August 4th, 2011 Results for the Quarter Ended June 30, 2011 K-IFRS, Non-audited Seoul, Korea, August 4, 2011 SK Telecom Co., Ltd. (KSE: 017670, NYSE: SKM) ( SK Telecom ), the leading wireless telecommunications company in Korea, today announced the results of its operations for the quarter ended June 30, 2011. This material contains forward-looking statements with respect to the financial condition, results of operations and business of SK Telecom and its subsidiaries (the Company ) and plans and objectives of the management of the Company. Statements that are not historical facts, including statements about the Company s beliefs and expectations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. The Company does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained in this management presentation, and nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Such forward-looking statements were based on current plans, estimates and projections of the Company and the political and economic environment in which the Company will operate in the future, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. Additional information concerning these and other risk factors are contained in the Company s latest annual report on Form 20-F and in the Company s other filings with the U.S. Securities and Exchange Commission (SEC).
Contents I. Financial Highlights - Consolidated 1 II. Financial Results - Consolidated... 2 1. Income Statement 2. Balance Sheet III. SK Telecom Operating Results.. 6 IV. Appendix.... 7 1. Consolidated Income Statement, Balance Sheet 2. Non-consolidated Income Statement, Balance Sheet V. IR Contacts........ 11
I. Financial Highlights - Consolidated Summary of Income Statement Operating revenue 4,041 3,824 217 4,041 3,909 132 Operating expenses 3,381 3,177 205 3,381 3,295 87 Operating income 660 647 13 660 614 45 Operating margin 16.3% 16.9% -0.6%p 16.3% 15.7% 0.6%p Net profit or loss in non-operating items Income from continuing operations before income tax (12) (39) 28 (12) 155 (166) 648 608 40 648 769 (121) Consolidated net income 465 449 17 465 537 (72) Net margin 11.5% 11.7% -0.2%p 11.5% 13.7% -2.2%p Majority interests 468 458 10 468 543 (75) Minoriry interests (2) (9) 6 (2) (5) 3 EBITDA 1) 1,265 1,171 94 1,265 1,200 65 EBITDA margin 31.3% 30.6% 0.7%p 31.3% 30.7% 0.6%p 1) EBITDA = operating income + depreciation (including R&D related depreciation) Summary of Balance Sheet Total assets 22,612 23,210 (598) 22,612 22,937 (325) Total liabilities 10,007 11,302 (1,295) 10,007 10,650 (643) Total shareholders' equity 12,605 11,908 697 12,605 12,287 318 Debt/Equity ratio 41.4% 56.8% -15.4%p 41.4% 44.6% -3.3%p 1
II. Financial Results (Consolidated) 1. Income Statement A. Operating revenue Operating revenue* 4,041 3,824 217 4,041 3,909 132 Operating revenue (SK Telecom)* Operating revenue (Other consolidated companies)* 3,140 3,037 103 3,140 3,085 55 901 787 114 901 824 77 * After offsetting intercompany transaction Operating revenue - The YoY and QoQ increase was mainly due to increase in the operating revenue of SK Telecom by smartphone subscriber increase, and growth in PS&M's product revenue from smartphone utilization. - Revenue of SK Telecom is 3,140 billion won, 78%, and that of other consolidated companies is 901 billion won, 22% of total consolidated revenue respectively. SK Telecom operating revenue (Non-consolidated) Mobile service revenue 2,723 2,680 44 2,723 2,676 47 Interconnection revenue 299 306 (6) 299 298 1 New business & others* 172 93 78 172 158 13 Total operating revenue 3,194 3,078 116 3,194 3,132 62 * Revenue from leased line business, fixed-line resale, solution/hardware sales, online shopping mall, motion film distribution business, etc. 1) Mobile service revenue - The YoY and QoQ increase was due to increase in the number of smartphone subscribers and in call traffic volume from the added number of business days. 2) Interconnection revenue - The YoY decrease was mainly due to decrease in the interconnection rate. - The QoQ increase was mainly due to increase in call traffic volume between mobile to mobile. 3) New business & others - The YoY and QoQ increase was mainly due to improvement in new businesses including broadband resale & online open market, "11 St." 2
B. Operating expenses Labor cost 253 196 57 253 314 (60) Commissions paid 1,425 1,442 (17) 1,425 1,360 65 Advertising 85 98 (13) 85 55 30 Depreciation 1) 606 524 81 606 586 20 Network interconnection 324 340 (17) 324 319 5 Leased line 66 63 3 66 66 0 Frequency usage fees 44 41 3 44 48 (4) Others 578 471 106 578 547 31 Operating expenses 3,381 3,177 205 3,381 3,295 87 1) Includes R&D related depreciation 1) Labor cost - The YoY increase was due to establishment of marketing and network outsourcing companies in July, '10. - The QoQ decrease was due to incentive bonus payment of SK Telecom in 1Q '11. 2) Commissions paid - The YoY decrease was mainly due to SK Telecom's marketing expense reduction resulted from the introduction of competitive handset models, such as Galaxy S2. - The QoQ increase was due to increase in commissions related to handset installment receivables, and increase in subscribers of SK Broadband. 3) Advertising cost - The YoY decrease was mainly due to World cup related promotional activities in 2Q '10 of SK Telecom. - The QoQ increase was mainly due to increase in new business and T-brand related promotional activities of SK Telecom. 4) Depreciation - The YoY and QoQ increase was mainly due to network related capital investments. 3
C. Non-operating items Interest income 42 62 (20) 42 49 (7) Interest expenses 71 99 (28) 71 81 (10) Net profit or loss in other non-operating items Net profit or loss in non-operating items 17 (2) 19 17 187 (169) (12) (39) 28 (12) 155 (166) 1) Interest income / expenses - The YoY decrease in interest income was due to decrease in handset installment receivables of SK Telecom. - The YoY and QoQ decrease in interest expenses was due to decrease in average level of borrowings of SK Telecom. 2) Net profit or loss in other non-operating items - The QoQ decrease was mainly due to reflection of gain from disposition of long-term investment assets related to SK C&C(4.1%) in 1Q '11. 4
2. Balance Sheet Total assets 22,612 23,210 (598) 22,612 22,937 (325) Current assets 6,098 6,971 (873) 6,098 6,921 (823) Cash & marketable securities 1,785 1,611 174 1,785 2,077 (291) Non-current assets 16,514 16,239 276 16,514 16,016 498 Property & equipment 8,542 7,631 911 8,542 8,031 511 Intangible assets 3,450 3,589 (139) 3,450 3,532 (82) Investment assets 3,050 2,887 163 3,050 3,153 (103) Total liabilities 10,007 11,302 (1,295) 10,007 10,650 (643) Current liabilities 5,773 6,082 (309) 5,773 6,820 (1,047) Short-term borrowings 507 656 (149) 507 681 (174) Current portion of long-term debt 1) 1,316 1,734 (418) 1,316 1,589 (273) Non-current liabilities 4,234 5,220 (985) 4,234 3,831 404 Bonds payable & long-term borrowings 3,407 4,538 (1,131) 3,407 3,230 176 Total shareholders' equity 12,605 11,908 697 12,605 12,287 318 Debt/Equity ratio 2) 41.4% 56.8% -15.4%p 41.4% 44.6% -3.3%p 1) Includes current portion of long-term payables related to payment of WCDMA license fee 2) Debt/Equity ratio = interest-bearing financial debt / shareholders' equity * Interest-bearing financial debt = short-term borrowings + current portion of long-term debt + bonds payable & long-term borrowings 1) Assets - The QoQ decrease in cash & marketable securities mainly resulted from SK Telecom's cash dividend payout. - The YoY and QoQ decrease in current assets was mainly due to decrease in SK Telecom's accounts receivable which resulted from the changing of the purchasing entitiy of handset installment receivables. - The increase in property & equipment due to increased network investments and the increase in investment assets due to acquiring shares of entities including Packet One resulted in a YoY increase in non-current assets. 2) Liabilities - Current liabilities decreased YoY due to decrease in borrowings related to the changing of the handset installment receivable purchasing structure, and the QoQ decrease was mainly due to the cash dividend payout in April. - Non-current liabilites decreased YoY due to increase in current portion of long-term debt and repayment of long-term borrowings of SK Telecom, and increased QoQ mainly due to increase in long-term payables related to SK Telecom's 800Mhz spectrum reallocation. 3) Shareholders' equity - The YoY increase was mainly due to increase in retained earnings. 5
III. SK Telecom's Operating Results (Non-consolidated) Q2 '11 Q2 '10 YoY Q2 '11 Q1 '11 QoQ Subscribers ('000) 26,269 25,146 1,123 26,269 25,989 280 Net adds 280 322 (42) 280 283 (3) Activations 2,418 2,321 97 2,418 2,237 181 Deactivations 2,137 1,999 138 2,137 1,953 184 Monthly churn rate (%) 2.7% 2.6% 0.1%p 2.7% 2.5% 0.2%p Average subscribers ('000) 26,134 24,996 1,138 26,134 25,847 287 ARPU (KRW) Total ARPU 40,738 41,051 (313) 40,738 40,393 344 Billing ARPU 1) 33,592 34,695 (1,103) 33,592 33,317 274 1) The billing ARPU excludes sign-up fee from mobile service revenue. Other Main Items Marketing expenses* 819 888 (70) 819 785 33 % of revenue 25.6% 28.9% -3.2%p 25.6% 25.1% 0.6%p Capital expenditure 559 297 261 559 300 258 % of revenue 17.5% 9.7% 7.8%p 17.5% 9.6% 7.9%p Interest-bearing debt 3,312 4,801 (1,489) 3,312 3,701 (389) Debt/Equity ratio 28.0% 44.0% -16.0%p 28.0% 32.2% -4.2%p * Marketing expense = marketing related commission + advertising expenses 6
IV. Appendix - Consolidated Statement of Income (K-IFRS) (KRW mn) Q2 '11 Q2 '10 YoY Q2 '11 Q1 '11 QoQ Operating revenue 4,040,953 3,823,587 217,366 4,040,953 3,908,861 132,092 Operating expenses 3,381,227 3,176,656 204,571 3,381,227 3,294,524 86,703 Labor cost 253,379 196,092 57,287 253,379 313,585 (60,206) Commissions paid 1,425,181 1,442,153 (16,972) 1,425,181 1,360,036 65,145 Advertising 85,277 98,485 (13,208) 85,277 55,275 30,001 Depreciation 1) 605,740 524,488 81,252 605,740 586,079 19,661 Network interconnection 323,503 340,050 (16,547) 323,503 318,741 4,762 Leased line 66,243 63,136 3,107 66,243 65,946 296 Frequency usage fees 44,192 40,838 3,354 44,192 47,948 (3,756) Others 577,712 471,415 106,297 577,712 546,912 30,800 Operating income 659,726 646,931 12,796 659,726 614,338 45,389 EBITDA 1,265,466 1,171,419 94,048 1,265,466 1,200,417 65,050 EBITDA margin 31.3% 30.6% 0.7%p 31.3% 30.7% 0.6%p Net profit or loss in non-operating items (11,660) (39,170) 27,510 (11,660) 154,563 (166,223) Interest income 41,896 61,602 (19,706) 41,896 48,647 (6,750) Interest expenses 71,014 99,247 (28,233) 71,014 80,944 (9,930) Profit or loss in other non-operating items 17,457 (1,526) 18,983 17,457 186,861 (169,404) Income from continuing operations before tax 648,066 607,761 40,305 648,066 768,901 (120,835) Consolidated net income 465,436 448,889 16,547 465,436 537,268 (71,832) Majority interests 467,794 457,655 10,139 467,794 542,534 (74,740) Minority interests (2,358) (8,766) 6,408 (2,358) (5,266) 2,908 1) Includes R&D related depreciation 7
IV. Appendix - Consolidated Balance Sheet (K-IFRS) (KRW mn) Q2 '11 Q2 '10 YoY Q2 '11 Q1 '11 QoQ Total assets 22,612,315 23,210,035 (597,719) 22,612,315 22,937,219 (324,904) Current assets 6,098,155 6,971,484 (873,329) 6,098,155 6,921,200 (823,045) Cash and marketable securities 1) 1,785,067 1,610,903 174,164 1,785,067 2,076,556 (291,489) Accounts receivable 3,794,094 4,513,541 (719,447) 3,794,094 4,032,991 (238,897) Short-term loans 101,909 102,186 (278) 101,909 110,375 (8,466) Inventories 170,318 134,231 36,088 170,318 154,924 15,395 Other current assets 246,767 610,622 (363,855) 246,767 546,355 (299,588) Non-current assets 16,514,160 16,238,551 275,609 16,514,160 16,016,019 498,141 Property & equipment 8,541,536 7,630,851 910,685 8,541,536 8,030,516 511,020 Intangible assets 3,450,246 3,589,272 (139,026) 3,450,246 3,532,063 (81,817) Investment assets 3,049,926 2,886,730 163,196 3,049,926 3,152,844 (102,918) Other non-current assets 1,472,452 2,131,697 (659,245) 1,472,452 1,300,595 171,857 Total liabilities 10,007,201 11,301,937 (1,294,737) 10,007,201 10,650,202 (643,001) Current liabilities 5,772,938 6,082,178 (309,241) 5,772,938 6,819,594 (1,046,656) Short-term borrowings 506,530 655,984 (149,454) 506,530 680,955 (174,425) Accounts payable 1,297,973 1,250,309 47,664 1,297,973 1,772,063 (474,090) Current portion of long-term debt 1,316,454 1,734,473 (418,019) 1,316,454 1,589,443 (272,989) Other current liabilities 2,651,981 2,441,413 210,568 2,651,981 2,777,133 (125,152) Non-current liabilities 4,234,263 5,219,759 (985,496) 4,234,263 3,830,608 403,655 Bonds payable & long-term borrowings 3,406,575 4,537,890 (1,131,315) 3,406,575 3,230,139 176,436 Long-term payables - other 234,782 54,852 179,930 234,782 37,399 197,383 Post-employment benefit obligation 96,529 71,768 24,761 96,529 83,047 13,481 Other non-current liabilities 496,378 555,249 (58,871) 496,378 480,023 16,355 Total shareholders' equity 12,605,115 11,908,097 697,017 12,605,115 12,287,017 318,097 Capital stock 44,639 44,639-44,639 44,639 - Capital surplus 2,925,005 2,922,960 2,045 2,925,005 2,925,390 (385) Retained earnings 11,126,255 9,789,519 1,336,736 11,126,255 10,662,776 463,479 Capital adjustments (2,997,915) (2,757,386) (240,529) (2,997,915) (2,997,892) (23) Other comprehensive income/loss 2) 442,937 794,480 (351,542) 442,937 582,238 (139,301) Minoriry interests 1,064,193 1,113,885 (49,692) 1,064,193 1,069,865 (5,672) 1) Cash & marketable securities: includes cash & cash equivalent, marketable securities & short-term financial instruments 2) Other comprehensive income/loss: includes gains or losses on valuation of investment securities and derivatives 8
IV. Appendix - Non-consolidated Statement of Income (K-IFRS) (KRW mn) Q2 '11 Q2 '10 YoY Q2 '11 Q1 '11 QoQ Operating revenue 3,193,893 3,078,368 115,525 3,193,893 3,132,148 61,745 Operating expenses 2,562,855 2,433,106 129,749 2,562,855 2,534,168 28,688 Labor cost 114,379 118,296 (3,917) 114,379 182,458 (68,079) Commissions paid 1,278,371 1,228,572 49,799 1,278,371 1,234,919 43,452 Marketing commissions 759,276 808,758 (49,481) 759,276 749,971 9,305 Other commissions 519,095 419,815 99,280 519,095 484,948 34,146 Advertising 59,336 79,570 (20,234) 59,336 35,388 23,948 Depreciation 1) 467,571 384,164 83,407 467,571 448,180 19,390 Network interconnection 249,280 267,777 (18,496) 249,280 242,494 6,786 Leased line 52,576 45,528 7,048 52,576 50,430 2,146 Frequency usage fees 43,695 40,285 3,410 43,695 47,423 (3,728) Others 297,648 268,916 28,732 297,648 292,876 4,772 Operating income 631,038 645,262 (14,223) 631,038 597,980 33,058 EBITDA 1,098,609 1,029,425 69,184 1,098,609 1,046,161 52,448 EBITDA margin 34.4% 33.4% 1.0%p 34.4% 33.4% 1.0%p Net profit or loss in non-operating items 18,248 (25,972) 44,220 18,248 191,058 (172,810) Interest income 35,306 54,901 (19,595) 35,306 43,015 (7,709) Interest expenses 44,827 69,085 (24,258) 44,827 55,083 (10,257) Net profit or loss in other non-operating items 27,769 (11,788) 39,557 27,769 203,126 (175,357) Income from continuing operations before tax 649,286 619,290 29,997 649,286 789,038 (139,752) Net income 474,387 461,885 12,502 474,387 560,672 (86,285) 1) Includes R&D related depreciation 9
IV. Appendix - Non-consolidated Balance Sheet (K-IFRS) (KRW mn) Q2 '11 Q2 '10 YoY Q2 '11 Q1 '11 QoQ Total assets 19,030,266 19,686,241 (655,975) 19,030,266 19,567,287 (537,021) Current assets 4,509,549 5,573,637 (1,064,088) 4,509,549 5,419,524 (909,975) Cash and marketable securities 1) 1,242,936 926,456 316,480 1,242,936 1,478,832 (235,896) Accounts receivable 3,036,015 4,017,325 (981,310) 3,036,015 3,440,024 (404,009) Short-term loans 92,530 90,633 1,897 92,530 97,717 (5,187) Inventories 14,274 15,324 (1,050) 14,274 13,876 398 Other current assets 123,794 523,899 (400,105) 123,794 389,075 (265,281) Non-current assets 14,520,716 14,112,604 408,112 14,520,716 14,147,763 372,953 Property & equipment 6,024,825 5,003,927 1,020,899 6,024,825 5,468,007 556,819 Intangible assets 2,596,870 2,645,685 (48,816) 2,596,870 2,668,147 (71,278) Investment assets 5,261,425 5,085,294 176,131 5,261,425 5,353,474 (92,049) Other non-current assets 637,596 1,377,698 (740,102) 637,596 658,136 (20,539) - - Total liabilities 7,191,575 8,775,961 (1,584,387) 7,191,575 8,073,570 (881,996) Current liabilities 3,830,117 4,357,129 (527,012) 3,830,117 4,630,040 (799,922) Short-term borrowings - - - - - - Accounts payable 1,195,162 1,321,792 (126,631) 1,195,162 1,887,179 (692,017) Current portion of long-term debt 709,003 1,200,093 (491,090) 709,003 822,164 (113,161) Other current liabilities 1,925,953 1,835,244 90,709 1,925,953 1,920,696 5,256 Non-current liabilities 3,361,457 4,418,832 (1,057,375) 3,361,457 3,443,531 (82,074) Bonds payable & long-term borrowings 2,620,069 3,767,314 (1,147,246) 2,620,069 2,896,251 (276,182) Long-term payables 230,606 50,121 180,485 230,606 33,257 197,350 Post-employment benefit obligation 36,898 32,585 4,313 36,898 31,373 5,525 Other non-current liabilities 473,884 568,811 (94,927) 473,884 482,650 (8,766) - - Total shareholders' equity 11,838,691 10,910,280 928,411 11,838,691 11,493,717 344,974 Capital stock 44,639 44,639-44,639 44,639 - Capital surplus 2,920,900 2,920,900-2,920,900 2,920,900 - Retained earnings 11,256,596 9,826,504 1,430,092 11,256,596 10,783,751 472,845 Capital adjustments (2,945,544) (2,739,237) (206,307) (2,945,544) (2,945,544) - Other comprehensive income/loss 2) 562,099 857,473 (295,374) 562,099 689,970 (127,871) 1) Cash & marketable securities: includes cash & cash equivalent, marketable securities & short-term financial instruments 2) Other comprehensive income/loss: includes gains or losses on valuation of investment securities and derivatives 10
V. IR Contacts IR 담당자전화번호 Email 주소 Ho Sook Hwang 02)6100-1636 hhwang@sk.com Won Tuh Chung 02)6100-1550 wt.chung@sk.com Sang Yun Lee 02)6100-1621 sktsylee@sk.com Jun Kim 02)6100-1637 starish7@sk.com Hyunyoung Jung 02)6100-1617 haley.jung@sk.com 11