1934 Act Registration No. 1-14418
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 APRIL 2003
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SK TELECOM CO., LTD.
(Translation of registrant's name into English)
99, Seorin-dong
Jongro-gu
Seoul, Korea
(Address of principal executive offices)
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(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F [X] Form 40-F [ ]
(Indicate by check mark 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 [ ] No [X]
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82- .)
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This report on Form 6-K shall be deemed to be incorporated by reference in
the prospectuses included in Registration Statements on Form F-3 (File Nos.
333-91034 and 333-99073) filed with the Securities and Exchange Commission and
to be a part thereof from the date on which this report is filed, to the extent
not superseded by documents or reports subsequently filed or furnished.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
In this report on Form 6-K, unless the context indicates or otherwise
requires, references to "we", "us", "our" or the "Company" shall mean SK Telecom
Co., Ltd. and its consolidated subsidiaries, and references to "SK Telecom"
shall mean SK Telecom Co., Ltd., but shall not include its consolidated
subsidiaries. Unless otherwise indicated, references to our number of
subscribers shall include Shinsegi Telecomm, Inc.'s subscribers from April 1,
2000. All references to "Korea" contained in this report shall mean The Republic
of Korea and all references to the "Government" shall mean the government of The
Republic of Korea.
The financial information appearing in this report and in our accompanying
non-consolidated financial statements is stated in Korean won. All references to
"Won" or "W" in this report are to the currency of Korea. Any discrepancies in
any table between totals and the sums of the amounts listed are due to rounding.
This report contains "forward-looking statements", as defined in Section
27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S.
Securities Exchange Act of 1934, as amended, that are based on our current
expectations, assumptions, estimates and projections about our company and our
industry. The forward-looking statements are subject to various risks and
uncertainties. Generally, these forward-looking statements can be identified by
the use of forward-looking terminology such as "anticipate", "believe",
"estimate", "expect", "intend", "project", "should", and similar expressions.
Those statements include, among other things, the discussions of our liquidity
and capital resources. We caution you that reliance on any forward-looking
statement involves risks and uncertainties, and that although we believe that
the assumptions on which our forward-looking statements are based are
reasonable, any of those assumptions could prove to be inaccurate, and, as a
result, the forward-looking statements based on those assumptions could be
incorrect. In light of these and other uncertainties, you should not conclude
that we will necessarily achieve any plans and objectives or projected financial
results referred to in any of the forward-looking statements. We do not
undertake to release the results of any revisions of these forward-looking
statements to reflect future events or circumstances.
NON-CONSOLIDATED FINANCIAL INFORMATION AS OF AND FOR THE YEAR ENDED DECEMBER 31,
2001 AND 2002
We must file quarterly reports with the Financial Supervisory Commission of
Korea and the Korea Stock Exchange. The audited and non-consolidated financial
information as of and for the year ended December 31, 2001 and 2002 shown below
were prepared pursuant to generally accepted accounting principles in Korea
("Korean GAAP").
The financial information below is non-consolidated and includes the
results of operations of our subsidiaries using the equity method of accounting.
Therefore, our operating revenue, total assets and total liabilities, if
prepared on a consolidated basis, could be significantly different from those in
our non-consolidated financial statements, even though net income in our
consolidated financial statements may be similar to that in our non-consolidated
financial statements. Under Korean GAAP, our non-consolidated revenues accounted
for approximately 74% to 97% of our consolidated revenues in the years 1999 to
2001. Since we have not yet completed the preparation of our consolidated
account for 2002, we can give no assurance as to what the actual ratios were for
2002.
We merged Shinsegi into SK Telecom with effect from January 12, 2002. As a
result, our results of operations from that date include the results of
operations of the business that was previously operated by Shinsegi and
accounted for using the equity method of accounting in our non-consolidated
financial information. Consequently, it may be difficult to compare our
non-consolidated financial information as of and for the year ended December 31,
2001 to that as of and for the year ended December 31, 2002.
FOR THE YEAR
ENDED DECEMBER 31,
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2001 2002
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(IN BILLIONS OF WON)
NON-CONSOLIDATED INCOME STATEMENT DATA
Operating Revenue W6,227.1 W8,634.0
Operating Expenses 4,023.0 5,950.4
Operating Income 2,204.2 2,683.7
Other Income 112.6 272.5
Other Expenses 555.3 776.1
Income Taxes 621.1 669.2
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Net Income W1,140.3 W1,511.3
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AS OF DECEMBER 31,
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2001 2002
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(IN BILLIONS OF WON)
NON-CONSOLIDATED BALANCE SHEET DATA
Total Current Assets W 2,589.7 W 2,676.7
Total Non-Current Assets 8,038.3 10,044.5
Total Assets 10,627.9 12,721.2
Total Current Liabilities 2,484.4 4,015.9
Total Long-Term Liabilities 2,403.9 3,168.4
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Total Shareholders' Equity W 5,739.6 W 5,536.9
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Non-Consolidated Operating Revenue. SK Telecom's operating revenue
increased by 38.7% to Won 8,634.0 billion for the year ended December 31, 2002
from Won 6,227.1 billion for the year ended December 31, 2001, principally
reflecting a 49.2% increase in cellular revenue to Won 7,542.5 billion for the
year ended December 31, 2002 from Won 5,056.1 billion for the year ended
December 31, 2001, which was partially offset by a 6.7% decrease in
interconnection revenue.
The increase in SK Telecom's cellular revenue was principally due to an
increase in the number of SK Telecom's wireless subscribers, which more than
offset a decrease in the average monthly revenue per subscriber. The number of
SK Telecom's subscribers increased to approximately 17.2 million as of December
31, 2002 from approximately 11.9 million as of December 31, 2001, reflecting the
Shinsegi merger and the continuing growth of our subscriber base. Wireless
Internet sales increased by 182.7% to Won 731.3 billion for the year ended
December 31, 2002 from Won 258.7 billion for the year ended December 31, 2001,
representing 9.7% of SK Telecom's cellular revenue, primarily due to the
increased number of wireless Internet-enabled handset holders.
SK Telecom's non-consolidated average monthly revenue per subscriber
(including interconnection revenue) decreased by 6.4% to Won 43,916 for the year
ended December 31, 2002 from Won 46,937 for the year ended December 31, 2001.
The decrease was principally due to the reduction in tariffs by 8.3% (based on
the reduction in a standard tariff plan) from January 2002, the decrease in
interconnection rates and the inclusion from January 12, 2002 of Shinsegi's
subscribers, who produced lower average monthly revenue per subscriber. However,
the decrease was partially offset by increases in wireless Internet average
monthly revenue per subscriber and average monthly revenue per subscriber from
value-added service.
On an aggregate basis, interconnection revenue decreased by 6.8% to Won
1,091.5 billion for the year ended December 31, 2002 from Won 1,171.1 billion
for the year ended December 31, 2001. The decrease was the result of lower
interconnection rates in 2002.
Non-Consolidated Operating Income. SK Telecom's operating income increased
by 21.3% to Won 2,683.7 billion for the year ended December 31, 2002 from Won
5
2,204.2 billion for the year ended December 31, 2001. SK Telecom's operating
income increased at a lower rate than operating revenue because SK Telecom's
operating expenses for the year ended December 31, 2002 increased by 47.9% to
Won 5,950.4 billion compared to Won 4,023.0 billion for the year ended December
31, 2001. The increase in SK Telecom's operating expenses was primarily due to
the Shinsegi merger and the increases in commissions, depreciation expenses,
interconnection expenses, advertising expenses, labor costs, leased line
expenses and miscellaneous operating expenses.
Commissions paid to SK Telecom's authorized dealers increased by 94.2% to
Won 800.0 billion for the year ended December 31, 2002 compared to Won 411.9
billion for the year ended December 31, 2001. The increase was primarily due to
the increase in new subscribers by 49.2% and in average subscribers by 17.6%
during the period. In addition, commissions paid to SK Telecom's authorized
dealers increased by 42.5 % to Won 253.4 billion for the fourth quarter of 2002
compared to Won 177.8 billion for the third quarter of 2002 as a result of
higher levels of payment to SK Telecom's authorized dealers in respect of
retention of our existing customers during the 30-day business suspension period
(from November 21, 2002 to December 20, 2002) imposed on the Company by the
Ministry of Information and Communication of Korea for violating its handset
subsidy regulation and to maintain our market leadership in 2G & 2.5G service as
well as 3G service going forward.
Depreciation and amortization expenses increased by 28.8% to Won 1,414.6
billion for the year ended December 31, 2002 compared to 1,098.0 billion for the
year ended December 31, 2001. The increase in depreciation expenses was
primarily due to the expansion of SK Telecom's CDMA 1xRTT network.
Interconnection expenses increased by 22.4% to Won 738.0 billion for the
year ended December 31, 2002 compared to Won 603.1 billion for the year ended
December 30, 2001. The increase was primarily due to the higher subscriber
numbers (including as a result of the Shinsegi merger) and an increase of the
mandated contributions to universal service obligation fund in the amount of Won
87.5 billion, which were only partially offset by a decrease in the level of
interconnection fees that SK Telecom must pay to other operators for calls using
their networks.
Advertising expenses increased by 59.4% to Won 440.0 billion for the year
ended December 31, 2002 compared to Won 276.2 billion for the year ended
December 31, 2001, primarily due to the promotion of new services and the
marketing activities related to the World Cup events in Korea. Advertising
expenses for the first half of 2001 also were unusually low as a result of our
efforts to satisfy the FTC's condition to our acquisition of Shinsegi that our
wireless market share be less than 50.0% as of June 30, 2001. In addition,
advertising expenses for the fourth quarter of 2002 were higher as a result of
our aggressive marketing activities to retain our existing customers during the
30-day business suspension period and to maintain our market leadership in 2G &
2.5G service as well as 3G service going forward.
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Labor cost increased by 38.6% to Won 304.6 billion for the year ended
December 31, 2002 compared to Won 219.8 billion for the year ended December 31,
2001. The increase was primarily due to the inclusion of Shinsegi's labor
expense from January 13, 2002 and higher wage levels.
Leased line expenses increased by 23.7% to Won 266.8 billion for the year
ended December 31, 2002 compared to Won 215.6 billion for the year ended
December 31, 2001, primarily due to the Shinsegi merger and an increase in
wireless traffic.
Non-Consolidated Other Income. Other income, consisting primarily of
commission income, interest income, foreign exchange and translation gains and
miscellaneous income, increased by 154.0% to Won 272.5 billion for the year
ended December 31, 2002 compared to Won 112.6 billion for the year ended
December 31, 2001. Other income increased primarily due to significant increases
in commission income, foreign exchange translation gains, interest income,
foreign exchange gains and miscellaneous other income.
Non-Consolidated Other Expenses. Other expenses, consisting primarily of
interest expense, donations, foreign exchange and translation losses and
miscellaneous expenses, increased by 39.9% to Won 776.1 billion for the year
ended December 31, 2002 compared to Won 555.3 billion for the year ended
December 31, 2001. Other expenses increased primarily as a result of a
significant increase in miscellaneous other expenses due to the loss on disposal
of fixed assets consisting of Shinsegi's unused equipment as well as the loss on
disposal of marketable securities and the loss on investment securities
impairment due to the share exchange transaction with KT Corporation. Other
expenses also increased as a result of a significant increase in interest
expenses, the absence of equity in losses of affiliates (we recorded a gain in
the year ended December 31, 2002) and an increase in foreign exchange losses,
which were partially offset by decreases in donations and foreign exchange
translation losses. As a percentage of operating revenue, other expenses
increased slightly to 9.0% for the year ended December 31, 2002 from 8.9% for
the year ended December 31, 2001.
Non-Consolidated Income Tax. Provision for income taxes increased by 7.9%
to Won 669.2 billion for the year ended December 31, 2002 from Won 621.1 billion
for the year ended December 31, 2001.
Non-Consolidated Net Income. Principally as a result of the factors
discussed above, SK Telecom's net income increased by 32.6% to 1,511.3 billion
for the year ended December 31, 2002 from Won 1,140.3 billion for the year ended
December 31, 2001.
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INCOME STATEMENT
(KRW MN)
2002 2001
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SIGN-UP FEE 229,993 113,227
MONTHLY FEE 3,035,622 2,143,776
CALL CHARGE 4,139,833 2,949,878
WIRELESS INTERNET 731,273 258,706
VAS AND OTHERS 401,374 249,655
SALES DISCOUNT (995,550) (659,177)
CELLULAR REVENUE 7,542,546 5,056,065
Mobile to Mobile 401,374 446,170
Land to Mobile 613,171 724,892
INTERCONNECTION REVENUE 1,091,503 1,171,062
TOTAL REVENUE 8,634,049 6,227,127
WAGE & EMPLOYEE BENEFITS 304,527 219,803
MARKETING EXPENSES 1,622,769 906,058
Cellular Initial Commission 368,027 123,052
Cellular Monthly Commission 431,971 286,513
Advertisement 440,024 276,164
Retention Commission 382,747 217,964
Others 2,365
REPAIR EXPENSES 95,790 46,233
RENT 137,142 127,429
FEES 634,348 418,937
DEPRECIATION (INCL. AMORTIZATION) 1,414,627 1,097,992
LEASED-LINE EXPENSES 266,804 215,569
R&D 170,536 105,725
FREQUENCY USAGE FEES 119,216 55,898
BAD DEBT 15,357 108
INTERCONNECTION EXPENSES 737,990 603,149
Mobile to Mobile 494,011 501,933
Mobile to Land 156,520 131,616
USOB 87,459 (30,400)
OTHERS 431,267 226,058
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OPERATING EXPENSES 5,950,373 4,022,959
OPERATING INCOME 2,683,676 2,204,168
INTEREST INCOME 46,274 38,869
INCOMING FEES 103,232 53,058
FX GAIN 8,599 6,671
FX TRANSLATION GAIN 26,200 2,369
OTHERS 88,153 11,596
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NON-OPERATING INCOME 272,458 112,563
INTEREST EXPENSES 304,509 150,575
LOSS ON USING EQUITY METHOD - 177,048
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(KRW MN)
2002 2001
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R&D CONTRIBUTION 58,555 23,000
DONATIONS 67,432 111,146
FX LOSS 1,789 783
FX TRANSLATION LOSS 4,232 12,366
OTHERS 339,624 80,401
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NON-OPERATING EXPENSES 776,141 555,319
ORDINARY INCOME 2,179,993 1,761,412
EXTRAORDINARY GAIN 504 25
EXTRAORDINARY LOSS
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INCOME BEFORE TAXES 2,180,497 1,761,437
INCOME TAXES 669,220 621,115
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NET INCOME 1,511,278 1,140,322
BALANCE SHEET
(KRW MN)
DEC-02 DEC-01
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ASSETS
CASH & MARKETABLE SECURITIES 476,115 826,678
TRADE RECEIVABLES 1,290,475 871,656
SHORT-TERM LOAN 29,623 14,352
ACCOUNTS RECEIVABLE 809,616 838,355
ACCRUED INCOME RECEIVABLES 4,805 1,713
INVENTORIES 10,718 2,989
PREPAID EXPENSES AND OTHERS 55,372 33,921
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TOTAL CURRENT ASSETS 2,676,724 2,589,665
INVESTMENT 1) 2,877,230 4,315,561
LONG-TERM DEPOSITS 2) 1,499 1,261
LEASEHOLD GUARANTEE DEPOSITS 221,815 201,846
OTHERS 102,053 115,521
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TOTAL INVESTMENT ASSETS 3,202,597 4,645,890
LAND 439,915 414,872
BUILDING & FIXTURE 778,833 711,270
MACHINERY AND EQUIPMENT 2,432,552 1,703,018
CONSTRUCTION IN PROGRESS 345,063 162,479
OTHERS 449,091 266,007
NET PP&E 4,451,548 3,257,646
INTANGIBLE & DEFERRED ASSETS 2,390,350 134,735
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TOTAL FIXED ASSETS 6,841,898 3,392,381
TOTAL ASSETS 12,721,218 10,627,936
LIABILITIES & SHAREHOLDERS'
EQUITY
ACCOUNTS PAYABLE 1,587,532 809,551
ACCRUED EXPENSES 354,716 231,639
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(KRW MN)
DEC-02 DEC-01
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SHORT-TERM BORROWING 620,000 850,000
INCOME TAX PAYABLE 362,365 357,201
CURRENT PORTION OF LONG-TERM DEBT 920,745 173,851
OTHERS 170,501 62,189
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TOTAL CURRENT LIABILITIES 4,015,859 2,484,431
DEPOSIT FOR FACILITIES 46,850 49,758
LONG-TERM DEBT 2,903,517 2,214,966
ACCRUED SEVERANCE INDEMNITIES 46,850 34,916
OTHERS 38,010 32,375
DEFERRED INCOME TAX CREDITS 133,185 71,926
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TOTAL LONG-TERM LIABILITIES 3,168,412 2,403,940
TOTAL LIABILITIES 7,184,271 4,888,371
CAPITAL STOCK 44,576 44,576
CAPITAL SURPLUS 2,884,385 3,748,546
RETAINED EARNINGS 4,897,099 3,439,004
CAPITAL ADJUSTMENTS (2,289,112) (1,492,562)
Treasury Stock (2,192,449) (1,425,851)
Loss on valuation of
investment (99,115) (67,670)
Stock Options 2,452 960
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TOTAL SHAREHOLDERS' EQUITY 5,536,948 5,739,565
1) INVESTMENT IN AFFILIATES + INVESTMENT SECURITIES
2) LONG-TERM DEPOSITS + LONG-TERM FINANCIAL INSTRUMENTS + INVESTMENT IN FUNDS
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SK TELECOM CO., LTD.
By: /s/ Sung Hae Cho
--------------------------------
Name: Sung Hae Cho
Title: Vice President
IR Office
Date: April 8, 2003
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