smartphones and tablet computers.

B.	Growth Potential


				(Unit: 1,000 persons)
		As of September 30,		As of December 31,
Classification		2012		2011		2010
Fixed-line Subscribers	High-speed Internet		18,138		17,860		17,224
	Fixed-line telephone		18,379		18,633		19,273
	IPTV (real-time)		5,820		3,591		2,740

(Source: Korea Communications Commission website)

C.	Cyclical Nature and Seasonality

High-speed Internet, fixed-line telephone and IPTV services are generally not sensitive to cyclical economic changes. Demand for these services also does not show seasonal fluctuations.

We expect that the accelerated transition to digital TV services as a result of the termination of analog open air TV broadcasting, as well as the entrance of Google Inc. (“Google”) and Apple Inc. (“Apple”) into the television market and the introduction of smart TV products, will present opportunities by expanding the market size and increasing consumers’ interests. We are strengthening our competitiveness in the TV business by improving the performance of our TV set boxes and expanding the number of popular channels, as well as introducing mobile IPTV services using N-screen.

Historical market share of the Company:


			(Unit: %)
Classification	As of September 30, 2012		As of December 31,
Classification	As of September 30, 2012		2011		2010
High-speed Internet (include resales)		24.0		23.5		23.2
Fixed-line telephone (include VOIP)		15.4		14.6		13.7
IPTV (real-time)		21.5		19.3		23.8

(Source: Korea Communications Commission website)

D.	Business Overview and Competitive Strengths

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

SK Telink, a material consolidated subsidiary of the Company, provides international telecommunications service. SK Telink has been able to establish itself as a market leader as a result of its affordable pricing, proactive marketing and the quality of its services. It launched a mobile phone-based international calling service under the brand name “00700” in 1998, creating a new niche market within the long-distance telephony market that was otherwise dominated by existing service providers. In 2003, SK Telink was designated a common carrier for international calling services, which allowed us to expand our international calling services to fixed-line international calling services. In addition, in 2011, we were again ranked first in the three major independent customer satisfaction surveys, including the Korea Nation Customer Satisfaction Index, after having been ranked first in 2010. The revenue from our international calling services in 2011 was Won 416.5 billion. SK Telink plans to strengthen its existing business, including international and long-distance calling services, while satisfying customers’ diverse needs for new services.

[Other Business]

A. Industry Characteristics

As the number of smartphones distributed in Korea exceeds 30 million, the growth in various mobile devices has spurred the rise of the service provider with a strong platform business as the leader in the ICT market. A platform business acts as an intermediary by promoting interactions among various customer groups, thereby generating new values. It is important for a platform business to continually attract subscribers and users and to create an ecosystem with certain lock-in effects. A platform can exist in various forms, including as a technological standard (iOS, Android OS), a subscriber-based service platform (Facebook, Twitter) or a marketplace (Amazon, T Store). Platform businesses are evolving and expanding globally.

A platform business has strong growth potential due to its connectivity with related services and ease of global expansion. Apple became a world-leading smartphone producer based on its innovative design and the competitive strength of its App Store platform. Google has created a new ecosystem of long-tail advertising by attracting millions of third parties to its advertising platform, as well as showing strong growth in mobile markets with its competitive platform based on Android OS.

B.	Growth Potential

The Company expects that the scope and value generated by the platform business, including application and content marketplaces and N-screen services, will increase, as smartphones and tablet computers become more popular and the bandwidth and speed of network infrastructure improve.

As the wireless network evolves to LTE, business opportunities for the platform business are growing, which include multimedia streaming, N-screen service based on cloud technology and high-definition location-based services. Since the platform business realizes profit by connecting with advertisements or commerce sites after building a critical mass of subscribers and traffic, the recent growth in the advertising and commerce markets is expected to present an opportunity for platform businesses.

C.	Domestic and Overseas Market Conditions

(1)

Competition

- Application Marketplace

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

- Commerce Markets

The Company expects that on-line commerce markets will continue to grow due to the growth potential of the Internet shopping population and the strengthening of on-line business models by off-line operators. The Korean advertising market is expected to grow from Won 7.4 trillion in 2010 to Won 10.0 trillion in 2015. In particular, mobile advertising is expected to grow rapidly to Won 0.8 trillion in 2015, primarily due to the popularity of smartphones and convergence with location-based advertising.

- Media Contents Market

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

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

(2)

Market Share

“CyWorld” service, our social networking website in Korea, had 26 million cumulative subscribers, 14 million net users and a page view of 7 billion as of September 2012. Our “Nate-On” service had the largest market share of 75.2% in the instant messenger market in Korea with 10 million net users as of September 2012. Our “Nate” search portal service had a market share of 1.8% as of September 2012. (Source: Korean Click, Company data).

D. Business Overview and Competitive Strengths

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

- Digital Content Marketplace

T Store, launched in September 2009, reached 17.15 million subscribers and cumulative downloads of 1 billion as of September 2012, solidifying its leadership position in the Korean application market and plans to widen its services to tablets and navigation devices. The Company intends to further develop T Store into a global service platform by evolving it into a personalized gateway through expansion of the scope of serviceable devices, reinforcement of digital content offerings and enhancement of search services, among other things.

- Commerce (Open Market)

11th Street, an online marketplace, has continued its growth through effective marketing and customer satisfaction. Despite its later entry into the online commerce market (launched in 2008) which was already divided between Auction and G-Market, it is leading the domestic e-commerce market and is also firmly establishing its position as the leader in the mobile commerce market. Future growth plans include overseas joint ventures based on 11th Street’s business expertise.

- Location-based Service

T-Map Navigation provides map, local information, real-time traffic information and navigation services. With cumulative subscribers of 15.27 million as of September 30, 2012, T-Map Navigation is one of the leading location-based service platforms in Korea. The Company plans to further develop the T-Map Navigation platform by initiating open application programming interface-based services, providing services to more diverse types of devices and providing local area-based services.

- Media Platform

The Company’s media platform business started with its “Hoppin” service, which provides N-screen media service enabling subscribers to enjoy contents through a number of devices. Hoppin has expanded its services to more types of smartphones and tablets and has 2.84 million subscribers as of September 30, 2012. The Company plans to develop Hoppin service into a media platform acting as an intermediary of various N-screen services. It also plans to provide media platform services in overseas markets in stages.

- Web Search through Nate.com

The Company plans to enhance the competitiveness of its web search service provided through Nate.com by adding a social search function. In addition, Cyworld plans to establish a worldwide service for global users.

- Mobile Social Networking Service

In the first quarter 2012, SK Planet, a subsidiary of the Company, acquired Mad Smart Co., Ltd., which provides “tic-toc” service, in order to expand its business to mobile communication and social networking services. Mobile social networking, still in its early stage of development, presents ample opportunities for new businesses and is expected to grow rapidly in the future. SK Planet plans to create synergies from the acquisition by combining its know-how in platform services and the strengths of “tic-toc” in social networking services.

- Music Business

The Company’s online music site, MelOn, has continued to increase its sales and, for the past four years, has been recognized as having the largest market share and the highest brand recognition in the digital music sales market in Korea. As of September 30, 2012, the Company supports all major smartphone and tablet devices introduced in Korea, including the iPhone and the iPad, and is strengthening its support for its mobile customers who use MelOn services in a multi-device environment. The Company plans to strengthen its leadership in the mobile market and increase the number of its subscribers by responding to changes in the smart device and 4G LTE network environment, providing reliable service operations and continually improving service, offering relevant and special music related contents to its customers and engaging in diverse and differentiated marketing promotion activities.

LOGO Satellite DMB

The Company launched its Hanbyul satellite in 2004 and received government approval in December 30, 2004 to provide satellite DMB services. Broadcasting through satellite DMB commenced in May 2005 and satellite DMB services expanded nationwide thereafter. On August 23, 2012, the board of directors resolved to discontinue operation of its satellite DMB services due to the rapid decrease in satellite DMB subscribers and the continued burden of fixed costs. Its DMB services were discontinued as of August 31, 2012.

2.	Major Products & Services

A.	Updates on Major Products and Services


(Unit: in millions of Won, %)
Business	Major companies	Item	Major trademarks	Sales amount (ratio)
Wireless	SK Telecom Co., Ltd., PS&Marketing Corporation, Service Ace Co., Ltd., Service Top Co. Ltd., Network O&S Co., Ltd.	Mobile Communication Service, Wireless Data Service, Information Telecommunication Service	T and others		9,798,453(81	%)
Fixed-line	SK Broadband Co., Ltd., Broadband D&M Co., Ltd., Broadband Media Co., Ltd., Broadband CS Co., Ltd., SK Telink Co., Ltd.	Fixed-line Phone, High Speed Internet, Data and Network Lease Service	B tv , 00700 international call and others		1,646,029(14	%)
Other	SK Planet Co., Ltd , Commerce Planet Co., Ltd , SK Communications Co., Ltd., PAXNet Co., Ltd., Loen Entertainment, Inc., SKT Americas, Inc., SK Telecom China Holdings Co., Ltd.	Internet Portal Service, Game Service	NATE, 11th Street, T Store, T-Map Navigation, MelOn, Cyworld and others		658,609(5	%)

Total					12,103,091(100	%)

B.	Price Fluctuation Trend of Major Products and Services

[Wireless Business]

In the past, based on the Company’s basic monthly subscription plan, the basic service fee was Won 13,000 per month and the usage fee was Won 20 per 10 seconds and based on the Company’s standard monthly subscription plan, the basic service fee was Won 12,000 per month and the usage fee was Won 18 per 10 seconds. As of September 30, 2012, based on the Company’s standard monthly subscription plan, the basic service fee was Won 11,000 per month and the usage fee was decreased to Won 1.8 per 1 second.

[Fixed-line Business]

SK Broadband provides broadband Internet access service, telephony, TV, corporate data services and other services for both individual and corporate customers. For the six months ended June 30, 2012, broadband Internet and TV services comprised 49.2% of SK Broadband’s revenue, telephony service 25.9%, corporate data services 21.2% and other telecommunications services 3.7%.

[Other Business]

SK Communications’ display advertisements are priced at Won 15 to 70 million per day. Search advertisements are priced variably depending on the search keyword using cost per click and cost per time methods. Cyworld revenues are generated through sale of cyber items at a price of Won 300 to 700 per item per week.

3.	Investment Status

[Wireless Business]

A. Investment in Progress

(Unit: in 100 millions of Won)

Business

Classification

Investment
period

Subject of
investment

Investment effect

Total
investments

Amount
already
invested

Future
investment

Network/Common

Upgrade/

New installation

2012

Network,
systems and
others

Capacity increase and

quality improvement;

systems improvement

To be
determined

18,863

To be
determined

Total

To be
determined

18,863

To be
determined

B. Future Investment Plan

(Unit: in 100 millions of Won)

Business

Expected investment amount

Expected investment for each year

Investment effect

Asset type

Amount

2012

2013

2014

Network/Common

Network,
systems and
others

28,000

To be
determined

Upgrades to the existing services and
provision of new services

Total

28,000

To be
determined

Upgrades to the existing services and
provision of new services

*	The Company modified its expected annual investment amount for 2012 from Won 2.3 trillion to Won 2.8 trillion in order to preemptively accommodate the rapidly increasing number of LTE subscribers and gain a strong competitive advantage in quality and technology.

[Fixed-line Business]

A. Investment in Progress

(Unit: in 100 millions of Won)

Business

Classification

Investment
period

Subject of

investment

Investment effect

Total
investments

Amount
already
invested

Future
investment

High-speed Internet

Upgrade/

New installation

2012

Backbone and subscriber network / others

Expand subscriber networks and facilities

2,315

685

To be
determined

Telephone

Television

522

Corporate Data

Increase leased-line and integrated information system

590

Others

Expand networks

456

Total

2,315

4.	Revenues


				(Unit: in millions of Won)
Business	Sales type	Item		For the nine months ended September 30, 2012		For the year ended December 31, 2011		For the year ended December 31, 2010
Wireless	Services	Mobile communication	Export		8,773		1,331		599
			Domestic		9,789,680		13,100,614		12,919,663
			Subtotal		9,798,453		13,101,945		12,920,262
Fixed-line	Services	Fixed-line, B2B data, High-speed Internet, TV	Export		23,954		28,070		30,883
			Domestic		1,622,075		2,134,498		2,196,424
			Subtotal		1,646,029		2,162,568		2,227,307
Other	Services	Display and Search ad., Content	Export		135,162		12,036		12,000
			Domestic		523,447		711,729		439,726
			Subtotal		658,609		723,765		451,726

Total			Export		167,889		41,437		43,482

			Domestic		11,935,202		15,946,841		15,555,813

			Total		12,103,091		15,988,278		15,599,295


(Unit: in thousands of Won)
For the nine months ended September 30, 2012	Wireless		Fixed		Other		Sub total		Internal transaction		After consolidation
Total revenue		10,763,934,063		2,206,564,845		1,229,340,764		14,199,839,672	–	2,096,749,093		12,103,090,579

Internal revenue		965,481,314		560,535,884		570,731,895		2,096,749,093	–	2,096,749,093		—
External revenue		9,798,452,749		1,646,028,961		658,608,869		12,103,090,579		—		12,103,090,579
Operating income (loss)		1,125,868,569		39,501,300		50,180,696		1,215,550,565		—		1,215,550,565
Net profit (loss)		662,002,544		-90,502,773		25,073,511		596,573,282		—		596,573,282

Total asset		23,116,767,489		3,372,434,207		3,349,850,827		29,839,052,523	–	3,780,556,505		26,058,496,018

Total liabilities		10,922,842,433		2,164,119,200		844,364,105		13,931,325,738	–	431,758,831		13,499,566,907

5.	Derivative Transactions

(1) Currency swap contract applying cash flow risk hedge accounting

The Company has entered into a currency and interest rate swap contract with Credit Agricole Corporate & Investment Bank to hedge the foreign currency risk and the interest rate risk of U.S. dollar denominated floating rate long-term borrowings with face amounts totaling US$100,000,000 borrowed on October 10, 2006. As of September 30, 2012, in connection with this unsettled currency and interest rate swap contract, an accumulated loss on valuation of derivatives amounting to Won 2,360,375,000 (excluding tax effect totaling Won 253,426,000 and foreign exchange translation loss arising from U.S. dollar denominated long-term borrowings totaling Won 17,060 million) was accounted for as accumulated other comprehensive loss.

In addition, the Company has entered into a currency and interest rate swap contract with two banks including HSBC in order to hedge the foreign currency risk and the interest rate risk of unguaranteed Japanese yen denominated bonds (56-2) with face amounts totaling JPY 12,500,000,000 issued on November 13, 2007. As of September 30, 2012, in connection with this unsettled currency and interest rate swap contracts, an accumulated gain on valuation of derivatives amounting to Won 3,645,512,000 (excluding tax effect totaling Won 564,189,000 and foreign exchange translation loss arising from unguaranteed Japanese yen denominated bonds totaling Won 76,078,267,000) was accounted for as accumulated other comprehensive gain.

In addition, the Company has entered into a currency swap contract with six banks including Morgan Stanley to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds (with face amounts totaling US$400,000,000) issued on July 20, 2007, and has applied cash flow risk hedge accounting to this foreign currency swap contract starting from May 12, 2010. Accordingly, as of September 30, 2012, in connection with this unsettled foreign currency swap contract, an accumulated loss on valuation of currency swap of Won 34,778,659,000 that has accrued since May 12, 2010 (excluding tax effect totaling Won 11,103,477,000 and foreign exchange translation gain arising from unguaranteed U.S. dollar denominated bonds totaling Won 9,924,123,000) was accounted for as accumulated other comprehensive loss. Meanwhile, a gain on valuation of currency swap of Won 129,806,021,000 incurred prior to the date of applying cash flow risk hedge accounting was charged to current operations.

The Company has entered into a currency and interest rate swap contract with two banks including DBS in order to hedge the foreign currency risk and the interest rate risk of floating rate foreign currency bonds with face amounts totaling US$250,000,000 issued on December 15, 2011. As of September 30, 2012, in connection with this unsettled currency and interest rate swap contract, an accumulated gain on valuation of derivatives of Won 5,770,479,000 (excluding tax effect totaling Won 1,842,290,000 and foreign exchange translation gain arising from this floating rate foreign currency bonds totaling Won 9,879,998,000) was accounted for as accumulated other comprehensive gain.

The Company has entered into a currency and interest rate swap contract with United Overseas Bank in order to hedge the foreign currency risk and the interest rate risk of floating rate foreign currency bonds with face amounts totaling SGD 65,000,000 issued on December 15, 2011. As of September 30, 2012, in connection with this unsettled currency and interest rate swap contract, an accumulated loss on valuation of derivatives of Won 252,103,000 (excluding tax effect totaling Won 80,487,000 and foreign exchange translation loss arising from this floating rate foreign currency bonds totaling Won 1,837,228,000) was accounted for as accumulated other comprehensive loss.

The Company has entered into a currency swap contract with six banks including Citibank in order to hedge the foreign currency risk of its fixed rate foreign currency bonds with face amounts totaling CHF 300,000,000 issued on June 12, 2012. As of September 30, 2012, in connection with this unsettled currency swap contract, an accumulated loss on valuation of derivatives of Won 15,259,211,000 (excluding tax effect totaling Won 4,871,674,000 and foreign exchange translation gain arising from these fixed rate foreign currency bonds totaling Won 5,600,087,000) was accounted for as accumulated other comprehensive loss.

(2) The fair values of the derivative instruments described above as of September 30, 2012 are recognized as derivative assets or derivative liabilities under current assets, non-current assets or current liabilities on the Company’s balance sheet. Details are as follows:


(Unit: in thousands of Won)
Category	Subject of Risk Hedge	Contract Period	Fair Value of Derivative Instruments
Category	Subject of Risk Hedge	Contract Period	Designated as Hedging Instrument		Not Designated as Hedging Instrument		Total
Currency Swap (Current Asset)	Unguaranteed Japanese Yen-denominated Bonds (face amount of JPY 12,500,000,000)	From Nov. 13, 2007 to Nov. 13, 2012		79,159,590		—		79,159,590
Currency Swap (Non-current Assets)	Floating-rate Long-term Borrowing (principal amount of USD 100,000,000)	From Oct. 10, 2006 to Oct. 10, 2013		14,446,199		—		14,446,199
	Unguaranteed Foreign Currency Bonds (face amount of USD 400,000,000)	From Jul. 20, 2007 to Jul. 20, 2027		73,999,761		—		73,999,761
	Floating-rate Foreign Currency Bonds (face amount of SGD 65,000,000)	From Dec. 15, 2011 to Dec. 12, 2014		1,504,638		—		1,504,638
Conversion Right (Non-current Asset)	Convertible Bonds (Available-for-sale Securities)(*) (face amount of Won 50,000,000,000)	From Sep. 1, 2009 to Aug. 31, 2014		—		532,169		532,169

Total derivative assets:				169,110,188		532,169		169,642,357

Currency Swap (Non-current Liability)	Floating-rate Foreign Currency Bonds (face amount of USD 250,000,000)	From Dec. 15, 2011 to Dec. 12, 2014		2,267,230		—		2,267,230
Currency Swap (Non-current Liability)	Fixed-rate Foreign Currency Bonds (face amount of CHF 300,000,000)	From Jun. 12, 2012 to Jun. 12, 2017		25,730,972		—		25,730,972

Total derivative liabilities				27,998,202		—		27,998,202

(*)	The fair value of Won 532,169,000 of the conversion rights of the convertible bonds held by SK Communications, a subsidiary of the Company, was recognized as a non-current derivative asset.

6.	Major Contracts

[SK Telecom]

Category

Vendor

Start Date

Completion
Date

Contract

Title

Contract Amount
(in 100 millions of
Won)

Service

SK Planet Co.,
Ltd.

January 1, 2012

December 31, 2012

B2B contents contract for 2012 with SK Planet (T-Map Navigation, T-Gift, Nate FZ, T-Cloud)

6,167

Service

Service Ace
Co., Ltd.

April 1, 2012

April 1, 2013

Operation of Roaming Centers in 2012

Goods

HAPPYNARAE
Co., Ltd.

May 1, 2012

April 30, 2013

Maintenance, repair and operations purchasing and agency services

150

Real Estate

Individual

First half 2012

Purchase of regional centers (Gangdong regional center and ten others)

Subtotal

6,452

[SK Broadband]

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


Counterparty	Contract Contents	Contract Period	Note
Telecommunication service providers	Interconnection among telecommunication service providers	-	Interconnection among telecommunication service providers
KEPCO	Provision of electric facilities	From Dec. 2004 until termination	Use of electricity poles
Seoul City Railway	Use of telecommunication line conduits	From Jan. 2009 to Dec. 2012	Use of railway telecommunication conduit
Seoul Metro	Use of telecommunication line conduits	From May 2010 to May 2013	Use of railway telecommunication conduit
Busan Transportation Corporation	Use of telecommunication line conduits	From July 2009 to July 2012	Use of railway telecommunication conduit
Gwangju City Railway	Use of telecommunication line conduits	From Sep. 2010 to Dec. 2012	Use of railway telecommunication conduit

[SK Planet]

Counterparty

Contract Contents

Contract Period

Amount

SK Communications

Operation of shopping business at Nate.com website

From Jul. 1, 2011 to

Dec. 31, 2013

Variable depending on the NATE shopping revenues and other factors

[SK Communications]


Counterparty	Purpose	Contract Period	Contract Amount
Overture Korea	Agency agreement for search advertisement	-	Amount determined based on the number of clicks
SK Construction Co., Ltd.	Construction of Pangyo Office Building	23 months	Won 61.9 billion
SK Planet Co., Ltd.	Operation of shopping business at nate.com website	From Jul. 1, 2011 to Dec. 31, 2013	Minimum guarantee of Won 18.4 billion for the period from Jul. 1, 2011 to Dec. 31, 2011; Amounts for 2012 and 2013 are to be determined depending on the NATE shopping revenues and other factors
Daum Communications	Business and service cooperation regarding search advertisement	-	Revenues are allocated in accordance with certain set percentages

Note. The agreements with SK Planet have been transferred from SK Telecom to SK Planet in connection with the spin-off of SK Planet on Oct. 5, 2011.

7.	R&D Investments


(Unit: in millions of Won)
Category		For the nine months ended September 30, 2012			For the year ended December 31, 2011			For the year ended December 31, 2010			Remarks
Raw material			31			45			41			—
Labor			47,250			48,656			49,441			—
Depreciation			121,250			149,850			143,131			—
Commissioned service			16,950			40,257			98,545			—
Others			37,779			57,118			64,755			—
Total R&D costs			223,260			295,927			355,913			—
Accounting	Sales and administrative expenses		221,147			289,979			352,186			—
Accounting	Development expenses (Intangible assets)		2,113			5,948			3,727			—
R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100)			1.84	%		1.85	%		2.28	%

8.	Other information relating to investment decisions

[SK Telecom]

A. Trademark Policies

The Company manages its corporate brand and other product brands such as “T” in a comprehensive way to protect and increase their value.

The Company’s Brand Management Council in charge of overseeing its systematic corporate branding operates full-time to execute decisions involving major brands and operates “Brandnet,” an intranet system to manage corporate brands which provides solutions including licensing of the brands and downloading of the Company logos.

B. Business-related Intellectual Property

The Company holds 4,705 Korean-registered patents, 266 U.S.-registered patents, 145 Chinese-registered patents (all including patents held jointly with other companies) and more patents with other countries. The Company holds 824 Korean-registered trademarks and owns intellectual property rights to the design of the alphabet “T”. The designed alphabet “T” is registered in all business categories for trademarks (total of 45) and is being used as the primary brand of the Company.

[SK Broadband]

SK Broadband holds 320 Korean-registered patents relating to high-speed Internet, telephone and IPTV service. In addition, SK Broadband has applied for a patent relating to two-way broadcasting system. SK Broadband also holds a number of trademarks and service marks relating to its service and brand.

[SK Planet]

As of September 30, 2012, SK Planet held 1,880 registered patents, 91 registered design marks, 692 registered trademarks and one copyright (including those held jointly with other companies) in Korea. It also holds 20 U.S.-registered patents, 31 Chinese-registered patents, 8 Japanese-registered patents, 15 E.U.-registered patents (all including patents held jointly with other companies) and 107 registered trademarks, along with a number of other intellectual property rights, in other countries.

[SK Communications]

As of September 30, 2012, SK Communications held 59 registered patents, 26 registered design rights and 700 registered trademarks in Korea.

III.

FINANCIAL INFORMATION

1.	Summary Financial Information (Consolidated)

A.	Summary Financial Information (Consolidated)


(Unit: in thousands of Won, except for number of companies)
	As of September 30, 2012			As of December 31, 2011			As of December 31,2010
Current Assets		5,443,180,022			6,117,478,958			6,653,991,923
• Cash and Cash Equivalents		1,168,091,430			1,650,793,876			659,404,935
• Accounts Receivable - Trade		1,950,202,277			1,823,169,889			1,949,397,279
• Accounts Receivable - Other		544,187,807			908,836,454			2,531,847,155
• Others		1,780,698,508			1,734,678,739			1,513,342,554
Non-Current Assets		20,615,315,996			18,248,557,471			16,478,397,157
• Long Term Investment Securities		1,002,933,347			1,537,945,216			1,680,582,091
• Investments in Associates		4,718,240,702			1,384,605,401			1,204,691,805
• Property and Equipment		9,072,883,245			9,030,998,201			8,153,412,683
• Intangible Assets		2,739,298,067			2,995,803,300			1,884,955,652
• Goodwill		1,740,149,083			1,749,932,878			1,736,649,137
• Others		1,341,811,552			1,549,272,475			1,818,105,789

Total Assets		26,058,496,018			24,366,036,429			23,132,389,080

Current Liabilities		5,312,382,723			6,673,589,809			6,202,170,452
Non-Current Liabilities		8,187,184,184			4,959,737,573			4,522,219,358

Total Liabilities		13,499,566,907			11,633,327,382			10,724,389,810

Equity Attributable to Owners of the Parent Company		11,540,534,896			11,661,880,863			11,329,990,900
Capital		44,639,473			44,639,473			44,639,473
Capital Deficit and Other Capital Adjustments		(290,660,059	)		(285,347,419	)		(78,952,875	)
Retained Earnings		11,610,756,252			11,642,525,267			10,721,249,327
Reserves		175,799,230			260,063,542			643,054,975
Non-controlling Interests		1,018,394,215			1,070,828,184			1,078,008,370

Total Equity		12,558,929,111			12,732,709,047			12,407,999,270

Number of Companies Consolidated		29			31			32


(Unit: in thousands of Won, except for per share amounts)
	For the nine months ended September 30, 2012			For the nine months ended September 30, 2011			For the year ended December 31, 2011			For the year ended December 31, 2010
Revenue		12,103,090,579			11,968,129,465			15,926,468,674			15,489,373,747
Operating Income		1,215,550,565			1,899,693,602			2,295,613,330			2,555,781,816
Income Before Income Tax		900,663,520			1,960,613,979			2,240,689,573			2,373,223,839
Net Income		596,573,282			1,386,591,288			1,582,073,280			1,766,834,754
Net Income Attributable to Owners of the Parent Company		628,691,998			1,396,493,916			1,612,889,086			1,841,612,790
Net Income Attributable to Non-controlling Interests		(32,118,716	)		(9,902,628	)		(30,815,806	)		(74,778,036	)
Net Income Per Share (Won)		9,021			19,698			22,848			25,598
Diluted Net Income Per Share (Won)		8,800			19,160			22,223			24,942

B.	Changes to Accounting Standards Adopted During 2012

- Presentation of Financial Statements

As of September 30, 2012, the Company early adopted the amendment to K-IFRS No. 1001, “Presentation of Financial Statements” and presented operating income (which equals revenues minus operating expenses) on a consolidated basis accordingly.

The Company has applied the amendment to K-IFRS No. 1001 retroactively and the impact of such amendment on the Company’s consolidated statements of comprehensive income is set forth in the table below.


(Unit: in thousands of Won)
	For the three months ended September 30, 2012			For the nine months ended September 30, 2012			For the three months ended September 30, 2011			For the nine months ended September 30, 2011
Operating income before adoption of the amendment		274,362,643			1,124,162,718			544,354,086			1,845,597,328
Differences:
Fees revenues		(1,025,677	)		(1,987,129	)		(1,989,627	)		(2,586,775	)
Gain on disposal of property and equipment and intangible assets		(2,138,155	)		(4,970,005	)		(1,360,609	)		(5,296,150	)
Others		(11,420,400	)		(25,488,313	)		(13,655,805	)		(26,852,683	)

Total other non-operating income		(14,584,232	)		(32,445,447	)		(17,006,041	)		(34,735,608	)

Impairment loss on property and equipment and intangible assets		5,850,000			9,719,444			—			1,559,326
Loss on disposal of property and equipment and intangible assets		7,154,655			10,134,161			6,124,908			14,098,829
Donations		4,207,082			45,215,525			15,795,586			46,634,671
Bad debts for accounts receivable - other		4,986,430			28,025,983			1,615,260			4,761,379
Others		18,717,816			30,738,181			9,850,571			21,777,677

Total other non-operating expense		40,915,983			123,833,294			33,386,325			88,831,882

Operating income after adoption of the amendment		300,694,394			1,215,550,565			560,734,370			1,899,693,602

2.	Summary Financial Information (Separate)

A.	Summary Financial Information (Separate)


				(Unit: in thousands of Won)
	As of September 30, 2012			As of December 31, 2011			As of December 31, 2010
Current Assets		3,187,584,533			3,948,077,706			5,316,976,799
• Cash and Cash Equivalents		365,673,348			895,557,654			357,469,908
• Accounts Receivable - Trade		1,423,606,763			1,282,233,900			1,453,060,673
• Accounts Receivable - Other		346,253,906			774,221,266			2,499,969,010
• Others		1,052,050,516			996,064,886			1,006,477,208
Non Current Assets		19,338,916,696			16,572,449,699			14,410,149,512
• Long Term Investment Securities		782,831,252			1,312,437,834			1,517,029,011
• Investments in Associates		7,998,066,050			4,647,505,583			3,584,394,790
• Property and Equipment		6,550,285,366			6,260,168,675			5,469,747,495
• Intangible Assets		2,225,887,517			2,364,795,182			1,424,968,542
• Goodwill		1,306,236,299			1,306,236,299			1,308,422,097
• Others		475,610,212			681,306,126			1,105,587,577

Total Assets		22,526,501,229			20,520,527,405			19,727,126,311

Current Liabilities		3,600,903,203			4,467,005,877			4,561,013,611
Non Current Liabilities		6,941,524,047			4,087,219,816			3,585,155,050

Total Liabilities		10,542,427,250			8,554,225,693			8,146,168,661

Capital		44,639,473			44,639,473			44,639,473
Capital Deficit and Other Capital Adjustments		(236,160,557	)		(236,016,201	)		(24,643,471	)
Retained Earnings		11,901,519,520			11,837,184,788			10,824,355,758
Reserves		274,075,543			320,493,652			736,605,890

Total Equity		11,984,073,979			11,966,301,712			11,580,957,650


	(Unit: in thousands of Won, except per share amounts)
	For the nine months ended September 30, 2012		For the nine months ended September 30, 2011		For the year ended December 31, 2011		For the year ended December 31, 2010
Revenue		9,173,496,789		9,521,830,703		12,551,255,630		12,514,520,922
Operating Income		1,125,503,908		1,792,288,526		2,184,498,641		2,530,954,768
Income Before Income Tax		891,467,012		1,936,692,038		2,274,421,558		2,503,637,367
Net Income		724,338,433		1,423,741,476		1,694,363,093		1,947,007,919
Net Income Per Share (Won)		10,393		20,083		24,002		27,063
Diluted Net Income Per Share (Won)		10,128		19,533		23,343		26,366

B.	Changes to Accounting Standards Adopted During 2012

- Presentation of Financial Statements

The Company has applied the amendment to K-IFRS No. 1001 retroactively and the impact of such amendment on the Company’s separate statements of income is set forth in the table below.


	(Unit: in thousands of Won)
	For the three months ended September 30, 2012			For the nine months ended September 30, 2012			For the three months ended September 30, 2011			For the nine months ended September 30, 2011
Operating income before adoption of the amendment		236,902,885			1,040,163,126			508,793,557			1,737,812,069
Differences:
Fees revenues		(2,275,215	)		(3,484,651	)		(1,636,297	)		(2,318,593	)
Gain on disposal of property and equipment and intangible assets		(1,522,914	)		(1,881,326	)		(328,018	)		(1,183,623	)
Others		(4,953,216	)		(9,390,330	)		(7,765,984	)		(12,726,271	)

Total other non-operating income		(8,751,345	)		(14,756,307	)		(9,730,299	)		(16,228,487	)

Impairment loss on property and equipment and intangible assets		—			15,437,758			—			—
Loss on disposal of property and equipment and intangible assets		6,772,897			8,858,034			6,230,076			13,584,618
Donations		4,013,045			44,495,477			15,480,091			45,534,199
Bad debt for accounts receivable - other		502,865			19,874,015			1,614,023			4,524,330
Others		10,100,248			11,431,805			1,865,796			7,061,797

Total other non-operating expense		21,389,055			100,097,089			25,189,986			70,704,944

Operating income after adoption of the amendment		249,540,595			1,125,503,908			524,253,244			1,792,288,526

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

- Transition to K-IFRS

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

IV.

AUDITOR’S OPINION

1.	Auditor (Consolidated)


Nine months ended September 30, 2012	Year ended December 31, 2011	Year ended December 31, 2010
KPMG Samjong Accounting Corp.	Deloitte Anjin LLC	Deloitte Anjin LLC

2.	Audit Opinion (Consolidated)


Period	Auditor’s opinion	Issues noted
Nine months ended September 30, 2012	-	-
Year ended December 31, 2011	Unqualified	-
Year ended December 31, 2010	Unqualified	-

3.	Auditor (Separate)


Nine months ended September 30, 2012	Year ended December 31, 2011	Year ended December 31, 2010
KPMG Samjong Accounting Corp.	Deloitte Anjin LLC	Deloitte Anjin LLC

4.	Audit Opinion (Separate)


Period	Auditor’s opinion	Issues noted
Nine months ended September 30, 2012	-	-
Year ended December 31, 2011	Unqualified	-
Year ended December 31, 2010	Unqualified	-

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

A.	Audit Contracts

(Unit: in thousands of Won / hour)

Fiscal Year

Auditors

Contents

Fee

Total
number of
hours
accumulated
for the fiscal
year

Year ended December 31, 2012

KPMG Samjong Accounting Corp.

Semi-annual review

1,220,000

16,160

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Year ended December 31, 2011

Deloitte Anjin LLC

Semi-annual review

1,364,000

14,033

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

English financial statements review and other audit task

Year ended December 31, 2010

Deloitte Anjin LLC

Semi-annual review

1,563,770

16,810

Quarterly review

Separate financial statements audit

Consolidated financial statements audit

IFRS-based financial statements review

English financial statements review and other audit task

B.	Non-Audit Services Contract with External Auditors


(Unit: in thousands of Won)
Period	Contract date	Service provided	Service duration	Fee
Nine months ended September 30, 2012	-	-	-		—
Year ended December 31, 2011	April 11, 2011	Tax consulting	30 days		45,000
Year ended December 31, 2011	April 28, 2011	Tax consulting	30 days		45,000
	July 20,2010	Management consulting	4 days		5,000
	July 28, 2010	Tax consulting	15 days		18,000
	July 28, 2010	Tax consulting	5 days		6,600
	July 28, 2010	Tax consulting	30 days		40,000
Year ended December 31, 2010	July 28, 2010	Tax consulting	20 days		23,100
	December 23, 2010	Tax consulting	3 days		7,700
	December 23, 2010	Tax consulting	20 days		24,600
	December 29, 2010	Tax consulting	15 days		17,000

6.	Change of Independent Auditors

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

V.	MANAGEMENT DISCUSSION AND ANALYSIS

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

VI.

CORPORATE ORGANIZATION INCLUDING BOARD OF DIRECTORS AND AFFILIATED COMPANIES

1.	Board of Directors

A.	Overview of the Composition of the Board of Directors

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


The number of persons	Inside directors	Independent directors
8	Sung Min Ha, Young Tae Kim, Dong Seob Jee	Dal Sup Shim, Rak Yong Uhm, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho

At the 28th General Shareholders’ Meeting held on March 23, 2012, Young Tae Kim and Dong Seob Jee were elected as inside directors, Hyun Chin Lim was re-elected as an independent director, and Hyun Chin Lim was re-elected as a member of the audit committee.

B.	Significant Activities of the Board of Directors


Meeting	Date	Agenda	Approval
339th (the 1st meeting of 2012)	February 9, 2012	• Financial Statements as of and for the year ended December 31, 2011 • Annual Business Report as of and for the year ended December 31, 2011 • Management Plan for 2012 • Transaction of goods, services and assets with SK Planet • Report for Internal Accounting Management System • Report for Subsequent Events following 4Q 2011	Approved as proposed Approved as proposed Approved as proposed Approved as proposed - -
340th (the 2nd meeting of 2012)	February 23, 2012	• Convocation of the 28th Annual General Meeting of Shareholders • Result of Internal Accounting Management System Evaluation	Approved as proposed -
341th (the 3rd meeting of 2012)	March 23, 2012	• Election of Chairman of the Board of Directors • Amendment to the Company’s internal rules • Election of committee members • Asset Management Transaction with Affiliated Company (SK Securities) • Donation to Happiness Sharing Institute	Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed


Meeting	Date	Agenda	Approval
342th (the 4th meeting of 2012)	April 26, 2012	• Adoption of internal compliance rules and the appointment of chief compliance officer • Amendment of board regulations • Issuance of overseas bonds • Report for the period after the first quarter of 2012	Approved as proposed Approved as proposed Approved as proposed -
343th (the 5th meeting of 2012)	June 21, 2012	• Asset management transaction with affiliated company (SK Securities) • Compliance support operating plan	Approved as proposed -
344th (the 6th meeting of 2012)	July 25, 2012	• Interim dividend • Bond offering • Agreement on the operation of Voluntary Responsible Management Support Group • Financial results for the first half of 2012 • Report for the period after the second quarter of 2012	Approved as proposed Approved as proposed Approved as proposed - -
345th (the 7th meeting of 2012)	September 26, 2012	• Sale of equity stake in POSCO	Approved as proposed
346th (the 8th meeting of 2012)	September 27, 2012	• Bond offering • Financial transactions with affiliated company (SK Securities)	Approved as proposed Approved as proposed
347th (the 9th meeting of 2012)	October 25, 2012	• Amendment of investment amount in 2012 LTE network investment plan • Report for the period after the third quarter of 2012	Approved as proposed -
348th (the 10th meeting of 2012)	November 22, 2012	• Amendment to agreement between affiliated companies • 2013 transaction plan with SK Forest Co., Ltd. • Base station maintenance service contract • Customer center management service contract	Approved as proposed Approved as proposed Approved as proposed Approved as proposed

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

C.	Committees within Board of Directors

(1)

Committee Structure (As of November 23, 2012)

Compensation Review Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
5	-	Dal Sup Shim, Rak Yong Uhm, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho	Review CEO remuneration system and amount.

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

Capex Review Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
5	Dong Seob Jee	Dal Sup Shim, Rak Yong Uhm, Jay Young Chung, Jae Ho Cho	Review major investment plans and changes thereto.

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

Corporate Citizenship Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
5	Dong Seob Jee	Dal Sup Shim, Rak Yong Uhm, Hyun Chin Lim, Jay Young Chung	Review guidelines on “Corporate Social Responsibility” (“CSR”) programs, etc.

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

Independent Director Nomination Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
3	Sung Min Ha	Rak Yong Uhm, Jae Ho Cho	Nomination of independent directors

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

Audit Committee


Number of Persons	Members		Task
Number of Persons	Inside Directors	Independent Directors	Task
4	-	Dal Sup Shim, Hyun Chin Lim, Jay Young Chung, Jae Ho Cho	Review financial statements and supervise independent audit process, etc.

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

2.	Audit System

The Company’s Audit Committee consists of four independent directors, Dal Sup Shim, Hyun Chin Lim, Jae Ho Cho and Jay Young Chung.

Major activities of the Audit Committee are as follows.


Meeting	Date	Agenda	Approval	Remarks

The first meeting of 2012	February 1, 2012	• Preparation for audit report for the 28th Annual General Meeting of Shareholders	-
The second meeting of 2012	February 8, 2012	• Business-to-business contract with SK Telink • Construction of Mobile Phone Facilities for 2012 • Construction of Network Facilities for 2012 • Evaluation of Internal Accounting Controls based on the Opinion of the Members of the Audit Committee • 2nd half 2011 Management Audit Results and Management Audit Plan for 2012 • Reports on Internal Accounting Management System	Approved as proposed Approved as proposed Approved as proposed Approved as proposed - -
The third meeting of 2012	February 22, 2012	• Reports on 2011 IFRS Audit • Report on Review of 2011 Internal Accounting Management System • Evaluation of Internal Accounting Management System Operation • Auditor’s Report for Fiscal Year 2011 • Agenda and Document Review for the 28^th Annual General Meeting of Shareholders • Purchase of Mobile Phone Relay Devices for 2012 • Purchase of Mobile Phone Transmission Devices for 2012 • 2012 IT SM contract • Engagement of Independent Auditing Firm for 2012 to 2014	- - Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed Approved as proposed
The fourth meeting of 2012	March 22, 2012	• Transactions with SK C&C in the second quarter of 2012 • Asset Management Transaction with Affiliated Company (SK Securities)	Approved as proposed -
The fifth meeting of 2012	April 26, 2012	• Election of Chairman – Jae Ho Cho • Remuneration of outside auditor for the Fiscal Year 2012 • Outside auditor service plan for the Fiscal Year 2012 • Audit plan for the Fiscal Year 2012 • Purchase of maintenance, repair and operations items from Happy Narae Co., Ltd.	Approved as proposed Approved as proposed Approved as proposed - Approved as proposed


Meeting	Date	Agenda	Approval	Remarks
The sixth meeting of 2012	May 23, 2012	• Construction of Mobile Phone Facilities for 2012 • Construction of Network Facilities for 2012 • Service contract for handset customer service for 2012	Approved as proposed Approved as proposed Approved as proposed
The seventh meeting of 2012	June 20, 2012	• Transaction with SK C&C in the third quarter of 2012 • Plans for asset management transaction with affiliate (SK Securities)	Approved as proposed -
The eighth meeting of 2012	July 24, 2012	• Financial results for the first half of 2012 • Results of operation for the first half of 2012 • Results of fiscal year 2012 IFRS half year review	- - -
The ninth meeting of 2012	August 22, 2012	• Plans for the construction of cell phone facilities in 2012 • Plans for the construction of transmission facilities in 2012 • Results of management audit in the first half of 2012	Approved as proposed Approved as proposed -
The tenth meeting of 2012	September 26, 2012	• Transactions with SK C&C in the fourth quarter of 2012 • Plans for financial transactions with affiliate (SK Securities)	Approved as proposed -
The eleventh meeting of 2012	October 24, 2012	• Agency contract for billboard advertising • Agency contract for 2013 integrated loyalty marketing	Approved as proposed Approved as proposed
The twelfth meeting of 2012	November 21, 2012	• Leases of electricity and transmission facilities • Service contract for fixed-line network services • Construction of cell phone facilities • Construction of transmission network facilities	Approved as proposed Approved as proposed Approved as proposed Approved as proposed

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

3.	Shareholders’ Exercises of Voting Rights

A.	Voting System and Exercise of Minority Shareholders’ Rights

Pursuant to the Articles of Incorporation as shown below, the cumulative voting system was first introduced in the General Meeting of Shareholders in 2003.


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

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

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

4.	Affiliated Companies

A.	Capital Investments between Affiliated Companies

(As of September 30, 2012)


Investing company	Invested companies
Investing company	SK Corporation			SK Innovation			SK Energy			SK Global Chemical			SK Telecom			SK Networks			SKC			SK E&C			SK Shipping			SK Securities
SK Corporation					33.4	%								25.2	%		39.1	%		42.5	%		40.0	%		83.1	%
SK Innovation								100.0	%		100.0	%
SK Energy
SK Global Chemical
SK Networks																													22.7	%
SK Telecom
SK Chemicals																	0.02	%					25.4	%
SKC
SK E&C
SK Gas
SK C&C		31.8	%
SK E&S
SK Communications
SK Broadband
SK D&D
SK Marketing & Company
SK Lubricant
SK Shipping
SK Planet
SK Hynix
Hynix Engineering

Total affiliated companies		31.8	%		33.4	%		100.0	%		100.0	%		25.2	%		39.2	%		42.5	%		65.4	%		83.1	%		22.7	%


Investing company	Invested companies
Investing company	SK E&S			SK Gas			DOPCO			CCE			YN Energy			Ko-one Energy Service(formerly, Daehan City Gas)			SK Sci-tech			SK Telink			Busan City Gas			Jeonnam City Gas
SK Corporation		94.1	%
SK Innovation								41.0	%
SK Energy
SK Global Chemical
SK Networks
SK Telecom																							83.5	%
SK Chemicals					45.5	%														50.0	%
SK C
SK E&C
SK Gas
SK C&C		5.9	%
SK E&S											100.0	%		100.0	%		99.1	%								40.0	%		100.0	%
SK Communications
SK Broadband
SK D&D
SK Marketing & Company
SK Lubricant
SK Shipping
SK Planet
SK Hynix
Hynix Engineering

Total affiliated companies		100.0	%		45.5	%		41.0	%		100.0	%		100.0	%		99.1	%		50.0	%		83.5	%		40.0	%		100.0	%


	Invested companies
Investing company	Gangwon City Gas			JBES			M & Service			SK Wyverns			Infosec			Happynarae (formerly, MRO Korea)			SK Telesys			Encar network			F&U Credit Info			Paxnet
SK Corporation
SK Innovation																	42.5	%
SK Energy
SK Global Chemical
SK Networks
SK Telecom											100.0	%					42.5	%								50.0	%
SK Chemicals
SK C																				50.0	%
SK E&C
SK Gas																	5.0	%
SK C&C														100.0	%		5.0	%					92.4	%
SK E&S		100.0	%		100.0	%
SK Communications
SK Broadband
SK D&D
SK Marketing & Company								100.0	%
SK Lubricant
SK Shipping
SK Planet																													59.7	%
SK Hynix
Hynix Engineering

Total affiliated companies		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		95.0	%		50.0	%		92.4	%		50.0	%		59.7	%


	Invested companies
Investing company	SK D&D			Natruck			Loen Entertainment			Independence			SK Mobile Energy			SK Petrochemical			SK Communications			SKN Internet			SKC Air Gas			SKN service
SK Corporation
SK Innovation														100.0	%
SK Energy					92.4	%
SK Global Chemical																	100.0	%
SK Networks																							100.0	%					85.0	%
SK Telecom
SK Chemicals
SK C																										80.0	%
SK E&C		45.0	%
SK Gas
SK C&C											100.0	%
SK E&S
SK Communications
SK Broadband
SK D&D
SK Marketing & Company
SK Lubricant
SK Shipping
SK Planet								67.6	%											64.6	%
SK Hynix
Hynix Engineering

Total affiliated companies		45.0	%		92.4	%		67.6	%		100.0	%		100.0	%		100.0	%		64.6	%		100.0	%		80.0	%		85.0	%


Investing company	Invested companies
Investing company	Commerce Planet			Real Vest			SKC Solmics Co., Ltd.			SK Broadband			SK M&C			Broadband Media			Broadband CS			UBcare			PyongTaek Energy Service			Wirye Energy Service
SK Corporation
SK Innovation														50.0	%
SK Energy
SK Global Chemical
SK Networks
SK Telecom											50.6	%		50.0	%
SK Chemicals																							44.0	%
SK C								53.7	%
SK E&C					100.0	%
SK Gas
SK C&C
SK E&S																										100.0	%		71.0	%
SK Communications
SK Broadband																	100.0	%		100.0	%
SK D&D
SK Marketing & Company
SK Lubricant
SK Shipping
SK Planet		100.0	%
SK Hynix
Hynix Engineering

Total affiliated companies		100.0	%		100.0	%		53.7	%		50.6	%		100.0	%		100.0	%		100.0	%		44.0	%		100.0	%		71.0	%


	Invested companies
Investing company	WS Commerce			Incyto			Jeju United FC			MKS Guarantee			PS&Marketing			SK Forest			SK Lubricants			Zicos			MAD Start			Bizen
SK Corporation																	100.0	%
SK Innovation																				100.0	%
SK Energy								100.0	%
SK Global Chemical
SK Networks		100.0	%
SK Telecom														100.0	%
SK Chemicals
SK C					100.0	%
SK E&C
SK Gas
SK C&C																													99.0	%
SK E&S
SK Communications
SK Broadband
SK D&D											100.0	%
SK Marketing & Company
SK Lubricant																							100.0	%
SK Shipping
SK Planet																										100.0	%
SK Hynix
Hynix Engineering

Total affiliated companies		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		99.0	%


Investing company	Invested companies
Investing company	SK Seentec			Daejeon Pure Water			Gwangju Pure Water			SKW			Television Media Korea			Network O&S			Service Ace			Service Top			SK Pinx			U base Manufacturing Asia
SK Corporation
SK Innovation
SK Energy
SK Global Chemical
SK Networks																										100.0	%
SK Telecom																	100.0	%		100.0	%		100.0	%
SK Chemicals		100.0	%
SK C											65.0	%
SK E&C					32.0	%		42.0	%
SK Gas
SK C&C
SK E&S
SK Communications
SK Broadband
SK D&D
SK Marketing & Company
SK Lubricant																													100.0	%
SK Shipping
SK Planet														51.0	%
SK Hynix
Hynix Engineering

Total affiliated companies		100.0	%		32.0	%		42.0	%		65.0	%		51.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%


Investing company	Invested companies
Investing company	Natruck Friends			Ulsan Aromatics			SK Biofarm			Service-In			SKC Lighting			Gimcheon Energy			SKSM			PMP			LC&C			Speed Motor
SK Corporation								100.0	%
SK Innovation
SK Energy		50.0	%
SK Global Chemical					50.0	%
SK Networks																										79.6	%		100.0	%
SK Telecom
SK Chemicals
SK C														72.2	%
SK E&C
SK Gas
SK C&C
SK E&S																	50.0	%					100.0	%
SK Communications											100.0	%
SK Broadband
SK D&D
SK Marketing & Company
SK Lubricant
SK Shipping																				100.0	%
SK Planet
SK Hynix
Hynix Engineering

Total affiliated companies		50.0	%		50.0	%		100.0	%		100.0	%		72.2	%		50.0	%		100.0	%		100.0	%		79.6	%		100.0	%


Investing company	Invested companies
Investing company	SK Planet			Highway Star			SK Hynix			Hynix Engineering			HYSTEC			HYLogitec			Hynix Human Resources			QRT Semiconductor			Silicon File			Ami Power
SK Corporation
SK Innovation
SK Energy					100.0	%
SK Global Chemical
SK Networks
SK Telecom		100.0	%					21.1	%
SK Chemicals
SK C
SK E&C
SK Gas
SK C&C
SK E&S
SK Communications
SK Broadband
SK D&D
SK Marketing & Company
SK Lubricant
SK Shipping
SK Planet
SK Hynix											100.0	%		100.0	%		100.0	%		100.0	%					28.8	%		100.0	%
Hynix Engineering																							100.0	%

Total affiliated companies		100.0	%		100.0	%		21.1	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		28.8	%		100.0	%

VII.

SHAREHOLDERS

1.	Shareholdings of the Largest Shareholder and Related Persons

A.	Shareholdings of the Largest Shareholder and Related Persons


(As of September 30, 2012)							(Unit: Shares, %)
			Number of shares owned and ownership ratio
			Beginning of Period				End of Period
Name	Relationship	Type of share	Number of shares		Ownership ratio		Number of shares		Ownership ratio
SK Corporation	Largest Shareholder	Common share		20,363,452		25.22		20,363,452		25.22
Tae Won Chey	Officer of affiliated company	Common share		100		0.00		100		0.00
Shin Won Chey	Officer of affiliated company	Common share		2,000		0.00		2,000		0.00
Sung Min Ha	Officer of affiliated company	Common share		738		0.00		738		0.00
Bang Hyung Lee*	Officer of affiliated company	Common share		200		0.00		0		0.00

Total-		Common share		20,366,490		25.22		20,366,290		25.22

*	Resigned on January 31, 2012.

B.	Overview of the Largest Shareholder

SK Corporation is a holding company and as of September 30, 2012, has nine subsidiaries: SK Innovation Co., Ltd., SK Telecom Co., Ltd., SK Networks Co., Ltd., SKC Co., Ltd., SK Shipping Co., Ltd., SK E&C Co., Ltd., SK E&S Co., Ltd., SK Biofarm Co., Ltd. and SK Forest Co., Ltd.

Details of SK Corporation’s subsidiaries are as follows:


						(Unit: in millions of Won)
Affiliates	Share Holdings			Book Value (million Won)		Industry	Description
SK Innovation Co., Ltd.		33.4	%		3,944,657	Energy and Petrochemical	Publicly Listed
SK Telecom Co., Ltd.		25.2	%		3,091,125	Telecommunication	Publicly Listed
SK Networks Co., Ltd.		39.1	%		1,165,759	Trading, Energy Sale	Publicly Listed
SKC Co., Ltd.		42.5	%		254,632	Synthetic Resin Manufacturing	Publicly Listed
SK E&C Co., Ltd.		40.0	%		485,171	Construction	Privately Held
SK Shipping Co., Ltd.		83.1	%		607,643	Ocean Freight	Privately Held
SK E&S Co., Ltd.		94.1	%		1,026,307	Gas Company Holdings and Power Generation	Privately Held
SK Biofarm Co., Ltd.		100.0	%		228,702	Biotechnology	Privately Held
SK Forest Co., Ltd.**		100.0	%		60,200	Forestry and landscaping	Privately Held

*	The above share holdings are based on common stock holdings as of September 30, 2012.

**	Acquired from SK E&C on June 29, 2012.

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

The rule is applicable to subsidiaries whose book value of the holding company’s shareholding exceeds 10% of its total assets based on the financial statements as of December 31, 2011. SK Innovation Co., Ltd., SK Telecom Co., Ltd. and SK Networks Co., Ltd. are three such subsidiaries.

2.	Changes in Shareholdings of the Largest Shareholder

Changes in shareholdings of the largest shareholder are as follows.


(As of September 30, 2012)						(Unit: Shares, %)
Largest Shareholder	Date of the change in the largest shareholder/ Date of change in shareholding	Shares Held		Holding Ratio		Remarks

SK Corporation	March 7, 2008		18,751,260		23.09	Purchased 1,085,325 shares from SK Networks on March 7, 2008
	March 13, 2009		18,751,360		23.22	At the 25^th General Meeting of Shareholders, elected the CEO, Man Won Jung (who owned 100 shares of the Company’s common stock)
	December 30, 2009		18,755,260		23.23	Man Won Jung, the CEO, purchased 3,900 shares.
	May 26, 2010		18,756,760		23.23	Man Won Jung, the CEO, purchased 1,500 shares
	July 20, 2010		18,756,860		23.23	Man Won Jung, the CEO, purchased 100 shares
	September 17, 2010		18,757,360		23.23	Dal Sup Shim, an Independent Director, purchased 500 shares
	March 11, 2011		18,750,490		23.22	Man Won Jung, SK Telecom’s CEO, resigned Shin Bae Kim, SK C&C’s CEO, resigned
	April 5, 2011		18,749,990		23.22	Dal Sup Shim, an Independent Director, disposed 500 shares
	July 8, 2011		18,749,990		23.22	Shin Won Chey, SKC’s Chairman, purchased 500 shares
	August 5, 2011		18,750,490		23.22	Shin Won Chey, SKC’s Chairman, purchased 500 shares
	August 23, 2011		18,751,490		23.22	Shin Won Chey, SKC’s Chairman, purchased 500 shares
	December 21, 2011		20,366,490		25.22	SK Corporation purchased 1,615,000 shares
	January 31, 2012		20,366,290		25.22	Retirement of Bang Hyung Lee, a former officer of an affiliated company

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

3.	Distribution of Shares

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


(As of June 30, 2012)		(Unit: shares, %)
		Common share
Rank	Name (title)	Number of shares		Ownership ratio
1	Citibank ADR		23,938,004		29.65
2	SK Corporation		20,363,452		25.22
3	SK Telecom		11,050,712		13.69
Shareholdings under the Employee Stock Ownership Program*			273,729		0.34

*	Shares held as of September 30, 2012.

B.	Shareholder Distribution


(As of June 30, 2012)	(Unit: shares, %)
Classification	Number of shareholders		Ratio (%)			Number of shares		Ratio (%)			Remarks
Total minority shareholders *		32,908		99.97	%		35,201,362		43.60	%		—

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

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

A.	Domestic Securities Market


(Unit: Won, shares)
Types		September 2012		August 2012		July 2012		June 2012		May 2012		April 2012
Common stock	Highest		152,000		153,000		144,500		142,500		138,500		126,500
Common stock	Lowest		144,000		141,000		125,000		134,500		120,500		120,500
Monthly transaction volume			3,529,323		4,472,290		5,328,072		7,871,677		5,027,374		4,468,381

B.	Foreign Securities Market


New York Stock Exchange									(Unit: US$, ADR)
Types		September 2012		August 2012		July 2012		June 2012		May 2012		April 2012
Depository	Highest		15.06		14.80		13.87	12.10			13.59		14.13
Receipt	Lowest		14.39		13.67		12.23	11.38			11.44		13.25
Monthly transaction volume			25,083,680		43,365,272		46,810,072	31,605,816			45,556,433		46,985,251

VIII.

EMPLOYEES AND DIRECTORS

1.	Employees


(As of September 30, 2012)								(Unit: persons, in thousands of Won)
Classification	Number of employees								Average service year		Aggregate wage for the nine months ended September 30, 2012		Average wage per person		Remarks
Classification	Regular employees		Contract employees		Others		Total		Average service year		Aggregate wage for the nine months ended September 30, 2012		Average wage per person		Remarks
Male		3,410		48		—	3,458			12.7		288,367,419		83,391	—
Female		512		68		—	580			10.5		34,505,794		59,493	—
Total		3,922		116		—	4,038			12.4		322,873,213		79,959	3.5% of operating income (on a separate basis)

*	Excludes retirement and severance payments to employees whose employment was terminated before the end of the respective employment periods.

2.	Compensation of Directors

A.	Amount Approved at the Shareholders’ Meeting


			(Unit: in millions of Won)
Classification	Number of Directors		Aggregate Amount Approved
Directors		8		12,000

B.	Amount Paid


(As of September 30, 3012)			(Unit: in millions of Won)
Classification	Number of Directors		Aggregate Amount Paid		Average Amount Paid Per Director
Insider Directors		3		9,005		3,002
Independent Directors*		1		64		64
Audit Committee Members		4		241		60

Total		8		9,309		—

*	Excludes independent directors who are Audit Committee members.

IX.

RELATED PARTY TRANSACTIONS

1.	Loans to the Largest Shareholder and Related Persons

None

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

A.	Investment and Disposition of Investment

None.

B.	Transfer of Assets

(Units: in millions of Won)

Name (Corporate Name)

Relationship

Details

Remarks

Transferred Objects

Purpose of Transfer

Date of Transfer

Amount
Transferred
From
Largest
Shareholder

Amount
Transferred
to Largest
Shareholder

Encar Network Co., Ltd.

Affiliated Company

Used car sale

Sale of assets not in use

March 21, 2012

—

Service Ace Co., Ltd.

Affiliated Company

Devices not in use

Sale of assets not in use

July 24, 2012

—

Service Ace Co., Ltd.

Affiliated Company

Devices not in use

Sale of assets not in use

July 31, 2012

—

SK Networks Co., Ltd. (Seoul branch)

Affiliated Company

Distribution network assets

Sale of assets not in use

August 23, 2012

—

PS&Marketing Corporation

Affiliated Company

Distribution network assets

Sale of assets not in use

August 27, 2012

—

Total

—

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

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

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Account category

Change details

Accrued
interest

Remarks

Beginning

Increase

Decrease

Ending

Midus and others

Agency

Long-term and short-term loans

118,919

162,456

183,363

98,012

—

(Unit: in millions of Won)

Name (Corporate name)

Relationship

Account category

Change details

Accrued
interest

Remarks

Beginning

Increase

Decrease

Ending

Daehan Kanggun BcN Co., Ltd.

Investee

Long-term loans

22,102

—

22,102

—

X.	OTHER INFORMATION RELATING TO THE PROTECTION OF INVESTORS

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

A.	Status and Progress of Major Management Events

None.

B.	Summary Minutes of the General Meeting of Shareholders


Date	Agenda	Resolution
24^th Fiscal Year Meeting of Shareholders (March 14, 2008)	1. Approval of the Financial Statements for the year ended December 31, 2007 2. Amendment to Articles of Incorporation 3. Approval of Remuneration Limit for Directors 4. Election of Directors • Election of inside directors • Election of independent directors • Election of independent directors as Audit Committee member	Approved (Cash dividend, Won 8,400 per share) Approved Approved (Won 12 billion) Approved (Shin Bae Kim, Young Ho Park) Approved (Rak Yong Uhm, Jay Young Chung) Approved (Jae Ho Cho)

25^th Fiscal Year Meeting of Shareholders (March 13, 2009)	1. Approval of the financial statements for the year ended December 31, 2008 2. Approval of Remuneration Limit for Directors 3. Amendment to Company Regulation on Executive Compensation 4. Election of Directors • Election of inside directors • Election of independent directors • Election of independent directors as Audit Committee member	Approved (Cash dividend, Won 8,400 per share) Approved (Won 12 billion) Approved Approved (Jae Won Chey, Man Won Jung) Approved (Hyun Chin Lim) Approved (Hyun Chin Lim)

26^th Fiscal Year Meeting of Shareholders (March 12, 2010)	1. Approval of the financial statements for the year ended December 31, 2009 2. Amendment to Articles of Incorporation 3. Approval of Remuneration Limit for Directors 4. Election of Directors • Election of inside directors • Election of independent directors • Election of independent directors as Audit Committee member	Approved (Cash dividend, Won 8,400 per share) Approved Approved (Won 12 billion) Approved (Ki Haeng Cho) Approved (Dal Sup Shim) Approved (Dal Sup Shim, Jay Young Chung)


Date	Agenda	Resolution
27^th Fiscal Year Meeting of Shareholders (March 11, 2011)	1. Approval of the financial statements for the year ended December 31, 2010 2. Approval of Remuneration Limit for Directors	Approved (Cash dividend, Won 8,400 per share) Approved
27^th Fiscal Year Meeting of Shareholders (March 11, 2011)	3. Amendment to Company Regulation on Executive Compensation 4. Election of Directors • Election of inside directors • Election of independent directors • Election of independent directors as Audit Committee member	Approved (Won 12 billion) Approved (Sung Min Ha, Jin Woo So) Approved (Rak Young Uhm, Jay Young Chung, Jae Ho Cho) Approved (Jay Young Chung, Jae Ho Cho)
1^st Extraordinary Meeting of Shareholders (August 31, 2011)	1. Approval of the Spin-off Plan 2. Election of Directors	Approved (Spin-off of SK Planet) Approved (Jun Ho Kim)

28^th Fiscal Year Meeting of Shareholders (March 23, 2012)	1. Approval of the financial statements for the year ended December 31, 2011 2. Amendment to Articles of Incorporation 3. Election of Directors • Election of inside directors • Election of inside directors • Election of independent directors 4. Election of an independent director as Audit Committee member 5. Approval of Remuneration Limit for Directors	Approved (Cash dividend, Won 8,400 per share) Approved Approved (Young Tae Kim) Approved (Dong Seob Jee) Approved (Hyun Chin Lim) Approved (Hyun Chin Lim) Approved (Won 12 billion)

2.	Contingent Liabilities

[SK Telecom]

A.	Material Legal Proceedings

(1)

Claim for Copyright License Fees regarding “Coloring” Services

On May 7, 2010, Korea Music Copyright Association (“KOMCA”) filed a lawsuit with the court demanding that the Company pay KOMCA license fees for the Company’s “Coloring” services. The court rendered a judgment against the Company ordering the Company to pay Won 570 million to KOMCA, which was affirmed by the appellate court on October 26, 2011. The Company appealed to the Supreme Court on November 8, 2011. The Company plans to vigorously defend itself in the Supreme Court by supplementing legal analysis relating to the interpretation of legal actions. While the Company does not expect immediate impact on its business and financial condition from the litigation because the judgment amount is Won 570 million and the final outcome of the litigation has not been decided, the Company may be required to pay on-going license fees in the future if it loses in the final judgment.

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

B. Other Matters

(1)

Pledged Assets and Covenants

In 2011, SK Broadband, a consolidated subsidiary of the Company, pledged its real estate and short term financial instruments as collateral for one year in connection with the borrowing by Broadband Media, another consolidated subsidiary. As of September 30, 2012, the amount of real estate provided as collateral was as follows: Won 65 billion to Hana Bank, Won 78 billion to IBK Capital and Won 52 billion to Kookmin Bank; the amount of short term financial instruments provided as collateral was as follows: Won 60 billion to Korea Exchange Bank, Won 35 billion to Hana Bank, Won 34 billion to National Agricultural Cooperative Federation and Won 20 billion to Woori Bank.

In addition, in 2011, SK Broadband, a consolidated subsidiary of the Company, pledged its real estate as collateral for one year in connection with the borrowing by Broadband CS, another consolidated subsidiary. As of September 30, 2012, the amount of real estate provided as collateral was Won 16.9 billion to Kookmin Bank.

SK Broadband, a consolidated subsidiary of the Company, has also provided “geun” mortgage amounting to Won 15.2 billion to others, including Ilsan Guksa, on a part of its buildings in connection with the leasing of the buildings.

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

As of September 30, 2012, SKY Property Mgmt, Ltd. pledged CNY 519 million of its buildings and land-use rights as collateral to Korea Exchange Bank and China Merchants Bank in connection with a long-term borrowing of CNY 525 million. In the first nine months of 2012, SKY Property Mgmt, Ltd. newly borrowed long-term loans of US$30 million and HKD 234 million from Standard Chartered Bank (HK) Ltd. and pledged its interests in its subsidiary, Shanghai Fujita Tianshan Housing Development Co., Ltd., as collateral.

(2)

Payment Guarantee by the Company

The Company is participating in the tactical aeronautics project of the Defense Acquisition Program Administration of Korea (the “DAPA”), together with Joint Defense Corporation. The Company has guaranteed the payment of Won 4.2 billion that the DAPA has prepaid to Joint Defense Corporation.

[SK Broadband]

A. Material Legal Proceedings

(1)

SK Broadband as the Plaintiff


	(Unit: in thousands of Won)
Description of Proceedings	Date of Commencement of Proceedings	Amount of Claim		Status
Claim for Cancellation of Korea Fair Trade Commission’s Penalty Reassessment	September 2009		1,810,000	Pending before Supreme Court
Claim relating to Gangamgu District Office Cable-Burying Project	March 2010		345,271	Pending before Supreme Court
Administrative Proceeding relating to Gangnamgu District Office	April 2010		703,440	Pending before Administrative Court
Claim for Sales Price by Sambo Motors	April 2011		321,200	Pending before Appellate Court
Damages Claims against Golden Young and Others	April 2011		454,267	Pending before District Court
Damages Claim relating to Hyundai Construction	December 2010		561,283	Pending before Appellate Court
Other claims and proceedings	-		163,114

Total	-		4,358,575	-

(2)

SK Broadband as the Defendant


	(Unit: in thousands of Won)
Description of Proceedings	Date of Commencement of Proceedings	Amount of Claim		Status
Damage Claim by Sun Technology and One Other	October 2011		1,223,778	Pending before Appellate Court
Claim for Return of Unfair Benefit from One Call	October 2010		471,302	Pending before Appellate Court
Damages Claim from Jin Man Cho and One Other	January 2011		200,000	Pending before Appellate Court
Claim for Commission by i-Media Valley and Five Other Companies	July 2010		879,374	Pending before Appellate Court
Claim for Commission by Vialty and Four Other Companies	November 2010		125,000	Pending before District Court
Damage Claim by On-nuri Co., Ltd.	December 2011		101,000	Pending before District Court
Damage Claim by Mac Telecom and Five Other Companies	January 2012		606,000	Pending before District Court
Claim for damages by the Seoul Metropolitan Office of Education	March 2012		100,000	Pending before District Court
Other claims and proceedings	-		74,505	-

Total	-		3,780,959	-

The management believes that the final results of the litigations listed above would not have a material impact on the company’s financial statements. In addition, in 2011, SK Broadband partly lost in a litigation relating to the leak of personal information at the district court, which ordered SK Broadband to pay damages of Won 5,266 million (out of the plaintiffs’ claims of Won 24,689 million), and recognized such damage order as other accounts payable.

(3)

Broadband Media as the Defendant


	(Unit: in thousands of Won)
Description of Proceedings	Date of Commencement of Proceedings	Amount of Claim		Status
Claim for commission by i-Media Valley and five other companies	July 2010		300,869	Pending before Appellate Court

Total	-		300,869	-

[SK Communications]

A. Material Legal Proceedings

As of September 30, 2012, the aggregate amount of claims was Won 7,720 million. The management cannot reasonably forecast the outcome of the pending cases.

B. Other Contingent Liabilities

The material payment guarantees provided by third parties to SK Communications as of September 30, 2012 are set forth in the table below.


	(Unit: in thousands of Won)
Financial Institution	Guarantee	Amount
Seoul Guarantee Insurance Company	Prepaid coverage payment guarantee		700,000
Seoul Guarantee Insurance Company	Provisional deposit guarantee insurance for bonds		1,068,051
Seoul Guarantee Insurance Company	Contractual payment guarantee		540,661

[SK Telink]

A. Other Contingent Liabilities

As of September 30, 2012, the management expects that SK Telink will be required to pay damages to the subscribers to the satellite DMB services at the time of discontinuation of SK Telink’s satellite DMB services due to such discontinuation. However, SK Telink did not record any contingent liabilities related to this matter as the amount of damages cannot be reasonably estimated.

[Loen Entertainment]

The following sets forth the important financial agreements Loen Entertainment has entered into as of September 30, 2012.


	(Unit: in thousands of Won)
Financial Institution	Amount		Type of Agreement
Hana Bank		2,000,000	Loan facility

Total		2,000,000	-

[PS&Marketing Corporation]

A. Material Legal Proceedings

As of November 29, 2012, the aggregate amount of the claim for the pending case was Won 24 million. The management cannot reasonably forecast the outcome of the pending case and therefore, has not reflected this matter in the company’s financial statements. In addition, the management believes that the final results of this litigation will not have a material impact on the company’s financial statements.

3.	Status of sanctions, etc.

[SK Telecom]

Due to the Company’s ineffective measures taken with respect to phone numbers that are used for sending illegal unsolicited bulk messages, the Korea Communications Commission, on April 8, 2009, ordered the Company to improve its work procedures.

On September 2, 2009, the Korea Communications Commission ordered the Company to improve its work procedures in a case relating to the obstruction of subscribers’ utilization of wireless Internet services. The Company completed the improvement of the procedures in consultation with the Korea Communications Commission by December 2009.

On October 13, 2009, the Korea Communications Commission imposed on the Company a fine of Won 140 million and a newspaper notice order in a case relating to the subscription for mobile telephone services using national identification numbers of the deceased and the Company’s failure to verify the required documents. The Company implemented the improved work procedures to strengthen identification process at the time of subscription for mobile telephone services in January 2010.

On June 10, 2010, the Korea Communications Commission imposed on the Company a fine of Won 2 billion and issued a correction order for hurting subscribers’ interests relating to USIM uses. The Company paid the fine and completed the improvement of the procedures in consultation with the Korea Communications Commission by September 2010.

On September 24, 2010, the Korea Communications Commission imposed on the Company a fine of Won 12.9 billion and issued a correction order for providing discriminatory subsidy to subscribers. The Company paid the fine and completed the improvement of the procedures in consultation with the Korea Communications Commission by January 2011.

On December 2, 2010, the Korea Communications Commission imposed on the Company a fine of Won 6.2 billion and issued a correction order in a case relating to the obstruction of subscribers’ utilization of wireless Internet services. The Company paid the fine and completed the improvement of the procedures in consultation with the Korea Communications Commission by March 2011.

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

In addition, on January 21, 2009, the Company was sanctioned for unfair business practices with a fine of Won 1,268 million by the Fair Trade Commission of Korea along with a correctional order of its policy of restricting certain rate plan subscribers from using third party portal contents. The Company has paid the fine and has taken efforts to educate applicable divisions of the issue and to improve the level of the voluntary compliance program to comply with fair trade laws to prevent a repeat of the same violation.

On April 8, 2010, the Company received a correctional order from the Fair Trade Commission of Korea for a violation of the Act on Fair Labeling and Advertising relating to 11th Street (the Company’s online shopping mall). In response thereto, the Company has been taking efforts to prevent a repetitive violation including thorough pre-review of the advertising and marketing activities of 11th Street and appropriate education for relevant employees.

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

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

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

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

On June 21, 2012, the Company received a correctional order from the Korea Communications Commission in connection with its decision on whether the Company had violated regulations related to the safeguarding of location information. The Company plans to work with the Korea Communications Commission to comply with the correction order by the end of 2012.

On July 4, 2012, the Company received a correctional order and a fine of Won 24,987 million from the Fair Trade Commission of Korea for alleged violation of Article 23 of the Fair Trade Act relating to the payment of system management and operation fees. The Company appealed the order and filed a suit with the administrative court. The suit is currently pending.

A trial of a former director of the Company is pending with respect to the Company’s past transactions.

[SK Broadband]

(1) Violation of the Telecommunications Business Act

•

Date: May 18, 2012

•

Subject Company: SK Broadband

•

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

•

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

•

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

•

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

(2) Violation of Accounting Rules

•

Date: January 20, 2012

•

Subject Company: SK Broadband

•

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

•

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

•

Status of Implementation: Paid the fine.

•

Company’s Plan: Will improve accounting management system.

(3) Violation of the Telecommunication Business Act

•

Date: November 23, 2011

•

Subject Company: SK Broadband

•

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

•

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

•

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

•

Company’s Plan: Will improve operating procedures.

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

•

Date: July 14, 2011

•

Subject: SK Broadband and a former officer of SK Broadband

•

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

•

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

•

Status of Implementation: Paid the fine.

•

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

(5) Violation of the Telecommunication Business Act

•

Date: February 21, 2011

•

Subject Company: SK Broadband

•

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

•

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

•

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

•

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

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

•

Date: June 10, 2010

•

Subject Company: SK Broadband

•

Sanction: SK Broadband was imposed a fine of Won 10 million.

•

Reason and the Relevant Law: Violated Articles 49 and 62 of the Act on Facilitation of the Use of Information Network and Protection of Information by providing subscribers’ personal information to telemarketers without subscribers’ consents.

•

Status of Implementation: Paid the fine.

•

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

[SK Planet]

On September 25, 2012, SK Planet received advance notice of an administrative action from the Korea Communications Commission relating to the delay in disclosing the change in the largest investor of a broadcasting channel-related company when SK Planet acquired 51% of Television Media Korea shares.

The Korea Communications Commission expects to impose a fine of less than Won 5 million (with the possibility of reducing the fine by up to half) and SK Planet intends to pay the fine once imposed.

[SK Communications]

On July 31, 2008, SK Communications was imposed a fine of Won 125 million by the Fair Trade Commission of Korea in connection with the preparation for the Fair Trade Commission’s field inspection. SK Communications has paid the fine and has taken efforts to prevent a repeat of the same violation, including education of the relevant personnel.

4.	Important Matters That Occurred After September 30, 2012

[SK Telecom]

(1) Bond offering

On September 27, 2012, the Company’s board of directors resolved to issue foreign currency-denominated bonds. The Company issued U.S. dollar-denominated bonds in an aggregate amount of USD 700,000,000 on November 1, 2012.

(2) Sale of POSCO shares

On October 8, 2012, the Company sold 1,240,655 shares of POSCO common stock, which had been recorded as non-current assets held for sale as of September 30, 2012.

[SK Broadband]

(1) Bond offering

On September 27, 2012, the board of directors of SK Broadband resolved to issue two tranches of unsecured bonds in the principal amounts of Won 130 billion and Won 120 billion, respectively. The two tranches of unsecured bonds were issued on October 12, 2012 and the proceeds of the offerings were used to repay commercial paper and for general working capital purposes. The maturities and annual interest rates of the two tranches are October 12, 2015 with an annual interest rate of 3.14% and October 12, 2017 with an annual interest rate of 3.27%, respectively.

(2) Merger

On October 25, 2012, the board of directors of SK Broadband resolved to merge Broadband CS Co., Ltd. (“Broadband CS”), SK Broadband’s wholly-owned subsidiary, into SK Broadband after Broadband CS sold its customer service business to Service Ace Co., Ltd. The merger is expected to be effective as of December 26, 2012 and the expected merger registration date is December 28, 2012.

5.	Use of Proceeds

A.	Use of Proceeds from Public Offerings

•

Not applicable.

B.	Use of Proceeds from Private Offerings


(Unit: In millions of Won)
Classification	Closing Date	Proceeds	Planned Use of Proceeds	Actual Use of Proceeds	Reasons for Change
Convertible Bonds	April 7, 2009	437,673	Refinancing of convertible bonds issued in May 2004	Refinancing and working capital	-

SK TELECOM CO., LTD.

Condensed Consolidated Interim Financial Statements

(Unaudited)

September 30, 2012

(With Independent Auditors’ Review Report Thereon)

Contents


	Page

Independent Auditors’ Review Report		1

Unaudited Condensed Consolidated Interim Statements of Financial Position		4

Unaudited Condensed Consolidated Interim Statements of Income		6

Unaudited Condensed Consolidated Interim Statements of Comprehensive Income		8

Unaudited Condensed Consolidated Interim Statements of Changes in Equity		9

Unaudited Condensed Consolidated Interim Statements of Cash Flows		10

Notes to Unaudited Condensed Interim Consolidated Financial Statements		12

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To The Board of Directors and Shareholders

SK Telecom Co., Ltd.:

Reviewed financial statements

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

We did not review the financial statements of SK Broadband Co., Ltd., a domestic subsidiary, two other domestic subsidiaries and an associate, whose financial statements constitute 25.8% of consolidated total assets as of September 30, 2012, and 15.2% of consolidated operating revenue for the nine-month period ended September 30, 2012. Those financial statements were reviewed by other auditors whose reports have been furnished to us, and our report, insofar as it relates to the amounts included for those subsidiaries and associate, is based solely on the reports of those other auditors.

Management’s responsibility for the condensed interim financial statements

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

Auditors’ review responsibility

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

We conducted our review in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review 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 auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

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

Highlights

As discussed in note 3, the Group early adopted amendments to K-IFRS No.1001, ‘Presentation of Financial Statements’ as of September 30, 2012 and presents discontinued operation as discussed in note 34. The Group retrospectively restated the condensed consolidated interim statements of income for the three-month and nine-month periods ended September 30, 2011, presented for comparative purposes.

Other matters

The condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2011, and the condensed consolidated statements of changes in equity and cash flows for the nine-month period ended September 30, 2011, were reviewed by other auditors and their report thereon, dated November 24, 2011, stated that nothing has come to their attention that causes them to believe that the condensed consolidated interim financial statements referred to above were not prepared, in all material respects, in accordance with K-IFRS No.1034, ‘Interim Financial Reporting’. The accompanying condensed consolidated interim statements of income and comprehensive income of the Group for the three-month and nine-month periods ended September 30, 2011, presented for comparative purposes, are not different from those reviewed by other auditors in all material respects, except for the retrospective restatement due to the early adoption of the amendments and discontinued operation, as noted above.

In addition, the consolidated statement of financial position of the Group as of December 31, 2011, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by other auditors and their report thereon, dated March 13, 2012, expressed an unqualified opinion. The accompanying consolidated statement of financial position of the Group as of December 31, 2011, presented for comparative purposes, is not different from that audited by other auditors in all material respects.

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

KPMG Samjong Accounting Corp.

Seoul, Korea

November 9, 2012

This report is effective as of November 9, 2012, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

SK TELECOM CO., LTD.

Unaudited Condensed Consolidated Statements of Financial Position

As of September 30, 2012 and December 31, 2011


(In millions of won)	Note		September 30, 2012		December 31, 2011

Assets
Current Assets:
Cash and cash equivalents		30,31	₩	1,168,091		1,650,794
Short-term financial instruments		5,30,31,33		469,508		979,564
Short-term investment securities		8,30,31		89,062		94,829
Accounts receivable - trade, net		6,30,31,32		1,950,202		1,823,170
Short-term loans, net		6,30,31,32		91,582		100,429
Accounts receivable - other, net		6,30,31,32		544,188		908,836
Prepaid expenses				104,229		118,200
Income tax refund receivables		28		645		—
Derivative financial assets		20,30,31		79,160		148,038
Inventories, net		7,33		238,606		219,590
Non-current assets held for sale		9		595,296		—
Advanced payments and other		6,30,31,32		112,611		74,029

Total Current Assets				5,443,180		6,117,479


Non-Current Assets:
Long-term financial instruments		5,30,31,33		139		7,628
Long-term investment securities		8,9,30,31		1,002,933		1,537,945
Investments in associates		10		4,718,241		1,384,605
Property and equipment, net		9,11,32,33		9,072,883		9,030,998
Investment property		9,12		222,373		271,086
Goodwill		13		1,740,149		1,749,933
Intangible assets		14		2,739,298		2,995,803
Long-term loans, net		6,30,31,32		73,033		95,565
Long-term accounts receivable - other		6,30,31		—		5,393
Long-term prepaid expenses		33		537,971		567,762
Guarantee deposits		6,30,31,32		234,164		245,218
Long-term derivative financial assets		20,30,31		90,483		105,915
Deferred tax assets		28		159,979		227,578
Other non-current assets		6,30,31		23,670		23,128

Total Non-Current Assets				20,615,316		18,248,557


Total Assets			₩	26,058,496		24,366,036

See accompanying notes to the unaudited condensed consolidated interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Consolidated Statements of Financial Position, Continued

As of September 30, 2012 and December 31, 2011


(In millions of won)	Note		September 30, 2012			December 31, 2011

Liabilities and Equity
Current Liabilities:
Short-term borrowings		15,30,31	₩	552,849			700,713
Current portion of long-term debt, net		15,16,18,30,31		366,877			1,662,841
Accounts payable - trade		30,31,32		399,993			195,391
Accounts payable - other		30,31,32		1,327,132			1,507,877
Withholdings		30,31		732,979			496,860
Accrued expenses		30,31,33		1,175,599			744,673
Income tax payable		28		—			293,725
Unearned revenue				264,818			290,791
Derivative financial liabilities		20,30,31		—			4,645
Provisions		17		380,633			657,198
Advanced receipt and other		32		111,503			118,876

Total Current Liabilities				5,312,383			6,673,590


Non-Current Liabilities:
Debentures, net, excluding current portion		15,30,31		4,687,319			3,229,009
Long-term borrowings, excluding current portion		15,30,31		2,169,506			323,852
Long-term payables - other		16,30,31,32		713,564			847,496
Long-term unearned revenue				209,291			212,172
Finance lease liabilities		18,30,31		26,926			41,940
Defined benefit obligation		19		117,165			85,941
Long-term derivative financial liabilities		20,30,31		27,998			—
Long-term provisions		17		161,802			142,361
Other non-current liabilities		30,31,32		73,613			76,966

Total Non-Current Liabilities				8,187,184			4,959,737


Total Liabilities				13,499,567			11,633,327


Equity
Share capital		1,21		44,639			44,639
Capital deficit and other capital adjustments		21,22		(290,660	)		(285,347	)
Retained earnings		23		11,610,756			11,642,525
Reserves		24		175,800			260,064

Equity attributable to owners of the Parent Company				11,540,535			11,661,881
Non-controlling interests				1,018,394			1,070,828

Total Equity				12,558,929			12,732,709


Total Liabilities and Equity			₩	26,058,496			24,366,036

See accompanying notes to the unaudited condensed consolidated interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Consolidated Statements of Income

For the three and nine-month periods ended September 30, 2012 and 2011


(In millions of won except for per share data)	Note		September 30, 2012						September 30, 2011 (Restated)
			Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended

Continuing operations
Operating revenue:		4,32
Revenue			₩	4,125,516			12,103,091			4,045,352			11,968,129


Operating expense:		32
Labor cost				309,389			957,839			292,625			859,589
Commissions paid				1,592,886			4,555,558			1,404,791			4,172,829
Depreciation and amortization				614,745			1,770,625			608,443			1,758,073
Network interconnection				286,168			855,787			322,345			964,589
Leased line				121,748			353,507			127,731			352,060
Advertising				92,818			262,372			117,071			257,623
Rent				105,708			312,976			97,984			290,919
Cost of products that have been resold				418,530			989,300			244,720			648,244
Other operating expenses		25		282,830			829,576			268,908			764,510

Sub-total				3,824,822			10,887,540			3,484,618			10,068,436


Operating income		3,4		300,694			1,215,551			560,734			1,899,693

Finance income		27		29,601			141,038			73,783			388,509
Finance costs		27		(113,565	)		(323,881	)		(100,357	)		(251,400	)
Gains (losses) related to investments in subsidiaries associates, net		1,10		4,941			(40,656	)		(1,383	)		(22,092	)
Other non-operating income		3,26		14,584			32,445			17,006			34,736
Other non-operating expenses		3,26		(40,915	)		(123,833	)		(33,386	)		(88,832	)

Income before income tax			₩	195,340			900,664			516,397			1,960,614

See accompanying notes to the unaudited condensed consolidated interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Consolidated Statements of Income, Continued

For the three and nine-month periods ended September 30, 2012 and 2011


(In millions of won except for per share data)	Note		September 30, 2012						September 30, 2011 (Restated)
			Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended

Income tax expense from continuing operations		28	₩	19,806			170,489			122,829			541,473

Net income from continuing operations				175,534			730,175			393,568			1,419,141


Discontinued operation
Income (loss) from discontinued operation, net of income taxes		34		102			(133,602	)		(9,681	)		(32,550	)

Net income for the period		4	₩	175,636			596,573			383,887			1,386,591

Attributable to :
Owners of the Parent Company			₩	178,872			628,692			386,166			1,396,494
Non-controlling interests				(3,236	)		(32,119	)		(2,279	)		(9,903	)

Earnings per share
Basic earnings per share		29	₩	2,566			9,021			5,478			19,698

Diluted earnings per share		29	₩	2,566			8,800			5,333			19,160


Earnings per share - Continuing operations
Basic earnings per share		29	₩	2,568			10,669			5,624			20,176

Diluted earnings per share		29	₩	2,568			10,395			5,475			19,623

See accompanying notes to the unaudited condensed consolidated interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Consolidated Statements of Comprehensive Income

For the three and nine-month periods ended September 30, 2012 and 2011


(In millions of won)	Note		September 30, 2012						September 30, 2011
			Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended

Net income for the period			₩	175,636			596,573			383,887			1,386,591

Other comprehensive income (loss)
Net change in unrealized fair value of available-for-sale financial assets		24		12,392			(38,107	)		(198,482	)		(376,631	)
Net change in other comprehensive income of investments in associates		10,24		(24,699	)		(17,522	)		13,867			5,023
Net change in unrealized fair value of derivatives		20,24		(13,875	)		(14,769	)		(22,031	)		(18,744	)
Foreign currency translation differences for foreign operations		24		(21,962	)		(24,459	)		69,408			46,361
Actuarial gains(losses), net, on defined benefit obligations		19		680			(4,266	)		1,090			(7,134	)

				(47,464	)		(99,123	)		(136,148	)		(351,125	)

Total comprehensive income			₩	128,172			497,450			247,739			1,035,466


Total Comprehensive Income Attributable to:
Owners of the Parent Company			₩	138,370			539,100			228,707			1,030,793
Non-controlling interests				(10,198	)		(41,650	)		19,032			4,673

See accompanying notes to the unaudited condensed consolidated interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Consolidated Statements of Changes in Equity

For the nine-month periods ended September 30, 2012 and 2011


(In millions of won)
	Controlling interest														Non-controlling interests			Total equity
	Share capital		Capital deficit and other capital adjustments			Retained earnings			Reserves			Sub-total			Non-controlling interests			Total equity
Balance, January 1, 2011	₩	44,639		(78,953	)		10,721,249			643,056			11,329,991			1,078,008			12,407,999
Cash dividends		—		—			(668,293	)		—			(668,293	)		(2,226	)		(670,519	)
Treasury stock		—		(208,012	)		—			—			(208,012	)		—			(208,012	)
Total comprehensive income
Net income (loss)		—		—			1,396,494			—			1,396,494			(9,903	)		1,386,591
Other comprehensive income (loss)		—		—			(7,199	)		(358,503	)		(365,702	)		14,577			(351,125	)
Changes in subsidiaries		—		5,868			—			—			5,868			3,055			8,923

Balance, September 30, 2011	₩	44,639		(281,097	)		11,442,251			284,553			11,490,346			1,083,511			12,573,857


Balance, January 1, 2012	₩	44,639		(285,347	)		11,642,525			260,064			11,661,881			1,070,828			12,732,709
Cash dividends		—		—			(655,133	)		—			(655,133	)		(2,133	)		(657,266	)
Total comprehensive income
Net income (loss)		—		—			628,692			—			628,692			(32,119	)		596,573
Other comprehensive loss		—		—			(5,328	)		(84,264	)		(89,592	)		(9,531	)		(99,123	)
Changes in subsidiaries		—		(5,313	)		—			—			(5,313	)		(8,651	)		(13,964	)

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

See accompanying notes to the unaudited condensed consolidated interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Consolidated Statements of Cash Flows

For the nine-month periods ended September 30, 2012 and 2011


(In millions of won)	Note		2012			2011

Cash flows from operating activities:
Cash generated from operating activities
Net income for the period			₩	596,573			1,386,591
Adjustments for income and expenses		35		2,547,459			2,431,971
Changes in assets and liabilities related to operating activities		35		483,852			1,246,222

Sub-total				3,627,884			5,064,784
Interest received				70,287			123,575
Dividends received				28,310			27,425
Interest paid				(272,553	)		(241,622	)
Income tax paid				(369,583	)		(567,259	)

Net cash provided by operating activities				3,084,345			4,406,903


Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net				502,990			—
Decrease in short-term investment securities, net				14,182			112,000
Collection of short-term loans				189,476			145,439
Proceeds from disposal of long-term financial instruments				5,000			3
Proceeds from disposal of long-term investment securities				58,922			258,158
Proceeds from disposal of investments in associates				1,898			5,141
Proceeds from disposal of property and equipment				10,234			21,947
Proceeds from disposal of intangible assets				6,589			2,767
Collection of long-term loans				8,783			29,260
Decrease of deposits				6,556			—
Proceeds from disposal of other non-current assets				640			1,136
Proceeds from disposal of a subsidiary				88,641			1,000

Sub-total				893,911			576,851
Cash outflows for investing activities:
Increase in short-term financial instruments, net				—			(393,086	)
Increase in other investment securities, net				(2,000	)		—
Increase in short-term loans				(163,785	)		(182,486	)
Increase in long-term loans				(2,523	)		(4,901	)
Increase in long-term financial instruments				(12	)		(7,650	)
Acquisition of long-term investment securities				(36,146	)		(254,365	)
Acquisition of investments in associates				(3,132,690	)		(61,896	)
Acquisition of property and equipment				(2,144,752	)		(1,756,705	)
Acquisition of investment property				—			(60,801	)
Acquisition of intangible assets				(84,529	)		(74,752	)
Increase in deposits				(4,186	)		—
Increase in other non-current assets				(1,838	)		(2,562	)
Acquisition of business, net of cash acquired				—			(13,626	)
Decrease in cash due to disposal				(11,560	)		—

Sub-total				(5,584,021	)		(2,812,830	)

Net cash used in investing activities				(4,690,110	)		(2,235,979	)

See accompanying notes to the unaudited condensed consolidated interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Consolidated Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2012 and 2011


(In millions of won)	Note	2012			2011

Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings		₩	1,791,386			1,206,434
Issuance of debentures			1,086,992			438,035
Proceeds from long-term borrowings			2,059,779			95,492
Cash inflows from settlement of derivatives			1,619			—
Cash inflows from other financial activities			92			—
Increase in cash from the consolidated capital transaction			—			6,457

Sub-total			4,939,868			1,746,418
Cash outflows for financing activities:
Repayment of short-term borrowings			(1,937,255	)		(574,247	)
Repayment of current portion of long-term debt			(100,464	)		(550,943	)
Repayment of debentures			(888,124	)		(332,160	)
Repayment of long-term borrowings			(207,948	)		(500,000	)
Cash outflows from transaction of derivatives			(5,415	)		(17,695	)
Payment of finance lease liabilities			(15,204	)		—
Payment of dividends			(657,266	)		(668,293	)
Acquisition of treasury stock			—			(208,012	)
Capital reduction of a subsidiary			(1,025	)		—

Sub-total			(3,812,701	)		(2,851,350	)

Net cash provided by (used in) financing activities			1,127,167			(1,104,932	)


Net increase (decrease) in cash and cash equivalents			(478,598	)		1,065,992
Cash and cash equivalents at beginning of the period			1,650,794			659,405
Effects of exchange rate changes on cash and cash equivalents			(4,105	)		3,323

Cash and cash equivalents at end of the period		₩	1,168,091			1,728,720

See accompanying notes to the unaudited condensed consolidated interim financial statements.

1.	Reporting Entity

(1)

General

SK Telecom Co., Ltd. (“the Parent Company”) was incorporated in March 1984 under the laws of Republic of Korea (“Korea”) to engage in providing cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications in Korea. The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of September 30, 2012, the Parent Company’s total issued shares are held by the following:


	Number of shares		Percentage of total shares issued (%)
SK Holdings Co., Ltd.		20,363,452		25.22
Tradewinds Global Investors, LLC		3,241,956		4.01
Institutional investors and other minority stockholders		46,089,591		57.08
Treasury stock		11,050,712		13.69

Total number of shares		80,745,711		100.00

These unaudited condensed consolidated interim financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individuals as “Group entities”). SK Holdings Co, Ltd. is the ultimate controlling entity of the Parent Company because it has de facto control of the Parent Company. An entity is viewed to have de facto control when the balance of holdings is dispersed and the other shareholders have not organized their interests in such a way that they exercise more votes than the minority holder.

(2)

List of subsidiaries

The list of subsidiaries as of September 30, 2012 and December 31, 2011 is as follows:

Ownership(%)

Subsidiary

Location

Primary business

Sep. 30,
2012

Dec. 31,
2011

SK Telink Co., Ltd.

Korea

Telecommunication service

83.5

SK Communications Co., Ltd.

Korea

Internet website services

64.6

PAXNet Co., Ltd.

Korea

Internet website services

59.7

Loen Entertainment, Inc.

Korea

Release of music disc

67.6

Stonebridge Cinema Fund

Korea

Investment association

57.0

Ntreev Soft Co., Ltd.

Korea

Game software production

—

63.7

Commerce Planet Co., Ltd.

Korea

Online shopping mall operation agency

100.0

SK Broadband Co., Ltd.

Korea

Telecommunication services

50.6

Broadband D&M Co., Ltd.(*1)

Korea

Base station maintenance service

—

100.0

Broadband Media Co., Ltd.

Korea

Multimedia TV portal service

100.0

Broadband CS Co., Ltd.

Korea

Customer Q&A and Service

100.0

K-net Culture and Contents Venture Fund

Korea

Investment association

59.0

Fitech Focus Limited Partnership II(*2)

Korea

Investment association

66.7

Open Innovation Fund

Korea

Investment association

98.9

PS&Marketing Corporation

Korea

Communications device retail business

100.0

Service Ace Co., Ltd.

Korea

Customer center management service

100.0

1.	Reporting Entity, Continued

(2)

List of subsidiaries, Continued

Ownership(%)

Subsidiary

Location

Primary business

Sep. 30,
2012

Dec. 31,
2011

Service Top Co., Ltd.

Korea

Customer center management service

100.0

Network O&S Co., Ltd.

Korea

Base station maintenance service

100.0

BNCP Co., Ltd.

Korea

Internet website services

100.0

Service-In Co., Ltd.

Korea

Database & on-line information service

100.0

SK Planet Co., Ltd.

Korea

Telecommunication service and new media business

100.0

SK Telecom China Holdings Co., Ltd.

China

Equity investment

100.0

SKY Property Mgmt. Ltd.

China

Real Estate Investment

60.0

Shenzhen E-eye High Tech Co., Ltd.

China

Manufacturing

65.5

SK China Real Estate Co., Ltd.

Hong Kong

Real Estate Investment

99.4

SKT Vietnam PTE. Ltd.

Singapore

Telecommunication service

73.3

SKT Americas, Inc.

USA

Information gathering and consulting

100.0

YTK Investment Ltd.

Cayman

Investment Association

100.0

Atlas Investment

Cayman

Investment Association

100.0

Technology Innovation Partners, LP

Cayman

Investment Association

100.0

SK Telecom China Fund I L.P.

Cayman

Investment Association

100.0

(*1)	Broadband D&M Co., Ltd. was merged into SK Broadband Co., Ltd. as of September 26, 2012 based on one-to-zero ratio of merger through the capital increase without consideration.

(*2)	Name of the company has been changed from Benex Focus Limited Partnership II to Fitech Focus Limited Partnership II during the nine-month period ended September 30, 2012.

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

1.	Reporting Entity, Continued

(3)

Financial information of subsidiaries

Financial information of subsidiaries as of and for the nine-month period ended September 30, 2012 is as follows:


(In millions of won)
Subsidiary	Total assets		Total liabilities		Total equity			Revenue		Net income (loss)
SK Telink Co., Ltd.	₩	310,029		208,699		101,330			256,863		(87,298	)
SK Communications Co., Ltd.		301,358		86,730		214,628			154,023		(19,190	)
PAXNet Co., Ltd.		32,420		10,123		22,297			25,449		(194	)
Loen Entertainment, Inc.		173,099		48,783		124,316			137,007		19,944
Stonebridge Cinema Fund		22,478		78		22,400			53		5,235
Commerce Planet Co., Ltd.		33,087		34,648		(1,561	)		35,799		(15	)
SK Broadband Co., Ltd.		2,984,582		1,596,001		1,388,581			1,799,111		16,996
Broadband D&M Co., Ltd.(*1)		—		—		—			33,472		(206	)
Broadband Media Co., Ltd.		65,777		340,445		(274,668	)		63,959		(7,747	)
Broadband CS Co., Ltd.		6,262		17,885		(11,623	)		53,159		181
K-net Culture and Contents Venture Fund		44,897		—		44,897			—		(645	)
Fitech Focus Limited Partnership II(*2)		23,196		283		22,913			—		(3,635	)
Open Innovation Fund		44,306		429		43,877			—		(391	)
PS&Marketing Corporation		461,429		325,013		136,416			1,173,071		(8,336	)
Service Ace Co., Ltd.		46,476		20,375		26,101			107,876		4,236
Service Top Co., Ltd.		41,988		20,286		21,702			101,990		8,004
Network O&S Co., Ltd.		75,116		49,483		25,633			207,500		7,022
BNCP Co., Ltd.		23,733		8,161		15,572			21,232		(1,485	)
Service-In Co., Ltd.		1,442		926		516			8,400		128
SK Planet Co., Ltd.		1,612,312		332,515		1,279,797			760,212		32,172
SK Telecom China Holdings Co., Ltd.		35,282		825		34,457			18,183		459
SKY Property Mgmt. Ltd.(*3)		800,602		308,760		491,842			53,010		6,817
Shenzhen E-eye High Tech Co., Ltd.		20,266		2,216		18,050			6,809		(706	)
SKT Vietnam PTE. Ltd.		40,212		9,346		30,866			1,000		(935	)
SKT Americas, Inc.		31,330		240		31,090			8,163		(9,287	)
YTK Investment Ltd.		64,359		—		64,359			—		—
Atlas Investment(*4)		50,567		302		50,265			—		(1,727	)

(*1)	Broadband D&M Co., Ltd. was merged into SK Broadband Co., Ltd. as of September 26, 2012 based on one-to-zero ratio of merger through the capital increase without consideration.

(*2)	Name of the company has been changed from Benex Focus Limited Partnership II to Fitech Focus Limited Partnership II during the nine-month period ended September 30, 2012.

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

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

1.	Reporting Entity, Continued

(3)

Financial information of subsidiaries, Continued

Financial information of subsidiaries as of and for the year ended December 31, 2011 is as follows:


(In millions of won)
Subsidiary	Total assets		Total liabilities		Total equity			Revenue		Net income (loss)
SK Telink Co., Ltd.	₩	420,829		228,687		192,142			416,545		35,269
SK Communications Co., Ltd.		319,948		84,282		235,666			260,573		(5,041	)
PAXNet Co., Ltd.		33,949		11,461		22,488			32,770		(2,347	)
Loen Entertainment, Inc.		157,104		48,386		108,718			167,176		21,398
Stonebridge Cinema Fund		18,506		196		18,310			3		1,069
Ntreev Soft Co., Ltd.		37,529		17,304		20,225			54,725		8,707
Commerce Planet Co., Ltd.		49,729		51,057		(1,328	)		74,982		(556	)
SK Broadband Co., Ltd.		3,318,699		1,945,825		1,372,874			2,285,845		19,272
Broadband D&M Co., Ltd.		11,872		7,399		4,473			46,418		(49	)
Broadband Media Co., Ltd.		89,915		356,816		(266,901	)		64,867		(32,214	)
Broadband CS Co., Ltd.		6,948		18,744		(11,796	)		73,935		63
K-net Culture and Contents Venture Fund		48,057		16		48,041			—		(113	)
Fitech Focus Limited Partnership II(*1)		21,663		285		21,378			—		(10,358	)
Open Innovation Fund		44,716		432		44,284			—		(427	)
PS&Marketing Corporation		289,062		143,883		145,179			1,078,668		(31,820	)
Service Ace Co., Ltd.		43,447		21,669		21,778			129,350		1,365
Service Top Co., Ltd.		37,165		23,255		13,910			122,580		1,829
Network O&S Co., Ltd.		80,249		61,555		18,694			199,642		5,646
BNCP Co., Ltd.		28,631		11,397		17,234			17,846		1,877
Service-In Co., Ltd.		3,247		759		2,488			6,225		(12	)
SK Planet Co., Ltd.		1,677,730		423,903		1,253,827			279,466		11,014
SK Telecom China Holdings Co., Ltd.		36,810		2,442		34,368			26,939		(232	)
SKY Property Mgmt. Ltd.(*2)		820,639		317,038		503,601			51,204		6,386
Shenzhen E-eye High Tech Co., Ltd.		23,569		3,744		19,825			13,740		2,007
SKT Vietnam PTE. Ltd.		42,539		9,769		32,770			5,519		205
SKT Americas, Inc.		42,681		1,280		41,401			18,468		(14,604	)
YTK Investment Ltd.		51,218		—		51,218			—		—
Atlas Investment(*3)		50,643		530		50,113			—		(2,056	)

(*1)	Name of the company has been changed from Benex Focus Limited Partnership II to Fitech Focus Limited Partnership II during the nine-month period ended September 30, 2012.

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

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

1.	Reporting Entity, Continued

(4)

Changes in subsidiaries

There are no subsidiaries that were newly acquired during the nine-month period ended September 30, 2012 and the list of subsidiary that is newly excluded during the same period is as follows:


Subsidiary		Reason
Ntreev Soft Co., Ltd.(*1)		The Parent Company sold its investment during the period.
Broadband D&M Co., Ltd.(*2)		Merged into SK Broadband Co., Ltd. during the period.

(*1)

The Parent Company sold 2,064,970 shares (ownership interest of 63.7%) of its investment to NCsoft Corporation and recognized a gain on the disposal of ₩ 66,006 million during the nine-month period ended September 30, 2012, which is included in gains(losses) related to investments in associates, net, in the accompanying condensed consolidated interim statements of income.

(*2)	As of September 26, 2012, Broadband D&M Co., Ltd. was merged into SK Broadband Co., Ltd. by contribution of the net assets of Broadband D&M Co., Ltd. to SK Broadband Co., Ltd.

2.	Basis of Preparation

(1)

Statement of compliance

These condensed consolidated interim financial statements were prepared in accordance with K-IFRS No. 1034, ‘Interim Financial Reporting’ as part of the period covered by the Group’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as of and for the year ended December 31, 2011. These unaudited condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

(2)

Use of estimates and judgments

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

In preparing these unaudited condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2011.

(3)

Common control transactions

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

Significant Accounting Policies

Except as described below, the accounting policies applied by the Group in these unaudited condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2011. The following changes in accounting policy are also expected to be reflected in the Group’s consolidated financial statements as of and for the year ended December 31, 2012.

(1)

Changes in accounting policy

- Presentation of financial statements

The Group early adopted the amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ from the interim period ended September 30, 2012. Pursuant to the amended K-IFRS No. 1001, the Group’s operating income is calculated as operating revenue less operating expense and is presented separately in the accompanying condensed consolidated interim statements of income. The Group retrospectively applied the amendment and the related impact of the adoption is presented in note 3 (2) below.

(2)

Impact of change in accounting policy

The impact of adopting the amendment to K-IFRS No. 1001 is as below:


(In millions of won)	September 30, 2012						September 30, 2011
	Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended
Operating income before adoption of the amendment	₩	274,363			1,124,163			544,354			1,845,597
Differences:
Other non-operating income
Fees revenues		(1,026	)		(1,987	)		(1,990	)		(2,587	)
Gain on disposal of property and equipment and intangible assets		(2,138	)		(4,970	)		(1,361	)		(5,296	)
Others		(11,420	)		(25,488	)		(13,655	)		(26,853	)

		(14,584	)		(32,445	)		(17,006	)		(34,736	)
Other non-operating expense
Impairment loss on property and equipment and intangible assets		5,850			9,719			—			1,559
Loss on disposal of property and equipment and intangible assets		7,154			10,134			6,125			14,099
Donations		4,207			45,216			15,795			46,635
Bad debt for accounts receivable - other		4,986			28,026			1,615			4,761
Others		18,718			30,738			9,851			21,778

		40,915			123,833			33,386			88,832

Operating income after adoption of the amendment	₩	300,694			1,215,551			560,734			1,899,693

4.	Operating Segments

The Group’s operating segments have been determined to be each business unit, for which the Group generates separately identifiable financial information that is regularly reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group’s reportable segments are: 1) cellular services, which include cellular voice service, wireless data service and wireless internet services, and 2) fixed-line telecommunication services, which include telephone services, internet services, and leased line services. All other operating segments, which include the Group’s Internet portal services and other operations, that do not meet the quantitative thresholds to be considered reportable segments are presented as Other.

(1) Segment information as of and for the nine-month period ended September 30, 2012 is as follows:


(In millions of won)
	Cellular services			Fixed-line telecommunication services			Other			Total segments			Consolidation adjustments			Consolidated amount
Total sales	₩	10,763,934			2,206,565			1,229,341			14,199,840			(2,096,749	)		12,103,091
Internal sales		965,481			560,536			570,732			2,096,749			(2,096,749	)		—
External sales		9,798,453			1,646,029			658,609			12,103,091			—			12,103,091
Operating income		1,125,869			39,501			50,181			1,215,551			—			1,215,551
Interest income		45,062			14,093			20,304			79,459			—			79,459
Interest expense		(230,645	)		(61,152	)		(10,542	)		(302,339	)		—			(302,339	)
Depreciation and amortization		(1,248,116	)		(433,990	)		(88,519	)		(1,770,625	)		—			(1,770,625	)
Gain (loss) related to investments in associates, net		(30,350	)		1,342			(11,648	)		(40,656	)		—			(40,656	)
Income tax benefit (expense) from continuing operations		(164,397	)		9,404			(15,496	)		(170,489	)		—			(170,489	)
Net income (loss)		662,003			(90,503	)		25,073			596,573			—			596,573
Total assets		23,116,767			3,372,434			3,349,851			29,839,052			(3,780,556	)		26,058,496
Total liabilities		10,922,843			2,164,119			844,364			13,931,326			(431,759	)		13,499,567

4.	Operating Segments, Continued

(2) Segment information as of and for the nine-month period ended September 30, 2011 is as follows:


(In millions of won)
	Cellular services			Fixed-line telecommunication services			Other			Total segments			Consolidation adjustments			Consolidated amount
Total sales	₩	10,600,403			2,007,824			520,588			13,128,815			(1,160,686	)		11,968,129
Internal sales		632,182			423,362			105,142			1,160,686			(1,160,686	)		—
External sales		9,968,221			1,584,462			415,446			11,968,129			—			11,968,129
Operating income		1,808,986			58,568			32,139			1,899,693			—			1,899,693
Interest income		114,526			10,810			7,620			132,956			—			132,956
Interest expense		(141,668	)		(77,127	)		(6,141	)		(224,936	)		—			(224,936	)
Depreciation and amortization		(1,303,691	)		(427,002	)		(27,380	)		(1,758,073	)		—			(1,758,073	)
Gain(Loss) related to investments in associates, net		(6,808	)		(409	)		(14,875	)		(22,092	)		—			(22,092	)
Income tax expense from continuing operations		(520,716	)		(13,040	)		(7,717	)		(541,473	)		—			(541,473	)
Net income (loss)		1,391,796			(21,893	)		16,688			1,386,591			—			1,386,591
Total assets		19,861,710			3,506,938			1,990,601			25,359,249			(2,216,337	)		23,142,912
Total liabilities		7,916,652			2,202,254			691,612			10,810,518			(241,463	)		10,569,055

Intersegment sales and purchases are conducted on an arms-length basis and eliminated on consolidation. Since there are no intersegment sales of inventory, there is no unrealized intersegment profit to be eliminated on consolidation.

The Group principally operates its business in its domestic market in Korea and the amounts outside of Korea are immaterial, therefore no entity-wide geographical information is presented.

5.	Restricted Deposits

Deposits which are restricted in use as of September 30, 2012 and December 31, 2011 are summarized as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Short-term financial instruments(*)	₩	235,437		232,462
Long-term financial instruments(*)		89		7,589

	₩	235,526		240,051

(*)	These financial instruments include financial instruments restricted in use for certain commitments that are non-cancellable until maturity.

6.	Trade and Other Receivables

(1)

Details of trade and other receivables as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable - trade	₩	2,183,076		(232,874	)		1,950,202
Short-term loans		93,525		(1,943	)		91,582
Accounts receivable - other		607,098		(62,910	)		544,188
Accrued income		52,200		(142	)		52,058
Others		433		—			433

		2,936,332		(297,869	)		2,638,463
Non-current assets:
Long-term loans		103,563		(30,530	)		73,033
Guarantee deposits		234,164		—			234,164
Long-term accounts receivable - trade		13,501		—			13,501

		351,228		(30,530	)		320,698

	₩	3,287,560		(328,399	)		2,959,161

6.	Trade and Other Receivables, Continued


(In millions of won)	December 31, 2011
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable - trade	₩	2,063,611		(240,441	)		1,823,170
Short-term loans		102,693		(2,264	)		100,429
Accounts receivable - other		953,821		(44,985	)		908,836
Accrued income		21,989		(142	)		21,847
Others		462		—			462

		3,142,576		(287,832	)		2,854,744
Non-current assets:
Long-term loans		126,553		(30,988	)		95,565
Long-term accounts receivable - other		5,393		—			5,393
Guarantee deposits		245,218		—			245,218
Long-term accounts receivable - trade		12,471		—			12,471

		389,635		(30,988	)		358,647

	₩	3,532,211		(318,820	)		3,213,391

(2)

The movement in allowance for doubtful accounts in respect of trade and other receivables during the nine-month periods ended September 30, 2012 and 2011 was as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2012			September 30, 2011
Balance at January, 1	₩	318,820			327,382
Increase of bad debt		64,298			56,550
Reversal of allowance for doubtful accounts		(5,395	)		(1,737	)
Write-offs		(69,250	)		(51,480	)
Others(*)		19,926			18,739

Balance at September, 30	₩	328,399			349,454

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

6.	Trade and Other Receivables, Continued

(3)

Details of trade and other receivables, overdue but not impaired, and impaired accounts receivable as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012						December 31, 2011
	Accounts receivable - trade			Other receivables			Accounts receivable - trade			Other receivables
Accounts receivable	₩	1,715,533			839,319			1,417,574			1,287,607
Overdue but not impaired accounts receivable		60,080			2,448			34,030			32,144
Impaired accounts receivable		420,964			249,216			624,478			136,378

		2,196,577			1,090,983			2,076,082			1,456,129
Allowance for doubtful accounts		(232,874	)		(95,525	)		(240,441	)		(78,379	)

	₩	1,963,703			995,458			1,835,641			1,377,750

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

(4)

The aging of overdue but not impaired accounts receivable as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012				December 31, 2011
	Accounts receivable - trade		Accounts receivable - other		Accounts receivable - trade		Accounts receivable - other
Less than 1 month	₩	10,867		383		9,125		15,384
1 ~ 3 months		10,838		473		8,063		3,147
3 ~ 6 months		12,074		39		4,124		713
More than 6 months		26,301		1,553		12,718		12,900

	₩	60,080		2,448		34,030		32,144

7.	Inventories

Details of Inventories as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012							December 31, 2011
	Acquisition cost		Write- down of inventory			Carrying amount		Acquisition cost		Write- down of inventory			Carrying amount
Merchandise	₩	227,373		(3,542	)		223,831		216,452		(4,551	)		211,901
Finished goods		3,626		(679	)		2,947		3,371		(547	)		2,824
Work in process		385		—			385		286		—			286
Raw materials and supplies		11,503		(60	)		11,443		4,630		(51	)		4,579

	₩	242,887		(4,281	)		238,606		224,739		(5,149	)		219,590

8.	Investment Securities

(1)

Details of short-term investment securities as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Beneficiary certificates(*)	₩	85,581		91,539
Current portion of long-term investment securities		3,481		3,290

	₩	89,062		94,829

(*)	The distributions arising from beneficiary certificates as of September 30, 2012 were accounted for as accrued income.

(2)

Details of long-term investment securities as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012			December 31, 2011
Equity securities:
Marketable equity securities(*1)	₩	613,909			1,100,847
Unlisted equity securities		99,629			97,397
Equity investments		242,923			281,877

		956,461			1,480,121
Debt securities:
Public bonds(*2)		421			413
Investment bonds(*3)		49,532			60,701

		49,953			61,114

Total		1,006,414			1,541,235
Less current portion of long-term investment securities		(3,481	)		(3,290	)

Long-term investment securities	₩	1,002,933			1,537,945

(*1)	During the nine-month period ended September 30, 2012, shares in POSCO with carrying amount of ₩ 453,459 million were classified as non-current assets held for sale.

(*2)	Details of maturity for the public bonds as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Less than 1 year	₩	45		45
1 ~ 5 years		376		368

	₩	421		413

8.	Investment Securities, Continued

(*3)

The Group classified convertible bonds of NanoEnTek, Inc. (carrying amount as of September 30, 2012: ₩ 15,793 million), which were acquired during the year ended December 31, 2011, as financial assets at fair value through profit or loss. The difference between acquisition cost and fair value is accounted for as finance income (loss).

On February 2, 2012, SK Communications Co., Ltd, a subsidiary of the Parent Company, disposed ₩ 20,000 million of convertible securities issued by Etoos Co., Ltd. to Shinhan the 2nd Private Investment Company for ₩ 19,000 million. In relation to this transaction, the Group recognized a gain on the disposal of available-for-sale financial assets of ₩ 2,812 million.

9.	Non-current Assets Held for Sale

(1)

Long-term investment securities

During the nine-month period ended September 30, 2012, 1,240,655 shares in POSCO were classified as non-current assets held for sale in accordance with a resolution of the Board of Directors on September 26, 2012. The Board of Directors planned to dispose the investment securities in order to secure investment resources for financial structure improvement and future growth, and the investment securities were disposed on October 8, 2012. Non-current assets held for sale as of September 30, 2012 are as follows:


(In millions of won)
	September 30, 2012
Long-term investment securities	₩	453,459

The above investment securities are measured at fair value and the difference between fair value and carrying amount of ₩ 287,129 million is recognized as net change in fair value of available-for-sale financial assets in other comprehensive income.

(2)

Property and equipment, and investment property

During the nine-month period ended September 30, 2012, part of property and equipment, and investment property were classified as non-current assets held for sale in accordance with the decision of management. Management planned to dispose of these assets in order to secure investment resources for financial structure improvement and future growth, and expected the assets to be sold by December 2012. Non-current assets held for sale as of September 30, 2012 are as follows:


(In millions of won)
	September 30, 2012
Property and equipment	₩	108,377
Investment property		33,460

	₩	141,837

Non-current assets held for sale are measured at carrying amount which is lesser of fair value less cost to sell or carrying amount.

10.

Investments in Associates

(1)

Investments in associates accounted for using the equity method as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won, except for share data)
	September 30, 2012								December 31, 2011
	Number of shares		Ownership (%)		Acquisition cost		Carrying amount		Carrying amount
SK Marketing & Company Co., Ltd.		5,000,000		50.0	₩	190,000		138,149		128,320
SK China Company Ltd.		720,000		22.5		49,529		43,044		48,488
SK USA, Inc.		49		49.0		3,184		4,777		4,534
Fitech Sector Limited Partnership IV(*1)		2,500		49.7		25,000		25,722		24,907
F&U Credit information Co., Ltd.		300,000		50.0		2,410		5,265		3,565
Korea IT Fund(*2)		190		63.3		190,000		227,048		230,980
JYP Entertainment Corporation		691,680		25.5		4,150		4,301		4,008
Konan Technology		78,550		29.5		13,456		4,116		4,760
Etoos Co., Ltd.(*3)		701,000		15.6		18,993		13,100		13,928
BMC Digital Culture Contents Fund		100		39.8		10,000		7,543		8,415
Wave City Development Co., Ltd.(*3)		382,000		19.1		1,967		—		1,124
IBKC-bmc Cultural Contents Fund		—		25.0		2,500		2,310		2,326
Hanhwa No.2 Daisy Entertainment Investment Fund		—		20.0		2,000		1,131		1,165
BMC Korea Movie Fund		135		46.6		13,500		15,340		13,926
HanaSK Card Co., Ltd.		57,647,058		49.0		400,000		384,229		396,553
Television Media Korea Ltd.(*4)		18,564,000		51.0		18,568		12,431		15,262
Candle Media Co., Ltd.		21,620,360		44.3		33,746		22,183		11,814
NanoEnTek, Inc.(*3)		1,807,130		9.3		11,000		9,553		10,470
UNISK(Beijing) Information Technology Co., Ltd.		49		49.0		3,475		6,527		5,886
PT. Melon Indonesia		4,900,000		49.0		6,492		4,447		5,326
Packet One Network		1,151,556		28.2		137,751		90,780		103,409
Mobile Money Venture, LLC		—		50.0		12,762		877		983
SK Technology Innovation Company		—		49.0		85,873		72,580		75,974
LightSquared Inc.(*3)		3,387,916		3.3		72,096		—		49,441
SK Industrial Development China Co., Ltd.		72,952,360		35.0		83,691		80,465		83,691
HappyNarae Co., Ltd.(*1)		680,000		42.0		12,250		12,530		12,250
SK Hynix Inc.(*5)		146,100,000		21.1		3,374,726		3,336,345		—
SK MENA Investment B.V.(*6)		—		32.1		14,485		14,261		—
SK Latin America Investment(*7)		—		32.1		14,243		14,243		—
Gemini(*8)		—		20.0		6,108		6,108		—
TR Entertainment and others		—		—		204,539		158,836		123,100

					₩	5,018,494		4,718,241		1,384,605

10.

Investments in Associates, Continued

(*1)	Name of the company has been changed from Benex Sector Limited Partnership IV and MRO Korea Co., Ltd. to Fitech Sector Limited Partnership IV and HappyNarae Co., Ltd., respectively, during the nine-month period ended September 30, 2012.

(*2)	Investment in Korea IT Fund was classified as investment in associates as the Group has less than 50% of voting rights under the contract.

(*3)

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

(*4)	The Group classified the investments in Television Media Korea Ltd. as investments in associates as the entity is considered a joint venture.

(*5)	The Group acquired 146,100,000 shares (ownership interest of 21.1%) of SK Hynix Inc. through purchase of existing shares and subscription of new shares at February 14, 2012.

(*6)	The Group acquired 32.1% of ownership interest of SK MENA Investment B.V. during the nine-month period ended September 30, 2012.

(*7)	The Group acquired 32.1% of ownership interest of SK Latin America Investment during the nine-month period ended September 30, 2012.

(*8)	The Group acquired 20.0% of ownership interest of Gemini during the nine-month period ended September 30, 2012.

(2)

The market price of investments in listed associates as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won, except for share and per share data)
	September 30, 2012						December 31, 2011
	Market value per share (In won)		Number of shares		Market price		Market value per share (In won)		Number of shares		Market price
Candle Media Co., Ltd.	₩	1,360		21,620,360		29,404		1,435		11,010,280		15,800
NanoEnTek, Inc.		4,074		1,807,130		7,362		4,160		1,807,130		7,518
SK Hynix Inc.		22,750		146,100,000		3,323,775		—		—		—

10.

Investments in Associates, Continued

(3)

The condensed financial information of the investees as of and for the nine-month periods ended September 30, 2012 and 2011 is as follows:


(In millions of won)
	As of and for the nine-month period ended September 30, 2012
	Total assets		Total liabilities			Total equity			Revenue		Net income (loss) for the period
SK Marketing & Company Co., Ltd.	₩	747,973		471,675			276,298			513,076		20,253
SK China Company Ltd.		235,318		19,517			215,801			58,095		1,206
SK USA, Inc.		19,459		9,709			9,750			7,945		374
Fitech Sector Limited Partnership IV(*1)		52,001		481			51,520			1,929		553
F&U Credit information Co., Ltd.		16,815		7,208			9,607			48,646		3,521
Korea IT Fund		358,652		—			358,652			8,154		2,091
JYP Entertainment Corporation		17,392		11,956			5,436			17,343		2,324
Konan Technology		13,538		3,897			9,641			7,136		(2,244	)
Etoos Co., Ltd.		97,779		70,990			26,789			87,805		4,224
BMC Digital Culture Contents Fund		21,134		121			21,013			337		(109	)
Wave City Development Co., Ltd.		123,028		132,150			(9,122	)		—		(1,363	)
IBKC-bmc Cultural Contents Fund		9,297		58			9,239			131		(66	)
Hanhwa No.2 Daisy Entertainment Investment Fund		5,807		150			5,657			32		(169	)
BMC Korea Movie Fund		33,075		122			32,953			3,451		3,038
HanaSK Card Co., Ltd.		9,638,788		8,945,168			693,620			770,435		(19,531	)
Television Media Korea Ltd.		30,015		6,112			23,903			887		78
Candle Media Co., Ltd.		32,499		3,934			28,565			10,011		(4,111	)
NanoEnTek, Inc.		46,817		20,889			25,928			8,996		(3,351	)
UNISK(Beijing) Information Technology Co., Ltd.		25,015		11,778			13,237			16,070		1,645
PT. Melon Indonesia		9,927		852			9,075			849		(1,131	)
Packet One Network		305,373		239,409			65,964			86,794		(33,720	)
Mobile Money Venture, LLC		1,818		32			1,786			—		(95	)
SK Technology Innovation Company		168,817		22,209			146,608			3,739		(5,695	)
LightSquared Inc.		4,484,504		3,125,885			1,358,619			8,343		(162,631	)
SK Industrial Development China Co., Ltd.		330,568		(100,668	)		431,236			—		8,247
HappyNarae Co., Ltd.(*1)		38,599		28,938			9,661			104,648		687
SK Hynix Inc.(*2)		19,221,984		9,435,542			9,786,442			7,443,823		(322,489	)
SK MENA Investment B.V.		43,682		2			43,680			—		55
SK Latin America Investment		43,593		17			43,576			—		1,008
Gemini		32,109		9,849			22,260			1,344		(1,361	)

10.

Investments in Associates, Continued

(*1)	Name of the company has been changed from Benex Sector Limited Partnership IV and MRO Korea Co., Ltd. to Fitech Sector Limited Partnership IV and HappyNarae Co., Ltd., respectively, during the nine-month period ended September 30, 2012.

(*2)

Financial information of SK Hynix Inc. used when applying the equity method represents financial information after the acquisition date, February 14, 2012 and revenue and net loss for the period recognized from the acquisition date to September 30, 2012 are ₩ 6,491,912 million and ₩ 235,242 million, respectively.


(In millions of won)
	As of and for the year ended December 31, 2011
	Total assets		Total liabilities		Total equity		Revenue		Net income (loss) for the period
SK Marketing & Company Co., Ltd.	₩	753,508		496,867		256,641		652,749		21,543
SK China Company, Ltd.		281,579		58,124		223,455		43,526		4,542
SK USA, Inc.		20,184		10,932		9,252		10,623		(2,133	)
Fitech Sector Limited Partnership IV(*)		50,357		478		49,879		—		(1,717	)
F&U Credit information Co., Ltd.		13,511		7,303		6,208		50,554		110
Korea IT Fund		364,706		—		364,706		—		10,502
JYP Entertainment Corporation		17,467		14,424		3,043		17,722		407
Konan Technology		15,507		3,622		11,885		11,790		651
Etoos Co., Ltd.		69,994		67,889		2,105		107,174		(743	)
BMC Digital Culture Contents Fund		21,288		166		21,122		187		(621	)
Wave City Development Co., Ltd.		129,768		123,882		5,886		431		(1,399	)
IBKC-bmc Cultural Contents Fund		9,387		82		9,305		638		106
Hanhwa No.2 Daisy Entertainment Investment Fund		5,877		51		5,826		92		(1,518	)
BMC Korea Movie Fund		30,068		153		29,915		4,690		1,019
HanaSK Card Co., Ltd.		9,810,720		9,094,326		716,394		849,719		25,593
Television Media Korea Ltd.		34,606		5,150		29,456		4,919		(6,481	)
Candle Media Co., Ltd.		25,978		5,588		20,390		27,494		(5,650	)
NanoEnTek, Inc.		52,649		20,379		32,270		13,088		(8,809	)
UNISK(Beijing) Information Technology Co., Ltd.		20,401		8,388		12,013		16,028		1,202
PT. Melon Indonesia		12,112		1,242		10,870		803		(1,860	)
Packet One Network		269,362		197,049		72,313		99,918		(72,307	)
Mobile Money Venture, LLC		2,191		227		1,964		6,294		1,189
SK Technology Innovation Company		159,745		4,695		155,050		—		(11,556	)
LightSquared Inc.		4,647,136		3,125,885		1,521,251		33,374		(669,558	)
HappyNarae Co., Ltd.(*)		31,335		22,095		9,240		124,986		1,001

(*)	Name of the company has been changed from Benex Sector Limited Partnership IV and MRO Korea Co., Ltd. to Fitech Sector Limited Partnership IV and HappyNarae Co., Ltd., respectively, during the nine-month period ended September 30, 2012.

10.

Investments in Associates, Continued

(4)

Details of changes in investments in associates accounted for using the equity method for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)
	For the nine-month period ended September 30, 2012
	Beginning balance		Acquisition		Disposal			Share of profits (losses)			Other comprehensive income			Impairment loss			Other increase (decrease)			Ending balance
SK Marketing & Company Co., Ltd.	₩	128,320		—		—			10,963			(1,134	)		—			—			138,149
SK China Company, Ltd.		48,488		—		—			69			(5,513	)		—			—			43,044
SK USA, Inc.		4,534		—		—			328			(85	)		—			—			4,777
Fitech Sector Limited Partnership IV(*)		24,907		—		—			283			532			—			—			25,722
F&U Credit information Co., Ltd.		3,565		—		—			1,700			—			—			—			5,265
Korea IT Fund		230,980		—		—			(3,502	)		320			—			(750	)		227,048
JYP Entertainment Corporation		4,008		—		—			351			(58	)		—			—			4,301
Konan Technology		4,760		—		—			(644	)		—			—			—			4,116
Etoos Co., Ltd.		13,928		—		—			(828	)		—			—			—			13,100
BMC Digital Culture Contents Fund		8,415		—		—			(872	)		—			—			—			7,543
Wave City Development Co., Ltd.		1,124		—		—			(1,124	)		—			—			—			—
IBKC-bmc Cultural Contents Fund		2,326		—		—			(16	)		—			—			—			2,310
Hanhwa No.2 Daisy Entertainment Investment Fund		1,165		—		—			(34	)		—			—			—			1,131
BMC Korea Movie Fund		13,926		—		—			1,414			—			—			—			15,340
HanaSK Card Co., Ltd.		396,553		—		—			(10,758	)		(1,566	)		—			—			384,229
Television Media Korea Ltd.		15,262		—		—			(2,831	)		—			—			—			12,431
Candle Media Co., Ltd.		11,814		8,000		(2,146	)		4,160			308			—			47			22,183
NanoEnTek, Inc.		10,470		—		—			(1,010	)		93			—			—			9,553
UNISK(Beijing) Information Technology Co., Ltd.		5,886		—		—			1,021			(380	)		—			—			6,527
PT. Melon Indonesia		5,326		—		—			(468	)		(411	)		—			—			4,447
Packet One Network		103,409		—		—			(13,473	)		844			—			—			90,780
Mobile Money Venture, LLC		983		—		—			(77	)		—			—			(29	)		877
SK Technology Innovation Company		75,974		—		—			(3,368	)		(26	)		—			—			72,580
LightSquared Inc.		49,441		—		—			(10,571	)		1,513			(40,383	)		—			—
SK Industrial Development China Co., Ltd.		83,691		—		—			(856	)		(2,370	)		—			—			80,465
HappyNarae Co., Ltd.(*)		12,250		—		—			292			(12	)		—			—			12,530
SK Hynix Inc.		—		3,374,725		—			(29,550	)		(8,830	)		—			—			3,336,345
SK MENA Investment B.V.		—		14,485		—			16			(240	)		—			—			14,261
SK Latin America Investment		—		14,243		—			—			—			—			—			14,243
Gemini		—		6,108		—			—			—			—			—			6,108
TR Entertainment and others		123,100		44,415		(1,850	)		(4,835	)		(593	)		—			(1,401	)		158,836

	₩	1,384,605		3,461,976		(3,996	)		(64,220	)		(17,608	)		(40,383	)		(2,133	)		4,718,241

10.

Investments in Associates, Continued

(*)	Name of the company has been changed from Benex Sector Limited Partnership IV and MRO Korea Co., Ltd. to Fitech Sector Limited Partnership IV and HappyNarae Co., Ltd., respectively, during the nine-month period ended September 30, 2012.


(In millions of won)
	For the nine-month period ended September 30, 2011
	Beginning balance		Acquisition		Disposal			Share of profits (losses)			Other comprehensive income			Dividends			Other increase (decrease)			Ending balance
SK Marketing & Company Co., Ltd.	₩	117,905		—		—			6,343			820			—			(265	)		124,803
SK China Company, Ltd.		46,573		—		—			(159	)		1,677			—			—			48,091
SK USA, Inc.		5,972		—		—			(360	)		209			—			—			5,821
Fitech Sector Limited Partnership IV(*)		24,953		—		—			(1,089	)		(213	)		—			—			23,651
F&U Credit information Co., Ltd.		4,529		—		—			(117	)		—			(1,000	)		—			3,412
Korea IT Fund		226,633		—		—			10,406			(467	)		—			—			236,572
JYP Entertainment Corporation		4,150		—		—			(135	)		—			—			—			4,015
Konan Technology		4,410		—		—			(327	)		(1	)		—			—			4,082
Etoos Co., Ltd.		14,339		—		—			229			299			—			—			14,867
BMC Digital Culture Contents Fund		8,925		—		—			(392	)		—			—			—			8,533
Wave City Development Co., Ltd.		1,392		—		—			(210	)		—			—			—			1,182
IBKC-bmc Cultural Contents Fund		2,292		—		—			91			—			—			—			2,383
Hanhwa No.2 Daisy Entertainment Investment Fund		2,008		—		—			(554	)		—			—			—			1,454
BMC Korea Movie Fund		13,977		—		—			75			—			—			—			14,052
HanaSK Card Co., Ltd.		386,417		—		—			6,186			(156	)		—			290			392,737
BNCP Co., Ltd.		7,264		—		—			—			—			—			—			7,264
Television Media Korea Ltd.		18,568		—		—			(2,013	)		—			—			—			16,555
Candle Media Co., Ltd.		19,313		1,000		—			(1,651	)		7			—			179			18,848
NanoEnTek, Inc.		—		11,000		—			(490	)		(23	)		—			(18	)		10,469
UNISK(Beijing) Information Technology Co., Ltd.		4,714		—		—			483			684			—			—			5,881
PT. Melon Indonesia		6,210		—		—			(783	)		286			—			—			5,713
Packet One Network		116,160		17,895		—			(20,485	)		(27	)		—			3,006			116,549
Mobile Money Venture, LLC		3,206		—		(2,739	)		617			—			—			(49	)		1,035
SK Technology Innovation Company		25,052		—		—			(2,542	)		698			—			—			23,208
Lightsquared Inc.		72,096		—		—			(17,405	)		2,091			—			—			56,782
SK Wyverns Baseball Club Co., Ltd. and others		67,634		32,001		(3,715	)		(200	)		(115	)		—			2,946			98,551

	₩	1,204,692		61,896		(6,454	)		(24,482	)		5,769			(1,000	)		6,089			1,246,510

(*)	Name of the company has been changed from Benex Sector Limited Partnership IV to Fitech Sector Limited Partnership IV during the nine-month period ended September 30, 2012.

10.

Investments in Associates, Continued

(5)

As the Group discontinued the application of the equity method due to the carrying amount of the Group’s share being reduced to zero, the unrecognized accumulated equity losses as of September 30, 2012 are as follows:


(In millions of won)	Unrealized loss				Unrealized change in equity
	Nine-month period ended Sep. 30		Accumulated		Nine-month period ended Sep. 30		Accumulated
SK Wyverns Baseball Club Co., Ltd.	₩	—		1,099		—		—
ULand Company Limited		—		496		—		50
Wave City Development Co., Ltd.		1,659		1,659		—		—
Cyworld Holdings Hong Kong and others		—		2,937		—		333

	₩	1,659		6,191		—		383

11.

Property and Equipment

(1)

Property and equipment as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012										December 31, 2011
	Acquisition cost		Accumulated depreciation			Accumulated impairment loss			Carrying amount		Carrying amount
Land	₩	692,891		—			—			692,891		730,361
Buildings		1,379,033		(489,171	)		—			889,862		989,078
Structures		631,746		(309,813	)		—			321,933		301,115
Machinery		22,209,363		(16,182,202	)		(122,266	)		5,904,895		5,493,572
Other		1,549,851		(966,511	)		(461	)		582,879		711,461
Construction in progress		680,423		—			—			680,423		805,411

	₩	27,143,307		(17,947,697	)		(122,727	)		9,072,883		9,030,998

11.

Property and Equipment, Continued

(2)

Changes in property and equipment for the nine-month periods ended September 30, 2012 and 2011 are as follows:


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

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

(*)	The Group recognized ₩ 108,889 million of impairment loss on property and equipment in relation to the discontinuance of the Digital Multimedia Broadcasting service and included the amount in profit (loss) from discontinued operation.


(In millions of won)
	For the nine-month period ended September 30, 2011
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Classified as held for sale			Ending balance
Land	₩	707,970		2,109		(1,947	)		22,434			—			—			730,566
Buildings		1,018,508		15,611		(6,005	)		2,317			(39,822	)		—			990,609
Structures		242,125		23,262		(734	)		6,851			(23,527	)		—			247,977
Machinery		5,167,143		167,757		(14,393	)		976,419			(1,292,851	)		(25	)		5,004,050
Other		570,187		927,739		(3,202	)		(618,212	)		(75,828	)		(61	)		800,623
Construction in progress		447,480		817,417		(8,061	)		(821,712	)		—			—			435,124

	₩	8,153,413		1,953,895		(34,342	)		(431,903	)		(1,432,028	)		(86	)		8,208,949

12.

Investment Property

(1)

Investment property as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012							December 31, 2011
	Acquisition cost		Accumulated depreciation			Carrying amount		Carrying amount
Land	₩	12,694		—			12,694		23,153
Buildings		273,639		(63,960	)		209,679		247,933

	₩	286,333		(63,960	)		222,373		271,086

12.

Investment Property, Continued

(2)

Changes in investment property for the nine-month periods ended September 30, 2012 and 2011 are as follows:


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

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


(In millions of won)	For the nine-month period ended September 30, 2011
	Beginning balance		Acquisition			Transfer			Depreciation			Ending balance
Land	₩	19,670		—			2,306			—			21,976
Buildings		177,637		60,801			16,568			(4,912	)		250,094

	₩	197,307		60,801			18,874			(4,912	)		272,070

(3)

Details of fair value of investment property as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012				December 31, 2011
	Carrying amount		Fair value		Carrying amount		Fair value
Land	₩	12,694		15,753		23,153		40,540
Buildings		209,679		227,744		247,933		272,794

	₩	222,373		243,497		271,086		313,334

The fair value of investment property was appraised on the basis of market price by an independent appraisal company.

13.

Goodwill

(1)

Goodwill as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Goodwill related to acquisition of Shinsegi Telecom, Inc.	₩	1,306,236		1,306,236
Goodwill related to acquisition of SK Broadband Co., Ltd.		358,443		358,443
Other goodwill		75,470		85,254

	₩	1,740,149		1,749,933

13.

Goodwill, Continued

(2)

Details of changes in goodwill for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2012			September 30, 2011
Beginning balance	₩	1,749,933			1,736,649
Goodwill increase (decrease) due to acquisition (disposal)		(9,685	)		18,389
Other increase (decrease)(*)		(99	)		2

	₩	1,740,149			1,755,040

(*)	Other increase (decrease) represents effects of exchange rate change in relation to the foreign subsidiaries.

14.

Intangible Assets

(1)

Intangible assets as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012										December 31, 2011
	Acquisition cost		Accumulated depreciation			Accumulated impairment			Carrying amount		Carrying amount
Frequency use rights	₩	2,851,137		(1,091,209	)		(2,907	)		1,757,021		1,889,102
Land use rights		43,893		(26,674	)		—			17,219		19,327
Industrial rights		93,692		(32,956	)		(6	)		60,730		59,473
Development costs		174,393		(150,285	)		(6,526	)		17,582		20,961
Facility usage rights		139,722		(75,724	)		—			63,998		69,491
Customer relations		99,466		(25,576	)		—			73,890		141,819
Memberships(*1)		116,404		—			—			116,404		117,711
Other(*2)		2,484,685		(1,838,735	)		(13,496	)		632,454		677,919

	₩	6,003,392		(3,241,159	)		(22,935	)		2,739,298		2,995,803

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

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

14.

Intangible Assets, Continued

(2)

Details of changes in intangible assets for the nine-month periods ended September 30, 2012 and 2011 are as follows:


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

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

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


(In millions of won)
	For the nine-month period ended September 30, 2011
	Beginning balance		Acquisition		Disposal			Transfer			Amortization			Impairment			Classified as held for sale			Ending balance
Frequency use rights	₩	709,043		—		—			404,970			(109,768	)		—			—			1,004,245
Land use rights		17,551		4,720		(53	)		—			(4,201	)		—			—			18,017
Industrial rights		60,740		1,440		(1	)		323			(2,787	)		—			—			59,715
Development costs		26,470		3,779		—			(510	)		(6,617	)		(459	)		(2,966	)		19,697
Facility usage rights		73,760		4,278		(86	)		36			(5,943	)		(777	)		—			71,268
Customer relations		226,940		98		—			—			(69,225	)		—			—			157,813
Memberships		111,736		6,310		(2,440	)		—			—			—			—			115,606
Other		658,716		54,127		(544	)		99,598			(259,838	)		(323	)		(46	)		551,690

	₩	1,884,956		74,752		(3,124	)		504,417			(458,379	)		(1,559	)		(3,012	)		1,998,051

14.

Intangible Assets, Continued

(3)

The carrying amount and residual useful lives of major intangible assets as of September 30, 2012 are as follows:


(In millions of won)
	Amount		Description	Residual useful lives
W-CDMA license	₩	413,875	Frequency use rights relating to W-CDMA service			(*1)
W-CDMA license		69,322	Frequency use rights relating to W-CDMA service			(*2)
800MHz license		354,760	Frequency use rights relating to CDMA and LTE service			(*3)
1.8GHz license		903,777	Frequency use rights relating to LTE service			(*4)
WiBro license		—	WiBro service			(*5)
WiBro license		15,289	WiBro service			(*6)
Customer relationships related to acquisition of SK Broadband Co., Ltd.		65,149	Customer relationships		1 year and 3 months

(*1)

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

(*2)

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

(*3)

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

(*4)

The Group purchased 1.8GHz license from KCC in December 2011. Amortization of the 1.8GHz license commenced once the Group started its related commercial LTE services in July 2012, under a straight-line basis over the remaining useful life of the 1.8GHz license. The 1.8GHz license will expire in December 2021.

(*5)	The WiBro license was used for seven years from the purchase date when the Group started its commercial WiBro services on March 30, 2005. The amortization is completed during the nine-month period ended September 30, 2012 as the useful life matures.

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

15.

Borrowings and Debentures

(1)

Short-term borrowings as of September 30, 2012 and December 31, 2011 are as follows:

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

Lender

Annual
interest
rate (%)

September 30,
2012

December 31,
2011

Commercial paper

Woori Bank, etc.

3.78 ~ 3.85

₩

200,000

Short-term borrowings (Korean won)

Kookmin Bank, etc.

4.00 ~ 6.65

316,495

394,033

Short-term borrowings (Foreign currency)

SK China Company, Ltd.

—

(USD

36,354

32,500

)

(USD

106,680

92,500

)

₩

552,849

700,713

(2) Long-term borrowings as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won, thousands of U.S. dollars, thousands of Chinese yuan and thousands of Hong Kong dollars)
Lender	Annual interest rate (%)	Maturity	September 30, 2012			December 31, 2011
Bank of Communications (*1,2)	6M Libor + 0.29	Oct. 10, 2013	₩ (USD	33,558 30,000	)	(USD	34,599 30,000	)
Bank of China(*1)	6M Libor + 0.29	Oct. 10, 2013	(USD	22,372 20,000	)	(USD	23,066 20,000	)
DBS Bank(*1)	6M Libor + 0.29	Oct. 10, 2013	(USD	27,965 25,000	)	(USD	28,833 25,000	)
SMBC(*1)	6M Libor + 0.29	Oct. 10, 2013	(USD	27,965 25,000	)	(USD	28,833 25,000	)
China Merchants Bank	5.35	Jan. 27, 2018	(CNY	63,668 360,000	)	(CNY	65,893 360,000	)
Korea Exchange Bank	5.18	Jan. 28, 2015	(CNY	29,181 165,000	)	(CNY	31,116 170,000	)
Hana Bank HK(*3)	3M Libor + 3.2	Mar. 3, 2014	(USD	83,895 75,000	)	(USD	86,498 75,000	)
SCB Bank HK(*3)	3M Libor + 3.3	Nov. 3, 2014	(USD	33,558 30,000	)		—
SCB Bank HK(*3)	3M Libor + 3.3	Nov. 3, 2014	(HKD	33,477 234,000	)		—
Kookmin Bank and 13 others	4.48	Feb. 14, 2015		1,800,000			—
Kookmin Bank	3.56	Jun. 15, 2012		—			1,977
Korea Development Bank	3.56	Jun. 17, 2013		2,644			5,288
Korea Development Bank	3.56	Jun. 16, 2014		5,766			8,237
Shinhan Bank	3.56	Jun. 15, 2015		9,417			10,273
Kookmin Bank	3.56	Jun. 15, 2016		9,749			9,749
Kookmin Bank	3.56	Mar. 15, 2017		5,996			—

Sub-total				2,189,211			334,362
Less present value discount on long-term borrowings				(9,529	)		—

				2,179,682			334,362
Less current portion of long-term borrowings				(10,176	)		(10,510	)

Long-term borrowings			₩	2,169,506			323,852

15.

Borrowings and Debentures, Continued

(*1)	As of September 30, 2012, 6M Libor rate is 0.64%.

(*2)	As of September 30, 2012, the Group’s lender is Bank of Communications as Credit Agricole transferred the loans to Bank of Communications during the nine-month period ended September 30, 2012.

(*3)	As of September 30, 2012, 3M Libor rate is 0.36%.

(3)

Debentures as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won, thousands of U.S. dollars, thousands of Japanese Yen, and thousands of other currencies)
	Purpose	Maturity	Annual interest rate (%)	September 30, 2012			December 31, 2011
Unsecured private bonds	Refinancing	2016	5.00	₩	200,000			200,000
Unsecured private bonds	fund	2013	4.00		200,000			200,000
Unsecured private bonds		2014	5.00		200,000			200,000
Unsecured private bonds(*1)		2012	3M Euro Yen Libor + 0.55	(JPY	180,140 12,500,000	)	(JPY	185,645 12,500,000	)
Unsecured private bonds	Other fund	2015	5.00		200,000			200,000
Unsecured private bonds		2018	5.00		200,000			200,000
Unsecured private bonds		2013	6.92		250,000			250,000
Unsecured private bonds		2016	5.54		40,000			40,000
Unsecured private bonds		2012	3M Euro Yen Libor + 2.50		—		(JPY	44,555 3,000,000	)
Unsecured private bonds		2016	5.92		230,000			230,000
Unsecured private bonds		2012	3M Euro Yen Tibor + 2.50		—		(JPY	74,258 5,000,000	)
Unsecured private bonds	Operating	2016	3.95		110,000			110,000
Unsecured private bonds	fund	2021	4.22		190,000			190,000
Unsecured private bonds	Operating and	2019	3.24		170,000			—
Unsecured private bonds	refinancing	2022	3.30		140,000			—
Unsecured private bonds	fund	2032	3.45		90,000			—
Unsecured private bonds(*2)	Refinancing	2014	4.86		50,000			50,000
Unsecured private bonds(*2)	fund	2015	4.62		50,000			50,000
Unsecured private bonds(*3)		2013	3.99		150,000			150,000
Unsecured private bonds(*3)		2014	4.53		290,000			290,000
Unsecured private bonds(*3)		2014	4.40		100,000			100,000
Unsecured private bonds(*3)		2015	4.09		110,000			—
Unsecured private bonds(*3)		2015	4.14		110,000			—
Unsecured private bonds(*3)		2017	4.28		100,000			—
Foreign global bonds		2027	6.63	(USD	447,440 400,000	)	(USD	461,320 400,000	)
Foreign global bonds		2012	7.00		—		(USD	576,650 500,000	)
Exchangeable bonds(*6,7)		2014	1.75	(USD	399,677 332,528	)	(USD	397,886 332,528	)

15.

Borrowings and Debentures, Continued


(In millions of won, thousands of U.S. dollars, thousands of Japanese Yen, and thousands of other currencies)
	Purpose	Maturity	Annual interest rate (%)	September 30, 2012			December 31, 2011
Floating rate notes(*4)	Operating fund	2012	3M Libor + 3.15	₩	—		(USD	253,726 220,000	)
Floating rate notes(*4)		2014	3M Libor + 1.60	(USD	279,650 250,000	)	(USD	288,325 250,000	)
Floating rate notes(*5)		2014	SOR rate + 1.20	(SGD	59,313 65,000	)	(SGD	57,618 65,000	)
Swiss unsecured private bonds		2017	1.75	(CHF	357,915 300,000	)		—

Sub-total					4,904,135			4,799,983
Less discounts on bonds					(36,690	)		(39,095	)

					4,867,445			4,760,888
Less current portion of bonds payable					(180,126	)		(1,531,879	)

				₩	4,687,319			3,229,009

(*1)	As of September 30, 2012, 3M Euro Yen Libor rate is 0.19%.

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

(*3)

According to covenant provision of the related borrowings, SK Broadband Co., Ltd., a subsidiary of the Parent Company, is required to maintain its debt to equity ratio lower than 10 to 1 and cannot dispose of its property and equipment more than ₩ 10 trillion in any given fiscal year. As of September 30, 2012, subsidiaries of the Parent Company comply with regulations in the debt covenants.

(*4)	As of September 30, 2012, 3M Libor rate is 0.36%.

(*5)	As of September 30, 2012, SOR rate is 0.38%.

(*6)

As of September 30, 2012, exchangeable bonds are classified as financial liabilities at fair value through profit or loss. As of December 31, 2011, the exchangeable bonds were classified as current as the bond holders would be eligible to redeem their notes at 100% of the principal amount on April 7, 2012. However, as of September 30, 2012, the exchangeable bonds are reclassified as non-current liabilities as the bond holders have not exercised and have lost their early redemption right.

15.

Borrowings and Debentures, Continued

(*7)

On April 7, 2009, the Group issued exchangeable bonds with a maturity of five years in the principal amount of USD 332,528,000 for USD 326,397,463 with a coupon rate of 1.75%. As of September 30, 2012, fair value of the exchangeable bonds is USD 357,301,336. The exchange price could be adjusted and the exchange price is ₩ 197,760 with the exchange rate of ₩ 1,383.40 per USD 1.

The Group may redeem the principal amount after 3 years from the issuance date if the market price exceeds 130% of the exchange price during a predetermined period. On the other hand, the bond holders may redeem their notes at 100% of the principal amount on April 7, 2012 (3 years from the issuance date). The exchange right may be exercised during the period from May 18, 2009 to March 24, 2014 and the number of common shares that can be exchanged as of September 30, 2012 is 2,326,149 shares.

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

In accordance with resolution of the Board of Directors on February 9, 2012, and July 28, 2012, the exchange price has changed from ₩ 209,853 to ₩ 197,760 and the number of common shares that can be exchanged was changed from 2,192,102 shares to 2,326,149 shares due to the payment of periodic and interim dividends. During the nine-month period ended September 30, 2012, no exchange was made.

15.

Borrowings and Debentures, Continued

(4)

Details of issuance or repayments of borrowings and debentures for the nine-month period ended September 30, 2012 are as follows:


(In millions of won, thousands of U.S. dollars, thousands of Japanese Yen, and thousands of other currencies)
	Lender	Annual interest rate (%)	Maturity	Coupon value			Carrying amount
January 1, 2012				₩	5,835,058			5,795,962
Issues:
Short-term borrowings	Kookmin Bank and other	3.43 ~ 6.50	-		791,387			791,387
	Woori Bank and	3.43	2012		200,000			200,000
	other	3.08 ~ 3.12	2012		500,000			500,000
		3.10	2012		300,000			300,000
Long-term borrowings	Kookmin Bank and other	4.48	2015		2,000,000			2,000,000
	Kookmin Bank	3.56	2017		5,996			5,996
	SCB Bank HK	3M Libor + 3.3	2014	(USD	34,134 30,000	)	(USD	34,134 30,000	)
	SCB Bank HK	3M Libor + 3.3	2014	(HKD	34,291 234,000	)	(HKD	34,291 234,000	)
Debentures		4.09	2015		110,000			110,000
		4.14	2015		110,000			110,000
		4.28	2017		100,000			100,000
		3.24	2019		170,000			170,000
		3.30	2022		140,000			140,000
		3.45	2032		90,000			90,000
		1.75	2017	(CHF	363,552 300,000	)	(CHF	363,552 300,000	)
Fees, etc.	-	—	-		—			(18,112	)
Repayments:
Short-term borrowings	Hana Bank and other	4.29 ~ 8.03	(*1)		(937,255	)		(937,255	)
	Woori Bank and	3.43	2012		(200,000	)		(200,000	)
	other	3.08 ~ 3.12	2012		(500,000	)		(500,000	)
		3.10	2012		(300,000	)		(300,000	)
Long-term borrowings	Korea Development Bank and other	4.48	2015(*2)		(200,000	)		(200,000	)
	Kookmin Bank and other	3.56	-		(7,948	)		(7,948	)
	Korea Exchange Bank	5.18	2015(*3)		(915	)		(915	)
Unsecured private bonds		3M Euro Yen Libor + 2.50	2012	(JPY	(44,555 3,000,000	) )	(JPY	(44,555 3,000,000	) )
Unsecured private bonds		3M Euro Yen Tibor + 2.50	2012	(JPY	(74,258 5,000,000	) )	(JPY	(74,258 5,000,000	) )
Foreign global bond		7.00	2012	(USD	(576,650 500,000	) )	(USD	(576,650 500,000	) )
Floating rate notes		3M Libor + 3.15	2012	(USD	(253,726 220,000	) )	(USD	(253,726 220,000	) )
Other:
Foreign translation gain (loss) and others(*4)		—	-		(42,915	)		(31,926	)

September 30, 2012				₩	7,646,196			7,599,977

15.

Borrowings and Debentures, Continued

(*1)	For the nine-month period ended September 30, 2012, the Group early redeemed the short-term borrowings amounting to ₩ 500,000 million while the contractual maturity is February 14, 2013.

(*2)	For the nine-month period ended September 30, 2012, the Group early redeemed ₩ 200,000 million from the long-term borrowings of ₩ 2,000,000 million.

(*3)	For the nine-month period ended September 30, 2012, the Group early redeemed CNY 5,000,000.

(*4)	Foreign translation gain (loss) and others represent changes from foreign translation gain (loss) of foreign currency borrowings and debentures and amortization of bond discount.

16.

Long-term Payables - other

(1)

Long-term payables as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Payables related to acquisition of W-CDMA licenses	₩	705,561		840,974
Other(*)		8,003		6,522

	₩	713,564		847,496

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

16.

Long-term Payables - other

(2)

As of September 30, 2012 and December 31, 2011, long-term payables consist of payables related to acquisition of W-CDMA licenses for 2.1GHz, 800MHZ, 1.8GHz and 2.3GHz frequency and other details are as follows:


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

Present value of long-term payables - other at the time of acquisition		49,363			197,190			679,453			8,009			934,015

Nominal value		52,600			208,250			746,250			—			1,007,100
Present value discount on long-term payables - other		(3,237	)		(11,060	)		(66,797	)		—			(81,094	)
Current portion of long-term payables - other		(17,533	)		—			(74,625	)		—			(92,158	)
Accumulated amortization of present value discount at December 31, 2011		2,065			1,926			3,136			—			7,127
Carrying amount as of December 31, 2011		33,895			199,116			607,964			—			840,975
Increase		—			—			—			8,650			8,650
Present value discount on long-term payables - other		—			—			—			(641	)		(641	)
Amortization of present value discount on long-term payables - other		440			3,002			6,795			103			10,340

Less current portion of long-term payables - other		(17,184	)		(67,509	)		(69,070	)		—			(153,763	)

Carrying amount at September 30, 2012	₩	17,151			134,609			545,689			8,112			705,561

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

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

16.

Long-term Payables - other, Continued

(3) The repayment schedule of long-term payables - other as of September 30, 2012 is as follows:


(In millions of won)
	Amount
2013	₩	161,575
2014		164,458
2015		146,925
2016 and thereafter		450,633

	₩	923,591

17.

Provisions

Change in provisions for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)
	For the nine-month period ended September 30, 2012									As of September 30, 2012
	Beginning balance		Increase		Utilization			Ending balance		Current		Non-current
Provision for handset subsidy	₩	762,238		272,869		(538,804	)		496,303		373,044		123,259
Provision for point programs		639		—		(289	)		350		—		350
Provision for restoration		36,378		9,703		(468	)		45,613		7,525		38,088
Provision for warranty		154		—		(49	)		105		—		105
Provision for sales return		81		25		(42	)		64		64		—
Other provisions		69		—		(69	)		—		—		—

	₩	799,559		282,597		(539,721	)		542,435		380,633		161,802


(In millions of won)
	For the nine-month period ended September 30, 2011									As of September 30, 2011
	Beginning balance		Increase		Utilization			Ending balance		Current		Non-current
Provision for handset subsidy	₩	732,042		668,248		(638,970	)		761,320		646,507		114,813
Provision for point programs		87		—		—			87		—		87
Provision for restoration		32,522		3,551		(3,275	)		32,798		—		32,798
Provision for warranty		140		19		—			159		—		159
Provision for sales return		48		55		(40	)		63		63		—
Other provisions		11		50		(32	)		29		29		—

	₩	764,850		671,923		(642,317	)		794,456		646,599		147,857

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

18.

Finance Lease Liabilities

(1)

The Group has leased certain telecommunication equipment under the finance lease agreement with Cisco Systems Capital Korea Ltd. Finance lease liabilities as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Finance Lease Liabilities
Current portion of long-term finance lease liabilities	₩	22,812		31,308
Long-term finance lease liabilities		26,926		41,940

	₩	49,738		73,248

(2)

The Group’s related interest and principal as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012					December 31, 2011
	Minimum lease payment		Present value			Minimum lease payment		Present value
Less than 1 year	₩	24,565		22,812			34,198		31,308
1 ~ 5 years		27,922		26,926			44,119		41,940

Subtotal		52,487		49,738			78,317		73,248

Current portion of long-term finance lease liabilities				(22,812	)				(31,308	)

Long-term finance lease liabilities	₩			26,926					41,940

19.

Defined Benefit Liabilities

(1)

Details of defined benefit liabilities as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012			December 31, 2011
Present value of defined benefit obligations	₩	222,074			188,120
Fair value of plan assets		(104,909	)		(102,179	)

	₩	117,165			85,941

(2)

Principal actuarial assumptions as of September 30, 2012 and December 31, 2011 are as follows:


	September 30, 2012	December 31, 2011
Discount rate for defined benefit obligations	3.95% ~ 6.15%	4.11% ~ 6.15%
Inflation rate	3.00%	3.00%
Expected rate of return on plan assets	3.50% ~ 5.34%	2.00% ~ 8.11%
Expected rate of salary increase	2.00% ~ 6.98%	3.50% ~ 5.62%

19.

Defined Benefit Liabilities, Continued

Discount rate for defined benefit obligation is determined based on the Group’s credit ratings and yield rate of corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of return on plan assets represent weighted average rate of market value of the individual assets on the plan. Expected rate of return on plan assets is determined based on the historical yield rate and current market conditions. Expected rate of salary increase is determined based on the Group’s historical promotion index, inflation rate and salary increase ratio in accordance with salary agreement. Inflation rate is determined based on inflation data declared by Bank of Korea.

(3)

Changes in defined benefit obligations for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2012			September 30, 2011
Beginning balance	₩	188,120			160,363
Current service cost		56,242			48,345
Interest cost		6,269			6,750
Actuarial loss		6,503			8,210
Benefit paid		(32,388	)		(33,642	)
Others(*)		(2,672	)		(58	)
Classified as held for sale		—			(295	)

Ending balance	₩	222,074			189,673

(*)	Others include effects of changes in consolidation scope of (-) ₩ 4,185 million in relation to the disposal of Ntreev Soft Co., Ltd. and transfer to construction in progress during the nine-month period ended September 30, 2012.

(4)

Changes in plan assets for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2012			September 30, 2011
Beginning balance	₩	102,179			92,493
Expected return on plan assets		2,818			3,050
Actuarial gain(loss)		801			(978	)
Contributions by employer directly to plan assets		5,597			2,200
Benefit paid		(6,351	)		(10,872	)
Others		(135	)		31

Ending balance	₩	104,909			85,924

(5)

Expenses recognized in profit and loss and construction-in-progress for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2012			September 30, 2011
Current service cost	₩	56,242			48,345
Interest cost		6,269			6,750
Expected return on plan assets		(2,818	)		(3,050	)

	₩	59,693			52,045

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

19.

Defined Benefit Liabilities, Continued

(6)

Details of plan assets as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Equity instruments	₩	311		—
Debt instruments		19,782		12,455
Short-term financial instruments, etc.		84,816		89,724

	₩	104,909		102,179

Actual return on plan assets for the nine-month periods ended September 30, 2012 and 2011 amounted to ₩ 3,619 million and ₩ 2,072 million, respectively.

20.

Derivative Instruments

(1)

Currency swap contracts under cash flow hedge accounting

The Group has entered into a floating-to-fixed cross currency swap contract with Credit Agricole Corporate & Investment Bank to hedge the foreign currency risk and the interest rate risk of U.S. dollar denominated long-term borrowings with face amounts totaling USD 100,000,000 borrowed on October 10, 2006. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contracts to which cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to ₩ 2,360 million (net of tax effect totaling ₩ 253 million and foreign currency translation loss arising from U.S. dollar denominated long-term borrowings totaling ₩ 17,060 million) is accounted for as accumulated other comprehensive loss.

In addition, the Group has entered into a floating-to-fixed cross currency swap contract with HSBC and SMBC Bank to hedge the foreign currency risk and the interest rate risk of its unguaranteed Japanese yen denominated bonds with face amounts totaling JPY 12,500,000,000 issued on November 13, 2007. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contracts to which cash flow hedge accounting is applied, an accumulated gain on valuation of derivatives amounting to ₩ 3,646 million (net of tax effect totaling ₩ 564 million and foreign currency translation loss arising from unguaranteed Japanese yen denominated bonds totaling ₩ 76,078 million) is accounted for as accumulated other comprehensive income.

In addition, the Group has entered into a fixed-to-fixed cross currency swap contract with Morgan Stanley and five other banks to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds with face amounts totaling USD 400,000,000 at annual fixed interest rate of 6.63% issued on July 20, 2007. As of September 30, 2012, in connection with unsettled foreign currency swap contract to which cash flow hedge accounting is applied since May 12 2010, an accumulated loss on valuation of derivatives amounting to ₩ 34,779 million (net of tax effect totaling ₩ 11,103 million and foreign currency translation gain arising from unguaranteed U.S. dollar denominated bonds totaling ₩ 9,924 million) is accounted for as accumulated other comprehensive loss. In connection with the currency swap contract, gain on valuation of currency swap which was incurred before application of hedge accounting, amounting to ₩ 129,806 million was recognized in profit or loss.

20.

Derivative Instruments, Continued

In addition, the Group has entered into a floating-to-fixed cross currency swap contract with DBS Bank and Citi Bank to hedge the foreign currency risk and the interest rate risk of its unguaranteed U.S. dollar denominated bonds with face amounts USD 250,000,000 issued on December 15, 2011. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contract, an accumulated gain on valuation of derivatives amounting to ₩ 5,770 million (net of tax effect totaling ₩ 1,842 million and foreign currency translation gain arising from unguaranteed U.S. dollar denominated bonds totaling ₩ 9,880 million) is accounted for as other comprehensive income.

In addition, the Group has entered into a floating-to-fixed cross currency swap contract with United Overseas Bank to hedge the foreign currency risk and the interest rate risk of its Singapore dollar denominated bonds with face amounts totaling SGD 65,000,000 issued on December 15, 2011. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to ₩ 252 million (net of tax effect totaling ₩ 80 million and foreign currency translation loss arising from unguaranteed Singapore dollar denominated bonds totaling ₩ 1,837 million) is accounted for as accumulated other comprehensive loss.

In addition, the Group has entered into a fixed-to-fixed cross currency swap contract with Citi Bank and five other banks to hedge the foreign currency risk of its Swiss Franc denominated bonds with face amounts totaling CHF 300,000,000 issued on June 12, 2012. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to ₩ 15,259 million (net of tax effect totaling ₩ 4,872 million and foreign currency translation gain arising from unguaranteed Swiss Franc denominated bonds totaling ₩ 5,600 million) is accounted for as accumulated other comprehensive loss.

20.

Derivative Instruments, Continued

(2)

As of September 30, 2012, fair values of above derivatives recorded in assets or liabilities and details of derivative instruments are as follows:


(In millions of won, thousands of U.S. dollars, Japanese yen, and Singapore dollars)
					Fair value
	Hedged item	Amount		Duration of Contract	Designated as Cash Flow Hedge		Not Designated		Total
Current assets:
Floating-to-fixed cross currency swap	Japanese yen denominated bonds	JPY	12,500,000	Nov. 13, 2007 ~ Nov. 13, 2012	₩	79,160		—		79,160
Non-current assets:
Floating-to-fixed cross currency swap	U.S. dollar denominated long-term borrowings	USD	100,000	Oct. 10, 2006 ~ Oct. 10, 2013		14,446		—		14,446
Fix-to-fixed cross currency swap	U.S. dollar denominated bonds	USD	400,000	Jul. 20, 2007 ~ Jul. 20, 2027		74,000		—		74,000
Floating-to-fixed cross currency swap	Singapore dollar denominated bonds	SGD	65,000	Dec. 15, 2011 ~ Dec. 12, 2014		1,505		—		1,505
Convertible option	Convertible bonds (*)	KRW	50,000	Sep. 01, 2009 ~ Aug. 31, 2014		—		532		532

Total assets					₩	169,111		532		169,643

Current liabilities:
Floating-to-fixed cross currency swap	U.S. dollar denominated bonds	USD	250,000	Dec. 15, 2011 ~ Dec. 12, 2014		2,267		—		2,267
Fixed-to-fixed cross currency swap	Swiss Franc denominated bonds	CHF	300,000	Jun. 12, 2012 ~ Jun. 12, 2017		25,731		—		25,731

Total liabilities					₩	27,998		—		27,998

(*)	Fair value of the conversion option of convertible bonds held by SK Communications Co., Ltd., a subsidiary, amounting to ₩ 532 million was accounted for as non-current derivative financial assets.

21.

Share Capital and Capital Surplus (Deficit) and Other Capital Adjustments

The Parent Company’s outstanding share capital consists entirely of common stock with a par value of ₩ 500. The number of authorized, issued and outstanding common shares and capital surplus (deficit) and other capital adjustments as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won, except for share data)
	September 30, 2012			December 31, 2011
Authorized shares		220,000,000			220,000,000
Issued shares(*1)		80,745,711			80,745,711
Share capital
Common stock	₩	44,639			44,639
Capital surplus (deficit) and other capital adjustments:
Paid-in surplus		2,915,887			2,915,887
Treasury stock		(2,410,451	)		(2,410,451	)
Loss on disposal of treasury stock		(18,855	)		(18,855	)
Others(*2)		(777,241	)		(771,928	)

	₩	(290,660	)		(285,347	)

(*1)

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

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

There were no changes in share capital for the nine-month period ended September 30, 2012 and for the year ended December 31, 2011.

22.

Treasury Stock

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

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

As a result of these treasury stock transactions, as of September 30, 2012 and December 31, 2011, the Parent Company has 11,050,712 shares of treasury stock at ₩ 2,410,451 million.

23.

Retained Earnings

(1)

Retained earnings as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Appropriated:
Legal reserve	₩	22,320		22,320
Reserve for research & manpower development		220,000		535,595
Reserve for business expansion		9,106,138		8,009,138
Reserve for technology development		1,901,300		1,524,000

		11,249,758		10,091,053
Unappropriated		360,998		1,551,472

	₩	11,610,756		11,642,525

(2)

Legal reserve

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

(3)

Reserve for research & manpower development

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

24.

Reserves

(1)

Details of reserves as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012			December 31, 2011
Net change in unrealized fair value of available-for-sale financial assets	₩	317,950			354,951
Net change in other comprehensive income of investments in associates		(111,211	)		(93,598	)
Net change in unrealized fair value of derivatives		(38,060	)		(25,099	)
Foreign currency translation differences for foreign operations		7,121			23,810

	₩	175,800			260,064

24.

Reserves, Continued

(2)

Change in reserves for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	Net change in unrealized fair value of available-for-sale financial assets			Net change in other comprehensive income of investments in associates			Net change in unrealized fair value of derivatives			Foreign currency translation differences for foreign operations			Total
Balance at January 1, 2011	₩	793,645			(91,413	)		(56,862	)		(2,314	)		643,056
Changes		(487,932	)		6,202			(20,955	)		31,158			(471,527	)
Tax effect		110,616			(1,282	)		3,690			—			113,024

Balance at September 30, 2011		416,329			(86,493	)		(74,127	)		28,844			284,553

Balance at January 1, 2012		354,951			(93,598	)		(25,099	)		23,810			260,064
Changes		(48,567	)		(17,832	)		(16,508	)		(16,689	)		(99,596	)
Tax effect		11,566			219			3,547			—			15,332

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

25.

Other Operating Expenses

Details of other operating expenses for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012					2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30			Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Other Operating Expenses:
Communication expenses	₩	15,116		48,870			14,375		41,571
Utilities		55,565		144,238			47,309		124,921
Taxes and dues(*)		13,098		76,584			18,584		38,430
Repair		39,222		160,887			62,808		185,718
Research and development		83,982		221,147			67,776		185,864
Training		10,583		25,651			9,343		21,042
Bad debt for accounts receivables - trade		12,646		36,272			15,753		51,789
Reversal of allowance for doubtful accounts		—		(4,904	)		—		(1,737	)
Travel		7,539		22,333			7,866		22,825
Supplies and other		45,079		98,498			25,094		94,087

	₩	282,830		829,576			268,908		764,510

(*)

Taxes and dues for the nine-month period ended September 30, 2012 includes ₩ 20.3 billion fined against the Company for allegedly colluding with other third parties to inflate the prices of handsets while advertising that the handsets are offered at a discount through subsidy plans. The Company’s appeal of the case is currently pending.

26.

Other Non-operating Income and Expenses

Details of other non-operating income and expenses for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Other Non-operating Income:
Fees revenues	₩	1,026		1,987		1,990		2,587
Gain on disposal of property and equipment and intangible assets		2,138		4,970		1,361		5,296
Others		11,420		25,488		13,655		26,853

	₩	14,584		32,445		17,006		34,736

Other Non-operating Expenses:
Impairment loss on property and equipment and intangible assets	₩	5,850		9,719		—		1,559
Loss on disposal of property and equipment and intangible assets		7,154		10,134		6,125		14,099
Donations		4,207		45,216		15,795		46,635
Bad debt for accounts receivable - other		4,986		28,026		1,615		4,761
Others		18,718		30,738		9,851		21,778

	₩	40,915		123,833		33,386		88,832

27.

Finance Income and Costs

(1)

Details of finance income and costs for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Finance Income:
Interest income	₩	22,206		79,459		42,435		132,956
Dividends		5,363		28,310		5,912		26,882
Gain on foreign currency transactions		—		4,882		2,461		5,410
Gain on foreign currency translation		1,351		2,065		—		3,505
Gain on disposal of long-term investment securities		681		13,628		2,290		162,667
Gain on valuation of derivatives		—		—		1,558		3,645
Gain on settlement of derivatives		—		12,694		—		—
Gain on valuation of financial asset at fair value through profit or loss		—		—		—		1,067
Gain on valuation of financial liability at fair value through profit or loss		—		—		19,127		52,377

	₩	29,601		141,038		73,783		388,509

27.

Finance Income and Costs, Continued


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Finance Costs:
Interest expense	₩	102,899		302,339		73,070		224,936
Loss on foreign currency transactions		531		5,449		3,697		7,350
Loss on foreign currency translation		1,562		2,089		22,998		12,832
Loss on disposal of long-term investment securities		—		9,134		300		457
Loss on impairment of long-term investment securities		—		580		—		—
Loss on valuation of derivatives		—		443		292		689
Loss on settlement of derivatives		—		1,232		—		5,136
Loss on valuation of financial asset at fair value through profit or loss		1,007		824		—		—
Loss on valuation of financial liability at fair value through profit or loss		7,566		1,791		—		—

	₩	113,565		323,881		100,357		251,400

(2)

Details of interest income included in finance income for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Interest income on cash equivalents and deposits	₩	11,555		44,751		18,438		41,550
Interest income on installment receivables and others		10,651		34,708		23,997		91,406

	₩	22,206		79,459		42,435		132,956

(3)

Details of interest expense included in finance costs for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Interest expense on bank overdrafts and borrowings	₩	42,537		102,830		15,813		48,156
Interest expense on debentures		51,004		151,202		50,536		157,106
Interest on finance lease liabilities		603		2,116		1,012		3,489
Others		8,755		46,191		5,709		16,185

	₩	102,899		302,339		73,070		224,936

27.

Finance Income and Costs, Continued

(4)

Details of impairment losses for financial assets for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows.


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Bad debt for accounts receivable - trade	₩	12,646		36,272		15,753		51,789
Bad debt for accounts receivable - other		4,986		28,026		1,615		4,761

	₩	17,632		64,298		17,368		56,550

28.

Income Tax Expense

Income tax expense was recognized as current tax expense adjusted for changes in estimates related to prior periods, deferred tax expenses by origination and reversal, temporary differences, and income tax recognized in other comprehensive income. The Group’s effective tax rate is higher in 2011 than in 2012 primarily due to additional tax expense recognized as a result of the resolution of various tax matters during the finalization of Tax Authorities audits of the Parent Company’s tax returns from 2005 to 2009.

29.

Earnings per Share

(1)

Basic earnings per share

Basic earnings per share for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In millions of won, shares)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Basic earnings per share attributable to owners of the Parent Company from continuing operation:
Net income attributable to owners of the Parent Company from continuing operations	₩	178,997		743,573		396,494		1,430,370
Weighted average number of common shares outstanding		69,694,999		69,694,999		70,499,159		70,894,202

Basic earnings per share from continuing operations (In won)	₩	2,568		10,669		5,624		20,176

Basic earnings per share attributable to owners of the Parent Company:
Net income attributable to owners of the Parent Company	₩	178,872		628,692		386,166		1,396,494
Weighted average number of common shares outstanding		69,694,999		69,694,999		70,499,159		70,894,202

Basic earnings per share (In won)	₩	2,566		9,021		5,478		19,698

29.

Earnings per Share, Continued

Net income attributable to owners of the Parent Company from continuing operation for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Net income attributable to owners of the Parent Company	₩	178,872		628,692		386,166		1,396,494
Results of discontinued operation attributable to owners of the Parent Company		125		114,881		10,328		33,876

Net income attributable to owners of the Parent Company from continuing operation	₩	178,997		743,573		396,494		1,430,370

The weighted average number of common shares outstanding for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


	Number of shares			Weighted number of days		Weighted number of shares
	Number of shares			Three-month period ended Sep. 30	Nine-month period ended Sep. 30	Three-month period ended Sep. 30			Nine-month period ended Sep. 30
Outstanding common shares at January 1, 2012		80,745,711		92/92	274/274		80,745,711			80,745,711
Effect of treasury stock		(11,050,712	)	92/92	274/274		(11,050,712	)		(11,050,712	)

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


	Number of shares			Weighted number of days		Weighted number of shares
	Number of shares			Three-month period ended Sep. 30	Nine-month period ended Sep. 30	Three-month period ended Sep. 30			Nine-month period ended Sep. 30
Outstanding common shares at January 1, 2011		80,745,711		92/92	273/273		80,745,711			80,745,711
Beginning treasury stock		(9,650,712	)	92/92	273/273		(9,650,712	)		(9,650,712	)
Acquisition of treasury stock		(1,400,000	)	39/92	39/273		(595,840	)		(200,797	)

Number of shares at September 30, 2011		69,694,999					70,499,159			70,894,202

29.

Earnings per Share, Continued

(2)

Diluted earnings per share

Diluted earnings per share for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In millions of won, shares)	2012				2011
	Three-month period ended Sep. 30(*)		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Diluted earnings per share attributable to owners of the Parent Company from continuing operations:
Diluted net income attributable to owners of the Parent Company from continuing operations	₩	178,997		748,631		397,904		1,433,913
Weighted average number of common shares outstanding		69,694,999		72,021,148		72,676,548		73,071,591

Diluted earnings per share from continuing operations (In won)	₩	2,568		10,395		5,475		19,623

Diluted earnings per share attributable to owners of the Parent Company:
Diluted net income attributable to owners of the Parent Company	₩	178,872		633,750		387,576		1,400,037
Weighted average number of common shares outstanding		69,694,999		72,021,148		72,676,548		73,071,591

Diluted earnings per share (In won)	₩	2,566		8,800		5,333		19,160

(*)

The number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds is excluded for the diluted earnings per share calculation for the three-month period ended September 30, 2012 as the effect of exchangeable bond is nil (diluted shares of 2,326 149); thus, diluted earnings per share for the three-month period ended September 30, 2012 is the same as basic earnings per share.

Diluted net income attributable to owners of the Parent Company from continuing operations for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In millions of won)	2012
	Continuing operations				Discontinued operation						Total
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30			Nine-month period ended Sep. 30			Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Net income attributable to owners of the Parent Company	₩	178,997		743,573		(125	)		(114,881	)		178,872		628,692
Effect of exchangeable bonds		—		5,058		—			—			—		5,058

Diluted net income attributable to owners of the Parent Company	₩	178,997		748,631		(125	)		(114,881	)		178,872		633,750

29.

Earnings per Share, Continued


(In millions of won)	2011
	Continuing operations				Discontinued operation						Total
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30			Nine-month period ended Sep. 30			Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Net income attributable to owners of the Parent Company	₩	396,494		1,430,370		(10,328	)		(33,876	)		386,166		1,396,494
Effect of exchangeable bonds		1,410		3,543		—			—			1,410		3,543

Diluted net income attributable to owners of the Parent Company	₩	397,904		1,433,913		(10,328	)		(33,876	)		387,576		1,400,037

Adjusted weighted average number of common shares outstanding for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In shares)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Weighted average number of common shares outstanding		69,694,999		69,694,999		70,499,159		70,894,202
Effect of exchangeable bonds(*)		—		2,326,149		2,177,389		2,177,389

Adjusted weighted average number of common shares outstanding		69,694,999		72,021,148		72,676,548		73,071,591

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

(3)

Basic loss per share from discontinued operation


(In millions of won, shares)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Loss from discontinued operation attributable to owners of the Parent Company	₩	125		114,881		10,328		33,876
Weighted average number of common shares outstanding		69,694,999		69,694,999		70,499,159		70,894,202

Basic loss per share (In won)	₩	2		1,648		146		478

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

30.

Categories of Financial Instruments

(1)

Financial assets by categories as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	₩	—		—		1,168,091		—		1,168,091
Financial instruments		—		—		469,647		—		469,647
Short-term investment securities		—		89,062		—		—		89,062
Long-term investment securities(*1)		15,792		987,141		—		—		1,002,933
Accounts receivable - trade		—		—		1,963,703		—		1,963,703
Loans and receivables(*2)		—		—		995,458		—		995,458
Derivative financial assets(*3)		532		—		—		169,111		169,643

	₩	16,324		1,076,203		4,596,899		169,111		5,858,537


(In millions of won)
	December 31, 2011
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	₩	—		—		1,650,794		—		1,650,794
Financial instruments		—		—		987,192		—		987,192
Short-term investment securities		—		94,829		—		—		94,829
Long-term investment securities(*1)		16,617		1,521,328		—		—		1,537,945
Accounts receivable - trade		—		—		1,835,641		—		1,835,641
Loans and receivables(*2)		—		—		1,377,750		—		1,377,750
Derivative financial assets(*3)		1,018		—		—		252,935		253,953

	₩	17,635		1,616,157		5,851,377		252,935		7,738,104

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

30.

Categories of Financial Instruments, Continued

(*2)	Details of loans and receivables as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Short-term loans	₩	91,582		100,429
Accounts receivable - other		544,188		908,836
Accrued income		52,058		21,847
Other current assets		433		462
Long-term loans		73,033		95,565
Long-term accounts receivable - other		—		5,393
Guarantee deposits		234,164		245,218

	₩	995,458		1,377,750

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

(2)

Financial liabilities by categories as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Accounts payable - trade	₩	—		399,993		—		399,993
Derivative financial liabilities		—		—		27,998		27,998
Borrowings		—		2,732,531		—		2,732,531
Debentures(*1)		399,677		4,467,768		—		4,867,445
Accounts payable - other and others (*2)		—		3,469,238		—		3,469,238

	₩	399,677		11,069,530		27,998		11,497,205


(In millions of won)	December 31, 2011
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Accounts payable - trade	₩	—		195,391		—		195,391
Derivative financial liabilities		—		—		4,645		4,645
Borrowings		—		1,035,075		—		1,035,075
Debentures(*1)		397,886		4,363,002		—		4,760,888
Accounts payable - other and others (*2)		—		3,312,642		—		3,312,642

	₩	397,886		8,906,110		4,645		9,308,641

30.

Categories of Financial Instruments, Continued

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

(*2)	Details of accounts payable and other payables as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Accounts payable - other	₩	1,327,132		1,507,877
Withholdings		10,307		10,416
Accrued expenses		1,175,599		744,673
Current portion of long-term payables - other		176,575		120,452
Long-term payables - other		713,564		847,496
Finance lease liabilities		26,926		41,940
Other non-current liabilities		39,135		39,788

	₩	3,469,238		3,312,642

31.

Financial Risk Management

(1)

Financial risk management

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

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

1) Market risk

(i) Currency risk

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

31.

Financial Risk Management, Continued

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


(In millions of won, thousands of U.S. dollars, thousands of Euros, thousands of Japanese Yen, thousands of other currencies)
	Assets				Liabilities
	Foreign currencies		Won translation		Foreign currencies		Won translation
USD		91,469	₩	102,356		1,178,660	₩	1,319,467
EUR		111		160		2,338		3,376
JPY		206,055		2,970		12,499,557		180,134
CNY		—		—		2		—
Others		—		—		362,689		414,632

			₩	105,486			₩	1,917,609

In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (Refer to Note 20)

As of September 30, 2012, effects on income (loss) before income tax as a result of change in exchange rate by 10% are as follows:


(In millions of won)
	If increased by 10%			If decreased by 10%
USD	₩	(38,781	)		38,781
EUR		(322	)		322
JPY		296			(296	)
CNY		—			—
Others		(14	)		14

	₩	(38,821	)		38,821

(ii) Equity price risk

The Group has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of September 30, 2012, available-for-sale equity instruments measured at fair value amount of ₩ 784,315 million.

(iii) Interest rate risk

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

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

31.

Financial Risk Management, Continued

The Group’s interest rate risk arises from floating-rate borrowings and payables. As of September 30, 2012, floating-rate debentures and borrowings amount to ₩ 519,103 million and ₩ 262,790 million, respectively, and the Group has entered into interest rate swaps to hedge interest rate risk related to floating-rate borrowings and debentures. (Refer to Note 20) If interest rate only increases (decreases) by 1%, income before income taxes for the nine-month period ended September 30, 2012 would have been decreased (increased) by ₩ 2,428 million due to the interest expense from floating-rate borrowings and bonds payables.

2) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet his/her contractual obligations. To manage credit risk, the Group evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors; based on such information, the Group establishes credit limits for each customer or counterparty.

For the nine-month period ended September 30, 2012, the Group has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Group believes that the possibility of default is remote. Also, the Group’s credit risk can rise due to transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivates. To minimize such risk, the Group has a policy to deal with high credit worthy financial institutions. The amount of maximum exposure to credit risk of the Group is the carrying amount of financial assets as of September 30, 2012.

In addition, the aging of trade and other receivables that are over due at the end of the reporting period but not impaired is stated in Note 6 and the analysis of financial assets that are individually determined to be impaired at the end of the reporting period is stated in Note 27.

3) 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 flexibly enough liquidity under credit lines through active operating activities.

31.

Financial Risk Management, Continued

Contractual maturities of financial liabilities as of September 30, 2012 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	₩	399,993		399,993		399,982		11		—
Derivative financial liabilities		27,998		27,998		—		27,998		—
Borrowings		2,732,531		2,969,217		667,777		2,237,771		63,669
Debentures(*1)		4,867,445		5,999,204		367,346		3,977,998		1,653,860
Accounts payable - other and others(*2)		3,469,238		3,502,130		2,542,619		581,460		378,051

	₩	11,497,205		12,898,542		3,977,724		6,825,238		2,095,580

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

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

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

(2)

Capital management

The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity balance. The overall strategy of the Group is the same as that of the Group as of and for the year ended December 31, 2011.

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

Debt-equity ratio as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012			December 31, 2011
Liabilities	₩	13,499,567			11,633,327
Equity		12,558,929			12,732,709

Debt-equity ratio		107.49	%		91.37	%

(3)

Fair value

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

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

31.

Financial Risk Management, Continued

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

Interest rates used by the Group for the fair value measurement as of September 30, 2012 are as follows:


		Interest rate
Derivative instruments		2.75% ~ 4.41%
Borrowings and debentures		3.13% ~ 3.20%

1) Fair value and carrying amount

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


(In millions of won)
	September 30, 2012				December 31, 2011
	Carrying amount		Fair value		Carrying amount		Fair value
Assets carried at fair value
Financial assets at fair value through profit or loss	₩	16,324		16,324		17,635		17,635
Derivative financial assets		169,111		169,111		252,935		252,935
Available-for-sale financial assets		784,315		784,315		1,129,928		1,129,928

	₩	969,750		969,750		1,400,498		1,400,498

Assets carried at amortized cost
Cash and cash equivalents	₩	1,168,091		1,168,091		1,650,794		1,650,794
Available-for-sale financial assets		291,888		291,888		486,229		486,229
Accounts receivable - trade and others		2,959,162		2,959,162		3,213,391		3,213,391
Financial instruments		469,647		469,647		987,192		987,192

	₩	4,888,788		4,888,788		6,337,606		6,337,606

Liabilities carried at fair value
Financial liabilities at fair value through profit or loss	₩	399,677		399,677		397,886		397,886
Derivative financial liabilities		27,998		27,998		4,645		4,645

	₩	427,675		427,675		402,531		402,531

Liabilities carried at amortized cost
Accounts payable - trade	₩	399,993		399,993		195,391		195,391
Borrowings		2,732,531		2,818,062		1,035,075		1,035,075
Debentures		4,467,768		4,802,197		4,363,002		4,562,156
Accounts payable - other and others		3,469,238		3,469,238		3,312,642		3,312,642

	₩	11,069,530		11,489,490		8,906,110		9,105,264

31.

Financial Risk Management, Continued

2) Fair value hierarchy

The different levels have been defined as follows:

•

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

•

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

•

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

(unobservable inputs)

The table below analyzes financial instruments carried at fair value, by fair value hierarchy as of September 30, 2012.


(In millions of won)
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss	₩	—		15,792		532		16,324
Derivative financial assets		—		169,111		—		169,111
Available-for-sale financial assets		613,909		26,107		144,299		784,315
Financial liabilities at fair value through profit or loss		399,677		—		—		399,677
Derivative financial liabilities		—		27,998		—		27,998

There have been no transfers from Level 2 to Level 1 in 2012 and changes of financial assets classified as Level 3 for the nine-month period ended September 30, 2012 are as follows:


(In millions of won)
	Balance at Jan. 1		Acquisition		Profit(loss) for the period			Other comprehensive income(loss)			Disposal			Balance at Sep. 30
Financial assets at fair value through profit or loss	₩	1,018		—		(486	)		—			—			532
Available-for-sale financial assets		197,019		7,568		—			(27,403	)		(32,885	)		144,299

32.

Transactions with Related Parties

Transactions among consolidated entities have been eliminated upon the consolidation and significant related party transactions of the Group for the three-month and nine-month periods ended September 30, 2012 and 2011, and account balances as of September 30, 2012 and December 31, 2011 are as follows:

(1)

Transactions


(In millions of won)	Operating revenue and others								Operating expense and others
	2012				2011				2012				2011
	Three- month period ended Sep. 30		Nine- month period ended Sep. 30		Three- month period ended Sep. 30		Nine- month period ended Sep. 30		Three- month period ended Sep. 30		Nine- month period ended Sep. 30		Three- month period ended Sep. 30		Nine- month period ended Sep. 30
Parent Company		198		501		256		639		29,107		195,448		23,634		180,673
Associates		112,103		530,788		31,064		71,730		115,347		378,775		157,074		390,766
Others		25,937		58,385		17,905		44,494		929,720		2,211,194		659,987		1,749,126

		138,238		589,674		49,225		116,863		1,074,174		2,785,417		840,695		2,320,565

(2)

Account balances


(In millions of won)	Accounts receivable and others				Accounts payable and others
	Sep. 30, 2012		Dec. 31, 2011		Sep. 30, 2012		Dec. 31, 2011
Parent Company	₩	115		147		—		—
Associates		51,846		81,427		88,821		46,534
Others		23,380		41,983		651,990		461,144

	₩	75,341		123,557		740,811		507,678

(3)

Compensation for the key management

The Parent Company considers registered directors who have substantial roles and responsibility in planning, operating, and controlling of the business as key management. The considerations given to such key management for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Salaries	₩	300		8,588		399		9,230
Provision for retirement benefits		79		721		107		731

	₩	379		9,309		506		9,961

33.

Commitments and Contingencies

(1)

Collateral assets and commitments

SK Broadband Co., Ltd., a subsidiary of the Parent Company, agreed to provide guarantees for Broadband Media Co., Ltd.’s loans as of September 30, 2012. For the guarantee, SK Broadband Co., Ltd. has provided its properties as collaterals as follows: ₩ 65,000 million to Hana Bank, ₩ 78,000 million to IBK Capital and ₩ 52,000 million to Kookmin Bank, respectively. SK Broadband Co., Ltd., has also provided its short-term financial instruments as collaterals as follows: ₩ 60,000 million to Korea Exchange Bank, ₩ 35,000 million to Hana Bank, ₩ 34,000 million to NH Bank and ₩ 20,000 million to Woori Bank, respectively.

SK Broadband Co., Ltd. has provided guarantees for loans of Broadband CS Co., Ltd. For the guarantee, SK Broadband Co., Ltd. has pledged its properties as collateral in the amount of ₩ 16,900 million to Kookmin Bank as of September 30, 2012.

SK Broadband Co., Ltd. has pledged its properties as collateral for leases on buildings in the amount of ₩ 17,100 million as of September 30, 2012.

PS & Marketing Corporation, a subsidiary of the Parent Company, has obtained a line of credit for ₩ 40,000 million from Shinhan Bank for operational purposes. In relation to the line of credit, PS & Marketing Corporation pledged ₩ 52,000 million of inventory as collateral to Shinhan Bank as of September 30, 2012.

As of September 30, 2012, SKY Property Mgmt. Ltd., a subsidiary, has pledged CNY 519 million of building and land use right (long-term prepaid expenses) as collateral for its long-term borrowing amounting to CNY 525 million to Korea Exchange Bank and China Merchants Bank. In relation to the newly obtained long-term borrowings of USD 30 million and HKD 234 million during the nine-month period ended September 30, 2012, the Parent Company has provided interests in Shanghai Fujita Tianshan Housing Development Co., Ltd., a subsidiary, as collateral to Standard Chartered Bank (HK) Ltd.

(2)

Guarantee provided

As of September 30, 2012, the Parent Company has participated in “Tactical Airship” program of the Defense Acquisition Program Administration with Joint Defense Corporation. For an advance receipt amounting to ₩ 4,200 million, which Joint Defense Corporation received from the Defense Acquisition Program Administration, the Parent Company provides payment guarantees to the Defense Acquisition Program Administration.

(3)

Contingencies

As of September 30, 2012, the Group recorded ₩ 5,266 million of indemnities as accrued expense as SK Broadband Co., Ltd., a subsidiary, has partially lost the first trial relating to the violation of customer’s privacy (plaintiff’s claims of ₩ 24,689 million) during the year ended December 31, 2011.

As of September 30, 2012, the claim amount of pending litigations of SK Communications Co., Ltd., a subsidiary, amounts to ₩ 7,720 million. The ultimate outcome of such litigation is not expected to have a material effect on the Group’s financial position.

34.

Discontinued Operation

(1)

Discontinued operation

During the nine-month period ended September 30, 2012, SK Telink Co., Ltd., a subsidiary, finalized its decision to cease the broadcasting business due to the rapid decrease in satellite Digital Multimedia Broadcasting subscribers along with the effects from smart phones, etc. In relation to this event, SK Telink Co., Ltd. submitted its business cessation plan to Korea Communications Commission on July 2, 2012 and the business cessation plan was accepted without amendment on July 5, 2012.

(2)

Results of discontinued operation

Results of discontinued operation included in the unaudited condensed consolidated interim statements of income for the nine-month periods ended September 30, 2012 and 2011 are as follows. The unaudited condensed consolidated interim statements of income presented for comparative purposes were restated in order to present discontinued operation segregated from the continuing operation.


(In millions of won)	2012			2011
Results of discontinued operation:
Revenue	₩	2,924			10,758
Expenses		(155,401	)		(53,930	)

Operating loss generated by discontinued operation		(152,477	)		(43,172	)
Income tax benefit		18,875			10,622

Loss generated by discontinued operation	₩	(133,602	)		(32,550	)

Attributable to :
Owners of the Parent Company		(114,881	)		(33,876	)
Non-controlling interests		(18,721	)		1,326

(3)

Cash flow from (used in) discontinued operation

Cash flow from (used in) discontinued operation for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012			2011
Cash flow used in discontinued operation:
Net cash provided by (used) in operating activities	₩	3,647			(10,269	)
Net cash used in investing activities		(303	)		(101	)
Net cash used in financing activities		(9,475	)		(39,645	)

Net cash used in discontinued operation	₩	(6,131	)		(50,015	)

35.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)
	2012			2011
Interest income	₩	(79,459	)		(132,956	)
Dividend		(28,310	)		(26,882	)
Gain on foreign currency translation		(2,065	)		(3,505	)
Gain on disposal of long-term investments assets		(13,628	)		(162,667	)
Gain on valuation of derivatives		—			(3,645	)
Gain on settlement of derivatives		(12,694	)		—
Equity in losses of investments in affiliates		40,656			22,092
Gain on disposal of property, equipment and intangible assets		(4,970	)		(5,304	)
Reversal of allowance for doubtful accounts		(5,395	)		(1,737	)
Gain on valuation of financial assets at fair value through profit or loss		—			(1,067	)
Gain on valuation of financial liabilities at fair value through profit or loss		—			(52,377	)
Other (income) loss		5,251			(5,740	)
Interest expenses		302,339			224,936
Loss on foreign currency translation		2,089			12,832
Loss on disposal of long-term investments securities		9,134			457
Impairment loss on long-term investment securities		580			—
Loss on valuation of derivatives		443			689
Loss on settlement of derivatives		1,232			5,136
Income tax expense		151,613			530,755
Provision for retirement benefits		59,693			52,045
Depreciation and amortization		1,909,035			1,895,319
Bad debt expenses		36,272			51,789
Loss on disposal of property and equipment and intangible assets		13,258			17,355
Impairment loss on property, equipment and intangible assets		130,709			1,559
Loss on valuation of financial assets at fair value through profit or loss		824			—
Loss on valuation of financial liabilities at fair value through profit or loss		1,791			—
Bad debt for accounts receivable - other		28,026			4,761
Impairment loss on other investment securities		950			—
Other expenses		85			8,126

	₩	2,547,459			2,431,971

35.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012			2011

Accounts receivable - trade	₩	(167,107	)		(23,658	)
Accounts receivable - other		345,826			1,038,616
Accrued income		(31,721	)		16,151
Advance payments		3,572			24,852
Prepaid expenses		20,533			(79,473	)
Proxy paid V.A.T.		(787	)		55,925
Inventories		(80,360	)		(70,107	)
Long-term accounts receivables - other		5,393			518,762
Guarantee deposits		15,448			13,023
Accounts payable - trade		213,780			17,947
Accounts payable - other		(191,109	)		(379,504	)
Advanced receipts		(4,366	)		16,304
Withholdings		234,410			119,331
Deposits received		(942	)		—
Accrued expenses		439,104			34,869
Advanced V.A.T.		1,611			(159	)
Unearned revenue		(28,849	)		(33,586	)
Provisions		(283,568	)		—
Long-term provisions		25,681			—
Plan assets		754			8,672
Retirement benefit payment		(32,388	)		(33,642	)
Others		(1,063	)		1,899

	₩	483,852			1,246,222

(3)

Significant non-cash transactions for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012		2011
Accounts payable - other related to acquisition of tangible assets and others	₩	8,010		197,190

36.

Subsequent Events

(1)

Issuance of note

SK Broadband Co., Ltd., a subsidiary, issued unsecured private bonds of ₩ 130 billion and ₩ 120 billion on October 12, 2012, and the Parent Company issued USD 700 million of Global Medium Term Note on November 1, 2012.

(2)

Disposal of shares in POSCO

As discussed in note 9, the Group disposed 1,240,655 shares in POSCO on October 8, 2012, which was classified as non-current assets held for sale as of September 30, 2012.

SK TELECOM CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

September 30, 2012

(With Independent Auditors’ Review Report Thereon)

Contents


	Page

Independent Auditors’ Review Report		1

Unaudited Condensed Separate Interim Statements of Financial Position		3

Unaudited Condensed Separate Interim Statements of Income		4

Unaudited Condensed Separate Interim Statements of Comprehensive Income		5

Unaudited Condensed Separate Interim Statements of Changes in Equity		6

Unaudited Condensed Separate Interim Statements of Cash Flows		8

Notes to the Unaudited Condensed Interim Separate Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To The Board of Directors and Shareholders

SK Telecom Co., Ltd.:

Reviewed financial statements

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

Management’s responsibility for the condensed interim financial statements

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

Auditors’ review responsibility

Our responsibility is to issue a report on these condensed separate interim 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 condensed separate interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No.1034, ‘Interim Financial Reporting’.

Highlights

As discussed in note 3, the Company early adopted amendments to K-IFRS No.1001, ‘Presentation of Financial Statements’ as of September 30, 2012 and retrospectively restated the condensed separate interim statements of income for the three-month and nine-month periods ended September 30, 2011, presented for comparative purposes.

Other matters

The condensed separate statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2011, and the condensed separate statements of changes in equity and cash flows for the nine-month period ended September 30, 2011, were reviewed by other auditors and their report thereon, dated November 24, 2011, stated that nothing has come to their attention that causes them to believe that the condensed separate interim financial statements referred to above were not prepared, in all material respects, in accordance with K-IFRS No.1034, ‘Interim Financial Reportings’. The accompanying condensed interim separate statements of income and comprehensive income of the Company for the three-month and nine-month periods ended September 30, 2011, presented for comparative purposes, are not different from those reviewed by other auditors in all material respects except for the retrospective restatement due to the early adoption of the amendments, as noted above.

In addition, the separate statement of financial position of the Company as of December 31, 2011, and the related separate statements of income, comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by other auditors and their report thereon, dated March 13, 2012, expressed an unqualified opinion. The accompanying separate statement of financial position of the Company as of December 31, 2011, presented for comparative purposes, is not different from that audited by other auditors in all material respects.

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

KPMG Samjong Accounting Corp.

Seoul, Korea

November 9, 2012

This report is effective as of November 9, 2012, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

SK TELECOM CO., LTD.

Unaudited Condensed Separate Statements of Financial Position

As of September 30, 2012 and December 31, 2011


(In millions of won)	Note		September 30, 2012		December 31, 2011

Assets
Current Assets:
Cash and cash equivalents		27,28	₩	365,673		895,558
Short-term financial instruments		4,27,28		128,300		627,500
Short-term investment securities		6,27,28		84,981		90,573
Accounts receivable - trade, net		5,27,28,29		1,423,607		1,282,234
Short-term loans, net		5,27,28,29		81,520		88,236
Accounts receivable - other, net		5,27,28,29		346,254		774,221
Prepaid expenses				72,022		79,668
Derivative financial assets		17,27,28		79,160		83,708
Inventories, net				13,779		8,407
Non-current assets held for sale		7		556,269		—
Income tax refund receivables		25		15,343		—
Advanced payments and other		5,27,28		20,677		17,972

Total Current Assets				3,187,585		3,948,077


Non-Current Assets:
Long-term financial instruments		4,27,28		69		7,569
Long-term investment securities		6,7,27,28		782,831		1,312,438
Investments in subsidiaries and associates		8		7,998,066		4,647,506
Property and equipment, net		7,9,29		6,550,285		6,260,169
Investment property		7,10		—		30,699
Goodwill		11		1,306,236		1,306,236
Intangible assets		12		2,225,888		2,364,795
Long-term loans, net		5,27,28,29		54,435		75,282
Long-term accounts receivable - other		5,27,28		—		5,393
Long-term prepaid expenses				20,885		20,939
Guarantee deposits		5,27,28,29		144,630		155,389
Long-term derivative financial assets		17,27,28		89,950		104,897
Deferred tax assets		25		164,554		280,380
Other non-current assets				1,087		758

Total Non-Current Assets				19,338,916		16,572,450


Total Assets			₩	22,526,501		20,520,527

See accompanying notes to the unaudited condensed separate interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Separate Statements of Income

For the three and nine-month periods ended September 30, 2012 and 2011


(In millions of won)	Note		September 30, 2012			December 31, 2011

Liabilities and Equity
Current Liabilities:
Current portion of long-term debt, net		13,14,27,28	₩	333,889			1,044,518
Accounts payable - other		27,28,29		1,174,276			1,361,473
Withholdings		27,28		557,482			330,674
Accrued expenses		27,28		853,751			468,313
Income tax payable		25		—			277,836
Unearned revenue				258,705			282,891
Derivative financial liabilities		17,27,28		—			4,645
Provisions		15		380,099			656,597
Advanced receipt and other				42,701			40,059

Total Current Liabilities				3,600,903			4,467,006


Non-Current Liabilities:
Debentures, net, excluding current portion		13,27,28		3,729,918			2,590,630
Long-term borrowings, excluding current portion		13,27,28		1,902,331			115,330
Long-term payables - other		14,27,28		705,561			840,974
Long-term unearned revenue				209,291			212,172
Defined benefit obligation		16		46,906			26,740
Long-term derivative financial liabilities		17,27,28		27,998			—
Long-term provisions		15		154,071			134,264
Other non-current liabilities		27,28,29		165,448			167,109

Total Non-Current Liabilities				6,941,524			4,087,219


Total Liabilities				10,542,427			8,554,225


Equity
Share capital		1,18		44,639			44,639
Capital deficit and other capital adjustments		18,19		(236,161	)		(236,016	)
Retained earnings		20		11,901,520			11,837,185
Reserves		21		274,076			320,494

Total Equity				11,984,074			11,966,302


Total Liabilities and Equity			₩	22,526,501			20,520,527

See accompanying notes to the unaudited condensed separate interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Separate Statements of Income

For the three and nine-month periods ended September 30, 2012 and 2011


(In millions of won except for per share data)	Note		September 30, 2012						September 30, 2011 (Restated)
			Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended

Operating revenue:		29
Revenue			₩	3,097,482			9,173,497			3,202,287			9,521,831


Operating expense:		29
Labor cost				113,976			402,171			133,437			421,254
Commissions paid				1,563,778			4,285,001			1,302,214			3,824,523
Depreciation and amortization				439,076			1,240,348			454,446			1,298,332
Network interconnection				216,233			648,645			247,310			739,085
Leased line				110,413			321,297			115,899			310,022
Advertising				48,347			146,228			78,957			173,681
Rent				82,493			244,348			77,971			231,943
Cost of products that have been resold				77,638			194,893			54,225			137,832
Other operating expenses		22		195,987			565,062			213,575			592,870

Sub-total				2,847,941			8,047,993			2,678,034			7,729,542


Operating income		3		249,541			1,125,504			524,253			1,792,289

Finance income		24		15,148			90,423			63,592			366,015
Finance costs		24		(90,153	)		(247,506	)		(72,727	)		(167,834	)
Other non-operating income		3,23		8,751			14,756			9,730			16,229
Other non-operating expenses		3,23		(21,389	)		(100,097	)		(25,190	)		(70,705	)
Gain on disposal of investments in subsidiaries and associates		8		—			80,483			—			1,990
Loss on disposal of investments in subsidiaries and associates		8		—			—			(1,291	)		(1,291	)
Impairment loss on investments in associates		8		—			(72,096	)		—			—

Income before income tax				161,898			891,467			498,367			1,936,693

Income tax expense		25		13,897			167,129			109,684			512,952


Net income for the period			₩	148,001			724,338			388,683			1,423,741


Basic earnings per share		26	₩	2,124			10,393			5,513			20,083

Diluted earnings per share		26	₩	2,124			10,128			5,368			19,533

See accompanying notes to the unaudited condensed separate interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Separate Statements of Changes in Equity

For the nine-month periods ended September 30, 2012 and 2011


(In millions of won)	Note		September 30, 2012						September 30, 2011
			Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended

Net income for the period			₩	148,001			724,338			388,683			1,423,741

Other comprehensive income(loss)
Net change in unrealized fair value of available-for-sale financial assets		21		12,969			(35,306	)		(199,438	)		(380,171	)
Net change in unrealized fair value of derivatives		17,21		(13,875	)		(11,112	)		(21,981	)		(15,754	)
Actuarial gains(losses), net on defined benefit obligations		16,20		1,016			(4,870	)		(182	)		(5,802	)

				110			(51,288	)		(221,601	)		(401,727	)

Total comprehensive income			₩	148,111			673,050			167,082			1,022,014

See accompanying notes to the unaudited condensed separate interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Separate Statements of Changes in Equity

For the nine-month periods ended September 30, 2012 and 2011


(In millions of won)
	Share capital		Capital deficit and other capital adjustments											Retained earnings			Reserves			Total equity
	Share capital		Paid-in surplus		Treasury stock			Loss on disposal of treasury stock			Other			Retained earnings			Reserves			Total equity

Balance, January 1, 2011	₩	44,639		2,915,887		(2,202,439	)		(15,875	)		(722,216	)		10,824,356			736,606			11,580,958
Cash dividends		—		—		—			—			—			(668,293	)		—			(668,293	)
Treasury stock		—		—		(208,012	)		—			—			—			—			(208,012	)
Changes in subsidiaries		—		—		—			—			(381	)		—			—			(381	)
Total comprehensive income
Net income		—		—		—			—			—			1,423,741			—			1,423,741
Other comprehensive loss		—		—		—			—			—			(5,802	)		(395,925	)		(401,727	)

Balance, September 30, 2011	₩	44,639		2,915,887		(2,410,451	)		(15,875	)		(722,597	)		11,574,002			340,681			11,726,286


Balance, January 1, 2012	₩	44,639		2,915,887		(2,410,451	)		(18,855	)		(722,597	)		11,837,185			320,494			11,966,302
Cash dividends		—		—		—			—			—			(655,133	)		—			(655,133	)
Transfer of business		—		—		—			—			(145	)		—			—			(145	)
Total comprehensive income
Net income		—		—		—			—			—			724,338			—			724,338
Other comprehensive loss		—		—		—			—			—			(4,870	)		(46,418	)		(51,288	)

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

See accompanying notes to the unaudited condensed separate interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Separate Statements of Cash Flows

For the nine-month periods ended September 30, 2012 and 2011


(In millions of won)	Note		2012			2011

Cash flows from operating activities:
Cash generated from operating activities
Net income for the period			₩	724,338			1,423,741
Adjustments for income and expenses		31		1,713,369			1,791,310
Changes in assets and liabilities related to operating activities		31		415,077			1,756,036

Sub-total				2,852,784			4,971,087
Interest received				37,744			105,593
Dividends received				31,143			33,676
Interest paid				(194,593	)		(147,528	)
Income tax paid				(328,107	)		(537,544	)

Net cash provided by operating activities				2,398,971			4,425,284


Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term investment securities, net				14,182			112,000
Decrease in short-term financial instruments, net				506,700			—
Collection of short-term loans				183,363			136,852
Proceeds from disposal of long-term investment securities				15,411			214,612
Proceeds from disposal of investments in subsidiaries and associates				88,602			7,124
Proceeds from disposal of property and equipment				2,968			2,294
Proceeds from disposal of intangible assets				2,832			2,172
Collection of long-term loans				8,098			28,152
Proceeds from disposal of other non-current assets				—			386

Sub-total				822,156			503,592
Cash outflows for investing activities:
Increase in short-term financial instruments, net				—			(406,000	)
Increase in short-term loans				(162,434	)		(177,372	)
Increase in long-term financial instruments				—			(7,509	)
Acquisition of long-term investment securities				(3,920	)		(215,323	)
Acquisition of investments in subsidiaries and associates				(3,105,160	)		(62,552	)
Acquisition of property and equipment				(1,865,858	)		(1,590,158	)
Acquisition of intangible assets				(41,271	)		(32,617	)
Increase in long-term loans				(22	)		(2,334	)
Cash outflows from transfer of business				(3,387	)		—
Increase in other non-current assets				(329	)		(4	)

Sub-total				(5,182,381	)		(2,493,869	)

Net cash used in investing activities				(4,360,225	)		(1,990,277	)

See accompanying notes to the unaudited condensed separate interim financial statements.

SK TELECOM CO., LTD.

Unaudited Condensed Separate Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2012 and 2011


(In millions of won)	Note	2012			2011

Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings		₩	1,500,000			500,000
Proceeds from long-term borrowings			1,986,800			—
Issuance of debentures			768,296			—
Cash inflows from settlement of derivatives			1,517			—

Sub-total			4,256,613			500,000
Cash outflows for financing activities:
Repayment of short-term borrowings			(1,500,000	)		—
Repayment of long-term borrowings			(200,000	)		—
Acquisition of treasury stock			—			(208,012	)
Repayment of current portion of long-term debt			(92,158	)		(670,000	)
Repayment of debentures			(372,539	)		(332,160	)
Payment of cash dividends			(655,133	)		(668,293	)
Cash outflows from settlement of derivatives			(5,415	)		(17,694	)

Sub-total			(2,825,245	)		(1,896,159	)

Net cash provided by (used in) financing activities			1,431,368			(1,396,159	)


Net increase (decrease) in cash and cash equivalents			(529,886	)		1,038,848
Cash and cash equivalents at beginning of the period			895,558			357,470
Effects of exchange rate changes on cash and cash equivalents			1			—

Cash and cash equivalents at end of the period		₩	365,673			1,396,318

See accompanying notes to the unaudited condensed separate interim financial statements.

1.	Reporting Entity

SK Telecom Co., Ltd. (“the Company”) was incorporated in March 1984 under the laws of Republic of Korea (“Korea”) to engage in providing cellular telephone communication services in Korea. The Company mainly provides wireless telecommunications in Korea. The Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of September 30, 2012, the Company’s total issued shares are held by the following:


	Number of shares		Percentage of total shares issued (%)
SK Holdings, Co., Ltd.		20,363,452		25.22
Tradewinds Global Investors, LLC		3,241,956		4.01
Institutional investors and other minority stockholders		46,089,591		57.08
Treasury stock		11,050,712		13.69

Total number of shares		80,745,711		100.00

2.	Basis of Preparation

(1)

Statement of compliance

These condensed separate interim financial statements were prepared in accordance with K-IFRS No. 1034, ‘Interim Financial Reporting’ as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as of and for the year ended December 31, 2011. These unaudited condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.

These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No.1027, ‘Consolidated and Separate Financial Statements’ presented by a parent, an investor in an associate or a venturer in a jointly controlled entity, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

2.	Basis of Preparation, Continued

(2)

Use of estimates and judgments

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

In preparing these unaudited condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements as of and for the year ended December 31, 2011.

(3)

Common control transactions

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

3.	Significant Accounting Policies

Except as described below, the accounting policies applied by the Company in these unaudited condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2011. The following changes in accounting policy are also expected to be reflected in the Company’s separate financial statements as of and for the year ended December 31, 2012.

(1)

Changes in accounting policy

- Presentation of financial statements

The Company early adopted the amendments to K-IFRS No. 1001, ‘Presentation of Financial Statements’ from the interim period ended September 30, 2012. Pursuant to the amended K-IFRS No. 1001, the Company’s operating income is calculated as operating revenue less operating expense and is presented separately in the accompanying condensed separate interim statements of income. The Company retrospectively applied the amendment and the related impact of the adoption is presented in note 3 (2) below.

3.	Significant Accounting Policies, Continued

(2)

Impact of change in accounting policy

The impact of adopting the amendment to K-IFRS No. 1001 is as below:


(In millions of won)	September 30, 2012						September 30, 2011
	Three-month period ended			Nine-month period ended			Three-month period ended			Nine-month period ended
Operating income before adoption of the amendment	₩	236,903			1,040,163			508,793			1,737,813
Differences:
Other non-operating income
Fees revenues		(2,275	)		(3,485	)		(1,636	)		(2,319	)
Gain on disposal of property and equipment and intangible assets		(1,523	)		(1,881	)		(328	)		(1,184	)
Others		(4,953	)		(9,390	)		(7,766	)		(12,726	)

		(8,751	)		(14,756	)		(9,730	)		(16,229	)
Other non-operating expense Impairment loss on property and equipment and intangible assets		—			15,438			—			—
Loss on disposal of property and equipment and intangible assets		6,773			8,858			6,230			13,585
Donations		4,013			44,495			15,480			45,534
Bad debt for accounts receivable - other		503			19,874			1,614			4,524
Others		10,100			11,432			1,866			7,062

		21,389			100,097			25,190			70,705

Operating income after adoption of the amendment	₩	249,541			1,125,504			524,253			1,792,289

4.	Restricted Deposits

Deposits which are restricted in use as of September 30, 2012 and December 31, 2011 are summarized as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Short-term financial instruments(*)	₩	77,500		70,000
Long-term financial instruments(*)		69		7,569

	₩	77,569		77,569

(*)	These financial instruments include financial instruments restricted in use for certain commitments that are non-cancellable until maturity.

5.	Trade and Other Receivables

(1)

Details of trade and other receivables as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable - trade	₩	1,529,591		(105,984	)		1,423,607
Short-term loans		82,604		(1,084	)		81,520
Accounts receivable - other		389,948		(43,694	)		346,254
Accrued income		4,270		—			4,270

		2,006,413		(150,762	)		1,855,651
Non-current assets:
Long-term loans		77,817		(23,382	)		54,435
Guarantee deposits		144,630		—			144,630

		222,447		(23,382	)		199,065

	₩	2,228,860		(174,144	)		2,054,716


(In millions of won)	December 31, 2011
	Gross amount		Allowances for impairment			Carrying amount
Current assets:
Accounts receivable - trade	₩	1,400,758		(118,524	)		1,282,234
Short-term loans		89,387		(1,151	)		88,236
Accounts receivable - other		802,581		(28,360	)		774,221
Accrued income		5,278		—			5,278

		2,298,004		(148,035	)		2,149,969
Non-current assets:
Long-term loans		98,886		(23,604	)		75,282
Long-term accounts receivable - other		5,393		—			5,393
Guarantee deposits		155,389		—			155,389

		259,668		(23,604	)		236,064

	₩	2,557,672		(171,639	)		2,386,033

5.	Trade and Other Receivables, Continued

(2)

The movement in allowance for doubtful accounts in respect of trade and other receivables during the nine-month periods ended September 30, 2012 and 2011 was as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2012			September 30, 2011
Balance at January 1	₩	171,639			210,996
Increase of bad debt		34,441			33,819
Reversal of allowance for doubtful accounts		(4,531	)		(41	)
Write-offs		(51,473	)		(36,061	)
Collection of receivables written-off		24,068			14,745

Balance at September 30	₩	174,144			223,458

(3)

Details of trade and other receivables, overdue but not impaired, and impaired accounts receivable as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012						December 31, 2011
	Accounts receivable - trade			Other receivables			Accounts receivable - trade			Other receivables
Accounts receivable	₩	1,108,179			632,972			944,178			1,072,199
Overdue but not impaired accounts receivable		43,595			—			24,880			—
Impaired accounts receivable		377,817			66,297			431,700			84,715

		1,529,591			699,269			1,400,758			1,156,914
Allowance for doubtful accounts		(105,984	)		(68,160	)		(118,524	)		(53,115	)

	₩	1,423,607			631,109			1,282,234			1,103,799

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

(4)

The aging of overdue but not impaired accounts receivable as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Less than 1 month	₩	7,017		4,229
1 ~ 3 months		8,679		6,979
3 ~ 6 months		11,355		3,336
More than 6 months		16,544		10,336

	₩	43,595		24,880

6.	Investment Securities

(1)

Details of short-term investment securities as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Beneficiary certificates(*)	₩	76,105		90,287
Current portion of long-term investment securities		8,876		286

	₩	84,981		90,573

(*) The distributions arising from beneficiary certificates as of September 30, 2012, were accounted for as accrued income.

(2)

Details of long-term available-for-sale financial assets as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012			December 31, 2011
Equity securities:
Marketable equity securities(*1)	₩	613,909			1,095,747
Unlisted equity securities		18,737			15,903
Equity investments		142,867			175,466

		775,513			1,287,116
Debt securities:
Public bonds(*2)		401			401
Investment bonds(*3)		15,793			25,207

		16,194			25,608

Total		791,707			1,312,724
Less current portion of long-term investment securities		(8,876	)		(286	)

Long-term investment securities	₩	782,831			1,312,438

(*1)	During the nine-month period ended September 30, 2012, shares in POSCO with carrying amount of ₩ 453,459 million were classified as non-current assets held for sale.

(*2)	Details of maturity for the public bonds as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Less than 1 year	₩	45		45
1 ~ 5 years		356		356

	₩	401		401

6.	Investment Securities, Continued

(*3)

The Company classified convertible bonds of NanoEnTek, Inc. (carrying amount as of September 30, 2012: ₩ 15,793 million), which were acquired during the year ended December 31, 2011, as financial assets at fair value through profit or loss. The difference between acquisition cost and fair value is accounted for as finance income (loss).

On February 2, 2012, SK Communications Co., Ltd, a subsidiary of the Company, disposed ₩ 20,000 million of convertible securities issued by Etoos Co., Ltd. to Shinhan the 2nd Private Investment Company for ₩ 19,000 million. In relation to this transaction, the Company recognized a gain on the disposal of available-for-sale financial assets of ₩ 2,812 million.

7.	Non-current Assets Held for Sale

(1)

Long-term investment securities


(In millions of won)
	September 30, 2012
Long-term investment securities	₩	453,459

The above investment securities are measured at fair value and the difference between fair value and carrying amount of W 287,129 million is recognized as net change in fair value of available-for-sale financial assets in other comprehensive income.

(2)

Property and equipment, and investment property


(In millions of won)
	September 30, 2012
Property and equipment	₩	72,015
Investment property		30,795

	₩	102,810

Non-current assets held for sale are measured at carrying amount which is lesser of fair value, a subtraction of costs to sell from fair value, or carrying amount.

8.	Investments in Subsidiaries and Associates

(1)

Investments in subsidiaries and associates as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Investments in subsidiaries	₩	3,396,034		3,382,939
Investments in associates		4,602,032		1,264,567

	₩	7,998,066		4,647,506

(2)

Details of investments in subsidiaries as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012						December 31, 2011
	Number of shares		Ownership (%)		Carrying amount		Carrying amount
SK Telink Co., Ltd.		1,082,272		83.5	₩	144,740		144,740
Ntreev Soft Co., Ltd.(*1)		—		—		—		7,708
SK Broadband Co., Ltd.		149,638,354		50.6		1,242,247		1,242,247
PS&Marketing Corporation		46,000,000		100.0		213,934		213,934
Service Ace Co., Ltd.		4,385,400		100.0		21,927		21,927
Service Top Co., Ltd.		2,856,200		100.0		14,281		14,281
Network O&S Co., Ltd.		3,000,000		100.0		15,000		15,000
SK Planet Co., Ltd.		60,000,000		100.0		1,234,884		1,234,884
SK Telecom China Holdings Co., Ltd.		—		100.0		29,116		29,116
SKY Property Mgmt. Ltd.		22,980		60.0		264,850		264,850
SKT Vietnam PTE. Ltd.		180,476,700		73.3		26,264		26,264
SKT Americas, Inc.		122		100.0		65,379		65,379
YTK Investment Ltd.(*2)		—		100.0		69,464		52,123
Atlas Investment(*2)		—		100.0		53,948		50,486

					₩	3,396,034		3,382,939

(*1)	During the nine-month period ended September 30, 2012, the Company sold 2,064,970 shares (ownership interest of 63.7%) of investment in Ntreev Soft Co., Ltd. to NCsoft Corporation and recognized gain on disposal of W 80,483 million.

(*2)	During the nine-month period ended September 30, 2012, the Company additionally invested W 17,341 million in YTK Investment Ltd. and W 3,462 million in Atlas Investment.

8.	Investments in Subsidiaries and Associates, Continued

(3)

Details of investments in associates as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012						December 31, 2011
	Number of shares		Ownership percentage (%)		Carrying amount		Carrying amount
SK Marketing & Company Co., Ltd.		5,000,000		50.0	₩	112,531		112,531
SK China Company Ltd.		720,000		22.5		47,830		47,830
SK USA, Inc.		49		49.0		5,498		5,498
HappyNarae Co., Ltd.(*1)		680,000		42.5		12,250		12,250
F&U Credit information Co., Ltd.		300,000		50.0		4,482		4,482
Korea IT Fund(*2)		190		63.3		220,957		220,957
Wave City Development Co., Ltd.(*3)		382,000		19.1		1,532		1,532
HanaSK Card Co., Ltd.		57,647,058		49.0		400,000		400,000
Daehan Kanggun BcN Co., Ltd.		1,675,126		29.0		8,340		8,340
NanoEnTek, Inc.(*3)		1,807,130		9.3		11,000		11,000
Health Connect Co., Ltd.		141,000		49.5		1,410		1,410
UNISK (Beijing) Information Technology Co., Ltd.		49		49.0		4,247		4,247
TR Entertainment		—		42.2		7,560		7,560
SK Industrial Development China Co., Ltd.		72,952,360		35.0		83,691		83,691
Packet One Network		1,151,556		37.4		137,751		137,751
SK Technology Innovation Company		9,800		49.0		85,873		85,873
Lightsquared Inc.(*3,4)		3,387,916		3.3		—		72,096
SK Hynix Inc.(*5)		146,100,000		21.1		3,374,726		—
SK MENA Investment B.V.(*6)		—		32.1		14,485		—
SK Latin America Investment S.A.(*7)		—		32.1		14,242		—
Gemini(*8)		—		20.0		6,108		—
SK Wyverns Baseball Club Co., Ltd. and others		—		—		47,519		47,519

					₩	4,602,032		1,264,567

(*1)	Name of the company has been changed from MRO Korea Co., Ltd. to HappyNarae Co., Ltd. during the nine-month period ended September 30, 2012.

(*2)	Investment in Korea IT Fund was classified as investments in associates as the Company only has less than 50% of voting rights under the contract.

(*3)	Investments in these associates were classified as investments in associates as the Company has the ability to exercise significant influence on these associates through participation on their board of directors.

(*4)	The Company recognized impairment loss of W 72,096 million during the nine-month period ended September 30, 2012.

8.	Investments in Subsidiaries and Associates, Continued

(*5)	The Company acquired 146,100,000 shares (ownership interest of 21.1%) of SK Hynix Inc. through purchase of existing shares and subscription of new shares at February 14, 2012.

(*6)	The Company acquired 32.1% of ownership interest of SK MENA Investment B.V. during the nine-month period ended September 30, 2012.

(*7)	The Company acquired 32.1% of ownership interest of SK Latin America Investment S.A. during the nine-month period ended September 30, 2012.

(*8)	The Company acquired 20.0% of ownership interest of Gemini during the nine-month period ended September 30, 2012.

(4)

The market price of investments in listed subsidiaries as of September 30, 2012 and December 31, 2011 are as follows:

(In millions of won, except for share data)

September 30, 2012

December 31, 2011

Market
value per
share
(In won)

Number of
shares

Market
price

Market
value per
share
(In won)

Number of
shares

Market
price

SK Broadband Co., Ltd.

₩

3,800

149,638,354

568,626

3,460

149,638,354

517,749

9.	Property and Equipment

(1)

Property and equipment as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012										December 31, 2011
	Acquisition cost		Accumulated depreciation			Accumulated impairment			Carrying amount		Carrying amount
Land	₩	384,369		—			—			384,369		409,696
Buildings		991,887		(382,870	)		—			609,017		676,095
Structures		631,589		(309,776	)		—			321,813		300,995
Machinery		16,657,099		(12,455,688	)		(12,531	)		4,188,880		3,581,275
Other		1,367,168		(846,582	)		—			520,586		640,317
Construction in progress		525,620		—			—			525,620		651,791


Total	₩	20,557,732		(13,994,916	)		(12,531	)		6,550,285		6,260,169

9.	Property and Equipment, Continued

(2)

Changes in property and equipment for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)
	For the nine-month period ended September 30, 2012
	Beginning balance		*Acquisition(1)**		Disposal			Transfer			Depreciation			Impairment loss(*2)			Ending balance
Land(*3)	₩	409,696		569		(140	)		(25,756	)		—			—			384,369
Buildings(*3)		676,095		1,020		(89	)		(38,869	)		(29,140	)		—			609,017
Structures(*3)		300,995		30,853		(4	)		15,194			(25,225	)		—			321,813
Machinery		3,581,275		131,113		(796	)		1,425,619			(935,800	)		(12,531	)		4,188,880
Other		640,317		1,108,710		(7,908	)		(1,149,815	)		(70,718	)		—			520,586
Construction in progress		651,791		594,858		(810	)		(720,219	)		—			—			525,620

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

(*1)	Acquisition for the nine-month period ended September 30, 2012 includes assets transferred of W 1,266 million in relation to the transfer of Imagine business from SK Planet Co., Ltd.

(*2)	The Company recognized impairment loss on property and equipment of W 12,531 million in relation to the Digital Multimedia Broadcasting service.

(*3)	During the nine-month period ended September 30, 2012, land, buildings and structures with carrying amount of W 72,015 million were reclassified as non-current assets held for sale.


(In millions of won)	For the nine-month period ended September 30, 2011
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	₩	402,702		2,109		(92	)		1,257			—			405,976
Buildings		686,645		15,168		(132	)		(2,502	)		(28,676	)		670,503
Structures		242,004		23,262		(734	)		6,851			(23,527	)		247,856
Machinery		3,240,001		48,749		(3,396	)		871,288			(953,730	)		3,202,912
Other		521,499		906,058		(2,613	)		(620,788	)		(59,479	)		744,677
Construction in progress		376,896		792,002		(8,061	)		(759,264	)		—			401,573

	₩	5,469,747		1,787,348		(15,028	)		(503,158	)		(1,065,412	)		5,673,497

10.

Investment Property

(1)

Investment property as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012						December 31, 2011
	Acquisition cost		Accumulated depreciation		Carrying amount		Carrying amount
Land	₩	—		—		—		9,001
Buildings		—		—		—		21,698

	₩	—		—		—		30,699

10.

Investment Property, Continued

(2)

Changes in investment property for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	For the nine-month period ended September 30, 2012
	Beginning balance		Transfer			Depreciation			Ending balance
Land	₩	9,001		(9,001	)		—			—
Buildings		21,698		(20,109	)		(1,589	)		—

	₩	30,699		(29,110	)		(1,589	)		—

During the nine-month period ended September 30, 2012, land and buildings with carrying amount of W 30,795 million were reclassified as non-current assets held for sale.


(In millions of won)	For the nine-month period ended September 30, 2011
	Beginning balance		Transfer		Depreciation			Ending balance
Land	₩	9,508		2,038		—			11,546
Buildings		25,291		5,757		(2,659	)		28,389

	₩	34,799		7,795		(2,659	)		39,935

(3)

Details of fair value of investment property as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012				December 31, 2011
	Carrying amount		Fair value		Carrying amount		Fair value
Land	₩	—		—		9,001		51,731
Buildings		—		—		21,698		21,679

	₩	—		—		30,699		73,410

The fair value of investment property was appraised on the basis of market price by an independent appraisal company.

11.

Goodwill

Goodwill as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Goodwill related to acquisition of Shinsegi Telecom, Inc.	₩	1,306,236		1,306,236

12.

Intangible Assets

(1)

Intangible assets as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)	September 30, 2012										December 31, 2011
	Acquisition cost		Accumulated amortization			Accumulated impairment			Carrying amount		Carrying amount
Frequency use rights	₩	2,837,385		(1,077,457	)		(2,907	)		1,757,021		1,889,102
Land use rights		30,973		(20,244	)		—			10,729		12,739
Industrial rights		31,600		(21,435	)		—			10,165		8,328
Development costs		124,545		(124,528	)		—			17		1,186
Facility usage rights		38,472		(24,497	)		—			13,975		15,058
Memberships(*1)		79,200		—			—			79,200		80,607
Other(*2)		1,465,531		(1,110,750	)		—			354,781		357,775

Total	₩	4,607,706		(2,378,911	)		(2,907	)		2,225,888		2,364,795

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

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

(2)

Details of changes in intangible assets for the nine-month periods ended September 30, 2012 and 2011 are as follows:


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

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

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

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

12.

Intangible Assets, Continued


(In millions of won)
	For the nine-month period ended September 30, 2011
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Ending balance
Frequency use rights	₩	709,043		—		—			404,970		(109,767	)		1,004,246
Land use rights		11,130		3,642		(54	)		—		(3,064	)		11,654
Industrial rights		14,748		1,395		—			323		(2,587	)		13,879
Development costs		4,898		—		—			—		(2,619	)		2,279
Facility usage rights		16,702		379		(87	)		36		(1,665	)		15,365
Memberships		90,108		3,313		(2,400	)		—		—			91,021
Other		578,340		23,888		—			89,770		(219,324	)		472,674

	₩	1,424,969		32,617		(2,541	)		495,099		(339,026	)		1,611,118

(3)

The carrying amount and residual useful lives of frequency usage rights as of September 30, 2012 are as follows:


(In millions of won)
	Amount		Description	Residual useful lives
W-CDMA license	₩	413,874	Frequency use rights relating to W-CDMA service		(	*1)
W-CDMA license		69,321	Frequency use rights relating to W-CDMA service		(	*2)
800MHz license		354,760	Frequency use rights relating to CDMA and LTE service		(	*3)
1.8GHz license		903,777	Frequency use rights relating to LTE service		(	*4)
WiBro license		—	WiBro service		(	*5)
WiBro license		15,289	WiBro service		(	*6)

	₩	1,757,021

(*1)

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

(*2)

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

(*3)

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

12.

Intangible Assets, Continued

(*4)

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

(*5)	The WiBro license was used for seven years from the purchase date when the Company started its commercial WiBro services on March 30, 2005. The amortization is completed during the nine-month period ended September 30, 2012 as the useful life matures.

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

13.

Borrowings and Debentures

(1)

Long-term borrowings as of September 30, 2012 and December 31, 2011 are as follows:

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

Lender

Annual interest
rate (%)

Maturity

September 30,
2012

December 31,
2011

Bank of Communications (*1,2)

6M Libor + 0.29

Oct. 10, 2013

₩

(USD

33,558

30,000)

(USD

34,599

30,000)

Bank of China(*1)

6M Libor + 0.29

Oct. 10, 2013

(USD

22,372

20,000)

(USD

23,066

20,000)

DBS Bank(*1)

6M Libor + 0.29

Oct. 10, 2013

(USD

27,965

25,000)

(USD

28,833

25,000)

SMBC(*1)

6M Libor + 0.29

Oct. 10, 2013

(USD

27,965

25,000)

(USD

28,832

25,000)

Kookmin Bank and 13 others

4.48

Feb. 14, 2015

1,800,000

—

1,911,860

115,330

Less present value discount on long-term borrowings

(9,529)

—

₩

1,902,331

115,330

(*1)	As of September 30, 2012, 6M Libor rate is 0.64%.

(*2)	As of September 30, 2012, the Company’s lender is Bank of Communications as Credit Agricole transferred the loans to Bank of Communications during the nine-month period ended September 30, 2012.

13.

Borrowings and Debentures, Continued

(2)

Debentures as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won, thousands of U.S. dollars, thousands of Japanese Yen, and thousands of other currencies)
	Purpose	Maturity	Annual interest rate (%)	September 30, 2012			December 31, 2011
Unsecured private bonds	Refinancing fund	2016	5.00	₩	200,000			200,000
Unsecured private bonds		2013	4.00		200,000			200,000
Unsecured private bonds		2014	5.00		200,000			200,000
Unsecured private bonds (*1)		2012	3M Euro Yen Libor + 0.55	(JPY	180,140 12,500,000	)	(JPY	185,645 12,500,000	)
Unsecured private bonds	Other fund	2015	5.00		200,000			200,000
Unsecured private bonds		2018	5.00		200,000			200,000
Unsecured private bonds		2013	6.92		250,000			250,000
Unsecured private bonds		2016	5.54		40,000			40,000
Unsecured private bonds		2012	3M Euro Yen Libor + 2.50		—		(JPY	44,555 3,000,000	)
Unsecured private bonds		2016	5.92		230,000			230,000
Unsecured private bonds		2012	3M Euro Yen Tibor + 2.50		—		(JPY	74,258 5,000,000	)
Unsecured private bonds	Operating fund	2016	3.95		110,000			110,000
Unsecured private bonds	Operating fund	2021	4.22		190,000			190,000
Unsecured private bonds	Operating and refinancing fund	2019	3.24		170,000			—
Unsecured private bonds		2022	3.30		140,000			—
Unsecured private bonds		2032	3.45		90,000			—
Foreign global bonds	Operating fund	2027	6.63	(USD	447,440 400,000	)	(USD	461,320 400,000	)
Exchangeable bonds (*4,5)	Refinancing fund	2014	1.75	(USD	399,677 332,528	)	(USD	397,886 332,528	)
Floating rate notes (*2)	Operating fund	2012	3M Libor + 3.15		—		(USD	253,726 220,000	)
Floating rate notes (*2)		2014	3M Libor + 1.60	(USD	279,650 250,000	)	(USD	288,325 250,000	)
Floating rate notes (*3)		2014	SOR rate + 1.20	(SGD	59,313 65,000	)	(SGD	57,619 65,000	)
Swiss unsecured private bonds		2017	1.75	(CHF	357,915 300,000	)		—

Sub-total					3,944,135			3,583,334
Less discounts on bonds					(34,091	)		(37,329	)

					3,910,044			3,546,005
Less current portion of bonds					(180,126	)		(955,375	)

				₩	3,729,918			2,590,630

(*1)	As of September 30, 2012, 3M EURO Yen Libor rate is 0.19%.

(*2)	As of September 30, 2012, 3M Libor rate is 0.36%.

(*3)	As of September 30, 2012, SOR rate is 0.38%.

13.

Borrowings and Debentures, Continued

(*4)

As of September 30, 2012, exchangeable bonds are classified as financial liabilities at fair value through profit or loss. As of December 31, 2011, the exchangeable bonds were classified as current liabilities as the bond holders would be eligible to redeem their notes at 100% of the principal amount on April 7, 2012. However, as of September 30, 2012, the exchangeable bonds are reclassified as non-current liabilities as the bond holders have not exercised and have lost their early redemption right.

(*5)

On April 7, 2009, the Company issued exchangeable bonds with a maturity of five years in the principal amount of USD 332,528,000 for USD 326,397,463 with a coupon rate of 1.75%. As of September 30, 2012, fair value of the exchangeable bonds is USD 357,301,336. The exchange price could be adjusted and the exchange price is ₩ 197,760 with the exchange rate of ₩ 1,383.40 per USD 1.

The Company may redeem the principal amount after 3 years from the issuance date if the market price exceeds 130% of the exchange price during a predetermined period. On the other hand, the bond holders may redeem their notes at 100% of the principal amount on April 7, 2012 (3 years from the issuance date). The exchange right may be exercised during the period from May 18, 2009 to March 24, 2014 and the number of common shares that can be exchanged as of September 30, 2012 is 2,326,149 shares.

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

13.

Borrowings and Debentures, Continued

(3)

Details of issuance or repayments of borrowings and debentures for the nine-month period ended September 30, 2012 are as follows:


(In millions of won, thousands of Japanese yen, and thousands of other currencies)
Lender	Annual interest rate (%)	Maturity	Coupon value			Carrying amount
January 1, 2012			₩	3,698,663			3,661,334
Issues:
Short-term borrowings	4.29	2013		500,000			500,000
	3.43	2012		200,000			200,000
	3.08 ~ 3.12	2012		500,000			500,000
	3.10	2012		300,000			300,000
Long-term borrowings	4.48	2015		2,000,000			2,000,000
Unsecured private bonds	3.24	2019		170,000			170,000
Unsecured private bonds	3.30	2022		140,000			140,000
Unsecured private bonds	3.45	2032		90,000			90,000
Swiss unsecured private bonds	1.75	2017	(CHF	363,552 300,000	)	(CHF	363,552 300,000	)
Commissions and others	—	-		—			(16,875	)
Redemption
Short-term borrowings	4.29	2013(*1)		(500,000	)		(500,000	)
	3.43	2012		(200,000	)		(200,000	)
	3.08 ~ 3.12	2012		(500,000	)		(500,000	)
	3.10	2012		(300,000	)		(300,000	)
Long-term borrowings	4.48	2015(*2)		(200,000	)		(200,000	)
Unsecured private bonds	3M Euro Yen Libor + 2.50	2012	(JPY	(44,555 3,000,000	) )	(JPY	(44,555 3,000,000	) )
Unsecured private bonds	3M Euro Yen Tibor + 2.50	2012	(JPY	(74,258 5,000,000	) )	(JPY	(74,258 5,000,000	) )
Floating rate notes	3M Libor + 3.15	2012	(USD	(253,726 220,000	) )	(USD	(253,726 220,000	) )
Other:
Foreign translation gain (loss) and others(*3)				(33,681	)		(23,097	)

September 30, 2012			₩	5,855,995			5,812,375

(*1)	For the nine-month period ended September 30, 2012, the Company early redeemed the short-term borrowings while the contractual maturity is February 14, 2013.

(*2)	For the nine-month period ended September 30, 2012, the Company early redeemed ₩ 200,000 million from the long-term borrowings of ₩ 2,000,000 million.

(*3)	Foreign translation gain (loss) and others represent changes from foreign translation gain (loss) of foreign currency borrowings and debentures and amortization of bond discount.

14.

Long-term Payables - other

(1)


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

Present value of long-term payables - other at the time of acquisition		49,363			197,190			679,453			8,009			934,015

Nominal value		52,600			208,250			746,250			—			1,007,100
Present value discount on long-term payables - other		(3,237	)		(11,060	)		(66,797	)		—			(81,094	)
Current portion of long-term payables - other		(17,533	)		—			(74,625	)		—			(92,158	)
Accumulated amortization of present value discount at December 31, 2011		2,065			1,926			3,136			—			7,127
Carrying amount as of December 31, 2011		33,895			199,116			607,964			—			840,975
Increase		—			—			—			8,650			8,650
Present value discount on long-term payables - other		—			—			—			(641	)		(641	)
Amortization of present value discount on long-term payables - other		440			3,002			6,795			103			10,340
Less current portion of long-term payables -other		(17,184	)		(67,509	)		(69,070	)		—			(153,763	)

Carrying amount at September 30, 2012	₩	17,151			134,609			545,689			8,112			705,561

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

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

(2)

The repayment schedule of long-term payables - other as of September 30, 2012 is as follows:


(In millions of won)	Amount
2013	₩	161,575
2014		164,458
2015		146,925
2016 and thereafter		450,633

	₩	923,591

15.

Provisions

Change in provisions for the nine-month periods ended September 30, 2012 and 2011 are as follows:


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

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


(In millions of won)	For the nine-month period ended Sep. 30, 2011									As of Sep. 30, 2011
	Beginning balance		Increase		Utilization			Ending balance		Current		Non-current
Provision for handset subsidy	₩	732,042		668,247		(638,970	)		761,319		646,507		114,812
Provision for restoration		27,740		2,726		(2,804	)		27,662		—		27,662

	₩	759,782		670,973		(641,774	)		788,981		646,507		142,474

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

16.

Defined Benefit Liabilities

(1)

Details of defined benefit liabilities as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012			December 31, 2011
Present value of defined benefit obligations	₩	116,774			95,359
Fair value of plan assets		(69,868	)		(68,619	)

	₩	46,906			26,740

(2)

Principal actuarial assumptions as of September 30, 2012 and December 31, 2011 are as follows:


	September 30, 2012			December 31, 2011
Discount rate for defined benefit obligations		4.52	%		4.53	%
Inflation rate		3.00	%		3.00	%
Expected rate of return on plan assets		3.67	%		4.74	%
Expected rate of salary increase		6.37	%		5.62	%

Discount rate for defined benefit obligation is determined based on the Company’s credit ratings and yield rate of corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of return on plan assets represent weighted average rate of market value of the individual assets on the plan. Expected rate of return on plan assets is determined based on the historical yield rate and current market conditions. Expected rate of salary increase is determined based on the Company’s historical promotion index, inflation rate and salary increase ratio in accordance with salary agreement. Inflation rate is determined based on inflation data declared by Bank of Korea.

16.

Defined Benefit Liabilities, Continued

(3)

Changes in defined benefit obligations for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2012			September 30, 2011
Beginning balance	₩	95,359			105,966
Current service cost		21,958			22,762
Interest cost		3,384			4,449
Actuarial loss		7,229			6,538
Benefit paid		(12,306	)		(17,072	)
Others(*)		1,150			368

Ending balance	₩	116,774			123,011

(*)	Others include transfer to construction in progress and transfer from SK Planet Co., Ltd. in relation to the transfer of Imagine business.

(4)

Changes in plan assets for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2012			September 30, 2011
Beginning balance	₩	68,619			84,584
Expected return on plan assets		1,673			2,818
Actuarial gain(loss)		803			(901	)
Benefit paid		1,000			—
Contributions to the plan		(2,416	)		(9,436	)
Others(*)		189			—

Ending balance	₩	69,868			77,065

(*)	Others include transfer from SK Planet Co., Ltd. in relation to the transfer of Imagine business.

(5)

Expenses recognized in profit and loss and construction-in-progress for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	For the nine-month period ended
	September 30, 2012			September 30, 2011
Current service cost	₩	21,958			22,762
Interest cost		3,384			4,449
Expected return on plan assets		(1,673	)		(2,818	)

	₩	23,669			24,393

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

16.

Defined Benefit Liabilities, Continued

(6)

Details of plan assets as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Equity instruments	₩	20		—
Debt instruments		15,675		—
Short-term financial instruments, etc.		54,173		68,619

	₩	69,868		68,619

Actual return on plan assets for the nine-month periods ended September 30, 2012 and 2011 amounted to ₩ 2,476 million and ₩ 1,917million, respectively.

17.

Derivative Instruments

(1)

Currency swap contracts under cash flow hedge accounting

The Company has entered into a floating-to-fixed cross currency swap contract with Credit Agricole Corporate & Investment Bank to hedge the foreign currency risk and the interest rate risk of U.S. dollar denominated long-term borrowings with face amounts totaling USD 100,000,000 borrowed on October 10, 2006. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contracts to which cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to ₩ 2,360 million (net of tax effect totaling ₩ 253 million and foreign currency translation loss arising from U.S. dollar denominated long-term borrowings totaling ₩ 17,060 million) is accounted for as accumulated other comprehensive loss.

In addition, the Company has entered into a floating-to-fixed cross currency swap contract with HSBC and SMBC Bank to hedge the foreign currency risk and the interest rate risk of its unguaranteed Japanese yen denominated bonds with face amounts totaling JPY 12,500,000,000 issued on November 13, 2007. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contracts to which cash flow hedge accounting is applied, an accumulated gain on valuation of derivatives amounting to ₩ 3,646 million (net of tax effect totaling ₩ 564 million and foreign currency translation loss arising from unguaranteed Japanese yen denominated bonds totaling ₩ 76,078 million) is accounted for as accumulated other comprehensive income.

In addition, the Company has entered into a fixed-to-fixed cross currency swap contract with Morgan Stanley and five other banks to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds with face amounts totaling USD 400,000,000 at annual fixed interest rate of 6.63% issued on July 20, 2007. As of September 30, 2012, in connection with unsettled foreign currency swap contract to which cash flow hedge accounting is applied since May 12, 2010, an accumulated loss on valuation of derivatives amounting to ₩ 34,779 million (net of tax effect totaling ₩ 11,103 million and foreign currency translation gain arising from unguaranteed U.S. dollar denominated bonds totaling ₩ 9,924 million) is accounted for as accumulated other comprehensive loss. In connection with the currency swap contract, gain on valuation of currency swap which was incurred before application of hedge accounting, amounting to ₩ 129,806 million was recognized in profit or loss.

17.

Derivative Instruments, Continued

In addition, the Company has entered into a floating-to-fixed cross currency swap contract with DBS Bank and Citi Bank to hedge the foreign currency risk and the interest rate risk of its unguaranteed U.S. dollar denominated bonds with face amounts totaling USD 250,000,000 issued on December 15, 2011. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contract, an accumulated gain on valuation of derivatives amounting to ₩ 5,770 million (net of tax effect totaling ₩ 1,842 million and foreign currency translation gain arising from unguaranteed U.S. dollar denominated bonds totaling ₩ 9,880 million) is accounted for as other comprehensive income.

In addition, the Company has entered into a floating-to-fixed cross currency swap contract with United Overseas Bank to hedge the foreign currency risk and the interest rate risk of its Singapore dollar denominated bonds with face amounts totaling SGD 65,000,000 issued on December 15, 2011. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to ₩ 252 million (net of tax effect totaling ₩ 80 million and foreign currency translation loss arising from unguaranteed Singapore dollar denominated bonds totaling ₩ 1,837 million) is accounted for as accumulated other comprehensive loss.

In addition, the Company has entered into a fixed-to-fixed cross currency swap contract with Citi Bank and five other banks to hedge the foreign currency risk of its Swiss Franc denominated bonds with face amounts totaling CHF 300,000,000 issued on June 12, 2012. As of September 30, 2012, in connection with unsettled cross currency interest rate swap contract, an accumulated loss on valuation of derivatives amounting to ₩ 15,259 million (net of tax effect totaling ₩ 4,872 million and foreign currency translation gain arising from unguaranteed Swiss Franc denominated bonds totaling ₩ 5,600 million) is accounted for as accumulated other comprehensive loss.

(2)

As of September 30, 2012, fair values of above derivatives recorded in assets or liabilities and details of derivative instruments are as follows:

(In millions of won, thousands of U.S. dollars, Japanese yen, and Singapore dollars)

Fair value

Hedged item

Amount

Duration of
Contract

Designated
as Cash Flow
Hedge

Current assets:

Floating-to-fixed cross currency swap

Japanese yen denominated bonds

JPY

12,500,000

Nov. 13, 2007
~ Nov. 13,
2012

₩

79,160

Non-current assets:

Floating-to-fixed cross currency swap

U.S. dollar denominated long-term borrowings

USD

100,000

Oct. 10, 2006
~ Oct. 10,
2013

14,446

Fixed-to-fixed cross currency swap

U.S. dollar denominated bonds

USD

400,000

Jul. 20, 2007
~ Jul. 20,
2027

74,000

Floating-to-fixed cross currency swap

Singapore dollar denominated bonds

SGD

65,000

Dec. 15, 2011
~ Dec. 12,
2014

1,504

Total assets

₩

169,110

Non-current liabilities:

Floating-to-fixed cross currency swap

U.S. dollar denominated bonds

USD

250,000

Dec. 15, 2011
~ Dec. 12,
2014

2,267

Fixed-to-fixed cross currency swap

Swiss Franc denominated bonds

CHF

300,000

Jun. 12, 2012
~ Jun. 12,
2017

25,731

Total liabilities

₩

27,998

18.

Share Capital and Capital Surplus (Deficit) and Other Capital Adjustments

The Company’s outstanding share capital consists entirely of common stock with a par value of ₩ 500. The number of authorized, issued and outstanding common shares and capital surplus (deficit) and other capital adjustments as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won, except for share data)
	September 30, 2012			December 31, 2011
Authorized shares		220,000,000			220,000,000
Issued shares(*1)		80,745,711			80,745,711
Share capital
Common stock	₩	44,639			44,639
Capital surplus (deficit) and other capital adjustments:
Paid-in surplus		2,915,887			2,915,887
Treasury stock		(2,410,451	)		(2,410,451	)
Loss on disposal of treasury stock		(18,855	)		(18,855	)
Others(*2)		(722,742	)		(722,597	)

	₩	(236,161)			(236,016	)

(*1)

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

(*2)	Others represent the difference between net assets and considerations paid in relation to the transfer of Imagine business from SK Planet Co., Ltd., a subsidiary.

There were no changes in share capital for the nine-month period ended September 30, 2012 and for the year ended December 31, 2011.

19.

Treasury Stock

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

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

As a result of these treasury stock transactions, as of September 30, 2012 and December 31, 2011, the Company has 11,050,712 shares of treasury stock at ₩ 2,410,451 million.

20.

Retained Earnings

(1)

Retained earnings as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Appropriated:	₩
Legal reserve		22,320		22,320
Reserve for research & manpower development		220,000		535,595
Reserve for business expansion		9,106,138		8,009,138
Reserve for technology development		1,901,300		1,524,000

		11,249,758		10,091,053
Unappropriated		651,762		1,746,132

	₩	11,901,520		11,837,185

(2)

Legal reserve

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

(3)

Reserve for research & manpower development

21.

Reserves

(1)

Details of reserves as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012			December 31, 2011
Net change in unrealized fair value of available-for-sale financial assets	₩	317,310			352,616
Net change in unrealized fair value of derivatives		(43,234	)		(32,122	)

	₩	274,076			320,494

21.

Reserves, Continued

(2)

Change in reserves for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)
	Net change in unrealized fair value of available-for-sale financial assets			Net change in unrealized fair value of derivatives			Total
Balance at January 1, 2011	₩	803,075			(66,469	)		736,606
Changes		(490,788	)		(19,444	)		(510,232	)
Tax effect		110,615			3,691			114,306

Balance at September 30, 2011		422,902			(82,222	)		340,680

Balance at January 1, 2012		352,616			(32,122	)		320,494
Changes		(46,578	)		(14,660	)		(61,238	)
Tax effect		11,272			3,548			14,820

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

22.

Other Operating Expenses

Details of other operating expenses for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012						2011
	Three-month period ended Sep. 30			Nine-month period ended Sep. 30			Three-month period ended Sep. 30			Nine-month period ended Sep. 30
Other Operating Expenses:
Communication expenses	₩	14,178			45,784			14,626			42,037
Utilities		41,844			107,159			35,343			91,896
Taxes and dues(*)		10,490			67,903			16,152			29,634
Repair		45,775			129,903			48,701			142,948
Research and development		58,422			150,945			67,198			182,964
Training		7,877			19,072			7,691			16,905
Bad debt for accounts receivables - trade		6,013			14,567			8,736			29,295
Reversal of allowance for doubtful accounts		(57	)		(4,531	)		(41	)		(41	)
Supplies and other		11,445			34,260			15,169			57,232

	₩	195,987			565,062			213,575			592,870

(*)

23.

Other Non-operating Income and Expenses

Details of other non-operating income and expenses for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Other Non-operating Income:
Fees revenues	₩	2,275		3,485		1,636		2,319
Gain on disposal of property and equipment and intangible assets		1,523		1,881		328		1,184
Others		4,953		9,390		7,766		12,726

	₩	8,751		14,756		9,730		16,229

Other Non-operating Expenses:
Impairment loss on property and equipment, and intangible assets	₩	—		15,438		—		—
Loss on disposal of property and equipment and intangible assets		6,773		8,858		6,230		13,585
Donations		4,013		44,495		15,480		45,534
Bad debt for accounts receivable – other		503		19,874		1,614		4,524
Others		10,100		11,432		1,866		7,062

	₩	21,389		100,097		25,190		70,705

24.

Finance Income and Costs

(1)

Details of finance income and costs for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Finance Income:
Interest income	₩	9,785		43,556		35,184		113,505
Dividends		5,363		31,143		7,203		33,676
Gain on foreign currency transactions		—		2,420		777		3,281
Gain on foreign currency translation		—		140		—		225
Gain on valuation of financial asset at fair value through profit or loss		—		—		—		1,067
Gain on disposal of long-term investment securities		—		470		—		158,495
Gain on valuation of derivatives		—		—		1,301		3,389
Gain on settlement of derivatives		—		12,694		—		—
Gain on valuation of financial liability at fair value through profit or loss		—		—		19,127		52,377

	₩	15,148		90,423		63,592		366,015

24.

Finance Income and Costs, Continued


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Finance Costs:
Interest expense	₩	80,706		231,289		48,465		148,375
Loss on foreign currency transactions		452		2,824		1,870		4,738
Loss on foreign currency translation		422		412		22,092		9,283
Loss on disposal of long-term investment securities		—		9,134		300		302
Loss on settlement of derivatives		—		1,232		—		5,136
Loss on valuation of financial asset at fair value through profit or loss		1,007		824		—		—
Loss on valuation of financial liability at fair value through profit or loss		7,566		1,791		—		—

	₩	90,153		247,506		72,727		167,834

(2)

Details of interest income included in finance income for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Interest income on cash equivalents and deposits	₩	5,971		25,761		15,669		33,390
Interest income on installment receivables and others		3,814		17,795		19,515		80,115

	₩	9,785		43,556		35,184		113,505

(3)

Details of interest expense included in finance costs for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Interest expense on bank overdrafts and borrowings	₩	32,101		69,373		6,783		23,570
Interest expense on debentures		41,503		120,749		37,678		115,946
Others		7,102		41,167		4,004		8,859

	₩	80,706		231,289		48,465		148,375

24.

Finance Income and Costs, Continued

(4)

Details of impairment losses for financial assets for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows.


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Bad debt for accounts receivable - trade	₩	6,013		14,567		8,736		29,295
Bad debt for accounts receivable - other		503		19,874		1,614		4,524

	₩	6,516		34,441		10,350		33,819

25.

Income Tax Expense

Income tax expense was recognized as current tax expense adjusted for changes in estimates related to prior periods, deferred tax expenses by origination and reversal, temporary differences, and income tax recognized in other comprehensive income. The Company’s effective tax rate is higher in 2011 than in 2012 primarily due to additional tax expense recognized as a result of the resolution of various tax matters during the finalization of Tax Authorities audits of the Company’s tax returns from 2005 to 2009.

26.

Earnings per Share

(1)

Basic earnings per share

Basic earnings per share for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In millions of won, shares)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Net income for the period	₩	148,001		724,338		388,683		1,423,741
Weighted average number of common shares outstanding		69,694,999		69,694,999		70,499,159		70,894,202

Basic earnings per share (In won)	₩	2,124		10,393		5,513		20,083

The weighted average number of common shares outstanding for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In shares)				Weighted number of days				Weighted number of shares
	Number of shares			Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30			Nine-month period ended Sep. 30
Outstanding common shares at January 1, 2012		80,745,711			92/92		274/274		80,745,711			80,745,711
Effect of treasury stock		(11,050,712	)		92/92		274/274		(11,050,712	)		(11,050,712	)

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

26.

Earnings per Share, Continued


(In shares)				Weighted number of days				Weighted number of shares
	Number of shares			Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30			Nine-month period ended Sep. 30
Outstanding common shares at January 1, 2011		80,745,711			92/92		273/273		80,745,711			80,745,711
Beginning treasury stock		(9,650,712	)		92/92		273/273		(9,650,712	)		(9,650,712	)
Acquisition of treasury stock		(1,400,000	)		39/92		39/273		(595,840	)		(200,797	)

Number of shares at September 30, 2011		69,694,999							70,499,159			70,894,202

(2)

Diluted earnings per share

Diluted net income per share for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In millions of won, shares)	2012				2011
	Three-month period ended Sep. 30(*)		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Diluted net income for the period	₩	148,001		729,397		390,093		1,427,285
Diluted weighted average number of common shares outstanding		69,694,999		72,021,148		72,676,548		73,071,591

Diluted earnings per share (In won)	₩	2,124		10,128		5,368		19,533

(*)

The number of common shares outstanding in respect of the exchangeable common shares of exchangeable bonds is excluded for the diluted earnings per share calculation for the three-month period ended September 30, 2012 as the effect of exchangeable bond is nil (diluted shares of 2,326,149); thus, diluted earnings per share for the three-month period ended September 30, 2012 is the same as basic earnings per share.

Adjusted net income for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Net income	₩	148,001		724,338		388,683		1,423,741
Effect of exchangeable bonds		—		5,059		1,410		3,544

Adjusted net income	₩	148,001		729,397		390,093		1,427,285

26.

Earnings per Share, Continued

Adjusted weighted average number of common shares outstanding for the three-month and nine-month periods ended September 30, 2012 and 2011 are calculated as follows:


(In shares)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Weighted average number of common shares outstanding		69,694,999		69,694,999		70,499,159		70,894,202
Effect of exchangeable bonds(*)		—		2,326,149		2,177,389		2,177,389

Adjusted weighted average number of common shares outstanding		69,694,999		72,021,148		72,676,548		73,071,591

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

27.

Categories of Financial Instruments

(1)

Financial assets by categories as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	₩	—		—		365,673		—		365,673
Financial instruments		—		—		128,369		—		128,369
Short-term investment securities		—		84,981		—		—		84,981
Long-term investment securities(*1)		15,793		767,038		—		—		782,831
Accounts receivable - trade		—		—		1,423,607		—		1,423,607
Loans and receivables(*2)		—		—		631,109		—		631,109
Derivative financial assets		—		—		—		169,110		169,110

	₩	15,793		852,019		2,548,758		169,110		3,585,680

27.

Categories of Financial Instruments, Continued


(In millions of won)
	December 31, 2011
	Financial assets at fair value through profit or loss		Available- for-sale financial assets		Loans and receivables		Derivative financial instruments designated as hedged item		Total
Cash and cash equivalents	₩	—		—		895,558		—		895,558
Financial instruments		—		—		635,069		—		635,069
Short-term investment securities		—		90,573		—		—		90,573
Long-term investment securities(*1)		16,617		1,295,821		—		—		1,312,438
Accounts receivable - trade		—		—		1,282,234		—		1,282,234
Loans and receivables(*2)		—		—		1,103,799		—		1,103,799
Derivative financial assets		—		—		—		188,605		188,605

	₩	16,617		1,386,394		3,916,660		188,605		5,508,276

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

(*2)	Details of loans and receivables as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Short-term loans	₩	81,520		88,236
Accounts receivable - other		346,254		774,221
Accrued income		4,270		5,278
Long-term loans		54,435		75,282
Long-term accounts receivable - other		—		5,393
Guarantee deposits		144,630		155,389

	₩	631,109		1,103,799

27.

Categories of Financial Instruments, Continued

(2)

Financial liabilities by categories as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Derivative financial liabilities	₩	—		—		27,998		27,998
Borrowings		—		1,902,331		—		1,902,331
Debentures (*1)		399,677		3,510,367		—		3,910,044
Accounts payable - other and others (*2)		—		3,028,758		—		3,028,758

	₩	399,677		8,441,456		27,998		8,869,131


(In millions of won)
	December 31, 2011
	Financial liabilities at fair value through profit or loss		Financial liabilities measured at amortized cost		Derivative financial instruments designated as hedged item		Total
Derivative financial liabilities	₩	—		—		4,645		4,645
Borrowings		—		115,330		—		115,330
Debentures(*1)		397,887		3,148,118		—		3,546,005
Accounts payable - other and others(*2)		—		2,901,123		—		2,901,123

	₩	397,887		6,164,571		4,645		6,567,103

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

(*2)	Details of accounts payable and other payables as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012		December 31, 2011
Accounts payable - other	₩	1,174,276		1,361,473
Withholdings		18		18
Accrued expenses		853,751		468,313
Current portion of long-term payables - other		153,763		89,144
Long-term payables - other		705,561		840,974
Other non-current liabilities		141,389		141,201

	₩	3,028,758		2,901,123

28.

Financial Risk Management

(1)

Financial risk management

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

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

1) Market risk

(i) Currency risk

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

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


(In millions of won, thousands of U.S. dollars, thousands of Euros, thousands of Japanese Yen, thousands of other currencies)
	Assets				Liabilities
	Foreign currencies		Korean won equivalent		Foreign currencies		Korean won equivalent
USD		15,152	₩	16,950		1,107,882	₩	1,239,278
EUR		111		160		2,338		3,376
JPY		178,494		2,572		12,499,057		180,126
SGD		—		—		64,567		58,918
CHF		—		—		298,035		355,571
Others		—		—		89		143

			₩	19,682			₩	1,837,412

In addition, the Company has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (Refer to Note 17)

As of September 30, 2012, effects on income (loss) before income tax as a result of change in exchange rate by 10% are as follows:


(In millions of won)
	If increased by 10%			If decreased by 10%
USD	₩	(39,303	)		39,303
EUR		(321	)		321
JPY		257			(257	)
CHF		—			—
Others		(14	)		14

	₩	(39,381	)		39,381

28.

Financial Risk Management, Continued

(ii) Equity price risk

The Company has equity securities which include listed and non-listed securities for its liquidity and operating purpose. As of September 30, 2012, available-for-sale equity instruments measured at fair value amounts to ₩ 759,877 million.

(iii) Interest rate risk

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

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

The Company’s interest rate risk arises from floating-rate borrowings and payables. As of September 30, 2012, floating-rate debentures and borrowings amount to ₩ 519,103 million and ₩ 111,860 million, respectively, and the Company has entered into interest rate swaps to hedge interest rate risk related to floating-rate borrowings and debentures (Refer to Note 17). If interest rate only increases (decreases) by 1%, income before income taxes for the nine-month period ended September 30, 2012 would not have been changed due to the interest expense from floating-rate borrowings and debentures.

2) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet his/her contractual obligations. To manage credit risk, the Company evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors; based on such information, the Company establishes credit limits for each customer or counterparty.

For the nine-month period ended September 30, 2012, the Company has no trade and other receivables or loans which have indications of significant impairment loss or are overdue for a prolonged period. As a result, the Company believes that the possibility of default is remote. Also, the Company’s credit risk can rise due to transactions with financial institutions related to its cash and cash equivalents, financial instruments and derivates. To minimize such risk, the Company has a policy to deal with high credit worthy financial institutions. The amount of maximum exposure to credit risk of the Company is the carrying amount of financial assets as of September 30, 2012.

In addition, the aging of trade and other receivables that are overdue at the end of the reporting period but not impaired is stated in Note 5 and the analysis of financial assets that are individually determined to be impaired at the end of the reporting period is stated in note 24.

28.

Financial Risk Management, Continued

3) Liquidity risk

The Company’s approach to managing liquidity is to ensure that it will always maintain sufficient cash equivalents balance and have enough liquidity through various committed credit lines. The Company maintains flexibly enough liquidity under credit lines through active operating activities. The Company’s current liabilities are greater than current assets by ₩ 413.3 billion and ₩ 518.9 billion as of September 30, 2012 and December 31, 2011, respectively. This was primarily caused by the acquisition of ownership interests in SK Hynix in February 2012. The Company plans to fund current liabilities with the cash flows generated by operations and through additional borrowings, as necessary.

Contractual maturities of financial liabilities as of September 30, 2012 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 - 5 years		More than 5 years
Derivative financial liabilities	₩	27,998		27,998		—		27,998		—
Borrowings		1,902,331		2,134,915		101,836		2,033,079		—
Debentures (*1)		3,910,044		4,948,278		325,751		2,968,667		1,653,860
Accounts payable - other and others (*2)		3,028,758		3,093,026		2,189,602		530,299		373,125

	₩	8,869,131		10,204,217		2,617,189		5,560,043		2,026,985

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

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

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

(2)

Capital management

The Company manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity balance. The overall strategy of the Company is the same as that of the Company as of and for the year ended December 31, 2011.

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

Debt-equity ratio as of September 30, 2012 and December 31, 2011 are as follows:


(In millions of won)
	September 30, 2012			December 31, 2011
Liability	₩	10,542,427			8,554,225
Equity		11,984,074			11,966,302

Debt-equity ratio		87.97	%		71.49	%

28.

Financial Risk Management, Continued

(3)

Fair value

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

Interest rates used by the Company for the fair value measurement as of September 30, 2012 are as follows:


		Interest rate
Derivative instruments		2.75% ~ 4.41%
Borrowings and Debentures		3.13%

1) Fair value and carrying amount

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


(In millions of won)
	September 30, 2012				December 31, 2011
	Carrying amount		Fair value		Carrying amount		Fair value
Assets carried at fair value
Financial assets at fair value through profit or loss	₩	15,793		15,793		16,617		16,617
Derivative financial assets		169,110		169,110		188,605		188,605
Available-for-sale financial assets		759,877		759,877		1,273,132		1,273,132

	₩	944,780		944,780		1,478,354		1,478,354

Assets carried at amortized cost
Cash and cash equivalents	₩	365,673		365,673		895,558		895,558
Available-for-sale financial assets		92,142		92,142		113,262		113,262
Accounts receivable - trade and others		2,054,716		2,054,716		2,386,033		2,386,033
Financial instruments		128,369		128,369		635,069		635,069

	₩	2,640,900		2,640,900		4,029,922		4,029,922

28.

Financial Risk Management, Continued


(In millions of won)
	September 30, 2012				December 31, 2011
	Carrying amount		Fair value		Carrying amount		Fair value
Liabilities carried at fair value
Financial liabilities at fair value through profit or loss	₩	399,677		399,677		397,887		397,887
Derivative financial liabilities		27,998		27,998		4,645		4,645

	₩	427,675		427,675		402,532		402,532

Liabilities carried at amortized cost
Borrowings	₩	1,902,331		1,977,648		115,330		115,330
Debentures		3,510,367		3,847,628		3,148,118		2,985,078
Accounts payable - other and others		3,028,758		3,028,758		2,901,123		2,901,123

	₩	8,441,456		8,854,034		6,164,571		6,001,531

2) Fair value hierarchy

The different levels have been defined as follows:

•

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

•

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

•

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

The table below analyzes financial instruments carried at fair value, by fair value hierarchy as of September 30, 2012.


(In millions of won)
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss	₩	—		15,793		—		15,793
Derivative financial assets		—		169,110		—		169,110
Available-for-sale financial assets		613,909		26,105		119,863		759,877
Financial liabilities at fair value through profit or loss		399,677		—		—		399,677
Derivative financial liabilities		—		27,998		—		27,998

There have been no transfers from Level 2 to Level 1 in 2012 and changes of financial assets classified as Level 3 for the nine-month period ended September 30, 2012 are as follows:


(In millions of won)
	Balance at Jan. 1		Other comprehensive income(loss)			Disposal			Balance at Sep. 30
Available-for-sale financial assets	₩	162,097		(28,149	)		(14,085	)		119,863

29.

Transactions with Related Parties

(1)

As of September 30, 2012, the parent company and subsidiaries of the Company are as follows:


Type	Company	Ownership percentage (%)			Types of business

Ultimate Controlling Entity(*1)	SK Holdings Co., Ltd.		25.2	(*2)	Holding company

Subsidiaries	SK Telink Co., Ltd.		83.5		Telecommunication service
	SK Communications Co., Ltd.		64.6	(*3)	Internet website services
	PAXNet Co., Ltd.		59.7	(*3)	Internet website services
	Loen Entertainment, Inc.		67.6	(*3)	Release of music disc
	Stonebridge Cinema Fund		45.6		Investment association
	Commerce Planet Co., Ltd.		100.0	(*3)	Online shopping mall operation agency
	SK Broadband Co., Ltd.		50.6		Telecommunication services
	Broadband D&M Co., Ltd.		100.0	(*3)	Base station maintenance service
	Broadband Media Co., Ltd.		100.0	(*3)	Multimedia TV portal service
	Broadband CS Co., Ltd.		100.0	(*3)	Customer Q&A and Service
	K-net Culture and Contents Venture Fund		59.0	(*3)	Investment association
	Fitech Focus Limited Partnership II (*4)		66.7	(*3)	Investment association
	Open Innovation Fund		98.9	(*3)	Investment association
	PS&Marketing Corporation		100.0		Retail
	Service Ace Co., Ltd.		100.0		Customer center management service
	Service Top Co., Ltd.		100.0		Customer center management service
	Network O&S Co., Ltd.		100.0		Base station maintenance service
	BNCP Co., Ltd.		100.0	(*3)	Software development and distribution service
	Service-In Co., Ltd.		100.0	(*3)	Data base and internet website service
	SK Planet Co., Ltd.		100.0		Telecommunication service and new media business
	SK Telecom China Holdings Co., Ltd.		100.0		Equity investment (Holding company)
	SKY Property Mgmt. Ltd.		60.0		Equity investment
	Shenzhen E-eye High Tech Co., Ltd.		65.5	(*3)	GPS manufacturing and selling
	SK China Real Estate Co., Ltd.		99.4		Equity investment
	SKT Vietnam PTE. Ltd.		73.3		Telecommunication service
	SKT Americas, Inc.		100.0		Telecommunication service
	YTK Investment Ltd.		100.0		Investment
	Atlas Investment		100.0		Investment
	Technology Innovation Partners, LP		100.0	(*3)	Investment
	SK Telecom China Fund I L.P.		100.0	(*3)	Investment

(*1)	SK Holdings Co., Ltd. is the Ultimate Controlling Entity because of its de facto control over the Company.

(*2)	The ownership percentage represents parent company’s ownership over the Company.

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

29.

Transactions with Related Parties, Continued

(*4)	Name of the company has been changed from Benex Focus Limited Partnership II to Fitech Focus Limited Partnership II during the nine-month period ended September 30, 2012.

(2)

Transactions


(In millions of won)	Operating revenue and others								Operating expense and others
	2012				2011				2012				2011
	Three- month period ended Sep. 30		Nine- month period ended Sep. 30		Three- month period ended Sep. 30		Nine- month period ended Sep. 30		Three- month period ended Sep. 30		Nine- month period ended Sep. 30		Three- month period ended Sep. 30		Nine- month period ended Sep. 30
Parent Company		191		474		250		614		27,415		190,285		25,187		176,743
Subsidiaries		58,192		187,040		61,845		182,827		809,147		1,732,432		413,845		1,008,648
Associates		18,538		69,045		26,163		69,113		99,945		341,392		146,421		359,146
Others		17,323		37,570		11,337		27,377		487,423		1,245,209		363,188		950,353

		94,244		294,129		99,595		279,931		1,423,930		3,509,318		948,641		2,494,890

(3)

Account balances


(In millions of won)	Accounts receivable and others				Accounts payable and others
	Sep. 30, 2012		Dec. 31, 2011		Sep. 30, 2012		Dec. 31, 2011
Parent Company	₩	138		146		—		—
Subsidiaries		33,181		106,022		334,051		519,639
Associates		45,757		71,674		35,216		30,430
Others		6,322		11,857		130,947		190,434

	₩	85,398		189,699		500,214		740,503

(4)

Compensation for the key management

The Company considers registered directors who have substantial roles and responsibility in planning, operating, and controlling of the business as key management. Considerations given to key management for the three-month and nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)	2012				2011
	Three-month period ended Sep. 30		Nine-month period ended Sep. 30		Three-month period ended Sep. 30		Nine-month period ended Sep. 30
Salaries	₩	301		8,588		399		9,230
Provision for retirement benefits		78		721		107		731

	₩	379		9,309		506		9,961

30.

Commitments and Contingencies

As of September 30, 2012, the Company has participated in “Tactical Airship” program of the Defense Acquisition Program Administration with Joint Defense Corporation. For an advance receipt amounting to ₩ 4,200 million, which Joint Defense Corporation received from the Defense Acquisition Program Administration, the Company provides payment guarantees to the Defense Acquisition Program Administration.

31.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)
	2012			2011
Interest income	₩	(43,556	)		(113,505	)
Dividends		(31,143	)		(33,676	)
Gain on foreign currency translation		(140	)		(225	)
Gain on valuation of financial assets at fair value through profit or loss		—			(1,067	)
Gain on valuation of financial liabilities at fair value through profit or loss		—			(52,377	)
Gain on disposal of long-term investments securities		(470	)		(158,495	)
Gain on valuation of derivatives		—			(3,389	)
Gain on settlement of derivatives		(12,694	)		—
Gain on disposal of investments in associates		(80,484	)		(1,990	)
Gain on disposal of property and equipment and intangible assets		(1,881	)		(1,184	)
Reversal of allowance for doubtful accounts		(4,531	)		(41	)
Other income		—			(2,879	)
Interest expenses		231,289			148,375
Loss on foreign currency translation		412			9,283
Loss on disposal of long-term investments securities		9,134			302
Loss on settlement of derivatives		1,232			5,136
Loss on valuation of financial assets at fair value through profit or loss		824			—
Loss on valuation of financial liabilities at fair value through profit or loss		1,791			—
Loss on disposal of investments in associates		—			1,291
Impairment loss on investment in associates		72,096			—
Income tax expense		167,128			512,952
Provision for retirement benefits		23,669			24,393
Depreciation and amortization		1,321,897			1,407,097
Bad debt for accounts receivable - trade		14,567			29,295
Loss on disposal of property and equipment and intangible assets		8,858			13,585
Impairment loss on property and equipment and intangible assets		15,438			—
Bad debt for accounts receivable - other		19,874			4,524
Other expenses		59			3,905

	₩	1,713,369			1,791,310

31.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)
	2012			2011
Accounts receivable - trade	₩	(151,836	)		89,148
Accounts receivable - other		408,092			1,202,545
Advance payments		18,944			36,957
Prepaid expenses		7,995			44,124
Inventories		(4,420	)		(6,844	)
Long-term accounts receivables - other		5,393			518,763
Guarantee deposits		18,309			(2,722	)
Accounts payable - other		(191,107	)		(254,493	)
Advanced receipts		2,642			8,939
Withholdings		226,808			137,191
Deposits received		(1,792	)		1,657
Accrued expenses		373,013			(7,939	)
Unearned revenue		(27,067	)		(33,213	)
Provisions		(283,552	)		(6,165	)
Long-term provisions		25,927			35,492
Plan assets		1,416			9,436
Retirement benefit payment		(12,306	)		(17,072	)
Others		(1,382	)		232

	₩	415,077			1,756,036

(3)

Significant non-cash transactions for the nine-month periods ended September 30, 2012 and 2011 are as follows:


(In millions of won)
	2012		2011
Accounts payable - other related to acquisition of tangible assets and others	₩	8,010		197,190

32.

Subsequent Events

(1)

Issuance of note

On September 27, 2012, the Board of Directors of the Company resolved to issue Global Medium Term Note and the Company issued USD 700 million of notes on November 1, 2012.

(2)

Disposal of shares in POSCO

As discussed in note 7, the Company disposed 1,240,655 shares in POSCO on October 8, 2012, which was classified as non-current assets held for sale as of September 30, 2012.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


SK Telecom Co., Ltd.

(Registrant)

By:		/s/ Soo Cheol Hwang
(Signature)

Name:		Soo Cheol Hwang
Title:		Senior Vice President

Date: December 21, 2012