Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16]

Share Name	Share Symbol	Market	Type
SK Telecom Co Ltd	NYSE:SKM	NYSE	Common Stock

	Price Change	% Change	Share Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	-0.26	-1.21%	21.20	21.51	21.16	21.45	341,654	00:32:53

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 OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF MARCH 2024

Commission File Number: 333-04906

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

65, Euljiro, Jung-gu

Seoul 04539, Korea

(Address of principal executive office)

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

Form 20-F ☒ Form 40-F ☐

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/ Hee Jun Chung
(Signature)
Name:		Hee Jun Chung
Title:		Vice President

Date: March 7, 2024

SK TELECOM CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

(With the Independent Auditor’s Report Thereon)

Contents


	Page
Independent Auditor’s Report		1

Consolidated Financial Statements		5

Consolidated Statements of Financial Position		6

Consolidated Statements of Income		8

Consolidated Statements of Comprehensive Income		9

Consolidated Statements of Changes in Equity		10

Consolidated Statements of Cash Flows		11

Notes to the Consolidated Financial Statements		13

Report on audit of Internal Control over Financial Reporting		132

Management’s Annual Report on Internal Control over Financial Reporting		134

Independent Auditor’s Report

(English Translation of a Report Originally Issued in Korean)

The Shareholders and Board of Directors

SK Telecom Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of SK Telecom Co., Ltd. and its subsidiaries (collectively referred to as the “Group”) which comprise the consolidated statement of financial position as of December 31, 2023 and 2022, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the two years in the period ended December 31, 2023, and notes to the consolidated financial statements, including a summary of material accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for each of the two years in the period ended December 31, 2023 in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”).

We also have audited the Group’s internal control over financial reporting as of December 31, 2023, based on the criteria established in Conceptual Framework for Designing and Operating Internal Control over Financial Reporting in accordance with the Korean Standards on Auditing (“KSA”) issued by the Operating Committee of internal control over financial reporting, and our report dated March 6, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

We conducted our audits in accordance with KSA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

1.	*Cut-off of revenue from wireless services.*

As described in notes 3 (21) and 4 (2) to the consolidated financial statements, the Group’s revenue from the wireless services is recognized based on data from a complex array of information technology systems which process a significant volume of transactions with its customers. Furthermore, the transactions involve a variety of contractual terms from new subscriptions to deactivations or churn, and changes of rate plans during the period. Therefore, we have identified timing of revenue recognition related to the Group’s wireless services as a key audit matter. Related revenue from the wireless services amounted to W10,328,980 million in 2023.

The primary procedures we performed to address this key audit matter included:

•

Inspecting major contracts with subscribers to assess whether the Group’s revenue recognition policies based on the terms and conditions as set out in the contracts, are consistent with reference to the requirements of KIFRS 1115;

•

Testing internal controls relating to the timing of revenue recognition for the wireless services; and

•

Evaluating the appropriateness of the timing of revenue recognition by recalculating the prorated revenue based on the subscribed rate plan and comparing it with the billing information.

2.	*Impairment assessment of goodwill for the fixed-line telecommunication services cash generating unit*

As described in notes 3 (10) and 16 to the consolidated financial statements, the Group assesses impairment of goodwill allocated to a cash generating unit (“CGU”), at least, annually or when there is an indication of possible impairment by comparing the carrying amount of the CGU to its recoverable amount based on value-in-use (”VIU”). The amount of goodwill allocated to the fixed-line telecommunication services CGU is W764,082 million as of December 31, 2023.

In carrying out the goodwill impairment assessment, the Group compared the carrying amount of the fixed-line telecommunication services CGU and its value in use (“VIU”) based on discounted cash flow forecasts. We have identified the goodwill impairment assessment for the fixed-line telecommunication services CGU as a key audit matter due to the inherent uncertainties and significant judgement involved in management’s estimates around the major assumptions such as estimates of future operating revenue, perpetual growth rate and discount rate, all of which have a significant impact on the determination of the VIU.

The primary audit procedures we have performed for this key audit matter include:

•

Assessing the competence and objectivity of the external specialist utilized by management;

•

Evaluating the appropriateness of the valuation method and assumptions applied by management by involving our internal specialist;

•

Performing a sensitivity analysis for both the discount rate and the perpetual growth rate applied to the discounted cash flow forecasts to assess the impact of changes in these key assumptions on the conclusion reached by management in its impairment assessment;

•

Evaluating the reasonableness of management’s future cash flow forecasts by comparison with financial budgets approved by management; and

•

Performing a retroactive assessment of the prior periods’ cash flow forecasts by comparison with the actual results.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with KIFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with KSA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

•

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Yoo, Jung Ho.

LOGO

March 6, 2024

This report is effective as of March 6, 2024, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the date of independent auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the accompanying consolidated financial statements and may result in modifications to this report.

SK TELECOM CO., LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

The accompanying consolidated financial statements, including all footnote disclosures, have been prepared by, and are the responsibility of, the Group.

Ryu, Young-Sang

Chief Executive Officer

SK TELECOM CO., LTD.

SK TELECOM CO., LTD. and its Subsidiaries

Consolidated Statements of Financial Position

As of December 31, 2023 and 2022


(In millions of won)	*Note*	December 31, 2023		December 31, 2022
Assets
Current Assets:
Cash and cash equivalents	5,35,36	W	1,454,978		1,882,291
Short-term financial instruments	5,35,36		294,934		237,230
Accounts receivable - trade, net	6,35,36,37		1,978,532		1,970,611
Short-term loans, net	6,35,36,37		78,129		78,590
Accounts receivable - other, net	6,35,36,37,38		344,350		479,781
Contract assets	8,36		89,934		83,058
Prepaid expenses	7		1,953,769		1,974,315
Prepaid income taxes	32		161		415
Derivative financial assets	22,35,36,39		8,974		168,527
Inventories, net	9		179,809		166,355
Non-current assets held for sale	41		10,515		6,377
Advanced payments and others	6,35,36		191,517		171,646

			6,585,602		7,219,196

Non-Current Assets:
Long-term financial instruments	5,35,36		375		375
Long-term investment securities	10,35,36		1,679,384		1,410,736
Investments in associates and joint ventures	12		1,915,012		1,889,289
Investment property, net	14		34,812		25,137
Property and equipment, net	13,15,37,38		13,006,196		13,322,492
Goodwill	11,16		2,075,009		2,075,009
Intangible assets, net	17		2,861,137		3,324,910
Long-term contract assets	8,36		39,837		49,163
Long-term loans, net	6,35,36,37		30,455		26,973
Long-term accounts receivable - other, net	6,35,36,37,38		312,531		373,951
Long-term prepaid expenses	7		1,086,107		1,073,422
Guarantee deposits, net	6,35,36,37		156,863		167,441
Long-term derivative financial assets	22,35,36,39		139,560		152,633
Deferred tax assets	32		11,609		6,860
Defined benefit assets	21		170,737		175,748
Other non-current assets	6,35,36		14,001		14,927

			23,533,625		24,089,066

Total Assets		W	30,119,227		31,308,262

(Continued)

SK TELECOM CO., LTD. and its Subsidiaries

Consolidated Statements of Financial Position, Continued

As of December 31, 2023 and 2022


(In millions of won)	*Note*		December 31, 2023			December 31, 2022
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable - trade		35,36,37	W	139,876			89,255
Accounts payable - other		35,36,37		1,913,006			2,427,906
Withholdings		35,36,37		802,506			803,555
Contract liabilities		8		155,576			172,348
Accrued expenses		26,35,36		1,439,786			1,505,549
Income tax payable		32		142,496			112,358
Provisions		20,40		38,255			39,683
Short-term borrowings		18,35,36,39		—			142,998
Current portion of long-term debt, net		18,35,36,39		1,621,844			1,967,586
Current portion of long-term payables - other		19,35,36,39		367,770			398,874
Lease liabilities		35,36,37,39		372,826			386,429
Liabilities held for sale				39			—

				6,993,980			8,046,541

Non-Current Liabilities:
Debentures, excluding current portion, net		18,35,36,39		7,106,299			6,524,095
Long-term borrowings, excluding current portion, net		18,35,36,39		315,578			668,125
Long-term payables – other		19,35,36,39		892,683			1,239,467
Long-term lease liabilities		35,36,37,39		1,238,607			1,395,628
Long-term contract liabilities		8		56,917			61,574
Defined benefit liabilities		21		—			61
Long-term derivative financial liabilities		22,35,36,39		305,088			302,593
Long-term provisions		20		83,169			79,415
Deferred tax liabilities		32		832,236			763,766
Other non-current liabilities		35,36,37		66,271			71,801

				10,896,848			11,106,525

Total Liabilities				17,890,828			19,153,066

Shareholders’ Equity:
Share capital		1,23		30,493			30,493
Capital surplus and others		11,23,24,25,26		(11,828,644	)		(11,567,117	)
Retained earnings		27		22,799,981			22,463,711
Reserves		28		387,216			391,233
Equity attributable to owners of the Parent Company				11,389,046			11,318,320
Non-controlling interests				839,353			836,876

Total Shareholder’s Equity				12,228,399			12,155,196

Total Liabilities and Shareholder’s Equity			W	30,119,227			31,308,262

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

SK TELECOM CO., LTD. and its Subsidiaries

Consolidated Statements of Income

For the years ended December 31, 2023 and 2022


(In millions of won, except for earnings per share)	*Note*		2023			2022
Operating revenue:		4,37
Revenue			W	17,608,511			17,304,973
Operating expenses:		37
Labor				2,488,245			2,449,813
Commission		7		5,549,899			5,518,786
Depreciation and amortization		4		3,614,766			3,621,325
Network interconnection				678,459			715,285
Leased lines				275,477			268,426
Advertising				235,769			252,402
Rent				142,356			143,747
Cost of goods sold		9		1,266,357			1,268,124
Others		29		1,603,979			1,454,995

			15,855,307			15,692,903

Operating profit		4		1,753,204			1,612,070
Finance income		4,31		248,376			179,838
Finance costs		4,31		(527,401	)		(456,327	)
Gain (loss) relating to investments in associates and joint ventures, net		4,12		10,928			(81,707	)
Other non-operating income		4,30		50,366			55,898
Other non-operating expenses		4,30		(47,294	)		(73,620	)

Profit before income tax		4		1,488,179			1,236,152
Income tax expense		32		342,242			288,321

Profit for the year			W	1,145,937			947,831

Attributable to:
Owners of the Parent Company			W	1,093,611			912,400
Non-controlling interests				52,326			35,431

Earnings per share		33
Basic earnings per share (in won)			W	4,954			4,118
Diluted earnings per share (in won)				4,950			4,116

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

SK TELECOM CO., LTD. and its Subsidiaries

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2023 and 2022


(In millions of won)	*Note*		2023			2022
Profit for the year			W	1,145,937			947,831
Other comprehensive income (loss):
Items that will not be reclassified subsequently to profit or loss, net of taxes:
Remeasurement of defined benefit liabilities (assets)		21		1,853			70,885
Valuation loss on financial assets at fair value through other comprehensive income		28,31		(18,842	)		(491,853	)
Items that are or may be reclassified subsequently to profit or loss, net of taxes:
Net change in other comprehensive income of investments in associates and joint ventures		12,28		9,225			119,707
Net change in unrealized fair value of derivatives		22,28,31		(17,460	)		(21,366	)
Foreign currency translation differences for foreign operations		28		1,257			16,401

Other comprehensive loss for the year, net of taxes				(23,967	)		(306,226	)

Total comprehensive income			W	1,121,970			641,605

Total comprehensive income attributable to:
Owners of the Parent Company			W	1,072,785			601,193
Non-controlling interests				49,185			40,412

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

SK TELECOM CO., LTD. and its Subsidiaries

Consolidated Statements of Changes in Equity

For the years ended December 31, 2023 and 2022


(In millions of won)
			Attributable to owners of the Parent Company														Non- controlling interests			Total equity
	*Note*		Share capital		Capital surplus (deficit) and others			Retained earnings			Reserves			Sub-total			Non- controlling interests			Total equity
Balance as of January 1, 2022			W	30,493		(11,623,726	)		22,437,341			735,238			11,579,346			755,792			12,335,138
Total comprehensive income (loss):
Profit for the year				—		—			912,400			—			912,400			35,431			947,831
Other comprehensive income (loss):		12,21,22,28,31		—		—			32,798			(344,005	)		(311,207	)		4,981			(306,226	)

				—		—			945,198			(344,005	)		601,193			40,412			641,605

Transactions with owners:
Annual dividends		34		—		—			(361,186	)		—			(361,186	)		—			(361,186	)
Interim dividends		34		—		—			(542,876	)		—			(542,876	)		—			(542,876	)
Share option		26		—		72,261			—			—			72,261			—			72,261
Interest on hybrid bonds		25		—		—			(14,766	)		—			(14,766	)		—			(14,766	)
Transactions of treasury shares		24		—		(2,683	)		—			—			(2,683	)		—			(2,683	)
Changes in ownership in subsidiaries, etc.		11		—		(12,969	)		—			—			(12,969	)		40,672			27,703

				—		56,609			(918,828	)		—			(862,219	)		40,672			(821,547	)

Balance as of December 31, 2022			W	30,493		(11,567,117	)		22,463,711			391,233			11,318,320			836,876			12,155,196

Balance as of January 1, 2023			W	30,493		(11,567,117	)		22,463,711			391,233			11,318,320			836,876			12,155,196
Total comprehensive income (loss):
Profit for the year				—		—			1,093,611			—			1,093,611			52,326			1,145,937
Other comprehensive loss:		12,21,22,28,31		—		—			(16,809	)		(4,017	)		(20,826	)		(3,141	)		(23,967	)

				—		—			1,076,802			(4,017	)		1,072,785			49,185			1,121,970

Transactions with owners:
Annual dividends		34		—		—			(180,967	)		—			(180,967	)		(50,557	)		(231,524	)
Interim dividends		34		—		—			(542,282	)		—			(542,282	)		—			(542,282	)
Share option		26		—		7,157			—			—			7,157			10,463			17,620
Interest on hybrid bonds		25		—		—			(17,283	)		—			(17,283	)		—			(17,283	)
Repayments of hybrid bonds		25		—		(400,000	)		—			—			(400,000	)		—			(400,000	)
Issuance of hybrid bonds		25		—		398,509			—			—			398,509			—			398,509
Transactions of treasury shares		24		—		(265,120	)		—			—			(265,120	)		—			(265,120	)
Changes in ownership in subsidiaries, etc.		11		—		(2,073	)		—			—			(2,073	)		(6,614	)		(8,687	)

				—		(261,527	)		(740,532	)		—			(1,002,059	)		(46,708	)		(1,048,767	)

Balance as of December 31, 2023			W	30,493		(11,828,644	)		22,799,981			387,216			11,389,046			839,353			12,228,399

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

SK TELECOM CO., LTD. and its Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31, 2023 and 2022


(In millions of won)	*Note*	2023			2022
Cash flows from operating activities:
Cash generated from operating activities:
Profit for the year		W	1,145,937			947,831
Adjustments for income and expenses	39		4,546,338			4,719,438
Changes in assets and liabilities related to operating activities	39		(274,163	)		118,106

			5,418,112			5,785,375
Interest received			60,134			52,163
Dividends received			50,899			16,388
Interest paid			(341,488	)		(259,719	)
Income tax paid			(240,452	)		(434,890	)

Net cash provided by operating activities			4,947,205			5,159,317

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net			—			264,693
Decrease in short-term investment securities, net			—			5,010
Collection of short-term loans			136,242			123,700
Decrease in long-term financial instruments			—			330,032
Proceeds from disposals of long-term investment securities			100,817			104,190
Proceeds from disposals of investments in associates and joint ventures			4,950			342,645
Proceeds from disposals of assets held for sale			1,353			20,136
Proceeds from disposals of property and equipment			12,900			15,792
Proceeds from disposals of intangible assets			4,428			10,993
Collection of long-term loans			1,547			1,134
Decrease in deposits			5,922			10,056
Proceeds from settlement of derivatives			1,452			1,542
Government grants received			2,967			—

			272,578			1,229,923
Cash outflows for investing activities:
Increase in short-term financial instruments, net			(51,421	)		—
Increase in short-term loans			(130,041	)		(127,263	)
Increase in long-term loans			(11,602	)		(11,724	)
Increase in long-term financial instruments			—			(330,032	)
Acquisitions of long-term investment securities			(324,997	)		(436,753	)
Acquisitions of investments in associates and joint ventures			(17,656	)		(11,065	)
Acquisitions of property and equipment			(2,973,882	)		(2,908,287	)
Acquisitions of intangible assets			(106,761	)		(138,136	)
Increase in deposits			(6,848	)		(12,146	)
Cash decrease due to changes in consolidation scope			(2,275	)		—
Cash outflow for business combinations, net			—			(62,312	)

			(3,625,483	)		(4,037,718	)

Net cash used in investing activities		W	(3,352,905	)		(2,807,795	)

(Continued)

SK TELECOM CO., LTD. and its Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2023 and 2022


(In millions of won)	*Note*		2023			2022
Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings, net			W	—			130,000
Proceeds from issuance of debentures				1,785,108			1,200,122
Proceeds from long-term borrowings				49,950			440,000
Proceeds from issuance of hybrid bonds				398,509			—
Cash inflows from settlement of derivatives				183,090			768
Transactions with non-controlling shareholders				160			31,151

				2,416,817			1,802,041
Cash outflows for financing activities:
Repayments of short-term borrowings, net				(142,998	)		—
Repayments of long-term payables – other				(400,245	)		(400,245	)
Repayments of debentures				(1,869,190	)		(1,390,000	)
Repayments of long-term borrowings				(125,000	)		(41,471	)
Repayments of hybrid bonds				(400,000	)		—
Payments of dividends				(773,806	)		(904,020	)
Payments of interest on hybrid bonds				(17,283	)		(14,766	)
Repayments of lease liabilities				(402,465	)		(401,054	)
Acquisition of treasury shares				(285,487	)		—
Transactions with non-controlling shareholders				(21,333	)		(367	)

				(4,437,807	)		(3,151,923	)

Net cash used in financing activities		39		(2,020,990	)		(1,349,882	)

Net increase (decrease) in cash and cash equivalents				(426,690	)		1,001,640
Cash and cash equivalents at beginning of the year				1,882,291			872,731
Effects of exchange rate changes on cash and cash equivalents				(623	)		7,920
				(623	)		7,920

Cash and cash equivalents at end of the year			W	1,454,978			1,882,291

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

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

1.	Reporting Entity

(1)

General

SK Telecom Co., Ltd. (the “Parent Company”) was incorporated on March 29, 1984, under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The head office of the Parent Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.

The Parent Company’s common shares are listed on the Stock Market of Korea Exchange, and its depositary receipts (DRs) are listed on the New York Stock Exchange. Meanwhile, the Board of Directors of the Parent Company resolved to cancel the listing of the Parent Company’s DRs on the London Stock Exchange on June 22, 2023, and the DRs were delisted from the London Stock Exchange as of July 31, 2023. As of December 31, 2023, the Parent Company’s total issued shares are held by the following shareholders:


	Number of shares		Percentage of total shares issued (%)
SK Inc.		65,668,397		30.01
National Pension Service		16,330,409		7.46
Institutional investors and other shareholders		126,854,437		57.97
Kakao Investment Co., Ltd.		3,846,487		1.76
Treasury shares		6,133,414		2.80

		218,833,144		100.00

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

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

1.	Reporting Entity, Continued

(2)

List of consolidated subsidiaries

The list of consolidated subsidiaries as of December 31, 2023 and 2022 is as follows:

Ownership (%)(*1)

Subsidiary

Location

Primary business

Dec. 31,
2023

Dec. 31,
2022

Subsidiaries

owned by the

Parent Company

SK Telink Co., Ltd.

Korea

International telecommunication and Mobile Virtual Network Operator Service

100.0

SK Communications Co., Ltd.

Korea

Internet website services

100.0

SK Broadband Co., Ltd.

Korea

Fixed-line telecommunication services

74.4

PS&Marketing Corporation

Korea

Communications device retail business

100.0

SERVICE ACE Co., Ltd.

Korea

Call center management service

100.0

SERVICE TOP Co., Ltd.

Korea

Call center management service

100.0

SK O&S Co., Ltd.

Korea

Base station maintenance service

100.0

SK Telecom China Holdings Co.,

Ltd.

China

Investment (Holdings company)

100.0

SK Global Healthcare Business Group Ltd.

Hong Kong

Investment

100.0

YTK Investment Ltd.

Cayman Islands

Investment

100.0

Atlas Investment

Cayman Islands

Investment

100.0

SK Telecom Americas, Inc.

USA

Information gathering and consulting

100.0

Quantum Innovation Fund I

Korea

Investment

59.9

SK Telecom Japan Inc.(*2)

Japan

Information gathering and consulting

33.0

100.0

Happy Hanool Co., Ltd.

Korea

Service

100.0

SK stoa Co., Ltd.

Korea

Other telecommunication retail business

100.0

SAPEON Inc.

USA

Manufacturing non-memory and other

electronic integrated circuits

62.5

Subsidiaries owned by

SK Broadband Co.,

Ltd.

Home & Service Co., Ltd.

Korea

Operation of information and

communication facility

100.0

Media S Co., Ltd.

Korea

Production and supply services of

broadcasting programs

100.0

Subsidiary owned by

PS&Marketing Corporation

SK m&service Co., Ltd.

Korea

Database and internet website service

100.0

Subsidiary owned by

SK Telecom Americas, Inc.

Global AI Platform Corporation(*2)

USA

Software development and supply business

100.0

—

Subsidiary owned by

Global AI Platform

Corporation

Global AI Platform Corporation

Korea(*2)

Korea

Software development and supply business

100.0

—

Subsidiary owned by

Quantum Innovation Fund I

PanAsia Semiconductor

Materials LLC.

Korea

Investment

66.4

Subsidiary owned by

SK Telecom Japan Inc.

SK Planet Japan, K. K.(*2)

Japan

Digital contents sourcing service

79.8

Subsidiary owned by

SAPEON Inc.

SAPEON Korea Inc.

Korea

Manufacturing non-memory and other

electronic integrated circuits

100.0

Others(*3)

SK Telecom Innovation Fund,

L.P.

USA

Investment

100.0

SK Telecom China Fund I L.P.

Cayman Islands

Investment

100.0

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

1.	Reporting Entity, Continued

(2)

List of subsidiaries, Continued

The list of consolidated subsidiaries as of December 31, 2023 and 2022 is as follows, Continued:

(*1)	The ownership interest represents direct ownership interest in subsidiaries either by the Parent Company or subsidiaries of the Parent Company.

(*2)	Details of changes in the consolidation scope for year ended December 31, 2023 are presented in note 1-(4).

(*3)	Others are owned by Atlas Investment and another subsidiary of the Parent Company.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

1.	Reporting Entity, Continued

(3)

Condensed financial information of subsidiaries

1) Condensed financial information of significant consolidated subsidiaries as of and for the year ended December 31, 2023 is as follows:


(In millions of won)
	As of December 31, 2023						2023
Subsidiary	Total assets		Total liabilities		Total equity		Revenue		Profit (loss)
SK Telink Co., Ltd.	W	213,920		65,049		148,871		309,091		17,761
SK Broadband Co., Ltd.		6,442,611		3,323,156		3,119,455		4,281,932		213,905
PS&Marketing Corporation		451,549		224,042		227,507		1,353,321		4,681
SERVICE ACE Co., Ltd.		83,395		54,888		28,507		197,598		2,822
SERVICE TOP Co., Ltd.		71,196		47,641		23,555		178,423		1,738
SK O&S Co., Ltd.		140,942		98,346		42,596		345,617		2,614
Home & Service Co., Ltd.		165,667		112,025		53,642		490,094		1,297
SK stoa Co., Ltd.		94,041		37,253		56,788		301,496		(1,427	)
SK m&service Co., Ltd.		153,660		88,195		65,465		247,479		1,253

2) Condensed financial information of significant consolidated subsidiaries as of and for the year ended December 31, 2022 is as follows:


(In millions of won)
	As of December 31, 2022						2022
Subsidiary	Total assets		Total liabilities		Total equity		Revenue		Profit (loss)
SK Telink Co., Ltd.	W	196,281		60,927		135,354		302,595		15,008
SK Broadband Co., Ltd.		6,245,484		3,134,949		3,110,535		4,162,093		212,816
PS&Marketing Corporation		403,030		177,739		225,291		1,376,400		3,856
SERVICE ACE Co., Ltd.		97,597		59,189		38,408		194,798		2,429
SERVICE TOP Co., Ltd.		81,590		53,589		28,001		179,365		1,613
SK O&S Co., Ltd.		121,755		70,280		51,475		331,715		2,059
Home & Service Co., Ltd.		158,248		102,184		56,064		413,259		(1,217	)
SK stoa Co., Ltd.		103,910		44,696		59,214		329,304		9,977
SK m&service Co., Ltd.(*)		160,704		95,263		65,441		211,081		4,157

(*)	The financial information is the condensed financial information after the entity was included in the scope of consolidation.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

1.	Reporting Entity, Continued

(4)

Changes in subsidiaries

1) The list of subsidiaries that were newly included in consolidation scope for the year ended December 31, 2023 is as follows:


Subsidiary		Reason
Global AI Platform Corporation Korea		Established by the SK Telecom Americas, Inc

Global AI Platform Corporation		Established by the SK Telecom Americas, Inc

2) The list of subsidiaries that were excluded from consolidation scope for the year ended December 31, 2023 is as follows:


Subsidiary		Reason
SK Telecom Japan Inc.		Loss of control

SK Planet Japan, K. K.		Loss of control

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

1.	Reporting Entity, Continued

(5)

The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	*SK Broadband Co., Ltd.()**
Ownership of non-controlling interests (%)		25.4

	As of December 31, 2023
Current assets	W	1,388,965
Non-current assets		5,214,315
Current liabilities		(1,388,317	)
Non-current liabilities		(1,988,989	)
Net assets		3,225,974
Carrying amount of non-controlling interests		819,592

	2023
Revenue	W	4,274,747
Profit for the year		202,890
Total comprehensive income		183,499
Profit attributable to non-controlling interests		51,448

Net cash provided by operating activities	W	1,110,847
Net cash used in investing activities		(1,064,434	)
Net cash used in financing activities		(60,254	)
Effects of exchange rate changes on cash and cash equivalents		9
Net decrease in cash and cash equivalents		(13,832	)

Dividends paid to non-controlling interests for the year ended December 31, 2023	W	50,557

(*)	The above condensed financial information is the consolidated financial information of the subsidiary and reflects fair value adjustments as a result of the business combination.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

1.	Reporting Entity, Continued

(5)

The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)
	*SK Broadband Co., Ltd.()**
Ownership of non-controlling interests (%)		25.3

	As of December 31, 2022
Current assets	W	1,348,305
Non-current assets		5,076,410
Current liabilities		(1,707,805	)
Non-current liabilities		(1,488,834	)
Net assets		3,228,076
Carrying amount of non-controlling interests		816,676

	2022
Revenue	W	4,156,326
Profit for the year		217,303
Total comprehensive income		237,860
Profit attributable to non-controlling interests		51,528

Net cash provided by operating activities	W	1,184,794
Net cash used in investing activities		(807,965	)
Net cash used in financing activities		(415,908	)
Effects of exchange rate changes on cash and cash equivalents		(584	)
Net decrease in cash and cash equivalents		(39,663	)

Dividends paid to non-controlling interests for the year ended December 31, 2022	W	—

(*)	The above condensed financial information is the consolidated financial information of the subsidiary and reflects fair value adjustments as a result of the business combination.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

2.	Basis of Preparation

These consolidated financial statements were prepared in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”), as prescribed in the Act on External Audits of Stock Companies of Korea. The accompanying consolidated financial statements have been translated into English from Korean financial statements. In the event of any differences in interpreting the financial statements or the independent auditor’s report thereon, Korean version, which is used for regulatory reporting purposes, shall prevail.

The accompanying consolidated financial statements comprise the Group and the Group’s investments in associates and joint ventures.

The consolidated financial statements were authorized for issuance by the Board of Directors on February 2, 2024, which will be submitted for final approval at the shareholder’s meeting to be held on March 26, 2024.

(1)

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statement of financial position:

•

derivative financial instruments measured at fair value;

•

financial instruments measured at fair value through profit or loss (“FVTPL”);

•

financial instruments measured at fair value through other comprehensive income (“FVOCI”);

•

liabilities measured at fair value for cash-settled share-based payment arrangement; and

•

liabilities (assets) for defined benefit plans recognized at the total present value of defined benefit obligations less the fair value of plan assets.

(2)

Functional and presentation currency

Financial statements of Group entities within the Group are prepared in functional currency of each group entity, which is the currency of the primary economic environment in which each entity operates. Consolidated financial statements of the Group are presented in Korean won, which is the Parent Company’s functional and presentation currency.

(3)

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with KIFRS 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.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.

1) Critical judgments

Information about critical judgments in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in notes for the following areas: consolidation (whether the Group has de facto control over an investee), and determination of stand-alone selling prices.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

2.	Basis of Preparation, Continued

(3)

Use of estimates and judgments, Continued

2) Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: loss allowance (notes 6 and 36), estimated useful lives of costs to obtain a contract (notes 8), property and equipment and intangible assets (notes 3 (7), (8), 13 and 17), impairment of goodwill (notes 3 (10) and 16), recognition of provision (notes 3 (15) and 20), measurement of defined benefit liabilities (assets) (notes 3 (14) and 21), transaction of derivative instruments (notes 3 (6) and 22) and recognition of deferred tax assets (liabilities) (notes 3 (23) and 32).

3) Fair value measurement

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

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

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

•

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

•

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

•

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

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

Information about assumptions used for fair value measurements are included in note 22 and note 36.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies

The material accounting policies applied by the Group in the preparation of its consolidated financial statements in accordance with KIFRS are included below. Except for certain standards and amendments which are effective for annual periods beginning on or after January 1, 2023, the material accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2022. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.

The new and amended standards and interpretations that are effective for annual periods beginning on or after January 1, 2023 are as follows. These amended standards had no material impact on the Group’s consolidated financial statements.

•

Disclosure of Accounting Polices (Amendments to KIFRS 1001)

•

Disclosures of Profit or Loss on Financial Liabilities with Conditions for Adjusting an Exercise Price (Amendments to KIFRS 1001)

•

Definition of Accounting Estimates (Amendments to KIFRS 1008)

•

Deferred Tax related to Assets and Liabilities Arising from a Single Transaction (Amendments to KIFRS 1012)

•

KIFRS 1117 Insurance Contracts and its amendments

•

International tax reform—Pillar Two model rules (Amendments to KIFRS 1012)

The Pillar Two model rules is scheduled to take effect for the Group’s fiscal year beginning January 1, 2024. As the Group falls within the scope of the enacted Pillar Two model rules, it has assessed the potential exposure to Pillar Two income tax. The assessment of potential exposure to Pillar Two income tax is based on the most recent tax returns of the Group’s ultimate controlling entity group, country-by-country reporting, and financial statements. The Group expects that the exposure to Pillar Two income tax will be immaterial.

(1)

Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. 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 has three reportable segments as described in note 4. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(2)

Basis of consolidation

1) Business combination

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.

In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.

The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

Consideration transferred is generally measured at fair value, identical to the measurement of identifiable net assets acquired at fair value. The difference between the acquired company’s fair value and the consideration transferred is accounted for goodwill. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received, except if related to the costs to issue debt or equity securities recognized based on KIFRS 1032 and KIFRS 1109.

Consideration transferred does not include the amount settled in relation to the pre-existing relationship. Such amounts are generally recognized through profit or loss.

Contingent consideration is measured at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. If contingent consideration is not classified as equity, the Group subsequently recognizes changes in fair value of contingent consideration through profit or loss.

2) Non-controlling interests

Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Changes in a Controlling Company’s ownership interest in a subsidiary that do not result in the Controlling Company losing control of the subsidiary are accounted for as equity transactions.

3) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of an investee begins from the date the Group obtains control of the investee and cease when the Group loses control of the investee.

SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3	Material Accounting Policies, Continued

(2)

Basis of consolidation Continued

4) Loss of control

If the Group loses control of a subsidiary, the Group derecognizes the assets and liabilities of the former subsidiary from the consolidated statement of financial position and recognizes gain or loss associated with the loss of control attributable to the former controlling interest. Any investment retained in the former subsidiary is recognized at its fair value when control is lost.

5) Interest in investees accounted for using the equity method

Interest in investees accounted for using the equity method composed of interest in associates and joint ventures.

An associate is an entity in which the Group has significant influence, but not control, over the entity’s financial and operating policies. A joint venture is a joint arrangement whereby the Group that has joint control of the arrangement has rights to the net assets of the arrangement.

The investment in an associate and a joint venture is initially recognized at cost including transaction costs and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and changes in equity of the associate or the joint venture after the date of acquisition.

6) Intra-group transactions

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group’s share of unrealized gain incurred from transactions with investees accounted for using the equity method are eliminated and unrealized loss are eliminated using the same basis if there are no evidence of asset impairments.

7) Business combinations under common control

SK Inc. is the ultimate controlling entity of the Group. The assets and liabilities acquired under business combination under common control are recognized at the carrying amounts in the ultimate controlling shareholder’s consolidated financial statements. The difference between consideration and carrying amount of net assets acquired is added to or subtracted from capital surplus and others.

(3)

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.

(4)

Inventories

Inventories are initially recognized at the acquisition cost and subsequently measured using the weighted average method. During the period, a perpetual inventory system is used to track inventory quantities, which is adjusted based on the physical inventory counts performed at the period end. When the net realizable value of inventories is less than cost, the carrying amount is reduced to the net realizable value, and any difference is charged to current period as operating expenses.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(5)

Non-derivative financial assets

1) Recognition and initial measurement

Accounts receivable – trade and debt investments issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless an accounts receivable – trade without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. An accounts receivable – trade without a significant financing component is initially measured at the transaction price.

2) Classification and subsequent measurement

On initial recognition, a financial asset is classified as measured at:

•

FVTPL

•

FVOCI – equity investment

•

FVOCI – debt investment

•

Financial assets at amortized cost

A financial asset is classified based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

•

it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

•

its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(5)

Non-derivative financial assets, Continued

2) Classification and subsequent measurement, Continued

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

•

it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

•

its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (“OCI”). This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

The following accounting policies are applied to the subsequent measurement of financial assets.


		Financial assets at FVTPL		These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

		Financial assets at amortized cost		These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

		Debt investments at FVOCI		These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

		Equity investments at FVOCI		These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(5)

Non-derivative financial assets, Continued

3) Impairment

The Group estimates the expected credit losses (“ECL”) for the debt instruments measured at amortized cost and FVOCI based on the Group’s historical experience and informed credit assessment that includes forward-looking information. The impairment approach is decided based on the assessment of whether the credit risk of a financial asset has increased significantly since initial recognition. However, the Group applies a practical expedient and recognizes impairment losses equal to lifetime ECLs for accounts receivable – trade and lease receivables from the initial recognition.

ECL is a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e., the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

At each reporting date, the Group assesses whether financial assets measured at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Loss allowance on financial assets measured at amortized cost is deducted from the carrying amount of the respective assets, while loss allowance on debt instruments at FVOCI is recognized in OCI, instead of reducing the carrying amount of the transferred assets.

4) Derecognition

Financial assets

The Group derecognizes a financial asset when:

•

the contractual rights to the cash flows from the financial asset expire; or

•

it transfers the rights to receive the contractual cash flows in a transaction in which either:

•

substantially all of the risks and rewards of ownership of the financial asset are transferred; or

•

the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group enters into transactions whereby it transfers assets recognized in its consolidated statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(5)

Non-derivative financial assets, Continued

4) Derecognition, Continued

Interest rate benchmark reform

When the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortized cost changed as a result of interest rate benchmark reform, the Group updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if the following conditions are met:

•

the change is necessary as a direct consequence of the reform; and

•

the new basis for determining the contractual cash flows is economically equivalent to the previous basis – i.e., the basis immediately before the change.

When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Group first updated the effective rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Group applied the policies on accounting for modifications to the additional changes.

5) Offsetting

Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position when the Group currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to settle the liability and realize the asset simultaneously.

A financial asset and a financial liability are offset only when the right to set off the amount is not contingent on future event and legally enforceable even on the event of default, insolvency or bankruptcy.

(6)

Derivative financial instruments, including hedge accounting

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of each reporting period, and changes therein are accounted for as described below.

1) Hedge accounting

The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designates derivatives as hedging instruments to hedge the variability in cash flow associated with highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(6)

Derivative financial instruments, including hedge accounting, Continued

1) Hedge accounting, Continued

Hedges directly affected by interest rate benchmark reform

When uncertainty arises about the interest rate benchmark designated as a hedged risk and the timing or the amount of the interest rate benchmark-based cash flows of the hedged item or of the hedging instrument as a result of IBOR reform, for the purpose of evaluating whether there is an economic relationship between the hedged items and the hedging instruments, the Group assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based is not altered as a result of interest rate benchmark reform.

For a cash flow hedge of a forecast transaction, the Group assumes that the benchmark interest rate will not be altered as a result of interest rate benchmark reform for the purpose of assessing whether the forecast transaction is highly probable and determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur.

The Group will cease applying the specific policy for assessing the economic relationship between the hedged item and the hedging instrument

•

to a hedged item or hedging instrument when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the respective item or instrument; or

•

when the hedging relationship is discontinued.

When the basis for determining the contractual cash flows of the hedged item or hedging instrument changes as a result of IBOR reform and therefore there is no longer uncertainty arising about the cash flows of the hedged item or the hedging instrument, the Group amends the hedge documentation of that hedging relationship to reflect the change(s) required by IBOR reform.

The Group amends the formal hedge documentation by the end of the reporting period during which a change required by IBOR reform is made to the hedged risk, hedged item or hedging instrument. These amendments in the formal hedge documentation do not constitute the discontinuation of the hedging relationship or the designation of a new hedging relationship.

If changes are made in addition to those changes required by interest rate benchmark reform to the financial asset or financial liability designated in a hedging relationship or to the designation of the hedging relationship, the Group determines whether those additional changes result in the discontinuation of hedging accounting. If the additional changes do not result in the discontinuation of hedging accounting, the Group amend the formal designation of the hedging relationship.

When the interest rate benchmark on which the hedged future cash flows had been based is changed as required by IBOR reform, for the purpose of determining whether the hedged future cash flows are expected to occur, the Group deems that the hedging reserve recognized in OCI for that hedging relationship is based on the alternative benchmark rate on which the hedged future cash flows will be based.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(6)

Derivative financial instruments, including hedge accounting, Continued

1) Hedge accounting, Continued

Cash flow hedge

When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

2) Other derivative financial instruments

Other derivative financial instrument not designated as a hedging instrument are measured at fair value, and the changes in fair value of the derivative financial instrument is recognized immediately in profit or loss.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(7)

Property and equipment

Property and equipment are initially measured at cost. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Property and equipment, subsequently, are carried at cost less accumulated depreciation and accumulated impairment losses.

Subsequent costs are recognized in the carrying amount of property and equipment at cost or, if appropriate, as a separate item if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

Property and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. A component that is significant compared to the total cost of property and equipment is depreciated over its separate useful life.

Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized as other non-operating income (loss).

The estimated useful lives of the Group’s property and equipment are as follows:


		Useful lives (years)
Buildings and structures		15 ~ 40
Machinery		3 ~ 15, 30
Other property and equipment		3 ~10

The Group reviews estimated residual values, expected useful lives, and depreciation methods annually at the end of each reporting date and adjusts, if appropriate. The change is accounted for as a change in an accounting estimate.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(8)

Intangible assets

Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.

Intangible assets, except for goodwill, are amortized on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, club memberships and brand are expected to be available for use as there are no foreseeable limits to the periods. These intangible assets are determined as having indefinite useful lives and, therefore, not amortized.

The estimated useful lives of the Group’s intangible assets are as follows:


		Useful lives (years)
Frequency usage rights		5 ~ 10
Land usage rights		5
Industrial rights		5, 10
Development costs		5
Facility usage rights		10, 20
Customer relations		3 ~ 15
Other		3 ~ 20

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes, if appropriate, are accounted for as changes in accounting estimates.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(8)

Intangible assets, Continued

Expenditures on research activities are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be reliably measured, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.

(9)

Investment property

Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are reported at cost less accumulated depreciation and accumulated impairment losses.

Subsequent expenditures are recognized in carrying amount of an asset or as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Group and the cost of an asset can be measured reliably. The carrying amount of those parts that are replaced is derecognized. The costs associated with routine maintenance and repairs are recognized in profit or loss as incurred.

Investment property, except for land, is depreciated on a straight-line basis over estimated useful lives of 30 years. In addition, right-of-use asset classified as investment property is depreciated using the straight-line basis from the commencement date to the end of the lease term.

The depreciation method, estimated useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(10)

Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets other than contract assets recognized for revenue arising from contracts with a customer, assets recognized for the costs to obtain or fulfill a contract with a customer, employee benefits, inventories, deferred tax assets, and non-current assets held for sale are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amounts to their carrying amounts.

The Group estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, the Group estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.

An impairment loss is recognized in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount.

Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergy arising from the business acquired. Any impairment identified at the CGU level will first reduce the carrying amount of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(11)

Leases

A contract is or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

1) Group as a lessee

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(11)

Leases, Continued

1) Group as a lessee, Continued

The right-of-use asset is subsequently depreciated using the straight-line basis from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

•

fixed payments, including in-substance fixed payments;

•

variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

•

amounts expected to be payable under a residual value guarantee; and

•

the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension of termination option of if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in ‘property and equipment’ in the statement of financial position.

The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognizes the lease payments on short-term leases and leases of low value assets as an expense on a straight-line basis over the lease term.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(11)

Leases, Continued

2) Group as a lessor

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Group is an intermediate lessor, is accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, then the Group applies KIFRS 1115 to allocate the consideration in the contract.

The Group applies derecognition and impairment requirements in KIFRS 1109 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.

The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.

(12)

Non-current assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sales rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assets (or disposal groups) must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amounts and fair value less cost to sell. The Group recognizes an impairment loss for any initial or subsequent write-down of assets (or disposal groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized.

A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(13)

Non-derivative financial liabilities

The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement. The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liabilities.

1) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, these liabilities are measured at fair value. The amount of change in fair value of financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income, and the remaining amount of change in the fair value of the liability shall be presented in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issue of the financial liability are recognized in profit or loss as incurred.

2) Other financial liabilities

Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the issue of the financial liabilities. Subsequent to initial recognition, other financial liabilities are measured at amortized cost and the interest expenses are recognized using the effective interest method.

3) Derecognition of financial liability

The Group extinguishes a financial liability only when the contractual obligation is fulfilled, canceled or expires. The Group recognizes new financial liabilities at fair value based on new contracts and eliminates existing liabilities when the contractual terms of the financial liabilities change and the cash flows change substantially.

When a financial liability is derecognized, the difference between the carrying amount and the consideration paid (including any transferred non-cash assets or liabilities assumed) is recognized in profit or loss.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(14)

Employee benefits

1) Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

2) Other long-term employee benefits

Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render related services. The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.

3) Retirement benefits: defined contribution plans

When an employee has rendered a service to the Group during a period, the Group recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Group recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

4) Retirement benefits: defined benefit plans

At the end of reporting period, defined benefit liabilities (assets) relating to defined benefit plans are recognized at present value of defined benefit obligations net of fair value of plan assets.

The calculation is performed annually by an independent actuary using the projected unit credit method. When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Group recognizes an asset, to the extent of the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.

Remeasurements of the net defined benefit liability (asset), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the beginning of the annual reporting period and considers changes in net defined benefit liability (asset) from contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are recognized through profit or loss.

When the plan amendment or curtailment occurs, gains or losses on amendment or curtailment in benefits for the past service provided are recognized through profit or loss. The Group recognizes a gain or loss on a settlement when the settlement of defined benefit plan occurs.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(15)

Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. If the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.

If some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

A provision is used only for expenditures for which the provision was originally recognized.

(16)

Emissions Rights

The Group accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission in Korea.

1) Greenhouse Gases Emission Right

Greenhouse Gases Emission Right consists of emission allowances, which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.

The Group derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.

2) Emissions liability

Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession and the unit price for such emission rights in the market at the end of the reporting period. The emissions liabilities are derecognized when they are surrendered to the government.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(17)

Transactions in foreign currencies

1) Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Exchange differences arising from monetary items except for financial liabilities designated cashflow hedging instruments are recognized in profit or loss. If a gain or loss on a non-monetary item is recognized in other comprehensive income, any foreign exchange differences are also recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any foreign exchange differences are also recognized in profit or loss.

2) Foreign operations

If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:

The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the closing rate at the reporting date.

When a foreign operation is disposed, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.

(18)

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.

When the Parent Company repurchases its own shares, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The gains or losses from the purchase, disposal, reissue, or retirement of treasury shares are directly recognized in equity being as transaction with owners.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(19)

Hybrid bond

The Group recognizes a financial instrument issued by the Group as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.

(20)

Share-based payment

For equity-settled share-based payment transaction, if the fair value of the goods or services received cannot be reliably estimated, the Group measures the value indirectly by reference to the fair value of the equity instruments granted. The related expense with a corresponding increase in capital surplus and others is recognized over the vesting period of the awards.

The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the fair value of the liability are recognized in profit or loss.

(21)

Revenue

1) Identification of performance obligations in contracts with customers

The Group identifies the distinct services or goods as performance obligations in contracts with customers such as (1) providing wireless and fixed-line telecommunications services, (2) sale of handsets and (3) providing other goods and services. In the case of providing both wireless telecommunications service and selling a handset together to one customer, the Group allocates considerations from the customer between the separate performance obligations for handset sale and wireless telecommunications service. The handset sale revenue is recognized when handset is delivered, and the wireless telecommunications service revenue is recognized over the period of the contract term as stated in the subscription contract.

2) Allocation of the transaction price to each performance obligation

The Group allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Group uses “adjusted market assessment approach” for estimating the stand-alone selling price of a good or service.

3) Incremental costs of obtaining a contract

The Group pays commissions to its retail stores and authorized dealers in connection with acquiring service contracts. The commissions paid to these parties constituted a significant portion of the Group’s operating expenses. These commissions would not have been paid if there have been no binding contracts with subscribers and, therefore, the Group capitalizes certain costs associated with commissions paid to obtain new customer contracts and amortize them over the expected contract periods.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(21)

Revenue, Continued

4) Customer loyalty programs

The Group provides customer loyalty points to customers based on the usage of the service to which the Group allocates a portion of consideration received as a performance obligation distinct from wireless telecommunications services. The amount to be allocated to the loyalty program is measured according to the relative stand-alone selling price of the customer loyalty points. The amount allocated to the loyalty program is deferred as a contract liability and is recognized as revenue when loyalty points are redeemed.

5) Consideration payable to a customer

Based on the subscription contract, a customer who uses the Group’s wireless telecommunications services may receive a discount for purchasing goods or services from a designated third party. The Group pays a portion of the price discounts that the customer receives to the third party which is viewed as consideration payable to a customer. The Group accounts for the amounts payable to the third party as a reduction of the wireless telecommunications service revenue.

(22)

Finance income and finance costs

Finance income comprises interest income on funds invested (including financial assets measured at fair value), dividend income, gains on disposal of financial assets at FVTPL, changes in fair value of financial instruments at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss when the right to receive the dividend is established.

Finance costs comprise interest expense on borrowings and debentures, changes in fair value of financial instruments at FVTPL, and losses on hedging instruments that are recognized in profit or loss. Interest expense on borrowings and debentures is recognized as it accrues in profit or loss using the effective interest rate method.

(23)

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

The Group pays income tax in accordance with the tax-consolidation system when the Parent Company and its subsidiaries are economically unified.

1) Current tax

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and includes interests and fines related to income taxes paid or payable. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(23)

Income taxes, Continued

2) Deferred tax

Deferred tax is recognized by using the asset-liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Group recognizes a deferred tax liability for all taxable temporary differences, except for the difference associated with investments in subsidiaries and associates that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes a deferred tax asset for all deductible temporary differences to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

A deferred tax asset is recognized for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. Future taxable profit is dependent on the reversal of taxable temporary differences. If there are insufficient taxable temporary differences to recognize the deferred tax asset, the business plan of the Group and the reversal of existing temporary differences are considered in determining the future taxable profit.

The Group reviews the carrying amount of a deferred tax asset at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if the Group has a legally enforceable right to offset the amount recognized and intends to settle the current tax liabilities and assets on a net basis. Income tax expense in relation to dividend payments is recognized when liabilities relating to the dividend payments are recognized.

3) Uncertainty over income tax treatments

The Group assesses the uncertainty over income tax treatments pursuant to KIFRS 1012. If the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Group reflects the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:

•

The most likely amount: the single most likely amount in a range of possible outcomes.

•

The expected value: the sum of the probability-weighted amounts in a range of possible outcomes.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(24)

Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees, if any.

(25)

Discontinued operation

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

•

represents a separate major line of business or geographic area of operations;

•

is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or

•

is a subsidiary acquired only for a purpose of resale.

When an operation is classified as a discontinued operation, the comparative statements of income and comprehensive income are re-presented as if the operation had been discontinued from the start of the comparative year.

(26)

Standards issued but not yet effective

The new and amended standards and interpretations that are issued, but not yet effective for annual period beginning after January 1, 2023 are disclosed below. The following amendments are not expected to have a significant impact on the Group’s consolidated financial statements.

•

Classification of Liabilities as Current or Non-current (Amendments to KIFRS 1001).

•

Disclosures of Information on Supplier Finance Arrangements (Amendments to KIFRS 1007 and KIFRS 1107)

•

Lease Liability in a Sale and Leaseback (Amendments to KIFRS 1116)

•

Disclosures of Crypto assets (Amendments to KIFRS 1001)

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

4.	Operating Segments

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

(1)

Segment information for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
	Cellular services		Fixed-line telecommunication services		Others			Sub-total		Adjustments			Total
Total revenue	W	14,664,180		5,095,704		603,493			20,363,377		(2,754,866	)		17,608,511
Inter-segment revenue		1,541,014		1,167,684		46,168			2,754,866		(2,754,866	)		—
External revenue		13,123,166		3,928,020		557,325			17,608,511		—			17,608,511
Depreciation and amortization		2,743,448		971,628		24,390			3,739,466		(124,700	)		3,614,766
Operating profit (loss)		1,463,934		329,072		(42,771	)		1,750,235		2,969			1,753,204
Finance income and costs, net														(279,025	)
Gain relating to investments in associates and joint ventures, net														10,928
Other non-operating income and expense, net														3,072
Profit before income tax														1,488,179


(In millions of won)
	2022
	Cellular services		Fixed-line telecommunication services		Others			Sub-total		Adjustments			Total
Total revenue	W	14,496,866		4,895,791		592,188			19,984,845		(2,679,872	)		17,304,973
Inter-segment revenue		1,554,550		1,082,802		42,520			2,679,872		(2,679,872	)		—
External revenue		12,942,316		3,812,989		549,668			17,304,973		—			17,304,973
Depreciation and amortization		2,738,547		981,838		22,730			3,743,115		(121,790	)		3,621,325
Operating profit (loss)		1,334,306		311,210		(2,126	)		1,643,390		(31,320	)		1,612,070
Finance income and costs, net														(276,489	)
Loss relating to investments in associates and joint ventures, net														(81,707	)
Other non-operating income and expense, net														(17,722	)
Profit before income tax														1,236,152

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

4.	Operating Segments, Continued

Segment information for the years ended December 31, 2023 and 2022 are as follows, Continued:

The Group principally operates its businesses in Korea and the revenue amounts earned outside of Korea are immaterial. Therefore, no entity-wide geographical information is presented.

No single customer contributed 10% or more to the Group’s total revenue for the years ended December 31, 2023 and 2022.

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


(In millions of won)
		2023		2022
Goods and Services transferred at a point in time:
Cellular revenue	Goods and others(*1)	W	993,919		969,025
Fixed-line telecommunication revenue	Goods and others		93,174		66,477
Other revenue	Others(*2)		459,905		464,805

			1,546,998		1,500,307

Goods and Services transferred over time:
Cellular revenue	Wireless service(*3)		10,328,980		10,253,217
	Cellular interconnection		432,660		471,163
	Other(*4)		1,367,607		1,248,911
Fixed-line telecommunication revenue	Fixed-line service		147,669		156,662
	Cellular interconnection		15,804		21,209
	Internet Protocol Television(*5)		1,837,209		1,816,130
	International calls		190,872		180,689
	Internet service and miscellaneous(*6)		1,643,292		1,571,822
Other revenue	Miscellaneous(*2)		97,420		84,863

			16,061,513		15,804,666

		W	17,608,511		17,304,973

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

4.	Operating Segments, Continued

(2)

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

(*1)	Cellular revenue includes revenue from sales of handsets and other electronic accessories.

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

(*3)	Wireless service includes revenue from wireless voice and data transmission services principally derived from wireless subscribers.

(*4)	Other revenue includes revenue from billing and collection services as well as other miscellaneous services.

(*5)	Internet Protocol Television (“IPTV”) service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers.

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

5.	Deposits with Restrictions on Use

Deposits which are restricted in use as of December 31, 2023 and 2022 are summarized as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Cash and cash equivalents(*)	W	58		43
Short-term financial instruments(*)		79,500		79,514
Long-term financial instruments(*)		372		375

	W	79,930		79,932

(*)

Includes the followings: i) deposits restricted in use due to the court’s order for seizure and collection of bonds; and ii) charitable trust fund established by the Group, profits from which shall be donated to charitable institutions. As of December 31, 2023, such deposits and funds cannot be withdrawn before maturity.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

6.	Trade and Other Receivables

(1)

Details of trade and other receivables as of December 31, 2023 and 2022 are as follows:


(In millions of won)	December 31, 2023
	Gross amount		Loss allowance			Carrying amount
Current assets:
Accounts receivable – trade	W	2,221,266		(242,734	)		1,978,532
Short-term loans		78,824		(695	)		78,129
Accounts receivable – other(*)		375,748		(31,398	)		344,350
Accrued income		4,295		—			4,295
Guarantee deposits (Other current assets)		129,357		—			129,357

		2,809,490		(274,827	)		2,534,663
Non-current assets:
Long-term loans		71,847		(41,392	)		30,455
Long-term accounts receivable – other(*)		314,409		(1,878	)		312,531
Guarantee deposits		157,163		(300	)		156,863
Long-term accounts receivable – trade (Other non-current assets)		12,320		(3	)		12,317

		555,739		(43,573	)		512,166

	W	3,365,229		(318,400	)		3,046,829

(*)

Gross and carrying amounts of accounts receivable – other as of December 31, 2023 include W 273,945 million of financial instruments classified as fair value through profit or loss (“FVTPL”).


(In millions of won)	December 31, 2022
	Gross amount		Loss allowance			Carrying amount
Current assets:
Accounts receivable – trade	W	2,205,530		(234,919	)		1,970,611
Short-term loans		79,298		(708	)		78,590
Accounts receivable – other(*)		522,091		(42,310	)		479,781
Accrued income		1,732		—			1,732
Guarantee deposits (Other current assets)		113,204		—			113,204

		2,921,855		(277,937	)		2,643,918
Non-current assets:
Long-term loans		71,857		(44,884	)		26,973
Long-term accounts receivable – other(*)		375,829		(1,878	)		373,951
Guarantee deposits		167,741		(300	)		167,441
Long-term accounts receivable – trade (Other non-current assets)		14,165		(4	)		14,161

		629,592		(47,066	)		582,526

	W	3,551,447		(325,003	)		3,226,444

(*)

Gross and carrying amounts of accounts receivable – other as of December 31, 2022 include W 332,669 million of financial instruments classified as fair value through profit or loss (“FVTPL”).

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

6.	Trade and Other Receivables, Continued

(2)

Changes in the loss allowance on accounts receivable – trade measured at amortized costs for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	Beginning balance		Impair ment		*Write-offs ()**			Collection of receivables previously written-off		Business combination		Ending balance
2023	W	234,923		37,906		(40,236	)		10,144		—		242,737
2022	W	238,881		27,053		(42,296	)		11,282		3		234,923

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

(3)

The Group applies the practical expedient that allows the Group to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Group uses its historical credit loss experience over the past three years and classifies the accounts receivable – trade by their credit risk characteristics and days overdue. Details of loss allowance on accounts receivable – trade as of December 31, 2023 are as follows:


(In millions of won)
		Less than 6 months			6 months ~ 1 year			1 ~ 3 years			More than 3 years
Telecommunications service revenue	Expected credit loss rate		1.51	%		69.24	%		88.55	%		99.99	%
	Gross amount	W	1,467,781			48,329			139,925			21,545
	Loss allowance		22,130			33,461			123,906			21,542

Other revenue	Expected credit loss rate		2.30	%		28.27	%		53.39	%		93.51	%
	Gross amount	W	516,401			4,100			11,378			24,127
	Loss allowance		11,903			1,159			6,075			22,561

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

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

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

7.	Prepaid expenses

The Group pays commissions to its retail stores and authorized dealers, primarily for wireless telecommunication services based on their performance of attracting new customers and renewing contracts with existing customers, and recognizes costs that would not occur in case of not signing contracts with new and existing customers as prepaid expenses among the commissions. These prepaid expenses are amortized on a straight-line basis over the periods that the Group expects to maintain its customers.

(1)

Details of prepaid expenses as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Current assets:
Incremental costs of obtaining contracts	W	1,882,296		1,888,182
Others		71,473		86,133

	W	1,953,769		1,974,315

Non-current assets:
Incremental costs of obtaining contracts	W	1,022,813		996,180
Others		63,294		77,242

	W	1,086,107		1,073,422

(2)

Incremental costs of obtaining contracts

The amortization in connection with incremental costs of obtaining contracts recognized for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Amortization recognized	W	2,505,724		2,485,593

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

8.	Contract Assets and Liabilities

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

(1)

Details of contract assets and liabilities as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Contract assets:
Allocation of consideration between performance obligations	W	129,771		132,221
Contract liabilities:
Wireless service contracts		19,149		18,544
Customer loyalty programs		7,164		7,706
Fixed-line service contracts		146,106		136,880
Others		40,074		70,792

	W	212,493		233,922

(2)

The amount of revenue recognized for the years ended December 31, 2023 and 2022 related to the contract liabilities carried forward from the prior periods are W141,460 million and W109,867 million, respectively. Details of revenue expected to be recognized from contract liabilities as of December 31, 2023 are as follows:


(In millions of won)
	Less than 1 year		1 ~ 2 years		More than 2 years		Total
Wireless service contracts	W	19,149		—		—		19,149
Customer loyalty programs		5,717		969		478		7,164
Fixed-line service contracts		93,587		9,502		43,017		146,106
Others		37,124		2,950		—		40,074

	W	155,577		13,421		43,495		212,493

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

9.	Inventories

(1)

Details of inventories as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023							December 31, 2022
	Acquisition cost		Valuation allowance			Carrying amount		Acquisition cost		Valuation allowance			Carrying amount
Merchandise	W	174,255		(7,641	)		166,614		156,919		(5,616	)		151,303
Supplies		13,195		—			13,195		15,052		—			15,052

	W	187,450		(7,641	)		179,809		171,971		(5,616	)		166,355

(2)

Inventories recognized as operating expenses for the years ended December 31, 2023 and 2022 are W1,264,302 million and W1,266,217 million, respectively, which are included in the cost of goods sold. In addition, valuation losses on inventories which are included in the cost of goods sold and other operating expenses amount to W2,025 million and W1,541 million for the years ended December 31, 2023 and 2022, respectively. Write-downs included in other operating expenses for the year ended December 31, 2023 are W19 million.

10.

Long-term Investment Securities

(1)

Details of long-term investment securities as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	Category			December 31, 2023		December 31, 2022
Equity instruments		FVOCI	(*)	W	1,398,734		1,189,597
		FVTPL			8		44,440

					1,398,742		1,234,037
Debt instruments		FVTPL			280,642		176,699

					280,642		176,699

				W	1,679,384		1,410,736

(*)	The Group designated investments in equity instruments that are not held for trading as financial assets at FVOCI, and the amounts of those equity instruments as of December 31, 2023 and 2022 are W1,398,734 million and W1,189,597 million, respectively.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

11.

Business Combinations

(1)

2023

There

were no changes in the Group due to the business combinations for the year ended December 31, 2023.

(2)

2022

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

PS&Marketing Corporation obtained control over SK m&service Co., Ltd. by acquiring its 3,099,112 shares (100%) for the year ended December 31, 2022. As this transaction is a business combination under common control, the assets acquired and liabilities assumed were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements, and the difference between the consideration transferred and the carrying amounts of net assets was recognized as capital surplus and others. Subsequent to the acquisition of control, SK m&service Co., Ltd. recognized W211,081 million of revenue and W4,157 million of net profit for the year ended December 31, 2022. In addition, assuming that the business combination occurred as of January 1, 2022, the Group would have been recognized W250,108 million of revenue and W4,695 million of net profit for the year ended December 31, 2022.

(i)

Summary of the acquiree


		Information of acquiree
Corporate name		SK m&service Co., Ltd.
Location		16^th floor, 34, Supyo-ro, Jung-gu, Seoul, Korea
CEO		Park, Jeong-Min
Industry		Database and internet website service

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

11.

Business Combinations, Continued

(ii)

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


(In millions of won)
	Amounts
I. Consideration transferred:
Cash and cash equivalents	W	72,859
II. Fair value of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		10,547
Accounts receivable – trade and other, net		76,035
Inventories, net		3,349
Property and equipment, net		27,138
Intangible assets, net		12,462
Goodwill		2,516
Other assets		10,394
Accounts payable – trade and other		(53,894	)
Income tax payable		(399	)
Lease liabilities		(6,503	)
Provisions		(991	)
Defined benefit liabilities		(2,739	)
Other liabilities		(18,337	)

		59,578

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

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

12.

Investments in Associates and Joint Ventures

(1)

Investments in associates and joint ventures accounted for using the equity method as of December 31, 2023 and 2022 are as follows:


(In millions of won)			December 31, 2023				December 31, 2022
	Country		Ownership (%)		Carrying amount		Ownership (%)		Carrying amount
Investments in associates:
SK China Company Ltd.		China		27.3	W	896,990		27.3	W	879,527
Korea IT Fund(*1)		Korea		63.3		336,404		63.3		324,860
UniSK		China		49.0		22,285		49.0		20,839
SK Technology Innovation Company		Cayman Islands		49.0		70,409		49.0		69,375
SK MENA Investment B.V.		Netherlands		32.1		14,872		32.1		14,296
SK Latin America Investment S.A.		Spain		32.1		14,607		32.1		11,961
SK South East Asia Investment Pte. Ltd.		Singapore		20.0		355,282		20.0		357,537
Citadel Pacific Telecom Holdings, LLC (*2)		USA		15.0		45,901		15.0		48,542
SM. Culture & Contents Co., Ltd.(*3)		Korea		22.8		41,578		23.1		59,611
Invites Genomics Co., Ltd.(*4) (Formerly, Invites Healthcare Co., Ltd.)		Korea		31.1		—		31.1		—
Nam Incheon Broadcasting Co., Ltd.		Korea		27.3		14,344		27.3		13,575
Home Choice Corp.(*2)		Korea		17.8		3,215		17.8		4,456
Konan Technology Inc.		Korea		20.7		6,349		20.8		8,366
CMES Inc. (*2)		Korea		7.7		900		7.7		900
SK telecom Japan Inc.(*5)		Japan		33.0		1,239		—		—
12CM JAPAN and others(*2,6,7)		—		—		81,142		—		69,734

					W	1,905,517			W	1,883,579

Investments in joint ventures:
UTC Kakao-SK Telecom ESG Fund(*8)		Korea		48.2		9,495		48.2		5,710

						9,495				5,710

					W	1,915,012			W	1,889,289

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

12.

Investments in Associates and Joint Ventures, Continued

(1)

Investments in associates and joint ventures accounted for using the equity method as of December 31, 2023 and 2022 are as follows, Continued:

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

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

(*3)	The Group recognized an impairment loss of W18,755 million as the recoverable amount was assessed to be less than the carrying amount for the year ended December 31, 2023.

(*4)	The Group recognized the carrying amount of investments in Invites Genomics Co., Ltd. (Formerly, Invites Healthcare Co., Ltd.) in its entirety as an impairment loss for the year ended December 31, 2022.

(*5)

The Group disposed of a portion of shares in SK telecom Japan Inc., which was a subsidiary of the Parent Company, to SK hynix Inc. and SK Square Co., Ltd. for W4,900 million in cash, from which it recognized W998 million of loss relating to investments in subsidiaries for the year ended December 31, 2023, and the remaining ownership interest is reclassified as investments in associates as of December 31, 2023.

(*6)

The Group additionally contributed W6,000 million of investment in KB ESG Fund of the three telecommunications companies, W28 million in F&U Credit information Co., Ltd., W215 million of investment in KDX Korea Data Exchange, W132 million of investment in SK Venture Capital, LLC, and W261 million of investment in Walden SKT Venture Fund for the year ended December 31, 2023. Also, the Group obtained significant influence by contributing W6,500 million to Telecom Daean Evaluation Jun B Corporation Co., Ltd., and W520 million to Covet Co., Ltd., for the year ended December 31, 2023.

(*7)	The Group disposed of a portion of shares in Start-up Win-Win Fund for W550 million and a portion of SK-KNET Youth Startup Investment Cooperative for W4,400 million in cash for the year ended December 31, 2023.

(*8)

The Group additionally contributed W4,000 million in cash to the investee for the year ended December 31, 2023, but there is no change in the ownership interest. The Group has joint control over the investee pursuant to the agreement with the other shareholders, thus the investment in the investee was classified as investments in joint ventures.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

12.

Investments in Associates and Joint Ventures, Continued

(2)

The market value of investments in listed associates as of December 31, 2023 and 2022 are as follows:


(In millions of won, except for share data)
	December 31, 2023						December 31, 2022
	Market price per share (in won)		Number of shares		Market value		Market price per share (in won)		Number of shares		Market value
SM.Culture & Contents Co.,Ltd.	W	1,887		22,033,898		41,578		2,960		22,033,898		65,220
Konan Technology Inc.		32,600		2,359,160		76,909		28,250		1,179,580		33,323

(3)

The condensed financial information of material associates as of and for the years ended December 31, 2023 and 2022 are as follows:



(In millions of won)
	Korea IT Fund		SK China Company Ltd.		SK South East Asia Investment Pte. Ltd.
	As of December 31, 2023
Current assets	W	128,344		1,350,607		213,522
Non-current assets		402,819		1,987,252		3,034,553
Current liabilities		—		99,083		502,728
Non-current liabilities		—		252,100		13,586


	2023
Revenue	W	33,017	70,126		76,686
Profit (loss) for the year		16,330	87,462		(66,169	)
Other comprehensive income (loss)		5,316	(56,660	)	2,779
Total comprehensive income (loss)		21,646	30,802		(63,390	)


(In millions of won)
	Korea IT Fund		SK China Company Ltd.		SK South East Asia Investment Pte. Ltd.
	As of December 31, 2022
Current assets	W	98,132		1,223,426		146,589
Non-current assets		414,804		2,050,001		3,034,335
Current liabilities		—		76,654		488,132
Non-current liabilities		—		276,525		—


	2022
Revenue	W	19,916		62,334		72,658
Profit (loss) for the year		7,505		(11,681	)	(17,504	)
Other comprehensive income (loss)		(11,779	)	58,034		(34,220	)
Total comprehensive income (loss)		(4,274	)	46,353		(51,724	)

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

12.

Investments in Associates and Joint Ventures, Continued

(4)

Reconciliations of financial information of material associates to carrying amounts of investments in associates in the consolidated financial statements as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023
	Net assets		Ownership interests (%)		Net assets attributable to the ownership interests		Cost-book value differentials		Carrying amount
Korea IT Fund	W	531,163		63.3		336,404		—		336,404
SK China Company Ltd.		2,986,676		27.3		814,503		82,487		896,990
SK South East Asia Investment Pte. Ltd.(*)		1,776,411		20.0		355,282		—		355,282


(In millions of won)
	December 31, 2022
	Net assets		Ownership interests (%)		Net assets attributable to the ownership interests		Cost-book value differentials		Carrying amount
Korea IT Fund	W	512,936		63.3		324,860		—		324,860
SK China Company Ltd.		2,920,248		27.3		796,387		83,140		879,527
SK South East Asia Investment Pte. Ltd.(*)		1,787,685		20.0		357,537		—		357,537

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

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

12.

Investments in Associates and Joint Ventures, Continued

(5)

Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)	2023
	Beginning balance		Acquisition and disposal			Share of profit (loss)			Other comprehensive income (loss)			Other increase (decrease)			Ending balance


Investments in associates:
SK China Company Ltd.	W	879,527		—			24,054			(6,591	)		—			896,990
Korea IT Fund(*1)		324,860		—			10,343			3,366			(2,165	)		336,404
UniSK(*1)		20,839		—			2,079			102			(735	)		22,285
SK Technology Innovation Company		69,375		—			(178	)		1,212			—			70,409
SK MENA Investment B.V.		14,296		—			335			241			—			14,872
SK Latin America Investment S.A.		11,961		—			1,974			672			—			14,607
SK South East Asia Investment Pte. Ltd.		357,537		—			(12,881	)		10,626			—			355,282
Citadel Pacific Telecom Holdings, LLC (*1)		48,542		—			2,628			637			(5,906	)		45,901
SM. Culture & Contents Co., Ltd.(*2)		59,611		(679	)		593			808			(18,755	)		41,578
Nam Incheon Broadcasting Co., Ltd.(*1)		13,575		—			905			—			(136	)		14,344
Home Choice Corp.		4,456		—			(1,241	)		—			—			3,215
Konan Technology Inc.		8,366		(44	)		(2,100	)		127			—			6,349
CMES Inc.		900		—			—			—			—			900
SK telecom Japan Inc.(*3)		—		—			—			—			1,239			1,239
12CM JAPAN and others(*1,4)		69,734		8,706			5,108			(2,264	)		(142	)		81,142

		1,883,579		7,983			31,619			8,936			(26,600	)		1,905,517
Investments in joint ventures:
UTC Kakao-SK Telecom ESG Fund		5,710		4,000			(215	)		—			—			9,495

		5,710		4,000			(215	)		—			—			9,495

	W	1,889,289		11,983			31,404			8,936			(26,600	)		1,915,012

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

12.

Investments in Associates and Joint Ventures, Continued

(5)

Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2023 and 2022 are as follows, Continued:

(*1)	Dividends received from the associates are deducted from the carrying amount for the year ended December 31, 2023.

(*2)	The Group recognized W18,755 million of impairment loss for the year ended December 31, 2023.

(*3)	The Group disposed of a portion of shares in SK telecom Japan Inc., which was a subsidiary of the Parent Company, resulting in the reclassification of the remaining shares as an investment in associates for the year ended December 2023.

(*4)

The acquisition for the year ended December 31, 2023 includes W6,500 million of investment in Telecom Daean Evaluation Jun B Corporation Co., Ltd., W6,000 million of investment in KB ESG Fund of the three telecommunications companies, W215 million of investment in KDX Korea Data Exchange, W132 million of investment in SK Venture Capital, LLC, W261 million of investment in Walden SKT Venture Fund, W520 million of investment in Covet Co., Ltd., and W28 million of investment in F&U Credit information Co., Ltd. The disposal for the year ended December 31, 2023 includes a portion of shares in Start-up Win-Win Fund for W550 million and a portion of SK-KNET Youth Startup Investment Cooperative for W4,400 million for the year ended December 31, 2023.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

12.

Investments in Associates and Joint Ventures, Continued

(5)

Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)	2022
	Beginning balance		Acquisition and disposal			Share of profit (loss)			Other comprehensive income (loss)			Other increase (decrease)			Ending balance


Investments in associates:
SK China Company Ltd.	W	793,754		—			(19,395	)		105,168			—			879,527
Korea IT Fund (*1)		339,976		—			4,753			(7,459	)		(12,410	)		324,860
HanaCard Co., Ltd.		349,866		(368,389	)		17,749			774			—			—
UniSK		19,156		—			2,424			(741	)		—			20,839
SK Technology Innovation Company		86,301		—			(22,923	)		5,997			—			69,375
SK MENA Investment B.V.		15,343		—			(2,059	)		1,012			—			14,296
SK Latin America Investment S.A.		14,004		—			(2,083	)		40			—			11,961
SK South East Asia Investment Pte. Ltd.		348,782		—			(6,975	)		15,730			—			357,537
Pacific Telecom Inc.		43,789		—			2,890			1,863			—			48,542
SM. Culture & Contents Co., Ltd.		60,261		37			(756	)		69			—			59,611
Digital Games International Pte. Ltd.		2,208		(1,757	)		(562	)		111			—			—
Invites Genomics Co., Ltd.(*2) (Formerly, Invites Healthcare Co., Ltd.)		26,474		—			(11,759	)		(74	)		(14,641	)		—
Nam Incheon Broadcasting Co., Ltd.(*1)		12,525		—			1,186			—			(136	)		13,575
Home Choice Corp.		3,052		—			1,403			1			—			4,456
Konan Technology Inc.		3,639		5,451			(710	)		(14	)		—			8,366
CMES Inc.(*3)		—		—			—			—			900			900
12CM JAPAN and others(*4)		68,966		1,873			1,245			—			(2,350	)		69,734

		2,188,096		(362,785	)		(35,572	)		122,477			(28,637	)		1,883,579
Investments in joint ventures:
Finnq Co., Ltd.		7,255		(3,840	)		(3,617	)		202			—			—
UTC Kakao-SK Telecom ESG Fund		2,000		4,000			(290	)		—			—			5,710

		9,255		160			(3,907	)		202			—			5,710

	W	2,197,351		(362,625	)		(39,479	)		122,679			(28,637	)		1,889,289

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

12.

Investments in Associates and Joint Ventures, Continued

(5)

Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2023 and 2022 are as follows, Continued:

(*1)	Dividends received from the associates are deducted from the carrying amount for the year ended December 31, 2022.

(*2)	The Group recognized W14,641 million of impairment loss for the year ended December 31, 2022.

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

(*4)

The acquisition for the year ended December 31, 2022 includes W2,000 million of cash investment in Smart SKT Infinitum Game Fund, W4,000 million of cash investment in KB ESG Fund of three telecommunications companies and W12 million of cash investment in SK Venture Capital, LLC. The disposal for the year ended December 31, 2022 includes W4,850 million relating to disposal of the part of shares of Start-up Win-Win Fund and W1,080 million relating to disposal of the part of shares of Daekyo Wipoongdangdang Contents Korea Fund. In addition, dividends amounting to W1,290 million received from Start-up Win-Win Fund deducted from the carrying amount for the year ended December 31, 2022.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

12.

Investments in Associates and Joint Ventures, Continued

(6)

The Group discontinued the application of equity method to the following investees due to their carrying amounts being reduced to zero. The details of cumulative unrecognized equity method losses as of December 31, 2023 are as follows:


((In millions of won)	Unrecognized loss				Unrecognized change in equity
	2023		Cumulative loss		2023		Cumulative loss
Invites Genomics Co., Ltd. (Formerly, Invites Healthcare Co., Ltd.)	W	7,844		7,844		1,179		1,179
Daehan Kanggun BcN Co., Ltd. and others		—		5,780		—		(124	)

	W	7,844		13,624		1,179		1,055

13.

Property and Equipment

(1)

Property and equipment as of December 31, 2023 and 2022 are as follows:


(In millions of won)	December 31, 2023
	Acquisition cost		Accumulated depreciation			Accumulated impairment loss			Carrying amount
Land	W	1,248,200		—			—			1,248,200
Buildings		1,775,563		(1,001,721	)		(450	)		773,392
Structures		941,868		(705,388	)		(1,601	)		234,879
Machinery		37,688,793		(29,796,000	)		(2,139	)		7,890,654
Other		1,757,617		(1,271,597	)		(863	)		485,157
Right-of-use assets		2,549,003		(933,567	)		(3,485	)		1,611,951
Construction in progress		761,963		—			—			761,963

	W	46,723,007		(33,708,273	)		(8,538	)		13,006,196


(In millions of won)	December 31, 2022
	Acquisition cost		Accumulated depreciation			Accumulated impairment loss			Carrying amount
Land	W	1,005,857		—			—			1,005,857
Buildings		1,736,257		(950,582	)		(450	)		785,225
Structures		935,276		(668,019	)		(1,601	)		265,656
Machinery		37,100,715		(29,185,881	)		(1,934	)		7,912,900
Other		1,771,890		(1,273,655	)		(841	)		497,394
Right-of-use assets		2,555,685		(766,350	)		(3,206	)		1,786,129
Construction in progress		1,069,331		—			—			1,069,331

	W	46,175,011		(32,844,487	)		(8,032	)		13,322,492

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

13.

Property and Equipment, Continued

(2)

Changes in property and equipment for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
	Beginning balance		Acquisition		Disposal			Transfer			Deprecia- tion			Impairment			Ending balance
Land	W	1,005,857		12		(388	)		242,719			—			—			1,248,200
Buildings		785,225		1,083		(294	)		41,516			(54,138	)		—			773,392
Structures		265,656		1,632		(198	)		6,446			(38,657	)		—			234,879
Machinery		7,912,900		553,541		(7,267	)		1,734,474			(2,302,789	)		(205	)		7,890,654
Other		497,394		554,595		(1,205	)		(476,097	)		(89,506	)		(24	)		485,157
Right-of-use assets		1,786,129		345,761		(86,069	)		(23,436	)		(410,032	)		(402	)		1,611,951
Construction in progress		1,069,331		1,554,922		(26	)		(1,862,264	)		—			—			761,963

	W	13,322,492		3,011,546		(95,447	)		(336,642	)		(2,895,122	)		(631	)		13,006,196


(In millions of won)
	2022
	Beginning balance		Acquisition		Disposal			Transfer			Deprecia- tion			Impairment			Business combination (*)		Ending balance
Land	W	972,800		79		(175	)		30,364			—			—			2,789		1,005,857
Buildings		794,453		1,071		(638	)		36,219			(54,463	)		—			8,583		785,225
Structures		291,279		2,288		(32	)		10,422			(38,301	)		—			—		265,656
Machinery		7,997,927		560,889		(49,586	)		1,696,447			(2,292,358	)		(419	)		—		7,912,900
Other		487,716		780,382		(938	)		(672,199	)		(105,730	)		(391	)		8,554		497,394
Right-of-use assets		1,559,333		720,932		(65,961	)		(27,579	)		(403,794	)		(3,133	)		6,331		1,786,129
Construction in progress		767,751		1,564,345		(1,709	)		(1,261,937	)		—			—			881		1,069,331

	W	12,871,259		3,629,986		(119,039	)		(188,263	)		(2,894,646	)		(3,943	)		27,138		13,322,492

(*)	Includes assets acquired from SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company for the year ended December 31, 2022.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

14.

Investment Property

(1)

Investment property as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023							December 31, 2022
	Acquisition cost		Accumulated depreciation			Carrying amount		Acquisition cost		Accumulated depreciation			Carrying amount
	Acquisition cost		Accumulated depreciation			Carrying amount		Acquisition cost		Accumulated depreciation			Carrying amount
Land	W	14,199		—			14,199		6,115		—			6,115
Buildings		27,462		(17,220	)		10,242		21,490		(14,606	)		6,884
Right-of-use assets		16,975		(6,604	)		10,371		17,057		(4,919	)		12,138

	W58,636		(23,824)			34,812		44,662		(19,525)			25,137

(2)

Changes in investment property for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
	Beginning balance		Transfer		Depreciation			Ending balance
Land	W	6,115		8,084		—			14,199
Buildings		6,884		5,343		(1,985	)		10,242
Right-of-use assets		12,138		473		(2,240	)		10,371

	W	25,137		13,900		(4,225	)		34,812


(In millions of won)
	2022
	Beginning balance		Transfer		Depreciation			Ending balance
Land	W	6,071		44		—			6,115
Buildings		7,353		564		(1,033	)		6,884
Right-of-use assets		9,610		4,124		(1,596	)		12,138

	W	23,034		4,732		(2,629	)		25,137

(3)

The Group recognized lease income of W6,202 million and W5,222 million from investment property for the years ended December 31, 2023 and 2022, respectively.

(4)

The fair value of investment property is W70,138 million and W73,934 million as of December 31, 2023 and 2022, respectively.

15.

Leases

(1)

Group as a lessee

Details of the right-of-use assets as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Right-of-use assets:
Land, buildings and structures	W	1,376,721		1,546,918
Others		235,230		239,211

	W	1,611,951		1,786,129

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

15.

Leases, Continued

(1)

Group as a lessee, Continued

2) Details of amounts recognized in the consolidated statements of income for the years ended December 31, 2023 and 2022 as a lessee are as follows:


(In millions of won)
	2023		2022
Depreciation of right-of-use assets:
Land, buildings and structures	W	346,931		346,499
Others(*)		63,101		57,295

	W	410,032		403,794

Interest expense on lease liabilities	W	46,595		29,996

(*)	Others include the amount reclassified as research and development expenses related to the lease contract for research and development facilities.

Expenses related to short-term leases and leases of low-value assets that the Group recognized are immaterial.

3) The total cash outflows due to lease payments for the years ended December 31, 2023 and 2022 amounted to W474,410 million and W449,196 million, respectively.

(2)

Group as a lessor

1) Finance lease

The Group recognized interest income of W800 million and W910 million on lease receivables for the years ended December 31, 2023 and 2022, respectively.

The following table sets out a maturity analysis for lease receivables, presenting the undiscounted lease payments to be received subsequent to December 31, 2023.


(In millions of won)
	Amount
Less than 1 year	W	11,499
1 ~ 2 years		3,306
2 ~ 3 years		1,517
3 ~ 4 years		693
4 ~ 5 years		271

Undiscounted lease payments	W	17,286

Unrealized finance income	W	360
Net investment in the lease		16,926

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

15.

Leases, Continued

(2)

Group as a lessor, Continued

2) Operating lease

The Group recognized lease income of W235,988 million and W246,279 million for the years ended December 31, 2023 and 2022, respectively, of which variable lease payments received are W2,694 million and W8,622 million, respectively.

The following table sets out a maturity analysis of lease payments, presenting the undiscounted fixed payments to be received subsequent to December 31, 2023.


(In millions of won)
	Amount
Less than 1 year	W	148,980
1 ~ 2 years		91,033
2 ~ 3 years		48,701

	W	288,714

16.

Goodwill

(1)

Goodwill as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Goodwill related to merger of Shinsegi Telecom, Inc.	W	1,306,236		1,306,236
Goodwill related to acquisition of SK Broadband Co., Ltd.		764,082		764,082
Other goodwill		4,691		4,691

	W	2,075,009		2,075,009

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

16.

Goodwill, Continued

(2)

Details of the impairment testing of Goodwill as of December 31, 2023 is as follows:

Goodwill is allocated to the following CGUs for the purpose of impairment testing.

•

goodwill related to Shinsegi Telecom, Inc.(*1): Cellular services;

•

goodwill related to SK Broadband Co., Ltd.(*2): Fixed-line telecommunication services; and

•

other goodwill: Others.

(*1)	Goodwill related to merger of Shinsegi Telecom, Inc.

The recoverable amount of the CGU is based on its value in use calculated by applying the post-tax annual discount rate of 5.4% (2022: 6.7%) (pre-tax annual discount rate for 2023 and 2022: 8.4% and 9.0%) to the estimated future post-tax cash flows based on financial budgets for the next five years. An annual growth rate of 0.0% (2022: 0.0%) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term wireless telecommunication industry growth rate.

(*2)	Goodwill related to acquisition of SK Broadband Co., Ltd.

The recoverable amount of the CGU is based on its value in use calculated by applying the post-tax annual discount rate of 6.2% (2022: 6.7%) (pre-tax annual discount rate for 2023 and 2022: 7.9% and 8.5%) to the estimated future post-tax cash flows based on financial budgets for the next five years. An annual growth rate of 1.0% (2022: 1.0%) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term fixed-line telecommunication industry growth rate.

(3)

Details of the changes in goodwill for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Beginning balance	W	2,075,009		2,072,493
Acquisition(*)		—		2,516

Ending balance	W	2,075,009		2,075,009

(*)	It consists of goodwill recognized as PS&Marketing Corporation’s acquisition of SK m&service Co., Ltd for the years ended December 31, 2022 (See Note 11).

As of December 31, 2023 and 2022, accumulated impairment losses are W33,441 million, respectively.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

17.

Intangible Assets

(1)

Intangible assets as of December 31, 2023 and 2022 are as follows:


(In millions of won)	December 31, 2023
	Acquisition cost		Accumulated amortization			Accumulated impairment loss			Carrying amount
Frequency usage rights(*1)	W	3,564,907		(1,958,301	)		—			1,606,606
Land usage rights		57,106		(56,519	)		—			587
Industrial rights		97,993		(34,141	)		(17,698	)		46,154
Development costs		14,815		(14,766	)		—			49
Facility usage rights		159,891		(145,578	)		—			14,313
Customer relations		505,063		(231,913	)		—			273,150
Club memberships(*2)		121,895		—			(24,709	)		97,186
Other(*3)		4,851,168		(4,020,886	)		(7,190	)		823,092

	W	9,372,838		(6,462,104	)		(49,597	)		2,861,137


(In millions of won)	December 31, 2022
	Acquisition cost		Accumulated amortization			Accumulated impairment loss			Carrying amount
Frequency usage rights(*1)	W	3,767,590		(1,499,158	)		(186,000	)		2,082,432
Land usage rights		59,389		(58,165	)		—			1,224
Industrial rights		94,238		(30,068	)		(12,378	)		51,792
Development costs		14,497		(14,213	)		—			284
Facility usage rights		157,651		(142,654	)		—			14,997
Customer relations		505,063		(204,882	)		—			300,181
Club memberships(*2)		116,401		—			(24,430	)		91,971
Other(*3)		4,627,565		(3,839,030	)		(6,506	)		782,029

	W	9,342,394		(5,788,170	)		(229,314	)		3,324,910

(*1)

The Parent Company was reassigned 800 MHz, 1.8 GHz and 2.1 GHz band of frequency licenses from the Ministry of Science and Information and Communication Technology (“ICT”) in exchange for W227,200 million, W547,800 million and W411,700 million, respectively, for the year ended December 31, 2021. The band of frequency was assigned to the Parent Company at the date of initial lump sum payment for the year ended December 31, 2021 and the annual payments in installment for the remaining balances are made in the next five years starting from the date of initial lump sum payment.

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

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

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

17.

Intangible Assets, Continued

(2)

Changes in intangible assets for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Impairment *(1)**			Ending balance
Frequency usage rights	W	2,082,432		—		—			—		(475,826	)		—			1,606,606
Land usage rights		1,224		155		(15	)		40		(817	)		—			587
Industrial rights		51,792		4,563		(350	)		—		(4,530	)		(5,321	)		46,154
Development costs		284		—		—			—		(234	)		(1	)		49
Facility usage rights		14,997		1,884		(16	)		981		(3,533	)		—			14,313
Customer relations		300,181		—		—			—		(27,031	)		—			273,150
Club memberships		91,971		7,619		(2,174	)		65		—			(295	)		97,186
Other		782,029		91,848		(1,752	)		294,567		(339,478	)		(4,122	)		823,092

	W	3,324,910		106,069		(4,307	)		295,653		(851,449	)		(9,739	)		2,861,137

(*1)	The Group recognized the difference between recoverable amount and the carrying amount of intangible assets amounting to W9,739 million as impairment loss for the year ended December 31, 2023.


(In millions of won)
	2022
	Beginning balance		Acquisition		Disposal			Transfer			Amortization			Impairment (*1)			Business Combination *(2)**		Ending balance
Frequency usage rights	W	2,559,689		—		—			—			(477,257	)		—			—		2,082,432
Land usage rights		2,732		—		—			—			(1,508	)		—			—		1,224
Industrial rights		55,954		13,428		(823	)		(103	)		(4,324	)		(12,343	)		3		51,792
Development costs		200		—		—			—			(573	)		—			657		284
Facility usage rights		17,874		1,396		(2	)		252			(4,523	)		—			—		14,997
Customer relations		327,257		—		—			—			(27,076	)		—			—		300,181
Club memberships		88,494		9,926		(7,113	)		—			—			(725	)		1,389		91,971
Other		817,569		108,144		(380	)		189,075			(342,776	)		(16	)		10,413		782,029

	W	3,869,769		132,894		(8,318	)		189,224			(858,037	)		(13,084	)		12,462		3,324,910

(*1)	The Group recognized the difference between recoverable amount and the carrying amount of intangible assets amounting to W13,084 million as impairment loss for the year ended December 31, 2022.

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

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

17.

Intangible Assets, Continued

(3)

Research and development expenditures recognized as expense for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Research and development costs expensed as incurred	W	369,507		340,864

(4)	Details of frequency usage rights as of December 31, 2023 are as follows:


(In millions of won)
	Amount		Description	Commencement of amortization	Completion of amortization
800MHz license	W	109,789	LTE service	Jul. 2021	Jun. 2026
1.8GHz license		308,534	LTE service	Dec. 2021	Dec. 2026
2.6GHz license		364,250	LTE service	Sep. 2016	Dec. 2026
2.1GHz license		231,879	W-CDMA and LTE service	Dec. 2021	Dec. 2026
3.5GHz license		592,154	5G service	Apr. 2019	Nov. 2028

	W1,606,606

18.

Borrowings and Debentures

(1)

Short-term borrowings as of December 31, 2023 and 2022 are as follows:


(In millions of won)
Lender	Annual interest rate (%)		Maturity		December 31, 2023		December 31, 2022
BNK Securities. Co., Ltd.		—		—	W	—		100,000
KEB Hana Bank		—		—		—		30,000
Hana Financial Investment Co., Ltd.		—		—		—		4,642
DB Financial Investment Co., Ltd.		—		—		—		2,785
Shinhan Financial Investment Co., Ltd.		—		—		—		5,571

					W	—		142,998

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

18.

Borrowings and Debentures, Continued

(2)

Long-term borrowings as of December 31, 2023 and 2022 are as follows:


(In millions of won)
Lender	Annual interest rate (%)		Maturity	December 31, 2023			December 31, 2022
Korea Development Bank(*1)		1.87	Feb. 10, 2026	W	28,125			40,625
Credit Agricole CIB(*2)		3M CD + 0.82	Dec. 14, 2023		—			12,500
Mizuho bank, Ltd.		1.35	May. 20, 2024		100,000			100,000
DBS bank Ltd.		1.30	May. 28, 2024		200,000			200,000
DBS bank Ltd.		2.65	Mar. 10, 2025		200,000			200,000
Credit Agricole CIB		3.30	Apr. 29, 2024		50,000			50,000
Mizuho Bank, Ltd.		3.29	Nov. 27, 2023		—			100,000
Nonghyup Bank(*3)		MOR + 1.36	Nov. 17, 2024		40,000			40,000
Credit Agricole CIB		4.89	Nov. 28, 2025		50,000			50,000
Mizuho Bank, Ltd.(*2)		3M CD + 1.05	Jul. 25, 2025		50,000			—

					718,125			793,125
Less: present value discount					(47	)		(13	)

					718,078			793,112
Less: current portions					(402,500	)		(124,987	)

				W	315,578			668,125

(*1)	The long-term borrowings are to be repaid by installments on an annual basis from 2022 to 2026.

(*2)	3M CD rates are 3.83% and 3.98% as of December 31, 2023 and 2022, respectively.

(*3)	6M MOR rates are 3.85% and 4.35% as of December 31, 2023 and 2022, respectively.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

18.

Borrowings and Debentures, Continued

(3)

Debentures as of December 31, 2023 and 2022 are as follows:


(In millions of won and thousands of U.S. dollars)
	Purpose	Maturity	Annual interest rate (%)	December 31, 2023		December 31, 2022
Unsecured corporate bonds	Operating and refinancing fund	2032	3.45		W90,000		90,000
Unsecured corporate bonds	Operating fund	2023	3.03		—		230,000
Unsecured corporate bonds		2033	3.22		130,000		130,000
Unsecured corporate bonds		2024	3.64		150,000		150,000
Unsecured corporate bonds	Refinancing fund	2024	2.82		190,000		190,000
Unsecured corporate bonds	Operating and	2025	2.49		150,000		150,000
Unsecured corporate bonds	refinancing fund	2030	2.61		50,000		50,000
Unsecured corporate bonds	Operating fund	2025	2.66		70,000		70,000
Unsecured corporate bonds		2030	2.82		90,000		90,000
Unsecured corporate bonds	Operating and	2025	2.55		100,000		100,000
Unsecured corporate bonds	refinancing fund	2035	2.75		70,000		70,000
Unsecured corporate bonds	Operating fund	2026	2.08		90,000		90,000
Unsecured corporate bonds		2036	2.24		80,000		80,000
Unsecured corporate bonds		2026	1.97		120,000		120,000
Unsecured corporate bonds		2031	2.17		50,000		50,000
Unsecured corporate bonds	Refinancing fund	2027	2.55		100,000		100,000
Unsecured corporate bonds	Operating and refinancing fund	2032	2.65		90,000		90,000
Unsecured corporate bonds	Refinancing fund	2027	2.84		100,000		100,000
Unsecured corporate bonds		2023	2.81		—		100,000
Unsecured corporate bonds		2028	3.00		200,000		200,000
Unsecured corporate bonds		2038	3.02		90,000		90,000
Unsecured corporate bonds	Operating and	2023	2.33		—		150,000
Unsecured corporate bonds	refinancing fund	2038	2.44		50,000		50,000
Unsecured corporate bonds	Operating fund	2024	2.09		120,000		120,000
Unsecured corporate bonds		2029	2.19		50,000		50,000
Unsecured corporate bonds		2039	2.23		50,000		50,000
Unsecured corporate bonds	Operating and	2024	1.49		60,000		60,000
Unsecured corporate bonds	refinancing fund	2029	1.50		120,000		120,000
Unsecured corporate bonds		2039	1.52		50,000		50,000
Unsecured corporate bonds		2049	1.56		50,000		50,000
Unsecured corporate bonds	Operating fund	2024	1.76		70,000		70,000
Unsecured corporate bonds		2029	1.79		40,000		40,000
Unsecured corporate bonds		2039	1.81		60,000		60,000
Unsecured corporate bonds	Operating and refinancing fund	2023	1.64		—		170,000

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

18.

Borrowings and Debentures, Continued

(3)

Debentures as of December 31, 2023 and 2022 are as follows, Continued:


(In millions of won and thousands of U.S. dollars)
	Purpose	Maturity	Annual interest rate (%)	December 31, 2023		December 31, 2022
Unsecured corporate bonds	Operating fund	2025	1.75		130,000		130,000
Unsecured corporate bonds		2030	1.83		50,000		50,000
Unsecured corporate bonds		2040	1.87		70,000		70,000
Unsecured corporate bonds	Refinancing fund	2025	1.40		140,000		140,000
Unsecured corporate bonds		2030	1.59		40,000		40,000
Unsecured corporate bonds		2040	1.76		110,000		110,000
Unsecured corporate bonds		2024	1.17		80,000		80,000
Unsecured corporate bonds		2026	1.39		80,000		80,000
Unsecured corporate bonds		2031	1.80		50,000		50,000
Unsecured corporate bonds		2041	1.89		100,000		100,000
Unsecured corporate bonds		2024	2.47		90,000		90,000
Unsecured corporate bonds		2026	2.69		70,000		70,000
Unsecured corporate bonds		2041	2.68		40,000		40,000
Unsecured corporate bonds		2025	3.80		240,000		240,000
Unsecured corporate bonds		2027	3.84		70,000		70,000
Unsecured corporate bonds		2042	3.78		40,000		40,000
Unsecured corporate bonds		2025	4.00		300,000		300,000
Unsecured corporate bonds		2027	4.00		95,000		95,000
Unsecured corporate bonds		2024	4.79		100,000		100,000
Unsecured corporate bonds		2025	4.73		110,000		110,000
Unsecured corporate bonds		2027	4.74		60,000		60,000
Unsecured corporate bonds		2032	4.69		40,000		40,000
Unsecured corporate bonds		2026	3.65		110,000		—
Unsecured corporate bonds		2028	3.83		190,000		—
Unsecured corporate bonds		2026	3.72		80,000		—
Unsecured corporate bonds		2028	3.80		200,000		—
Unsecured corporate bonds		2030	3.96		70,000		—
Unsecured corporate bonds		2026	4.54		115,000		—
Unsecured corporate bonds		2028	4.68		100,000		—
Unsecured corporate bonds		2030	4.72		50,000		—
Unsecured corporate bonds		2033	4.72		30,000		—
Unsecured corporate bonds(*1)	Operating fund	2023	2.93		—		80,000
Unsecured corporate bonds(*1)	Refinancing fund	2024	2.09		160,000		160,000
Unsecured corporate bonds(*1)	Operating and	2024	1.71		100,000		100,000
Unsecured corporate bonds(*1)	refinancing fund	2026	1.86		50,000		50,000
Unsecured corporate bonds(*1)	Refinancing fund	2023	1.48		—		100,000
Unsecured corporate bonds(*1)	Operating and refinancing fund	2025	1.64		100,000		100,000

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

18.

Borrowings and Debentures, Continued

(3)

Debentures as of December 31, 2023 and 2022 are as follows, Continued:


(In millions of won and thousands of U.S. dollars)
	Purpose	Maturity	Annual interest rate (%)	December 31, 2023			December 31, 2022
Unsecured corporate bonds(*1)	Refinancing fund	2025	1.41		160,000			160,000
Unsecured corporate bonds(*1)		2024	1.69		100,000			100,000
Unsecured corporate bonds(*1)		2025	2.58		100,000			100,000
Unsecured corporate bonds(*1)		2032	2.92		50,000			50,000
Unsecured corporate bonds(*1)	Operating and	2025	4.21		50,000			—
Unsecured corporate bonds(*1)	refinancing fund	2026	4.28		100,000			—
Unsecured corporate bonds(*1)		2028	4.37		90,000			—
Unsecured corporate bonds(*1)	Facility fund	2026	4.87		100,000			—
Unsecured corporate bonds(*1)		2028	5.00		60,000			—
Unsecured global bonds	Operating fund	2027	6.63		515,760 (USD 400,000	)		506,920 (USD 400,000	)
Unsecured global bonds		2023	3.75		—			633,650 (USD 500,000	)
Unsecured global bonds(*1)	Refinancing fund	2023	3.88		—			380,190 (USD 300,000	)
Unsecured global bonds(*1)		2028	4.88		386,820 (USD 300,000	)		—
Floating rate notes(*2)	Operating fund	2025	SOFR rate + 1.17		386,820 (USD 300,000	)		380,190 (USD 300,000	)
Convertible bonds(*3)	Operating fund	2028	—		3,868 (USD 3,000	)		—
Convertible bonds(*3)		2028	—		3,868 (USD 3,000	)		—
Convertible bonds(*3)		2028	—		2,579 (USD 2,000	)		—
Convertible bonds(*3)		2028	—		10,444 (USD 8,100	)		—
Convertible bonds(*3)		2028	—		20,824 (USD 16,150	)		—
Convertible bonds(*3)		2028	—		9,993 (USD 7,750	)		—
Convertible bonds(*3)		2028	—		10,315 (USD 8,000	)		—

					8,351,291			8,385,950
Less: discounts on bond					(25,648	)		(19,256	)

					8,325,643			8,366,694
Less: current portions of bonds					(1,219,344	)		(1,842,599	)

				W	7,106,299			6,524,095

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

18.

Borrowings and Debentures, Continued

(3)

Debentures as of December 31, 2023 and 2022 are as follows, Continued:

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

(*2) Interest rates applied are SOFR rate 5.38% as of December 31, 2023 and LIBOR rate (3 month) 4.75% + 0.91% as of December 31, 2022.

(*3) Convertible bonds were issued by SAPEON Inc., a subsidiary of the Parent Company, and the conditions for issuing convertible bonds and changes are as follows:

As of December 31, 2023, the conditions for issuing convertible bonds are as follows:

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

Series

Total amount of convertible bonds authorized

3,868

(USD 3,000

)

3,868

(USD 3,000

)

2,579

(USD 2,000

)

10,444

(USD 8,100

)

20,824

(USD 16,150

)

Coupon rate

0% (However, if not converted, 4% from January 1, 2025, to three
years from the issue date, and 8% thereafter until the maturity of the
convertible bonds)

Repayment of interest and principal

Lump-sum repayment at maturity with accrued interest added to the
issued amount

Convertible period

Until the maturity date or the mandatory conversion date

Type of shares to be issued upon conversion

Registered common stock or securities identical to subsequent
investments

Conversion ratio

100%

Conversion price (In U.S. dollars)

USD 410.22 per share

Early redemption right

Exercisable from January 1, 2025, in case of non-fulfillment of certain
conditions


(In millions of won and thousands of U.S. dollars)
	Series
	6	7
Total amount of convertible bonds authorized	9,993 (USD 7,750)	10,315 (USD 8,000)
Coupon rate	0%(However, if not converted, 4% from January 1, 2025, to three years from the issue date, and 8% thereafter until the maturity of the convertible bonds)
Repayment of interest and principal	Lump-sum repayment at maturity with accrued interest added to the issued amount
Convertible period	Until the maturity date or the mandatory conversion date
Type of shares to be issued upon conversion	Registered common stock or securities identical to subsequent investments
Conversion ratio	100%
Conversion price (In U.S. dollars)	USD 410.22 per share
Early redemption right	Exercisable from January 1, 2025, in case of non-fulfillment of certain conditions

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

18.

Borrowings and Debentures, Continued

(3)

Debentures as of December 31, 2023 and 2022 are as follows, Continued:

(*3) Convertible bonds were issued by SAPEON Inc., a subsidiary of the Parent Company, and the conditions for issuing convertible bonds and changes are as follows, Continued

The conversion rights of the aforementioned convertible bonds are classified as equity

The carrying amount of changes in the liability component (present value of non-convertible bonds) of the convertible bonds for the year ended December 31, 2023 are as follows


(In millions of won and thousands of U.S. dollars)
	2023
Beginning balance		—
Issuance of convertible bonds		54,284 (USD 41,932	)
Amortization based on effective interest rate		4,951 (USD 4,007	)

Ending balance		59,235 (USD 45,939	)

The liability component of convertible bonds (present value of non-convertible bonds) is measured at amortized cost using the effective interest rate.

19.

Long-term Payables – other

(1)

As of December 31, 2023 and 2022, details of long-term payables – other which consist of payables related to the acquisition of frequency usage rights are as follows (See note 17):


(In millions of won)
	December 31, 2023			December 31, 2022
Long-term payables – other	W	1,290,225			1,690,470
Present value discount on long-term payables – other		(29,772	)		(52,129	)
Current portion of long-term payables – other		(367,770	)		(398,874	)

Carrying amount as of December 31	W	892,683			1,239,467

(2)

The sum of portions repaid among the principal of long-term payables – other for the years ended December 31, 2023 and 2022 amounts to W400,245 million and W400,245 million, respectively. The repayment schedule of the principal amount of long-term payables – other as of December 31, 2023 is as follows:


(In millions of won)
	Amount
Less than 1 year	W	369,150
1 ~ 3 years		738,300
3 ~ 5 years		182,775

	W	1,290,225

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

20.

Provisions

Changes in provisions for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023															As of December 31, 2023
	Beginning balance		Increase		Utilization			Reversal			Other			Ending balance		Current		Non-current
Provision for restoration	W	115,089		8,041		(2,397	)		(714	)		5			120,024		37,073		82,951
Emission allowance		2,186		2,404		(635	)		(2,773	)		—			1,182		1,182		—
Other provisions		1,823		—		(1,005	)		(108	)		(492	)		218		—		218

	W	119,098		10,445		(4,037	)		(3,595	)		(487	)		121,424		38,255		83,169


(In millions of won)
	2022																	As of December 31, 2022
	Beginning balance		Increase		Utilization			Reversal			Other			Business combination		Ending balance		Current		Non-current
Provision for restoration	W	114,731		6,823		(5,679	)		(1,767	)		(10	)		991		115,089		36,998		78,091
Emission allowance		1,885		2,719		—			(2,418	)		—			—		2,186		2,186		—
Other provisions		10,379		4,071		(9,509	)		(3,080	)		(38	)		—		1,823		499		1,324

	W	126,995		13,613		(15,188	)		(7,265	)		(48	)		991		119,098		39,683		79,415

21.

Defined Benefit Liabilities (Assets)

(1)

Details of defined benefit liabilities (assets) as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023			December 31, 2022
Present value of defined benefit obligations	W	1,121,679			1,038,320
Fair value of plan assets		(1,292,416	)		(1,214,007	)

Defined benefit assets(*)		(170,737	)		(175,748	)

Defined benefit liabilities		—			61

(*)

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

(2)

Principal actuarial assumptions as of December 31, 2023 and 2022 are as follows:


	December 31, 2023	December 31, 2022
Discount rate for defined benefit obligations	3.71% ~ 4.79%	5.09% ~ 5.71%
Expected rate of salary increase	2.00% ~ 5.27%	2.00% ~ 8.37%

Discount rate for defined benefit obligation is determined based on market yields of high-quality corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of salary increase is determined based on the Group’s historical promotion index, inflation rate and salary increase ratio.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

21.

Defined Benefit Liabilities (Assets), Continued

(3)

Changes in present value of defined benefit obligations for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Beginning balance	W	1,038,320			1,035,016
Current service cost		132,465			134,847
Interest cost		54,032			32,572
Remeasurement
- Demographic assumption		810			(28,222	)
- Financial assumption		(24,953	)		(84,532	)
- Adjustment based on experience		18,814			2,369
Business combinations(*1)		—			29,357
Benefit paid		(99,396	)		(79,117	)
Others(*2)		1,587			(3,970	)

Ending balance	W	1,121,679			1,038,320

(*1)

Includes liabilities acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company for the year ended December 31, 2022.

(*2)

Others include changes in liabilities due to employee’s transfers among affiliates for the years ended December 31, 2023 and 2022.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

21.

Defined Benefit Liabilities (Assets), Continued

(4)

Changes in fair value of plan assets for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Beginning balance	W	1,214,007			1,040,286
Interest income		62,058			32,910
Remeasurement		(2,140	)		(18,622	)
Contributions		108,224			215,254
Benefit paid		(90,452	)		(83,123	)
Business combinations(*1)		—			26,618
Others(*2)		719			684

Ending balance	W	1,292,416			1,214,007

(*1)

Includes liabilities acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company for the years ended December 31, 2022.

(*2)

Others include changes in assets due to the employee’s transfers among affiliates for the years ended December 31, 2023 and 2022.

The Group’s expected contributions to the defined benefit plan for the year ended December 31, 2024, amounts to W150,608 million.

(5)

Total cost of defined benefit plan, which is recognized in profit or loss for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Current service cost	W	132,465			134,847
Net interest income		(8,026	)		(338	)

	W	124,439			134,509

Costs related to the defined benefit plan except for the amounts transferred to construction in progress are included in labor expenses and research and development expenses.

(6)

Details of plan assets as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Equity instruments	W	72,619		17,716
Debt instruments		162,374		174,385
Short-term financial instruments, etc.		1,057,423		1,021,906

	W	1,292,416		1,214,007

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

21.

Defined Benefit Liabilities (Assets), Continued

(7)

Sensitivity analysis

As of December 31, 2023, effects on defined benefit obligations if each of significant actuarial assumptions changes within expectable and reasonable range are as follows:


(In millions of won)
	0.5% Increase			0.5% Decrease
Discount rate	W	(37,694	)		40,345
Expected salary increase rate		40,624			(38,319	)

The sensitivity analysis does not consider dispersion of all cash flows that are expected from the plan but provides approximate values of sensitivity for the assumptions used.

A weighted average duration of defined benefit obligations as of December 31, 2023 and 2022 are 7.27 years and 7.53 years, respectively.

(8)

Defined contribution plan

The amount recognized as an expense for defined contribution plans are W20,404 million and W15,529 million for the years ended December 31, 2023 and 2022, respectively.

22.

Derivative Instruments

(1)

Currency and interest rate swap contracts under cash flow hedge accounting as of December 31, 2023 are as follows:


(In millions of won and thousands of U.S. dollars)
Borrowing date	Hedging Instrument (Hedged item)	Hedged risk	Financial institution	Duration of contract
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)	Foreign currency risk	Morgan Stanley and four other banks	Jul. 20, 2007 ~ Jul. 20, 2027
Mar. 4, 2020	Floating-to-fixed cross-currency interest rate swap (U.S. dollar-denominated bonds face value of USD 300,000)	Foreign currency risk and Interest rate risk	Citibank	Mar. 4, 2020 ~ Jun. 4, 2025
Jun. 28, 2023	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000)	Foreign currency risk	Citi bank, Shinhan Bank, Korea Development Bank and J.P. Morgan	Jun. 28, 2023 ~ Jun. 28, 2028

As of December 31, 2023, the changes in fair value of derivatives designated as hedging instrument, which are all effective in hedging, were recognized in full in other comprehensive income.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

22.

Derivative Instruments, Continued

(2)

SK Broadband Co., Ltd., a subsidiary of the Parent Company, entered into Total Return Swap(TRS) contract amounting to W270,000 million and W64,000 million with beneficiary certificates as underlying asset with IGIS Professional Investment Type Private Real Estate Investment Trust No. 156 and Hana Professional Alternative Investment Type Private Real Estate Investment Trust No. 62, respectively. The contracts consist of the settlement of the difference resulting from the change in the value of the real estate on the maturity date of the contract and the settlement of the difference between the dividend and the standard dividend during the contract period. SK Broadband Co., Ltd. has an obligation to guarantee fixed rate of returns to the other party to each contract. SK Broadband Co., Ltd. recognized long-term derivative financial assets of W21,027 million and W20,631 million for TRS as of December 31, 2023 and 2022, respectively. Long-term derivative financial assets were measured using the discounted present value methods for estimated future cash flows.

(3)

In relation to the business acquisition by SK Broadband Co., Ltd. for the year ended December 31, 2020 the Parent Company has entered into a shareholders’ agreement with the shareholders of the acquirees. Pursuant to the agreement, when certain conditions are met within a period of time subsequent to the merger, the shareholders of the acquirees can exercise their drag-along rights and require the Parent Company to sell its shares in SK Broadband Co., Ltd. Should the shareholders exercise their drag-along rights, the Parent Company also can exercise its call options over the shares held by those shareholders. The Group recognized a long-term derivative financial liability of W295,876 million (W302,593 million as of December 31, 2022) for the rights prescribed in the shareholders’ agreement as of December 31, 2023.

The fair value of SK Broadband Co., Ltd.’s common stock was estimated using 5-year projected cash flows discounted at 6.2% per annum. The fair value of the derivative financial liability was determined by using the Binomial Model based on various assumptions including the price of common stock and its price fluctuations. The significant unobservable inputs used in the fair value measurement and inter-relationship between significant unobservable inputs and fair value measurement are as follows:


Significant unobservable inputs		Correlations between inputs and fair value measurements
Fair value of SK Broadband Co., Ltd.’s common stock		The estimated fair value of derivative financial liabilities would decrease (increase) if the fair value of common stock would increase (decrease)
Volatility of stock price		The estimated fair value of derivative financial liabilities would decrease (increase) if the volatility of stock price increase (decrease)

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

22.

Derivative Instruments, Continued

(4)

The Parent Company has entered into the agreement with Newberry Global Limited, whereby the Group has been granted subscription right and contingent subscription right to acquire Newberry series-C redeemable convertible preferred stock for the year ended December 31, 2020. The Parent Company recognized derivative financial assets of W13,136 million and W8,083 million as of December 31, 2022, respectively, for subscription right and contingent subscription right. There is no balance for derivative financial assets as of December 31, 2023, as the exercise period expired without the exercise of subscription rights and contingent subscription rights for the year ended December 31, 2023.

(5)

The Parent Company has entered into the agreement with HAEGIN Co., Ltd., whereby the Parent Company has been granted contingent subscription right to acquire HAEGIN Co., Ltd.’s common stock for the year ended December 31, 2022. The Parent Company is able to exercise the right in accordance with the agreement when certain conditions are met and recognized long-term derivative financial assets of W2,323 million for the contingent subscription right as of December 31, 2023. The fair value of HAEGIN Co., Ltd.’s common stock was estimated using 5-year projected cash flows discounted at 13.0% per annum. Meanwhile, if the fair value of HAEGIN Co., Ltd.’s common stock, significant unobservable input used in the fair value measurement, increases (decreases), the estimated fair value of derivative financial asset would increase (decrease). If the volatility of stock price, significant unobservable input used in the fair value measurement, increases (decreases), the estimated fair value of derivative financial asset would increase (decrease).

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

22.

Derivative Instruments, Continued

(6)

The fair value of derivative financial instruments to which the Group applies cash flow hedging is recorded in the consolidated financial statements as long-term derivative financial assets and long-term derivative financial liabilities. As of December 31, 2023, details of fair values of the derivative assets and liabilities are as follows:


(In millions of won and thousands of U.S. dollars)
Hedging instrument (Hedged item)	Cash flow hedge			Fair value
Non-current assets:
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)	W	80,426			80,426
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)		35,784			35,784

	W	116,210			116,210

Non-current liabilities:
Fixed-to-fixed cross currency swap (U.S dollar denominated bonds face value of USD 300,000)	W	(9,212	)		(9,212	)

	W	(9,212	)		(9,212	)

As of December 31, 2023, the changes in fair value of derivatives designated as hedging instrument, which are all effective in hedging, were recognized in full in other comprehensive income.

(7)

The fair value of derivatives held for trading is recorded in the consolidated financial statements as derivative financial assets, long-term derivative financial assets and long-term derivative financial liabilities. As of December 31, 2023, details of fair values of the derivative assets and liabilities are as follows:


(In millions of won)
	Held for trading			Fair value
Current assets:
Contract for difference settlement	W	8,974			8,974
Non-current assets:
Contingent subscription right		2,323			2,323
Contract for difference settlement		21,027			21,027

	W	32,324			32,324

Non-current liabilities:
Drag-along and call option rights	W	(295,876	)		(295,876	)

	W	(295,876	)		(295,876	)

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

23.

Share Capital and Capital Surplus and Others

(1)	Details of share capital as of December 31, 2023 and 2022 are as follows:


(In millions of won, except for share data)
	December 31, 2023		December 31, 2022
Number of authorized shares	W	670,000,000		670,000,000
Par value (in won)		100		100
Number of issued shares		218,833,144		218,833,144
Share capital:
Common share(*1)	W	30,493		30,493

(*1)

In 2002 and 2003, The Parent Company retired treasury shares with reduction of its retained earnings before appropriation. As a result, the Group’s issued shares have decreased without change in share capital.

(2)

There were no changes in share capital of the Parent Company for the years ended December 31, 2023 and 2022.

(3)

Details of shares outstanding as of December 31, 2023 and 2022 are as follows:

(In shares)

December 31, 2023

December 31, 2022

Issued
shares

Treasury
shares

Outstanding
shares

Issued
shares

Treasury
shares

Outstanding
shares

Shares outstanding

218,833,144

6,133,414

212,699,730

218,833,144

801,091

218,032,053

(4)

Details of capital surplus and others as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023			December 31, 2022
Paid-in surplus	W	1,771,000			1,771,000
Treasury shares (Note 24)		(301,981	)		(36,702	)
Hybrid bonds (Note 25)		398,509			398,759
Share option (Note 26)		9,818			2,061
Others(*)		(13,705,990	)		(13,702,235	)

	W	(11,828,644	)		(11,567,117	)

(*)

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

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

24.

Treasury Shares

(1)

Treasury shares as of December 31, 2023 and 2022 are as follows:


(In millions of won, except for the number of shares)
	December 31, 2023		December 31, 2022
Number of shares		6,133,414		801,091
Acquisition cost	W	301,981		36,702

(2)

Changes in treasury shares for the years ended December 31, 2023 and 2022 are as follows:


(In shares)
	2023			2022
Treasury shares as of January 1		801,091			1,250,992
Acquisition(*1)		5,773,410			—
Disposal(*2)		(441,087	)		(449,901	)

Treasury shares as of December 31		6,133,414			801,091

(*1)

The Parent Company acquired 5,773,410 of its treasury shares for W285,487 million in an effort to increase shareholder value by stabilizing its stock price for the years ended December 31, 2023.

(*2)

The Parent Company distributed 441,087 treasury shares (acquisition cost: W20,208 million) as bonus payment to the employees, resulting in gain on disposal of treasury shares of W212 million for the year ended December 31, 2023. Also, the Parent Company distributed 449,901 treasury shares (acquisition cost: W20,612 million) as bonus payment to the employees, resulting in gain on disposal of treasury shares of W4,813 million for the year ended December 31, 2022.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

25.

Hybrid Bonds

Hybrid bonds classified as equity as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	Type	Issuance date		*Maturity(1)**		Annual interest rate(%)(*2)		December 31, 2023			December 31, 2022
Series 3 hybrid bonds	Unsecured subordinated bearer bond		June 5, 2023		June 5, 2083		4.95	W	400,000			—
Series 2-1 hybrid bonds	Unsecured subordinated bearer bond		June 7, 2018		June 7, 2078		3.70		—			300,000
Series 2-2 hybrid bonds	Unsecured subordinated bearer bond		June 7, 2018		June 7, 2078		3.65		—			100,000
Issuance costs									(1,491	)		(1,241	)

								W	398,509			398,759

The Parent Company redeemed previously issued hybrid bonds and issued new ones for the year ended December 31, 2023. As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Parent Company classified the hybrid bonds as equity.

These are subordinated bonds that rank before common shares in the event of a liquidation or reorganization of the Parent Company.

(*1)

The Parent Company has a right to extend the maturity without any notice or announcement.

(*2)

Annual interest rate is determined as yield rate of 5-year national bond plus premium. According to the step-up clause, additional premium of 0.25% and 0.75%, respectively, after 10 years and 25 years from the issuance date are applied.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

26.

Share based payment Arrangement

26.1

Share-based payment arrangement of the Parent Company

(1)

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

Share-based payment arrangement with cash alternatives

Series

1-3

Grant date

March 24, 2017

February 22,

2019

March 26,

2019

March 26,

2020

March 25,

2021

Types of shares to be issued

Registered common shares of the Parent Company

Grant method

Reissue of treasury shares, Cash settlement

Number of shares (in share)

67,320

8,907

5,266

376,313

87,794

Exercise price (in won)

57,562

53,052

50,862

38,452

50,276

Exercise period

Mar. 25, 2021
~ Mar. 24,
2024

Feb. 23, 2021
~ Feb. 22,
2024

Mar. 27, 2021
~ Mar. 26,
2024

Mar. 27, 2023
~ Mar. 26,
2027

Mar. 26, 2023
~ Mar. 25,
2026

Vesting conditions

4 years’ service
from the grant
date

2 years’ service
from the grant
date

3 years’ service
from the grant
date

2 years’ service
from the grant
date


	Series
	7-1		7-2
Grant date		March 25, 2022
Types of shares to be issued		Registered common shares of the Parent Company
Grant method		Reissue of treasury shares, Cash settlement
Number of shares (in share)		295,275		109,704
Exercise price (in won)		56,860		56,860
Exercise period		Mar. 26, 2025 ~ Mar. 25, 2029		Mar. 26, 2024 ~ Mar. 25, 2027
Vesting conditions		2 years’ service from the grant date		2 years’ service from the grant date

(*)	The remaining parts of 1-2st and 2nd share options were fully forfeited, and the 8th share option was canceled for the year ended December 31, 2023.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

26.

Share based payment Arrangement, Continued

26.1

Share-based payment arrangement of the Parent Company, Continued:

(1)

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

Cash-settled share-based payment arrangement


	Granted in 2021		Granted in 2022
	Share appreciation rights of *SK Telecom Co., Ltd.()**	Share appreciation rights of *SK Square Co., Ltd.()**	Share appreciation rights of SK Telecom Co., Ltd.
Grant date	January 1, 2021		January 1, 2022
Grant method	Cash settlement
Number of shares (in share)	183,246	118,456	338,525
Exercise price (in won)	50,276		56,860
Exercise period	Jan. 1, 2023 ~ Mar. 28, 2024		Jan. 1, 2024 ~ Mar. 25, 2025
Vesting conditions	2 years’ service from the grant date		2 years’ service from the grant date

(*)	Parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2022.

Equity-settled share-based payment arrangement

The Parent Company newly established Performance Share Units (“PSU”) for executives of the Parent Company and major subsidiaries as part of the compensation based on the growth of corporate value for the year ended December 31, 2023, and the details are as follows:


		PSU of SK Telecom Co., Ltd.
Grant date		March 28, 2023
Types of shares to be issued		Registered common shares of the Parent Company
Grant method		Reissue of treasury shares
Number of shares(*)		Fluctuates according to the share price on the expiration date and the cumulative increase rate of KOSPI200
Reference share price (in won)		47,280
Reference index (KOSPI200)		315
Maturity (exercise date)		The day in which the annual general meeting of shareholders is held after 3 years from the grant date
Vesting conditions		Full service in the year in which the grant date is included

(*)	The initial amount granted is a total of W10,813 million, and the amount calculated according to the adjustment rate based on the share price on the expiration date and the cumulative increase rate of KOSPI200 will be paid in shares.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

26.

Share based payment Arrangement, Continued

26.1

Share-based payment arrangement of the Parent Company, Continued:

(2)

Share compensation expense for share-based payment arrangements with cash alternatives recognized for the year ended December 31, 2023 and the remaining share compensation expense to be recognized in subsequent periods are as follows:


(In millions of won)
	Share compensation expense
As of December 31, 2022	W	155,579
For the year ended December 31, 2023		2,171
In subsequent periods		504

	W158,254

The liabilities recognized by the Parent Company in relation to the share-based payment arrangement with cash alternatives are W5,530 million and W4,221 million, respectively, which are included in accrued expenses as of December 31, 2023 and 2022.

As of December 31, 2023 and 2022, the carrying amount of liabilities recognized by the Parent Company in relation to the cash-settled share-based payment arrangement are W 1,133 million and W 906 million, respectively.

Share compensation expenses recognized for equity-settled share-based payment arrangements are W6,267 million for the year ended December 31, 2023.

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

26. Share based payment Arrangement, Continued

26. 1

Share-based payment arrangement of the Parent Company, Continued:

(3)

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

Share-based payment arrangement with cash alternatives

(i) SK Telecom Co., Ltd.


(In won)	Series
	1-3			3			4			5			6			7-1			7-2
Risk-free interest rate		3.52	%		3.49	%		3.52	%		3.14	%		3.18	%		3.15	%		3.14	%
Estimated option’s life		7 years			5 years			5 years			7 years			5 years			7 years			5 years
Share price on the remeasurement date		50,100			50,100			50,100			50,100			50,100			50,100			50,100
Expected volatility		16.80	%		16.80	%		16.80	%		16.80	%		16.80	%		16.80	%		16.80	%
Expected dividends yield		6.60	%		6.60	%		6.60	%		6.60	%		6.60	%		6.60	%		6.60	%
Exercise price		57,562			53,052			50,862			38,452			50,276			56,860			56,860
Per-share fair value of the option		63			310			1,157			11,648			3,400			2,466			1,974

(ii) SK Square Co., Ltd.


(In won)	Series
	1-3			3			4			5			6
Risk-free interest rate		2.07	%		1.91	%		1.78	%		1.52	%		1.55	%
Estimated option’s life		7 years			5 years			5 years			7 years			5 years
Share price (Closing price on the preceding day)		52,500			51,800			50,600			34,900			49,800
Expected volatility		13.38	%		8.30	%		7.70	%		8.10	%		25.70	%
Expected dividends yield		3.80	%		3.80	%		3.90	%		5.70	%		4.00	%
Exercise price		57,562			53,052			50,862			38,452			50,276
Per-share fair value of the option		3,096			1,720			1,622			192			8,142

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

26.

Share based payment Arrangement, Continued

26. 1

Share-based payment arrangement of the Parent Company, Continued:

(3)

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

Cash-settled share-based payment arrangement


(In won)	Granted in 2021						Granted in 2022
	Share appreciation rights of SK Telecom Co., Ltd.			Share appreciation rights of SK Square Co., Ltd.			Share appreciation rights of SK Telecom Co., Ltd.
Risk-free interest rate		3.52	%		3.52	%		3.37	%
Estimated option’s life		3.25 years			3.25 years			3.25 years
Share price on the remeasurement date		50,100			52,600			50,100
Expected volatility		16.80	%		30.90	%		16.80	%
Expected dividends yield		6.60	%		0.00	%		6.60	%
Exercise price		50,276			50,276			56,860
Per-share fair value of the option		1,387			4,706			949

Equity-settled share-based payment arrangement


(In won)
	PSU of SK Telecom Co., Ltd.
Risk-free interest rate		3.26	%
Estimated option’s life		3 years
Share price on the expected grant date		48,500
Expected volatility		18.67	%
Expected dividends yield		4.90	%
Per-share fair value of the option		27,525

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

26.

Share based payment Arrangement, Continued

26.2 Share-based payment arrangement by SAPEON Inc., a subsidiary of the Parent Company

(1)

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


	Series
	1-1	1-2	2
Grant date	February 28, 2023			November 13, 2023
Types of shares to be issued	Registered common shares of SAPEON Inc.
Grant method	Issuance of shares
Number of shares (in share)	14,500	35,100		6,450
Exercise price (in U.S. dollars)		100.0
Exercise period(*)	Jan. 4, 2024 ~ Jan. 4, 2032	Apr. 1, 2024 ~ Apr. 1, 2032		Feb. 1, 2025 ~ Feb. 1, 2033
Vesting conditions	2 years’ service from the commencement date, 50% 3 years’ service from the commencement date, 25% 4 years’ service from the commencement date, 25%

(*)	The exercise periods vary as vesting periods for each share-based payment arrangement are different. The exercise period was disclosed based on the vesting period with the highest number of grants.

(2)

Share compensation expense for share-based payment arrangements for the year ended December 31, 2023 and the remaining share compensation expense to be recognized in subsequent periods are as follows:


(In millions of won)
	Share compensation expense
As of December 31, 2022	W	—
For the year ended December 31, 2023		2,555
In subsequent periods		1,312

	W	3,867

(3)

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


(In U.S. dollars)
	1-1			1-2			2
Risk-free interest rate		4.18	%		4.16	%		4.67	%
Estimated option’s life		5.18 years			5.42 years			5.55 years
Underlying share price		107.8			107.8			118.1
Expected volatility		43.50	%		43.00	%		43.00	%
Expected dividends yield		0.00	%		0.00	%		0.00	%
Exercise price		100.0			100.0			100.0
Per-share fair value of the option		50.7			51.4			61.4

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

27.

Retained Earnings

(1)

Retained earnings as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Appropriated:
Legal reserve	W	22,320		22,320
Reserve for business expansion		9,831,138		9,631,138
Reserve for technology development		4,565,300		4,365,300

		14,396,438		13,996,438
Unappropriated		8,381,223		8,444,953

	W	22,799,981		22,463,711

(2)

Legal reserve

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

28.

Reserves

(1)

Details of reserves, net of taxes, as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023			December 31, 2022
Valuation gain on FVOCI	W	176,208			173,281
Other comprehensive income of investments in associates and joint ventures		182,702			173,477
Valuation gain (loss) on derivatives		(1,488	)		14,463
Foreign currency translation differences for foreign operations		29,794			30,012

	W	387,216			391,233

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

28.

Reserves, Continued

(2)

Changes in reserves for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	Valuation gain on financial assets at FVOCI			Other comprehensive income of investments in associates and joint ventures		Valuation gain (loss) on derivatives			Foreign currency translation differences for foreign operations			Total
	Valuation gain on financial assets at FVOCI					Valuation gain (loss) on derivatives						Total
Balance as of January 1, 2022	W	633,240			53,770		33,918			14,310			735,238
Changes, net of taxes		(459,959	)		119,707		(19,455	)		15,702			(344,005	)
Balance as of December 31, 2022	W	173,281			173,477		14,463			30,012			391,233
Changes, net of taxes		2,927			9,225		(15,951	)		(218	)		(4,017	)

Balance as of December 31, 2023	W	176,208			182,702		(1,488	)		29,794			387,216

(3)

Changes in valuation gain on financial assets at FVOCI for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Balance as of January 1	W	173,281			633,240
Amount recognized as other comprehensive income for the year, net of taxes		(18,883	)		(490,959	)
Amount reclassified to retained earnings, net of taxes		21,810			31,000

Balance as of December 31	W	176,208			173,281

(4)

Changes in valuation gain (loss) on derivatives for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Balance as of January 1	W	14,463			33,918
Amount recognized as other comprehensive income for the year, net of taxes		(18,725	)		(25,630	)
Amount reclassified to profit, net of taxes		2,774			6,175

Balance as of December 31	W	(1,488	)		14,463

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

29.

Other Operating Expenses

Details of other operating expenses for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Communication	W	32,238		31,881
Utilities		511,240		401,025
Taxes and dues		29,009		49,445
Repair		431,964		435,572
Research and development		369,507		340,864
Training		39,286		39,632
Bad debt for accounts receivable – trade		37,906		27,053
Travel		22,499		15,684
Supplies and other		130,330		113,839

	W	1,603,979		1,454,995

30.

Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Other non-operating income:
Gain on disposal of property and equipment and intangible assets	W	21,898		15,985
Others		28,468		39,913

	W	50,366		55,898

Other non-operating expenses:
Loss on impairment of property and equipment and intangible assets	W	10,369		17,027
Loss on disposal of property and equipment and intangible assets		9,369		20,465
Donations		14,766		13,125
Bad debt for accounts receivable – other		5,256		3,011
Others		7,534		19,992

	W	47,294		73,620

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

31.

Finance Income and Costs

(1)

Details of finance income and costs for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Finance income:
Interest income	W	70,055		58,472
Gain on sale of accounts receivable – other		—		1,043
Dividends		43,014		2,552
Gain on foreign currency transactions		19,065		21,283
Gain on foreign currency translations		1,199		2,095
Gain relating to financial instruments at FVTPL		115,043		94,393

	W	248,376		179,838


(In millions of won)
	2023		2022
Finance costs:
Interest expense	W	389,813		328,307
Loss on sale of accounts receivable – other		65,027		61,841
Loss on foreign currency transactions		21,693		19,485
Loss on foreign currency translations		1,227		3,814
Loss relating to financial instruments at FVTPL		49,641		41,597
Loss on disposal of investment assets		—		1,283

	W	527,401		456,327

(2)

Details of interest income included in finance income for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Interest income on cash equivalents and financial instruments	W	44,921		27,991
Interest income on loans and others		25,134		30,481

	W	70,055		58,472

(3)

Details of interest expenses included in finance costs for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Interest expense on borrowings	W	29,917		25,736
Interest expense on debentures		247,105		217,475
Others		112,791		85,096

	W	389,813		328,307

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

31.

Finance Income and Costs, Continued

(4)

Finance income and costs by category of financial instruments for the years ended December 31, 2023 and 2022 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable – trade, loans and receivables are presented and explained separately in notes 6 and 36.

Finance income and costs


(In millions of won)
	2023
	Finance income		Finance costs
Financial assets:
Financial assets at FVTPL	W	127,001		114,668
Financial assets at FVOCI		39,681		—
Financial assets at amortized cost		69,373		22,795
Derivatives designated as hedging instrument		2,480		—

		238,535		137,463

Financial liabilities:
Financial liabilities at FVTPL		6,717		—
Financial liabilities at amortized cost		3,124		389,938

		9,841		389,938

	W	248,376		527,401


(In millions of won)
	2022
	Finance income		Finance costs
Financial assets:
Financial assets at FVTPL	W	104,068		103,292
Financial assets at FVOCI		1,495		1,283
Financial assets at amortized cost		45,008		23,094
Derivatives designated as hedging instrument		—		146

		150,571		127,815

Financial liabilities:
Financial liabilities at FVTPL		18,432		—
Financial liabilities at amortized cost		10,835		328,512

		29,267		328,512

	W	179,838		456,327

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

31.

Finance Income and Costs, Continued

(4)

Other comprehensive income (loss), net of tax


(In millions of won)
	2023			2022
Financial assets:
Financial assets at FVOCI	W	(18,842	)		(491,853	)
Derivatives designated as hedging instrument		(11,520	)		(21,548	)

		(30,362	)		(513,401	)

Financial liabilities:
Derivatives designated as hedging instrument		(5,940	)		182

	W	(36,302	)		(513,219	)

(5)

Details of impairment losses for financial assets for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Accounts receivable – trade	W	37,906		27,053
Other receivables		5,256		3,011

	W	43,162		30,064

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

32.

Income Tax Expense

(1)

Income tax expenses for the years ended December 31, 2023 and 2022 consist of the following:


(In millions of won)
	2023			2022
Current tax expense:
Current year	W	273,936			274,902
Current tax of prior years		(11,590	)		73,477

		262,346			348,379

Deferred tax expense:
Changes in net deferred tax assets		79,896			(60,058	)

Income tax expense:	W	342,242			288,321

(2)

The difference between income taxes computed using the statutory corporate income tax rates and the recorded income taxes for the years ended December 31, 2023 and 2022 is attributable to the following:


(In millions of won)
	2023			2022
Profit before income tax	W	1,488,179			1,236,152
Income taxes at statutory income tax rate		382,517			329,580
Non-taxable income		(3,091	)		(14,969	)
Non-deductible expenses		15,725			24,679
Tax credit and tax reduction		(64,829	)		(10,300	)
Changes in unrecognized deferred taxes		14,354			21,057
Changes in tax rate		3,444			(42,307	)
Income tax refund and others		(5,878	)		(19,419	)

Income tax expense	W	342,242			288,321

100

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

32.

Income Tax Expense, Continued

(3)

Deferred taxes directly charged to (credited from) equity for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Valuation gain on financial assets measured at fair value	W	12,977			167,249
Share of other comprehensive gain (loss) of investment in associates and joint ventures		292			(2,972	)
Valuation gain on derivatives		5,631			7,649
Remeasurement of defined benefit liabilities (assets)		(2,672	)		(20,867	)
Loss on disposal of treasury shares and others		(53	)		(28,108	)

	W	16,175			122,951

(4)

Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
	Beginning			Deferred tax expense (income)			Directly charged to (credited from) equity			Ending
Deferred tax assets (liabilities) related to temporary differences:
Loss allowance	W	75,042			73			—			75,115
Accrued interest income		(7,903	)		1,064			—			(6,839	)
Financial assets measured at fair value		(10,171	)		(5,332	)		12,977			(2,526	)
Investments in subsidiaries, associates and joint ventures		16,846			5,792			292			22,930
Property and equipment and intangible assets		(352,605	)		(66,808	)		—			(419,413	)
Provisions		1,629			(310	)		—			1,319
Retirement benefit obligation		30,619			(15,517	)		(2,672	)		12,430
Valuation gain on derivatives		12,768			1,271			5,631			19,670
Gain (loss) on foreign currency translation		20,633			34			—			20,667
Incremental costs to acquire a contract		(722,900	)		4,689			—			(718,211	)
Contract assets and liabilities		4,279			13,286			—			17,565
Right-of-use assets		(431,397	)		41,534			—			(389,863	)
Lease liabilities		428,648			(40,557	)		—			388,091
Others		85,716			(81,397	)		(53	)		4,266

		(848,796	)		(142,178	)		16,175			(974,799	)

Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards:
Tax loss carryforwards		2,007			5,143			—			7,150
Tax credit		89,883			57,139			—			147,022

		91,890			62,282			—			154,172

	W	(756,906	)		(79,896	)		16,175			(820,627	)

101

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

32.

Income Tax Expense, Continued

(4)

Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)
	2022
	Beginning			Deferred tax expense (income)			Directly charged to (credited from) equity			Business combinations			Ending
Deferred tax assets (liabilities) related to temporary differences:
Loss allowance		W77,357			(2,315	)		—			—			75,042
Accrued interest income		(166	)		(5,057	)		—			(2,680	)		(7,903	)
Financial assets measured at fair value		(157,828	)		(19,592	)		167,249			—			(10,171	)
Investments in subsidiaries, associates and joint ventures		(31,817	)		51,635			(2,972	)		—			16,846
Property and equipment and intangible assets		(305,967	)		(46,895	)		—			257			(352,605	)
Provisions		4,198			(2,569	)		—			—			1,629
Retirement benefit obligation		52,332			(875	)		(20,867	)		29			30,619
Valuation gain on derivatives		6,336			(1,217	)		7,649			—			12,768
Gain (loss) on foreign currency translation		21,378			(745	)		—			—			20,633
Incremental costs to acquire a contract		(749,871	)		26,971			—			—			(722,900	)
Contract assets and liabilities		(2,201	)		6,480			—			—			4,279
Right-of-use assets		(389,502	)		(41,895	)		—			—			(431,397	)
Lease liabilities		381,537			47,111			—			—			428,648
Others		68,481			41,691			(28,108	)		3,652			85,716

		(1,025,733	)		52,728			122,951			1,258			(848,796	)

Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards:
Tax loss carryforwards		—			2,007			—			—			2,007
Tax credit		84,560			5,323			—			—			89,883

		84,560			7,330			—			—			91,890

		W(941,173	)		60,058			122,951			1,258			(756,906	)

102

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

32.

Income Tax Expense, Continued

(5)

Details of temporary differences, unused tax loss carryforwards and unused tax credits carryforwards which are not recognized as deferred tax assets (liabilities), in the consolidated statements of financial position as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023			December 31, 2022
Loss allowance		W77,837			85,969
Investments in subsidiaries, associates and joint ventures		(480,667	)		(434,253	)
Other temporary differences		64,004			61,817
Unused tax loss carryforwards		174,589			229,410

The amount of unused tax loss carryforwards which are not recognized as deferred tax assets as of December 31, 2023 are expiring within the following periods:


(In millions of won)
	Unused tax loss carryforwards
Less than 1 year	W	19,087
1 ~ 2 years		14,345
2 ~ 3 years		12,956
More than 3 years		128,201

	W	174,589

33.

Earnings per Share

Earnings per share is calculated to profit of the Parent Company per common share and dilutive potential common share, and details are as follows:

(1)

Basic earnings per share

1) Basic earnings per share for the years ended December 31, 2023 and 2022 are calculated as follows:


(In millions of won, except for share data and basic earnings per share)
	2023			2022
Basic earnings per share attributable to owners of the Parent Company:
Profit attributable to owners of the Parent Company	W	1,093,611			912,400
Interest on hybrid bonds		(17,283	)		(14,766	)

Profit attributable to owners of the Parent Company on common shares		1,076,328			897,634
Weighted average number of common shares outstanding		217,264,615			217,994,490

Basic earnings per share (in won)	W	4,954			4,118

103

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

33.

Earnings per Share, Continued

(1)

Basic earnings per share, Continued

The weighted average number of common shares outstanding for the years ended December 31, 2023 and 2022 are calculated as follows:


(In shares)	2023
	Number of common shares			Weighted average number of common shares
Issued shares as of January 1, 2023		218,833,144			218,833,144
Treasury shares as of January 1, 2023		(801,091	)		(801,091	)
Acquisition of treasury shares		(5,773,410	)		(1,154,633	)
Disposal of treasury shares		441,087			387,195

		212,699,730			217,264,615


(In shares)	2022
	Number of common shares			Weighted average number of common shares
Issued shares as of January 1, 2022		218,833,144			218,833,144
Treasury shares as of January 1, 2022		(1,250,992	)		(1,250,992	)
Disposal of treasury shares		449,901			412,338

		218,032,053			217,994,490

(2)

Diluted earnings per share

Diluted earnings per share for the years ended December 31, 2023 and 2022 are calculated as follows:


(In millions of won, except for share data and diluted earnings per share)	2023		2022
Profit attributable to owners of the Parent Company on common shares	W	1,076,328		897,634
Adjusted weighted average number of common shares outstanding		217,452,721		218,108,742

Diluted earnings per share (in won)	W	4,950		4,116

The adjusted weighted average number of common shares outstanding for the years ended December 31, 2023 and 2022 are calculated as follows:


(In shares)	2023			2022
Outstanding shares as of January 1		218,032,053			217,582,152
Effect of treasury shares		(767,438	)		412,338
Effect of share option		188,106			114,252

Adjusted weighted average number of common shares outstanding		217,452,721			218,108,742

104

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

34.

Dividends

(1)

Details of dividends declared

Details of dividend declared in Parent company for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won, except for face value and share data)
Year	Dividend type	Number of shares outstanding		Face value (in won)		Dividend ratio			Dividends
2023	Cash dividends (Interim)		218,466,141		100		830	%	W	181,327
	Cash dividends (Interim)		218,473,140		100		830	%		181,333
	Cash dividends (Interim)		216,412,898		100		830	%		179,623
	Cash dividends (Year-end)		212,699,730		100		1,050	%		223,335

									W	765,618

2022	Cash dividends (Interim)		218,002,830		100		830	%	W	180,942
	Cash dividends (Interim)		218,032,053		100		830	%		180,967
	Cash dividends (Interim)		218,032,053		100		830	%		180,967
	Cash dividends (Year-end)		218,032,053		100		830	%		180,967

									W	723,843

(2)

Dividends yield ratio

Dividends yield ratios for the years ended December 31, 2023 and 2022 are as follows:

(In won)


Year	Dividend type	Dividend per share		Closing price at year-end		Dividend yield ratio
2023	Cash dividends		3,540		50,100		7.07	%
2022	Cash dividends		3,320		47,400		7.00	%

105

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

35.

Categories of Financial Instruments

(1)

Financial assets by category as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023
	Financial assets at FVTPL		Equity instruments at FVOCI		Financial assets at amortized cost		Derivatives hedging instrument		Total
Cash and cash equivalents	W	313,340		—		1,141,638		—		1,454,978
Financial instruments		62,364		—		232,945		—		295,309
Long-term investment securities(*)		280,650		1,398,734		—		—		1,679,384
Accounts receivable – trade		—		—		1,990,849		—		1,990,849
Loans and other receivables		273,945		—		781,157		—		1,055,102
Derivative financial assets		32,324		—		—		116,210		148,534

	W	962,623		1,398,734		4,146,589		116,210		6,624,156


(*) The Group designated W1,398,734 million of equity instruments that are not held for trading as financial assets at FVOCI.
(In millions of won)
	December 31, 2022
	Financial assets at FVTPL		Equity instruments at FVOCI		Financial assets at amortized cost		Derivatives hedging instrument		Total
Cash and cash equivalents	W	245,982		—		1,636,309		—		1,882,291
Financial instruments		148,365		—		89,240		—		237,605
Long-term investment securities(*)		221,139		1,189,597		—		—		1,410,736
Accounts receivable – trade		—		—		1,984,772		—		1,984,772
Loans and other receivables		332,669		—		909,003		—		1,241,672
Derivative financial assets		54,009		—		—		267,151		321,160

	W	1,002,164		1,189,597		4,619,324		267,151		7,078,236

(*)	The Group designated W1,189,597 million of equity instruments that are not held for trading as financial assets at FVOCI.

106

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

35.

Categories of Financial Instruments, Continued

(2)

Financial liabilities by category as of December 31, 2023 and 2022 are as follows:


(In millions of won)	December 31, 2023
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivatives hedging instrument		Total
Accounts payable – trade	W	—		139,876		—		139,876
Derivative financial liabilities		295,876		—		9,212		305,088
Borrowings		—		718,078		—		718,078
Debentures		—		8,325,643		—		8,325,643
Lease liabilities(*)		—		1,611,433		—		1,611,433
Accounts payable – other and others		—		4,539,838		—		4,539,838

	W295,876		15,334,868		9,212		15,639,956


(In millions of won)	December 31, 2022
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Total
Accounts payable – trade	W	—		89,255		89,255
Derivative financial liabilities		302,593		—		302,593
Borrowings		—		936,110		936,110
Debentures		—		8,366,694		8,366,694
Lease liabilities(*)		—		1,782,057		1,782,057
Accounts payable – other and others		—		5,505,465		5,505,465

	W	302,593		16,679,581		16,982,174

(*)	Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at amortized cost, considering the nature of measuring liabilities.

107

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

36.

Financial Risk Management

(1)

Financial risk management

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

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

1) Market risk

(i) Currency risk

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

Monetary assets and liabilities denominated in foreign currencies as of December 31, 2023 are as follows:


(In millions of won, thousands of foreign currencies)
	Assets				Liabilities
	Foreign currencies		Won equivalent		Foreign currencies		Won equivalent
USD		74,608	W	96,200		1,025,369	W	1,322,111
EUR		5,391		7,691		132		188
Others				336				—

			W	104,227			W	1,322,299

In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency debentures. (See note 22)

As of December 31, 2023, a hypothetical change in exchange rates by 10% would have increased (decreased) the Group’s profit before income tax and equity as follows:


(In millions of won)
	Profit before income tax					Equity
	If increased by 10%		If decreased by 10%			If increased by 10%		If decreased by 10%
USD	W	5,521		(5,521	)	W	5,521		(5,521	)
EUR		750		(750	)		750		(750	)
Others		34		(34	)		34		(34	)

	W	6,305		(6,305	)	W	6,305		(6,305	)

108

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

36.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

1) Market risk, Continued

(ii)

Interest rate risk

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

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

As of December 31, 2023, floating-rate borrowings and debentures amount to W90,000 million and W386,820 million, respectively, and the Group has entered into interest rate swaps to hedge interest rate risk related to the floating-rate debentures. Therefore, profit before income tax for the year ended December 31, 2023 would not have been affected by the changes in interest rates of floating-rate debentures.

If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income tax and equity for the year ended December 31, 2023 would change by W900 million in relation to the floating-rate borrowings which have not entered into interest rate swaps.

As of December 31, 2023, the floating-rate long-term payables – other are W1,290,225 million. If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income tax and equity for the year ended December 31, 2023 would change by W12,902 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.

Interest rate benchmark reform and associated risks

In case of Korean CD rate, the alternative interest rate benchmark has selected as Korea Overnight Financing Repo Rate(“KOFR”) and as part of interest rate benchmark reform, the interest rate has been disclosed through Korea Securities Depository since November 26, 2021. KOFR is calculated using the overnight RP rate as collateral for government bonds and monetary stabilization bonds. However, unlike LIBOR, calculation of CD rate will not be suspended, thereby making it unclear when and how the transition to KOFR will take place.

109

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

36.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

1) Market risk, Continued

Non-derivative financial liabilities

The Parent Company’s non-derivative financial liabilities subject to interest rate benchmark reform as of December 31, 2022 were floating-rate bonds indexed to USD LIBOR. The Group completed discussion with the counterparty about including the fallback clauses as of December 31, 2023.

Derivatives

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

(iii)

Price fluctuations risk

As of December 31, 2023, the Group holds equity instruments in an active trading market, exposing it to price fluctuation risk. Assuming all other variables remain constant, the impact on the Group’s profit before income tax and equity resulting from a 10% fluctuation in the per-share stock price of the equity securities for the year ended December 31, 2023 is as follows.

(In millions of won)

Profit before income tax

Equity

If increased by 10%

If decreased by 10%

If increased by 10%

If decreased by 10%

—

85,006

(85,006

)

110

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

36.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Credit risk

The maximum credit exposure as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Cash and cash equivalents	W	1,454,773		1,882,093
Financial instruments		295,309		237,605
Investment securities		—		900
Accounts receivable – trade		1,990,849		1,984,772
Contract assets		129,771		132,221
Loans and other receivables		1,055,102		1,241,672
Derivative financial assets		148,534		321,160

	W	5,074,338		5,800,423

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Group evaluates the credit worthiness of each customer or counterparty by 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.

(i)

Accounts receivable – trade and contract assets

The Group establishes a loss allowance in respect of accounts receivable – trade and contract assets. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Details of changes in loss allowance for the year ended December 31, 2023 are included in note 6.

(ii)

Debt investments

The credit risk arises from debt investments included in W295,309 million of financial instruments, and W1,055,102 million of loans and other receivables. To limit the exposure to this risk, the Group transacts only with financial institutions with credit ratings that are considered to be low credit risk.

Most of the Group’s debt investments are considered to have a low risk of default and the borrower has a strong capacity to meet its contractual cash flow obligations in the near term. Thus, the Group measured the loss allowance for the debt investments at an amount equal to 12-month expected credit losses.

Meanwhile, the Group monitors changes in credit risk at each reporting date. The Group recognized the loss allowance at an amount equal to lifetime expected credit losses when the credit risk on the debt investments is assumed to have increased significantly if it is more than 30 days past due.

111

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

36.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

2) Credit risk, Continued

(ii) Debt investments, Continued

The Group’s maximum exposure to credit risk is equal to each financial asset’s carrying amount. The gross carrying amounts of each financial asset except for the accounts receivable – trade and derivative financial assets as of December 31, 2023 are as follows.


(In millions of won)
	Financial assets at FVTPL		Financial assets at amortized cost
			12-month ECL			Lifetime ECL – not credit impaired			Lifetime ECL – credit impaired
Gross amount	W	336,309		1,009,175			8,914			71,677
Loss allowance		—		(3,314	)		(3,095	)		(69,255	)

Carrying amount	W	336,309		1,005,861			5,819			2,422

Changes in the loss allowance for the debt investments for the year ended December 31, 2023 are as follows:


(In millions of won)
	12-month ECL			Lifetime ECL – not credit impaired			Lifetime ECL – credit impaired			Total
December 31, 2022	W	3,081			3,314			83,685			90,080
Remeasurement of loss allowance, net		1,105			3,049			1,102			5,256
Transfer to lifetime ECL – not credit impaired		(868	)		868			—			—
Transfer to lifetime ECL – credit impaired		—			(4,136	)		4,136			—
Amounts written off		(4	)		—			(26,583	)		(26,587	)
Recovery of amounts written off		—			—			6,915			6,915

December 31, 2023	W	3,314			3,095			69,255			75,664

(iii) Cash and cash equivalents

The Group deposits W1,454,773 million of cash and cash equivalents as of December 31, 2023 (W1,882,093 million as of December 31, 2022) at banks and financial institutions with credit ratings above the certain level. Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Group considered that its cash and cash equivalents have low credit risk based on the credit ratings of the counterparties assigned by external credit rating agencies.

112

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

36.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

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 enough liquidity within credit lines through active operating activities.

Contractual maturities of financial liabilities as of December 31, 2023 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 - 5 years		More than 5 years
Accounts payable – trade	W	139,876		139,876		139,876		—		—
Borrowings(*)		718,078		739,791		417,056		322,735		—
Debentures(*)		8,325,643		9,532,468		1,493,063		5,800,210		2,239,195
Lease liabilities		1,611,433		1,899,929		386,202		1,026,475		487,252
Accounts payable – other and others(*)		4,539,838		4,614,608		3,642,356		972,202		50

	W	15,334,868		16,926,672		6,078,553		8,121,622		2,726,497

(*)	The contractual cash flow is amount that includes interest payables.

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

As of December 31, 2023, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:


(In millions of won)
	Carrying amount			Contractual cash flows			Less than 1 year		1 - 5 years
Assets	W	116,210			123,260			30,928		92,332
Liabilities		(9,212	)		(10,610	)		2,970		(13,580	)

		106,998			112,650			33,898		78,752

113

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

36.

Financial Risk Management, Continued

(2)

Capital management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Group is the same as that of the Group as of and for the year ended December 31, 2022.

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

Debt-equity ratio as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023			December 31, 2022
Total liabilities	W	17,890,828			19,153,066
Total equity		12,228,399			12,155,196

Debt-equity ratios		146.31	%		157.57	%

(3)

Fair value

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2023 are as follows:


(In millions of won)	December 31, 2023
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that are measured at fair value:
FVTPL	W	962,623		—		649,649		312,974		962,623
Derivative hedging instruments		116,210		—		116,210		—		116,210
FVOCI		1,398,734		1,135,832		—		262,902		1,398,734

	W	2,477,567		1,135,832		765,859		575,876		2,477,567

Financial liabilities that are measured at fair value:
FVTPL		295,876		—		—		295,876		295,876
Derivative hedging instruments		9,212		—		9,212		—		9,212

	W	305,088		—		9,212		295,876		305,088

Financial liabilities that are not measured at fair value:
Borrowings	W	718,078		—		695,320		—		695,320
Debentures		8,325,643		—		8,052,193		—		8,052,193
Long-term payables – other		1,260,453		—		1,294,977		—		1,294,977

	W	10,304,174		—		10,042,490		—		10,042,490

114

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

36.

Financial Risk Management, Continued

(3)

Fair value, Continued

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


(In millions of won)
	December 31, 2022
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that are measured at fair value:
FVTPL	W	1,002,164		44,431		727,014		230,719		1,002,164
Derivative hedging instruments		267,151		—		267,151		—		267,151
FVOCI		1,189,597		993,765		—		195,832		1,189,597

	W	2,458,912		1,038,196		994,165		426,551		2,458,912

Financial liabilities that are measured at fair value:
FVTPL	W	302,593		—		—		302,593		302,593

Financial liabilities that are not measured at fair value:
Borrowings	W	936,110		—		911,597		—		911,597
Debentures		8,366,694		—		7,813,420		—		7,813,420
Long-term payables – other		1,638,341		—		1,614,934		—		1,614,934

	W	10,941,145		—		10,339,951		—		10,339,951

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

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

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

Interest rates used by the Group for the fair value measurement as of December 31, 2023 are as follows:


	Interest rate
Derivative instruments		2.18% ~ 6.25%
Borrowings and debentures		3.84% ~ 18.12%
Long-term payables – other		3.72% ~ 3.85%

115

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

36.

Financial Risk Management, Continued

(3)

Fair value, Continued

There have been no transfers between Level 1 and Level 2 for the year ended December 31, 2023. The changes of financial instruments classified as Level 3 for the year ended December 31, 2023 are as follows:


(In millions of won)
	Balance as of January 1, 2023		Gain (loss) for the year			OCI		Acquisition		Disposal			Balance as of December 31, 2023
Financial assets
FVTPL		W 230,719		(41,556	)		1,602		157,356		(35,147	)		312,974
FVOCI		195,832		—			14,448		52,622		—			262,902

	W	426,551		(41,556	)		16,050		209,978		(35,147	)		575,876

Financial liabilities
FVTPL	W	(302,593)		6,717			—		—		—			(295,876	)

(4)

Enforceable master netting agreement or similar agreement

Carrying amounts of financial instruments recognized to which offset agreements are applicable as of December 31, 2023 and 2022 are as follows:


(In millions of won)	December 31, 2023
	Gross financial instruments recognized		Amount offset			Net financial instruments presented on the consolidated statements of financial position
Financial assets:
Accounts receivable – trade and others	W	194,374		(183,520	)		10,854
Financial liabilities:
Accounts payable – other and others	W	190,630		(183,520	)		7,110


(In millions of won)	December 31, 2022
	Gross financial instruments recognized		Amount offset			Net financial instruments presented on the consolidated statements of financial position
Financial assets:
Accounts receivable – trade and others	W	245,835		(236,921	)		8,914
Financial liabilities:
Accounts payable – other and others	W	244,509		(236,921	)		7,588

116

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

37.

Transactions with Related Parties

(1)

List of related parties


Relationship		Company
Ultimate controlling entity		SK Inc.
Joint venture		UTC Kakao-SK Telecom ESG Fund
Associates		SK China Company Ltd. and 44 others
Others		The Ultimate controlling entity’s subsidiaries and associates and others

As of December 31, 2023, the Group belongs to SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act of the Republic of Korea. All of the other entities included in SK Group are considered related parties of the Group.

(2)

Compensation for the key management

The Parent Company considers registered directors who have substantial role and responsibility in planning, operations, and relevant controls of the business as key management. The compensation given to such key management for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Salaries	W	4,139		3,487
Defined benefits plan expenses		1,005		761
Share option		2,542		1,598

	W	7,686		5,846

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

117

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

37.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)		2023
Scope	Company	Operating revenue and others		Operating expense and others (*1)		Acquisition of property and equipment and others
Ultimate Controlling Entity	SK Inc.(*2)	W	21,438		633,265		120,926

Associates	F&U Credit information Co., Ltd.		3,876		49,398		552
	SK USA, Inc.		—		5,384		—
	Daehan Kanggun BcN Co., Ltd.		12,972		—		—
	Others(*3)		8,806		15,962		865

			25,654		70,744		1,417

Others	SK Innovation Co., Ltd.		33,571		18,977		—
	SK Energy Co., Ltd.		4,113		540		—
	SK Geo Centric Co., Ltd.		835		2		—
	SK Networks Co., Ltd.(*4)		5,876		970,662		1
	SK Networks Service Co., Ltd.		5,471		72,274		8,393
	SK Ecoplant Co., Ltd.		2,547		—		—
	SK hynix Inc.		58,725		178		—
	SK Shieldus Co., Ltd.		59,974		147,333		26,021
	Content Wavve Corp.		14,524		87,263		176
	Eleven Street Co., Ltd.		72,683		34,053		—
	SK Planet Co., Ltd.		18,308		88,250		16,338
	SK RENT A CAR Co., Ltd.		14,023		20,231		—
	SK Magic Co., Ltd.		1,632		1,142		—
	Tmap Mobility Co., Ltd.		24,862		10,003		—
	Onestore Co., Ltd.		16,265		166		—
	Dreamus Company		6,202		77,452		284
	UNA Engineering Inc. (Formerly, UbiNS Co., Ltd.)		172		50,263		52,733
	Happy Narae Co., Ltd.		1,472		35,461		92,375
	Others		52,039		21,884		13,292

			393,294		1,636,134		209,613

		W	440,386		2,340,143		331,956

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

(*2)	Operating expenses and others include W218,019 million of dividends paid by the Parent Company.

(*3)	Operating revenue and others include W8,806 million of dividends received which was deducted from the investment in associates.

(*4)	Operating expenses and others include costs for handset purchases amounting to W915,339 million.

118

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

37.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the years ended December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)		2022
Scope	Company	Operating revenue and others		Operating expense and others (*1)		Acquisition of property and equipment and others
Ultimate Controlling Entity	SK Inc.(*2)	W	22,162		662,247		114,895

Associates	F&U Credit information Co., Ltd.		3,490		49,227		265
	HanaCard Co., Ltd. (*3)		8,932		1,820		22
	Daehan Kanggun BcN Co., Ltd.		20,290		—		—
	Others(*4)		13,795		5,608		80

			46,507		56,655		367

Others	SK Innovation Co., Ltd.		27,524		19,598		—
	SK Energy Co., Ltd.		4,585		710		—
	SK Geo Centric Co., Ltd.		925		1		—
	SK Networks Co., Ltd.(*5)		4,312		904,320		288
	SK Networks Service Co., Ltd.		6,110		71,432		7,891
	SK Ecoplant Co., Ltd.		3,330		112		—
	SK hynix Inc.		60,933		75		—
	SK Shieldus Co., Ltd.		39,455		147,731		35,854
	Content Wavve Corp.		6,797		108,760		229
	Eleven Street Co., Ltd.		71,972		31,589		—
	SK Planet Co., Ltd.		19,753		95,261		17,481
	SK RENT A CAR Co., Ltd.		14,992		15,891		—
	SK Magic Co., Ltd.		2,204		1,071		—
	Tmap Mobility Co., Ltd.		22,011		4,973		892
	Onestore Co., Ltd.		17,181		24		—
	Dreamus Company		7,235		85,193		649
	UNA Engineering Inc. (Formerly, UbiNS Co., Ltd.)		283		46,222		53,897
	Happy Narae Co., Ltd.		1,637		24,727		143,188
	Others		40,058		29,610		20,555

			351,297		1,587,300		280,924

		W	419,966		2,306,202		396,186

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

(*2)	Operating expenses and others include W272,524 million of dividends paid by the Parent Company.

(*3)	HanaCard Co., Ltd. was excluded from the related parties due to the disposal of the Group’s shares in the entity for the year ended December 31, 2022, and the transactions above occurred before the disposal.

(*4)	Operating revenue and others include W13,700 million of dividends deducted from the investment in associates as a result of receipt by the Group.

(*5)	Operating expenses and others include costs for handset purchases amounting to W844,157 million.

119

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

37.

Transactions with Related Parties, Continued

(4)

Account balances with related parties as of December 31, 2023 and 2022 are as follows:


(In millions of won)		December 31, 2023
		Receivables				Payables
Scope	Company	Loans		Accounts receivable – trade, etc.		Accounts payable – other, etc.
Ultimate Controlling Entity	SK Inc.	W	—		1,535		106,546
Associates	F&U Credit information Co., Ltd.		—		325		4,417
	Daehan Kanggun BcN Co., Ltd.(*1)		22,147		4,701		—
	Others		—		3,910		3,476

			22,147		8,936		7,893

Others	SK Innovation Co., Ltd.		—		8,697		28,646
	SK Networks Co., Ltd.		—		120		156,316
	Mintit Co., Ltd.		—		17,036		—
	SK hynix Inc.		—		8,022		2,251
	Happy Narae Co., Ltd.		—		101		5,686
	SK Shieldus Co., Ltd.		—		12,723		14,784
	Content Wavve Corp.		—		1,476		2
	Incross Co., Ltd.		—		2,239		943
	Eleven Street Co., Ltd.		—		6,138		6,103
	SK Planet Co., Ltd.		—		9,981		18,833
	SK RENT A CAR Co., Ltd.		—		866		33,365
	UNA Engineering Inc. (Formerly, UbiNS Co., Ltd.)		—		1		10,764
	Others(*2)		—		15,082		30,184

			—		82,482		307,877

		W	22,147		92,953		422,316

(*1)	As of December 31, 2023, the Parent Company recognized loss allowance for the entire balance of loans to Daehan Kanggun BcN Co., Ltd.

(*2)

During the year ended December 31, 2022, SK Telecom Innovation Fund, L.P., a subsidiary of the Parent Company, entered into a convertible loan agreement for USD 13,000,000 with id Quantique SA, classified as an other related party. SK Telecom Innovation Fund, L.P. acquired shares of id Quantique SA amounting to USD 26,731,250, including common shares converted from the entire balance of loan for the year ended December 31, 2023

120

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

37.

Transactions with Related Parties, Continued

(4)

Account balances with related parties as of December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)		December 31, 2022
		Receivables				Payables
Scope	Company	Loans		Accounts receivable – trade, etc.		Accounts payable – other, etc.
Ultimate Controlling Entity	SK Inc.	W	—		2,383		103,141
Associates	F&U Credit information Co., Ltd.		—		64		5,682
	SK USA, Inc.		—		—		1,519
	Wave City Development Co., Ltd.(*1)		—		901		—
	Daehan Kanggun BcN Co., Ltd.(*2)		22,147		3,199		—
	Others		—		—		65

			22,147		4,164		7,266

Others	SK Innovation Co., Ltd.		—		9,726		33,091
	SK Networks Co., Ltd.		—		488		113,943
	Mintit Co., Ltd.		—		35,058		3
	SK hynix Inc.		—		15,494		311
	Happy Narae Co., Ltd.		—		31		31,979
	SK Shieldus Co., Ltd.		—		14,035		17,447
	Content Wavve Corp.		—		349		19,244
	Incross Co., Ltd.		—		3,774		16,152
	Eleven Street Co., Ltd.		—		6,797		13,026
	SK Planet Co., Ltd.		—		8,190		43,238
	SK RENT A CAR Co., Ltd.		—		1,291		22,895
	UNA Engineering Inc. (Formerly, UbiNS Co., Ltd.)		—		—		21,179
	Others(*3)		16,475		13,996		41,890

			16,475		109,229		374,398

		W	38,622		115,776		484,805

(*1)	As of December 31, 2022, the Parent Company recognized loss allowance amounting to W379 million for accounts receivable – trade.

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

(*3)	During the year ended December 31, 2022, SK Telecom Innovation Fund, L.P., a subsidiary of the Parent Company, entered into a convertible loan agreement for USD 13,000,000 with id Quantique SA, classified as other related party.

(5)

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

(6)

The details of additional investments and disposal of associates and joint ventures for the year ended December 31, 2023 are as presented in note 12.

121

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

38.

Commitments and Contingencies

(1) Collateral assets and commitments

SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount of W1,228 million as of December 31, 2023.

(2) Legal claims and litigations

As of December 31, 2023, the Group is involved in various legal claims and litigation. Provision recognized in relation to these claims and litigation is immaterial. In connection with those legal claims and litigation for which no provision was recognized, management does not believe the Group has a present obligation, nor is it expected any of these claims or litigation will have a material impact on the Group’s financial position or operating results in the event an outflow of resources is ultimately necessary.

(3) Accounts receivable from sale of handsets

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

The accounts receivable from sale of handsets amounting to W291,747 million and W357,467 million as of December 31, 2023 and 2022, respectively, which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.

(4) Obligation relating to spin-off

The Parent Company carried out the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments on November 1, 2021. The Parent Company has obligation to jointly and severally reimburse the Parent Company’s liabilities incurred prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act.

122

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

38.

Commitments and Contingencies, Continued

(5) Commitment of the acquisition and disposal of shares

The Board of Directors of the Parent Company resolved the acquisition and disposal of certain shares in order to strengthen the strategic alliance with Hana Financial Group Inc.(“HFG”) at the Board of Directors’ meeting held on July 22, 2022. In accordance with the resolution, as of July 27, 2022, the Parent Company disposed of its entire common shares of HanaCard Co., Ltd. (39,902,323 shares) and entire common shares of Finnq Co., Ltd. (6,370,000 shares) to HFG for W330,032 million and W5,733 million, respectively. Through the agreement with HFG, the Parent Company is obligated to acquire HFG’s common shares from July 27, 2022 to January 31, 2024, after depositing W330,032 million in a specific money trust, and the Parent Company completed the acquisition of the shares for the year ended December 31, 2022. As a part of the aforementioned transaction, as of July 27, 2022, the Parent Company disposed of its entire common shares of SK Square Co., Ltd. (767,011 shares) to HanaCard Co., Ltd. for W31,563 million, and HanaCard Co., Ltd. is obligated to acquire the Parent Company’s common shares from July 27, 2022 to January 31, 2024, after depositing W68,437 million in a specific money trust, and completed the acquisition of the shares for the year ended December 31, 2022. The Parent Company, HFG, and HanaCard Co., Ltd. may not dispose of shares they have acquired under the aforementioned transaction until March 31, 2025.

(6) The acquisition cost of property and equipment and intangible assets to be incurred in subsequent periods under arrangements is W44,202 million as of December 31, 2023.

(7) According to the covenant for bond issuance and borrowings, the Group is required to maintain specific financial ratios, such as the debt ratio, at certain levels. The funds obtained must be used for specified purposes only, and regular reporting to lenders is mandated. Additionally, the contracts include clauses that restrict both provision of additional collateral of assets held by the Group and disposal of certain assets.

123

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

39.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Interest income	W	(70,055	)		(58,472	)
Dividends		(43,014	)		(2,552	)
Gain on foreign currency translations		(1,199	)		(2,095	)
Gain on sale of accounts receivable – other		—			(1,043	)
Gain (loss) relating to investments in associates and joint ventures, net		(10,928	)		81,707
Gain on disposal of property and equipment and intangible assets		(21,898	)		(15,985	)
Gain relating to financial instruments at FVTPL		(115,043	)		(94,393	)
Interest expense		389,813			328,307
Loss on foreign currency translations		1,227			3,814
Loss on sale of accounts receivable – other		65,027			61,841
Income tax expense		342,242			288,321
Expense related to defined benefit plan		124,439			134,509
Share option		18,889			84,463
Bonus paid by treasury shares		20,420			25,425
Depreciation and amortization		3,750,796			3,755,312
Bad debt for accounts receivables – trade		37,906			27,053
Impairment loss on property and equipment and intangible assets		10,369			17,027
Loss on disposal of property and equipment and intangible assets		9,369			20,465
Bad debt for accounts receivable – other		5,256			3,011
Loss relating to financial instruments at FVTPL		49,641			41,597
Loss on disposal of investment assets		—			1,283
Other income (expenses)		(16,919	)		19,843

	W	4,546,338			4,719,438

124

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

39.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Accounts receivable – trade	W	(46,531	)		(60,546	)
Accounts receivable – other		79,223			54,988
Advanced payments		3,986			(25,377	)
Prepaid expenses		(2,262	)		11,989
Inventories		(17,549	)		39,633
Long-term accounts receivable – other		66,036			(74,729	)
Contract assets		3,877			(13,400	)
Guarantee deposits		(2,117	)		6,245
Accounts payable – trade		50,442			(101,465	)
Accounts payable – other		(188,318	)		369,693
Withholdings		(3,714	)		4,964
Contract liabilities		(19,620	)		18,910
Deposits received		(1,744	)		99
Accrued expenses		(73,734	)		116,039
Provisions		(566	)		(20	)
Long-term provisions		(1,061	)		(13,792	)
Plan assets		(17,772	)		(132,131	)
Retirement benefits payment		(99,396	)		(79,117	)
Others		(3,343	)		(3,877	)

	W	(274,163	)		118,106

(3)

Significant non-cash transactions for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets	W	(305,823	)		(39,977	)
Increase of right-of-use assets		345,761			720,932
Transfer from property and equipment to investment property		13,900			4,732

125

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

39.

Statements of Cash Flows, Continued

(4)

Reconciliation of liabilities arising from financing activities for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
	January 1, 2023			Cash flows			Non-cash transactions
	January 1, 2023			Cash flows			Exchange rate changes(*)		Fair value changes			Other changes		December 31, 2023
Total liabilities from financing activities:
Short-term borrowings	W	142,998			(142,998	)		—		—			—		—
Long-term borrowings		793,113			(75,050	)		—		—			15		718,078
Debentures		8,366,693			(84,082	)		36,701		—			6,331		8,325,643
Lease liabilities		1,782,057			(402,465	)		—		—			231,841		1,611,433
Long-term payables – other		1,638,341			(400,245	)		—		—			22,357		1,260,453
Derivative financial liabilities		—			—			—		(9,212	)		—		(9,212	)
Derivative financial assets		(267,151	)		183,090			—		(32,149	)		—		(116,210	)

	W	12,456,051			(921,750	)		36,701		(41,361	)		260,544		11,790,185
Other cash flows from financing activities:
Payments of cash dividends				W	(773,806	)
Payments of interest on hybrid bonds					(17,283	)
Acquisition of treasury shares					(285,487	)
Proceeds of hybrid bonds					398,509
Repayments of hybrid bonds					(400,000	)
Cash inflow from transactions with the non-controlling shareholders					160
Cash outflow from transactions with the non-controlling shareholders					(21,333	)

					(1,099,240	)

				W	(2,020,990	)

(*)	The effect of changes in foreign exchange rates for financial liabilities at amortized cost.

126

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

39.

Statements of Cash Flows, Continued

(4)

Reconciliation of liabilities arising from financing activities for the years ended December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)
	2022
	January 1, 2022			Cash flows			Non-cash transactions
	January 1, 2022			Cash flows			Exchange rate changes(*)		Fair value changes			Business combinations		Other changes		December 31, 2022
Total liabilities from financing activities:
Short-term borrowings	W	12,998			130,000			—		—			—		—		142,998
Long-term borrowings		394,187			398,529			—		—			—		397		793,113
Debentures		8,426,683			(189,878	)		122,350		—			—		7,538		8,366,693
Lease liabilities		1,534,281			(401,054	)		—		—			6,503		642,327		1,782,057
Long-term payables – other		2,009,833			(400,245	)		—		—			—		28,753		1,638,341
Derivative financial liabilities		111			—			—		(111	)		—		—		—
Derivative financial assets		(182,661	)		768			—		(85,258	)		—		—		(267,151	)

	W	12,195,432			(461,880	)		122,350		(85,369	)		6,503		679,015		12,456,051
Other cash flows from financing activities:
Payments of cash dividends				W	(904,020)
Payments of interest on hybrid bonds					(14,766	)
Cash inflow from transactions with the non-controlling shareholders					31,151
Cash outflow from transactions with the non-controlling shareholders					(367	)

					(888,002	)

				W	(1,349,882)

(*)	The effect of changes in foreign exchange rates for financial liabilities at amortized cost.

127

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

40.

Emissions Liabilities

(1)

The quantity of emissions rights allocated free of charge for each implementation year as of December 31, 2023 are as follows:


(In tCO2-eQ)
	Quantities allocated in 2021		Quantities allocated in 2022		Quantities allocated in 2023		Quantities allocated in 2024		Quantities allocated in 2025		Total
Emissions rights allocated free of charge(*)		1,385,433		1,602,751		1,443,977		1,300,465		1,300,465		7,033,091

(*)

The changes in quantity due to additional allocation, cancellation of allocation and others are considered.

(2)

Changes in emissions rights quantities the Group held are as follows:


(In tCO2-eQ)
	Quantities allocated in 2021			Quantities allocated in 2022			Quantities allocated in 2023			Total
Beginning		—			—			306,575			306,575
Allocation at no cost		1,385,433			1,602,751			1,443,977			4,432,161
Purchase		—			213,609			—			213,609
Surrender or shall be surrendered		(1,421,570	)		(1,515,595	)		(1,657,664	)		(4,594,829	)
Borrowed		36,137			5,810			—			41,947

Ending		—			306,575			92,888			399,463

(3)

As of December 31, 2023, the estimated annual greenhouse gas emissions quantities of the Group are 1,657,664 tCO2-eQ.

128

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

41.

Non-current Assets Held for Sale

Non-current assets held for sale as of December 31, 2023 and 2022 are as follows:


(In millions of won)
		December 31, 2023		December 31, 2022
Investments in associates	Daekyo Wipoongdangdang Contents Korea Fund	W	746		1,062
Long-term Investment securities	Digital Content Korea Fund		3,395		3,645
	InterVest Fund		—		107
	Central Fusion Content Fund		884		1,563
	P&I Cultural Innovation Fund		1,892		—
Inventories	–		505		—
Prepaid Expenses	–		1,489		—
Property and Equipment	–		1,604		—

		W	10,515		6,377

129

SK TELECOM CO., LTD. and its Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023 and 2022

42.

Subsequent Events

(1)

On January 25, 2024, the Board of Directors of the Parent Company approved the disposal of treasury shares and details of the transaction are as follows:


		Information of disposal
Number of treasury shares		498,135 Common shares
Price of the treasury shares (in won)		Per share W49,600
Aggregate disposal value		W24,707 million
Disposal date		January 29, 2024
Purpose of disposal		Allotment of shares as bonus payment
Method of disposal		Over-the-counter

(2)

The Board of Directors of the Parent Company approved the acquisition and retirement of treasury shares of the Parent Company at the Board of Directors’ meeting held on July 26, 2023. The Parent Company acquired a total of 6,090,410 shares during the period from July 27, 2023 to January 26, 2024 through a trust agreement and 4,043,091 shares were retired on February 5, 2024.

130

Audit opinion on internal control over financial reporting

The accompanying independent auditor’s report on internal control over financial reporting is attached as a result of auditing the internal control over financial reporting of SK Telecom Co., Ltd. and its subsidiaries (the “Group”) and the consolidated financial statements of the Group for the year ended December 31, 2023 in accordance with the Article 8 of the Act on External Audit of Stock Companies.

Attachments:

Independent auditor’s report on Internal Control over Financial Reporting

Management’s Annual Report on Internal Control over Financial Reporting

131

Independent auditor’s report on Internal Control over Financial Reporting

(Based on a report originally issued in Korean)

SK Telecom Co., Ltd.:

The Shareholders and Board of Directors

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting (“ICFR”) of SK Telecom Co., Ltd. and its subsidiaries (the “Group”) based on the Conceptual Framework for Designing and Operating ICFR (“ICFR Design and Operation Framework”) established by the Operating Committee of ICFR in Korea (the “ICFR Committee”) as of December 31, 2023.

In our opinion, the Group’s ICFR has been effectively designed and operated, in all material respects, as of December 31, 2023, in accordance with the ICFR Design and Operation Framework.

We also have audited, in accordance with Korean Standards on Auditing (“KSA”), the consolidated statement of financial position as of December 31, 2023, the consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of material accounting policies, of the Group, and our report dated March 6, 2024 expressed an unqualified opinion thereon.

Basis for Opinion on ICFR

We conducted our audit in accordance with KSA. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of ICFR section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of ICFR in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for ICFR

Management is responsible for designing, operating, and maintaining effective ICFR, and for its assessing the effectiveness of ICFR, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.

Those charged with governance are responsible for overseeing the Group’s ICFR.

Auditor’s Responsibilities for the Audit of ICFR

Our responsibility is to express an opinion of the Group’s ICFR based on our audit. We conducted our audit in accordance with KSA. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective ICFR was maintained in all material respects.

An audit of the ICFR involves performing procedures to obtain audit evidence as to whether a material weakness exists. The procedures selected depend on the auditor’s judgment, including the assessment of the risks that a material weakness exists. An audit also includes testing and evaluating the design and operation of ICFR based on obtaining an understanding of ICFR and the assessed risk.

132

ICFR definition and Inherent Limitations

A company’s ICFR is implemented by those charged with governance, management, and other employees and is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”). A company’s ICFR includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with KIFRS, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, ICFR may not prevent or detect misstatements of the financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that ICFR may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The engagement partner on the audit resulting in this independent auditor’s report is Yoo, Jung Ho.

LOGO

March 6, 2024

This report is effective as of March 6, 2024, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the Group’s ICFR and may result in modifications to this report.

133

Management’s Annual Report on Internal Control over Financial Reporting

English translation of a Report Originally Issued in Korean

To Shareholders, the Board of Directors and Audit Committee of

SK Telecom Co., Ltd.

We, as the Chief Executive Officer (“CEO”) and Internal Control over Financial Reporting (“ICFR”) Officer of SK Telecom Co., Ltd. and its subsidiaries (the “Group”), assessed the status of the design and operation of the Group’s ICFR for the year ending December 31, 2023.

The Group’s management including the CEO and ICFR Officer is responsible for designing and operating ICFR. We, as the CEO and ICFR Officer (collectively, “We”, “Our” or “Us”), evaluated whether the ICFR has been appropriately designed and is effectively operating to prevent and detect error or fraud which may cause material misstatement of the financial statements to ensure preparation and disclosure of reliable financial information.

We used the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’ established by the Operating Committee of Internal Control over Financial Reporting in Korea (the “ICFR Committee”)’ as the criteria for design and operation of the Group’s ICFR. We also conducted an evaluation of ICFR based on the ‘Management Guideline for Evaluating and Reporting Effectiveness of Internal Control over Financial Reporting’ established by the ICFR Committee.

Based on our assessment of ICFR operation, we concluded that the Group’s ICFR has been appropriately designed and is operating effectively in all material respects as of December 31, 2023, in accordance with the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’.

We certify that this report does not contain any untrue statement of a fact, or omit to state a fact necessary to be presented herein. We also certify that this report does not contain or present any statements which might cause material misunderstandings of the readers, and we have reviewed and verified this report with sufficient care.

February 20, 2024

/s/ Kim, Yang Seob

Internal Control over Financial Reporting Officer

/s/ Ryu, Young Sang

Chief Executive Officer

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