1934 Act Registration No. 1-14418
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULES 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF: MARCH 2004
COMMISSION FILE NUMBER: 1-14418
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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 is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7):
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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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
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 not historical facts and 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. Forward-looking statements include, among other things,
the discussions of revenue trends; subscriber and usage trends; impact of
regulations, new technologies, tariffs and competition on our business and
results of operations; anticipated economic developments; our liquidity and
capital resources and our business outlook and anticipated trends.
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. Risks associated with
our business, include risks related to changes in the regulatory environment;
technology changes; potential litigation and governmental actions; changes in
the competitive environment; political changes; currency risks; foreign
ownership limitations; credit risks and other risks that are more fully
described in our annual report filed on Form 20-F with the Securities and
Exchange Commission. 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.
OVERVIEW
We are Korea's leading wireless telecommunications services provider and a
pioneer in the commercial development and provision of high-speed wireless data
and Internet services.
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We provide our services principally through networks using CDMA
technology. In October 2000, we became the world's first wireless operator to
commercially launch CDMA 1xRTT, a CDMA-based advanced radio transmission
technology for high-speed wireless data and wireless Internet services. CDMA
1xRTT allows transmission of data at speeds of up to 144 Kbps, compared to the
64 Kbps currently possible over our CDMA networks. In addition to higher data
transfer speeds, CDMA 1xRTT technology uses packet-based data transmission,
which permits more efficient use of wireless spectrum and packet-based pricing
of data services.
In December 2001, we acquired a license to develop, construct and operate
a wide-band code division multiple access, or W-CDMA, digital cellular network
using 2 X 20 MHz of radio frequency spectrum (i.e., 20 MHz for transmissions
from handsets to cell sites and 20 MHz for transmissions from cell sites to
handsets) in the 2 GHz band. In May 2003, we merged SK IMT, a subsidiary
established for the principal purpose of operating and developing our W-CDMA
services, into SK Telecom because we felt that we could better manage the
technology, marketing and operations of the W-CDMA business as one entity. We
commenced construction of the W-CDMA network and provision of W-CDMA service in
Seoul at the end of 2003.
In January 2002, we acquired the remaining 29.6% interest in Shinsegi, the
second wireless operator to introduce wireless voice services in Korea, which we
did not yet own, and merged Shinsegi into SK Telecom. As a result of this
merger, we now have a combined 2 X 25 MHz of spectrum in the 800 MHz range.
In January 2003, the MIC announced its plan to implement number
portability with respect to wireless telecommunications services in Korea,
allowing wireless subscribers to switch wireless service operators while
retaining the same mobile phone number. Korea's wireless telecommunications
system used a network-specific prefix system in which a unique prefix was
assigned to all the phone numbers of a network operator. We were assigned the
"011" prefix (the former Shinsegi subscribers used the "017" prefix) and our
subscribers could not change their wireless phone service to another wireless
operator while keeping their current numbers. Pursuant to the MIC's plan, number
portability was first adopted by SK Telecom, starting from January 1, 2004. KT
Freetel and LG Telecom will be required to introduce number portability starting
from July 1, 2004 and January 1, 2005, respectively. In addition, from 2004 the
MIC is integrating mobile telephone identification numbers into a common prefix
identification number "010" in order to manage the availability of phone numbers
efficiently and to secure phone number resources for the new services. All new
subscribers are given the "010" prefix starting in January 2004, while existing
users are able to maintain their mobile service identification number. We
believe that the use of the common prefix identification system may have a
greater effect on us as compared to our competitors because "011" has a very
high brand recognition in Korea as the premium wireless telecommunications
service. We can give no assurance that the implementation of the number
portability system will not negatively affect our results of operations due to,
among others factors, increased competition among wireless service providers
(and a corresponding increase in our marketing costs), an adverse effect on our
ability to attract new subscribers and a possible increase in our churn rate. We
may also incur additional costs related to maintaining the number portability
system and increased subscriber deactivations.
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NON-CONSOLIDATED FINANCIAL INFORMATION AS OF AND FOR THE YEAR ENDED DECEMBER 31,
2002 AND 2003
We must file quarterly reports with the Financial Supervisory Commission
of Korea and the Korea Stock Exchange. The audited, non-consolidated financial
information as of and for the year ended December 31, 2002 and the unaudited,
non-reviewed and non-consolidated financial information as of and for the year
ended December 31, 2003 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 78%, 74% and 93% of our consolidated revenues for the years
ended December 31, 2000, 2001 and 2002, respectively. Since we have not yet
completed the preparation of our consolidated accounts for the year ended
December 31, 2003, we can give no assurance as to what the actual ratios are for
that year.
We merged Shinsegi into SK Telecom effective as of January 12, 2002. As a
result, our results of operations after 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.
FOR THE YEAR
ENDED DECEMBER 31,
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2002 2003
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(IN BILLIONS OF WON)
NON-CONSOLIDATED INCOME STATEMENT DATA
Operating Revenue.................................. (Won)8,634.0 (Won)9,520.2
Operating Expenses................................. 5,950.4 6,439.6
Operating Income................................... 2,683.7 3,080.7
Other Income....................................... 272.5 250.4
Other Expenses..................................... 776.1 616.9
Income Taxes....................................... 670.0 771.4
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Net Income......................................... (Won)1,511.3 (Won)1,942.8
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AS OF DECEMBER 31,
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2002 2003
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(IN BILLIONS OF WON)
NON-CONSOLIDATED BALANCE SHEET DATA
Total Current Assets............................... (Won)2,747.0 (Won)3,460.7
Total Non-Current Assets........................... 9,974.2 9,915.3
Total Assets....................................... 12,721.2 13,436.0
Total Current Liabilities.......................... 4,015.9 4,232.0
Total Long-Term Liabilities........................ 3,168.4 3,202.1
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Total Shareholders' Equity......................... (Won)5,536.9 (Won)5,941.8
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Non-Consolidated Operating Revenue. We earn revenue principally from
initial connection fees and monthly access fees, usage charges and value-added
service fees paid by subscribers to our wireless services, interconnection fees
paid to us by other telecommunications operators and sales of wireless handsets
by our subsidiary, SK Teletech. The amount of our revenue depends principally
upon the number of our wireless subscribers, the rates we charge for our
services, subscriber usage of our services and the terms of our interconnection
with other telecommunications operators. For cellular services, we charge
initial connection fees, monthly access fees, usage charges, wireless Internet
service fees and monthly charges for value-added services. Under current
regulations, we must obtain prior MIC approval of the terms on which we may
offer our services, including all rates and fees charged for these services.
Each of our competitors, however, is permitted to offer its services at rates
set at its discretion without having to obtain the MIC approval.
SK Telecom's operating revenue increased by 10.3% to Won 9,520.2 billion
for the year ended December 31, 2003 from Won 8,634.0 billion for the year ended
December 31, 2002, principally reflecting a 12.6% increase in cellular revenue
to Won 8,492.9 billion for the year ended December 31, 2003 from Won 7,542.5
billion, which was partially offset by a 6.0% decrease in interconnection
revenue. During the year ended December 31, 2002, we received an order from the
MIC prohibiting us from signing on new subscribers for 30 days (from November
21, 2002 through December 2002) for violating MIC's handset subsidy regulation,
which had a negative impact on revenues.
The increase in SK Telecom's cellular revenue was principally due to an
increase in wireless Internet sales by 80.6% to Won 1.320.1 billion for the year
ended December 31, 2003 from Won 731.3 billion for the year ended December 31,
2002, representing 15.5% of SK Telecom's cellular revenue. The increase in
wireless Internet sales was primarily due to the increased number of wireless
Internet-enabled handset holders and the increase in usage of wireless Internet.
Increased usage of value-added services contributed to an increase in revenue
from value-added services by 29% to Won 424.8 billion for the year ended
December 31, 2003 from Won 330.4 billion for the year ended December 31, 2002
even though revenue from such services decreased in the fourth quarter of 2003
as compared to the third quarter of 2003 as a result of the reduction in the
Caller ID service fee. Despite the tariff cut in January 2003, call charges in
2003 increased due to the increases in total minute usage and in the number of
subscribers. We believe that this trend principally reflects lower overall
tariff levels and increased use of wireless telecommunications as a substitute
for fixed-line communications.
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SK Telecom's non-consolidated average monthly revenue per subscriber
(including interconnection revenue) increased by 1.4% to Won 44,546 for the year
ended December 31, 2003 from Won 43,919 for the year ended December 31, 2002.
The increase was principally due to increases in average monthly revenue per
subscriber from wireless Internet usage, value-added services and
interconnection fees, which were partially offset by decreases in revenue from
sign-up fees and call charges.
On an aggregate basis, interconnection revenue decreased by 5.9% to Won
1,027.3billion for the year ended December 31, 2003 from Won 1,092.3 billion for
the year ended December 31, 2002. Under our interconnection agreements, we are
required to make payments in respect of calls from our subscribers which are
routed through networks of other Korean telecommunication operators, and the
other operators are required to make payments to us in respect of calls which
originate in their networks and terminate in our network. In April 2002, the MIC
revised the manner in which interconnection charges for calls made from
fixed-line operators to wireless networks and calls made between wireless
networks are calculated, which resulted in an affect our net revenue, because
the changes reduced the interconnection charges payable to us in respect of
calls made from fixed-line networks to our wireless networks. The MIC is
expected to introduce a new method of calculating interconnection payments,
based on the originator's long-run incremental cost, in 2004.
Non-Consolidated Operating Income. SK Telecom's operating income increased
by 14.8% to Won 3,080.7 billion for the year ended December 31, 2003 from Won
2,683.7 billion for the year ended December 31, 2002. In 2003, our operating
margin increased, primarily due to an increase in the number of our subscribers
and decreases in the number of leased lines. Our operating income increased at a
faster rate than our operating revenue principally because we were able to
successfully limit a corresponding increase in our operating expenses. We cannot
assure you that our operating margin will not decrease in future periods.
SK Telecom's operating expenses for the year ended December 31, 2003
increased by 8.2% to Won 6,439.6 billion compared to Won 5,950.4 billion for the
year ended December 31, 2002. Our operating expenses consist principally of
depreciation, commissions paid to authorized dealers, network interconnection
and leased line expenses, the cost of manufacturing handsets, advertising costs
and labor costs. The increase in SK Telecom's operating expenses was primarily
due to the increases in commissions, depreciation expenses, labor costs, leased
line expenses and miscellaneous operating expenses.
Total commissions increased by 16.6% to Won 2,324.6 billion for the year
ended December 31, 2003 compared to Won 1,994.1 billion for the year ended
December 31, 2002. The increase was primarily due to an increase in retention
commissions paid in connection with the increased commission for handset changes
in preparation for Mobile Number Portability and an increase in the payment of
Information Usage Fee to content provider as wireless internet usage has
increased.
Depreciation and amortization expenses increased by 5.2% to Won 1,488.2
billion for the year ended December 31, 2003 compared to Won 1,414.6 billion for
the year ended December 31, 2002. The increase in depreciation expenses was
primarily due to the expansion of SK Telecom's CDMA 1xRTT network.
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Advertising expenses decreased by 17.9% to Won 361.1 billion for the year
ended December 31, 2003 compared to Won 440.0 billion for the year ended
December 31, 2002, primarily due to decreases in spending in preparation for
Mobile Number Portability and aggressive marketing activities to retain our
existing customers.
Labor cost increased by 28.9% to Won 392.7 billion for the year ended
December 31, 2003 compared to Won 304.6 billion for the year ended December 31,
2002. The increase was primarily due to the payment of incentive bonuses and
wage increases.
Leased line expenses increased by 13.3% to Won 302.3 billion for the year
ended December 31, 2003 compared to Won 266.8 billion for the year ended
December 31, 2002, primarily due to increases in the number of base stations and
repeaters related to W-CDMA services.
Non-Consolidated Other Income. Other income, consisting primarily of
commission income, interest income, foreign exchange and translation gains and
miscellaneous income, decreased by 8.1% to Won 250.4 billion for the year ended
December 31, 2003 compared to Won 268.4 billion for the year ended December 31,
2002. Other income decreased primarily due to an absence of equity in earnings
of affiliates which was present in 2002 and a decrease of 94.1% in foreign
exchange and translation gains to Won 2.1 billion for the year ended December
31, 2003 compared to Won 34.8 billion for the year ended December 31, 2002. The
decrease was offset by increases in interest income, commission income, and
miscellaneous other income. Miscellaneous other income increased by 125.6% to
Won 56.9 billion for the year ended December 31, 2003 compared to Won 25.2
billion for the year ended December 31, 2002.
Non-Consolidated Other Expenses. Other expenses, consisting primarily of
interest expense, research and development contributions and donations, loss on
disposal of certain securities and miscellaneous expenses, decreased by 20.6% to
Won 616.9 billion for the year ended December 31, 2003 compared to Won 776.1
billion for the year ended December 31, 2002. Other expenses decreased from 2002
primarily because, in 2002, we recognized certain one-time losses including a
loss relating to disposal of Shinsegi's unused equipment, a loss relating to the
disposal of marketable securities and a loss on investment securities impairment
due to the share exchange transaction with KT Corporation. As a percentage of
operating revenue, other expenses decreased to 6.5% for the year ended December
31, 2003 from 9.0% for the year ended December 31, 2002.
Non-Consolidated Income Tax. Provision for income taxes increased by 16.3%
to Won 771.4 billion for the year ended December 31, 2003 from Won 669.2 billion
for the year ended December 31, 2002.
Non-Consolidated Net Income. Principally as a result of the factors
discussed above, SK Telecom's net income increased by 28.6% to Won 1,942.8
billion for the year ended December 31, 2003 from Won 1,511.3 billion for the
year ended December 31, 2002.
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INCOME STATEMENT
(KRW mn) 2003 2002
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Operating revenue 9,520,244 8,634,049
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Cellular revenue
Voice 7,172,825 6,811,273
Wireless Internet 1,320,107 731,273
Interconnection revenue 1,027,312 1,091,503
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Operating expenses 6,439,585 5,950,373
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Labor cost 392,701 304,644
Commissions paid 2,324,586 1,994,074
Advertising 361,114 440,024
Depreciation 1,488,165 1,414,627
Network interconnection 738,236 737,990
Leased line 302,288 266,804
R&D expenses 199,074 170,536
Rent 140,213 137,142
Frequency usage fees 129,525 119,216
Bad debt 19,536 15,357
Others 344,146 349,959
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Operating income 3,080,660 2,683,676
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Other income 250,448 272,459
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Interest income 68,259 46,274
Commissions 120,480 103,025
Gain on disposal of property & equipment 2,709 3,242
Equity in earnings of affiliates -- 59,877
Foreign exchange & translation gains 2,064 34,799
Others 56,936 25,242
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Other expenses 616,914 776,141
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Interest 375,609 304,509
R&D contribution & donations 90,200 125,987
Loss on disposal of property & equipment 12,816 205,932
Equity in losses of affiliates 30,537 --
Foreign exchange & translation losses 1,065 6,020
Loss on impairment of investment securities 20,343 44,896
Loss on disposal of investment assets 45,175 51,532
Others 41,169 37,264
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Ordinary income 2,714,194 2,179,994
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Income before income taxes 2,714,194 2,180,498
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Income taxes 771,444 669,220
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Net income 1,942,750 1,511,278
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BALANCE SHEET
(KRW mn) 2003 2002
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TOTAL ASSETS 13,375,959 12,721,218
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Current assets 3,460,706 2,746,991
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Cash and marketable securities 987,646 476,115
Accounts receivable - trade 1,438,836 1,290,475
Accounts receivable - other 811,496 809,616
Short-term loans 51,102 29,623
Inventories 8,024 10,718
Other 163,602 130,444
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Investment assets 1,763,359 3,132,330
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Investment securities 2) 1,418,734 2,806,963
Long-term loans 41,591 57,984
Guarantee deposits 246,004 221,815
Other 57,030 45,568
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Property & equipment 4,551,626 4,451,548
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Land 446,574 439,915
Building & fixture 840,237 778,833
Machinery 2,625,307 2,432,552
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Vehicles & others 329,945 455,186
Construction in progress 309,564 345,063
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Intangible assets 3,600,268 2,390,350
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TOTAL LIABILITIES 7,434,121 7,184,271
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Current liabilities 4,231,974 4,015,859
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Accounts payable 1,117,835 1,587,532
Short-term borrowings 728,669 620,000
Income taxes payable 399,852 362,365
Accrued expenses 401,245 354,716
Current portion of long-term debt 1,364,264 920,745
Other 220,109 170,502
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Long-term liabilities 3,202,147 3,168,412
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Bond payable & long-term borrowings 2,258,276 2,913,922
Facility deposits 44,197 46,850
Accrued severance indemnities 63,663 45,861
Others 836,011 161,778
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TOTAL SHAREHOLDERS' EQUITY 5,941,838 5,536,948
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Capital stock 44,639 44,576
Capital surplus 2,915,964 2,884,385
Retained earnings 5,140,349 4,897,099
Capital adjustments (2,159,114) (2,289,112)
Treasury stock (2,047,103) (2,192,449)
Unrealized gain(loss) on valuation of investment securities (115,752) (99,115)
Stock options 3,741 2,452
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1) Cash & marketable securities : Cash & cash equivalent, marketable
securities & short-term financial instruments are included
2) Investment securities : Investments in affiliates with more than 20%
interest, listed companies & non-listed companies are included
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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
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Name: Sung Hae Cho
Title: Vice President
IR Office
Date: March 15, 2004
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