SK TELECOM CO LTD — Audit Report / Information 2005

Mar 30, 2005

6-K 1 u99629e6vk.htm SK TELECOM CO., LTD. FORM 6-K SK TELECOM CO., LTD. FORM 6-K PAGEBREAK

Table of Contents

1934 Act Registration No. 1-14418

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 2005

_______

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

99, Seorin-dong Jongro-gu Seoul, Korea ( Address of principal executive offices )

_______

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

Form 20-F þ Form 40-F o

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes o No þ

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

PAGEBREAK

TOC

TABLE OF CONTENTS

SIGNATURES
SK TELECOM CO., LTD. NON-CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2004 AND 2003
SK TELECOM CO., LTD. NON-CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2004 AND 2003
SK TELECOM CO., LTD. NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF RETAINED EARNINGS YEARS ENDED DECEMBER 31, 2004 AND 2003
SK TELECOM CO., LTD. NON-CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2004 AND 2003
SK TELECOM CO., LTD. NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004 AND 2003

/TOC

Table of Contents

link2 "SK Telecom’s Audit Report for the Fiscal Year of 2004"

SK Telecom’s Audit Report for the Fiscal Year of 2004

On March 2, 2005, SK Telecom Co. Ltd. (“SK Telecom”) released audit report for the fiscal year of 2004, which includes comparative non-consolidated financial statements for the years ended December 31, 2004 and 2003 and related notes to the statements.

Exhibit: SK Telecom’s 2004 Audit Report

2

PAGEBREAK

Table of Contents

link2 "SIGNATURES"

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.

S K T ELECOM C O ., L TD .
By:	/s/ Sung Hae Cho
Name:	Sung Hae Cho
Title:	Vice President

Date: March 25, 2005

3

PAGEBREAK

Table of Contents

SK TELECOM CO., LTD.
NON-CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 AND INDEPENDENT AUDITORS’ REPORT

Audit.Tax.Consulting.Financial Advisory.

PAGEBREAK

Table of Contents

Independent Auditors’ Report

To the Stockholders and Board of Directors of SK Telecom Co., Ltd.

We have audited the accompanying non-consolidated balance sheets of SK Telecom Co., Ltd. (the “Company”) as of December 31, 2004 and 2003, and the related non-consolidated statements of income, appropriations of retained earnings, and cash flows for the years then ended (all expressed in Korean won). These non-consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these non-consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the non-consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the non-consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall non-consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements presents fairly, in all material respects, the financial position of the Company as of December 31, 2004 and 2003, and the results of its operations, the appropriations of its retained earnings and its cash flows for the years then ended, in conformity with financial accounting standards generally accepted in the Republic of Korea.

Our audits also comprehended the translation of the Korean won amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2(a) to the accompanying non-consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside of the Republic of Korea.

Audit.Tax.Consulting.Financial Advisory. Member of Deloitte Touche Tohmatsu

PAGEBREAK

Table of Contents

Without qualifying our opinion, we draw attention to the following :

As described in Note 26(a) to the accompanying non-consolidated financial statements, the Company acquired the license for WiBro, a portable internet service which is scheduled to start commercial operations in June 2006, together with KT Corporation and Hanaro Telecom Inc. through deliberation of the Committee of Information and Communication Policy dated January 20, 2005. With regard to this service, the Company is scheduled to make contribution of W117 billion and receive the WiBro license from the Ministry of Information and Technology by the end of February 2005.

As described in Note 26(b) to the accompanying non-consolidated financial statements, in accordance with the resolution of the Company’s board of directors dated January 26, 2005, the Company and EarthLink, Inc., an internet service provider in the United States of America, agreed to establish ‘SK-EarthLink’, a joint venture company, in the United States of America in February 2005 in order to provide wireless telecommunication service across the United States of America. The Company will invest US$220 million for a 50% equity interest in the joint venture company from 2005 through 2007. SK-EarthLink plans to launch cellular voice and data services across the United States of America by the third quarter of 2005 by renting networks from network operators throughout the United States of America, also known as partial mobile virtual network operator (MVNO) system.

As described in Note 24 to the accompanying non-consolidated financial statements, on May 1, 2003, the Company merged with SK IMT Co., Ltd. in the accordance with a resolution of the Company’s board of directors dated December 20, 2002, and the approval of the shareholders of SK IMT Co., Ltd. dated February 21, 2003.

Accounting principles and auditing standards and their application in practice vary among countries. The accompanying financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying financial statements are for use by those knowledgeable about Korean accounting procedures and auditing standards and their application in practice.

January 28, 2005

Notice to Readers

This report is effective as of January 28, 2005, the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the accompanying financial statements and may result in modification to the auditors’ report.

PAGEBREAK

Table of Contents

link1 "SK TELECOM CO., LTD. NON-CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2004 AND 2003"

SK TELECOM CO., LTD. NON-CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2004 AND 2003

ASSETS	In millions of Korean won — 2004		2003		In thousands of U.S. dollars (Note 2) — 2004	2003
CURRENT ASSETS :
Cash and cash equivalents (Note 12)	W	112,966	W	28,393	$ 109,135	$ 27,430
Short-term financial instruments (Note 12)		7,700		100,513	7,439	97,105
Trading securities (Notes 2 and 3)		640,389		858,739	618,674	829,619
Current portion of long-term investment securities
(Notes 2 and 3)		3,600		85,861	3,478	82,949
Accounts receivable — trade (net of allowance
for doubtful accounts of W58,248 million in 2004
and W56,805 million in 2003)
(Notes 2, 12 and 22)		1,562,774		1,438,836	1,509,781	1,390,045
Short-term loans (net of allowance for doubtful
accounts of W562 million in 2004 and
W516 million in 2003) (Notes 2, 5 and 22)		55,613		51,102	53,727	49,369
Accounts receivable — other (net of allowance
for doubtful accounts of W13,665 million in 2004
and W15,979 million in 2003) (Notes 2, 12 and 22)		1,365,226		811,496	1,318,932	783,978
Inventories (Note 2)		10,961		8,024	10,589	7,752
Accrued income and other		95,116		77,742	91,890	75,107
Total Current Assets		3,854,345		3,460,706	3,723,645	3,343,354
NON-CURRENT ASSETS :
Property and equipment, net (Notes 2, 6, 21 and 22)		4,605,253		4,551,626	4,449,090	4,397,281
Intangible assets, net (Notes 2 and 7)		3,448,619		3,600,268	3,331,677	3,478,184
Long-term investment securities (Notes 2 and 3)		923,537		855,195	892,220	826,196
Equity securities accounted for using the equity method
(Notes 2 and 4)		826,246		563,539	798,228	544,430
Long-term loans (net of allowance for doubtful
accounts of W19,173 million in 2004 and
W19,502 million in 2003) (Notes 2, 5 and 22)		28,284		41,591	27,325	40,181
Guarantee deposits (Notes 12 and 22)		242,387		246,004	234,168	237,662
Long-term deposits and other		92,034		57,030	88,913	55,095
Total Non-Current Assets		10,166,360		9,915,253	9,821,621	9,579,029
TOTAL ASSETS	W	14,020,705	W	13,375,959	$ 13,545,266	$ 12,922,383

(Continued)

PAGEBREAK

Table of Contents

SK TELECOM CO., LTD. NON-CONSOLIDATED BALANCE SHEETS (CONTINUED) DECEMBER 31, 2004 AND 2003

| LIABILITIES
AND STOCKHOLDERS’ EQUITY | In millions of Korean won — 2004 | | 2003 | | 2004 | | 2003 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| CURRENT LIABILITIES: | | | | | | | | | |
| Accounts payable (Notes 12 and 22) | W | 1,070,588 | W | 1,117,835 | $ | 1,034,285 | $ | 1,079,929 | |
| Short-term borrowings | | 400,000 | | 728,669 | | 386,436 | | 703,960 | |
| Income taxes payable | | 267,797 | | 399,852 | | 258,716 | | 386,293 | |
| Accrued expenses | | 378,303 | | 401,245 | | 365,475 | | 387,639 | |
| Current portion of long-term debt, net
(Notes 2, 8, 9 and 11) | | 498,278 | | 1,364,264 | | 481,382 | | 1,318,002 | |
| Current portion of facility deposits (Note 10) | | 13,405 | | 10,824 | | 12,950 | | 10,457 | |
| Other | | 231,340 | | 209,285 | | 223,495 | | 202,189 | |
| Total Current Liabilities | | 2,859,711 | | 4,231,974 | | 2,762,739 | | 4,088,469 | |
| LONG-TERM LIABILITIES : | | | | | | | | | |
| Bonds payable, net (Notes 2 and 8) | | 2,891,843 | | 2,256,644 | | 2,793,781 | | 2,180,122 | |
| Long-term borrowings (Note 9) | | — | | 1,633 | | — | | 1,578 | |
| Subscription deposits (Note 10) | | 31,440 | | 44,197 | | 30,374 | | 42,698 | |
| Long-term payables — other, net of present value
discount of W72,663 million in 2004 and W85,881
million in 2003 (Note 2) | | 577,337 | | 564,119 | | 557,760 | | 544,990 | |
| Accrued severance indemnities, net (Notes 2 and 22) | | 75,409 | | 63,663 | | 72,852 | | 61,504 | |
| Deferred income tax liabilities (Notes 2 and 17) | | 323,096 | | 242,057 | | 312,140 | | 233,849 | |
| Long-term currency swap (Notes 2 and 23) | | 96,743 | | — | | 93,462 | | — | |
| Guarantee deposits received and other (Note 22) | | 38,034 | | 29,834 | | 36,744 | | 28,822 | |
| Total Long-Term Liabilities | | 4,033,902 | | 3,202,147 | | 3,897,113 | | 3,093,563 | |
| Total Liabilities | | 6,893,613 | | 7,434,121 | | 6,659,852 | | 7,182,032 | |
| STOCKHOLDERS’ EQUITY : | | | | | | | | | |
| Capital stock (Notes 1 and 13) | | 44,639 | | 44,639 | | 43,125 | | 43,125 | |
| Capital surplus (Note 13) | | 2,983,166 | | 2,915,964 | | 2,882,008 | | 2,817,084 | |
| Retained earnings : (note 14) | | | | | | | | | |
| Appropriated | | 4,733,936 | | 4,743,822 | | 4,573,409 | | 4,582,960 | |
| Unappropriated | | 1,422,772 | | 396,527 | | 1,374,526 | | 383,081 | |
| Capital adjustments : | | | | | | | | | |
| Treasury stock (Note 15) | | (2,047,105 | ) | (2,047,103 | ) | (1,977,688 | ) | (1,977,686 | ) |
| Unrealized loss on valuation of long-term
investment securities (Notes 2 and 3) | | (89,842 | ) | (156,948 | ) | (86,795 | ) | (151,626 | ) |
| Equity in capital adjustments of affiliates
(Notes 2 and 4) | | 124,145 | | 41,196 | | 119,935 | | 39,799 | |
| Loss on valuation of currency swap (Notes 2 and 23) | | (49,452 | ) | — | | (47,775 | ) | — | |
| Stock options (Notes 2 and 16) | | 4,833 | | 3,741 | | 4,669 | | 3,614 | |
| Total Stockholders’ Equity | | 7,127,092 | | 5,941,838 | | 6,885,414 | | 5,740,351 | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | W | 14,020,705 | W | 13,375,959 | $ | 13,545,266 | $ | 12,922,383 | |

See accompanying notes to non-consolidated financial statements.

PAGEBREAK

Table of Contents

link1 "SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2004 AND 2003"

SK TELECOM CO., LTD. NON-CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2004 AND 2003

	In millions of Korean won,
	except for per share data				except for per share data (Note 2)
	2004		2003		2004		2003
OPERATING REVENUE (Note 2 and 22)	W	9,703,681	W	9,520,244	$	9,374,631	$	9,197,415
OPERATING EXPENSES (Notes 2 and 22)
Labor cost		(402,734	)	(348,455	)	(389,077	)	(336,639	)
Commissions paid		(2,827,159	)	(2,324,587	)	(2,731,291	)	(2,245,761	)
Depreciation and amortization (Notes 6 and 7)		(1,577,434	)	(1,488,165	)	(1,523,944	)	(1,437,702	)
Network interconnection		(858,754	)	(738,236	)	(829,634	)	(713,203	)
Leased line		(365,444	)	(302,288	)	(353,052	)	(292,037	)
Advertising		(328,552	)	(361,114	)	(317,411	)	(348,869	)
Research and development		(203,741	)	(199,074	)	(196,832	)	(192,323	)
Rent		(167,671	)	(140,213	)	(161,985	)	(135,458	)
Cost of goods sold		(5,915	)	(19,152	)	(5,714	)	(18,503	)
Other		(606,696	)	(518,300	)	(586,123	)	(500,724	)
Sub-total		(7,344,100	)	(6,439,584	)	(7,095,063	)	(6,221,219	)
OPERATING INCOME		2,359,581		3,080,660		2,279,568		2,976,196
OTHER INCOME :
Interest income		68,319		68,259		66,002		65,944
Dividends		23,843		25,923		23,034		25,044
Commissions (Note 22)		32,843		95,243		31,729		92,013
Foreign exchange and translation gains (Note 2)		10,897		2,064		10,527		1,994
Gain on disposal of property and equipment		2,054		2,709		1,984		2,617
Gain on transaction of currency swap (Note 2)		2,850		—		2,753		—
Equity in earnings of affiliates (Notes 2 and 4)		53,825		—		52,000		—
Other		42,498		56,250		41,059		54,343
Sub-total		237,129		250,448		229,088		241,955
OTHER EXPENSES :
Interest and discounts		(302,491	)	(375,609	)	(292,234	)	(362,872	)
Donations		(19,796	)	(25,780	)	(19,125	)	(24,906	)
Foreign exchange and translation losses (Note 2)		(6,248	)	(1,065	)	(6,036	)	(1,029	)
Loss on disposal and impairment of property,
equipment and intangible assets		(18,344	)	(12,816	)	(17,722	)	(12,381	)
Loss on impairment of long-term investment securities
(Notes 2 and 3)		(32,074	)	(20,343	)	(30,986	)	(19,653	)
Loss on disposal of investment assets		(810	)	(45,175	)	(783	)	(43,643	)
Equity in losses of affiliates (Notes 2 and 4)		—		(30,537	)	—		(29,501	)
Loss on transaction and valuation of currency swap
(Notes 2 and 23)		(15,819	)	—		(15,283	)	—
Other		(85,350	)	(105,589	)	(82,455	)	(102,010	)
Sub-total		(480,932	)	(616,914	)	(464,624	)	(595,995	)
ORDINARY INCOME		2,115,778		2,714,194		2,044,032		2,622,156

(Continued)

PAGEBREAK

Table of Contents

SK TELECOM CO., LTD. NON-CONSOLIDATED STATEMENTS OF INCOME (CONTINUED) YEARS ENDED DECEMBER 31, 2004 AND 2003

	In millions of Korean won,
	except for per share data				except for per share data (Note 2)
	2004		2003		2004		2003
EXTRAORDINARY GAINS	W	—	W	—	$	—	$	—
INCOME BEFORE INCOME TAXES		2,115,778		2,714,194		2,044,032		2,622,156
PROVISION FOR INCOME TAXES (Notes 2 and 17)		(620,926	)	(771,444	)	(599,870	)	(745,284	)
NET INCOME	W	1,494,852	W	1,942,750	$	1,444,162	$	1,876,872
NET INCOME PER SHARE
(In Korean won and U.S. dollars) (Note 18)	W	20,307	W	25,876	$	19.62	$	25.00

See accompanying notes to non-consolidated financial statements.

PAGEBREAK

Table of Contents

link1 "SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF
APPROPRIATIONS OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 2004 AND 2003"

SK TELECOM CO., LTD. NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF RETAINED EARNINGS YEARS ENDED DECEMBER 31, 2004 AND 2003

	In millions of Korean won				(Note 2)
	2004		2003		2004		2003
RETAINED EARNINGS BEFORE APPROPRIATIONS
Beginning of year	W	1,534	W	1,537	$	1,482	$	1,485
Retirement of treasury stock (Note 15)		—		(1,545,281	)	—		(1,492,881	)
Equity in beginning retained earnings adjustments
of equity-method investees (Notes 2 and 4)		—		(2,479	)	—		(2,395	)
Interim dividends (Note 19)		(73,614	)	—		(71,118	)	—
Net income for the year		1,494,852		1,942,750		1,444,162		1,876,872
End of year		1,422,772		396,527		1,374,526		383,081
TRANSFER FROM VOLUNTARY RESERVES
Reserve for research and manpower development (Note 14)		84,235		62,902		81,379		60,769
Reserve for business expansion (Note 14)		—		483,000		—		466,622
		84,235		545,902		81,379		527,391
APPROPRIATIONS
Legal reserve (Note 14)		—		(32	)	—		(31	)
Reserve for loss on disposal of treasury stock (Note 14)		—		(255,984	)	—		(247,304	)
Reserve for research and manpower development (Note 14)		(130,000	)	(280,000	)	(125,592	)	(270,505	)
Reserve for business expansion (Note 14)		(691,000	)	—		(667,568	)	—
Cash dividends (Note 19)		(684,613	)	(404,879	)	(661,398	)	(391,150	)
		(1,505,613	)	(940,895	)	(1,454,558	)	(908,990	)
UNAPPROPRIATED RETAINED EARNINGS TO BE
CARRIED FORWARD TO THE FOLLOWING YEAR	W	1,394	W	1,534	$	1,347	$	1,482

See accompanying notes to non-consolidated financial statements.

PAGEBREAK

Table of Contents

link1 "SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2004 AND 2003"

SK TELECOM CO., LTD. NON-CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2004 AND 2003

2004		2003		2004		2003
CASH FLOWS FROM OPERATING ACTIVITIES :
Net income	W1,494,852		W1,942,750	$	1,444,162	$	1,876,872
Expenses not involving cash payments :
Depreciation
and amortization	1,699,531		1,612,132		1,641,900		1,557,465
Provision for severance indemnities	52,487		59,757		50,707		57,731
Allowance for doubtful accounts	34,797		20,455		33,617		19,761
Foreign translation loss	736		145		711		140
Loss on disposal and impairment of property,
equipment and intangible assets	18,344		12,816		17,722		12,381
Loss on impairment of long-term investment securities	32,074		20,343		30,986		19,653
Loss on disposal of investment assets	810		45,175		783		43,643
Equity in losses of affiliates	—		30,537		—		29,501
Loss on transaction and valuation of currency swap	15,819		—		15,283		—
Amortization of discounts on bonds and other	45,254		71,932		43,719		69,494
Sub-total	1,899,852		1,873,292		1,835,428		1,809,769
Income not involving cash receipts :
Foreign translation gain	(365	)	(605	)	(353	)	(584	)
Reversal of allowance for doubtful accounts	(284	)	(7	)	(274	)	(7	)
Gain on disposal of property and equipment	(2,054	)	(2,709	)	(1,984	)	(2,617	)
Equity in earnings of affiliates	(53,825	)	—		(52,000	)	—
Gain on transaction of currency swap	(2,850	)	—		(2,753	)	—
Other	(3,846	)	(11,782	)	(3,716	)	(11,383	)
Sub-total	(63,224	)	(15,103	)	(61,080	)	(14,591	)
Changes in assets and liabilities related to
operating activities :
Accounts receivable — trade	(146,726	)	(167,845	)	(141,751	)	(162,153	)
Accounts receivable — other	(566,411	)	(35,879	)	(547,204	)	(34,662	)
Inventories	(3,114	)	2,694		(3,008	)	2,603
Accrued income and other	(13,212	)	(54,380	)	(12,764	)	(52,536	)
Accounts payable	(46,886	)	(473,574	)	(45,296	)	(457,515	)
Income taxes payable	(131,813	)	17,064		(127,343	)	16,485
Accrued expenses	(22,941	)	43,015		(22,163	)	41,556
Current portion of facility deposits	2,580		(3,377	)	2,493		(3,262	)
Other current liabilities	21,880		55,510		21,138		53,627
Deferred income taxes	80,797		117,474		78,057		113,490
Severance indemnity payments	(26,728	)	(22,731	)	(25,822	)	(21,960	)
Sub-total	(852,574	)	(522,029	)	(823,663	)	(504,327	)
Net Cash Provided by Operating Activities	2,478,906		3,278,910		2,394,847		3,167,723

(Continued)

PAGEBREAK

Table of Contents

SK TELECOM CO., LTD. NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 2004 AND 2003

	In millions of Korean won
	2004		2003		2004		2003
CASH FLOWS FROM INVESTING ACTIVITIES :
Cash inflows from investing activities :
Decrease in short-term financial instruments	W	92,813	W	—	$	89,666	$	—
Decrease in trading securities		220,849		—		213,360		—
Decrease in current portion of long-term investment
securities		85,861		70,267		82,949		67,884
Decrease in short-term loans		86,359		45,682		83,431		44,133
Decrease in long-term financial instruments		50,000		3		48,305		3
Proceeds from sales of long-term investment securities		17,390		756,434		16,800		730,783
Proceeds from sales of equity securities accounted
for using the equity method		2,710		3,440		2,618		3,323
Decrease in long-term loans		—		394		—		381
Decrease in guarantee deposits		19,513		44,020		18,851		42,527
Decrease in other non-current assets		36,287		50,758		35,057		49,038
Proceeds from disposal of property and equipment		9,853		11,726		9,519		11,328
Proceeds from disposal of intangible assets		2,292		2,248		2,214		2,172
Sub-total		623,927		984,972		602,770		951,572
Cash outflows for investing activities :
Increase in short-term financial instruments		—		(12,705	)	—		(12,274	)
Increase of trading securities		—		(194,514	)	—		(187,918	)
Increase in short-term loans		(49,892	)	(50,870	)	(48,200	)	(49,145	)
Increase in long-term financial instruments		(60,003	)	—		(57,968	)	—
Acquisition of long-term investment securities		(52,266	)	(430,660	)	(50,494	)	(416,056	)
Acquisition of equity securities accounted for using
the equity method		(130,240	)	(151,648	)	(125,824	)	(146,506	)
Increase in long-term loans		(27,416	)	—		(26,486	)	—
Increase in guarantee deposits and other non-current
assets		(97,704	)	(117,900	)	(94,391	)	(113,903	)
Acquisition of property and equipment		(1,570,002	)	(1,611,209	)	(1,516,764	)	(1,556,573	)
Increase in intangible assets		(57,627	)	(46,526	)	(55,673	)	(44,948	)
Sub-total		(2,045,150	)	(2,616,032	)	(1,975,800	)	(2,527,323	)
Net Cash Used in Investing Activities		(1,421,223	)	(1,631,060	)	(1,373,030	)	(1,575,751	)

(Continued)

PAGEBREAK

Table of Contents

SK TELECOM CO., LTD. NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 2004 AND 2003

	In millions of Korean won
	2004		2003		2004		2003
CASH FLOWS FROM FINANCING ACTIVITIES :
Cash inflows from financing activities :
Increase in short-term borrowings	W	—	W	108,669	$	—	$	104,984
Issuance of bonds		1,205,727		688,737		1,164,841		665,382
Transaction of currency swap		2,850		—		2,753		—
Other		13,496		23,932		13,039		23,120
Sub-total		1,222,073		821,338		1,180,633		793,486
Cash outflows for financing activities :
Repayment of short-term borrowings		(328,669	)	—		(317,524	)	—
Repayment of current portion of long-term debt		(1,370,036	)	(924,180	)	(1,323,578	)	(892,841	)
Payment of dividends		(478,318	)	(151,739	)	(462,098	)	(146,594	)
Decrease in subscription deposits		(12,757	)	(2,654	)	(12,324	)	(2,564	)
Acquisition of treasury stock		(2	)	(1,379,337	)	(2	)	(1,332,564	)
Transaction of currency forward		(29	)	—		(28	)	—
Other		(5,372	)	(32,337	)	(5,191	)	(31,240	)
Sub-total		(2,195,183	)	(2,490,247	)	(2,120,745	)	(2,405,803	)
Net Cash Used in Financing Activities		(973,110	)	(1,668,909	)	(940,112	)	(1,612,317	)
NET INCREASE IN CASH AND CASH
EQUIVALENTS FROM THE MERGED ENTITY (Note 24)		—		43,224		—		41,758
NET INCREASE IN CASH AND CASH EQUIVALENTS		84,573		22,165		81,705		21,413
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE YEAR		28,393		6,228		27,430		6,017
CASH AND CASH EQUIVALENTS
AT END OF THE YEAR	W	112,966	W	28,393	$	109,135	$	27,430

See accompanying notes to non-consolidated financial statements.

PAGEBREAK

Table of Contents

link1 "SK TELECOM CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003"

SK TELECOM CO., LTD. NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004 AND 2003

| 1. |
| --- |
| SK Telecom Co., Ltd. (the “Company”) was incorporated in March 1984 under the laws of Korea to
engage in providing nationwide cellular telephone communication services in the Republic of
Korea. The Company’s common shares and depositary receipts (DRs) are listed on the Korea Stock
Exchange and the New York and London Stock Exchanges, respectively. As of December 31, 2004,
the Company’s total issued shares are held by the following : |

Number of shares	total shares issued (%)
SK Group	19,772,914	24.03
POSCO Corp.	4,098,496	4.98
Institutional investors and other minority shareholders	49,742,886	60.46
Treasury stock	8,662,415	10.53
	82,276,711	100.00

| 2. |
| --- |
| The accompanying non-consolidated financial statements of the Company have been prepared in
accordance with Korean Financial Accounting Standards and Statements of Korea Accounting
Standards (“SKAS”) No.1 through No.10, No.12 and No.13 and significant accounting policies
followed in preparing the accompanying non-consolidated financial statements are summarized as
follows. The accompanying non-consolidated financial statements were approved by the Company’s
board of directors on January 26, 2005. |

| a. |
| --- |
| The Company maintains its official accounting records in Korean won and prepares statutory
financial statements in the Korean language (Hangul) in conformity with the accounting
principles generally accepted in the Republic of Korea (“Korean GAAP”). Certain accounting
principles applied by the Company that conform with financial accounting standards and
accounting principles in the Republic of Korea may not conform with generally accepted
accounting principles in other countries. Accordingly, these financial statements are
intended for use by those who are informed about Korean accounting principles and practices.
The accompanying non-consolidated financial statements have been restructured and translated
into English from the Korean language financial statements. Certain information included in
the Korean language financial statements, but not required for a fair presentation of the
Company’s financial position, results of operations or cash flows, is not presented in the
accompanying non-consolidated financial statements. |

PAGEBREAK

Table of Contents

| | The official accounting records of the Company are maintained and expressed in Korean won,
the currency of the country in which the Company is incorporated and operates. The
translations of Korean won amounts into U.S. dollar amounts in the accompanying
non-consolidated financial statements are included solely for the convenience of readers
outside of Korea and have been made at the rate of W1,035.1 to US$1, the Noon Buying Rate in
the City of New York for cable transfers in Korean won as certified for customs purposes by
the Federal Reserve Bank of New York on the last business day of the year ended December 31,
2004. Such translations into U.S. dollars should not be construed as representations that
the Korean won amounts could be converted into U.S. dollars at the above or any other rate. |
| --- | --- |
| b. | Allowance for Doubtful Accounts |
| | An allowance for doubtful accounts is maintained based on the estimated collectibility of
individual accounts and historical bad debt experience. |
| c. | Inventories |
| | Inventories, which consist mainly of replacement units for wireless telecommunication
facilities and supplies for sales promotion, are stated at the lower of cost or market value,
with cost determined using the moving average method. During the year, perpetual inventory
systems are used to value inventories, which are adjusted to physical inventory counts
performed at the end of the year. When the market value of inventories is less than the
acquisition cost, the carrying amount shall be reduced to the market value and any difference
is charged to current operations as operating expenses. There was no such loss for the years
ended December 31, 2004 and 2003. |
| d. | Securities (excluding securities accounted for using the equity method of accounting) |
| | Debt and equity securities are initially recorded at their acquisition costs (fair value of
considerations paid) including incidental cost incurred in connection with acquisition of the
related securities and classified into trading, available-for-sale and held-to-maturity
securities depending on the acquisition purpose and nature. |
| | Trading securities are stated at fair value with gains or losses on valuation reflected in
current operations. |
| | Securities classified as available-for-sale are reported at fair value. Unrealized gains or
losses on valuation of available-for-sale securities are included in capital adjustments and
the unrealized gains or losses are reflected in net income when the securities are sold or if
an impairment is other than temporary as discussed below. Equity securities are stated at
acquisition cost if fair value cannot be reliably measured. If the declines in the fair
value (or recoverable value) of individual available-for-sale securities below their
acquisition or amortized cost are other than temporary and there is objective evidence of
impairment, write-downs of the individual securities are recorded to reduce the carrying
value to their fair value. The related write-downs are recorded in current operations as
loss on impairment of investment securities. |
| | Held-to-maturity securities are presented at acquisition cost after premiums or discounts for
debt securities are amortized or accreted, respectively. The Company recognizes write-downs
resulting from the other-than-temporary declines in the fair value below its book value on
the balance sheet date if there is objective evidence of impairment. The related write-downs
are recorded in current operations as loss on impairment of investment securities. |
| | Trading securities are presented in the current asset section of the balance sheet, and
available-for-sales and held-to-maturity securities are presented in the current and/or
non-current asset section of the balance sheet as long-term investment securities, based on
their maturities from the balance sheet date. |

PAGEBREAK

Table of Contents

e.	Investment Securities with 20% or More Ownership Interest
	Investment securities of affiliated companies, in which the Company has a 20% or more
ownership interest, are carried using the equity method of accounting, whereby the Company’s
initial investment is recorded at cost and the carrying value is subsequently increased or
decreased to reflect the Company’s portion of shareholders’ equity of the investee.
Differences between the purchase cost and net asset value of the investee are amortized over
20 years using the straight-line method. When applying the equity method of accounting,
unrealized intercompany gains and losses are eliminated and the effect of eliminations is
reflected in the investment securities account.
f.	Property and Equipment
	Property and equipment are stated at cost. Major renewals and betterments, which prolong the
useful life or enhance the value of assets, are capitalized; expenditures for maintenance and
repairs are charged to expense as incurred.
	Depreciation is computed using the declining balance method (except for buildings and
structures acquired on or after January 1, 1995 which are depreciated using the straight-line
method) over the estimated useful lives (4 ~ 30 years) of the related assets.
	Interest expense and other financing charges for borrowings related to the manufacture or
constructions of property and equipment are charged to current operations as incurred.
g.	Intangible Assets
	Intangible assets are stated at cost, less amortization computed using the straight-line
method over 5 to 20 years. The amortization for the years ended December 31, 2004 and 2003
were W317,394 million and W202,449 million, respectively.
	With its application for a license to provide IMT 2000 service, the Company has a commitment
to pay W1,300,000 million to the Ministry of Information Communication (“MIC”). W650,000
million was paid in March 2001 by SK IMT Co., Ltd. (a former subsidiary of the Company), which
was merged into the Company on May 1, 2003, and the remainder is required to be paid over 10
years with an annual interest rate equal to the 3-year-maturity government bond rate minus
0.75% (3.20% as of December 31, 2004). On December 4, 2001, SK IMT Co., Ltd. received the IMT
2000 license from the MIC, and recorded the total license cost as an intangible asset. As a
result of the merger with SK IMT Co., Ltd., the Company acquired such IMT license of
W1,259,253 million and assumed the related long-term payable with a principal amount of
W650,000 million on May 1, 2003 (the date of merger). Amortization of the IMT license
commenced when the Company started its commercial IMT 2000 service in December 2003, using the
straight-line method over the estimated useful life of the IMT license which expires in
December 2016.
h.	Convertible Bonds
	The proceeds from issuance of convertible bonds are allocated between the conversion rights
and the debt issued; the portion allocable to the conversion rights is accounted for as
capital surplus with corresponding conversion right adjustment which is deducted from related
bonds. Such conversion right adjustment is amortized to interest expense using the effective
interest rate method over the redemption period of the convertible bonds. The portion
allocable to the conversion rights is measured by deducting the present value of the debt at
time of issuance from the gross proceeds from issuance of convertible bonds, with the present
value of the debt being computed by discounting the expected future cash flows (including call
premium, if any) using the effective interest rate applied to ordinary or straight debt of the
Company at the issue date.

PAGEBREAK

Table of Contents

i.	Discounts on Bonds
	Discounts on bonds are amortized to interest expense using the effective interest rate method
over the redemption period of the bonds and long-term payables.
j.	Valuation of Long-term Payables
	Long-term payables resulting from long-term installment transactions are stated at the
present value of the expected future cash flows. Imputed interest amounts are recorded in
present value discount accounts which are deducted directly from the related nominal payable
balances. Such imputed interest is included in operations using the effective interest rate
method over the redemption period.
k.	Accrued Severance Indemnities
	In accordance with the Company’s policy, all employees with more than one year of service are
entitled to receive severance indemnities, based on length of service and rate of pay, upon
termination of their employment. Accruals for severance indemnities are recorded to
approximate the amount required to be paid if all employees were to terminate at the balance
sheet date.
	The Company has deposits with insurance companies to fund the portion of the employees’
severance indemnities which is in excess of the tax deductible amount allowed under the
Corporate Income Tax Law, in order to take advantage of the additional tax deductibility for
such funding. Such funding of severance indemnities in outside insurance companies, of which
the beneficiary is its employees, totaling W155,228 million and W138,839 million as of
December 31, 2004 and 2003, respectively, is deducted from accrued severance indemnities.
	In accordance with the Korean National Pension Fund Law, the Company transferred a portion of
its accrued severance indemnities to the Korean National Pension Fund through March 1999.
Such transfers, amounting to W5,612 million and W6,148 million as of December 31, 2004 and
2003, respectively, are deducted from accrued severance indemnities.
	Actual payment of severance indemnities amounted to W26,728 million and W22,731 million for
the years ended December 31, 2004 and 2003, respectively.
l.	Accounting for Employee Stock Option Compensation Plan
	The Company adopted the fair value based method of accounting for its employee stock option
compensation plan. Under the fair value based method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service period. For
stock options, fair value is determined using an option-pricing model that takes into account
the stock price at the grant date, the exercise price, the expected life of the option, the
volatility of the underlying stock, expected dividends and the current risk-free interest
rate for the expected life of the option. However, as permitted under Korean GAAP the
Company excludes the volatility factor in estimating the value of its stock options granted
before December 31, 2003, which results in measurement at minimum value. The total
compensation cost of an option estimated at the grant date is not subsequently adjusted for
changes in the price of the underlying stock or its volatility, the actual life of the
option, dividends on the stock, or the risk-free interest rate.

PAGEBREAK

Table of Contents

m.	Accounting for Leases
	Lease agreements that include a bargain purchase option, result in the transfer of ownership
at the end of the lease term, have a lease term equal to 75% or more of the estimated
economic life of the leased property or where the present value of minimum lease payments
equals or exceeds 90% of the fair value of the leased property, are accounted for as capital
leases. All other leases are accounted for as operating leases.
	Assets and liabilities related to capital leases are recorded as property and equipment and
obligations under capital leases, respectively, and the related interest is calculated using
the effective interest rate method and charged to expense. For operating leases, the future
minimum lease payments are expensed ratably over the lease term while contingent rentals are
expensed as incurred.
n.	Research and Development Costs
	The Company charges substantially all research and development costs to expense as incurred.
The Company incurred internal research and development costs of W203,741 million and
W199,074 million for the years ended December 31, 2004 and 2003, respectively, and external
research and development costs of W68,549 million and W64,419 million for the years ended
December 31, 2004 and 2003, respectively.
o.	Accounting for Foreign Currency Transactions and Translation
	Transactions denominated in foreign currencies are recorded in Korean won translated at the
exchange rate prevailing on the transaction date. Monetary assets and liabilities
denominated in foreign currency are translated into Korean won at the Base Rates announced by
Seoul Money Brokerage Services, Ltd. on the balance sheet date, which were, for US dollars,
W1,043.80=US$1 and W1,197.80=US$1 at December 31, 2004 and 2003, respectively. The
resulting gains or losses arising from the settlement of foreign currency transactions and
the translation of foreign currency assets and liabilities are charged or credited to current
operations.
p.	Derivative Instruments
	The Company records rights and obligations arising from derivative instruments as assets and
liabilities, which are stated at fair value. The gains and losses that result from the
change in the fair value of derivative instruments are reported in current earnings.
However, for derivative instruments designated as hedging the exposure of variable cash
flows, the effective portion of the gains or losses on the hedging instruments are recorded
as a separate component of shareholders’ equity and credited/charged to operations at the
time the hedged transactions affect earnings, and the ineffective portions of the gains or
losses is credited/charged immediately to operations.
q.	Revenue Recognitions
	Operating revenue is recognized when cellular telephone communication services are provided.
r.	Income Taxes
	Deferred tax assets and liabilities are recorded for future tax consequences of operating
loss carryforwards, tax credits and temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets are recognized to the extent that they are expected to be realizable. Deferred
tax assets and liabilities are presented on the balance sheet as a single non-current net
number.

PAGEBREAK

Table of Contents

s.	Adoptions of New Statements of Korea Accounting Standards (“SKAS”)
	On January 1, 2004, the Company adopted SKAS No.10, No.12 and No.13. Such adoptions of new
SKAS did not have an effect on the non-consolidated financial position of the Company as of
December 31, 2004 or non-consolidated ordinary income and net income of the Company for the
year ended December 31, 2004.
t.	Reclassification of Prior Period’s Financial Statements
	Certain reclassifications have been made in prior period’s non-consolidated financial
statements to conform to classifications used in the current period. Such reclassifications
did not have an effect on the non-consolidated financial positions of the Company as of
December 31, 2003 or non-consolidated ordinary income and net income for the year ended
December 31, 2003.

1. INVESTMENT SECURITIES

a. Trading Securities

Trading securities as of December 31, 2004 and 2003 are as follows (in millions of Korean won) :

Acquisition		Carrying	Acquisition		Carrying
cost	Fair value	amount	cost	Fair value	amount
Beneficiary certificates	W640,389	W640,389	W640,389	W860,778	W858,739	W858,739

b.
Long-term investment securities as of December 31, 2004 and 2003 are as follows (in millions of
Korean won) :

Available-for-sale equity securities	W872,209		W800,790
Available-for-sale debt securities	4,928		13,919
Held-to-maturity securities	50,000		126,347
Total	927,137		941,056
Less current portion	(3,600	)	(85,861	)
Long-term portion	W923,537		W855,195

PAGEBREAK

Table of Contents

b-(1). Available-for-sale Equity Securities

Available-for-sale equity securities as of December 31, 2004 and 2003 are as follows (in millions of Korean won, except for share data) :

		Acquisition				Unrealized
percentage (%)		cost at Dec. 31,		at Dec. 31,		gain (loss) at				Carrying amount
at Dec. 31, 2004		2004		2004		Dec. 31, 2004				2004		2003
(Investments in listed companies)
Digital Chosunilbo Co., Ltd.	7.8	W	5,781	W	2,023	W	(3,758	)	(note a)	W	2,023	W	2,847
Hanaro Telecom Inc.	4.8		121,677		71,019		(50,658	)	(note a)		71,019		26,838
Korea Radio Wave Basestation
Management	4.5		1,171		2,178		1,007		(note a)		2,178		2,669
POSCO Corporation	2.7		332,662		464,005		131,343		(note a)		464,005		404,454
INNOTG Co., Ltd.	3.9		1,695		152		(1,543	)	(note a)		152		—
SINJISOFT Corporation	2.3		130		590		460		(note a)		590		—
sub-total			463,116				76,851				539,967		436,808
(Investments in non-listed companies)
Powercomm Co., Ltd.	5.0		240,243		71,565		(168,678	)	(note b)		71,565		68,407
Japan MBCO	7.3		27,332	(note d)			—				27,332		42,516
Real Telecom Co., Ltd.	8.3		5,981		—		—		(note c)		—		5,981
Enterprise Networks Co., Ltd.	4.0		14,438		—		—		(note c)		—		14,438
Eonex Technologies Inc.	14.1		3,600	(note d)			2,010				4,593		4,593
Widerthan. Co., Ltd.	14.3		1,000	(note d)			(27	)			3,188		3,166
Others			95,186	(note d)			—		(note e)		29,158		27,964
sub-total			387,780				(166,693	)			135,836		167,065
(Investments in funds)
Korea IT Fund			190,000	(note d)			—				190,000		190,000
Others			6,406	(note d)			—				6,406		6,917
sub-total			196,406				—				196,406		196,917
Total						W	(89,842	)		W	872,209	W	800,790

| (note a) | The net unrealized gain on investments in common stock of
Digital Chosunilbo Co., Ltd., Hanaro Telecom Inc., Korea
Radio Wave Basestation Management, POSCO Corporation, INNOTG
Co., Ltd. and SINJISOFT Corporation as of December 31, 2004,
totaling W76,851 million, and the net unrealized loss on
investments in common stock of Digital Chosunilbo Co., Ltd.,
Hanaro Telecom, Inc., Korea Radio Wave Basestation Management
and POSCO Corporation as of December 31, 2003, totaling
W14,888 million, were recorded as a capital adjustment. |
| --- | --- |
| (note b) | The Company recorded its investments in common stock of
Powercomm Co., Ltd. at its fair value, which was estimated by
an outside professional valuation company using the present
value of expected future cash flows and the unrealized loss
on valuation of investments amounting to W168,678 million
and W171,836 million as of December 31, 2004 and 2003,
respectively, were recorded as a capital adjustment. |
| (note c) | Due to the impairment of the Company’s investments in common
stock of Real Telecom Co., Ltd. and Enterprise Networks Co.,
Ltd., the Company recorded impairment losses of W20,419
million for the year ended December 31, 2004. |

PAGEBREAK

Table of Contents

| (note d) | As a reasonable estimate of fair value could not be made, the
investment is stated at acquisition cost. The investments in
common stock of Eonex Technologies Inc. and Widerthan. Co., Ltd.
were reclassified to available-for-sale equity from equity
securities accounted for using the equity method during 2003 and
2004, respectively, as the Company’s ownership in such investees
decreased to less than 20%. As a result, the carrying value of
the investments in such investees include the accumulated effect
resulted from applying the equity method before reclassification
to available-for-sale equity. |
| --- | --- |
| (note e) | Due to the impairment of the Company’s investments in common
stock of Mobilewelcom Co., Ltd. in 2004 and CCK Van, Biznet Tech,
Hanse Telecom, Cybird Korea and Venture Korea in 2003, the
Company recorded impairment losses of W1,000 million and W3,926
million recorded for the years ended December 31, 2004 and 2003,
respectively. |

b-(2). Available-for-sale Debt Securities
Available-for-sale debt securities as of December 31, 2004 and 2003 are as follows (in millions
of Korean won) :

	Maturity	Acquisition cost — at Dec. 31, 2004		Carrying amount — 2004		2003
Public bonds	(note a)	W	1,328	W	1,328	W	805
Convertible bonds of Real Telecom
Co., Ltd. (note b)	March, 2007		10,656		—		9,514
Convertible bonds of Eonex
Technologies, Inc.(3 rd ) (note c)	January, 2005		3,600		3,600		3,600
Total					4,928		13,919
Less current portion of available-for-sale debt securities					(3,600	)	(9,514	)
Long-term available-for-sale debt securities				W	1,328	W	4,405

(note a) The maturities of public bonds as of December 31, 2004 and 2003 are as follows (in millions of Korean won) :

Maturity — Within five years	2004 — W	904	2003 — W	738
Within ten years		424		67
	W	1,328	W	805

| (note b) | The convertible bonds of Real Telecom Corp. with a principal amount of W10,656
million can be converted into 371,018 shares of common stock of Real Telecom Corp. at
W28,721 per share over the period from September 29, 2004 to March 28, 2007. If such
bonds are converted, the Company’s equity interest in Real Telecom Corp. will increase to
14.8%. Meanwhile, due to the impairment in such bonds, the Company recorded an impairment
loss of W10,656 million for the year ended December 31, 2004. |
| --- | --- |
| (note c) | The convertible bonds of Eonex Technologies, Inc. (3rd) with a principal amount of
W3,600 million can be converted into 48,000 shares of common stock of Eonex Technologies,
Inc. at W75,000 per share over the period from July 30, 2003 to January 29, 2005. If such
bonds are converted, the Company’s equity interest in Eonex Technologies, Inc. will
increase to 20.4%. |

PAGEBREAK

Table of Contents

b-(3). Held-to-maturity Securities

Held-to-maturity securities as of December 31, 2004 and 2003 are as follows (in millions of Korean won) :

	Maturity	Acquisition cost — at Dec. 31, 2004		2004		2003
Subordinated bonds of
SK Life Insurance Co., Ltd.	April, 2006	W	50,000	W	50,000	W	50,000
Subordinated bonds of
Nate Third Special Purpose Company	May, 2004		—		—		27,464
Subordinated bonds of
Nate Fourth Special Purpose Company	September, 2004		—		—		25,393
Subordinated bonds of
Nate Fifth Special Purpose Company	December, 2004		—		—		23,490
Total					50,000		126,347
Less current portion of held-to-maturity securities					—		(76,347	)
Long-term held-to-maturity securities				W	50,000	W	50,000

On May 2, 2003, September 4, 2003 and December 15, 2003, the Company sold W577,253 million, W549,256 million and W498,426 million, respectively, of accounts receivable resulting from its mobile phone dealer financing plan to Nate Third Special Purpose Company, Nate Fourth Special Purpose Company and Nate Fifth Special Purpose Company, respectively, in asset-backed securitization transactions. In the course of these transactions, the Company acquired subordinate bonds issued by such special purpose companies, in order to supplement the creditworthiness of bonds issued by them. Subordinated bonds of Nate Third Special Purpose Company, Nate Fourth Special Purpose Company and Nate Fifth Special Purpose Company were all collected in 2004.

PAGEBREAK

Table of Contents

4.
Equity securities accounted for using the equity method as of December 31, 2004 and 2003 are as
follows (in millions of Korean won, except for share data) :

of shares	Percentage (%)		Acquisition — Cost		Net Asset — Value		2004		2003
SK Teletech Co., Ltd.	6,747,421	89.1	W	80,491	W	187,610	W	190,896	W	104,340
SK Capital Co., Ltd.	10,000,000	100.0		50,000		34,891		34,891		45,865
SK Communications Co., Ltd.	7,844,454	92.2		175,441		118,157		143,096		120,706
SK Telink Co., Ltd.	943,997	90.8		5,296		56,182		56,182		43,452
SK C&C Co., Ltd.	300,000	30.0		19,071		196,077		201,353		93,433
SK Wyverns Baseball Club Co., Ltd.	199,997	100.0		1,000		—	(note a)	—		—
STIC Ventures Co., Ltd.	1,600,000	24.1		8,000		7,321		7,321		7,098
Paxnet Co., Ltd.	5,590,452	67.1		26,563		5,934		25,244		25,712
VCASH Co., Ltd.	—	—		—		—	(note b)	—		942
Global Credit & Information Corp.	300,000	50.0		2,410		2,384		3,054		2,773
TU Media Corp.	7,800,000	28.5		39,000		34,607		34,607		39,000
Aircross Co., Ltd.	600,000	38.1		300		944		944		300
DSS Mobile Communications Ltd.	—	—		—		—	(note a)	—		—
SLD Telecom PTE. Ltd.	75,941,700	55.1		89,203		59,376		59,804		24,701
Skytel Co., Ltd.	1,756,000	28.6		2,159		3,633		3,633		3,053
SK China Company Ltd.	28,160	20.7		3,195		803		803		2,187
SK Telecom International, Inc.	1,099	100.0		17,467		21,995		21,995		18,963
SK Telecom China Co., Ltd.	6,150,000	100.0		7,340		9,212		9,212		7,340
Centurion IT Investment Association		37.5		3,000		3,205		3,205		3,126
SK-QC Wireless Development Fund		50.0		6,540		5,145		5,145		5,906
SKT-HP Ventures, LLC		50.0		6,415		5,284		5,284		5,964
Other investments in affiliates				20,077		—	(note c)	19,577		8,678
Total							W	826,246	W	563,539

| (note a) | SK Wyverns Baseball Club Co., Ltd. has had a negative capital
since December 31, 2001 due to accumulated losses. DSS
Mobile Communication Ltd., an Indian company, has had a
negative capital since March 31, 1998 and the investments in
common stock of DSS Mobile Communications Ltd. were sold in
2004. |
| --- | --- |
| (note b) | The investments in common stock of VCASH Co., Ltd. were sold
to Korea Railway Transportation Promotion Foundation in 2004. |
| (note c) | As allowed under Korean GAAP, investments in equity
securities of SK Telecom Europe Limited and certain others
were not accounted for using the equity method of accounting,
as their total assets at December 31, 2003 were less than W7
billion. |

PAGEBREAK

Table of Contents

Details of the changes in investments in affiliates accounted for using the equity method for the years ended December 31, 2004 and 2003 are as follows (in millions of Korean won) :

	For the year ended December 31, 2004
	Beginning balance		Equity in earnings		Equity in capital		Decrease
	or acquisition cost		(losses)		adjustments		or other			Ending balance
SK Teletech Co., Ltd. (note a)	W	159,275	W	32,788	W	—	W	(1,167	)	W	190,896
SK Capital Co., Ltd.		45,865		(11,515	)	541		—			34,891
SK Communications Co., Ltd		127,486		11,961		3,649		—			143,096
SK Telink Co., Ltd.		43,452		12,724		6		—			56,182
SK C&C Co., Ltd. (note a)		93,433		14,563		93,957		(600	)		201,353
STIC Ventures Co., Ltd.		7,098		151		72		—			7,321
Paxnet Co., Ltd.		25,712		(515	)	47		—			25,244
VCASH Co., Ltd. (note b)		943		(600	)	—		(343	)		—
Global Credit & Information Corp.		2,773		281		—		—			3,054
Widerthan. Co., Ltd. (note c)		3,166		49		(27	)	(3,188	)		—
TU Media Corp.		39,000		(4,732	)	339		—			34,607
Aircross Co., Ltd.		300		663		(19	)	—			944
SLD Telecom PTE. Ltd.		78,131		(11,064	)	(7,263	)	—			59,804
Skytel Co., Ltd. (note a)		3,053		1,177		(421	)	(176	)		3,633
SK China Company, Ltd.		2,187		(1,198	)	(186	)	—			803
SK Telecom International, Inc.		18,963		6,037		(3,005	)	—			21,995
SK Telecom China Co., Ltd.		7,340		2,886		(1,014	)	—			9,212
Centurion IT investment Association		3,125		80		—		—			3,205
SKT-QC Wireless Development Fund		5,906		(2	)	(759	)	—			5,145
SKT-HP Ventures, LLC		5,964		91		(771	)	—			5,284
	W	673,172	W	53,825	W	85,146	W	(5,474	)	W	806,669

| (note a) | The Company received dividends from SK Teletech Co., Ltd., SK
C&C Co., Ltd. and Skytel Co., Ltd. and the corresponding
amount was deducted from its equity method securities. |
| --- | --- |
| (note b) | The investments in common stock of VCASH Co., Ltd. were sold
to Korea Railway Transportation Promotion Foundation in 2004. |
| (note c) | Investments in common stock of Widerthan. Co., Ltd. were
reclassified to available-for-sale securities as the
Company’s ownership in Widerthan. Co., Ltd. decreased from
20.0% to 14.3% during 2004. |

PAGEBREAK

Table of Contents

	For the year ended December 31, 2003
								Equity in beginning
	Beginning balance		Equity in earnings			Equity in capital		retained earning			Dividend received			Ending
	or acquisition cost		(losses)			adjustments		(note b)			or other			balance
SK Teletech
Co., Ltd. (note c)	W	87,286	W	19,387		W	—	W	—		W	(2,333	)	W	104,340
SK Capital Co., Ltd.		57,535		(6,978	)		(3,176	)	(1,516	)		—			45,865
SK Communications Co., Ltd		160,751		(36,840	)		(3,205	)	—			—			120,706
SK Telink Co., Ltd.		36,395		7,057			—		—			—			43,452
SK C&C
Co., Ltd. (note c)		53,971		(4,528	)		44,590		—			(600	)		93,433
STIC Ventures Co., Ltd.		7,648		(675	)		128		(3	)		—			7,098
Paxnet Co., Ltd.		26,563		(804	)		(47	)	—			—			25,712
VCASH Co., Ltd.		2,007		(1,217	)		179		(27	)		—			942
Eonex
Technologies, Inc. (note e)		4,618		(26	)		—		—			(4,592	)		—
Global Credit & Information Corp.		2,477		296			—		—			—			2,773
Widerthan. Co., Ltd.		1,665		1,498			3		—			—			3,166
SLD Telecom PTE. Ltd.		34,566		(9,771	)		22		(116	)		—			24,701
Skytel Co., Ltd.		2,784		533			(264	)	—			—			3,053
SK China Co., Ltd.		3,500		(1,317	)		4		—			—			2,187
SK Telecom International Inc.		13,693		6,371			(1,101	)	—			—			18,963
Centurion IT investment association		3,064		62			—		—			—			3,126
SK-QC Wireless Development Fund		5,979		(58	)		(15	)	—			—			5,906
SKT-HP Ventures, LLC (note a)		6,415		(25	)		(426	)	—			—			5,964
SK IMT Co., Ltd. (note d)		1,014,647		(3,502	)		—		(817	)		(1,010,328	)		—
	W	1,525,564	W	(30,537	)	W	36,692	W	(2,479	)	W	(1,017,853	)	W	511,387

| (note a) | Investments in equity securities are carried using the equity
method of accounting, based on the financial statements as of
June 30, 2003, as the information as of December 31, 2003 was
not available. |
| --- | --- |
| (note b) | Effective January 1, 2003, the Company’s investees including
SK Capital Co., Ltd., STIC Ventures Co., Ltd., VCASH Co.,
Ltd., SLD Telecom PTE. Ltd., and SK IMT Co., Ltd., adopted
SKAS No.3, “Intangible Assets”. This statement requires that
organization cost be charged to expenses as incurred and the
unamortized organization costs at January 1, 2003 be offset
against the beginning retained earnings. To reflect the
Company’s portion of the decrease in the beginning retained
earnings of the investees, the Company reduced its beginning
retained earnings of 2003. |
| (note c) | The Company received dividends from SK Teletech Co., Ltd. and
SK C&C Co., Ltd. and the corresponding amount was deducted
from its equity method securities. |
| (note d) | Investments in equity securities of SK IMT Co., Ltd. were
accounted for using the equity method of accounting until the
merger on May 1, 2003. |
| (note e) | Investments in common stock of Eonex Technologies, Inc. were
reclassified to available-for-sale securities as the
Company’s ownership in Eonex Technologies, Inc. decreased to
16.1% from 22.5% during the first quarter of 2003. |

PAGEBREAK

Table of Contents

5.
Short-term and long-term loans to employees as of December 31, 2004 and 2003 are as follows (in
millions of Korean won) :

Short-term	Long-term	Total	2003
Loans to employees’ stock ownership association	W4,122	W18,423	W22,545	W33,788
Loans to employees for housing and other	111	502	613	769
	W4,233	W18,925	W23,158	W34,557

6.
Property and equipment as of December 31, 2004 and 2003 are as follows (in millions of Korean
won) :

(years)		2004		2003
Land	—	W	463,656	W	446,574
Buildings and structures	30,15		1,441,937		1,077,479
Machinery	6		9,452,751		8,348,633
Vehicles	4		20,268		18,860
Other	4		721,032		743,219
Construction in progress	—		138,002		309,564
			12,237,646		10,944,329
Less accumulated depreciation			(7,632,393	)	(6,392,703	)
Property and equipment, net		W	4,605,253	W	4,551,626

The standard value of land declared by the government as of December 31, 2004 and 2003 are W401,771 million and W393,683 million, respectively.

PAGEBREAK

Table of Contents

Details of change in property and equipment for the years ended December 31, 2004 and 2003 are as follows (in millions of Korean won) :

	For the year ended December 31, 2004
	Beginning
	balance	Acquisition			Disposal			Transfer			Depreciation			Ending balance
Land	W	446,574	W	3,394	W	(2,684	)	W	16,372		W	—		W	463,656
Buildings and structures		840,237		7,239		(7,849	)		366,296			(42,854	)		1,163,069
Machinery		2,625,306		67,408		(7,659	)		1,143,443			(1,243,380	)		2,585,118
Vehicles		3,836		2,957		(333	)		695			(3,125	)		4,030
Other		326,109		720,431		(5,267	)		(697,118	)		(92,778	)		251,377
Construction in progress		309,564		768,573		(756	)		(939,378	)		—			138,003
Total	W	4,551,626	W	1,570,002	W	(24,548	)	W	(109,690	)	W	(1,382,137	)	W	4,605,253

	For the year ended December 31, 2003
					Increase from
					the merged
	Beginning balance		Acquisition		entity, SK IMT		Disposal			Transfer			Depreciation			Ending balance
Land	W	439,915	W	3,380	W	198	W	(4,793	)		7,874		W	—		W	446,574
Buildings and structures		778,832		5,562		175		(4,599	)		100,340			(40,073	)		840,237
Machinery		2,432,552		106,811		—		(4,034	)		1,359,890			(1,269,913	)		2,625,306
Vehicles		6,095		771		15		(104	)		18			(2,959	)		3,836
Other		449,091		851,183		523		(3,278	)		(874,672	)		(96,738	)		326,109
Construction in progress		345,063		643,502		8,555		—			(687,556	)		—			309,564
Total	W	4,451,548	W	1,611,209	W	9,466	W	(16,808	)	W	(94,106	)	W	(1,409,683	)	W	4,551,626

7.
Intangible assets as of December 31, 2004 and 2003 are as follows (in millions of Korean won) :

	2004							2003
	Acquisition		Accumulated			Carrying		Carrying
	cost		amortization			amounts		amounts
Goodwill	W	2,335,532	W	(385,986	)	W	1,949,546	W	2,078,208
Frequency use rights		1,267,053		(103,734	)		1,163,319		1,251,278
Software development costs		221,278		(120,699	)		100,579		133,833
Other		445,359		(210,184	)		235,175		136,949
	W	4,269,222	W	(820,603	)	W	3,448,619	W	3,600,268

PAGEBREAK

Table of Contents

Details of changes in intangible assets for the years ended December 31, 2004 and 2003 are as follows (in millions of Korean won) :

	For the year ended December 31, 2004
	Beginning balance		Increase		Decrease			Transfer		Amortization			Ending balance
Goodwill	W	2,078,208	W	—	W	—		W	—	W	(128,662	)	W	1,949,546
Frequency use rights		1,251,278		—		—			7,800		(95,759	)		1,163,319
Software development costs		133,833		3,431		(3,094	)		10,545		(44,136	)		100,579
Other		136,949		54,196		(792	)		93,659		(48,837	)		235,175
	W	3,600,268	W	57,627	W	(3,886	)	W	112,004	W	(317,394	)	W	3,448,619

	For the year ended December 31, 2003
					Increase from
					the merged
	Beginning balance		Increase		entity, SK IMT		Decrease			Transfer		Amortization			Ending balance
Goodwill	W	2,206,870	W	—	W	—	W	—		W	—	W	(128,662	)	W	2,078,208
Frequency use rights		—		—		1,259,253		—			—		(7,975	)		1,251,278
Software development costs		88,303		25,163		—		—			56,381		(36,014	)		133,833
Other		95,177		21,363		318		(7,274	)		57,163		(29,798	)		136,949
	W	2,390,350	W	46,526	W	1,259,571	W	(7,274	)	W	113,544	W	(202,449	)	W	3,600,268

The book value as of December 31, 2004 and residual useful lives of major intangible assets are as follows (in millions of Korean won) :

	Amount		Description	Residual useful — lives
Goodwill	W	1,949,546	Goodwill related to acquisition
of Shinsegi Telecomm, Inc.	16 years
IMT license		1,155,575	Relating to W-CDMA Service	(note)
Development costs		100,579	Software for business use	1 ~ 5 years

(note) Amortization of the IMT license commenced when the Company started its commercial IMT 2000 service in December 2003, using the straight-line method over the estimated useful life of the IMT license which expires in December 2016.

PAGEBREAK

Table of Contents

8.
Bonds payable as of December 31, 2004 and 2003 are as follows (in millions of Korean won and
thousands of U.S. dollars) :

Maturity year	rate (%)	2004		2003
Domestic general bonds	2004	5.0 – 7.0	W —		W1,120,000
”	2005	6.0	500,000		500,000
”	2006	5.0 – 6.0	800,000		800,000
”	2007	5.0 – 6.0	700,000		700,000
”	2008	5.0	300,000		300,000
”	2009	5.0	300,000		—
”	2011	3.0	200,000		—
Dollar denominated bonds
(US$200,078)	2004	7.75	—		239,653
(US$300,000)	2011	4.25	313,140		—
Convertible bonds (US$329,450)	2009	—	385,885		—
Total			3,499,025		3,659,653
Less discounts on bonds			(51,467	)	(47,495	)
Less conversion right adjustments			(82,245	)	—
Add long-term accrued interest			24,808		—
Net			3,390,121		3,612,158
Less portion due within one year			(498,278	)	(1,355,514	)
Long-term portion			W2,891,843		W2,256,644

| All of the above bonds will be paid in full at maturities. |
| --- |
| On May 27, 2004, the Company issued zero coupon convertible bonds with a maturity of five years
in the principal amount of US$329,450,000 for US$324,923,469, with an initial conversion price
of W235,625 per share of the Company’s common stock, subject to certain redemption right. The
Company may redeem their principal amount after 3 years from the issuance date if the market
price exceeds 130% of the conversion price during predetermined period. In other hand, the bond
holders may redeem their notes at 103.81% of the principal amount on May 27, 2007 (3 years from
the issuance date). The conversion right may be exercised during the period from July 7, 2004 to
May 13, 2009 and the number of common shares to be converted as of December 31, 2004 is
1,644,978 shares. Conversion of notes to common shares may be prohibited under the
Telecommunications Law or other legal restrictions which restrains foreign governments,
individuals and entities from owning more than 49% of the Company’s voting stock, if this 49%
ownership limitation is violated due to the exercise of conversion rights. In this case, the
Company will pay a bond holder a cash settlement determined at the average price of one day
after a holder exercises its conversion right or the weighted average price for the following
five business days. The Company intends to sell treasury shares held in trust by the Company
that corresponds to the number of shares of common stock that would have been delivered in the
absence of the 49% foreign shareholding restrictions. The Company entered into an agreement
with Credit Suisse First Boston International to fix its exposure with respect to cash
settlement payments which may be more or less than the proceeds from sales of treasury shares
held in trust. Unless either previously redeemed or converted, the notes are redeemable at
106.43% of the principal amount at maturity. |

PAGEBREAK

Table of Contents

9.
Long-term borrowings denominated in foreign currency as of December 31, 2004 and 2003 are as
follows (in millions of Korean won and thousands of U.S. dollars) :

Lender	Final — maturity year	Annual interest — rate (%)	2004	2003
Korea Development Bank	2004	3M Libor + 3.45	US$—	US$	4,478
Woori Bank	2005	Floating rate + 0.2	—		4,089
Total in foreign currency			US$—	US$	8,567
Equivalent in Korean won			W—	W	10,262
Less portion due within one year			—		(8,629	)
Long-term portion			W—	W	1,633

| 10. |
| --- |
| The Company receives subscription deposits from customers of cellular services at the
subscription date. The Company has no obligation to pay interest on subscription deposits but
is required to return them to subscribers upon termination of the subscription contract. |
| Long-term subscription deposits held as of December 31, 2004 and 2003 are as follows (in
millions of Korean won except deposit per subscriber amounts) : |

Service type	Deposit — per subscriber	2004	2003
Cellular	W200,000	W31,440	W44,197

The Company offers existing and new cellular subscribers the option of obtaining credit insurance from Seoul Guarantee Insurance Company (“SGIC”) in lieu of the subscription deposits. Existing subscribers who elect this option are refunded their subscription deposits. As a result, the balance of subscription deposits has been decreasing.

| 11. |
| --- |
| As the Company merged with Shinsegi Telecomm, Inc. in January 2002, certain capital leases made
by Shinsegi Telecomm, Inc. were transferred to the Company. The Company has an option to
acquire the leased machinery and equipment, free of charge, upon termination of the lease
period. Depreciation expense for the years ended December 31, 2004 and 2003 were W37 million
and W250 million, respectively . For the year ended December 31, 2004, all capital leases were
terminated and the Company acquired the related leased machinery free of charge. |

PAGEBREAK

Table of Contents

| The obligation under capital leases that was recorded as current portion of long-term debt as of
December 31, 2003 was US$101 thousand (Korean won equivalent : W121 million). |
| --- |
| The Company leased certain machinery and equipment under an operating lease and the related
lease expenses for the years ended December 31, 2004 and 2003 were W261 million and W1,774
million, respectively. This operating lease was terminated in 2004. |

| 12. |
| --- |
| The details of monetary assets and liabilities denominated in foreign currencies (except for
bonds payable and long-term borrowings denominated in foreign currencies described in Notes 8
and 9) as of December 31, 2004 and 2003 are as follows (in millions of Korean won, thousands of
U.S. dollars, thousands of HK dollars, thousands of Japanese yen, thousands of Great Britain
pounds, thousands of Chinese yuan, thousands of Singapore dollars, thousands of Australian
dollars, thousands of Swiss Franc, thousands of Denmark Krone and thousands of Euros): |

	2004 — Foreign	Korean won		2003 — Foreign	Korean won
	currencies	equivalent		currencies	equivalent
Cash and cash equivalents	US$	3,851	W4,020	US$	1,722	W 2,062
″		—	—	EUR	17	26
″		—	—	GBP	5	10
Short-term financial instruments		—	—	US$	31,492	37,721
Accounts receivable — trade	US$	2,163	2,257	US$	2,552	3,057
″		—	—	SG$	743	522
Accounts receivable — other	US$	2,930	3,058	US$	4,863	5,825
Guarantee deposits	US$	142	149	US$	193	232
″	JPY	15,756	160	JPY	16,337	183
			W9,644			W49,638
Accounts payable	US$	5,158	5,384	US$	5,166	6,188
″	JPY	38,618	391	JPY	20,606	231
″	HK$	217	29	HK$	267	41
″	GBP	67	135	GBP	304	648
″	SG$	5	3	SG$	5	3
″	CNY	1	1	CNY	140	20
″		—	—	AU$	1	1
″	EUR	119	169	EUR	10	15
″		—	—	CHF	4	4
″		—	—	DKK	1	1
Obligation under capital lease
including current portion		—	—	US$	101	121
			W6,112			W 7,273

PAGEBREAK

Table of Contents

13.
The Company’s capital stock consists entirely of common stock with a par value of W500. The
number of authorized and issued shares as of December 31, 2004 and 2003 are as follows :

Authorized shares	220,000,000	220,000,000
Issued shares	82,276,711	82,276,711
Outstanding shares, net of treasury stock	73,614,296	73,614,308

| The number of authorized shares of preferred stock as of December 31, 2004 is 5,500,000 shares,
none of which is outstanding as of December 31, 2004. |
| --- |
| Significant changes in capital stock and capital surplus during the years ended December 31,
2004 and 2003 are as follows (in millions of Korean won, except for share data): |

shares issued		Common stock	Capital surplus
At January 1, 2003	89,152,670		W44,576	W2,884,385
Excess unallocated purchase price (note a)	—		—	(230	)
Retirement of treasury stock (note b)	(7,002,235	)	—	—
Issuance of common stock for the merger with
SK IMT (note c)	126,276		63	31,809
At December 31, 2003	82,276,711		44,639	2,915,964
Excess unallocated purchase price (note d)	—		—	(77	)
Considerations for conversion right (note e)	—		—	67,279
At December 31, 2004	82,276,711		W44,639	W2,983,166

| (note a) | The excess unallocated purchase price of W864,161 million for
the acquisition of additional equity interest of Shinsegi
Telecomm, Inc. after acquiring a majority interest in such
subsidiary, was deducted from capital surplus upon the merger
with Shinsegi Telecomm, Inc. dated January 13, 2002, in
accordance with Korean GAAP. In addition, during the year ended
December 31, 2003, the Company paid W230 million to certain
former shareholders of Shinsegi Telecomm, Inc. in accordance with
the ruling of the court and deducted it from capital surplus. |
| --- | --- |
| (note b) | The Company retired 4,457,635 shares and 2,544,600 shares of
treasury stock on January 3, 2003 and August 20, 2003,
respectively, and reduced unappropriated retained earnings in
accordance with Korean Commercial laws. |
| (note c) | The excess of acquired net assets over the par value of W63
million for the issuance of 126,276 shares of new common stock to
minority shareholders of SK IMT Co., Ltd. upon the merger dated
May 1, 2003, was added to capital surplus. |
| (note d) | During the year ended December 31, 2004, the Company paid W77
million to certain former shareholders of Shinsegi Telecomm, Inc.
in accordance with the ruling of the court and deducted it from
capital surplus. |
| (note e) | The Company issued zero coupon convertible bonds in the principal
amount of US$329,450,000 at US$324,923,469 with an initial
conversion price of W235,625 per share of the Company’s common
stock on May 27, 2004 and the consideration for conversion right
of W67,279 million was added to capital surplus in accordance
with Korean GAAP (See Note 2(h)). |

PAGEBREAK

Table of Contents

14.
Retained earnings as of December 31, 2004 and 2003 are as follows (in millions of Korean won) :

Appropriated	W4,733,936	W4,743,822
Unappropriated	1,422,772	396,527
	W6,156,708	W5,140,349

The details of appropriated retained earnings as of December 31, 2004 and 2003 are as follows (in millions of Korean won):

Legal reserve	W 22,320	W 22,288
Reserve for improvement of financial structure	33,000	33,000
Reserve for loss on disposal of treasury stock	477,182	221,197
Reserve for research and manpower development	776,296	559,198
Reserve for business expansion	3,425,138	3,908,139
Total	W4,733,936	W4,743,822

a.	Legal Reserve
	The Korean Commercial Code requires the Company to appropriate as a legal reserve at least
10% of cash dividends for each accounting period until the reserve equals 50% of outstanding
capital stock. 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 capital stock.
b.	Reserve for Improvement of Financial Structure
	The Financial Control Regulation for listed companies in Korea requires that at least 10% of
net income (net of accumulated deficit), and an amount equal to net gain (net of related
income taxes, if any) on the disposal of property and equipment be appropriated as a reserve
for improvement of financial structure until the ratio of stockholders’ equity to total
assets reaches 30%. The reserve for improvement of financial structure may not be utilized
for cash dividends, but may only be used to offset a future deficit, if any, or may be
transferred to capital stock.
c.	Reserves for Loss on Disposal of Treasury Stock and Research and Manpower Development
	Reserves for loss on disposal of treasury stock and research and manpower development were
appropriated in order to recognize certain tax deductible benefits through the early
recognition of future expenditures. These reserves will be unappropriated from appropriated
retained earnings in accordance with the relevant tax laws. Such unappropriation will be
included in taxable income in the year of unappropriation.

PAGEBREAK

Table of Contents

15.	TREASURY STOCK
	Upon the issuances of stock dividends and new common stock and the merger with Shinsegi
Telecomm, Inc. and SK IMT Co., Ltd., the Company acquired fractional shares totaling 77,958
shares for W6,108 million through 2003. In addition, the Company acquired 7,452,810 shares of
treasury stock in the market or through the trust funds for W1,771,507 million through 2003 in
order to stabilize the market price of its stock.
	Under the Mutual Agreement on Stock Exchange between the Company and KT Corporation, on
December 30, 2002 and January 10, 2003, the Company acquired 8,266,923 shares of the Company’s
common stock from KT Corporation for W1,853,643 million.
	On January 13, 2002, the Company merged with Shinsegi Telecomm, Inc. and distributed 2,677,653
shares of treasury stock to minority shareholders of Shinsegi Telecomm, Inc., of which the cost
was W584,646 million.
	On January 6, 2003, the Company retired 4,457,635 shares of treasury stock that were purchased
from KT Corporation as mentioned above in accordance with a resolution of the board of
directors dated December 26, 2002 and reduced unappropriated retained earnings by W1,008,882
million including the tax effect of W9,373 million, in accordance with the Korean Commercial
Laws.
	On June 30, 2003, in accordance with a resolution of the board of directors dated June 24,
2003, the Company announced a stock repurchase program to acquire 2,544,600 shares of common
stock in the market in order to enhance stockholders’ interest and to stabilize the stock
price. Pursuant to the program, the Company acquired a total of 2,544,600 shares of Company’s
outstanding common stock for W525,174 million during the period from June 30, 2003 to August
11, 2003 and retired such treasury shares on August 20, 2003, which reduced the unappropriated
retained earnings by W537,138 million including the tax effect of W11,964 million, in
accordance with Korean Commercial Laws.
	On February 20, 2004, the Company additionally acquired fractional shares totaling 12 shares
for W2 million which resulted from the merger with SK IMT Co., Ltd.
16.	STOCK OPTIONS
	On March 17, 2000, March 16, 2001 and March 8, 2002, in accordance with the approval of its
stockholders and its board of directors, the Company granted stock options to its management,
representing 17,800 shares at an exercise price of W424,000 per share, 43,290 shares at an
exercise price of W211,000 per share and 65,730 shares at an exercise price of W267,000 per
share. The stock options will become exercisable after three years from the date of grant and
shall be exercisable within two years from the first exercisable date. If the employees leave
the Company within three years after the grant of stock options, the Company may cancel the
stock options awarded. Upon exercise of stock options, the Company will issue its common
stock. During the year ended December 31, 2004, stock options representing 530 shares, of
which total compensation cost was W3 million, were forfeited. During the year ended December 31, 2003, there was no such forfeitures of stock options.

PAGEBREAK

Table of Contents

The value of stock options granted is determined using the Black-Scholes option-pricing model, without considering a volatility factor in estimating the value of its stock options, as permitted under Korean GAAP. The following assumptions are used to estimate the fair value of options granted in 2000, 2001 and 2002; risk-free interest rate of 9.1% for 2000, 5.9% for 2001 and 6.2% for 2002; expected life of three years for 2000, 2001 and 2002; expected dividend of W500 for 2000, 2001 and 2002. Under these assumptions, total compensation cost, the recognized compensation cost for the years ended December 31, 2004 and 2003, the compensation cost to be recognized for the following period after December 31, 2004 and the outstanding balance of stock option in capital adjustment as of December 31, 2004 and 2003 are as follows (in millions of Korean won) :

	Total — compensation	Recognized — compensation cost		Compensation — cost to be	Stock option in — capital adjustment
Grant date	cost	2004	2003	recognized	2004	2003
March 17, 2000	W1,533	W —	W 128	W —	W1,533	W1,533
March 16, 2001	234	10	79	—	234	224
March 8, 2002	3,246	1,082	1,082	180	3,066	1,984
	W5,013	W1,092	W1,289	W180	W4,833	W3,741

The pro forma net income and net income per common share, if the Company had not excluded the volatility factor (expected volatility of 66.8% for options granted in 2000, 67.5% for options granted in 2001 and 63.0% for options granted in 2002) in estimating the value of its stock options, for the years ended December 31, 2004, 2003 and 2002 are as follows :

Pro forma net income (in millions of Korean won)	W1,492,914	W1,939,636	W1,507,911
Pro forma net income per common share
(in Korean won)	20,280	25,835	17,894

PAGEBREAK

Table of Contents

1. INCOME TAXES

a.
Income tax expenses for the years ended December 31, 2004 and 2003 consist of the following
(in millions of Korean won) :

Current	W540,129	W653,970
Deferred (note 1)	80,797	117,474
Income tax expenses	W620,926	W771,444

(Note 1) Changes in deferred tax liabilities for the years ended December 31, 2004 and 2003 are as follows (in millions of Korean won) :

Beginning balance of deferred tax liabilities	(W242,057	)	(W123,768	)
Ending balance of deferred tax liabilities	323,096		242,057
Adjustment to the beginning deferred income
tax liabilities based on tax return filed, and other	(242	)	20,187
Tax effect of temporary differences arising
from disposal and retirement of treasury stock	—		(20,598	)
Deferred tax liabilities transferred from merged
entity, SK IMT Co., Ltd.	—		(404	)
	W 80,797		W117,474

PAGEBREAK

Table of Contents

| b. |
| --- |
| Reconciling items between accounting income and taxable income
for the years ended December 31, 2004 and 2003 are as follows
(in millions of Korean won) : |

(Temporary Differences)
Additions:
Allowance for doubtful accounts	W59,622		W66,833
Accrued interest income — prior year	5,978		6,147
Reserves for research and manpower development	84,235		62,902
Equity in losses of affiliates	—		30,537
Foreign currency translation gain	2,802		8,635
Depreciation	12,073		5,520
Loss on impairment of long-term investment securities	32,074		20,343
Loss on impairment of other assets	21,070		22,458
Loss on valuation of currency swap	15,789		—
Accrued severance indemnities	19,636		31,649
Deposits for severance indemnities	10,540		11,669
Other	57,719		87,523
Sub-total	321,538		354,216
Deductions:
Reserves for research and manpower development	(130,000	)	(280,000	)
Reserves for loss on disposal of treasury stock	—		(255,984	)
Allowance for doubtful accounts — prior year	(67,482	)	(65,844	)
Depreciation — prior year	(183,861	)	(40,957	)
Accrued interest income	(7,797	)	(5,978	)
Foreign currency translation loss	(5,617	)	(17,084	)
Equity in earnings of affiliates	(53,825	)	(287	)
Loss on impairment of other assets	(22,459	)	(9,896	)
Loss on impairment of long-term investment securities	(20,342	)	(56,270	)
Accrued severance indemnities	(19,636	)	—
Deposits for severance indemnities	(10,540	)	(34,613	)
Other	(88,358	)	(38,547	)
Sub-total	(609,917	)	(805,460	)
Total
Temporary Differences	(288,379	)	(451,244	)
(Permanent Differences)	200,043		155,965
Total	(W88,336	)	(W295,279	)

PAGEBREAK

Table of Contents

c.
Changes in cumulative temporary differences for the years ended December 31, 2004 and 2003
and deferred tax liabilities as of December 31, 2004 and 2003 are as follows (in Korean won) :
For the year ended December 31, 2004

Description	January 1, — 2004	(note b)		(note b)		2004
Property and equipment	W 41,373		(W159,764	)	W 9,431		(W 127,822	)
Allowance for doubtful accounts	66,833		60,271		67,482		59,622
Loss on impairment of investment securities	95,269		32,074		20,591		106,752
Foreign currency translation loss	5,617		—		5,617		—
Foreign currency translation gain	(2,802	)	—		(2,802	)	—
Reserves for research and manpower
development	(663,702	)	(130,000	)	(84,235	)	(709,467	)
Reserves for loss on disposal of treasury stock	(474,081	)	—		—		(474,081	)
Accrued interest income	(5,978	)	(7,797	)	(5,978	)	(7,797	)
Equity in earnings of affiliates	(35,616	)	(53,825	)	—		(89,441	)
Loss on impairment of other assets	22,459		21,070		22,459		21,070
Accrued severance indemnities	148,963		19,636		29,075		139,524
Deposits for severance indemnities	(139,054	)	(19,636	)	(19,166	)	(139,524	)
Loss on valuation of currency swap	—		15,789		—		15,789
Other	57,547		34,788		61,854		30,481
Total temporary differences	(W883,172	)	(W187,394	)	W104,328		(W1,174,894	)
Deferred tax liabilities-net (note a)	(W242,057	)					(W 323,096	)

| (note a) | The tax effects of temporary differences which are not realizable and the net
unrealized loss on valuation of long-term investment securities are excluded in
determining the above net deferred tax liabilities as of December 31, 2004. Pursuant to
a revision in the Korean Corporate Income Tax Law, statutory corporate income tax rate
will be changed from current 29.5% to 27.5%, effective January 1, 2005. |
| --- | --- |
| (note b) | These changes include adjustments to reflect the change in accumulated
temporary differences based on the prior year tax return. |

PAGEBREAK

Table of Contents

For the year ended December 31, 2003

	January 1,	merged entity,							December 31,
Description	2003	SK IMT		Increase		Decrease			2003
Property and equipment	W 33,395		W —		W 59,113		W 51,135		W 41,373
Allowance for doubtful accounts	69,887		—		66,833		69,887		66,833
Loss on impairment of long-term investment
securities	131,196		—		20,343		56,270		95,269
Foreign currency translation loss	22,701		—		—		17,084		5,617
Foreign currency translation gain	(11,437	)	—		—		(8,635	)	(2,802	)
Reserves for research and manpower development	(442,603	)			(284,000	)	(62,902	)	(663,702	)
Reserves for loss on disposal of treasury stock	(218,097	)	—		(255,984	)	—		(474,081	)
Accrued interest income	(4,718	)	(1,414	)	(5,978	)	(6,132	)	(5,978	)
Equity in earnings (losses) of affiliates	(62,363	)	—		(287	)	(27,034	)	(35,616	)
Loss on impairment of other assets	10,224		—		22,459		10,224		22,459
Accrued severance indemnities	115,765		268		32,930		—		148,963
Deposits for severance indemnities	(115,765	)	(215	)	(34,742	)	(11,669	)	(139,054	)
Other	55,087		1		15,557		13,100		57,547
Total temporary differences	(W416,728	)	(W1,360	)	(W363,756	)	W101,328		(W883,172	)
Deferred tax liabilities-net (note a)	(W123,768	)	(W 404	)					(W242,057	)

(note a) The tax effects of temporary differences which are not realizable and the net unrealized loss on valuation of long-term investment securities are excluded in determining the above net deferred tax liabilities as of December 31, 2003. Pursuant to a revision in the Korean Corporate Income Tax Law, statutory corporate income tax rate will be changed from current 29.7% to 27.5%, effective January 1, 2005. Such change in statutory corporate income tax rate resulted in a decrease in deferred tax liabilities as of December 31, 2003 by W20,245 million.

d.
Effective tax rates for the years ended December 31, 2004 and 2003 are as follows (in
millions of Korean won):

Income before income tax expenses	W2,115,778	W2,714,194
Income tax expenses	620,926	771,444
Effective tax rate	29.35 %	28.42 %

PAGEBREAK

Table of Contents

e.
Intra-period allocation of income tax expenses for the years ended December 31, 2004 and
2003 are as follows (in millions of Korean won) :

Income tax expenses of ordinary income	W620,926	W771,444
Income tax expenses of extraordinary gain	—	—
Income tax expenses of capital surplus
retained earnings	—	20,598
Income tax expenses	W620,926	W792,042

| 18. |
| --- |
| The Company’s net income and ordinary income per share amounts for the years ended December 31,
2004 and 2003 are computed as follows (in millions of Korean won, except for share and income
per share) : |
| Net income and ordinary income per share |

Net income and ordinary income	W 1,494,852	W 1,942,750
Weighted average number of common shares outstanding	73,614,297	75,078,219
Net income and ordinary income per share (in Korean won)	W 20,307	W 25,876

PAGEBREAK

Table of Contents

The weighted average number of common shares outstanding for the years ended December 31, 2004 and 2003 is calculated as follows :

shares		number of days	number of shares
For 2004
At January 1, 2004	82,276,711		366 / 366	82,276,711
Treasury stock, at the beginning	(8,662,403	)	366 / 366	(8,662,403	)
Purchase of fractional share related to merger
with SK IMT Co., Ltd.	(12	)	316 / 366	(11	)
Total	73,614,296			73,614,297
For 2003
At January 1, 2003	89,152,670		365 / 365	89,152,670
Treasury stock, at the beginning	(9,310,607	)	365 / 365	(9,310,607	)
Purchase of treasury stock	(3,809,288	)	356 / 365	(3,715,360	)
Purchase of fractional share related to merger
with Shinsegi Telecomm, Inc.	(52	)	332 / 365	(47	)
Purchase of fractional share related to merger
with SK IMT Co., Ltd.	(91	)	233 / 365	(58	)
Issuance of common stock for merger with SK
IMT Co., Ltd.	126,276		233 / 365	80,609
Purchase of treasury stock	(2,544,600	)	(note 1)	(1,128,988	)
Total	73,614,308			75,078,219

(note 1) The treasury stock was acquired on several different dates in 2003 and the weighted number of shares was calculated considering each transaction date.

| Diluted net income and ordinary income per share amounts for the years ended December 31,
2004 and 2003 are computed as follows (in millions of won, except for share data) : |
| --- |
| Diluted net income and ordinary income per share |

Adjusted net income and ordinary income (note 2)	W 1,494,852	W 1,942,750
Adjusted weighted average number of
common shares outstanding (note 2)	73,614,297	75,078,219
Diluted net income and ordinary income per share	W 20,307	W 25,876

(note 2) In the years ended December 31, 2004 and 2003, the outstanding stock options did not have a dilutive effect because the exercise price exceeded the average market price of common stock for the years ended December 31, 2004 and 2003, respectively.

PAGEBREAK

Table of Contents

19.
Details of dividends which were declared for the years ended December 31, 2004 and 2003 are as
follows (in millions of Korean won except for share data) :

	Dividend type	Number of shares — outstanding	Face value	Dividend ratio	Dividends
2004	Cash dividends (interim)	73,614,308	W500	200 %	W 73,614
	Cash dividends (year-end)	73,614,296	W500	1,860 %	684,613
	Total				W758,227
2003	Cash dividends (year-end)	73,614,308	W500	1,100 %	W404,879

Dividends payout ratios (including interim dividend) for the years ended December 31, 2004 and 2003 are as follows (in millions of Korean won) :

Dividends	W 758,227	W 404,879
Net income	1,494,852	1,942,750
Dividends payout ratio	50.72 %	20.84 %

Dividends yield ratios for the years ended December 31, 2004 and 2003 are as follows (in Korean won):

Dividend per share	W 10,300	W 5,500
Stock price at the year-end	197,000	199,000
	5.23 %	2.76 %

20.	COMMITMENTS AND CONTINGENCIES
a.	The Company’s warranty obligations under mobile network system development service
contracts with TA Orange Co., Ltd., a Thailand company, and
Singapore Telecommunications Ltd., a Singapore company, have been guaranteed by Citi Corp. and Chohung Bank within the
limit of US$ 550,000 and SG$ 117,250, respectively.
b.	At December 31, 2004, the Company has guarantee deposits restricted for its checking
accounts totaling W26 million and deposits restricted for the interest of the public
totaling W10,000 million.
21.	INSURANCE
	At December 31, 2004, certain of the Company’s assets are insured with local insurance
companies as follows (in millions of Korean won and thousands of U.S. dollars):

Insured	Risk	Carrying value		Coverage
				US$	68,815
Property and equipment	Fire and comprehensive liability	W	6,467,675	W	12,076,952

In addition, the Company carries directors and officers liability coverage insurance totaling W30,000 million.

PAGEBREAK

Table of Contents

22.
Significant related party transactions and balances as of and for the years ended December 31,
2004 and 2003 were as follows (in millions of Korean won) :

Description	2004		2003
Transactions
SK C&C Co., Ltd.:
Purchases of property and equipment	W	126,648	W	180,270
Commissions paid and other expenses		289,933		284,032
Commission and other income		7,918		8,200
SK Engineering & Construction Co., Ltd.:
Construction		419,871		324,260
Commissions paid and other expenses		6,148		7,662
Commissions and other income		1,081		775
SK Networks Co., Ltd.:
Purchases of property and equipment		3,087		3,213
Commissions paid and other expenses		400,290		210,374
Commissions and other income		13,196		10,761
SK Corporation:
Purchases of property and equipment		4,071		3,831
Commissions paid and other expenses		47,438		35,004
Commissions and other income		7,994		5,274
Innoace Co., Ltd.:
Purchases of property and equipment		23,776		35,225
Commissions paid and other expenses		4,337		8,969
Commissions and other income		296		313
SK Communications Co., Ltd.:
Purchases of property and equipment		229		7,379
Commissions paid and other expenses		39,090		29,042
Commissions and other income		13,660		18,534
SK Telesys Co., Ltd.:
Purchases of property and equipment		188,822		188,111
Commissions paid and other expenses		3,102		1,717
Commissions and other income		322		179
SK Life Insurance Co., Ltd.:
Purchases of property and equipment		29,959		1,570
Commissions paid and other expenses		1,630		1,637
Commissions and other income		8,175		8,295
Widerthan. Co., Ltd.:
Purchases of property and equipment		4,418		22,643
Commissions paid and other expenses		82,364		49,939
Commissions and other income		1,084		401

PAGEBREAK

Table of Contents

Description	2004		2003
Balances
SK C&C Co., Ltd.:
Accounts receivable	W	77	W	112
Accounts payable		75,802		72,384
Guarantee deposits received		346		346
SK Engineering & Construction Co., Ltd.:
Accounts receivable		76		92
Accounts payable		135,213		63,442
Guarantee deposits received		408		90
SK Networks Co., Ltd.:
Accounts receivable		1,102		996
Guarantee deposits		113		113
Accounts payable		18,696		62,436
Guarantee deposits received		955		719
SK Corporation:
Accounts receivable		2,392		474
Guarantee deposits paid		103,720		103,720
Accounts payable		19,917		2,908
Guarantee deposits received		10,194		10,194
Innoace Co., Ltd.:
Accounts payable		15,199		25,640
Guarantee deposits received		2,138		1,069
SK Communications Co., Ltd.:
Accounts receivable		235		4,838
Accounts payable		11,509		8,903
Guarantee deposits received		11,127		6,764
SK Telesys Co., Ltd.:
Accounts receivable		11		2
Accounts payable		51,954		33,904
SK Wyverns Baseball Club Co., Ltd.:
Long-term and short-term loans		7,957		13,532
SK Life Insurance Co., Ltd.:
Deposits for severance indemnities		61,419		59,613
Guarantee deposits		60		60
Accounts receivable		1,100		1,119
Guarantee deposits received		821		338
Widerthan. Co., Ltd.:
Accounts receivable		58		30
Accounts payable		9,829		9,762

PAGEBREAK

Table of Contents

| 23. |
| --- |
| The Company has entered into a foreign currency forward contract and a fixed-to-fixed cross
currency swap contract with Citi Bank, BNP Paribas and Credit Suisse First Boston International
to hedge the foreign currency risk of unguaranteed US dollar denominated bonds with face
amounts totaling US$300,000 thousand at annual fixed interest rate of 4.25% issued on April 1,
2004. As of December 31, 2004, in connection with unsettled foreign currency swap contract to
which the cash flow hedge accounting is applied, a loss on valuation of derivatives amounting
to W49,452 million (excluding foreign exchange translation gain arising from unguaranteed US
dollar denominated bonds totaling W31,501 million) was accounted for as a capital adjustment. |
| In addition, the Company has entered into a fixed-to-fixed cross currency swap contract with
Credit Suisse First Boston International to hedge foreign currency risk of unguaranteed US
dollar denominated convertible bonds with face amounts of US$329,450 thousand issued on May 27,
2004. In connection with unsettled fixed-to-fixed cross currency swap contract to which the
cash flow hedge accounting is not applied, a loss on valuation of currency swap of W15,790
million for year ended December 31, 2004 is charged to current operations. |
| As of December 31, 2004, fair values of above derivatives totaling W96,743 million are recorded
in long-term liabilities. |
| Details of derivative instruments as of December 31, 2004 are as follows (in thousands of US
dollars and millions of Korean won) : |

				Fair value
				Designated
	Hedged	Face	Duration	as cash	Not
Type	item	amount	of contract	flow hedge	designated
Fix-to-fixed cross currency swap	Unguaranteed US dollar denominated bonds	US$300,000	March 23, 2004 ~ April 1, 2011	W80,953	W —
Fix-to-fixed cross currency swap	Unguaranteed US dollar denominated convertible bonds	US$100,000	May 27, 2004 ~ May 27, 2009	—	15,790

The above derivative instruments designated as cash flow hedge mature within 75 months from December 31, 2004 at the longest; and the expected portion of capital adjustments as of December 31, 2004, related to loss on valuation of currency swap, to be recorded in earnings within the next 12 months amounted to W5,612 million.

PAGEBREAK

Table of Contents

| 24. |
| --- |
| On May 1, 2003, the Company merged with SK IMT Co., Ltd., in accordance with a resolution of
the Company’s board of directors on December 20, 2002 and the approval of shareholders of SK
IMT Co., Ltd. on February 21, 2003. The exchange ratio of common stock between the Company and
SK IMT Co., Ltd. was 0.11276 share of the Company’s common stock with a par value of W500 to 1
share of common stock of SK IMT Co., Ltd. with a par value of W5,000. Using such exchange
ratio, the Company distributed 126,276 shares of new issued common stock to minority
shareholders of SK IMT Co., Ltd. and the Company retired all shares of SK IMT Co., Ltd. owned
by the Company and SK IMT Co., Ltd. upon the merger. The assets and liabilities transferred
from SK IMT Co., Ltd. were accounted for at the carrying amounts of SK IMT Co., Ltd. |
| The condensed balance sheet of SK IMT as of April 30, 2003 and December 31, 2002 and the
condensed statements of operations for the period from January 1, 2003 to April 30, 2003 and
for the year ended December 31, 2002 are as follows (in millions of Korean won) : |

	Apr. 30, 2003
Condensed Balance Sheets
Current assets	W	332,321	W	963,896
Fixed asset		1,274,185		1,274,630
Total Assets	W	1,606,506	W	2,238,526
Current liabilities	W	7,808	W	26,164
Long-term liabilities		556,444		558,107
Total Liabilities		564,252		584,271
Capital stock		300,000		300,000
Capital surplus		1,300,020		1,300,020
Retained earnings		47,192		54,235
Capital adjustment		(604,958	)	—
Total Stockholders’ Equity		1,042,254		1,654,255
Total Liabilities and Stockholders’ Equity	W	1,606,506	W	2,238,526

2003 to Apr. 30,		Year ended
2003		Dec. 31, 2002
Condensed Statements of Operations
Operating revenue	W —		W —
Operating expenses	(7,009	)	(7,737	)
Operating loss	(7,009	)	(7,737	)
Non-operating income	12,032		47,794
Non-operating expenses	(13,694	)	(1,265	)
Ordinary income (loss)	(8,671	)	38,792
Extraordinary gain (loss)	—		—
Income before income taxes	(8,671	)	38,792
Income tax benefit (expenses)	2,961		(11,554	)
Net income (loss)	(W 5,710	)	W27,238

PAGEBREAK

Table of Contents

25.
The Company’s key operating results for the three months ended December 31, 2004 and 2003 are as
follows (in millions of Korean won, except for income per share) :

2004	2003
(unaudited)	(unaudited)
Operating revenue	W2,484,849	W2,480,397
Ordinary income	481,355	560,063
Net income	348,072	433,230
Net income per share (in Korean won)	4,728	5,885

26.	SUBSEQUENT EVENT
a.	Acquisition of License for WiBro
	The Company acquired the license for WiBro, a portable internet service which is scheduled
to start commercial operations in June 2006, together with KT Corporation and Hanaro
Telecom Inc. through deliberation of the Committee of Information and Communication Policy
dated January 20, 2005. With regard to this service, the Company is scheduled to make
contribution of W117 billion and receive the WiBro license from the Ministry of
Information and Technology by the end of February 2005.
b.	Agreement for establishing SK-EarthLink, a joint venture company in the U.S.A.
	In accordance with the resolution of the Company’s board of directors dated January 26,
2005, the Company and EarthLink, Inc., an internet service provider in the United States of
America, agreed to establish ‘SK-EarthLink’, a joint venture company, in the United States
of America in February 2005 in order to provide wireless telecommunication service across
the United States of America. The Company will invest US$220 million for a 50% equity
interest in the joint venture company from 2005 through 2007. SK-EarthLink plans to launch
cellular voice and data services across the United States of America by the third quarter
of 2005 by renting networks from network operators throughout the United States of America,
also known as partial mobile virtual network operator (MVNO) system.