Edgar Filing: SK TELECOM CO LTD

SK TELECOM FORM 20-F

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

ANNUAL REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

COMMISSION FILE NUMBER 1-14418

SK Telecom Co., Ltd.

(Exact name of Registrant as specified in its charter)

SK TELECOM CO., LTD.

(Translation of Registrant’s name into English)

THE REPUBLIC OF KOREA

(Jurisdiction of incorporation or organization)

11, EULJIRO2-GA

JUNG-GU

SEOUL, KOREA

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act


Title of Each Class		Name of Each Exchange on Which Registered

AMERICAN DEPOSITARY SHARES, EACH REPRESENTING ONE-NINTH OF ONE SHARE OF COMMON STOCK		NEW YORK STOCK EXCHANGE, INC.
COMMON STOCK, PAR VALUE WON 500 PER SHARE		NEW YORK STOCK EXCHANGE, INC.*

Securities registered or to be registered pursuant to Section 12(g) of the Act.

NONE

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

NONE

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

82,276,711 SHARES OF COMMON STOCK, PAR VALUE WON 500 PER SHARE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


þ Yes		o No

Indicate by check mark which financial statement item the registrant has elected to follow.


o Item 17		þ Item 18

* Not for trading, but only in connection with the registration of the American Depositary Shares.

TABLE OF CONTENTS


		Page

Item. 1	Identity of Directors, Senior Management and Advisers		5
Item. 2	Offer Statistics and Expected Timetable		5
Item. 3	Key Information		5
Item. 4	Information on the Company		24
Item. 5	Operating and Financial Review and Prospects		54
Item. 6	Directors, Senior Management and Employees		77
Item. 7	Major Shareholders and Related Party Transactions		84
Item. 8	Financial Information		89
Item. 9	The Offer and Listing		94
Item. 10	Additional Information		102
Item. 11	Quantitative and Qualitative Disclosures about Market Risk		128
Item. 12	Description of Securities other than Equity Securities		130
Item. 13	Defaults, Dividend Arrearage and Delinquencies		130
Item. 14	Material Modifications to the Rights of Security Holders and Use of Proceeds		130
Item. 15	Controls and Procedures		130
Item. 16A	Audit Committee Financial Expert		130
Item. 16B	Code of Ethics		131
Item. 16C	Principal Accountant Fees and Services		131
Item. 16D	Exemptions from the Listing Standards for Audit Committees		132
Item. 16E	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		132
Item. 17	Financial Statements		133
Item. 18	Financial Statements		133
INDEX TO FINANCIAL STATEMENTS			F-1
Item 19	Exhibits		E-1
EX-1.1 ARTICLES OF INCORPORATION
EX-4.2 ENFORCEMENT DECREE OF THE TELECOMMUNICATIONS BASIC ACT
EX-4.4 ENFORCEMENT DECREE - TELECOMMUNICATIONS BUSINESS ACT
EX-4.8 KOREAN SECURITIES AND EXCHANGE ACT
EX-11.1 CODE OF ETHICS AND INTERPRETATIONS
EX-12.1 CERTIFICATION OF CEO
EX-12.2 CERTIFICATION OF CFO
EX-13.1 CERTIFICATION OF CEO AND CFO
EX-13.2 CERTIFICATION OF CEO AND CFO
EX-99.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCT FIRM

OVERVIEW OF THE COMPANY’S WIRELESS NETWORK

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. We provide our services principally through networks using CDMA (code division multiple access) 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 possible over our CDMA network. 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 the first half of 2002, we launched an upgrade of our CDMA 1xRTT network in 26 cities in Korea to CDMA 1xEV/DO. CDMA 1xEV/DO is a more advanced CDMA-based technology which enables data to be transmitted at speeds of up to 2.4 Mbps. CDMA 1xEV/DO technology allows us to provide advanced wireless data services such as streaming video and audio services. CDMA 1xEV/ DO-capable handsets became available in Korea in June 2002. As of December 31, 2004, CDMA 1xEV/DO network upgrade has been completed in 84 cities in Korea.

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 × 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. We have commenced construction of the W-CDMA network and began providing W-CDMA service on a limited basis in Seoul at the end of 2003. We expect to provide W-CDMA services in the Seoul metropolitan area and other local metropolitan areas of Korea by the end of 2005.

In January 2002, we acquired the remaining 29.6% interest in Shinsegi Telecomm, Inc., which we did not own and merged Shinsegi into SK Telecom. As a result of this merger we have a combined 2 × 25 MHz of spectrum in the 800 MHz range.

In March 2004, we were assigned by the Ministry of Information Communication (the “MIC”) frequency for satellite digital multimedia broadcasting (“DMB”), a service which allows broadcasting of multimedia content through transmission by satellite to various mobile devices including satellite DMB handsets. In October 2004, we granted the right to use our satellite, satellite orbit and frequency to TU Media Corp., one of our affiliates, which received a license from the MIC as a satellite DMB provider on December 30, 2004. On May 1, 2005, TU Media Corp. began to provide satellite DMB services.

In March 2005, we obtained a license from the MIC to provide Wireless Broadband (“WiBro”) services, which will serve as a complementary solution to the existing mobile communication services such as W-CDMA. WiBro will offer wireless Internet services at a competitive price in the metropolitan areas where there is a high demand for high-speed and large packet data services. In April 2005, we were assigned by the MIC a 27 MHz of spectrum in the 2.3GHz (2,300,2,327MHz) range in connection with WiBro services.

In this report, we refer to third generation or “3G” mobile communications systems. Second generation systems or 2G systems were designed primarily with voice communications in mind. 3G systems are designed to facilitate voice, high speed data and multimedia service.

CERTAIN DEFINED TERMS AND CONVENTIONS USED IN THIS REPORT

All references to “Korea” contained in this report shall mean The Republic of Korea. All references to the “Government” shall mean the government of The Republic of Korea. All references to “we”, “us”, “our” or the “Company” shall mean SK Telecom Co., Ltd. and its consolidated subsidiaries. References to “SK Telecom” shall mean SK Telecom Co., Ltd., but shall not include its consolidated subsidiaries. All references to “U.S.” shall mean the United States of America. Unless otherwise indicated, all references to our number of subscribers shall include Shinsegi Telecomm, Inc.’s subscribers from April 1, 2000.

All references to “KHz” contained in this report shall mean kilohertz, a unit of frequency denoting one thousand cycles per second, used to measure band and bandwidth. All references to “MHz” shall mean

megahertz, a unit of frequency denoting one million cycles per second. All references to “GHz” shall mean gigahertz, a unit of frequency denoting one billion cycles per second. All references to “Kbps” shall mean one thousand binary digits, or bits, of information per second. All references to “Mbps” shall mean one million bits of information per second. Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding.

All references to “Won” or “W” in this report are to the currency of Korea, all references to “Dollars”, “$” or “US$” are to the currency of the United States of America and all references to “Yen” or “¥” are to the currency of Japan.

Unless otherwise indicated, all financial information in this report is presented in accordance with Korean generally accepted accounting principles (“Korean GAAP”).

Unless otherwise indicated, translations of Won amounts into Dollars in this report were made at the noon buying rate in The City of New York for cable transfers in Won per US$1.00 as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise stated, the translations of Won into Dollars were made at the noon buying rate in effect on December 31, 2004, which was Won 1,035.1 to US$1.00. On December 31, 2003, the noon buying rate was Won 1,192.0 to US$1.00. On May 25, 2005, the noon buying rate was Won 1,000.0 to US$1.00. See “Item 3. Key Information — Exchange Rates”.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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”, “considering”, “depends”, “estimate”, “expect”, “intend”, “plan”, “planning”, “planned”, “project” and similar expressions, or that certain events, actions or results “will”, “may”, “might”, “should” or “could” occur, be taken or be achieved.

Forward-looking statements in this annual report include, but are not limited to, the following:


	•	our ability to anticipate and respond to various competitive factors affecting the industry, including new services that may be introduced, changes in consumer preferences, economic conditions and discount pricing strategies by competitors;

	•	our implementation of CDMA 1xEV/ DO technology and other technologies such as W-CDMA, which is commonly referred to as third generation, or 3G, wireless technology;

	•	our plans to spend approximately Won 1.6 trillion for capital expenditures in 2005 for a range of projects, including expansion and improvement of our wireless networks, investments in our Internet-related businesses and expansion of our W-CDMA network and our expected future capital expenditures on various initiatives;

	•	our efforts to make significant investments to build, develop and broaden our businesses, including developing and providing wireless data, multimedia, mobile commerce and Internet services;

	•	our ability to comply with governmental rules and regulations, including the MIC regulations related to telecommunications providers, rules related to our status as a “market-dominating business entity” under the Fair Trade Commission of Korea’s Korean Monopoly Regulation and Fair Trade Act, or the FTA, and the effectiveness of steps we have taken to comply with such regulations;

	•	our ability to manage effectively our bandwidth and to implement timely and efficiently new bandwidth-efficient technologies;

	•	our expectations and estimates related to interconnection fees; tariffs charged by wireless operators; regulatory fees; operating costs and expenditures; working capital requirements; principal repayment


		obligations with respect to long-term borrowings, bonds and obligations under capital leases; and research and development expenditures and other financial estimates;

	•	the effect of the number portability system that allows wireless subscribers to switch wireless service operators while retaining the same mobile phone number and the use of the common prefix identification system;

	•	the success of our various joint ventures and investments in other telecommunication service providers; and

	•	the telecommunications industry in Korea and other markets in which we do business and the effect economic, political or social conditions have on our number of subscribers, call volumes and results of operations.

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 and uncertainties associated with our business, include but are not limited to, 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 and uncertainties that are more fully described under the heading “Key Information — Risk Factors” beginning on page 12 of this report, and elsewhere in this report. 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.

ENFORCEABILITY OF CIVIL LIABILITIES

We are a corporation with limited liability organized under the laws of Korea. All of our directors and officers and certain other persons named in this annual report reside in Korea, and all or a significant portion of the assets of the directors and officers and certain other persons named in this annual report and substantially all of our assets are located in Korea. As a result, it may not be possible for you to effect service of process within the United States upon such persons or to enforce against them or against us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated on the U.S. federal securities laws.

PART I

Item. 1 Identity of Directors, Senior Management and Advisers

Not applicable.

Item. 2 Offer Statistics and Expected Timetable

Not applicable.

Item. 3 Key Information

SELECTED FINANCIAL DATA

You should read the selected consolidated financial data below in conjunction with the consolidated financial statements and the related notes included elsewhere in this report. The selected consolidated financial data for the five years ended December 31, 2004 are derived from our audited consolidated financial statements and related notes. Information as of and for the years ended December 31, 2000 and 2001 includes information as of and for the nine months ended December 31, 2000 and the year ended December 31, 2001, respectively, for Shinsegi Telecomm, Inc. unless otherwise specified. Shinsegi Telecomm, Inc. was merged into SK Telecom in January 2002.

Our consolidated financial statements are prepared in accordance with Korean generally accepted accounting principles, or Korean GAAP, which differ in certain respects from United States generally accepted accounting principles, or U.S. GAAP. For more detailed information you should refer to notes 30 and 31 of the notes to our audited consolidated financial statements included in this annual report.


		As of or for the Year Ended December 31,

		2000		2001		2002		2003		2004		2004*

		(In billions of won and millions of dollars, except per share and percentage data)
INCOME STATEMENT DATA
Korean GAAP:
Total Operating Revenue(1)		W	7,423.1	W	8,371.9	W	9,324.0	W	10,272.1	W	10,570.6	US$	10,212.2
	Cellular Service(1)		7,245.1		8.203.0		9,156.8		10,091.8		10,297.6		9,948.4
	Paging Service(2)		57.7		8.8		—		—		—		—
	Other(3)		120.3		160.1		167.2		180.3		273.0		263.8
Operating Expenses			5,927.6		6,047.4		6,526.4		7,167.0		8,130.9		7,855.2
Operating Income			1,495.5		2,324.5		2,797.6		3,105.1		2,439.7		2,357.0
Income before Income Taxes and Minority Interest			1,287.8		1,976.7		2,218.8		2,754.3		2,123.2		2,051.2
Income before Minority Interest			920.5		1,126.4		1,520.3		1,965.3		1,493.4		1,442.8
Net Income			972.3		1,146.0		1,487.2		1,966.1		1,491.5		1,440.9
Income per Share of Common Stock(4)			11,146		13,242		17,647		26,187		20,261		19.57
Diluted Net Income per Share of Common Stock(4)			11,146		13,242		17,647		26,187		20,095		19.41
Dividends per Share of Common Stock(5)			540		690		1,800		5,500		10,300		9.95
Weighted Average Number of Shares			87,226,559		86,545,041		84,270,450		75,078,219		73,614,297		73,614,297
U.S. GAAP:
Net Income		W	895.4	W	1,111.6	W	1,301.1	W	2,062.7	W	1,553.1	US$	1,500.4
Income per Share of Common Stock(4)			10,265		12,844		15,440		27,475		21,097		20.38
Diluted Net Income per Share of Common Stock(4)			10,265		12,844		15,439		27,475		20,921		20.21
Dividends per Share of Common Stock(5)			540		690		1,800		5,500		10,300		9.95
Weighted Average Number of Shares			87,226,559		86,545,041		84,270,450		75,078,219		73,614,297		73,614,297


		As of or for the Year Ended December 31,

		2000			2001			2002			2003			2004			2004*

		(In billions of won and millions of dollars, except per share and percentage data)
BALANCE SHEET DATA
Korean GAAP:
Working Capital (Deficiency)(6)		W	(374.6	)	W	668.2		W	(189.7	)	W	(461.4	)	W	1,323.8		US$	1,278.9
Fixed Assets — Net			4,543.2			4,174.7			4,569.4			4,641.5			4,703.9			4,544.4
Total Assets			11,044.2			13,326.3			14,228.7			13,818.2			14,283.4			13,799.1
Long-term Liabilities(7)		W	1,727.2		W	3,498.4		W	3,693.4		W	3,193.5		W	4,010.7		US$	3,874.7
Total Shareholders’ Equity			6,142.7			6,149.3			6,231.9			6,093.8			7,205.7			6,961.4
U.S. GAAP:
Working Capital (Deficiency)			(332.5	)		729.6			(108.2	)		(445.5	)		1,311.3			1,266.8
Total Assets			11,182.8			13,841.0			15,720.7			15,586.2			15,576.8			15,048.6
Total Shareholders’ Equity			6,117.9			5,820.1			6,356.2			7,014.7			8,237.0			7,957.7
OTHER FINANCIAL DATA
Korean GAAP:
EBITDA(8)		W	2,941.7		W	3,932.4		W	3,954.1		W	4,706.4		W	4,085.8		US$	3,947.3
Capital Expenditures(9)			2,241.1			1,382.1			2,024.7			1,647.6			1,704.3			1,646.5
R&D Expenses(10)			117.1			153.7			253.3			300.2			336.1			324.7
	Internal R&D		78.8			130.7			194.3			235.8			267.1			258.0
	External R&D		38.3			23.0			59.0			64.4			69.0			66.7
Depreciation and Amortization			1,456.4			1,759.7			1,543.3			1,646.3			1,741.6			1,682.5
Cash Flow from Operating Activities			3,043.5			2,423.9			4,267.8			3,328.8			2,516.1			2,430.8
Cash Flow from Investing Activities			(4,667.8	)		(1,972.8	)		(3,063.4	)		(1,414.4	)		(1,469.5	)		(1,419.7	)
Cash Flow from Financing Activities			1,629.3			331.2			(1,418.2	)		(2,261.0	)		(968.6	)		(935.8	)
Margins (% of total sales):
	EBITDA Margin(8)		39.6	%		47.0	%		42.4	%		45.8	%		38.7	%		38.7	%
	Operating Margin		20.1			27.8			30.0			30.2			23.1			23.1
	Net Margin		13.1			13.7			15.9			19.1			14.1			14.1
U.S. GAAP:
EBITDA(8)			2,930.5			3,859.1			3,620.7			4,679.1			3,970.4			3,835.8
Capital Expenditures(9)			2,241.1			1,382.1			2,024.7			1,647.6			1,704.3			1,646.5
Cash Flow from Operating Activities			3,043.5			2,423.8			3,708.9			3,281.3			2,985.9			2,884.7
Cash Flow from Investing Activities			(4,667.8	)		(1,972.8	)		(2,995.2	)		(1,422.5	)		(1,393.2	)		(1,346.0	)
Cash Flow from Financing Activities			1,629.3			331.2			(927.5	)		(2,205.5	)		(1,514.8	)		(1,463.4	)


		As of or for the Year Ended December 31,

		2000			2001			2002			2003			2004

SELECTED OPERATING DATA
Population of Korea (millions)(11)			47.1			47.4			47.6			47.9			48.2
Our Wireless Penetration(12)			30.7	%		32.0	%		36.1	%		38.2	%		39.0	%
Number of Employees(13)			7,279			5,693			6,241			6,286			7,353
Total Sales per Employee (millions)		W	1,019.8		W	1,470.6		W	1,494.0		W	1,634.1		W	1,437.6
Wireless Subscribers(14)			14,452,683			15,179,163			17,219,562			18,313,315			18,783,338
	Digital(14)		14,452,683			15,179,163			17,219,562			18,313,315			18,783,338
	Analog(15)		—			—			—			—			—
Average Monthly Outgoing Voice Minutes per Subscriber(16)			148			172			191			197			194
Average Monthly Revenue per Subscriber(17)		W	32,906		W	36,400		W	38,383		W	39,739		W	39,689
Average Monthly Churn Rate(18)			2.8	%		1.4	%		1.4	%		1.2	%		1.7	%
Digital Cell Sites(19)			7,008			6,056			7,384			8,309			9,458


	*	The conversion into US Dollars was made at the rate of Won 1,035.1 to US$1.00. See note 2(a) of the notes to our consolidated financial statements.


	(1)	Includes Won 494.0 billion for 2000, Won 702.4 billion for 2001, Won 534.0 billion for 2002, Won 612.0 billion for 2003 and Won 649.8 billion for 2004 from the sale of digital handsets and Won 1,312.4 billion for 2000, Won 1,339.9 billion for 2001, Won 1,043.2 billion for 2002, Won 1,017.1 billion for 2003 and Won 849.4 billion for 2004 of interconnection revenue (including interconnection revenue in respect of calls between mobile users starting in 2000). Shinsegi was merged into us on January 13, 2002. See “Information on the Company — Business overview — Interconnection”.

	(2)	In March 2001, we transferred our paging business to Real Telecom Co., Ltd. (formerly known as INTEC Telecom Co., Ltd.) in exchange for 9.9% of Real Telecom’s newly issued shares and bonds with a principal amount of Won 9.5 billion that can be converted into an additional 7.8% interest in Real Telecom.

	(3)	For more information about our other revenue, see “Operating and Financial Review and Prospects” and “Information on the Company”.

	(4)	Income per share of common stock is calculated by dividing net income by the weighted average number of shares outstanding during the period, giving effect to the 10-for-1 stock split of our common shares which became effective on April 21, 2000 and resulted in the par value of each share being reduced from Won 5,000 to Won 500.

	(5)	Dividend per share has been adjusted to give effect to the 10-for-1 stock split of our common shares which became effective on April 21, 2000. On January 1, 2002, we early adopted Statement of Korea Accounting Standards (“SKAS”) No. 6, “Events Occurring after Balance Sheet Date”. This statement requires that proposed cash dividends be reflected on the balance sheet when the appropriations are approved by shareholders which is similar to U.S. GAAP. In order to reflect this accounting change, prior year’s financial statements have been restated. See note 2(w) of the notes to our consolidated financial statements.

	(6)	Working capital means current assets minus current liabilities.

	(7)	Our monetary assets and liabilities denominated in foreign currencies are valued at the exchange rate of Won 1,260 to US$1.00 as of December 31, 2000, Won 1,326 to US$1.00 as of December 31, 2001, Won 1,200 to US$1.00 as of December 31, 2002, Won 1,198 to US$1.00 as of December 31, 2003 and Won 1,044 to US$1.00 as of December 31, 2004, the rates of exchange permitted under Korean GAAP as of those dates. See note 2(s) of the notes to our consolidated financial statements.

	(8)	EBITDA refers to income before interest income, interest expense, taxes, depreciation and amortization. EBITDA is commonly used in the telecommunications industry to analyze companies on the basis of operating performance, leverage and liquidity. Since the telecommunications business is a very capital intensive business, capital expenditures and level of debt and interest expenses may have a significant impact on net income for companies with similar operating results. Therefore, for a telecommunications company such as ourselves, we believe that EBITDA provides a useful reflection of our operating results. We use EBITDA as a measurement of operating performance because it assists us in comparing our performance on a consistent basis as it removes from our operating results the impact of our capital structure, which includes interest expense from our outstanding debt, and our asset base, which includes depreciation and amortization of our property and equipment. However, EBITDA should not be construed as an alternative to operating income or any other measure of performance determined in accordance with Korean GAAP or U.S. GAAP or as an indicator of our operating performance, liquidity or cash flows generated by operating, investing and financing activities. Other companies may define EBITDA differently than we do. EBITDA under U.S. GAAP is computed using interest income, interest expense, depreciation, amortization and income taxes under U.S. GAAP which may differ from Korean GAAP for these items.

As a measure of our operating performance, we believe that the most directly comparable U.S. and Korean GAAP measure to EBITDA is net income. The following table reconciles our net income under U.S. GAAP to our definition of EBITDA on a consolidated basis for the five years ended December 31, 2000, 2001, 2002, 2003 and 2004.

RECONCILIATION OF NET INCOME TO EBITDA UNDER US GAAP


		As of or For the Year Ended December 31,

		2000			2001			2002			2003			2004			2004*

		(In billions of won and millions of dollars)
Net Income		W	895.4		W	1,111.6		W	1,301.1		W	2,062.7		W	1,553.1		US$	1,500.4
ADD: Interest income			(67.6	)		(101.8	)		(90.8	)		(93.9	)		(86.7	)		(83.8	)
	Interest expense		215.1			274.4			396.6			387.1			291.0			281.2
	Taxes		408.5			791.3			585.0			811.4			611.1			590.3
	Depreciation and Amortization		1,479.1			1,783.6			1,428.8			1,511.7			1,601.9			1,547.6

EBITDA		W	2,930.5		W	3,859.1		W	3,620.7		W	4,679.0		W	3,970.4		US$	3,835.7

The following table reconciles our net income under Korean GAAP to our definition of EBITDA on a consolidated basis for the five years ended December 31, 2000, 2001, 2002, 2003 and 2004.

RECONCILIATION OF NET INCOME TO EBITDA UNDER KOREAN GAAP


		As of or For the Year Ended December 31,

		2000			2001			2002			2003			2004			2004*

		(In billions of won and millions of dollars)
Net Income		W	972.3		W	1,146.0		W	1,487.2		W	1,966.1		W	1,491.5		US$	1,440.9
ADD: Interest income			(67.6	)		(97.4	)		(86.0	)		(86.5	)		(80.5	)		(77.8	)
	Interest expense		213.3			273.9			311.1			391.5			303.4			293.1
	Taxes		367.3			850.3			698.5			789.0			629.8			608.5
	Depreciation and Amortization		1,456.4			1,759.6			1,543.3			1,646.3			1,741.6			1,682.5

EBITDA		W	2,941.7		W	3,932.4		W	3,954.1		W	4,706.4		W	4,085.8		US$	3,947.2


	(9)	Consists of investments in property, plant and equipment.


(10)	Includes donations to Korean research institutes and educational organizations. See “Information on the Company — Research and Development”.

(11)	Population estimates based on historical data published by the National Statistical Office of Korea.

(12)	Wireless penetration is determined by dividing subscribers by total estimated population, as of the end of the period.

(13)	Includes regular employees and temporary employees. See “Information on the Company — Employees”. Includes 1,687 and 1,332 Shinsegi employees as of December 31, 2000 and 2001, respectively.

(14)	Wireless subscribers include those subscribers who are temporarily deactivated, including (1) subscribers who voluntarily deactivate temporarily for a period of up to three months no more than twice a year and (2) subscribers with delinquent accounts who may be involuntarily deactivated up to two months before permanent deactivation, which we determine based on various factors, including prior payment history. Wireless subscribers also include 3,517,831 Shinsegi subscribers as of December 31, 2000 and 3,311,874 as of December 31, 2001. Shinsegi was merged into SK Telecom on January 13, 2002.

(15)	We discontinued our analog service on December 31, 1999.

(16)	The average monthly outgoing voice minutes per subscriber is computed by dividing the total minutes of outgoing voice usage for the period by the monthly weighted average number of subscribers for the period and dividing the quotient by the number of months in the period. The monthly weighted average number of subscribers is the sum of the average number of subscribers for the month, calculated by taking the simple average number of subscribers at the beginning of the month and at the end of the month, divided by the number of months in the period. Shinsegi’s subscribers and outgoing voice minutes are included from April 1, 2000.

(17)	The average monthly revenue per subscriber excludes interconnection revenue and is computed by dividing total initial connection fees, monthly access fees, usage charges for voice and data, international charges, value-added service fees; and interest on overdue accounts (net of telephone tax) for the period by the monthly weighted average number of subscribers for the period and dividing the quotient by the number of months in the period. Including interconnection revenue, consolidated average monthly revenue per subscriber was Won 43,958 for 2002, Won 44,546 for 2003 and Won 43,542 for 2004. Shinsegi’s subscribers and revenue are included from April 1, 2000. For information about the average monthly revenue per subscriber of SK Telecom and Shinsegi on a stand-alone basis, see “Operating and Financial Review and Prospects — Overview”.

(18)	The average monthly churn rate for a period is the number calculated by dividing the sum of voluntary and involuntary deactivations during the period by the simple average of the number of subscribers at the beginning and end of the period and dividing the quotient by the number of months in the period. Churn includes subscribers who upgrade to CDMA lxRTT or CDMA 1xEV/ DO-capable handsets by terminating their service and opening a new subscriber account.

(19)	Includes 2,532 cell sites of Shinsegi as of December 31, 2000 and 1,685 cell sites as of December 31, 2001.

EXCHANGE RATES

The following table sets forth, for the periods and dates indicated, certain information concerning the noon buying rate in The City of New York for cable transfers in Won per US$1.00 as certified for customs purposes by the Federal Reserve Bank of New York. We make no representation that the Won or Dollar amounts we refer to in this report could have been or could be converted into Dollars or Won, as the case may be, at any particular rate or at all.


	At End		Average
Year Ended December 31,	Of Period		Rate(1)		High		Low

	(Won per US$1.00)
2000		1,267		1,140		1,267		1,106
2001		1,314		1,293		1,369		1,234
2002		1,186		1,250		1,332		1,161
2003		1,192		1,193		1,262		1,146
2004		1,035		1,145		1,195		1,035


Past Six Months	High		Low

	(Won per
	US$1.00)
November 2004		1,119		1,046
December 2004		1,067		1,035
January 2005		1,058		1,024
February 2005		1,044		1,001
March 2005		1,024		998
April 2005		1,019		997
through May 25, 2005		1,009		997


(1)	The average rates for the annual periods were calculated based on the average noon buying rate on the last day of each month (or portion thereof) during the period. The average rate for the monthly periods were calculated based on the average noon buying rate of each day of the month (or portion thereof).

On May 25, 2005, the noon buying rate was Won 1,000 to US$1.00.

RISK FACTORS

An investment in our American Depositary Shares, or ADSs, and our debt securities involves various risks. If you own or are considering purchasing our ADSs or our debt securities, you should carefully review the information contained in this report. You should particularly refer to the following:


	*Competition may reduce our market share and harm our results of operation and financial condition.*

We face substantial competition in the wireless telecommunications sector in Korea. We expect competition to intensify as a result of consolidation of market leaders and the development of new technologies, products and services. Continued competition from the other wireless and fixed-line service providers has resulted in, and may continue to result in, a substantial level of deactivations among our subscribers. Subscriber deactivations, or “churn”, may significantly harm our business and results of operations. In addition, increased competition may cause our marketing expenses to increase as a percentage of sales, reflecting higher advertising expenses and other costs of new marketing activities which may be introduced to attract and retain subscribers.

Prior to April 1996, we were the only wireless telecommunications service provider in Korea. Since then, several new providers have entered the market, offering wireless voice and data services that compete directly with our own. Together, these providers had a market share of approximately 48.9%, in terms of numbers of wireless service subscribers, as of April 30, 2005. Furthermore, in 2001, the Government awarded to three companies licenses to provide high-speed third generation, or 3G, wireless telecommunications services. One of these licenses was awarded to SK Telecom’s former subsidiary, SK IMT Co., Ltd., which was merged into SK Telecom on May 1, 2003, and the other two licenses were awarded to consortia led by or associated with KT Corporation (formerly known as Korea Telecom Corp.), Korea’s principal fixed-line operator and the parent of KT Freetel Co., Ltd., one of our principal wireless competitors, and to LG Telecom, Ltd. In addition, our wireless voice businesses compete with Korea’s fixed-line operators, and our wireless data and Internet businesses compete with providers of fixed-line data and Internet services.

Beginning in 2000, there has been considerable consolidation in the wireless telecommunications industry resulting in the emergence of stronger competitors. In 2000, KT Corporation acquired a 47.9% interest in Hansol M.Com (formerly Hansol PCS Co., Ltd.), which was the fifth largest wireless operator in terms of numbers of wireless service subscribers at such time. Hansol M.Com subsequently changed its name to KT M.Com and merged into KT Freetel in May 2001. In May 2002, the Government sold its remaining 28.4% stake in KT Corporation. KT Corporation has a 48.7% interest in KT Freetel as of December 31, 2004. It is widely believed that KT Corporation is likely to operate more efficiently and be managed more effectively and profitably following its privatization. Such consolidation has created large, well-capitalized competitors with substantial financial, technical, marketing and other resources to respond to our business offerings.

We expect competition to intensify as a result of such consolidation and the rapid development of new technologies, products and services. Our ability to compete successfully will depend on our ability to anticipate and respond to various competitive factors affecting the industry, including new services that may be introduced, changes in consumer preferences, economic conditions and discount pricing strategies by competitors. Future business combinations and alliances in the telecommunications industry may create significant new competitors and could harm our business and results of operations.


	*Significant technological advancements affecting the wireless industry may harm our business.*

Significant advances in technology are occurring that may affect our business, including the roll-out by us and our competitors of advanced high-speed wireless telecommunications networks based on CDMA 1xEV/ DO technology and other technologies such as W-CDMA and cdma2000, both of which are commonly referred to as third generation, or 3G, wireless technology. W-CDMA service is also known as IMT-2000 service in Korea. Such networks are expected to support data transmission services with more advanced features and significantly higher data transmission rates than our principal data network, which uses a technology called CDMA 1xRTT. We commenced provision of our W-CDMA services on a limited basis in Seoul at the end of 2003. The successful introduction and operation of a 3G network by a competitor could materially and adversely affect our existing wireless businesses as well as the returns on future investments we may make in a 3G network or our

other businesses. We could also be harmed if we fail to adapt to technological or other changes in the telecommunications sector in a timely manner. For an explanation of some of the difficulties that we are facing with respect to W-CDMA, see “— W-CDMA technology may require significant capital and other expenditures for implementation which we may not recoup and may be difficult to integrate with our other businesses.” In March 2005, we obtained a license from the MIC to provide WiBro services, which will offer high-speed and large packet data services at a competitive price and serve as a complementary solution to the existing mobile communication services such as W-CDMA. Our decision to make further investments in WiBro services will depend on the market demand for such services, competitors offering similar services and development of competing technologies. We cannot assure you, however, that there will be sufficient demand for our WiBro services as a result of competition or otherwise. Our risk associated with our WiBro services, however, may be partially offset by a successful deployment of HSDPA which can substitute WiBro services.


	*W-CDMA technology may require significant capital and other expenditures for implementation which we may not recoup and may be difficult to integrate with our other businesses.*

W-CDMA is a high-speed wireless communication technology that we believe will allow us to offer even more sophisticated wireless data transmission services at faster speeds than our current CDMA 1xRTT network. Under the terms of our W-CDMA license received in 2001, we were required to commence provision of W-CDMA services by the end of 2003. We commenced provision of our IMT-2000 services based on our W-CDMA network on a limited basis in Seoul at the end of 2003. Although we developed and launched in March 2005 dual band/dual mode handsets, one of the key factors in a nationwide deployment of W-CDMA, the actual scope and timing of the full nationwide roll-out of our W-CDMA network will depend on other several factors, including the availability of network equipment, ability to overcome technical problems currently affecting W-CDMA performance, regulatory decisions, our assessment of the market opportunities for W-CDMA technology-based services and the competitive landscape in the Korean wireless market. We expect to provide W-CDMA services in the Seoul metropolitan area and other local metropolitan areas of Korea by the end of 2005.

We cannot assure you that we will be able to construct a nationwide W-CDMA network or provide W-CDMA services in a timely, effective and cost efficient manner. Several companies in other countries have announced delays in the roll-out of their 3G services as a result of technological problems and difficulties with software, equipment and handset supply. We are vulnerable to similar problems, and if such problems are not resolved effectively as they arise, our financial condition or results of operations could be adversely affected. In addition, the MIC is empowered to take various measures against us ranging from the suspension of our business to the revocation of our W-CDMA license if we fail to comply with the terms of our W-CDMA license. We believe that we are currently in compliance with all material terms of the license. Also, we cannot assure you that there will be sufficient demand for our W-CDMA services, as a result of competition or otherwise, to permit us to recoup or profit from our investment in the W-CDMA license and network. In addition, demand for our W-CDMA services will depend in part on the availability of attractive content and services. We cannot assure you that such content and services will become available in a timely manner, or at all. If W-CDMA services are not widely implemented, we may have to record an impairment loss on the license fee that we paid and our equipment relating to W-CDMA.

We expect that any future expansion of our W-CDMA network may require external funding, and we cannot assure you that such funding will be available at a cost acceptable to us, or at all. Although we do not foresee that the funding of such expansion of our W-CDMA will necessarily require significant amount of capital and expenditure for an extended period of time due to the significant on-going advances in technology relating to the construction of W-CDMA network in general and due to increasing deployment of W-CDMA technology in the wireless communication market worldwide, we cannot assure you that we will be able to successfully integrate W-CDMA services into our existing businesses in a timely or cost-effective manner or that the W-CDMA business will not adversely affect our current wireless businesses, including the services currently provided on our networks and new services. The MIC also awarded the IMT-2000 license to provide 3G services based on a technology different from ours to LG Telecom for a fee lower than the fee we are required to pay for our IMT-2000 license and on terms generally more favorable than the terms of our license, which may give LG

Telecom a competitive advantage. See “Information on the Company — W-CDMA Network” and “Operating and Financial Review and Prospects — Liquidity and Capital Resources”.


	Our business environment requires us to continually invest in the growth of our business, and as a result, we may make significant investments in new businesses and regions, including businesses and regions in which we have limited experience.

We believe that we must continue to make significant investments to build, develop and broaden our businesses, including developing and providing wireless data, multimedia, mobile commerce and Internet services. We will need to respond to market and technological changes and the development of services which we may have little or no experience in providing. We may also make investments in wireless telecommunications and other businesses outside of Korea. Entering these new businesses and regions may require us to make substantial investments and no assurance can be given that we will be successful in our efforts.


	Due to the existing high penetration rate of wireless services in Korea and the Korean government’s prohibition on handset subsidies, we are unlikely to maintain our subscriber growth rate, which could adversely affect our results of operations.

According to data published by the MIC and our population estimates based on historical data published by the National Statistical Office of Korea, the penetration rate for the Korean wireless telecommunications service industry as of April 30, 2005 was approximately 77.1%, which is high compared to many industrialized countries. In the past, wireless telecommunications service providers provided handsets at below retail prices to attract new subscribers, offsetting a significant portion of the cost of handsets. The rapid growth in penetration rate in recent years can, at least in part, be attributed to such subsidies on handsets given to new subscribers. The MIC prohibited all wireless telecommunications service providers, subject to certain exceptions stipulated in the Telecommunications Business Act, from providing any such handset subsidies beginning June 1, 2000. In March 2002, the MIC concluded that certain incentive payments made to wireless handset dealers by us and other wireless network service providers were being passed on to purchasers of wireless handsets and therefore constituted improper handset subsidies. On April 8, 2002, we, KT Freetel and LG Telecom were fined an aggregate of Won 20.0 billion by the MIC in respect of these incentive payments. We were assessed and have paid in full a fine of Won 10.0 billion. On November 15, 2002, we received an order from the MIC prohibiting us from signing up new subscribers for 30 days (from November 21, 2002 through December 20, 2002) for violating MIC’s handset subsidy regulation. KT Freetel and LG Telecom were also prohibited from signing up new subscribers for 20 days. In February 2004, the MIC imposed upon us a fine of Won 21.7 billion with respect to another incentive payments that were deemed by the MIC to constitute improper handset subsidies and thereby disrupt fair competition. We paid the fine in March 2004. In February 2004, KT Freetel and KT Corporation were also fined Won 7.5 billion and Won 4.1 billion, respectively, in respect of such incentive payments.

On May 25, 2004, a policy advisory committee to the MIC announced the results of its review of the merger conditions related to our acquisition of Shinsegi in January 2002 and stated that the committee believed that our market dominance may significantly restrict competition in the telecommunications market and that we have violated a merger condition by providing subsidies to handset buyers. The committee stated that it will recommend that the MIC extend the post-merger monitoring period by two years until January 2007 and take appropriate corrective measures against us. In June 2004, the MIC made a formal decision as to the policy advisory committee’s findings and imposed a Won 11.9 billion fine on us and extended the post-merger monitoring period until January 2007 pursuant to the policy advisory committee’s recommendation. On May 25, 2004, we voluntarily undertook to limit our market share to 52.3% of the wireless telecommunications market through the end of 2005, the level of our market share at the time of the approval of our merger with Shinsegi in January 2002. On June 7, 2004, the MIC issued a suspension that prohibited us from acquiring new subscribers for a period of 40 days beginning on August 20, 2004. The MIC also issued suspension to our three largest competitors that prohibited them from acquiring new subscribers for periods ranging from 20 to 30 days. KT Freetel Co. Ltd. was issued a 30 day suspension beginning on July 21, 2004; LG Telecom Ltd. was issued a 30 day suspension beginning on June 21, 2004; and Korea Telecom was issued a 20 day suspension beginning on July 21, 2004. These suspensions resulted from MIC’s determination that we violated the ban on providing

subsidies to handset purchasers. During the suspensions, each company was able to continue regular business activities, including replacement of handsets, changes in user names, changes in mobile phone numbers and changes in tariff plans applicable to the existing subscribers. Because of the length and timing of our suspension relative to our competitors, we believe the suspension had a negative impact on the number of new subscribers to our services in August and September of 2004. In May 2005, the MIC ordered us to pay fines of Won 23.1 billion with respect to our payment of improper handset subsidies. LG Telecom and KT Freetel were also fined Won 2.7 billion and Won 1.1 billion, respectively, in respect of such subsidy payments. We were relatively heavily fined compared to KT Freetel and LG Telecom as the MIC found that our efforts to take corrective measures were not sufficient and making such incentive payments was a violation of a merger condition related to our acquisition of Shinsegi in January 2002. We plan to make payment of such fine in June 2005. For detailed government penalties, see “Financial Information — Legal Proceedings”.

As a result of the already high penetration rates in Korea for wireless services, our large market share, the MIC’s handset subsidy regulation and the steps we have taken to comply with such regulation, we expect our subscriber growth rate to decrease, which could adversely affect our results of operations.


	Our business and results of operations may be adversely affected if we fail to acquire adequate spectrum or use efficiently our bandwidth to accommodate subscriber growth and subscriber usage.

One of the principal limitations on a wireless network’s subscriber capacity is the amount of spectrum available for use by the system. SK Telecom’s networks have been allocated 2 x 25 Mhz of spectrum in the 800 Mhz band.

As a result of bandwidth constraints, SK Telecom’s CDMA 1xRTT network is currently operating near its capacity in the Seoul metropolitan area. While we believe that we can address this through system upgrades and efficient allocation of bandwidth, the inability to address such capacity constraints may adversely affect our business and results of operations.

The growth of our wireless data businesses has increased our utilization of our bandwidth, since wireless data applications can be more bandwidth-intensive than voice services. This trend has been offset in part by the implementation of our CDMA 1xRTT network, which uses bandwidth more efficiently for voice and data traffic than our CDMA networks. If current upward trends in data transmission by our subscribers continue, our bandwidth capacity requirements could increase further. Growth of our wireless business will depend in part upon our ability to manage effectively our bandwidth and to implement timely and efficiently new bandwidth-efficient technologies if they become available. We cannot assure you that bandwidth constraints will not adversely affect the growth of our wireless businesses.


	*We may have to make further financing arrangements to meet our capital requirements and contractual payment obligations.*

We estimate that we will spend approximately Won 1.6 trillion for capital expenditures in 2005 for a range of projects, including expansion and improvement of our wireless networks, investments in our Internet-related businesses and expansion of our W-CDMA network. We expect to plan our future capital expenditures after we have reviewed the progress of the introduction and marketability of our W-CDMA service which we commenced on a limited basis in Seoul at the end of 2003. For a more detailed discussion of our capital expenditure plans and a discussion of other factors which may affect our capital expenditures in the future, see “Operating and Financial Review and Prospects — Liquidity and Capital Resources”. At December 31, 2004, we had approximately Won 500.0 billion in contractual payment obligations due in 2005 of which almost all involve repayment of debt obligations. See “Operating and Financial Review and Prospects — Contractual Obligation & Commitments”.

We have not arranged firm financing for all of our capital expenditure plans. We have in the past obtained funds for our proposed capital investments and cash payment obligations from various sources, including our cash flow from operations as well as debt and equity financing transactions. We believe that we have sufficient capital resources, including our ability to sell debt and equity securities, to meet our capital requirements and payment obligations in the near term. However, if, for any reason, adequate capital is not available at the time it is

needed, our business and prospects could be adversely affected. If the overall cost of our proposed capital investment projects increases above expected levels or if spending is required at a different rate than we now project, we may not be able to finance the projects in the manner currently intended, and we may be required to seek additional sources of funding for these projects. We cannot assure you that these additional funds will be available at a cost acceptable to us, or at all.


	*Termination or impairment of our relationship with a small number of key suppliers could adversely affect our results of operations.*

We purchase wireless network equipment from a small number of suppliers. We purchase our principal wireless network equipment from Samsung Electronics Co., Ltd. and LG Electronics Inc. To date, we have purchased substantially all of the equipment for our CDMA 1xRTT network from Samsung Electronics. Samsung Electronics also currently manufactures more than 40% of the wireless handsets sold to our subscribers. Although other manufacturers sell the equipment we require, sourcing such equipment from other manufacturers could result in delays and additional costs in our roll-out or expansion of the CDMA 1xRTT network. Carriers globally have had difficulty in obtaining adequate quantities of various types of 3G equipment, including handsets, from suppliers. In addition, we rely on KT Corporation and SK Networks to provide a substantial majority of our leased lines. In 2004, KT Corporation and SK Networks provided approximately 21% and 65%, respectively, of our leased lines. In order to reduce our dependence on our competitor, KT Corporation, we are considering leasing a majority of our fixed lines from SK Networks in the future. We cannot assure you that we will be able to continue to obtain the necessary equipment from one or more of our suppliers. Any discontinuation or interruption in the availability of equipment from our suppliers for any reason could have an adverse effect on our results of operations.


	Our businesses are subject to extensive government regulation and any change in government policy relating to the telecommunications industry could have a material adverse effect on our results of operations and financial condition.

The MIC has periodically reviewed the tariffs charged by wireless operators and has from time to time suggested tariff reductions. Although these suggestions are not binding, we have in the past implemented some level of tariff reductions in response to these suggestions. After discussions with the MIC, effective January 1, 2003, we reduced our standard rate plan’s monthly access fee by Won 1,000, increased our free air time from 7 minutes to 10 minutes per month and reduced our peak usage charges from Won 21 to Won 20 per minute. After discussions with the MIC, in October 2003, we reduced our monthly charges for caller ID service from Won 2,000 to Won 1,000. In addition, after discussions with the MIC, effective September 1, 2004, we reduced our tariffs by 3.7% by reducing our monthly basic charges by Won 1,000 to Won 13,000 from Won 14,000.

The Korean government plays an active role in the selection of technology to be used by telecommunications operators in Korea. The MIC has adopted the W-CDMA and cdma2000 technologies as the only standards available in Korea for implementing 3G services. The MIC may impose similar restrictions on the choice of technology used in future telecommunications services and we can give no assurance that the technologies promoted by the Government will provide the best commercial returns for us.

common prefix identification number “010” and to gradually retract the current mobile service identification numbers which had been unique to each wireless telecommunications service provider, including “011” for our cellular services, starting from 2004. All new subscribers were given the “010” prefix starting in January 2004.

We believe that the use of the common prefix identification system may pose a greater risk to us compared to the other wireless telecommunications providers because “011” has a very high brand recognition in Korea as the premium wireless telecommunications service. The MIC’s adoption of number portability system could also result in a deterioration of our market share as a result of weakened customer loyalty, increased competition among wireless service providers and higher costs as a result of maintaining the number portability system, increased subscriber deactivations, increased churn rate and higher marketing costs, all of which had, and may continue to have, an adverse effect on our results of operations. See “Operating and Financial Review and Prospects”. See “Information on the Company — Law and Regulation — Number Portability”.

In December 2002, the MIC implemented a wireless Internet network co-share system that permits the wireless application protocol gateway, or WAP gateway, of a fixed-line operator to connect to a wireless network service provider’s IWF (inter-working function) device. IWF is a device that connects cellular network with an IP (Internet Protocol) network while WAP Gateway converts hypertext transfer protocol, or HTTP protocol, into WAP protocol. This co-share system would allow subscribers of a wireless network service provider to have access to wireless Internet content provided by a fixed-line operator. In December 2002, KT Corporation connected to our IWF but has not yet commenced service. In July 2003, the MIC approved the basic terms regarding the implementation of a network co-system. In January 2004, we entered into a memorandum of understanding with Onse to establish a co-share system, under which we plan on launching these services in June 2005. Currently, our subscribers can access portals provided by outside parties. In addition, the MIC has requested that a third party oversee wireless operators’ customer billing procedures with respect to third-party content providers who are seeking to provide their content directly to subscribers without going through an individual operator’s portal, as third-party content providers have experienced difficulties in the past in providing their content service directly to subscribers due to the lack of resources for billing users. We believe that such a co-share system, if widely adopted, will have the effect of giving our users access to a wide variety of content using their handsets which may in turn increase revenues attributable to our data services. However, this system could also place significant competitive pressure on the revenues and profits attributable to our NATE wireless portal.


	*We are subject to additional regulation as a result of our market position, which could harm our ability to compete effectively.*

The MIC’s policy is to promote competition in the Korean telecommunications markets through measures designed to prevent the dominant service provider in a telecommunications market from exercising its market power to prevent the emergence and development of viable competitors. SK Telecom is currently designated by the MIC as a “market dominant service provider” in respect of our wireless telecommunications business. As such, we are subject to more stringent regulation than our competitors. For example, under current government regulations, we must obtain prior approval from the MIC to change our existing rates or introduce new rates although our competitors may generally change their rates or introduce new rates at their discretion. See “Information on the Company — Law and Regulation — Rate Regulation”. As of April 30, 2005, our standard peak usage charge rate was approximately 11.1% higher than those charged by our competitors. We could also be required by the MIC to charge higher usage rates than our competitors for future services. In addition, we were required to introduce number portability earlier than our competitors, KT Freetel and LG Telecom. The MIC also awarded the IMT-2000 license to provide 3G services based on a technology different from ours to LG Telecom for a fee lower than the fee we are required to pay for our IMT-2000 license and on terms generally more favorable than the terms of our license. As a result, our wireless businesses may operate at a competitive disadvantage to that of LG Telecom.

The MIC approved the merger of SK IMT into SK Telecom on April 30, 2003, subject to the satisfaction of certain conditions imposed by the MIC to ensure fair competition and customer protection. These conditions included, among others, commencing provision of W-CDMA IMT-2000 services using 2 X 20 MHz of spectrum

in the 2GHz band by the end of 2003, obtaining approval from the MIC on the initial tariff plan for the W-CDMA services, submission of an implementation plan to open our wireless Internet network to other telecommunications operators and an implementation plan for number portability. On May 1, 2003 SK IMT was merged into SK Telecom. See “Operating and Financial Review and Prospects — Overview”. We believe that we are currently in compliance with all material terms of the license.

In addition, when the MIC approved the merger of Shinsegi into SK Telecom in January 2002, the MIC imposed certain conditions on SK Telecom. The MIC periodically reviews our compliance with the conditions to our merger with Shinsegi. On May 25, 2004, a policy advisory committee to the MIC announced the results of its review and stated that the committee believed that our market dominance may significantly restrict competition in the telecommunications market and that we have violated a merger condition related to our acquisition of Shinsegi by providing subsidies to handset buyers. The committee stated that it will recommend that the MIC extend the post-merger monitoring period by two years until January 2007 and take appropriate corrective measures against us for providing subsidies to handset buyers. On June 7, 2004, the MIC made a formal decision as to the policy advisory committee’s findings and imposed a Won 11.9 billion fine on us and extended the post-merger monitoring period until January 2007 pursuant to the policy advisory committee’s recommendation. On June 7, 2004, the MIC issued a suspension that prohibited us, along with our three largest competitors, from acquiring new subscribers for a period of 40 days beginning on August 20, 2004 as a punishment for violating the ban on providing subsidies to handset purchasers.

In addition, we qualify as a “market-dominating business entity” under the Korean Monopoly Regulation and Fair Trade Act, or the Fair Trade Act. The Fair Trade Commission of Korea, or the FTC, approved our acquisition of Shinsegi on various conditions, one of which was that SK Telecom’s and Shinsegi’s combined market share of the wireless telecommunications market, based on numbers of subscribers, be less than 50.0% as of June 30, 2001. In order to satisfy this condition, we reduced the level of our subscriber activations and adopted more stringent involuntary subscriber deactivation policies beginning in 2000 and ceased accepting new subscribers from April 1, 2001 through June 30, 2001. We complied with this requirement by reducing our market share to approximately 49.7% as of June 30, 2001. We are not currently subject to any market share limitations; however, on May 25, 2004, we voluntarily undertook to limit our market share to 52.3% of the wireless telecommunications market through the end of 2005, the level of our market share at the time of the approval of our merger with Shinsegi in January 2002. We can give no assurances that the Government will not impose restrictions on our market share in the future or that we will not undertake to voluntarily restrict our market share in the future. If we are subject to market share limitations in the future, our ability to compete effectively will be impeded. The FTC, also as a condition to the Shinsegi acquisition, imposed a maximum limit of 1,200,000 on the number of digital handsets we may purchase annually from our subsidiary, SK Teletech Co., Ltd., until December 31, 2005. The limitation on the number of handsets we may purchase annually from SK Teletech does not apply to W-CDMA handsets.

The additional regulation to which we are subject has affected our competitiveness in the past and may hurt our profitability and impede our ability to compete effectively against out competitors in the future.


	*Financial difficulties and charges of financial statement irregularities at our affiliate, SK Networks (formerly SK Global), may cause disruptions in our business.*

Charges of financial statement irregularities by certain directors and executives at SK Networks have culminated in the resignation of four of our board members and executives, although none of these resignations were related to any allegations of wrongdoing in connection with their role in our business, and SK Telecom was not implicated in any of the charges against SK Networks’ management. Furthermore, continuing financial difficulties at SK Networks could result in our having to look for alternative sources for handset distribution and fixed network line needs. In February 2004, Mr. Kil Seung Son and Mr. Tae Won Chey, who both received prison terms of three years in the court of first instance and appealed with the Seoul High Court in connection with allegations of financial misconduct at SK Networks, resigned from our board of directors, along with Mr. Moon Soo Pyo, our president and Mr. Jae Won Chey, our executive vice president. See “Directors, Senior Management and Employees — Certain Legal Proceedings”.

The financial future of SK Networks remains uncertain. In March 2003, the principal creditor banks of SK Networks commenced corporate restructuring procedures against SK Networks after the company announced that its financial statements understated its total debt by Won 1.1 trillion and overstated its profits by Won 1.5 trillion. These banks agreed to a temporary rollover of approximately Won 6.6 trillion of SK Networks’ debt until June 18, 2003 and subsequently decided to put SK Networks into corporate restructuring. In October 2003, SK Networks’ foreign and domestic creditors agreed to a restructuring plan which, among other things, allowed the foreign creditors to cash out their debts at a buyout rate of 43% of the face value of the outstanding debt owed to them. In November 2003, SK Networks underwent a capital reduction and sold approximately Won 1 trillion of its assets as part of its restructuring plan, and SK Corporation approved a Won 850 billion debt-for-equity swap. Although SK Networks is still under the joint management of its domestic creditors in accordance with its business normalization plan, some financial indicators suggest that the financial conditions of SK Networks have consistently improved since 2003. In April 2005, the Korea Exchange Inc. removed SK Networks from the ‘watch list’, the list of which is maintained by the Korea Exchange Inc. to alert the public of possible companies that may be delisted from the KRX Stock Market. Korea Information Service, a leading credit ratings agency in Korea, further raised the credit rating of SK Networks by 8 levels from level C in June 2004 to level BB+ at the end of 2004.

SK Networks is the exclusive distributor of all of the handsets sold by our subsidiary, SK Teletech, to our nationwide network of dealers. SK Networks also serves as a distributor of handsets manufactured by third parties to our nationwide network of dealers. Samsung Electronics Co. Ltd., LG Electronics Inc., Motorola Korea, Inc. and Pantech & Curitel suspended their supply of handsets to SK Networks from the beginning of April 2002 for two to three weeks because of the credit risk of SK Networks. In May 2003, all suppliers resumed their supply of handsets on the condition that payment on their mobile phones be made in cash within one week of delivery. Although we believe that we will be able to find another distributor to replace SK Networks, in the event SK Networks is no longer able to distribute handsets, we may encounter difficulties in efficiently distributing the handsets to our subscribers and other customers in the short term. See “Major Shareholders and Related Party Transactions — Certain Relationships and Related Party Transactions — SK Networks”.

In addition, in 2004, we leased approximately 65% of our fixed network lines, which connect our various cell sites and switching stations, from SK Networks. In order to reduce our dependence on the fixed network lines of our competitor, KT Corporation, we are considering leasing a majority of our fixed lines from SK Networks in the future. If there is a material disruption of SK Networks’ ability to maintain and operate this business due to its financial difficulties, we may need to seek alternative sources. Although we do not believe that this will have a materially adverse effect on our business, this may result in a disruption of our services in the short term.


	Concerns that radio frequency emissions may be linked to various health concerns could adversely affect the market prices of our ADSs and common stock and we could be subject to litigation relating to these health concerns.

In the past, allegations that serious health risks may result from the use of wireless telecommunications devices or other transmission equipment have adversely affected share prices of some wireless telecommunications companies in the United States. We cannot assure you that these health concerns will not adversely affect our business. Several class action and personal injury lawsuits have been filed in the United States against several wireless phone manufacturers and carriers, asserting product liability, breach of warranty and other claims relating to radio transmissions to and from wireless phones. Certain of these lawsuits have been dismissed. We could be subject to liability or incur significant costs defending lawsuits brought by our subscribers or other parties who claim to have been harmed by or as a result of our services. In addition, the actual or perceived risk of wireless telecommunications devices could have an adverse effect on us by reducing our number of subscribers or our usage per subscriber.


	*Our businesses may be adversely affected by developments affecting the Korean economy.*

We generate substantially all of our revenue from operations in Korea. Our future performance will depend in large part on Korea’s future economic growth. Adverse developments in Korea’s economy or in political or

social conditions in Korea may have an adverse effect on our number of subscribers, call volumes and results of operations, which could have an adverse effect on our business.

In 1997 and 1998, Korea experienced a significant increase in the number and size of companies filing for corporate reorganization and protection from their creditors. As a result of these corporate failures, high levels of short-term foreign currency borrowings from foreign financial institutions and the consideration of non-market oriented factors in making lending decisions, Korea’s financial institutions experienced a sharp increase in non-performing loans and a deterioration in their capital adequacy ratios. These developments led to a substantial increase in the number of unemployed workers, reducing the purchasing power of consumers in Korea. These developments also led international credit rating agencies to downgrade the credit ratings of Korea and various companies and financial institutions in Korea to below investment grade, although Standard & Poor’s, or S&P, and Moody’s raised the credit rating of Korea back to investment grade levels in early 1999. The current long-term foreign currency rating of Korea by S&P is A- and the current foreign currency rating on bond obligations of Korea by Moody’s is A3. Prompted by heightened security concerns stemming from nuclear weapons program of Democratic People’s Republic of Korea, or North Korea, Moody’s had changed the outlook on the long-term ratings of Korea from positive to negative in February 2003 before changing it to stable in June 2004 as a series of six party talks involving Korea, the United States, North Korea, China, Japan and Russia suggested a lessened tension over the nuclear weapons program of North Korea.

Although the Korean economy began to experience a recovery in 1999, the pace of the recovery has since slowed and has been volatile. The economic indicators in 2001, 2002, 2003 and 2004 have shown mixed signs of recovery and uncertainty, and future recovery or growth of the economy is subject to many factors beyond our control. Events related to terrorist attacks in the United States that took place on September 11, 2001, recent developments in the Middle East, including the war in Iraq, higher oil prices, the general weakness of the global economy and the outbreak of severe acute respiratory syndrome, or SARS, in Asia and other parts of the world, and natural disasters of large scale such as the earthquakes and tsunami that devastated many parts of Southeast Asia and East Africa have increased the uncertainty of world economic prospects in general and continue to have an adverse effect on the Korean economy. Any future deterioration of the Korean economy would adversely affect our financial condition and results of operations.

Developments that could hurt Korea’s economy in the future include:


	•	financial problems relating to Korean conglomerates, or chaebols, or their suppliers, and their potential adverse impact on Korea’s financial sector, including as a result of recent investigations relating to unlawful political contributions by chaebols;

	•	failure of restructuring of large troubled companies, including LG Card and other troubled credit card companies and financial institutions;

	•	adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including depreciation of the Dollar or Yen), interest rates and stock markets;

	•	increased reliance on exports to service foreign currency debts, which could cause friction with Korea’s trading partners;

	•	adverse developments in the economies of countries such as the United States, China and Japan to which Korea exports, or in emerging market economies in Asia or elsewhere that could result in a loss of confidence in the Korean economy;

	•	the continued emergence of China, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of the manufacturing base from Korea to China);

	•	social and labor unrest or declining consumer confidence or spending resulting from lay-offs, increasing unemployment and lower levels of income;

	•	another widespread outbreak of severe acute respiratory syndrome, or SARS, or any similar contagion, in Asia and other parts of the world;


	•	another occurrence of natural disasters of large scale such as the earthquakes and tsunami that hit many parts of Southeast Asia and East Africa;

	•	a decrease in tax revenues and a substantial increase in the Korean government’s expenditures for unemployment compensation and other social programs that, together, lead to an increased government budget deficit;

	•	political uncertainty or increasing strife among or within political parties in Korea; and

	•	a deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including such deterioration resulting from trade disputes or disagreements in foreign policy.

Any developments that could adversely affect Korea’s economic recovery will likely also decrease demand for our services and adversely affect our results of operations.


	Depreciation of the value of the won against the dollar and other major foreign currencies may have a material adverse effect on our results of operations and on the prices of our common stock and the ADSs.

Substantially all of our revenues are denominated in Won. Depreciation of the Won may materially affect our results of operations because, among other things, it causes:


	•	an increase in the amount of Won required by us to make interest and principal payments on our foreign currency-denominated debt, which accounted for approximately 18.7% of our total consolidated long-term debt, including current portion, as of December 31, 2004; and

	•	an increase, in Won terms, of the costs of equipment that we purchase from overseas sources which we pay for in Dollars or other foreign currencies.

Fluctuations in the exchange rate between the Won and the Dollar will affect the Dollar equivalent of the Won price of the shares of our common stock on the KRX Stock Market. These fluctuations also will affect the amounts a registered holder or beneficial owner of ADSs will receive from the ADR depositary in respect of:


	•	dividends, which will be paid in Won to the ADR depositary and converted by the ADR depositary into Dollars;

	•	the Dollar value of the proceeds that a holder will receive upon sale in Korea of the shares; and

	•	the secondary market price of the ADSs.

For the past exchange rates since 2000, see “Key Information — Exchange Rate”.


	*Increased tensions with North Korea could have an adverse effect on us and the prices of our common stock and the ADSs.*

Relations between Korea and North Korea have been tense over most of Korea’s history. The level of tension between Korea and North Korea has fluctuated and may increase or change abruptly as a result of current and future events, including ongoing contacts at the highest levels of the governments of Korea and North Korea and increasing hostility between North Korea and the United States. In December 2002, North Korea removed the seals and surveillance equipment from its Yongbyon nuclear power plant and evicted inspectors from the United Nations International Atomic Energy Agency, and has reportedly resumed activity at its Yongbyon power plant. In January 2003, North Korea announced its intention to withdraw from the Nuclear Non-Proliferation Treaty, demanding that the United States sign a non-aggression pact as a condition to North Korea dismantling its nuclear program. In August 2003, representatives of Korea, the United States, North Korea, China, Japan and Russia held multilateral talks in an effort to resolve issues relating to the nuclear weapons program of North Korea. While the talks concluded without resolution, participants in the August meeting indicated that further negotiations may take place in the future and, in February 2004, six party talks resumed in Beijing, China. Since the last six party talks in June 2004, however, the talks involving the six countries aimed at dismantling the North Korea’s nuclear programs have been stalled. In February 2005, North Korea claimed that it had nuclear weapons and were pulling

out of the six party talks. Any further increase in tensions, resulting for example from a break-down in contacts, test of long-range nuclear missiles coupled with continuing nuclear programs by North Korea or an outbreak in military hostilities, could hurt our business, results of operations and financial condition and could lead to a decline in the market value of our common stock and the ADSs.


	*If SK Corporation causes us to breach the foreign ownership limitations on shares of our common stock, we may experience a change of control.*

There is currently a 49% limit on the aggregate foreign ownership of our issued shares. As of December 31, 2004, SK Corporation owned 17,663,127 shares of our common stock, or approximately 21.47%, of our issued shares. As of December 31, 2004, a foreign investment fund and its related parties collectively held a 14.85% stake in SK Corporation. Under a newly adopted amendment to the Telecommunications Business Law, which became effective on May 9, 2004, a Korean entity, such as SK Corporation, is deemed to be a foreign entity if its largest shareholder (determined by aggregating the shareholdings of such shareholder and its related parties) is a foreigner and such shareholder (together with the shareholdings of its related parties) holds 15% or more of the issued voting stock of the Korean entity. Thus, effective from May 9, 2004, if the foreign investment fund and its related parties increase their shareholdings in SK Corporation to 15% or more and if such foreign investment fund and its related parties collectively constitute the largest shareholder of SK Corporation, SK Corporation will be considered a foreign shareholder of SK Telecom, and its shareholding in SK Telecom would be included in the calculation of the aggregate foreign shareholding of SK Telecom. If SK Corporation’s shareholding in SK Telecom is included in the calculation of the aggregate foreign shareholding of SK Telecom, then the aggregate foreign shareholding in SK Telecom based on our foreign ownership level as of December 31, 2004 (which we believe was 48.33%), would reach 69.8%, exceeding the 49% ceiling on foreign shareholding. We also could breach the foreign ownership limitations if the number of shares of our common stock or ADSs owned by other foreign persons significantly increases.

If the aggregate foreign shareholding limit in SK Telecom is exceeded, the MIC may issue a corrective order to SK Telecom, the breaching shareholder (including SK Corporation if the breach is caused by an increase in foreign ownership of SK Corporation) and the foreign investment fund and its related parties who own in the aggregate 15% or more of SK Corporation. Furthermore, if SK Corporation is considered a foreign shareholder, it may not exercise its voting rights with respect to the shares held in excess of the 49% ceiling, which may result in a change in control of us. In addition, the MIC may refuse to grant us licenses or permits necessary for entering into new telecommunications businesses until the aggregate foreign shareholding of SK Telecom is reduced to below 49%. If a corrective order is issued to us by the MIC arising from the violation of the foregoing foreign ownership limit, and we do not comply within the prescribed period under such corrective order, the MIC may (1) suspend all or part of our business, or (2) if the suspension of business is deemed to result in significant inconvenience to our customers or be detrimental to the public interest, impose a one-time administrative penalty of up to 3% of our sales revenues. The amendment to the Telecommunications Business Law in May 2004 also authorizes the MIC to assess monetary penalties of up to 0.3% of the purchase price of the shares for each day the corrective order is not complied with, as well as a prison term of up to one year and a penalty of Won 50 million. For a description of further actions that the MIC could take, see “Information on the Company — Law and Regulation — Foreign Ownership and Investment Restrictions and Requirements”.

If our convertible notes are converted by foreign holders and the conversion would cause a violation of the foreign ownership restrictions of the Telecommunications Business Law, or in certain other circumstances, we may have to sell common stock in order to settle the converting holders’ conversion rights in cash rather than by issuing common stock to them, and these sales might adversely affect the market price of our common stock or ADRs.

In May 2004, we sold US$329.5 million in zero coupon convertible notes due 2009. These convertible notes are convertible by the holders into shares of our common stock at the rate of Won 235,625 per share. These notes are held principally by foreign holders. If (1) the exercise by the holder of the conversion right would be prohibited by Korean law or we reasonably conclude that the delivery of common stock upon conversion of these notes would result in a violation of applicable Korean law or (2) we do not have a sufficient number of shares of

our common stock to ratify the conversion right, then we will pay a converting holder a cash settlement payment. In such situations, we intend to sell such number of treasury shares held in trust for us that corresponds to the number of shares of common stock that would have been deliverable in the absence of the 49% foreign shareholding restrictions imposed by the Telecommunications Law or other legal restrictions. The number of shares sold in these circumstances might be substantial. We cannot assure you that such sales would not adversely affect the market prices of our common stock or ADSs.


	*Sales of SK Telecom shares by companies in the SK Group, POSCO and/or other large shareholders may adversely affect the prices of SK Telecom’s common stock and the ADSs.*

Sales of substantial amounts of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the prevailing market price of the shares of our common stock or the ADSs or our ability to raise capital through an offering of our equity securities.

As of December 31, 2004, POSCO owned 4.98% of our issued common stock. POSCO has not agreed to any restrictions on its ability to dispose of our shares. See “Major Shareholders and Related Party Transactions — Major Shareholders”. Companies in the SK Group, which collectively owned 24.03% of our issued common stock as of December 31, 2004, may sell their shares of our common stock in order to comply with the Korean Fair Trade Act’s limits on the total investments that companies in a large business group, such as the SK Group, may hold in other domestic companies. See “Information on the Company — Business Overview — Law and Regulation — Competition Regulation”. We can make no prediction as to the timing or amount of any sales of our common stock. We cannot assure you that future sales of shares of our common stock, or the availability of shares of our common stock for future sale, will not adversely affect the market prices of the shares of our common stock or ADSs prevailing from time to time.


	*Korea’s new legislation allowing class action suits related to securities transactions may expose us to additional litigation risk.*

A new law enacted on January 12, 2004 allows class action suits to be brought by shareholders of companies listed on the KRX Stock Market (including us) for losses incurred in connection with purchases and sales of securities and other securities transactions arising from (i) false or inaccurate statements provided in the registration statements, prospectuses, business reports and audit reports; (ii) insider trading and (iii) market manipulation. This law became effective starting from January 1, 2005 with respect to companies whose total assets are equal to or greater than Won 2.0 trillion as of the end of the fiscal year immediately preceding January 1, 2005. However, in the event that certain elements of a financial statement for the fiscal year ended before January 1, 2005, were not in compliance with the then effective accounting standards, this law does not apply, if such non-compliance is cured or addressed in the financial statements for the fiscal year ending on December 31, 2006, and such corrected information is submitted to the Financial Supervisory Commission or the Korea Exchange Inc. (the “KRX”) or made publicly available. This law permits 50 or more shareholders who collectively hold 0.01% of the shares of a company to bring a class action suit against, among others, the issuer and its directors and officers. It is uncertain how the courts will apply this law. Litigation can be time-consuming and expensive to resolve, and can divert management time and attention from the operation of a business. We are not aware of any basis under which such suit may be brought against us, nor are any such suits pending or threatened. Any such litigation brought against us could have a material adverse effect on our business, financial condition and results of operations.


	*If an investor surrenders his ADSs to withdraw the underlying shares, he may not be allowed to deposit the shares again to obtain ADSs.*

Under the deposit agreement, holders of shares of our common stock may deposit those shares with the ADR depositary’s custodian in Korea and obtain ADSs, and holders of ADSs may surrender ADSs to the ADR depositary and receive shares of our common stock. However, under the terms of the deposit agreement, as amended, the depositary bank is required to obtain our prior consent to any such deposit if, after giving effect to such deposit, the total number of shares of our common stock on deposit exceeds a specified maximum, which was 22,514,442 shares as of April 30, 2005, subject to adjustment under certain circumstances. In addition, the

depositary bank or the custodian may not accept deposits of our common shares for issuance of ADSs under certain circumstances, including (1) if it has been determined by us that we should block the deposit to prevent a violation of applicable Korean laws and regulations or our articles of incorporation or (2) if a person intending to make a deposit has been identified as a holder of at least 3% of our common stock on October 7, 2002. See “Additional Information — Description of American Depositary Shares”. It is possible that we may not give the consent. Consequently, an investor who has surrendered his ADSs and withdrawn the underlying shares may not be allowed to deposit the shares again to obtain ADSs.


	*An investor in our ADSs may not be able to exercise preemptive rights for additional shares and may suffer dilution of his equity interest in us.*

The Korean Commercial Code and our articles of incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we offer any rights to subscribe for additional shares of our common stock or any rights of any other nature, the ADR depositary, after consultation with us, may make the rights available to an ADS holder or use reasonable efforts to dispose of the rights on behalf of the ADS holder and make the net proceeds available to the ADS holder. The ADR depositary, however, is not required to make available to an ADS holder any rights to purchase any additional shares unless it deems that doing so is lawful and feasible and:


	•	a registration statement filed by us under the U.S. Securities Act of 1933, as amended, is in effect with respect to those shares; or

	•	the offering and sale of those shares is exempt from, or is not subject to, the registration requirements of the U.S. Securities Act.

We are under no obligation to file any registration statement with respect to any ADSs. If a registration statement is required for an ADS holder to exercise preemptive rights but is not filed by us, the ADS holder will not be able to exercise his preemptive rights for additional shares. As a result, ADS holders may suffer dilution of their equity interest in us.


	*Short selling of our ADSs by purchasers of securities convertible or exchangeable into our ADSs could materially adversely affect the market price of our ADSs.*

SK Corporation, through one or more special purpose vehicles, has engaged and may in the future engage in monetization transactions relating to its ownership interest in us. These transactions have included and may include offerings of securities that are convertible or exchangeable into our ADSs. Many investors in convertible or exchangeable securities seek to hedge their exposure in the underlying equity securities at the time of acquisition of the convertible or exchangeable securities, often through short selling of the underlying equity securities or through similar transactions. Since a monetization transaction could involve debt securities linked to a significant number of our ADSs, we expect that a sufficient quantity of ADSs may not be immediately available for borrowing in the market to facilitate settlement of the likely volume of short selling activity that would accompany the commencement of a monetization transaction. This short selling and similar hedging activity could place significant downward pressure on the market price of our ADSs, thereby having a material adverse effect on the market value of ADSs owned by you.


	After the exchange of ADSs into the underlying common shares of the company, seller or purchasers of the underlying common shares may have to pay securities transaction tax upon the transfer of the shares.

Under Korean tax law, transfer of the company’s common shares after the exchange of ADSs into the underlying common shares of the company will be subject to securities transaction tax (including an agricultural and fishery special tax) at the rate of 0.3% of the sales price if traded on the KRX Stock Market.

Securities transaction tax, if applicable, generally must be paid by the transferor of the shares or the rights to subscribe to such shares. When the transfer is effected through a securities settlement company, such settlement company is generally required to withhold and pay the tax to the tax authority. When such transfer is made

through a securities company, such securities company is required to withhold and pay the tax. In case the sale takes place outside the KRX Stock Market, without going through a securities settlement company or a securities company, between two non-residents or between a non-resident seller and a Korean resident purchaser, the purchaser will have to withhold securities transaction tax at the rate of 0.5% of the sales price of the common shares.

The failure to pay the securities transaction will result in a penalty of 10% of the tax due. The penalty is imposed on the party responsible for paying the securities transaction tax or, if the securities transaction tax is to be paid via withholding, the penalty is imposed on the party that has the withholding obligation. See “Additional Information — Taxation — Korean Taxation”.


	*We are generally subject to Korean corporate governance and disclosure standards, which may differ from those in other countries.*

Companies in Korea, including us, are subject to corporate governance standards applicable to Korean public companies which may differ in some respects from standards applicable in other countries, including the United States. As a reporting company registered with the Securities and Exchange Commission and listed on the New York Stock Exchange, we are, and in the future will be, subject to certain corporate governance standards as mandated by the Sarbanes-Oxley Act of 2002. However, foreign private issuers, including us, are exempt from certain corporate governance requirements under the Sarbanes-Oxley Act or under the rules of the New York Stock Exchange. There may also be less publicly available information about Korean companies, such as us, than is regularly made available by public or non-public companies in other countries. Such differences in corporate governance standards and less public information could result in corporate governance practices or disclosures that are perceived as less than satisfactory by investors in certain countries.

Item. 4 Information on the Company

HISTORY AND DEVELOPMENT OF THE COMPANY

Introduction

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. We served approximately 19.1 million subscribers throughout Korea as of April 30, 2005, including 18.4 million subscribers who owned data-capable handsets. As of April 30, 2005, our share of the Korean wireless market was approximately 51.2%, based on the number of subscribers.

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 possible over our CDMA network. 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. As of April 30, 2005, approximately 17.7 million of our subscribers had handsets capable of accessing our CDMA 1xRTT network.

In the first half of 2002, we launched an upgrade of our CDMA 1xRTT network in 26 cities in Korea to CDMA 1xEV/ DO. CDMA 1xEV/ DO is a more advanced CDMA-based technology which enables data to be transmitted at speeds of up to 2.4 Mbps. CDMA 1xEV/DO technology allows us to provide advanced wireless data services such as streaming video and audio services. CDMA 1xEV/DO-capable handsets became available in Korea in June 2002. As of December 31, 2004, CDMA 1xEV/DO network upgrade has been completed in 84 cities in Korea.

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 have commenced construction of the W-CDMA network and began providing W-CDMA service on a limited basis 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 × 25 MHz of spectrum in the 800 MHz range.

In 2003, we commenced construction of our W-CDMA network and began providing W-CDMA service on a limited basis in Seoul at the end of 2003. We expect to provide W-CDMA services in the Seoul metropolitan area and other local metropolitan areas of Korea by the end of 2005.

In March 2004, we were assigned by the MIC frequency for satellite DMB. In October 2004, we granted the right to use such satellite, satellite orbit and frequency to TU Media Corp., one of our affiliates, which received a license from the MIC as a satellite DMB provider on December 30, 2004. In April 2005, SK Teletech launched its own brand handsets for use in connection with satellite DMB services. On May 1, 2005, TU Media Corp. began to provide satellite DMB services.

In March 2005, we obtained a license from the MIC to provide WiBro services, which will serve as a complementary solution to the existing mobile communication services such as W-CDMA. WiBro will offer wireless Internet services at a competitive price in the metropolitan areas where there is a high demand for high-speed and large packet data services. In April 2005, we were assigned by the MIC a 27 MHz of spectrum in the 2.3GHz (2,300,2,327MHz) range in connection with WiBro services.

On May 24, 2005, we had a market capitalization of approximately Won 14.5 trillion (US$14.4 billion, as translated at the noon buying rate of May 23, 2005) or approximately 3.01% of the total market capitalization on the KRX Stock Market, making us the sixth largest company listed on the KRX Stock Market based on market capitalization on that date. Our ADSs, each representing one-ninth of one share of our common stock, have traded on the New York Stock Exchange since June 27, 1996.

We established our telecommunications business in March 1984 under the name of Korea Mobile Telecommunications Co., Ltd., under the laws of Korea. We changed our name to SK Telecom Co., Ltd., effective March 21, 1997.

Our registered office is at 11, Euljiro 2-ga, Jung-gu, Seoul 100-999, Korea and our telephone number is 82-2-6100-1639.

Our Business Strategy

We believe that trends in the Korean telecommunications industry during the next decade will mirror those in the global market and that the industry will be characterized by rapid technological change, reduced regulatory barriers and increased competition. Our business strategy is to enhance shareholder value by maintaining and consolidating our leading position in the Korean market for wireless services, including voice, data and Internet services. As the Korean market continues to mature, we will continue to focus on these core businesses in order to expand and enhance the range and quality of our wireless telecommunications services. Our principal strategies are to:


	•	Enhance the technical capabilities of our wireless networks to improve data transmission rates and service quality and to enable us to offer an increased range of services. We are expanding the geographic coverage and subscriber capacity of our existing CDMA 1xRTT network and are progressively upgrading this network to employ CDMA 1xEV/DO technology, capable of data transmission at speeds of up to 2.4 Mbps.

	•	Offer a broad range of new and innovative wireless data and Internet services. Through our integrated wireless and on-line portal, NATE, we plan to continue expanding the range of our wireless data and Internet services with a view to increasing revenue from these services. Our strategy includes the introduction of sophisticated multimedia services (such as June, a premium wireless data service that


		provides streaming multimedia video content through our CDMA 1xEV/DO technology), mobile commerce services (such as Moneta and Liquid Screen Small Payment Service, wireless credit and payment systems which allow subscribers to provide merchants with credit card information and payment authorization using chips embedded in their wireless handsets), mobile community portal services (such as Mobile Cyworld which allows subscribers to enjoy Cyworld, the wire-line community portal service, through their cellular phone) and mobile finance services (such as Nemo, a mobile payment solution which allows subscribers to transfer money from their accounts to the accounts of other Nemo subscribers by typing in the recipient’s wireless handset number) that can be accessed using handsets and other devices such as personal computers, personal digital assistants and vehicle mounted terminals.

	•	Retain and capitalize on our large, high-quality wireless subscriber base. With approximately 19.1 million subscribers as of April 30, 2005, we have the largest wireless subscriber base in Korea. We focus on maintaining and expanding our high-quality subscriber base through the provision of enhanced wireless services, particularly advanced wireless data and Internet based applications, at higher speeds than previously available. As part of this strategy, we encourage our CDMA subscribers to migrate to our CDMA 1xRTT network.

	•	Position ourselves to be a leader in implementing new and improved wireless technologies. We pursue a research and development program designed to allow us to implement new wireless technologies as market opportunities arise. We operate a network research and development center which is focused on wireless network design, digital cellular technologies and wireless telecommunications applications. This center includes a research team that is helping to develop fourth generation wireless technology, which is expected to enable wireless data transmission at speeds of up to 155 Mbps, 70 times faster than 3G technology. We have acquired a license to develop and operate a W-CDMA network using 2 × 20 MHz of spectrum in the 2 GHz band. We have commenced provision of our IMT-2000 services based on our W-CDMA network on a limited basis in Seoul at the end of 2003. We expect to provide W-CDMA services in the Seoul metropolitan area and other local metropolitan areas of Korea by the end of 2005. In the first half of 2006, we plan to start deploying high speed download packet access (“HSDPA”), also known as 3.5G technology, which enables data to be transmitted at speeds of up to two to three times faster than 1xEV/DO. We have commenced testing of the system that will enable such upgrade to HSDPA by simply upgrading applicable software and without requiring any new infrastructure.

	•	Take initiative in transition to the convergent and ubiquitous era. We are striving to satisfy our customers’ ever-growing needs by launching such new services as Telematics, Broadband Convergence Networks and Digital Home. In particular, we obtained a 2.3Ghz portable Internet (WiBro) service license in January of 2005. This service will be deployed in a way that will maximize its synergistic effect with conventional mobile phone services. We are actively implementing new businesses with an objective of achieving significant synergies between our subsidiary and affiliate companies. In this regard, TU Media Corp., one of our affiliates, successfully launched satellite DMB service in May 2005.

	•	Continue to reach for overseas markets. We have been seeking advancement into various overseas markets. Through the launch of a joint venture company with China Unicom in February 2004, we are rapidly extending our wireless Internet service in China. We are also providing a CDMA cellular service in the Vietnamese market. In addition, we have been exporting Coloring solution, and wireless Internet platforms and solutions, to such countries as Taiwan and Thailand. We established a joint venture with EarthLink, the third largest Internet service provider in the U.S., to launch voice and data services across the U.S. as a mobile virtual network operator (MVNO) in 2005.

Merger with Shinsegi

In a series of transactions between December 1999 and April 2000, we acquired a 51.2% interest in the common stock of Shinsegi. In subsequent transactions between March and September 2001, we increased our interest to 70.4%. On January 13, 2002, Shinsegi merged into SK Telecom. Shinsegi’s business has been fully integrated into our business.

The attractiveness of our merger with Shinsegi derived in large measure from the synergies, growth opportunities and cost savings we hope to achieve by integrating Shinsegi’s former operations and customer base with those of SK Telecom and our plans to use the spectrum formerly owned and operated by Shinsegi in SK Telecom’s networks.

In 2001, we began integrating Shinsegi’s operations with those of SK Telecom. In 2002, we completed the following steps to realize additional benefits from our merger with Shinsegi:


	•	Decommissioned Shinsegi’s former network and transfer Shinsegi’s former subscribers to SK Telecom’s networks. We have allowed transferred subscribers to continue receiving services under their existing rate plans. However, after the merger, no new subscribers have been accepted under Shinsegi’s plans and further marketing efforts have been limited to the SK Telecom brands. Shinsegi’s subscribers did not have to purchase new handsets, were allowed to use the same telephone numbers assigned to them and had access to the same services as before the merger.

	•	Re-allocated the spectrum formerly used by Shinsegi’s network to SK Telecom’s CDMA and CDMA 1xRTT networks.

	•	A portion of Shinsegi’s former network equipment was re-deployed in SK Telecom’s CDMA network or sold for use outside Korea. The remainder of Shinsegi’s former network equipment was discarded and written off and an impairment loss of Won 185.8 billion was recorded in 2002.

We also identified and implemented other cost saving measures, such as the elimination of redundant distribution centers.

BUSINESS OVERVIEW

Cellular Services

We were the sole provider of cellular services in Korea from 1988, when we began network operations, to April 1996, when Shinsegi began operating a digital cellular system in several regions of Korea. In October 1997, three additional companies commenced providing wireless telecommunications services. As a result of consolidation in the wireless telecommunications industry in Korea since 2000, there are currently three providers of wireless telecommunications services in Korea, SK Telecom, KT Freetel, whose largest shareholder is KT Corporation, and LG Telecom.

We introduced our digital cellular service using CDMA technology in the Seoul metropolitan area in January 1996 and substantially completed the geographic build out of the network in 1998. On December 31, 1999, we terminated our analog service. Our digital network provides service to an area covering approximately 99.0% of the Korean population. We continue to increase the capacity of our wireless networks to keep pace with the growth of our subscriber base and the resulting increase in usage of voice and wireless data services by our subscribers.

To complement the services we provide to our subscribers in Korea, we have entered into roaming service agreements with various foreign wireless telecommunications service providers, including Verizon Wireless, Sprint and Alltel in the United States, KDDI in Japan, Telstra in Australia, China Unicom in China, Hutchison Telecom in Hong Kong, Telecom New Zealand in New Zealand, Telus Mobility and Bell Mobility in Canada, Guamcell in Guam, Guamcell in Saipan, Hutchison CAT Wireless Multimedia in Thailand, Iuacell in Mexico, VIVO in Brazil, Telefonica Moviles del Peru in Peru, Pelephone in Israel, Asia Pacific Broadband Wireless in Taiwan and Mobile 8 in Indonesia.

In order to enhance our ability to provide wireless data services to our customers, we constructed and are expanding a new wireless network based on CDMA 1xRTT technology. CDMA 1xRTT is an improved code division multiple access add-on technology which allows wireless data transmission at speeds of up to 144 Kbps compared to 64 Kbps for CDMA technology. Subscribers to our new CDMA 1xRTT based services, in addition to having access to our wireless data services at higher speeds, also have access to other enhanced wireless data applications, such as the ability to download music videos from the Internet to their handsets. To enjoy these

services, subscribers must purchase CDMA 1xRTT-capable handsets. As of April 30, 2005, approximately 17.7 out of 19.1 million of our subscribers owned handsets capable of accessing our CDMA 1xRTT network. Over time, we intend to continue migrating our existing CDMA subscribers to this new network.

In the first half of 2002, we launched an upgrade of our CDMA 1xRTT network in 26 cities in Korea to an advanced technology called CDMA 1xEV/DO. CDMA 1xEV/DO is a CDMA-based technology, which enables data to be transmitted at speeds up to 2.4 Mbps, which is 16 times faster than CDMA 1xRTT’s maximum transmission speed. CDMA 1xEV/DO-capable handsets became available in Korea in June 2002. CDMA 1xEV/DO technology allows us to provide advanced wireless data services such as streaming video and audio services. As of December 31, 2004, CDMA 1xEV/DO network upgrade has been completed in 84 cities in Korea. The CDMA 1xEV/DO technology allows us to provide wireless data services which require faster transmission speeds to our subscribers, as well as allow us to use our spectrum more efficiently.

In December 2000, we were awarded by the MIC the right to acquire a license to operate a W-CDMA network using 2 X 20 MHz of spectrum in the 2 GHz band. W-CDMA is a 3G level high capacity wireless communication system that is expected to enable us to offer a wider range of telecommunications services, including cellular, paging, data communications, video-conferencing, multimedia services and satellite communications. We commenced provision of our IMT-2000 services based on our W-CDMA network on a limited basis in Seoul at the end of 2003 and expect to provide W-CDMA services in the Seoul metropolitan area and other local metropolitan areas of Korea by the end of 2005.

Wireless Internet Services

We are a world leader in developing and commercializing wireless Internet services. We were the first in the world to commercialize CDMA 1xRTT and CDMA 1xEV/DO technologies and are a pioneer in developing and commercializing various wireless commerce services. In terms of revenue, we are the leading wireless Internet service provider in Korea. We have also demonstrated a pilot service of the next generation 2.3 GHz Portable Internet Service that allows users to surf the Internet at an average speed of 1Mbps.

On Line Services and Internet Access

We offer a wide variety of Internet content and services as well as provide our wireless subscribers access to the Internet.

Under our brand name “NATE”, we offer our wireless subscribers access to the Internet, where subscribers can access a wide variety of content including current news and stock quotes and other information, as well as have access to a wide variety of services including securities trading as well as online banking services. Subscribers can purchase goods and services through their wireless devices as well as send and receive email and have access to various third party Internet websites configured to work with wireless technology. Subscribers access NATE using wireless application protocol, or WAP, technology. WAP is a technology that allows wireless data transmission and has been adopted by over 200 major telecommunications operators worldwide. As of April 30, 2005, approximately 18.2 million, or 95.5%, of our subscribers owned WAP-enabled handsets are capable of accessing our CDMA 1xRTT network.

Under our “NATE.com” brand name, we offer a portal service at our website, www.NATE.com. NATE.com includes information and content formerly offered under our Netsgo brand as well as those content and services formerly available on Lycos Korea, which our subsidiary, SK Communications Co., Ltd., acquired in 2002. Nate.com offers a wide variety of content and services, including an Internet search engine as well as access to free email accounts. In the month of April 2005, approximately 23.3 million users have visited this website at least once.

We offer an instant messaging service to our Nate.com and NATE users. This service, which we call “NATE-ON” allows users to chat online through a variety of devices, including personal computers, wireless handsets and personal digital assistants. As of April 2005, the number of NATE-ON subscribers reached approximately 10.3 million, surpassing that of MSN Messenger of Microsoft Corporation, making us number one in Korean instant messaging service market, according to a survey conducted by an independent consulting firm

of Korea. We continue to seek to introduce new wireless data services and innovations with a view to increasing revenue from these businesses.

We are also seeking to market our NATE wireless Internet platform to other CDMA operators worldwide. In April 2002, we entered into an agreement with Pelephone Communications Ltd., an Israeli CDMA operator, to supply our NATE wireless Internet platform to Pelephone on a turnkey basis. In May 2002, we entered into a memorandum of understanding with Openwave of the United States, a wireless Internet-based communication software and application provider, to form a strategic alliance in order to carry out co-marketing of our NATE wireless Internet platform solutions in overseas markets. In December 2002, we entered into an agreement with Asia Pacific Broadband Wireless Communications (“APBW”), one of five companies licensed to offer 3G mobile services in Taiwan, to offer wireless Internet solution on a turn-key basis. Under the agreement, APBW was granted license to use software and applications for mobile Internet access and multimedia services.

Global Business


	*Exports of wireless Internet Technology and Network Solution*

We have been actively seeking to expand our global business through exporting of wireless Internet platforms and cellular network solutions as well as providing consulting services in the field of mobile communications. Our export of wireless Internet platform began with a US$10 million sales to Pelephone of Israel in April 2002 and continued to deliver excellent results through completed orders like a US$20 million contract with APBW of Taiwan. We also signed a contract with TA Orange, a GSM-based mobile communications operator in Thailand in July of 2004 for providing wireless Internet platforms including NATE portal platforms, NATE service solutions and contents. In addition, we have been making greater inroads into overseas markets with our cellular network solutions such as Coloring service solution, which converts a typical ring back tone of cellular phone to the subscribers’ preferred tone sequence such as music or greetings.

We are also seeking to market our NATE wireless Internet platform to other CDMA operators worldwide. For more details, see “Business Overview — OnLine Services and Internet Access”.


	*Overseas Operations*

We have been expanding our business operations in overseas markets, including U.S.A., China, Vietnam and Mongolia.

U.S.A. On March 24, 2005, EarthLink and we completed the formation of SK-EarthLink, a joint venture to market wireless voice and data services in the U.S. It is expected that SK-EarthLink (www.SK-EarthLink.com) will be capitalized with $440 million of partner investments over the next three years. The joint-venture is a non-facilities-based nationwide mobile virtual network operator (“MVNO”) offering cellular voice and data services to U.S. Consumers. SK-EarthLink expects to enter into a previously under-served, but rapidly growing wireless data, entertainment, and voice market. SK-EarthLink will leverage our expertise in developing and implementing 3G technology and other cutting-edge applications and EarthLink’s established sales channels, Wi-Fi experience, network data centers and billing capabilities. Each of us and EarthLink has a 50 percent voting and economic ownership interests in SK-EarthLink. Beginning in December 2004, we offered the Coloring service to Verizon Wireless, the major mobile phone service provider in the U.S. We take part in this operation as an application service provider, receiving a percentage of Verizon’s Coloring-related revenues.

China. In July 2002, we and China Unicom signed an MOU to establish a joint venture company designed to launch a commercial wireless Internet service in China. China Unicom is China’s second largest telecom operator and its only CDMA service provider. In February 2004, the two companies established a joint venture company called “UNISK Information Technology Co., Ltd.’ with capital of US$6 million. We own 49% of its equity share while China Unicom holds a 51% stake. Currently UNISK is offering wireless Internet service in China by the brand name called “U-jok-bu-rak’, which means a community of young elites. As of December 2004, UNISK has over 100,000 subscribers. In July 2004, we acquired ViaTech, an Internet portal service provider in China, to enhance our wireless Internet contents and expand our service area.

Vietnam. In October 2000, with an aim toward commercializing CDMA cellular service in Vietnam, we, LG Electronics and Dongah Elecomm established a joint venture company named ‘SLD Telecom’. On July 1, 2003, the company started its own commercial CDMA cellular service, the first of its kind in Vietnam. The ‘S-Fone’ service is now being offered in 13 major provinces in Vietnam, including Hochimin and Hanoi, and has been increasing its subscriber base through exceptionally clear call quality, customized tariff plans and value-added services. The number of S-Fone (SLD Telecom’s operator in Vietnam) subscribers has surpassed 165,000 as of December 2004. As mobile phone service subscriptions only account for 5% of total Vietnamese population of about 82 million, we believe that the Vietnamese mobile communication market carries a tremendous opportunity for future growth.

Mongolia. In July 1999, we acquired a 27.8% equity interest in Skytel, Mongolia’s second-largest cellular service provider, by providing approximately Won 1.5 billion worth of analog infrastructure. As of December 31, 2004, Skytel had approximately 75,607 subscribers. We, together with Skytel, have been providing cellular service in Mongolia since July 1999, and CDMA service since February 2001. In April 2001, we completed installing the equipment necessary to provide WAP service. In December 2002, we subscribed to the newly issued common shares of Skytel. As a result, as of December 31, 2004, our equity interest in Skytel is 28.6%.

M-Commerce

In April 2002, we introduced Moneta, a wireless credit and payment system, which allows holders of mobile credit cards to provide merchants with credit card information and payment authorization using chips embedded in their wireless handsets instead of a traditional plastic credit card with a magnetic stripe. The wireless handset contains an infrared transmitter which transmits transaction information to the merchant’s reader system. Users do not need to manually enter their credit card number when they make payments using this system. The system is based on an international technological standard developed by Europay, Mastercard and Visa. We receive a fee from the card issuer for each card issued and a transaction fee, based on the transaction value, for each transaction effected using the mobile commerce card. In May 2002, we entered into a technological cooperation agreement with Visa pursuant to which Visa has agreed to adopt our wireless credit and payment system as the international standard for Visa’s worldwide operations. In addition, we have established payment system with major department stores and discount stores (such as E-Mart) and affiliated merchant stores (such as Starbucks and TGI). We expanded the commercial use of Moneta payment system to 68% of affiliated merchant stores as of the end of 2004.

In October 2002, we acquired Paxnet, an on-line financial portal offering services related to securities trading. We expect to expand our services provided through Paxnet to include a vast array of financial services relating to insurance, real estate, personal asset management and investment trust funds. We are also developing other uses for mobile credit card technology to provide other services, such as payment for transportation and to serve as a secure means of identification.

In August and November 2003, we launched Mobile Trading System and Stock Investment Information Service, respectively. Unlike other trading services where customers had to use stock trading programs and terminals designated by securities firms, the Mobile Trading System service provides a program that permits customers to carry out a variety of stock trading, including futures, options and ECN trading transactions anytime through a universal software.

As of May 26, 2005, we provide chip-based mobile banking services in conjunction with 16 banks of Korea. Through this mobile banking services, we offer e-bankbook services as well as a variety of e-commerce services.

Multimedia

In November 2002, we introduced June, a wireless data service that provides multimedia content through streaming method using our CDMA 1xEV/ DO technology. Content provided through the June service includes Video on Demand (VOD), Music on Demand (MOD), TV broadcastings and multimedia messaging. June furnishes subscribers with real-time news aired by a Korean news channel and permits subscribers to view regular TV programs aired by the four main domestic broadcasting stations on cellular phones. In addition, subscribers to

June can access the Internet through NATE, our wired and wireless integrated Internet platform. As of April 30, 2005, June had 4.3 million subscribers.

In September 2003, we also invested in a satellite-based DMB business, a service which allows broadcasting of multimedia content through transmission by satellite to various mobile devices, including to satellite DMB handsets. With this technology, our subscribers would be able to view satellite TV broadcasts on their cellular handsets or from their cars. We launched the satellite in March 2004. In October 2004, we granted the right to use our satellite, satellite orbit and frequency to TU Media Corp., one of our affiliates, which received a license from the MIC as a satellite DMB provider on December 30, 2004. On May 1, 2005, TU Media Corp. began to provide satellite DMB services. We believe that this business will enable us to improve the breadth of services that we already offer and remain competitive in the face of increasing convergence in the telecommunications, finance and broadcasting industries. See “Operating and Financial Review and Prospects — Liquidity and Capital Resources — Capital Requirements and Resources”

In November 2004, we introduced a music portal service called MelOn, a new ubiquitous music service concept from a combined wireless and wired network. This service lets subscribers enjoy digital music through cellular phones on a wireless network, while paying airtime charges and monthly flat rates. This service also offers real-time streaming from wire-line web sites, and listening to digital music through MP3 phones and MP3 players after the download from PCs. In addition, the service presented a new method of prompting the digital music market by protecting the rights of music copyright holders using Digital Right Management, or DRM, technology. The technology prevents the distribution and use of illegal digital music content. We had a revenue of Won 5.5 billion from Melon service in the first quarter of 2005 and had 320,000 subscribers as of March 31, 2005. We expect demand for this service to grow throughout 2005.

Other Investments and Relationships” and “Key Information — Risk Factors — Our business environment requires us to continually invest in the growth of our business, and as a result, we may make significant investments in new businesses and regions, including businesses and regions in which we have limited experience.”

Other Products and Services


	*Handset Manufacturing*

Through our subsidiary, SK Teletech Co., Ltd., of which we owned 89.1% at December 31, 2004, we design, market and sell digital handsets under the brand name “Sky”. The handsets are principally manufactured by third parties under contracts with SK Teletech. We established SK Teletech together with Kyocera Corporation of Japan, which, as of December 31, 2003, held a significant minority interest in SK Teletech before selling all of its interest in SK Teletech to us in March 2004. We increased our stake in SK Teletech to 89.1% in March 2004. On May 3, 2005, our board of directors elected to sell 4,542,000 of 6,747,421 shares of SK Teletech, or 60% of the total outstanding shares of SK Teletech’s common stocks to Pantech & Curitel, a handset maker in Korea. Once such transfer is consummated, our ownership in SK Teletech will decrease from 89.1% to 29.1%. Currently, all of SK Teletech’s domestic sales of digital handsets are to our affiliate, SK Networks, which distributes them principally to our network of dealers for sale to our subscribers and other consumers. Due to an FTC-imposed condition to our acquisition of Shinsegi, until the end of 2005, SK Teletech may not sell more than 1,200,000 handsets (excluding W-CDMA handsets) per year to SK Telecom and its affiliates.


	*International calling services*

Through our 90.8% owned subsidiary, SK Telink Co., Ltd., we provide international telecommunications services, including direct-dial as well as pre-and post-paid card calling services, bundled services for corporate customers, voice services using internet protocol, Web-to-phone services, and data services. SK Telink handled approximately 788 million total call minutes in 2004, which generated Won 133.9 billion in revenues. SK Telink obtained a long distance telephone service business license in July 2004 and began commercial service in February 2005. SK Telink’s efforts will be directed at continuing to reinforce its existing core businesses such as international and long distance calls and seeking to create a new revenue base by securing new growth drivers.

In 2000, we established SK Telink America, Inc., to extend our international telecommunications service to the United States. We closed down our business operations of SK Telink America, Inc. in June 2003 because the business proved to be unprofitable. We recorded US$1.2 million in losses relating to impairment of our investment in common stock of SK Telink America, Inc. in our consolidated financial statements for 2003. We dissolved the company as of May 28, 2004.


	*Telematics*

In February 2002, we introduced a Telematics service called NATE Drive. NATE Drive is an interactive communication service designed to guide vehicle drivers using the satellite-based global positioning system (GPS) and a wireless network to provide drivers with real-time location and traffic information. In April 2002, we entered into an agreement with Renault Samsung Motors and Samsung Electronics to jointly develop a Telematics business and launched a commercial product in September 2003. Pursuant to the agreement, we provide the cellular phone network and NATE Drive service, Samsung Electronics provides Telematics terminals for vehicles and Renault Samsung Motors installs Telematics-enabled terminals in the vehicles it sells. In an effort to accelerate the Telematics business, in February 2005, we entered into another agreement with Renault Samsung Motors under which we focus on improving the Telematics service platform and infrastructure. We plan to launch new handsets equipped with autonomous GPS for NATE Drive service in June 2005 and expect the number of our subscribers to NATE Drive service to increase to 500,000, a 270% increase compared to the previous year, by the end of 2005. Also, as part of the MIC and Jeju Island’s joint effort to establish the island as a model city for Telematics service, we launched the pilot Telematics services in Jeju Island in December 2004 and started the commercial service in May 2005 in Jeju Island.

W-CDMA Network

In December 2000, the MIC awarded a consortium we lead the right to acquire a license to operate a W-CDMA network using 2 X 20 MHz of spectrum in the 2 GHz band. W-CDMA is a high-speed wireless communication technology that we believe will allow us to offer even more sophisticated data transmission services at faster speeds than our current CDMA 1xRTT network. In March 2001, we incorporated SK IMT to hold the license and develop our W-CDMA business and we, together with Shinsegi, invested Won 985.2 billion for a 61.6% interest in SK IMT. In December 2001, we disposed of 144,000 shares of SK IMT worth Won 3.9 billion. On May 1, 2003, SK IMT merged into SK Telecom.

The W-CDMA license was awarded by the MIC to SK IMT on December 4, 2001. The total license cost to SK IMT was Won 1.3 trillion. SK IMT paid Won 650 billion of this amount in March 2001, and we are required to pay the remainder of the license cost in annual installments from 2007 through 2011. For more information, see note 2(i) of the notes to our consolidated financial statements. In accordance with the terms of the license, we commenced provision of our IMT-2000 services based on our W-CDMA network on a limited basis in Seoul at the end of 2003. We expect to provide W-CDMA services in the Seoul metropolitan area and other local metropolitan areas of Korea by the end of 2005. Currently, we have approximately 15,000 subscribers for our W-CDMA service. We believe that we are currently in compliance with all material terms of the license.

On April 30, 2003, the MIC approved the proposed merger of SK IMT into SK Telecom, subject to the satisfaction of certain conditions imposed by the MIC to ensure fair competition and to protect customer interests. We believe that we have satisfied these conditions. In addition, if such merger is determined by the MIC to seriously impair fair market competition or harm subscribers due to factors such as increased market share or discrimination between cellular subscribers and W-CDMA service subscribers, the MIC may implement additional measures to remedy such situation.

We developed and launched in March 2005 dual band/dual mode handsets, one of the key factors in a nationwide deployment of W-CDMA. However, the actual scope and timing of the full nationwide roll-out of our W-CDMA network will depend on other several factors, including the availability of network equipment, ability to overcome technical problems currently affecting W-CDMA performance, regulatory decisions, our assessment of the market opportunities for W-CDMA technology-based services and the competitive landscape in the Korean wireless market. We expect to provide W-CDMA services in the Seoul metropolitan area and other local

metropolitan areas of Korea by the end of 2005. See “Key Information — Risk Factors — W-CDMA technology may require significant capital and other expenditures for implementation which we may not recoup and may be difficult to integrate with our other businesses”.

Revenues, Rates and Facility Deposits

Our wireless revenues are generated principally from initial connection fees, monthly access fees, usage charges for outgoing calls and wireless data, interconnection fees and access fees for value-added services. The following table sets forth information regarding our cellular revenues (net of taxes) and facility deposits for the periods indicated:


		As of and For the Year Ended December 31,

		2002		2003		2004

		(In billions of Won)
Initial Connection Fees		W	230.4	W	176.6	W	198.4
Monthly Access Fees			3,055.4		3,132.2		3,266.1
Usage Charges			3,415.6		3,615.1		5,300.7
Interconnection Revenue			1,043.2		1,017.1		849.4
Revenue from Sales of Digital Handsets(1)			534.0		612.0		649.8
Other Revenue(2)			878.2		1,538.8		33.2

	Total	W	9,156.8	W	10,091.8	W	10,297.6

Additional Facility Deposits		W	11.0	W	5.0	W	31.8
Refunded Facility Deposits			20.6		7.7		44.6
Facility Deposits at Period End			46.9		44.2		31.4


(1)	Our revenue from handset sales consists of sales by our subsidiary, SK Teletech.

(2)	Other revenue includes revenue from value-added services, including voice-activated dialing, caller ID, call forwarding, call waiting and three-way calling.

On their initial subscription, we charge our new customers an initial connection fee for service activation. After their initial connection, we require our customers to pay a monthly access fee and usage, or airtime, charges for outgoing calls and access to wireless data services. Prior to April 1, 1999, all network service providers had mandatory subscription periods. However, since April 1, 1999, in accordance with MIC guidelines, new wireless service subscribers cannot be subjected to any mandatory subscription periods. We do not charge our customers for incoming calls, although we do receive interconnection charges from KT Corporation and other companies for calls from the fixed-line network terminating on our networks and, since 2000, interconnection revenues from other wireless network operators. See “— Interconnection”. Monthly access fees for some plans include free airtime and/or discounts for designated calling numbers.

SK Telecom currently offers four basic types of service plans: the Standard rate plans, the TTL plans, the Ting plans and the long-term contract discount plans. We also offer June plans, designed for multimedia wireless data service using CDMA2000 1xEV-DO technology, and Free plans offering free airtime on weekends or between 12 a.m. and 6 a.m. on weekdays for an additional monthly fee of Won 10,000 to Won 15,000.

Higher rate plans generally include a fixed monthly amount of usage time while the lower rate plans are generally usage-based. The monthly access fees for the Standard plans range from Won 11,000 to Won 16,000, and generally target the adult market segment. The monthly access fees for the TTL plans range from Won 16,000 to Won 22,000 and target young adults between the ages of 19 and 24. The monthly access fees for the Ting plans range from Won 13,500 to Won 27,000 and generally target youths between the ages of 13 and 18.

In February 2005, we simplified our 26 different types of June plans, a new set of rates designed for subscribers using our CDMA 1xEV/ DO service, into four types of flat fee based plans. The monthly access fees range from Won 3,500 to 15,000 and any unused minutes are carried over to the following month.

In January 2004, we introduced discount plans for subscribers committing to long-term contracts with a duration of 18 months or 24 months based on usage levels. Subscribers with the highest usage per month (whose monthly charges are above Won 70,000) on a two-year contract benefit from the highest level of discount.

After discussions with the MIC, effective from January 1, 2003, we reduced our Speed011 Standard rate plan’s monthly access fee by Won 1,000, included 10 minutes of free air time per month and reduced our peak usage charges from Won 21 to Won 20 per minute. Subsequently in October 2003, we reduced our monthly charges for caller ID service from Won 2,000 to Won 1,000, and, effective September 1, 2004, we reduced our tariffs by 3.7% and reduced our monthly basic charges by Won 1,000 to Won 13,000 from Won 14,000. See “Operating and Financial Review and Prospects — Overview”.

For all calls made from our subscribers’ handsets in Korea to any destination in Korea, we charge usage fees based on the subscriber’s cellular rate plan (as described in the table below). The fees are the same whether the call is local or long distance. With respect to international calls placed by a subscriber, we bill the subscriber the international rate charged by the Korean international telephone service provider through which the call is routed. We remit to that provider the international charge less our usage charges. See “— Interconnection”.

The following table summarizes some of SK Telecom’s cellular rate plans as of December 31, 2004:


								Off-Peak Usage		Night-Time
	Monthly			Included Airtime/		Peak Usage Charges		Charges		Usage Charges
	Access Fee			Discount(1)(2)		(per 10 seconds)(2)		(per 10 seconds)(2)		(per 10 seconds)

Standard
Regular		W13,000			10 minutes	W	20	W	13	W	10
Slim		12,500					19		19		19
Family		13,000			5 minutes		18		12		9
Silver(3)		11,000			30 minutes		38		38		38
TTL Plans
TTL Discount(4)		15,500-22,000			7 minutes		9-21		9-20		9-12
Ting Plans
Ting		12,500-15,000			70 minutes		12-37		12-24		9-18
Data Free Plan(5)		26,000
“Free Plans”
Free Holiday		—	(6)
Free Eleven		—	(7)


(1)	Discounts may include free text messages, ring tone downloads, colorings and NATE minutes.

(2)	Excludes a 5% discount on domestic calls for customers who have subscribed to our cellular services for over 1 year; a 10% discount for customers who have subscribed to our cellular services over 2 years; a 15% discount for customers who have subscribed to our cellular services over 3 years and a 20%, discount for customers who have subscribed to our cellular services for over 5 years.

(3)	Subscribers must be 65 years old or older and each subscriber is limited to one silver Plan.

(4)	Includes TTL plan for designated numbers, designated area and TTL plan for couples.

(5)	Includes unlimited use of data service. Plan will be offered until September 30, 2005 and offer is effective until June 30, 2005.

(6)	11 hours of free weekend airtime for an additional Won 10,000 per month.

(7)	11 hours of free airtime exceeding the average number of minutes used November and December 2003 for an additional Won 15,000 per month.

We offer a variety of value-added services including voice-activated calling, voice mail, text messaging, caller ID and call waiting. Depending on the rate plan selected by the subscriber, the monthly fee may or may not include these value-added services.

We offer wireless data services to our subscribers through NATE. Subscribers using SK Telecom’s CDMA network may elect to pay a monthly fee, which includes a fixed amount of airtime or data packets, or may elect to pay on a per-use basis. Standard rates for NATE range from Won 7 to Won 15 for ten seconds of airtime. Since April 23, 2001, subscribers using our CDMA 1xRTT network are charged based on the amount of data that is transmitted to the subscriber’s handset. The data transmitted is measured in packets of 512 bytes. We charge Won 6.5 per text packet and Won 1.3 per multimedia packet. Prior to April 23, 2001, our CDMA 1xRTT subscribers were charged time-based fees.

We offer wireless multimedia data services through June. In February 2005, we simplified our 26 different types of June plans into four types of flat fee based plans. The monthly access fees range from Won 3,500 to 15,000 and any unused minutes are carried over to the following month. For a limited time until the end of June 2005, subscribers are allowed to elect to pay a fixed monthly fee at Won 26,000 for unlimited use of data service.

We generally require new subscribers (other than some corporate and government subscribers) to pay a non-interest bearing facility deposit of Won 200,000, which we may utilize to offset a defaulting subscriber’s outstanding account balance. In lieu of paying the facility deposit, subscribers who meet the credit qualifications required by the Seoul Guarantee Insurance Company may elect to be covered under insurance provided by the Seoul Guarantee Insurance Company. We pay a Won 10,000 premium to the Seoul Guarantee Insurance Company on behalf of such subscribers. Seoul Guarantee Insurance Company reimburses us up to Won 350,000 for each insured subscriber that defaults on any payment obligations. We refund the facility deposit to any existing subscriber who had initially made a facility deposit and later elects the facility insurance option. We bill subscribers on a monthly basis and subscribers may make payment at a bank, post office, any of our regional headquarters or sales offices, or at any of our authorized dealers. As a result of the facility insurance program, we have refunded a substantial amount of facility deposits, and facility deposits decreased from Won 61.8 billion as of December 31, 2000 to Won 31.4 billion as of December 31, 2004. We do not expect to have a significant amount of facility deposits to be refunded in the future.

Because we have been designated by the MIC as a “market dominant service provider”, our establishment or amendment of fees, charges, and terms and conditions of service, including promotional rates and facility deposits, requires prior approval by the MIC.

In December 2000, with effect from September 1, 2001, the National Assembly abolished the 10.0% telephone tax previously charged to our customers as part of their monthly service charges. Since September 1, 2001, we have instead charged our customers a 10.0% value-added tax. We can offset the value-added tax we collect from our customers against value-added tax refundable to us by the Korean tax authorities. We remit taxes we collect from our customers to the Korean tax authorities. We record revenues in our financial statements net of such taxes.

Subscribers

We had 19.1 million subscribers as of April 30, 2005, representing a market share of 51.2%, the largest market share among Korean wireless service providers. We believe that, historically, our subscriber growth has been due to many factors, including:


	•	our expansion and technical enhancement of our digital network, including with high-speed data capabilities;

	•	increasing consumer awareness of the benefits of wireless telecommunications;

	•	until June 2000, when the MIC prohibited subsidies on handset sales, the decline in handset prices in Korea through the payment of subsidies to subscribers, which effectively lowered the cost of initiating service;

	•	an effective marketing strategy;

	•	our focus on customer service;


	•	the introduction of new, value-added services, such as voicemail services, call-forwarding, caller ID, three-way calling and wireless data and Internet services provided by NATE; and

	•	our acquisition of Shinsegi.

The following table sets forth selected historical information about our subscriber base for the periods indicated:


	As of or For the Year Ended December 31,

	2002			2003			2004

Subscribers		17,219,562			18,313,153			18,783,338
Subscribers Growth Rate		13.4	%		6.4	%		2.6	%
Activations		4,769,612			3,688,312			4,407,087
Deactivations		2,729,113			2,594,721			3,936,884
Average Monthly Churn Rate(1)		1.4	%		1.2	%		1.7	%

(1)

Average monthly churn rate for a period is the number calculated by dividing the sum of deactivations during the period by the simple average of the number of subscribers at the beginning and end of the period and dividing the quotient by the number of months in the period. Churn includes subscribers who upgrade to CDMA 1xRTT or CDMA lxEV/DO-capable handsets by terminating their service and opening a new subscriber account.

We had 18,783,338 million subscribers as of December 31, 2004. For the year ended December 31, 2004, we had 4,407,087 activations and 936,884 deactivations, representing an average monthly churn rate of 1.7% during the same period. Our subscribers include those subscribers who are temporarily deactivated, including (1) subscribers who voluntarily deactivate temporarily for a period of up to three months no more than twice a year and (2) subscribers with delinquent accounts who may be involuntarily deactivated up to two months before permanent deactivation, which we determine based on various factors, including prior payment history.

Our subscriber growth rate was adversely affected by actions we took to comply with certain requirements of the FTC regarding our acquisition of Shinsegi. The FTC approved our acquisition of Shinsegi on the condition that SK Telecom’s and Shinsegi’s combined market share of the wireless telecommunications market, based on numbers of subscribers, be less than 50.0% as of June 30, 2001. In order to satisfy this condition, we reduced the level of our subscriber activations and adopted more stringent involuntary subscriber deactivation policies beginning in 2000 and ceased accepting new subscribers from April 1, 2001 through June 30, 2001. We complied with this requirement by reducing our market share to approximately 49.7% as of June 30, 2001. We are not currently subject to any market share limitations; however, on May 25, 2004, we voluntarily undertook to limit our market share to 52.3% of the wireless telecommunications market through the end of 2005, the level of our market share at the time of the approval of our merger with Shinsegi in January 2002. We can give no assurances that the Government will not impose restrictions on our market share in the future. If we are subject to market share limitations in the future, our ability to compete effectively will be impeded. As a result, our subscriber growth rate may decline in future periods.

In January 2003, the MIC announced its plan to implement number portability with respect to wireless telecommunications service in Korea. The number portability system allows wireless subscribers to switch wireless service operators while retaining the same mobile phone number. However, subscribers who switch operators must purchase a new handset, as we use a different frequency than KT Freetel and LG Telecom. In accordance with the plan published by the MIC, the number portability system was adopted by SK Telecom first, starting from January 1, 2004. Subscribers who choose to transfer to a different wireless operator have the right to return to us without paying any penalties within 14 days of the initial transfer. KT Freetel and LG Telecom introduced number portability beginning on July 1, 2004 and January 1, 2005, respectively. The following

number of subscribers have transferred to the services of our competitors during each month following the implementation of the number portability system:


Month		SKT → KTF		SKT → LGT		KTF → SKT		KTF → LGT		LGT → SKT		LGT → KTF		Total

Jan. 2004			203,853		101,414		—		—		—		—		305,267
Feb. 2004			102,282		81,594		—		—		—		—		183,876
Mar. 2004			111,077		103,155		—		—		—		—		214,232
Apr. 2004			139,508		122,146		—		—		—		—		261,654
May 2004			167,228		92,414		—		—		—		—		259,642
Jun. 2004			137,489		73,100		—		—		—		—		210,589
Jul. 2004			53,611		23,116		277,751		20,504		—		—		374,982
Aug. 2004			29,698		60,240		67,743		45,724		—		—		203,405
Sep. 2004			90,075		49,959		5,744		42,995		—		—		188,773
Oct. 2004			64,563		46,169		62,131		39,701		—		—		212,564
Nov. 2004			74,478		56,135		59,578		51,802		—		—		241,993
Dec. 2004			97,210		47,635		94,466		41,773		—		—		281,084
Jan. 2005			145,295		71,142		135,862		75,069		115,197		106,024		649,589
Feb. 2005			120,638		32,654		106,099		33,629		49,159		57,555		399,734
Mar. 2005			125,453		43,690		112,711		47,696		48,823		56,743		435,116
Apr. 2005			120,781		69,318		131,266		72,072		55,483		47,863		496,783

	Total		1,783,239		1,073,881		1,053,351		470,965		268,662		268,185		4,919,283

The following table sets forth, based on the MIC data, new subscribers for each of the major wireless cellular providers following the adoption of the “010” prefix in January 2004:

Number of New Wireless Subscribers/Percentage of

New Wireless Subscribers

Month

SK Telecom

KT Freetel

LG Telecom

January 2004

382,420/42.1%

375,181/41.3%

149,737/16.5%

February 2004

422,816/43.6%

329,066/33.9%

218,435/22.5%

March 2004

405,199/39.0%

356,003/34.3%

276,537/26.6%

April 2004

448,997/41.2%

330,441/30.3%

309,736/28.4%

May 2004

499,799/48.1%

353,389/34.0%

186,011/17.9%

June 2004

327,863/43.7%

305,488/40.7%

117,594/15.7%

July 2004

332,833/63.5%

132,141/25.2%

59,151/11.3%

August 2004

185,687/42.2%

112,455/25.5%

142,308/32.3%

September 2004

28,626/6.7%

256,558/60.3%

140,351/33.0%

October 2004

276,359/48.3%

169,364/29.6%

125,994/22.0%

November 2004

278,694,45.7%

183,200/30.0%

148,562/24.3%

December 2004

240,306/43.6%

200,054/36.3%

110,269/20.0%

January 2005

233,921/40.6%

209,182.36.3%

132,639/23.0%

February 2005

248,073/43.1%

231,803/40.3%

95,236/16.6%

March 2005

257,062/43.0%

229,202/38.4%

111,036/18.6%

April 2005

214,949/45.5%

148,820/31.5%

108,962/23.0%

As of April 30, 2005, approximately 18.1 million, or 95.1%, of our subscribers owned WAP-enabled handsets are capable of accessing our CDMA 1xRTT network.

Marketing and Service Distribution

We market our services and provide after-sales service support to customers through 29 sales centers, 45 branch offices and a network of 1,492 authorized exclusive dealers located throughout Korea. Our dealers are connected via computer to our database and are capable of assisting customers with account information. In addition, approximately 200,000 independent retailers (principally handset dealers) assist new subscribers to complete activation formalities, which includes completing subscription applications and accepting facility deposits or arranging for insurance with Seoul Guarantee Insurance Company.

Currently, authorized dealers are entitled to an initial commission for each new subscriber registered by the dealer as well as an average ongoing commission calculated as a percentage of that subscriber’s monthly access and usage charges from domestic calls for the first four years. In order to strengthen our relationships with our exclusive dealers, we offer a dealer financing plan, which provides interest-free or low-interest loans of up to Won 1.0 billion with a repayment period of up to three years. From July 2004, the maximum amount of such loans had been reduced to Won 700 million before it was increased back to Won 1.0 billion in February 2005.

We operate a customer information system designed to provide us with an extensive customer database. Our customer information system includes a billing system which provides us with comprehensive account information for internal purposes and enables us to efficiently respond to customer requests. In May 2000, we launched 011e-station.co.kr, a website through which SK Telecom customers can change their service plans, verify the charges accrued on their accounts, receive their bills online and send text messages to our other subscribers.

When we were the only cellular service provider in Korea, we were able to maintain a low level of marketing and advertising expenses. Over the last several years, competition in the wireless telecommunications business has caused us to increase significantly our marketing and advertising expenses and, with continuing competition, we expect that such expenses will remain high. We have implemented a range of marketing

measures, including more extensive promotions to attract new customers as well as to encourage loyalty of our existing subscribers and discourage migration to other service providers. In 2001, advertising expenditures as a percentage of revenues amounted to 4.1%, principally for promotion of our voice and wireless data services. Our marketing expenses were lowered during the first half of 2001 due to the elimination of handset subsidies and our efforts to satisfy the FTC-imposed condition that SK Telecom’s and Shinsegi’s combined market share of the wireless telecommunications market, based on numbers of subscribers, be less than 50.0% as of June 30, 2001. We complied with this requirement by reducing our market share to approximately 49.7% as of June 30, 2001, and thus, we are not subject to any market share limitations. In 2002, 2003 and 2004 advertising expenditures amounted to 4.1%, 3.7% and 3.3% of our revenues, respectively.

In March 2004, we entered into a Won 120 billion agreement with IBM Business Consulting Services for a term of two years in connection with our efforts to improve our marketing system. IBM has been implementing a new process and application infrastructure consisting of a new customer relationship management system, as well as billing, partner relationship management and content management systems. In May 2005, after paying IBM Business Consulting Services about Won 60.2 billion for its services on our marketing system, we decided to mutually terminate the March 2004 agreement with IBM Business Consulting Services with an understanding that another system integration company is better suited for our needs in light of the enhanced features of the new systems to cover data for our customers of newly launched services. We expect to seek a better suited firm for such services and plan to enter into a Won 122.1 billion agreement with such firm by July of this year.

Interconnection

Our networks interconnect with the public switched telephone networks operated by KT Corporation, Hanaro Telecom, DACOM and Onse, as well as the networks of the other wireless telecommunications service providers in Korea. These connections enable our subscribers to make and receive calls from telephones outside our networks. Under Korean law, service providers are required to permit other service providers to interconnect to their networks. If the new service provider desires interconnection with the networks of incumbent service provider but the parties are unable to reach an agreement within 90 days, the new service provider can appeal to the Korea Communications Commission, a government agency under the MIC. We estimate that approximately 39.7% in 2002, approximately 37.9% in 2003 and approximately 34.03% in 2004 of our incoming and outgoing calls originated from or were routed to the networks of KT Corporation and Hanaro Telecom or the international gateways of KT Corporation, DACOM and Onse. With respect to the interconnection arrangement for calls from fixed-line networks to wireless networks, for the years 2000 through 2001, fixed-line operators’ payments to wireless network service providers were calculated based on the actual imputed costs in 1998 of the leading wireless network service provider, which is us. For 2002, these payments were calculated based on each wireless operator’s actual imputed costs in 2001. This change reduced the interconnection revenue we received from each call made from a fixed-line network terminating on our network, adversely affecting our interconnection revenue compared to previous years. For 2003, pursuant to a new MIC policy, an operator’s interconnection fees were derived from that operator’s actual interconnection fees for 2001 and actual imputed costs for 2001. The MIC also implemented interconnection charges for calls between wireless network service providers beginning in January 2000, affecting both our revenue and our expenses. These charges were also reduced beginning in January 2002 and in January 2003. On July 9, 2004, the MIC introduced a new method of calculating interconnection payments, based on the terminator’s long-run incremental cost in 2004 and the competitive market situation in the telecommunication service industry of Korea. The LRIC method is designed to calculate costs of interconnection of individual telecommunication service providers within a network using certain models called “bottom-up” and “top-down.” The LRIC method was adopted by other countries such as the United States, the United Kingdom and Japan. The new interconnection rates are as follows:


Year	SK Telecom		KT Freetel		LG Telecom

	(Won/Minute)
2003		41.02		47.99		52.89
2004		31.81		47.66		58.55
2005		31.19		46.70		54.98

The new rates had a negative impact on our operations in this year in the amount of approximately Won 289.2 billion, resulting from an estimated Won 168.7 billion reduction in revenue and Won 120.5 billion increase in interconnection expenses. The Won 120.5 billion increase in the interconnection expenses includes the increase in the LM interconnection expenses that were paid to fixed-line service providers. See “— Law and Regulation — Interconnection” and “Operating and Financial Review and Prospects — Overview — Revenue”.

For 2003, our total interconnection revenues were Won 1,017.1 billion and our total interconnection expenses were Won 771.5 billion. For 2004, our total interconnection revenues were Won 849.4 billion and our total interconnection expenses were Won 913.7 billion.


	*Domestic calls*

Guidelines issued by the MIC require that all interconnection charges levied by a regulated carrier take into account (i) the actual costs to that carrier of carrying a call or (ii) imputed costs. The interconnecting parties are required to calculate the relevant imputed costs on an annual basis. In the event of a dispute regarding the imputed costs, the Korea Communications Commission is empowered to act as arbitrator.

Wireless-to-Fixed-line. According to our interconnection arrangement with KT Corporation, for a call from our wireless network to KT Corporation’s fixed-line network, we collect the usage rate from our wireless subscriber and in turn pay KT Corporation the interconnection charges based on KT Corporation’s imputed costs.

Fixed-line-to-Wireless. In December 1997, the MIC announced new interconnection arrangements for calls from a fixed-line network to a wireless network. Under these arrangements, effective January 1, 1998, for a call initiated by a fixed-line user to one of our wireless service subscribers, the fixed-line network operator was to collect our usage fee from the fixed-line user and pay us an interconnection charge based on our related revenue. Interconnection with KT Corporation accounts for substantially all of our fixed-line-to-wireless interconnection revenue and expenses.

For 2000, KT Corporation’s payments to network service providers were calculated based on a discount of 7.76% to our actual imputed costs in 1998 and for 2001, a discount of 14.92%. According to this calculation, KT Corporation was required to pay interconnection charges of Won 68.94 per minute (exclusive of value-added taxes) for fixed-line to mobile calls to network operators in 2000 and Won 63.59 per minute in 2001.

In April 2002, the MIC announced new interconnection arrangements effective January 1, 2002 which reduced the interconnection fees payable among Korean wireless operators by between 10.2% and 28.1%, depending upon the operators involved. For 2002, KT Corporation’s payments to network service providers were calculated based on a discount of 28.1% to our actual imputed costs for 2000. According to this calculation, KT Corporation was required to pay interconnection charges of Won 45.7 per minute (exclusive of value-added taxes). This was reduced to Won 41.0 per minute for 2003. On July 9, 2004, the MIC introduced a new method of calculating interconnection payments, based on the terminator’s long-run incremental cost of 2004 and the competitive market situation in the telecommunication service industry of Korea. The new interconnection rates for us under the new method are Won 31.8 per minute for 2004 and Won 31.2 per minute for 2005. The MIC determines the charges and notifies the wireless operators.

Wireless-to-Wireless. The MIC did not determine interconnection charges for calls between wireless telephone networks in Korea prior to 2000; instead, the interconnection charges were negotiated among the operators. The MIC implemented interconnection charges for such calls starting in January 2000. Under these arrangements, the operator originating the call pays an interconnection charge to the operator terminating the call. For all operators, the amount of the charge is derived from SK Telecom’s imputed cost, which was Won 45.7 per minute for 2002. This was reduced to Won 41.0 per minute for 2003 and further reduced to Won 31.8 per minute and Won 31.2 per minute for 2004 and 2005, respectively. The charge for 2006 has not been determined yet. Our revenues from the wireless-to-wireless charge were Won 365.6 billion (including Won 86.1 billion for Shinsegi) in 2000, Won 435.2 billion (including Won 86.6 billion for Shinsegi) in 2001, Won 350.9 billion in 2002, Won 412.2 billion in 2003 and Won 426.6 billion in 2004. Our expenses from these charges were Won 429.6 billion (including Won 106.7 billion for Shinsegi), Won 496.0 billion (including Won 105.5 billion for

Shinsegi) in 2001, Won 482.7 billion in 2002, Won 518.2 billion in 2003 and Won 644.6 billion in 2004. The charges above have been agreed among the parties involved and confirmed by the MIC.


	*International calls*

With respect to international calls, if a call is initiated by a wireless subscriber, we bill the wireless subscriber for the international charges of KT Corporation, DACOM or Onse, and we receive interconnection charges from such operators. If an international call is received by our subscriber, KT Corporation, DACOM or Onse pays interconnection charges to us based on our imputed costs.


	*International roaming arrangements*

We currently have CDMA automatic roaming agreements with several wireless telecommunications service providers, including Verizon Wireless, Sprint and Alltel in the United States, KDDI in Japan, Telstra in Australia, China Unicom in China, Hutchison Telecom in Hong Kong, Telecom New Zealand in New Zealand, Telus Mobility and Bell Mobility in Canada, Guamcell in Guam, Guamcell in Saipan, Hutchison CAT Wireless Multimedia in Thailand, Iuacell in Mexico, VIVO in Brazil, Telefonica Moviles del Peru in Peru, Pelephone in Israel, Asia Pacific Broadband Wireless in Taiwan and Mobile 8 in Indonesia. We plan to enter into similar arrangements with other wireless telecommunications service providers.

We have also begun to introduce inter-standard roaming which allows our subscribers to roam on networks employing GSM technology and vice-versa. From March 2002, we have established a roaming arrangement with Telefonica Moviles Espana S.A. of Spain. Under this arrangement, GSM subscribers can use their own SIM cards (Subscriber Information Module Card) with CDMA handsets that are compatible with such GSM SIM cards by renting such CDMA handsets from us. Roaming users are able to receive calls made to their normal mobile telephone numbers. We are seeking to enter into these arrangements with many GSM operators worldwide. As of April 30, 2005, we had entered into inter-standard roaming agreements with 180 operators in 90 nations.

Digital Cellular Network

We offer wireless voice and data telecommunications services throughout Korea using digital wireless networks. SK Telecom operates a CDMA network which currently reaches approximately 99% of the population, and a CDMA 1xRTT network which currently reaches approximately 90% of the population. Shinsegi operated a CDMA network prior to its merger into SK Telecom that we completed decommissioning in July 2002.


	*CDMA Networks*

In January 1996, SK Telecom introduced a digital wireless network based on CDMA technology. This network has been the core platform for our wireless telecommunications business. CDMA technology is a continuous digital transmission technology that accommodates higher throughput than analog technology by using various coding sequences to allow concurrent transmission of voice and data signals for wireless communication. CDMA technology provides customers with a high degree of call quality and security.

CDMA technology is currently in commercial operation in several countries including Korea, Hong Kong and the United States. A majority of the digital wireless networks currently in use around the world are based on either the European Global System for Mobile Communication standard or other time division multiple access technologies. Unlike the continuous digital transmission method of CDMA technology, these technologies break voice signals into sequential pieces of a defined length, place each piece into an information conduit at specific intervals and then reconstruct the pieces at the end of the conduit.

We completed decommissioning the CDMA network formerly owned and operated by Shinsegi in July 2002. In areas where Shinsegi’s former network no longer operates, Shinsegi’s former subscribers are able to roam on SK Telecom’s CDMA network.


	*CDMA 1xRTT Network*

In October 2000, we began offering wireless voice and data services on our CDMA 1xRTT network. CDMA 1xRTT is an advanced CDMA-based technology which allows transmission of data at speeds of up to 144 Kbps (compared to a maximum of 64 Kbps for our CDMA networks) and constitutes what is sometimes referred to as a 2.5G network. As of December 31, 2004, our CDMA 1xRTT network currently covers 84 cities in Korea, approximately 90% of the population. In areas where the CDMA 1xRTT network is currently unavailable, CDMA 1xRTT-enabled handsets are capable of accessing the CDMA network.

Unlike our CDMA network, our CDMA 1xRTT network has been designed to be upgraded in step with advances in wireless technology. In the first half of 2002, we launched an upgrade of our CDMA 1xRTT network in 26 cities in Korea to an advanced technology called CDMA 1xEV/DO. CDMA 1xEV/DO is a CDMA-based technology, similar to CDMA 1xRTT, which enables data to be transmitted at speeds of up to 2.4 Mbps. This speed permits interactive transmission of data required for videophone services, a high-speed wireless Internet connection, as well as a multitude of multimedia services. CDMA 1xEV/DO-capable handsets became available in Korea in June 2002. We are expanding our CDMA 1xEV/DO network and completed the upgrade in 84 cities in Korea as of the end of 2004. This network permits 3G capabilities. A significant portion of our capital expenditures is expected to be used for the future expansion and upgrading of our CDMA 1xRTT network as well as our CDMA 1xEV/DO network. For details of our capital expenditure plans relating to CDMA 1xRTT, see “Operating and Financial Review and Prospects — Liquidity and Capital Resources”.


	*W-CDMA Network*

W-CDMA is a 3G level high capacity wireless communication system that is expected to enable us to offer a wider range of telecommunications services, including cellular, paging, data communications, video-conferencing, multimedia services and satellite communications. We commenced provision of our IMT-2000 services based on our W-CDMA network on a limited basis in Seoul at the end of 2003. Although we developed and launched in March 2005 dual band/dual mode handsets, one of the key factors in a nationwide deployment of W-CDMA, the actual scope and timing of the full nationwide roll-out of our W-CDMA network will depend on other several factors, including the availability of network equipment, ability to overcome technical problems currently affecting W-CDMA performance, regulatory decisions, our assessment of the market opportunities for W-CDMA technology-based services and the competitive landscape in the Korean wireless market. We expect to provide W-CDMA services in the Seoul metropolitan area and other local metropolitan areas of Korea by the end of 2005. For more information about our capital expenditure plans relating to W-CDMA, see “Operating and Financial Review and Prospects — Liquidity and Capital Resources” and for more information about risks relating to W-CDMA, see “Key Information — Risk Factors — W-CDMA technology may require significant capital and other expenditures for implementation which we may not recoup and may be difficult to integrate with our other businesses”. In the first half of 2006, we plan to start deploying HSDPA, which enables data to be transmitted at speeds of up to two to three times faster than 1xEV/DO. We have commenced testing of the system that will enable such upgrade to HSDPA by simply upgrading applicable software and without requiring any new infrastructure.


	*Network infrastructure*

The principal components of our wireless networks are:


	•	cell sites, which are physical locations equipped with transmitters, receivers and other equipment that communicate by radio signals with wireless handsets within range of the cell (typically a 3 to 40 kilometer radius);

	•	base station transceiver subsystems, which manage the radio transmission by the equipment located at one or more cell sites, including radio-channel management, message transport and hand-off of calls between cell sites;

	•	switching stations, which switch calls to the proper destinations; and


	•	leased lines, microwave links or other connections which link the switching stations, cell sites and the public switched telephone networks of KT Corporation and Hanaro Telecom.

The following table sets forth some basic information about our wireless networks at December 31, 2004:


			Switching
	Cell Sites		Stations

CDMA Network (excluding CDMA lxRTT and CDMA 1xEV/DO)		5,484		56
CDMA 1xRTT Network and CDMA 1xEV/DO		3,348		55
W-CDMA		626		3

We purchase our principal digital wireless equipment for our CDMA networks from LG Electronics and Samsung Electronics. We have purchased from Samsung Electronics substantially all of the equipment for our CDMA 1xRTT network. Several manufacturers, including Samsung Electronics, Pantech & Curitel, LG Electronics and Motorola Korea, Inc., currently produce handsets for use on our CDMA and CDMA 1xRTT networks. Samsung Electronics, SK Teletech and Motorola Korea, Inc. currently manufacture most of the handsets for use on our CDMA 1xEV/DO Network.

Under applicable Korean law, Korean fixed-line operators may not decline to provide leased line services to us without reasonable cause. We have completed installation of substantially all optical fiber lines between our switching stations. In addition, we own several microwave links in areas to serve certain sections of the network formerly owned and operated by Shinsegi. We have also installed optical fiber lines linking base stations with switching stations and other base stations. Where we have not installed optical fiber lines, we continue to use lines leased by us from SK Networks and KT Corporation. KT Corporation’s fixed charges for the leased lines are based on line capacity, length and type.

We use a cellular network surveillance system. This system oversees the operation of cell sites and allows us to monitor our main equipment located throughout the country from one monitoring station. The automatic inspection and testing provided to the cell sites lets the system immediately rebalance to the most suitable setting, and the surveillance system provides automatic dispatch of repair teams and quick recovery in emergency situations.

Other Investments and Relationships

We have investments in several other businesses and companies and have entered into various business arrangements with other companies. Our principal investments fall into the following categories:

Wireless Application Developers and Content Providers. As part of our strategy to develop additional applications and content for our wireless data services, we invest in companies which develop wireless applications and provide Internet content, including content accessible by users of our wireless networks. These investments include:


	—	Information Technology and Content Providers. We hold investments in approximately 40 companies, with an aggregate book value of approximately Won 36.0 billion as of December 31, 2004, which develop technology and content for use in our fixed-line and wireless data and Internet businesses and for continuing development of our multimedia platforms and networks.

	—	Joint Ventures. We own a 50% interest in a joint venture with Hewlett-Packard Company to support development of next generation wireless multi-media and mobile commerce services and a 50% interest in a joint venture with Qualcomm Incorporated, formed for the purpose of funding venture startup companies engaged in development and commercialization of new applications or services utilizing CDMA technology. We have committed to invest US$5 million in each of these ventures. As of December 31, 2004, we invested Won 5.1 billion in our joint venture with Qualcomm and Won 5.3 billion in our joint venture with Hewlett-Packard. In addition, pursuant to an agreement entered into on March 20, 2003, we established in December 2003, UniSK, a joint venture company with China Unicom, China’s second largest mobile phone operator and exclusive CDMA wireless service provider, to develop wireless Internet platform and content. We and China Unicom have a 49% interest and 51%


		interest, respectively, in UniSK. UniSK, which had an initial capitalization of US$6 million, commenced offering portal services in February 2004. In September 2003, we reached a business cooperation agreement with Teliasonera for the purpose of jointly developing and commercializing new businesses cross-licensing, partnership exchange and joint advancement into overseas markets. On September 16, 2003, we signed a memorandum of understanding with Alcatel for a joint development of a Mobile Payment Service by combining our Nemo with Alcatel’s Prepayment Instant Billing System.

	—	Mobile Broadcasting Corporation. In September 2003, we entered into an agreement with Mobile Broadcasting Corporation, a wireless multi-media company in Japan, for the purposes of co-owning and launching a satellite for the satellite DMB business. MBCO is a developer and provider of content and technology related to wireless multimedia services and developed new services in Satellite DMB. Under the terms of the agreement, SK Telecom is committed to fund 34.7% of the cost of launching and maintaining the operations of the satellite, which is approximately Won 100.8 billion. As of December 31, 2004, we have invested a total of Won 27.3 billion, and had a 7.3% interest in MBCO. We launched the satellite in March 2004. In March 2004, we were assigned by the MIC frequency for satellite DMB. In October 2004, we granted the right to use our satellite, satellite orbit and frequency to TU Media Corp., one of our affiliates, which received a license from the MIC as a satellite DMB provider on December 30, 2004. On May 1, 2005, TU Media Corp. began to provide satellite DMB services. See “Information on the Company — Multimedia”.

	—	Mobile Data and Digital Content Market. In order to generate new revenue from the ever growing mobile data and digital content market, we plan to increase our investment in the entertainment sector, particularly in music, movies and games. As mobile data and digital content market has become increasingly important in the growth of our business, we are seeking to secure valuable mobile data and digital contents by making equity investment in various content providers. In March 2005, we acquired 8 million shares, or 21.66% of the issued and outstanding shares of iHQ Inc. for Won 14.44 billion with an option to purchase 5 million additional shares from Mr. Hun-Tak Jeong, a majority shareholder of iHQ Inc., during the period starting on March 15, 2006 and ending on April 30, 2006. iHQ Inc. is an entertainment management firm producing films, managing entertainers and operating on-line game services. In addition, our board of directors resolved to form a ‘movie fund’ on May 3, 2005 and a ‘music fund’ on May 27, 2005, each with local investment companies to expand our business to media and entertainment. The size of the fund will be around Won 20 billion and Won 29.7 billion, respectively. Once each of the fund is formed, we will have a 26.66% interest in the movie fund and a 99.0% interest in the music fund. On May 27, 2005, our board of directors also resolved to purchase a 60% interest in YBM Seoul Records, one of the leading record companies in Korea whose music sources are critical in our advancement into digital music business from the offline record label business, for Won 29.2 billion.

Foreign Wireless Telecommunications Operators. We have investments in the following wireless telecommunications operators:


	—	Skytel. In July 1999, we acquired a 27.8% equity interest in Skytel, Mongolia’s second-largest cellular service provider, by providing approximately Won 1.5 billion worth of analog infrastructure. As of December 31, 2004, Skytel had approximately 75,607 subscribers. We, together with Skytel, have been providing cellular service in Mongolia since July 1999, and CDMA service since February 2001. In April 2001, we completed installing the equipment necessary to provide WAP service. In December 2002, we subscribed to the newly issued common shares of Skytel. As a result, as of December 31, 2004, our equity interest in Skytel is 28.6%.

	—	SLD Telecom. In a series of transactions during 2000, we entered the Vietnam CDMA market through the acquisition of a 53.8% equity interest of SLD Telecom Pte. Ltd. in return for an investment of US$1.35 million. SLD Telecom entered into a business cooperation contract with Saigon Post & Telecommunication Services Corporation to provide CDMA service throughout Vietnam. We commenced CDMA service through Saigon Post & Telecommunication Service Corporation in July 2003. Under the business cooperation contract, SLD Telecom will contribute no less than $150 million to the investment capital for the joint CDMA business in Vietnam through 2016, which amount will include


		capital expenditures as well as contribution to the working capital. Our contribution amount will be determined according to our equity interests in SLD Telecom from time to time. We have invested US$86.2 million as of December 31, 2004.

	—	SK-EarthLink. On March 24, 2005, EarthLink and we completed the formation of SK-EarthLink, a joint venture to market wireless voice and data services in the U.S. The joint-venture is a non-facilities-based nationwide mobile virtual network operator (“MVNO”) offering cellular voice and data services to U.S. consumers. SK-EarthLink expects to enter into a previously under-served, but rapidly growing wireless data, entertainment, and voice market. SK-EarthLink will leverage our expertise in developing and implementing 3G technology and other cutting-edge applications and EarthLink’s established sales channels, Wi-Fi experience, network data centers and billing capabilities. Each of the Company and EarthLink has a 50 percent voting and economic ownership interests in SK- EarthLink.

Other Investments. Our other investments include:


	—	Hanaro Telecom. As of December 31, 2004, we owned a 4.8% interest in the outstanding capital stock of Hanaro Telecom. On September 2, 2003, we purchased Won 120.0 billion of Hanaro Telecom commercial paper in order to provide Hanaro Telecom with short-term liquidity while it attempted to secure a foreign investor that would inject new capital into the company. The decision to provide liquidity support to Hanaro Telecom was made to protect the value of our stake in Hanaro Telecom. Following an investment in Hanaro Telecom by a consortium led by AIG and Newbridge, we disposed of the Hanaro Telecom commercial paper in December 2003. In May 2004, we purchased from Samsung Electronics Co., Ltd. 13,870,000 shares of Hanaro Telecom, representing 3.0% of the outstanding shares of Hanaro for Won 39.3 billion as part of our strategic efforts in consideration of increasing convergence between wireless and fixed-line services. As a result of the acquisition, our equity interest in Hanaro increased to 4.8% as of December 31, 2004, up from 1.8% as of December 31, 2003.

	—	Powercomm. We currently own a 5.0% interest in Powercomm Corporation with a book value as of December 31, 2004 of Won 71.6 billion. For more information, see note 3 of the notes to our consolidated financial statements. Powercomm is an operator of fixed-line networks that provides wholesale fixed-line network services, such as leased lines, to telecommunications, Internet and cable television service providers in Korea. We have no current plans to either increase or decrease our investment in Powercomm.

	—	SKC&C. We currently own a 30.0% equity interest in SKC&C Co., Ltd. with a book value as of December 31, 2004 of Won 201.4 billion. SKC&C is an information technologies services provider. Substantially all of SKC&C’s revenue is generated from services provided to member companies of the SK group, including us. We are party to several service contracts with SKC&C related to development and maintenance of our information technologies systems. See “Major Shareholders and Related Party Transactions — Certain Relationships and Related Party Transactions”.

	—	SK Group Japan Co., Ltd. In December 2001, we invested Won 5.3 billion in SK Group Japan Co., Ltd., a trading company. We held a 16.5% equity interest in SK Group Japan with an acquisition cost of Won 16.4 billion, which was written off due to an impairment. SK Group Japan was dissolved as of January 17, 2005.

	—	SK Communications. In August 2002, we purchased a 44.5% interest from Mirae Corporation in Lycos Korea, one of Korea’s leading Internet portals, for Won 12.3 billion. Subsequently, we subscribed for additional shares in Lycos Korea and increased our interest in Lycos Korea to 90.3%. Lycos Korea was renamed SK Communications after it acquired Netsgo Co., Ltd. and business rights to Nate.com service in November 2002. SK Communications subsequently consolidated services from Lycos and Nate.com to offer portal service on-line.

In February 2001, we transferred our paging business to Real Telecom and received a 9.9% interest in Real Telecom, as well as convertible bonds with a principal amount of Won 9.5 billion. Such convertible bonds and accrued interest were exchanged for bonds issued by Real Telecom in May 2003 with a principal amount of Won 10.6 billion which can be converted into 371,018 shares of common stock of Real Telecom as of April 2004.

On December 31, 2004, we wrote off Real Telecom’s debt on the bonds as it was very doubtful to collect on the bonds.

We have from time to time engaged in discussions with several wireless telecommunications services providers including KDDI Corporation and Sprint PCS about strategic relationships of various types.

Competition

We were Korea’s only provider of cellular telecommunications services until April 1996, when Shinsegi began offering its CDMA service using 10 MHz of spectrum in the 800 MHz band under a license issued in 1994. In 1996, the Government issued three additional licenses to KT Freetel, LG Telecom and Hansol PCS to operate CDMA services, each using 10 MHz of spectrum in the 1700-1800 MHz band. Each of KT Freetel, LG Telecom and Hansol PCS commenced operation of its CDMA service in October 1997.

Beginning in 2000, there has been considerable consolidation in the wireless telecommunications industry resulting in the emergence of stronger competitors. In 2000, KT Corporation acquired 47.9% of Hansol M.Com’s outstanding shares and renamed the company KT M.Com. KT M.Com merged into KT Freetel in May 2001. In May 2002, the Government sold its remaining 28.4% stake in KT Corporation. It is widely believed that KT Corporation is likely to operate more efficiently and be managed more effectively and profitably following its privatization. KT Corporation had a 48.7% interest in KT Freetel as of December 31, 2004.

Significant advances in technology are occurring that may affect our businesses, including the roll-out or the planned roll-out by us and our competitors of advanced high-speed wireless telecommunications networks based on CDMA 1xEV/DO technology and other technologies such as W-CDMA and cdma2000, both of which are commonly referred to as third generation, or 3G, wireless technology. In October 2000, we launched the world’s first CDMA 1xRTT network, which enables us to provide advanced data services. Since then our two principal competitors, KT Freetel and LG Telecom, have also launched networks using CDMA 1xRTT technology. As of December 31, 2004, CDMA 1xEV/ DO network upgrade has been completed in 84 cities in Korea. KT Freetel has expanded its CDMA 1xEV/ DO network to cover 75 cities in Korea as of December 31, 2004. In addition, we and our competitors also have the rights to acquire licenses to provide 3G services using W-CDMA technology (in the case of us and KT Freetel) or cdma2000 technology (in the case of LG Telecom). Such networks are expected to support data transmission services with more advanced features and significantly higher data transmission rates than our principal data network, which uses a technology called CDMA 1xRTT. We commenced provision of our IMT-2000 services based on our W-CDMA network on a limited basis in Seoul at the end of 2003. Although we developed and launched in March 2005 dual band/dual mode handsets, one of the key factors in a nationwide deployment of W-CDMA, the actual scope and timing of the full nationwide roll-out of our W-CDMA network will depend on other several factors, including the availability of network equipment, ability to overcome technical problems currently affecting W-CDMA performance, regulatory decisions, our assessment of the market opportunities for W-CDMA technology-based services and the competitive landscape in the Korean wireless market. We expect to provide W-CDMA services in the Seoul metropolitan area and other local metropolitan areas of Korea by the end of 2005. See “Key Information — Risk Factors — Competition may reduce our market share and harm our results of operations and financial condition”.

As of April 30, 2005, according to the MIC, KT Freetel and LG Telecom had 12.0 million and 6.1 million subscribers, respectively, representing approximately 32.4% and 16.5%, respectively, of the total number of wireless subscribers in Korea on such date. As of April 30, 2005, we had 19.1 million subscribers, representing a market share of approximately 51.2%. On May 25, 2004, we voluntarily undertook to limit our market share to 52.3% of the wireless telecommunications market through the end of 2005, the level of our market share at the time of the approval of our merger with Shinsegi in January 2002.

For a description of the risks associated with the competitive environment in which we operate, see “Key Information — Risk Factors — Competition may reduce our market share and harm our results of operations and financial condition”.

Under current government regulations, as the designated market dominant service provider for wireless network services, we must obtain prior MIC approval for a change in our wireless telecommunications service

rates, although our competitors may change their rates at their discretion. The MIC gave new entrants similar price advantages when DACOM started competing with KT Corporation in international long distance service in 1991 and domestic long distance service in 1996. On April 9, 2003, the MIC announced its plan to adopt a “reserved reporting” system for setting new rates as a measure to relax the stringent regulation on pricing. Under the “reserved reporting” system, we would have to report our proposed new rate plan with the MIC in order to change our rates. Unless the MIC objected to the proposed rate plan within a certain period of time, such rates would be automatically adopted. We believe that this system, if implemented, would give us greater flexibility in setting our wireless communications service rates in response to market conditions in a timely manner, but we can give no assurance that such a system will be adopted as currently contemplated, or at all, or that the rates allowed by such a system will allow us to remain profitable.

For a description of our rates and subscription plans, see “— Revenues, Rates and Facility Deposits”. In addition, the FTC approved our acquisition of Shinsegi on two conditions. First, the FTC required that SK Telecom’s and Shinsegi’s combined market share of the wireless telecommunications market, based on numbers of subscribers, be less than 50.0% as of June 30, 2001. As a result, we reduced the level of our subscriber activations and adopted more stringent involuntary subscriber deactivation policies beginning in 2000 and ceased accepting new subscribers for three months, from April 1, 2001 through June 30, 2001. We complied with this requirement by reducing our market share to approximately 49.7% as of June 30, 2001, and thus, we are not subject to any market share limitations. On May 25, 2004, we voluntarily undertook to limit our market share to 52.3% of the wireless telecommunications market through the end of 2005, the level of our market share at the time of the approval of our merger with Shinsegi in January 2002. As of April 30, 2005, we had approximately 19.1 million subscribers, representing a market share of approximately 51.2%. Second, the FTC imposed a maximum limit of 1,200,000 on the number of digital handsets we may purchase annually from our subsidiary, SK Teletech, until December 31, 2005. This restriction does not apply to W-CDMA handsets.

In February 1997, member governments of the World Trade Organization, or WTO, reached the WTO Agreement on Basic Telecommunications Services, which became effective in November 1997. As part of this agreement and to expedite the opening of the telecommunications market and promote competition, the Government has amended the Telecommunications Business Law several times to, among other things, increase the allowed foreign shareholding ownership threshold (up to an aggregate of 49.0%) and participation in telecommunications service providers, including us.

While we believe that these measures will enable us to more easily take advantage of opportunities for investments in overseas telecommunications projects, they have increased and may in the future increase competition and the financial and technological resources of our competitors in the domestic market.

Law and Regulation


	*Overview*

Korea’s telecommunications industry is subject to comprehensive regulation by the MIC, which is responsible for information and telecommunications policies, radio and broadcasting management, postal services and postal finances. The MIC regulates and supervises a broad range of communications issues, including:


	•	entry into the telecommunications industry;

	•	scope of services provided by telecommunications service providers;

	•	allocation of radio spectrum;

	•	setting of technical standards and promotion of technical standardization;

	•	rates, terms and practices of telecommunications service providers;

	•	customer complaints;

	•	interconnection and revenue-sharing between telecommunications service providers;


	•	disputes between telecommunications service providers;

	•	research and development budgeting and objectives of telecommunications service providers; and

	•	competition among telecommunications service providers.

Telecommunications service providers are currently classified into three categories: network service providers, value-added service providers, and specific service providers. We are classified as a network service provider because we provide telecommunications services with our own telecommunications networks and related facilities. As a network service provider, we are required to obtain a license from the MIC for each of the services we provide. Our licenses permit us to provide cellular services and third generation wireless services using W-CDMA technology. Our cellular license is valid for an indefinite term and our W-CDMA license is valid for 15 years starting from 1999.

The MIC may revoke our licenses or suspend any of our businesses if we fail to comply with its rules, regulations and corrective orders, including the rules restricting beneficial ownership and control and corrective orders issued in connection with any violation of rules restricting beneficial ownership and control, or the conditions of our licenses. Alternatively, in lieu of suspension of our business, the MIC may levy a monetary penalty of up to 3% of our revenues. A network services provider that wants to cease its business or dissolve must obtain MIC approval.

The MIC has stated that its policy is to promote competition in the Korean telecommunications market through measures designed to prevent the dominant service provider in any such market from exercising its market power in such a way as to prevent the emergence and development of viable competitors. While all network service providers are subject to MIC regulation, we are subject to increased regulation because of our position as the dominant wireless telecommunications services provider in Korea.


	*Rate Regulation*

Most network service providers must report to the MIC the rates and contractual terms for each type of service they provide, but generally set rates at their discretion. However, as the dominant network services provider for specific services (based on having the largest market share in terms of number of subscribers and meeting certain revenue thresholds), we must obtain prior approval of our rates and terms of service from the MIC. In each of the years in which this requirement has been applicable, the MIC has designated us, for wireless telecommunications service, and KT Corporation, for local telephone service, as dominant network service providers subject to this approval requirement. As a condition to its approval of SK Telecom’s merger with SK IMT, the MIC required that we submit the rates for our third generation mobile services using W-CDMA technology to MIC for approval prior to the launch of such services. The MIC’s policy is to approve rates if they are appropriate, fair and reasonable and if they are calculated in a transparent and appropriate manner. It may order changes if it deems the rates to be significantly unreasonable or against public policy.


	*Interconnection*

Dominant network service providers such as ourselves that own essential infrastructure facilities or that possess a certain market share are required to provide interconnection of their telecommunications network facilities to other service providers upon request. The MIC sets and announces the standards for determining the scope, procedures, compensation and other terms and conditions of such provision, interconnection or co-use. We have entered into interconnection agreements with KT Corporation, DACOM, Onse and other network service providers permitting these entities to interconnect with our network. We expect that we will be required to enter into additional agreements with new operators as the MIC grants permits to additional telecommunications service providers.


	*Wireless Internet Network Co-Share*

In December 2002, the MIC implemented a wireless Internet network co-share system that permits the wireless application protocol gateway, or WAP Gateway, of a fixed-line operator to connect to a wireless network service provider’s IWF (inter-working function) device. IWF is a device that connects cellular network with an IP

(Internet Protocol) network while WAP Gateway converts hypertext transfer protocol, or HTTP protocol, into WAP protocol. This co-share system would allow subscribers of a wireless network service provider to have access to wireless Internet content provided by a fixed-line operator. In December 2002, KT Corporation connected to our IWF but has not yet commenced service. In July 2003, the MIC approved the basic terms regarding the implementation of a network co-system. In January 2004, we entered into a memorandum of understanding with Onse to establish a co-share system, under which we plan on launching these services in June 2005. Currently, our subscribers can access portals provided by outside parties. In addition, the MIC has requested that a third party oversee wireless operators’ customer billing procedures with respect to third-party content providers who are seeking to provide their content directly to subscribers without going through an individual operator’s portal, as third-party content providers have experienced difficulties in providing their content service directly to subscribers due to the lack of resources for billing users. We believe that such a co-share system, if widely adopted, will have the effect of giving our users access to a wide variety of content using their handsets which may in turn increase revenues attributable to our data services. However, this system could also place significant competitive pressure on the services available on our NATE platform.


	*Contributions to Fund for Development of Information Telecommunications*

The MIC has the authority to recommend to network service providers that they provide funds for national research and development of telecommunications technology and related projects. For 2005, the MIC recommends that we contribute 0.75% of budgeted revenues (calculated pursuant to MIC guidelines that differ from our accounting practices) to the Fund for Development of Information Telecommunications operated by the MIC. Although these recommendations were not mandatory prior to 2002, we have in the past contributed recommended amounts. Our contribution to this fund in 2000 was Won 38.3 billion (including Won 0.6 billion for Shinsegi) based on the MIC recommendation of 1.5% of MIC-calculated revenues for 2000. Our contribution to this fund in 2001 was Won 23.0 billion (including nil for Shinsegi) based on the MIC-recommended minimum level of contribution of 1.0% of MIC-calculated revenues for 2001.

In May 2002, the MIC announced significant changes to the government contribution system. Starting from 2002, the contributions became mandatory, and the annual contribution which was set at 1.0% of total revenues for the previous year was lowered to 0.5% (0.75% for market dominant service providers like us) of total revenues for the previous year, and will be applicable only to those network service providers who have Won 30 billion in total sales and recorded net profits for the previous year. Under the policy, the amount of the annual contribution does not need to exceed the net profit of each company. Our contribution to this fund in 2002, 2003 and 2004 was Won 58.6 billion, Won 64.4 billion and Won 68.5 billion based on the new MIC requirement of 0.75% of MIC-calculated revenues for 2002, 2003 and 2004, respectively.


	*Universal Service Obligation*

All telecommunications service providers other than value-added service providers, specific service providers and regional paging service providers or any telecommunications service providers whose net annual revenue is less than an amount determined by the MIC (currently set at Won 30 billion) are required to provide “universal” telecommunications services including local telephone services, local public telephone services, telecommunications services for remote islands and wireless communication services for ships and telephone services for the handicapped and low-income citizens or contribute toward the supply of such universal services. The MIC designates universal services and the service provider who is required to provide each service. Currently, we are required to offer free subscription fee and 30% discount of our monthly fee for cellular services to the handicapped and the low-income citizens. In addition to such universal services for the handicapped and low-income citizens, we are also required to make certain monetary contributions to compensate for other service provider’s costs for the universal services. The size of a service provider’s contribution is based on its net annual revenue (calculated pursuant to MIC guidelines which differ from our accounting practices). In 2002, we paid Won 28.9 billion, which was our estimated contribution amount based on our net annual revenue for our fiscal year 2001 pursuant to MIC guidelines. We received a refund in the amount of Won 1.8 billion from the MIC after calculating our required contribution amount based on our net annual revenue for our fiscal year 2001, which effectively reduced our actual contribution amount to Won 27.1 billion. In 2003, our contribution amount was

Won 80.7 billion for our fiscal year 2002. In 2004, our contribution amount was Won 46.6 billion for our fiscal year 2003. Our contribution amount for 2005 has not yet been determined, but is expected to be Won 48.2 billion. With the introduction of a new calculation method based on the long-run incremental cost to be applicable to the calculation of our contribution for 2006, we anticipate that our contribution amount for 2006 for our fiscal year 2005 will be lower than that of the previous year. As a wireless telecommunications services provider, we are not considered a provider of universal telecommunications services and do not receive funds for providing universal service. Other network service providers that do provide universal services make all or a portion of their “contribution” in the form of expenses related to the universal services they provide.


	*Frequency Allocation*

The MIC has the discretion to allocate and adjust the frequency band for each type of service. Upon allocation of new frequency bands or adjustment of frequency bands, the MIC is required to give a public notice. The MIC also regulates the frequency to be used by each radio station, including our base stations, by the terms of its approval for each radio station. All of our frequency allocations are for an indefinite term. We pay fees to the MIC for our frequency usage which are determined based upon our number of subscribers, frequency usage by our networks and other factors. For 2001, 2002, 2003 and 2004 the fee amounted to Won 78.9 billion, Won 119.2 billion, Won 129.5 billion and Won 143.0 billion, respectively.

In addition, we have paid Won 650 billion of the Won 1.3 trillion cost of the W-CDMA license in March 2001. We are required to pay the remainder of the license cost in annual installments for a five-year period from 2007 through 2011. For more information, see note 2(i) of the notes to our consolidated financial statements for the years ended December 31, 2002, 2003 and 2004.


	*Competition Regulation*

The Korea Communications Commission is charged with ensuring that network service providers engage in fair competition, and has broad powers to carry out this goal. If a network service provider is found to be in violation of the fair competition requirement, the Korea Communications Commission may take corrective measures it deems necessary, including, but not limited to, the prohibition of further violation, the amendment to the articles of incorporation or the service contracts with customers, the execution or performance of, or amendment to, the interconnection agreements with other network service providers.

In addition, we qualify as a market-dominating business entity under the Korean Fair Trade Act. Accordingly, we are prohibited from engaging in any act of abuse, such as unreasonably determining, maintaining or altering service rates, unreasonably controlling the rendering of services, unreasonably interfering with business activities of other business entities, hindering unfairly the entry of newcomers or substantially restricting competition to the detriment of the interests of consumers.

Under the Fair Trade Act, a company that is a member of a large business group as designated by the FTC, such as ourselves, as a company in the SK Group, is generally required to limit its total investments in other domestic companies to 25.0% of its non-consolidated net assets. Investment in companies engaging in similar business is not included in calculating the 25% limit. Depending on the time frame in which such a company acquired shares in excess of the 25% ceiling, the FTC may issue corrective orders such as disposition of the shares held in excess of the 25.0% ceiling or the limitation on the voting rights for such shares and/or impose monetary sanctions. SK Telecom’s total investments in other domestic companies (excluding investments in Hanaro Telecom, Powercomm, SK Telink, Enterprise Networks and Real Telecom, companies engaging in similar business) amounted to Won 787.4 billion, or 5.6% of our consolidated net assets as of December 31, 2004.


	*Number Portability*

keep their existing numbers. In January 2003, the MIC announced its plan to implement number portability with respect to wireless telecommunications services in Korea. The number portability system allows wireless subscribers to switch wireless service operators while retaining the same mobile phone number. However, subscribers who switch operators must purchase a new handset, as we use a different frequency than KT Freetel and LG Telecom. In accordance with the plan published by the MIC, the number portability system was adopted by SK Telecom starting from January 1, 2004. KT Freetel and LG Telecom introduced number portability beginning on July 1, 2004 and January 1, 2005, respectively. For details of the number of subscribers who transferred to the services of our competitors following the implementation of the number portability system, see “Information on the Company — Business Overview — Subscribers”.

In addition, in order to manage the availability of phone numbers efficiently and to secure phone number resources for the new services, the MIC plans to integrate mobile telephone identification numbers into a common prefix identification number “010” and to gradually retract the current mobile service identification numbers which had been unique to each wireless telecommunications service provider, including “011” for our cellular services, starting from January 1, 2004. All new subscribers have been given the “010” prefix starting in January 2004. For details of the number of new subscribers for each of the major wireless cellular providers following the adoption of the “010” prefix in January 2004, see “Information on the Company — Business Overview — Subscribers”.

For risks relating to number portability, see “Key Information — Risk Factors — Our businesses are subject to extensive Government regulation and any change in Government policy relating to the telecommunications industry could have a material adverse effect on our results of operations and financial condition”.


	*Contribution to 114 Directory Service*

The MIC has been negotiating with network service providers on sharing the cost of providing 114 directory services through KT Corporation. Prior to 1998, this cost was shared among service providers through the NTS Participation Program. The NTS (Nontraffic Sensitive) Participation Program included both the Universal Service Provider Program and contributions to 114 directory service before it came to a halt due to disagreements between network service providers and the MIC. The MIC has determined SK Telecom’s share of such cost for the period between 1998 and 2001 to be Won 40.6 billion, based on the number of calls made to 114 directory service through its network. KT Freetel and LG Telecom were charged Won 16.8 billion and Won 6.7 billion, respectively. This amount is to be paid in monthly installments over a 20-month period. Contribution to the 114 directory service for 2002, 2003 and 2004 have not been determined yet.


	*Foreign Ownership and Investment Restrictions and Requirements*

Because we are a network service provider, foreign governments, individuals, and entities (including Korean entities that are deemed foreigners, as discussed below) are prohibited from owning more than 49% of our voting stock. Effective from May 9, 2004, Korean entities where a foreign government or a foreigner (together with any of its related parties) (i) is the largest shareholder and (ii) owns 15% or more of the outstanding voting stock are deemed foreigners. If this 49% ownership limitation is violated, certain of our foreign shareholders will not be permitted to exercise voting rights in excess of the limitation and the MIC may require other corrective action.

As of December 31, 2004, SK Corporation owns 17,663,127 shares of our common stock, or approximately 21.47%, of our issued shares. As of April 4, 2005, a foreign investment fund and its related parties collectively held a 14.85% stake in SK Corporation. Effective from May 9, 2004, if the foreign investment fund and its related parties increase their shareholdings in SK Corporation to 15% or more and such foreign investment fund and its related parties collectively constitute the largest shareholder of SK Corporation, SK Corporation will be considered a foreign shareholder of SK Telecom, and its shareholding in SK Telecom would be included in the calculation of the aggregate foreign shareholding of SK Telecom. If SK Corporation’s shareholding in SK Telecom is included in the calculation of the aggregate foreign shareholding of SK Telecom, then the aggregate foreign shareholding in SK Telecom assuming foreign ownership level as of December 31, 2004 (which we believe was 48.36%), would reach 69.83%, exceeding the 49% ceiling on foreign shareholding.

If the aggregate foreign shareholding limit in SK Telecom is exceeded, the MIC may issue a corrective order to SK Telecom, the breaching shareholder (including SK Corporation if the breach is caused by an increase in foreign ownership of SK Corporation) and the foreign investment fund and its related parties who own in the aggregate 15% or more of SK Corporation. Furthermore, SK Corporation may not exercise its voting rights with respect to the shares held in excess of the 49% ceiling, which may result in a change in control of us. In addition, the MIC may refuse to grant us licenses or permits necessary for entering into new telecommunications businesses until the aggregate foreign shareholding of SK Telecom is reduced to below 49%. If a corrective order is issued to us by the MIC arising from the violation of the foregoing foreign ownership limit, and we do not comply within the prescribed period under such corrective order, the MIC may (1) suspend all or part of our business, or (2) if the suspension of business is deemed to result in significant inconvenience to our customers or be detrimental to the public interest, impose a one-time administrative penalty of up to 3% of our sales revenues. Additionally, an amendment to the Telecommunications Business Law in May 2004 also authorizes the MIC to assess monetary penalties of up to 0.3% of the purchase price of the shares for each day the corrective order is not complied with, as well as a prison term of up to one year and a penalty of Won 50 million. See “Key Information — Risk Factors — If SK Corporation breaches the foreign ownership limitations on SK Telecom, it may result in a change of control of us.”

We are required under the Foreign Exchange Transaction Act to file a report with a designated foreign exchange bank or with the Ministry of Finance and Economy, or the MOFE, in connection with any issue of foreign currency denominated securities by us in foreign countries. Issuances of US$30 million or less require the filing of a report with a designated foreign exchange bank, and issuances that are over US$30 million require the filing of a report with the MOFE.


	*Restrictions on Investment in Telecommunications Companies*

A newly adopted amendment to the Telecommunications Business Law, that has taken effect from May 9, 2004, provides for the creation of a Public Interest Review Committee under the MIC to review investments in or changes in the control of network services providers. The following events would be subject to review by the Public Interest Review Committee: (i) the acquisition by an entity (and its related parties) of 15% or more of the equity of a network services provider, (ii) a change in the largest shareholder of a network services provider, (iii) agreements by a network service provider or its shareholders with foreign governments or parties regarding important business matters of such network services provider, such as the appointment of officers and directors and transfer of businesses and (iv) a change in the entity that actually controls a network services provider. If the Public Interest Review Committee determines that any of the foregoing transactions or events would be detrimental to the public interest, then the MIC may issue orders to stop the transaction, amend any agreements, suspend voting rights, or divest the shares of the relevant network services provider. Additionally, effective from May 9, 2004, if a dominant network services provider (which would currently include us and KT Corporation) holds more than 5% of the equity of another dominant network services provider, the voting rights on the shares held in excess of the 5% limit may not be exercised.

Patents and Licensed Technology

Access to the latest relevant technology is critical to our ability to offer the most advanced wireless services and to design and manufacture competitive products. In addition to active internal and external research and development efforts as described in “Operating and Financial Review and Prospects — Research and Development”, our success depends in part on our ability to obtain patents, licenses and other intellectual property rights covering our products. We own numerous patents and trademarks worldwide, in addition to applications for patents pending in many countries, including Korea, Japan, China, the United States, and Europe. Our patents are mainly related to CDMA technology and wireless Internet applications. We also acquired a number of patents related to W-CDMA technology.

We also license a number of patented processes and trademarks under cross-licensing, technical assistance and other agreements. The most important agreement is with Qualcomm Inc. and relates mainly to CDMA applications technology. This agreement generally grants us a non-exclusive license to manufacture handsets in return for royalty payment or a sub-license to manufacture and sell certain products both in Korea and overseas

during a fixed, but usually renewable term. We consider our technical assistance and licensing agreements to be important to our business and believe that we will be able to renew this agreement on commercially reasonable terms that will not adversely affect our ability to use the relevant technologies.

We are not currently involved in any material litigation regarding patent infringement.

Organizational Structure

We are a member of the SK Group (formerly the Sunkyong Group), whose members collectively owned in aggregate 24.02% of the shares of our issued and outstanding common stock as of December 31, 2004. The SK Group is a group of companies incorporated in Korea with interests in, among other things, telecommunications, trading, energy, chemicals, engineering and leisure industries.


	*Significant subsidiaries*

For information regarding our subsidiaries, see note 2(b) of the notes to our consolidated financial statements.

PROPERTY, PLANTS AND EQUIPMENT

The following table sets forth certain information concerning our principal properties as of May 20, 2005:

Approximate Area

Nature of

in Square Feet

Primary Use

Interest

Seoul

988,654

Corporate Headquarters

Ownership

Seoul

607,246

Regional Headquarters

Ownership

Seoul

162,406

Customer Service Center

Ownership

Taegu

153,623

Regional Headquarters

Ownership

Taejon

565,773

Regional Headquarters

Ownership

Kwangju

265,610

Regional Headquarters

Ownership

Pusan

363,422

Regional Headquarters

Ownership

Sungnam

482,783

Central Research and

Ownership

Development Laboratory

Ichon

279,550

Training Center

Ownership

Wonju

116,562

Regional Headquarters

Ownership

Yongin

589,625

Training Center

Ownership

In December 2004, we constructed a new building as our new headquarters with an area of approximately 82,624 square feet for use as our corporate headquarters in which we have full ownership. We relocated our corporate offices into the new building in January 2005. In addition, we own or lease various locations for cell sites and switching equipment. We do not anticipate that we will need a significant number of new cell sites in connection with the expansion of our networks which is planned for 2005 and we expect to lease or acquire new sites as needed. We expect that we will need new cell sites in constructing our W-CDMA network. Our current plan is to share sites with our existing network and therefore do not at this time expect to have to obtain a significant number of new cell site locations. We do not anticipate that we will encounter material difficulties in meeting our future needs for any existing or prospective leased space for our cell sites. See “— Cellular Services”.

In October 2004, we purchased certain land and building (including incidental movables) of SK Life Insurance Co., Ltd. accounting for 589,625 square feet for an amount of Won 30 billion in order to secure stable training facilities to enhance expertise and leadership of SK Telecom’s employees as required by its campaign of new value management.

We maintain a range of insurance policies to cover our assets and employees, including our directors and officers. We are insured against business interruption, fire, lightening, flooding, theft, vandalism, public liability and certain other risks that may affect our assets and employees. We believe that the types and amounts of our insurance are in accordance with general business practices in Korea.

Item. 5 Operating and Financial Review and Prospects

You should read the following discussion together with our consolidated financial statements and the related notes which appear elsewhere in this annual report. We prepare our financial statements in accordance with Korean GAAP, which differs in some respects from U.S. GAAP. Notes 30 and 31 of the notes to our consolidated financial statements provide a description of the significant differences between Korean GAAP and U.S. GAAP as they relate to us and provide a reconciliation to U.S. GAAP of our net income and shareholders’ equity for fiscal years 2002, 2003 and 2004. In addition, you should read carefully the section titled “— Critical Accounting Policies, Estimates and Judgments” as well as note 2 of the notes to our consolidated financial statements which provide summaries of certain critical accounting policies that require our management to make difficult, complex or subjective judgments relating to matters which are highly uncertain and that may have a material impact on our financial conditions and results of operations.

Overview

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. Government regulation also affects our revenues.

The following table sets forth certain revenue information about our wireless operations during the periods indicated:


			Year Ended December 31,

			2002			2003			2004

			(In billions of Won, except percentages)
*Cellular Revenue:*
	Wireless Services(1)		W	7,579.6		W	8,462.7		W	8,798.4
	Interconnection			1,043.2			1,017.1			849.4
	Digital Handset Sales			534.0			612.0			649.8

	Total Cellular Revenue			9,156.8			10,091.8			10,297.6
*Other Revenue:*
	Paging Revenue(2)			—			—			—
	International Calling Service(3)			101.6			97.4			126.3
	Portal Service(4)			22.8			42.0			85.0
	Miscellaneous			42.8			40.9			61.7

	Total Other Revenue			167.2			180.3			273.0

		*Total Operating Revenue:*	W	9,324.0		W	10,272.1		W	10,570.6

	Cellular Revenue as a percent of Total Revenue			98.2	%		98.2	%		97.4	%
	Total Operating Revenue Growth			11.4	%		10.2	%		2.9	%


(1)	Wireless service revenue includes initial connection fees, monthly access fees, usage charges, international charges, wireless Internet service fees, value-added-service fees and interest on overdue subscriber accounts (net of telephone tax).


(2)	Prior to March 2001, we also earned revenue from initial connection fees and monthly access fees, usage charges and value-added service fees paid by our subscribers for our paging services. In March 2001, we sold our entire paging business to Real Telecom in exchange for 9.9% of Real Telecom’s newly issued shares and bonds with a principal amount of Won 9.5 billion that can be converted into an additional 7.8% interest in Real Telecom. Consequently, the results of the paging business are no longer included in the revenue from March 2001. Our paging revenue for the year ended December 31, 2001 was negligible.

(3)	Provided by our 90.8%-owned subsidiary, SK Telink Co., Ltd.

(4)	Portal service revenue attributable to SK Communications Co., Ltd. and since 2003, Paxnet Co., Ltd.

Our wireless subscriber base has been increasing rapidly in recent years, growing from approximately 10.1 million subscribers at the end of 1999 to approximately 14.5 million subscribers (including approximately 3.5 million Shinsegi subscribers), 15.2 million subscribers (including approximately 3.3 million Shinsegi subscribers), 17.2 million subscribers, 18.3 million subscribers and 18.8 million subscribers at the end of 2000, 2001, 2002, 2003 and 2004, respectively. As a condition to its approval of our acquisition of Shinsegi, the FTC required that SK Telecom’s and Shinsegi’s combined market share of the wireless telecommunications market, based on numbers of subscribers, be less than 50% as of June 30, 2001. As a result, we reduced the level of our subscriber activations and adopted more stringent involuntary subscriber deactivation policies beginning in 2000 and ceased accepting new subscribers for three months, from April 1, 2001 through June 30, 2001. We complied with this requirement by reducing our market share to approximately 49.7% as of June 30, 2001. On May 25, 2004, a policy advisory committee to the MIC announced the results of its review and stated that the committee believed that our market dominance may significantly restrict competition in the telecommunications market and that we have violated a merger condition related to our acquisition of Shinsegi by providing subsidies to handset buyers. The committee stated that it will recommend that the MIC extend the post-merger monitoring period by two years until January 2007 and take appropriate corrective measures against us for providing subsidies to handset buyers. In June 2004, the MIC made a formal decision as to the policy advisory committee’s findings and imposed a Won 11.9 billion fine on us and extended the post-merger monitoring period until January 2007 pursuant to the policy advisory committee’s recommendation. On May 25, 2004, we voluntarily undertook to limit our market share to 52.3% of the wireless telecommunications market through the end of 2005, the level of our market share at the time of the approval of our merger with Shinsegi in January 2002. As of April 30, 2005, we had approximately 19.1 million subscribers, representing a market share of approximately 51.2%.

In the past, wireless telecommunications service providers provided handsets at below retail prices to attract new subscribers, offsetting a significant portion of the cost of handsets. The MIC prohibited all wireless telecommunications service providers, subject to certain exceptions stipulated in the Telecommunications Business Act, from providing handset subsidies beginning June 1, 2000. In March 2002, the MIC concluded that certain incentive payments made to wireless handset dealers by us and other wireless network service providers were being passed on to purchasers of wireless handsets, and therefore constituted improper handset subsidies. On April 8, 2002, we, KT Freetel, LG Telecom and KT Corporation were fined an aggregate of Won 20.0 billion by the MIC in respect of these incentive payments. We were assessed and have paid in full a fine of Won 10.0 billion. On November 15, 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. KT Freetel and LG Telecom were also prohibited from signing on new subscribers for 20 days. In February 2004, the MIC imposed upon us a fine of Won 21.7 billion with respect to another incentive payments that were deemed by the MIC to constitute improper handset subsidies and thereby disrupt fair competition. We paid the fine in March 2004. In February 2004, KT Freetel and KT Corporation were also fined Won 7.5 billion and Won 4.1 billion, respectively, in respect of such incentive payments. On March 21, 2005, the MIC ordered us, KT Freetel and LG Telecom, to pay fines of Won 1.4 billion, Won 360 million and Won 230 million, respectively, for changing calling plans and adding value-added services to the subscribers without obtaining express consents of such subscribers. We paid such fine in April 2005. In May 2005, the MIC ordered us to pay fines of Won 23.1 billion with respect to our payment of improper handset subsidies. LG Telecom and KT Freetel were also fined Won 2.7 billion and Won 1.1 billion, respectively, in respect of such subsidy payments. We were relatively heavily fined compared to KT Freetel and LG Telecom as the MIC found that our efforts to take corrective

measures were not sufficient and making such incentive payments was a violation of a merger condition related to our acquisition of Shinsegi in January 2002. We plan to make payment of such fine in June 2005.

As a result of the MIC’s handset subsidy regulation and steps we have taken as a result, we experienced a significant reduction in our gross and net additions of new subscribers in April and May 2002. The MIC’s November 2002 order also resulted in a reduction in our gross and net additions of new subscribers in November and December 2002. We believe that our competitors have also experienced similar reductions and our market share has not been adversely affected. We cannot assure you that the elimination of dealer incentives will not continue to adversely affect the rate at which we attract new subscribers or the rate at which existing subscribers upgrade their wireless handsets to take advantage of the higher data transmission capabilities of our CDMA 1xRTT and CDMA 1xEV/ DO network technologies. We also believe that beginning in March 2002, there was an expectation among dealers that dealer incentives would soon be eliminated or reduced as a result of the MIC’s actions. This expectation contributed to the unusually high number of gross and net subscriber additions and the higher churn rate that we experienced in March 2002, which was 2.3%, compared to 1.2% in January 2002 and 1.1% in February 2002. Churn rate increased in part because many existing subscribers chose to upgrade their handsets by terminating their service and opening a new subscriber account. For 2004, our churn rate has ranged from 1.2% to 2.3%, with churn rate for December 2004 at 1.4%. We cannot assure you that our churn rates will not increase in the future.

Previously, Korea’s wireless telecommunications system was based on a network-specific prefix system in which a unique prefix is assigned to all the phone numbers of a network operator. We were assigned the “011” prefix, and all of our subscriber’s mobile phone numbers began with “011” (former Shinsegi subscribers use the “017” prefix) and our subscribers could not change their wireless phone service to another wireless operator and keep their existing numbers. In January 2003, the MIC announced its plan to implement number portability with respect to wireless telecommunications services in Korea. The number portability system allows wireless subscribers to switch wireless service operators while retaining the same mobile phone number. However, subscribers who switch operators must purchase a new handset, as we use a different frequency than KT Freetel and LG Telecom. In accordance with the plan published by the MIC, the number portability system was adopted by SK Telecom starting from January 1, 2004. According to MIC data, following the implementation of the number portability system, 305,267, 183,876, 214,232 and 261,654 of our subscribers transferred to the services of our competitors in January 2004, February 2004, March 2004 and April 2004, respectively. Subscribers who choose to transfer to a different wireless operator have the right to return to us without paying any penalties within 14 days of the initial transfer. KT Freetel and LG Telecom introduced number portability beginning on July 1, 2004 and January 1, 2005, respectively.

We believe that the adoption of the common prefix identification system may pose a greater risk to us as compared to the other wireless telecommunications providers because “011” has a very high brand recognition in Korea as the premium wireless telecommunications service. Adoption of number portability system could also result in a deterioration of our market share as a result of weakened customer loyalty, increased competition among wireless service providers and higher costs as a result of maintaining the number portability system, increased subscriber deactivations, increased churn rate and higher marketing costs. See “Key Information — Risk Factors — Our businesses are subject to extensive Government regulation and any change in Government policy relating to the telecommunications industry could have a material adverse effect on our results of operations and financial condition”. In February 2004, the MIC imposed a total fine of Won 2.0 billion on us in connection with our marketing efforts related to the number portability system. For details, see “Financial Information — Legal Proceedings — MIC Proceedings”.

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. See “Information on the Company — Law and Regulation — Rate Regulation” and “Key Information — Risk Factors — We are subject to more stringent regulation than our competitors as a result of our market position, which could harm our ability to compete effectively”. Generally, the rates we charge for our services have been declining. In September 1997 and April 2000, we implemented revised rate plans which generally offer rates lower than our previous rates. Effective June 8, 1998, we have been providing a 20% discount for calls made between our cellular customers. Effective May 1, 2001, we implemented a new charge system based on the amount of data that is transmitted to the subscribers’ handsets, with respect to subscribers using our CDMA 1xRTT network. CDMA 1xRTT is an advanced CDMA-based technology which allows transmissions of data at speeds of up to 144 Kbps (compared to a maximum of 64 Kbps for our CDMA networks). After discussions with the MIC, effective January 1, 2003, we reduced our Standard rate plan’s monthly access fee by Won 1,000, included 10 minutes of free air time per month and reduced our peak usage charges from Won 21 to Won 20 per minute. After discussions with the MIC, in October 2003, we reduced our monthly charges for caller ID service from Won 2,000 to Won 1,000. As of April 30, 2005, our standard peak usage rate was approximately 11% higher than those charged by our competitors. We can give no assurance that these rate changes will not negatively affect our results of operations. For more information about the rates we charge, see “Information on the Company — Overview — Revenues, Rates and Facility Deposits”.

Our wireless telecommunications services depend, in part, on our interconnection arrangements with domestic and international fixed-line and other wireless networks. Charges for interconnection affect our revenues and operating results. The MIC determines the basic framework for interconnection arrangements in Korea and has changed this framework several times in the past. We cannot assure you that we will not be adversely affected by future changes in the MIC’s interconnection policies. Under our interconnection agreements, we are required to make payments in respect of calls which originate from our networks and terminate in the networks of other Korean telecommunications 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. See “Information on the Company — Overview — Interconnection”. With respect to the interconnection arrangement for calls from fixed-line networks to wireless networks, for the years 1999 through 2001, fixed-line operators’ payments to wireless network service providers were calculated based on the actual imputed costs in 1998 of the leading wireless network service provider, which is us. For 2002, these payments were calculated based on each wireless operator’s actual imputed costs in 2001. This change reduced the interconnection revenue we received from each call made from a fixed-line network terminating on our network, adversely affecting our interconnection revenue compared to previous years. For 2003, pursuant to a new MIC policy, an operator’s interconnection fees are derived from that operator’s actual interconnection fees for 2001 and actual imputed costs for 2001. The MIC also implemented interconnection charges for calls between wireless network service providers beginning in January 2000, affecting both our revenue and our expenses. These charges were also reduced beginning in January 2002 and in January 2003. On July 9, 2004, the MIC introduced a new method of calculating interconnection payments, based on the terminator’s long-run incremental cost in 2004 and the competitive market situation in the telecommunication service industry of Korea. The LRIC method is designed to calculate costs of interconnection of individual telecommunication service providers within a network using certain models called “bottom-up” and “top-down.” The LRIC method was adopted by other countries such as the United States, the United Kingdom and Japan. The new rates had a negative impact on our operations in this year in the amount of approximately Won 289.2 billion, resulting in an estimated Won 168.7 billion reduction in revenue and Won 120.5 billion increase in interconnection expenses. The Won 120.5 million increases in the interconnection expenses include the increase in the LM interconnection expenses that were paid to fixed-line service providers. For more information about our interconnection revenue and expenses, see “Information on the Company — Interconnection — Domestic Calls”.

The following table sets forth selected information concerning our wireless telecommunications network during the periods indicated:


		Year Ended December 31,

		2002(1)		2003		2004

Outgoing Voice Minutes (In Thousands):(2)
	SK Telecom		37,629,656		42,175,874		43,184,944
	Shinsegi		—		—		—
	Combined SK Telecom and Shinsegi		37,629,656		42,175,874		43,184,944
Average Monthly Outgoing Voice Minutes Per Subscriber:(3)
	SK Telecom		191		197		194
	Shinsegi		—		—		—
	Combined SK Telecom and Shinsegi		191		197		194
Average Monthly Revenue Per Subscriber:(4)
	SK Telecom	W	38,383	W	39,739	W	39,689
	Shinsegi		—		—		—
	Consolidated SK Telecom and Shinsegi(4)(5)		38,383		39,739		39,689


(1)	Excludes information relating to Shinsegi for a period of 12 days, from January 1, 2002 to January 12, 2002. Shinsegi merged into SK Telecom on January 13, 2002.

(2)	Does not include minutes of incoming calls or minutes of use relating the use of text messaging and data services.

(3)	The average monthly outgoing voice minutes per subscriber is computed by dividing the total minutes of outgoing voice usage for the period by the monthly weighted average number of subscribers for the period and dividing the quotient by the number of months in the period. The monthly weighted average number of subscribers is the sum of the average number of subscribers for the months calculated by taking the simple average number of subscribers at the beginning of the month and at the end of the month, divided by the number of months in the period.

(4)	The average monthly revenue per subscriber excludes interconnection revenue and is computed by dividing total initial connection fees, monthly access fees, usage charges for voice and data, international charges, value-added service fees and interest on overdue subscriber accounts (net of telephone tax) for the period by the monthly weighted average number of subscribers for the period and dividing the quotient by the number of months in the period.

(5)	Including interconnection revenue, consolidated average monthly revenue per subscriber was Won 43,958 for 2002, Won 44,546 for 2003 and Won 43,542 for 2004.

Our average monthly outgoing minutes of voice traffic increased by 11.0% in 2002, 12.1% in 2003 and 5.8% in 2004. We believe that this trend principally reflects generally lower overall tariff levels and increased use of wireless telecommunications as a substitute for fixed-line communications. Due to the existing high penetration rate of wireless services in Korea, we expect the rate of increase to be comparatively lower in 2005 and the near future.

Our consolidated average monthly revenue per subscriber increased in 2002 by 5.4% to Won 38,383 compared to Won 36,400 in 2001. Our consolidated average monthly revenue per subscriber also increased by 3.5% to Won 39,739 in 2003 compared to Won 38,383 in 2002. Our consolidated average monthly revenue per subscriber decreased by 0.13% to Won 39,689 in 2004 compared to Won 39,739 in 2003. These changes reflect the net effect of several offsetting trends, including:


	•	reduction of overall tariff by 3.7% in September 2004;

	•	decrease in minutes of use; and


	•	decrease in caller ID rates by 50% that took effect in October 2003.

We cannot assure you that the increases in our average monthly revenue per subscriber experienced in 2002, 2003 and 2004 will continue or that revenue per subscriber will not decrease in future periods.

Operating Expenses and Operating Margins. 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. Operating income represented 30.0% of operating revenue in 2002, 30.2% in 2003 and 23.1% in 2004. In 2002, our operating margin increased, primarily due to an increase in the number of our subscribers and decreases in the number of leased lines and depreciation expenses due to the write-off of Shinsegi’s unused network equipment. Our operating margin increased slightly from 30.0% in 2002 to 30.2% in 2003, primarily due to the fact that our operating revenues increased at a faster rate than our operating expenses. In 2004, our operating margin decreased to 23.1% from 30.2% in 2003, primarily due to an increase in our marketing expenses and interconnection charges we paid. We cannot assure you that our operating margin will not decrease in future periods.

Acquisition of Shinsegi. On April 27, 2000, we completed the acquisition of a 51.2% interest in Shinsegi. In subsequent transactions between March and September 2001, we increased our interest to 70.4%. The results of operations of Shinsegi have been consolidated with our results of operations beginning in April 2000. Shinsegi accounted for 12.8% of our consolidated assets and 22.6% of our consolidated revenue as of and for the year ended December 31, 2001. In January 2002, we acquired the remaining 29.6% interest in Shinsegi which we did not yet own, and merged Shinsegi into SK Telecom on January 13, 2002.

Industry Consolidation. Beginning in 2000, there has been considerable consolidation in the wireless telecommunications industry resulting in the emergence of stronger competitors. In July 2000, KT Corporation acquired a 47.9% interest in KT M.Com and merged KT M.Com into KT Freetel in May 2001. In May 2002, the Government sold its remaining 28.4% stake in KT Corporation. It is widely believed that KT Corporation is likely to operate more efficiently and be managed more effectively and profitably as a privatized business following its privatization. Such consolidations have created large, well-capitalized competitors with substantial financial, technical, marketing and other resources to respond to our business offerings. See “Key Information — Risk Factors — Competition may reduce our market share and harm our results of operations and financial condition”.

On May 1, 2003, we merged with SK IMT, in accordance with a resolution of our board of directors on December 20, 2002 and the approval of shareholders of SK IMT on February 21, 2003. The exchange ratio of common stock between us and SK IMT was 0.11276 share of our common stock with a par value of Won 500 shares to 1 share of common stock of SK IMT with a par value of Won 5,000. Using such exchange ratio, we distributed 126,276 shares of new issued common stock to minority shareholders of SK IMT and we cancelled all shares of SK IMT owned by us and SK IMT upon the merger. The assets and liabilities transferred from SK IMT were accounted for at the carrying amounts of SK IMT. See note 24 of the notes to our consolidated financial statements. The SK IMT merger resulted in an increase in our cash and cash equivalents by Won 328.9 billion and had no impact on our liabilities. Until the date of the merger, SK IMT was not generating any revenue.

On May 23, 2002, we acquired a 9.6% equity interest (29,808,333 shares of common stock) in KT Corporation for Won 1,609 billion. Pursuant to the terms of an agreement between us and KT Corporation dated November 14, 2002, we sold all of our shares of KT Corporation. Under the terms of the agreement, we exchanged 29,808,333 shares of KT Corporation’s common stock for 8,266,923 shares of our common stock and settled the difference in the price in cash on December 30, 2002 and January 10, 2003. The exchange was made at Won 50,900 per share of KT Corporation’s common stock and Won 224,000 per share of our common stock.

On September 2, 2003, we purchased Won 120.0 billion of Hanaro Telecom commercial paper in order to provide Hanaro Telecom with short-term liquidity while it attempted to secure a foreign investor that would inject new capital into the company. The decision to provide liquidity support to Hanaro Telecom was made to protect the value of our stake in Hanaro Telecom, as we held a 1.8% stake in Hanaro Telecom as of December 31, 2003. Following an investment in Hanaro Telecom by a consortium led by AIG and Newbridge, we disposed of the

Hanaro Telecom commercial paper in December 2003. In May 2004, we purchased from Samsung Electronics Co., Ltd. 13,870,000 shares of Hanaro Telecom, representing 3.0% of the outstanding shares of Hanaro for Won 39.3 billion as part of our strategic efforts in consideration of increasing convergence between wireless and fixed-line services. As a result of the acquisition, our equity interest in Hanaro increased to 4.8% as of December 31, 2004, up from 1.8% as of December 31, 2004.

Results of Operations

The following table sets forth selected income statement data, including data expressed as a percentage of operating revenue, for the periods indicated:


	For the Year Ended December 31,

	2002					2003				2004

	(In billions of Won, except percentage data)
Operating Revenue	W	9,324.0		100.00	%	W	10,272.1	100.00	%	W	10,570.6		100.00	%
Operating Expenses		6,526.4		70.00			7,167.0	69.77			8,130.9		76.92
Operating Income		2,797.6		30.00			3,105.1	30.23			2,439.7		23.08
Other Income		259.7		2.79			261.4	2.54			199.4		1.89
Other Expenses		838.5		8.99			612.2	5.96			516.0		4.88

Income Before Income Taxes and Minority Interest		2,218.8		23.80			2,754.3	26.81			2,123.1		20.09
Income Taxes		698.5		7.49			789.0	7.68			629.7		5.96
Minority Interest		(33.1	)	(0.35	)		0.8	0.01			(1.9	)	(0.02	)

Net Income		1,487.2		15.96	%		1,966.1	19.14	%		1,491.5		14.10	%

Depreciation and Amortization(2)	W	1,435.0		15.39	%	W	1,510.5	14.70	%		1,607.5		15.20	%


(1)	Information for the year ended December 31, 2001 includes information for the year ended December 31, 2001 for Shinsegi.

(2)	Excludes the depreciation and amortization allocated to internal research and development costs of Won 108.3 billion, Won 135.8 billion and Won 134.1 billion for the years ended December 31, 2002, 2003 and 2004, respectively.


	*2004 Compared to 2003*

Operating Revenue. Our operating revenue increased by 2.91% to Won 10,570.6 billion in 2004 from Won 10,272.1 billion in 2003 principally reflecting a 2.04% increase in our cellular revenue to Won 10,297.6 billion in 2004 from Won 10,091.8 billion in 2003.

The increase in our cellular revenue was principally due to an increase in our wireless services revenue resulting from an increase in the number of our wireless subscribers, which was partially offset by a decrease in our consolidated average monthly revenue per subscriber as a result of a 16.5% decrease in interconnection revenue due in part to the adjusted interconnection rates announced by the MIC on July 9, 2004, which was partially offset by an increase in the Nate service revenue and the phone mail service revenue. See Information on the Company — Interconnection. Our wireless services revenue increased by 3.97% to Won 8,798.4 billion in 2004 from Won 8,462.7 billion in 2003. The number of our wireless subscribers increased to approximately 18.8 million as of December 31, 2004 from approximately 18.3 million as of December 31, 2003.

On an aggregate basis, interconnection revenue decreased by 16.5% to Won 849.4 billion in 2004 from Won 1,017.1 billion in 2003. The decrease was due in part to the new adjusted interconnection rates announced by the MIC on July 9, 2004, which were applied retroactively.

Our consolidated average monthly revenue per subscriber (excluding interconnection revenue) decreased by 0.13% to Won 39,689 in 2004 from Won 39,739 in 2003. The decrease is principally due to decreases in average monthly revenue per subscriber from call charges and value-added services, which was partially offset by an increase in average monthly revenue per subscriber from wireless Internet services.

Our consolidated average monthly revenue per subscriber from monthly fee and call charges decreased by 5.6% to Won 29,023 in the year ended December 31, 2004, down from Won 30,748 in the corresponding period in 2003. The decrease is primarily due to the reduction in monthly fee effective September 1, 2004.

Our consolidated average monthly revenue per subscriber from wireless Internet services sales increased by 32.5% to Won 8,182 in 2004 from Won 6,177 in 2003. Wireless Internet services sales increased by 38.1% to Won 1,823.4 billion in 2004 (representing 17.7% of our cellular revenue) from Won 1,320.1 billion in 2003, primarily due to the increased number of subscribers who use wireless Internet-enabled handsets.

Our consolidated average monthly revenue per subscriber from value-added services such as caller ID services and ring tone service and other sales decreased by 19.8% to Won 1,594 in 2004 from Won 1,988 in 2003. Value-added services and other sales decreased by 16.4% to Won 355.2 billion in 2004 from Won 424.8 billion in 2003 primarily due to a decrease in caller ID rates from Won 2,000 to Won 1,000 that took effect in October 2003.

Operating Expenses. Our operating expenses in 2004 increased by 13.4% to Won 8,130.9 billion compared to Won 7,167.0 billion in 2003 primarily due to increases in commissions paid, labor costs, depreciation and amortization expenses, leased line expenses, network interconnection expenses and miscellaneous operating expenses, which more than offset decreases in advertising expenses and cost of goods sold.

Commissions increased by 21.5% to Won 2,812.3 billion in 2004 compared to Won 2,314.6 billion in 2003, primarily due to the increase in average number of subscribers by 2.6% during the period, increases in commissions in an effort to retain existing subscribers that were affected by the number portability system introduced in 2004 and to acquire new subscribers. We also increased our marketing activities to maintain our market leadership in 2G and 2.5G, to promote our 3G services and to counter the effects of number portability. In addition, commission paid to our content providers increased as the wireless Internet usage increased.

Labor costs increased by 14.1% to Won 464.8 billion in 2004 compared to Won 407.2 billion in 2003. The increase was primarily due to an increase in performance bonuses and an increase in salaries.

Depreciation and amortization expenses increased by 6.4% to Won 1,607.5 billion in 2004 compared to Won 1,510.5 billion in 2003. The increase in depreciation and amortization expenses was primarily due to the continued expansion of our CDMA 1xRTT network.

Cost of goods sold decreased by 14.5% to Won 479.3 billion in 2004 compared to Won 560.9 billion in 2003. The decrease was primarily due to a decrease in sales of wireless Internet solutions (including software, hardware and service) following the completion of our obligation to provide wireless Internet solutions to Asia Pacific Broadband Wireless Communications (APBW) at the end of 2003.

Leased line expenses increased by 22.4% to Won 375.2 billion in 2004 compared to Won 306.5 billion in 2003 primarily due to higher call volumes.

Network interconnection expenses increased by 18.4% to Won 913.7 billion in 2004 compared to Won 771.6 billion in 2003, primarily due to an increase in interconnection rates and an increase in the level of interconnection fees that we must pay to other operators for calls using their networks, which was partially offset by the higher subscriber numbers. Mobile-to-mobile interconnection expenses increased by 22.7% to Won 644.6 billion in 2004, compared to Won 525.4 billion in 2003. Mobile-to-land interconnection expenses decreased by 12.1% to Won 214.2 billion in 2004, compared to Won 212.9 billion in 2003.

Miscellaneous operating expenses increased by 22.4% to Won 1,125.2 billion in 2004 compared to Won 919.3 billion in 2003 primarily due to increases in taxes and other dues and rent expenses.

Advertising expenses decreased by 6.2% to Won 352.9 billion in 2004 compared to Won 376.4 billion in 2003. We reduced advertising and focused our efforts on managing our distribution network to mitigate the effects of number portability.

Operating Income. Our operating income decreased by 21.4% to Won 2,439.7 billion in 2004 from Won 3,105.1 billion in 2003. Our operating income decreased because our operating expenses increased at a faster rate than our operating revenue, primarily due to an increase in commissions paid in our marketing efforts to keep our market share under the number portability system that were introduced in 2004. Although we expect our marketing expenses to continue to increase in an effort to promote our new services such as W-CDMA and satellite-based digital multimedia broadcasting, we anticipate no significant changes in marketing expenses as a percentage of operating revenue in the year of 2005.

Other Income. Other income, consisting primarily of equity in earnings of affiliates dividend income, commission income and interest income and foreign exchange and translation gains, decreased by 23.7% to Won 199.4 billion in 2004 compared to Won 261.4 billion in 2003, primarily due to decreases in commissions and other miscellaneous income, which were partially offset by an increase in equity in earnings of affiliates.

Other Expenses. Other expenses include interest and discount expenses, loss on disposal of property, equipment and intangible assets and donations. Other expenses decreased by 15.7% to Won 516.0 billion in 2004, compared to Won 612.2 billion in 2003. The decrease was primarily due to decreases in interest and discounts, equity in losses of affiliates and other miscellaneous expenses, which more than offset increases in loss on disposal of investment assets. As a percentage of operating revenue, other expenses decreased to 4.9% in 2004 from 6.0% in 2003.

Income Tax. Provision for income taxes decreased by 20.2% to Won 629.7 billion in 2004 from Won 789.0 billion in 2003. Our effective tax rate in 2004 increased to 29.7% from an effective tax rate of 28.7% in 2003. See note 17 of the notes to our consolidated financial statements.

Net Income. Principally as a result of the factors discussed above, our net income decreased by 24.1% to Won 1,491.5 billion in 2004 from Won 1,966.1 billion in 2003, with net income as a percentage of operating revenues at 14.1% in 2004 as compared to 19.1% in 2003.


	*2003 Compared to 2002*

Operating Revenue. Our operating revenue increased by 10.2% to Won 10,272.1 billion in 2003 from Won 9,324.0 billion in 2002 principally reflecting a 10.2% increase in our cellular revenue to Won 10,091.8 billion in 2003 from Won 9,156.8 billion in 2002.

The increase in our cellular revenue was principally due to an increase in our wireless services revenue resulting from an increase in the number of our wireless subscribers, as well as an increase in our consolidated average monthly revenue per subscriber, which was partially offset by a 2.5% decrease in interconnection revenue. Our wireless services revenue increased by 11.7% to Won 8,462.7 billion in 2003 from Won 7,579.6 billion in 2002. The number of our wireless subscribers increased to approximately 18.3 million as of December 31, 2003 from approximately 17.2 million as of December 31, 2002.

On an aggregate basis, interconnection revenue decreased by 2.5% to Won 1,017.1 billion in 2003 from Won 1,043.2 billion in 2002. The decrease was primarily due to lower interconnection rates in 2003 compared 2002.

Our consolidated average monthly revenue per subscriber (excluding interconnection revenue) increased by 3.5% to Won 39,739 in 2003 from Won 38,383 in 2002. The increase is principally due to increases in average monthly revenue per subscriber from wireless Internet services sales and average monthly revenue per subscriber from value-added services and other sales, which was partially offset by the reduction in rates by 7.3% (based on a reduction in the standard rate plan) from January 2003 and the 10.3% decrease in interconnection rates in 2003 as compared to 2002.

Our consolidated average monthly revenue per subscriber from wireless Internet services sales increased by 66.0% to Won 6,177 in 2003 from Won 3,720 in 2002. Wireless Internet services sales increased by 80.1% to

Won 1,320.1 billion in 2003 (representing 13.1% of our cellular revenue) from Won 732.8 billion in 2002, primarily due to the increased number of subscribers who use wireless Internet-enabled handsets.

Our consolidated average monthly revenue per subscriber from value-added services and other sales increased by 18.3% to Won 1,988 in 2003 from Won 1,681 in 2002. Value-added services and other sales increased by 28.6% to Won 424.8 billion in 2003 from Won 330.4 billion in 2002 primarily due to the increased number of subscribers who use wireless Internet-enabled handsets through which we can also provide value-added and other services.

Operating Expenses. Our operating expenses in 2003 increased by 9.8% to Won 7,167.0 billion compared to Won 6,526.4 billion in 2002 primarily due to increases in commissions paid, labor costs, depreciation and amortization expenses, cost of goods sold, leased line expenses, network interconnection expenses and miscellaneous operating expenses, which more than offset decreases in advertising expenses.

Commissions paid to our authorized dealers increased by 17.8% to Won 2,314.6 billion in 2003 compared to Won 1,964.8 billion in 2002, primarily due to the increase in average number of subscribers by 8.7% during the period, increases in commissions paid to wireless Internet content providers and retail agents, increase in the number of handsets sold and our aggressive marketing activities to maintain our market leadership in 2G and 2.5G services as well as 3G services going forward.

Labor costs increased by 27.9% to Won 407.2 billion in 2003 compared to Won 318.3 billion in 2002. The increase was primarily due to payment of performance bonuses to employees in 2003 and salary increases.

Depreciation and amortization expenses increased by 5.3% to Won 1,510.5 billion in 2003 compared to Won 1,435.0 billion in 2002. The increase in depreciation and amortization expenses was primarily due to the continuing expansion of our CDMA 1xRTT network.

Cost of goods sold increased by 10.2% in 2003 to Won 560.9 billion in 2003 compared to Won 509.1 billion in 2002. The increase was primarily due to an increase in the sales of handsets by SK Teletech.

Leased line expenses increased by 9.4% to Won 306.5 billion in 2003 compared to Won 280.1 billion in 2002 primarily due to higher call volumes.

Network interconnection expenses increased by 2.6% to Won 771.6 billion in 2003 compared to Won 752.1 billion in 2002, primarily due to the higher subscriber numbers, which were only partially offset by a decrease in interconnection rates and a decrease in the level of interconnection fees that we must pay to other operators for calls using their networks. Additionally, we reflected as an expense in the second quarter of 2003 all of the amounts due to be paid to KT Corporation for the years 1998, 1999, 2000 and 2001 pursuant to a cost sharing arrangement regarding the provision of directory assistance services by KT Corporation to our subscribers. We will discuss with KT Corporation the amounts to be paid by us for directory assistance services provided to our subscribers during 2002 and 2003.

Miscellaneous operating expenses increased by 12.4% to Won 919.3 billion in 2003 compared to Won 818.1 billion in 2002 primarily due to increases in research and development expenses, frequency usage fees and communications expenses.

Advertising expenses decreased by 16.1% to Won 376.4 billion in 2003 compared to Won 448.8 billion in 2002, primarily due to the marketing expenses incurred during the World Cup soccer tournament and the Asian Games, both of which were held in Korea in 2002.

Operating Income. Our operating income increased by 11.0% to Won 3,105.1 billion in 2003 from Won 2,797.6 billion in 2002. Our operating income increased at a faster rate than our operating revenue principally because we were able to limit a corresponding increase in our operating expenses, as explained above.

Other Income. Other income, consisting primarily of dividend income, commission income and interest income, increased by 0.8% to Won 261.4 billion in 2003 compared to Won 259.2 billion in 2002, primarily due to increases in dividends, commissions and other income, which were partially offset by decreases in foreign exchange and translation gains and equity in earnings of affiliates.

Other Expenses. Other expenses include interest expenses, foreign exchange and translation losses, loss on disposal and impairment of property, equipment and intangible assets, donations, loss on impairment of long-term investment securities, loss on disposal of investment assets, equity loss in affiliates and miscellaneous expenses. Other expenses decreased by 27.0% to Won 612.2 billion in 2003 compared to Won 838.5 billion in 2002. The decrease was primarily due to decreases on loss on disposal and impairment of property, equipment and intangible assets, loss on impairment of long-term investment securities and donations, which more than offset an increase in interest expense. As a percentage of operating revenue, other expenses decreased to 6.0% in 2003 from 9.0% in 2002.

Income Tax. Provision for income taxes increased by 13.0% to Won 789.1 billion in 2003 from Won 698.5 billion in 2002. Our effective tax rate in 2003 decreased to 28.7% from an effective tax rate of 31.5% in 2002. See note 18 of the notes to our consolidated financial statements.

Net Income. Principally as a result of the factors discussed above, our net income increased by 32.2% to Won 1,966.1 billion in 2003 from Won 1,487.2 billion in 2002, with net income as a percentage of operating revenues at 19.1% in 2003 as compared to 16.0% in 2002.

Liquidity and Capital Resources


	*Liquidity*

We had a working capital (current assets minus current liabilities) deficit of Won 189.7 billion as of December 31, 2002, a working capital deficit of Won 461.4 billion as of December 31, 2003 and a working capital surplus of Won 1,323.8 billion as of December 31, 2004.

We had cash, cash equivalents, short-term financial instruments and trading securities of Won 1,621.2 billion as of December 31, 2002, Won 1,365.1 billion as of December 31, 2003 and Won 1,038.1 billion as of December 31, 2004. We had outstanding short-term borrowings of Won 687.3 billion as of December 31, 2002, Won 786.1 billion as of December 31, 2003 and Won 425.5 billion as of December 31, 2004. As of December 31, 2004, we had availability under unused credit lines of approximately Won 458.5 billion. We funded our investment in shares and exchangeable bonds of KT Corporation in May 2002 with Won 901.7 billion of cash and by incurring Won 1,040.0 billion of short-term debt.

Management believes all the above-mentioned sources provide adequate liquidity to SK Telecom to meet its operation needs in the foreseeable future.

Operating cash flow is our principal source of liquidity. Cash and cash equivalents increased by Won 53.1 billion to Won 370.6 billion in 2004 from Won 317.5 billion in 2003.


	*Cash Flow Analysis*


	Year Ended December 31,									Change

	2002			2003			2004			2002 to 2003					2003 to 2004

	(In billions Won except percentages)
Net Cash Flow from Operating Activities	W	4,267.8		W	3,328.8		W	2,516.0		W	(939.0	)	(22.0	)%	W	(812.8	)	(24.4	)%
Net Cash Used in Investing Activities		(3,063.4	)		(1,414.4	)		(1,469.5	)		1,649.0		(53.8	)%		(55.1	)	(3.9	)%
Net Cash Used in Financing Activities		(1,418.2	)		(2,261.0	)		(968.6	)		(842.8	)	59.4	%		1,292.4		57.2	%
Net Cash Flow due to Changes in Consolidated Subsidiaries		10.7			0.1			(24.8	)		(10.6	)	(99.1	)%		(24.9	)	(249.0	)%

Increase (Decrease) in Cash and Cash Equivalents	W	(203.2	)	W	(346.6	)	W	53.1		W	143.4		70.6	%	W	399.7		115.3	%
Cash and Cash Equivalents at Beginning of Period		867.3			664.1			317.5			(203.2	)	(23.4	)%		(346.6	)	(52.2	)%

Cash and Cash Equivalents at End of Period	W	664.1		W	317.5		W	370.6		W	(346.6	)	(52.2	)%	W	53.1		16.7	%

Net Cash Flow from Operating Activities. Our principal sources of funds have been operating cash flow and debt financing. Net cash flow provided by operations was Won 4,267.8 billion in 2002, Won 3,328.8 billion in 2003 and Won 2,516.0 billion in 2004.

Net Cash from Investing Activities. Net cash used in investing activities was Won 1,469.5 billion in 2004, compared to Won 1,414.4 billion in 2003. Cash inflows from investing activities were Won 599.8 billion in 2004 compared to Won 1,126.6 billion in 2003, and the primary contributor to such inflows related to a decrease in trading securities of Won 240.2 billion in 2004 compared to an increase of Won 137.6 billion in 2003. Cash outflows for investing activities were Won 1,976.6 billion in 2004 compared to Won 2,438.7 billion in 2003. The primary contributors to the overall cash outflows for investing activities were expenditures related to the acquisition of property and equipment, which were Won 1,631.9 billion in 2004 compared to Won 1,647.6 billion in 2003; acquisition of long-term investment securities, which were Won 54.1 billion in 2004 compared to Won 437.1 billion in 2003; and decrease of trading securities, which were Won 240.2 billion in 2004 compared to an increase of Won 137.6 billion in 2003.

Net Cash from Financing Activities. Net cash used in financing activities was Won 1,418.2 billion in 2002, Won 2,261.1 billion in 2003 and Won 968.6 billion in 2004. Cash inflows from financing activities included net increase in issuance of bonds, which provided cash of Won 1,205.7 billion in 2004 compared to Won 688.7 billion in 2003. Cash outflows for financing activities included, among other items, net repayment of short-term borrowing of Won 359.1 billion in 2004 compared to Won 12.1 billion in 2003; repayment of the current portion of long-term debt, which used cash of Won 1,370.6 billion in 2004 compared to Won 925.6 billion in 2003; acquisition of treasury stock, which used cash of Won 2 million in 2004, compared to Won 1,379.3 billion in 2003; and payment of dividends which used cash of Won 478.3 billion in 2004 compared to Won 151.7 billion in 2003.

Depreciation and amortization were Won 1,435.0 billion in 2002, Won 1,510.5 billion in 2003 and Won 1,607.5 billion in 2004.

As of December 31, 2002, we had total long-term debt (excluding current portion and facility deposits) outstanding of Won 2,918.9 billion. As of December 31, 2003, we had total long-term debt (excluding current portion and facility deposits) outstanding of Won 2,263.5 billion. Our long-term debt as of December 31, 2003 included bonds in the amount of Won 2,261.9 billion and bank and institutional borrowings in the amount of Won 1.6 billion. As of December 31, 2004, we had total long-term debt (excluding current portion and facility deposits) outstanding of Won 2,891.8 billion and facility deposits of Won 31.4 billion. Our long-term debt as of December 31, 2003 included, among other items, bonds payable in the net amount of Won 2,261.9 billion, facility

deposits of Won 44.2 billion, long-term payables of Won 564.1 billion and bank and institutional loans of Won 1.6 billion. For a description of our long-term liabilities, see notes 8 and 9 of the notes to our consolidated financial statements.

As of December 31, 2004, substantially all of our foreign currency-denominated long-term debt, which amounted to approximately 17.4% of our total outstanding long-term debt, including current portion, as of such date, was denominated in Dollars. Appreciation of the Won against the Dollar will result in net foreign exchange and translation gains. Changes in foreign currency exchange rates will also affect our liquidity because of the effect of such changes on the amount of funds required for us to make interest and principal payments on our foreign currency-denominated debt.

In addition, in May, July, August and November 2002, we issued Won 500.0 billion, Won 200.0 billion, Won 200.0 billion and Won 300.0 billion principal amount of unsecured and unguaranteed Won-denominated bonds, respectively. The Won 500.0 billion bonds with an annual interest rate of 6% matured in May 2005. The other bonds mature in July 2007, August 2007 and November 2007, and have an annual interest rate of 6%, 6% and 5%, respectively. We used the net proceeds from the sale of these bonds to repay maturing long-term indebtedness. We issued Won-denominated bonds with a principal amount of Won 300.0 billion, Won 150.0 billion and Won 250.0 billion in March, August and November 2003, respectively. These bonds mature in March 2008, August 2006 and November 2006, respectively, and have an annual interest rate of 5.0%. In March, May and December 2004, we issued Won-denominated bonds with a principal amount of Won 150.0 billion, 150.0 billion and 200 billion, respectively. These bonds will mature in April 2009, May 2009 and December 2011, respectively, and have an annual interest rate of 5.0%, 5.0% and 3.0%, respectively. The proceeds of the Won-denominated note offering in March, May and December 2004 were used for our operations. See note 8 of the notes to our consolidated financial statements.

In April 2004, we issued notes in the principal amount of US$300,000,000 with a maturity of seven years and an interest rate of 4.25%. The proceeds from the offering in April 2004 were used to pay maturing debt.

In late May 2004, we issued zero coupon convertible notes with a maturity of five years in the principal amount of US$329,450,000, with an initial conversion price of Won 235,625 per share of our common stock, subject to certain redemption rights. In connection with the issuance of the zero coupon convertible notes, we deposited 1,645,000 shares of our common stock with Korea Securities Depository to be reserved and used to satisfy the note holders’ conversion rights. This will be deemed as the repurchase of treasury stock and cancellation thereof for the purposes of Korean law. We used the proceeds of the zero coupon convertible notes for general corporate purposes, including for measures to improve shareholders’ return in their investment in our common stock through payment of dividends or share repurchase programs. On March 14, 2005, we filed a report with the Financial Supervisory Services to disclose that we adjusted the conversion price of the convertible notes issued in late May 2004 in the principal amount of US$329,450,000 from Won 235,625 to Won 226,566 and made additional deposit of our common stocks accordingly so that the total number of shares of common stock deposited with Korea Securities Depository to satisfy the note holders’ conversion rights increase from 1,644,978 to 1,710,750. Such adjustment of conversion price has been made as a result of the payment of cash dividend in excess of 1% of the market capitalization in the fiscal year of 2004. On January 26, 2005, our board of directors resolved to recommend a cash dividend of Won 9,300 per common share, of which Won 4,100 is ordinary dividend (excluding interim dividend) and Won 5,200 is special dividend.

We also have long-term liabilities in respect of facility deposits received from subscribers, which stood at Won 46.9 billion at December 31, 2002, Won 44.2 billion at December 31, 2003 and Won 31.4 billion at December 31, 2004. These non-interest bearing deposits are collected from some subscribers when they initiate service and returned (less unpaid amounts due from the subscriber for our services) when the subscriber’s service is deactivated. See “Information on the Company — Revenues, Rates and Facility Deposits”.

In June 2002 and December 2002, we sold Won 631.4 billion and Won 650.6 billion, respectively, of accounts receivable resulting from our mobile phone dealer financing plan to Nate First Special Purpose Company and Nate Second Special Purpose Company, respectively, in asset-backed securitization transactions and recorded a loss on disposal of accounts receivable-other of Won 10.9 billion and Won 12.9 billion,

respectively. Nate First Special Purpose Company and Nate Second Special Purpose Company were liquidated in August 2003 and April 2004, respectively.

On May 2, 2003, September 4, 2003 and December 15, 2003, we sold Won 577.3 billion, Won 549.3 billion and Won 498.4 billion of accounts receivable resulting from our 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 and recorded a loss on disposal of accounts receivable-other of Won 10.8 billion, Won 12.9 billion and Won 9.9 billion, respectively. As of December 31, 2004, such special purpose companies are all liquidated. See note 3 of the notes to our consolidated financial statements.


	*Capital Requirements and Resources*

The following table sets forth our actual capital expenditures for 2002, 2003 and 2004 as well as our currently planned capital expenditures for 2005:


		Year Ended (Ending) December 31,

		2002		2003		2004			2005

		(In billions of Won)
CDMA Network		W	175	W	96	W	—		W	—
CDMA 1xRTT Network(2)			1,186		641		728	(1)		500	(1)
Wireless Data(3)			221		175		92			500
W-CDMA(4)			15		204		220			600
Other(3)(5)			428		532		592			—

	Total	W	2,025	W	1,648	W	1,632		W	1,600


(1)	Our capital expenditures for our CDMA network in 2004 and 2005 are included in our actual and estimated capital expenditures, respectively, for our CDMA 1xRTT network.

(2)	Includes upgrades to CDMA 1xEV/DO Network technology which were Won 200 billion for 2002 and Won 36 billion for 2003.

(3)	Consists principally of equipment necessary for the provision of data services. Our estimated wireless data capital expenditures in 2005 include “other” miscellaneous capital expenditures referred to in note (5) below.

(4)	Provision of W-CDMA services commenced on a limited basis in Seoul at the end of 2003.

(5)	“Other” capital expenditure amount includes investments in new process and application infrastructure consisting of a new customer relationship management system, real estate for our headquarters and information technology systems. “Other” capital expenditure amount also includes actual capital expenditures of our consolidated subsidiaries which were Won 61 billion, Won 37 billion and Won 25 billion for 2002, 2003 and 2004, respectively. See note (3) above.

Our actual capital expenditures in 2002 were Won 2,025 billion, primarily for the expansion and upgrading of our CDMA 1xRTT network and for the development and introduction of new wireless data services. Our actual capital expenditures in 2003 were Won 1,648 billion, primarily for the expansion and upgrading of our CDMA 1xRTT network, for our initial investment in the satellite-based digital multimedia broadcasting (DMB) business and for the development and introduction of wireless data services. Our actual capital expenditures in 2004 were Won 1,631.9 billion. Of the Won 1,631.9 billion for capital expenditures in 2004, we spent Won 728.0 billion on capital expenditures related to expansion and improvement of our 95A/ B and CDMA 1xRTT Network; Won 219.7 billion on capital expenditures related to construction of our W-CDMA network and provision of W-CDMA services, which began service on a limited basis in Seoul at the end of 2003; and Won 684.8 billion on other capital expenditures and projects.

We estimate that we will spend approximately Won 1.6 trillion for capital expenditures in 2005 for a range of projects, including primarily for the expansion and improvement of our wireless networks, investments in our wireless Internet-related businesses and the roll-out of our W-CDMA network. The construction of our new headquarters was completed in December 2004. The total contract price for the demolition of existing buildings

on the site and construction of the new building was Won 161 billion. See “Certain Relationships and Related Party Transactions”. We may also make additional capital expenditure investments as opportunities arise. In addition, we may increase, reduce or suspend our planned capital expenditures for 2005 or change the timing and area of our capital expenditure spending from the estimates reflected in the table above in response to market conditions or for other reasons.

We currently plan to spend up to Won 600 billion in 2005 on capital expenditures related to construction of our W-CDMA network and provision of W-CDMA services which began service on a limited basis in Seoul at the end of 2003. Although we developed and launched in March 2005 dual band/dual mode handsets, one of the key factors in a nationwide deployment of W-CDMA, the actual scope and timing of the full nationwide roll-out of our W-CDMA network will depend on other several factors, including the availability of network equipment, ability to overcome technical problems currently affecting W-CDMA performance, regulatory decisions, our assessment of the market opportunities for W-CDMA technology-based services and the competitive landscape in the Korean wireless market. We expect to provide W-CDMA services in the Seoul metropolitan area and other local metropolitan areas of Korea by the end of 2005. At the time we applied for the W-CDMA license, we estimated that the construction of a nationwide W-CDMA network would require capital expenditures amounting to approximately Won 3.1 trillion over a six-year period. We have not subsequently revised or updated this estimate. Accordingly, our actual construction costs are likely to differ significantly from this original estimate. Our actual capital expenditures for the construction of the W-CDMA network will depend upon many factors, including the scope and timing of the network roll-out, whether W-CDMA technology is widely implemented worldwide (which could lower the cost of network equipment) and other factors.

Our future capital expenditures will be fixed after we have reviewed the progress of the introduction and marketability of our W-CDMA service and the competitive market situation. See “Key Information — Risk Factors — W-CDMA technology may require significant capital and other expenditures for implementation which we may not recoup and may be difficult to integrate with our other businesses”.

In September 2003, we entered into an agreement with Mobile Broadcasting Corporation for the purposes of co-owning and launching a satellite for the satellite DMB business. Under the terms of the agreement, SK Telecom is committed to fund 34.7% of the cost of launching and maintaining the operations of the satellite, which is expected to be approximately Won 92.0 billion. We launched the satellite in March 2004. In March 2004, we were assigned by the MIC frequency for satellite DMB. In October 2004, we granted the right to use our satellite, satellite orbit and frequency to TU Media Corp., one of our affiliates, which received a license from the MIC as a satellite DMB provider on December 30, 2004. On May 1, 2005, TU Media Corp. began to provide satellite DMB services.

On March 24, 2005, EarthLink and we completed the formation of SK-EarthLink, a joint venture to market wireless voice and data services in the U.S. It is expected that SK-EarthLink (www.SK-EarthLink.com) will be capitalized with $440 million of partner investments over the next three years. The joint-venture is a non-facilities-based nationwide mobile virtual network operator (“MVNO”) offering cellular voice and data services to U.S. consumers. SK-EarthLink expects to enter into a previously under-served, but rapidly growing wireless data, entertainment, and voice market. SK-EarthLink will leverage our expertise in developing and implementing 3G technology and other cutting-edge applications and EarthLink’s established sales channels, Wi-Fi experience, network data centers and billing capabilities. Each of the Company and EarthLink has a 50 percent voting and economic ownership interests in SK-EarthLink.

In May 2002, the Government sold its remaining 28.4% stake in KT Corporation. By participating in this privatization, we acquired 9.6% of KT Corporation’s common stock and Won 332.0 billion aggregate principal amount of exchangeable bonds issued by KT Corporation exchangeable at our option for 1.8% of KT Corporation’s common stock. We purchased 29,808,333 shares of common stock of KT Corporation for Won 1.6 trillion and bonds exchangeable into 5,589,666 shares of such common stock for Won 332.0 billion. We funded our investment in shares and bonds of KT Corporation in May 2002 with Won 901.7 billion of cash and by incurring Won 1,040.0 billion of short-term debt. On July 16, 2002, we sold all of the exchangeable bonds of KT Corporation which we owned to several Korean institutional investors for an aggregate sale price of Won 340.3 billion. We used the proceeds of the sale to repay our short-term debt and for general corporate

purposes. We exchanged 29,808,333 shares of KT Corporation’s common stock at Won 50,900 per share for 8,266,923 shares of our common stock at Won 224,000 per share and settled the difference of Won 334.5 billion between the aggregate sale and purchase prices in cash on December 30, 2002 and January 10, 2003, under a mutual agreement on stock exchange between us and KT Corporation dated November 14, 2002. Related to these stock exchanges, a loss on exchange of investments in 15,454,659 shares of KT Corporation for 4,457,635 shares of our common stock on December 31, 2002, amounting to Won 47.9 billion, was recorded as a loss on disposal of investments during the year ended December 31, 2002. An impairment loss amounting to Won 44.5 billion, which was related to the investments in

14,353,674 shares of KT Corporation’s common stock as of December 31, 2002, was also recorded during the year ended December 31, 2002. 4,457,635 shares were subsequently cancelled and 3,809,288 shares were designated as treasury stock for use in future mergers and acquisitions transactions and strategic alliances or for other corporate purposes to be determined by us. As a result of the share swap, all cross-shareholdings between KT Corporation and us have been completely eliminated.

On July 22, 2003, we acquired 2,481,310 shares of POSCO common stock held by SK Corporation at a price of Won 134,000 per share in accordance with a resolution of our board of directors dated July 22, 2003. We elected to purchase the shares for strategic reasons in order to address overhang concerns arising from POSCO’s ownership of our shares. As of December 31, 2004, POSCO owned 4.98% of our shares.

From time to time, we may make other investments in telecommunications or other businesses, in Korea or abroad, where we perceive attractive opportunities for investment. From time to time, we may also dispose of existing investments when we believe that doing so would be in our best interest.

As of December 31, 2004, our principal repayment obligations with respect to long-term borrowings, bonds and obligations under capital leases outstanding were as follows for the periods indicated:


Year Ending December 31,	Total

	(In billions of Won)
2005		500.0
2006		800.0
2007		700.0
After 2007		1,499.0

Our research and development expenses have been influenced by the MIC, which makes annual recommendations concerning the level of our research and development spending. Our research and development expenses (including donations to research institutes and educational organizations) equaled 2.7% in 2002, 2.9% in 2003 and 3.2% in 2004, respectively, of operating revenue. See “Operating and Financial Review and Prospects — Research and Development”.

We anticipate that capital expenditures, repayment of outstanding debt and research and development expenditures will represent our most significant use of funds in 2005 and thereafter. To fund our scheduled debt repayment and planned capital expenditures over the next several years, we intend to rely primarily on funds provided by operations, as well as bank and institutional borrowings, and offerings of debt or equity in the domestic or international markets. We believe that these sources will be sufficient to fund our planned capital expenditures for 2005. Our ability to rely on these alternatives could be affected by the liquidity of the Korean financial markets or by government policies regarding Won and foreign currency borrowings and the issuance of equity and debt. Our failure to make needed expenditures would adversely affect our ability to sustain subscriber growth and provide quality services and, consequently, our results of operations.

No commercial bank in Korea may extend credit (including loans, guarantees and purchase of bonds) in excess of 20% of its shareholders’ equity to any one borrower. In addition, no commercial bank in Korea may extend credit exceeding 25% of the bank’s shareholders’ equity to any one borrower and to any person with whom the borrower shares a credit risk.

We generally collect refundable, non-interest bearing deposits from our customers as a condition to activating their service. Subject to the approval of the MIC, we set the amounts to be collected for deposits for

cellular services. Effective February 1, 1996, we generally require cellular subscribers to pay a facility deposit of Won 200,000. These deposits were an important source of interest-free capital for us and historically funded a substantial portion of our capital expenditures. Since 1997, we have been offering existing and new cellular subscribers the option of obtaining facility insurance from the Seoul Guarantee Insurance Company, instead of paying the facility deposit. In order to obtain this facility insurance, subscribers must meet Seoul Guarantee Insurance Company’s credit requirements and pay a Won 10,000 premium for three years of coverage. After three years, we pay the cost of such insurance on the subscriber’s behalf. For each defaulting insured subscriber, Seoul Guarantee Insurance Company reimburses us up to Won 350,000. We refund the facility deposit to any existing subscriber who elects to have facility insurance. As a result of the facility insurance program, we have refunded a substantial amount of facility deposits, and facility deposits decreased from Won 46.9 billion as of December 31, 2002 to Won 44.2 billion as of December 31, 2003 and Won 31.4 billion as of December 31, 2004. We do not expect to have a significant amount of facility deposits available for capital expenditures in the future.

On April 27, 2001, in accordance with the approval of our board of directors, we announced a treasury stock purchase program to acquire 4% of our total outstanding common stock during the period from May 2, 2001 to June 28, 2001 in order to stabilize our stock price. Pursuant to this program, we acquired an aggregate of 3,566,100 shares of our common stock in 2001 for an aggregate of purchase price of Won 789.7 billion. We acquired these shares at market prices on different dates and hold them as treasury stock. On August 11, 2003, we concluded a stock buyback program which we commenced on June 30, 2003. We acquired a total of 2,544,600 shares of our outstanding common stock, all of which were cancelled on August 20, 2003. The total purchase price for the stock buyback was Won 525.2 billion (or an average of approximately Won 206,388 per share), with the price per share ranging from Won 192,000 (on July 24, 2003) to Won 216,000 (on July 15-16, 2003). As a result of the stock buyback and subsequent cancellation of shares, the total number of our outstanding common stock declined from 82,993,404 as of December 31, 2001 to 73,614,308 as of December 31, 2003. On February 20, 2004, we additionally acquired fractional shares totaling 12 shares for Won 2 million, which resulted from the merger with SK IMT Co., Ltd.

In October 2001, in accordance with the approval of our board of directors, we established trust funds with four Korean banks with a total funding of Won 1.3 trillion for the purpose of acquiring our shares at market prices plus or minus five percent. Each of the trust funds has an initial term of three years but is terminable at our option six months after the establishment of the trust fund and at the end of each succeeding six-month period thereafter. While held by the trust funds, our shares are not entitled to voting rights and do not bear dividends. Upon termination of the trust funds, we are required to resell the shares acquired by the trust funds. On November 6, 2001, these funds purchased an aggregate of 2,674,580 of our shares of common stock, or approximately 3.0% of our issued shares, from KT Corporation. On January 31, 2002, these funds purchased from SK Networks an aggregate of 1,367,180 shares of our common stock, or approximately 1.5% of our issued shares. In December 2003, we terminated the trust funds in the amount of Won 318 billion. In October 2004, we extended the trust funds, with a balance of Won 982 billion, for another three years.

The total accrued and unpaid retirement and severance benefits for all of our employees as of December 31, 2004 of Won 80.9 billion was reflected in our consolidated financial statements as a liability, which is net of deposits with insurance companies totaling Won 164.6 billion to fund a portion of the employees’ severance indemnities. See “Information on the Company — Employees” and note 2[m] of the notes to our consolidated financial statements.

Dividends declared on our common stock amounted to Won 151.7 billion, Won 404.9 billion and Won 758.2 billion, respectively, in 2002, 2003 and 2004. In 2004, we amended our articles of incorporation to permit payment of interim dividends in accordance with relevant laws. On July 23, 2004, our board of directors approved the interim dividend rate of Won 1,000 per common share for the first half of fiscal year 2004. The shareholders who are registered in our shareholders registry as of June 30, 2004 were entitled to receive the interim dividends. The interim dividend was paid in August 2004. The total amount of the interim dividend paid was Won 73.6 billion. At the ordinary shareholder’s meeting on March 11, 2005, our shareholders approved a cash dividend of Won 9,300 per common share, of which Won 4,100 is ordinary dividend (excluding interim dividend) and Won 5,200 is special dividend. The cash dividend was paid in April 2005. The overall dividend

payout ratio with respect to dividends to be paid for 2005 is currently expected to be up to 35% of net income from 2005.

Substantially all of our revenue and operating expenses are denominated in Won. We generally pay for imported capital equipment in Dollars.

We did not have any outstanding swap or derivative transactions as of December 31, 2004 other than currency swap agreements and currency forward contracts entered into in the first quarter of 2004 to reduce our foreign currency exposure with respect to our issuance of US$300 million notes on April 1, 2004 and a fixed-to-fixed cross currency swap contract with Credit Suisse First Boston International to hedge the foreign currency risk of unguaranteed US dollar denominated convertible bonds with face amounts of US$329.5 million issued on May 27, 2004. See note 23 of the notes to our consolidated financial statements.

In April 2004, we issued unguaranteed U.S. dollar denominated bonds with face amounts totaling US$300 million at an annual rate of 4.25% for US$297.8 million. The bonds will be repaid in full at its maturity on April 1, 2011. In May 2004, we sold US$329.5 million in zero coupon convertible notes due 2009. These convertible notes are convertible by the holders into shares of our common stock at the rate of Won 235,625 per share. In connection with the issuance of the zero coupon convertible notes, we deposited 1,645,000 shares of our common stock with Korea Securities Depository to be reserved and used to satisfy the note holders’ conversion rights. This will be deemed as the disposition of treasury stock and cancellation thereof for the purposes of Korean law. On March 14, 2005, we filed a report with the Financial Supervisory Services to disclose that we adjusted the conversion price of the convertible notes issued in late May 2004 in the principal amount of US$329.5 million from Won 235,625 to Won 226,566 and made additional deposit of our common stocks accordingly so that the total number of shares of common stock deposited with Korea Securities Depository to satisfy the note holders’ conversion rights increase from 1,644,978 to 1,710,750. Such adjustment of conversion price has been made as a result of the payment of cash dividend in excess of 1% of the market capitalization in the fiscal year of 2004. If (1) the exercise by the holder of the conversion right would be prohibited by Korean law or we reasonably conclude that the delivery of common stock upon conversion of these notes would result in a violation of applicable Korean law or (2) we do not have a sufficient number of shares of our common stock to ratify the conversion right, then we will pay a converting holder a cash settlement payment. In such situations, we intend to sell such number of treasury shares held in trust for us that corresponds to the number of shares of common stock that would have been deliverable in the absence of the 49% foreign shareholding restrictions imposed by the Telecommunications Law or other legal restrictions. As described in the preceding paragraph, we entered into a swap agreement to reduce our exposure with respect to cash settlement payments exceeding the proceeds from sales of treasury shares held in trust.

We may consider in the future entering into additional currency swap agreements, currency forward contracts transactions and other arrangements solely for hedging purposes.

Contractual Obligations and Commitments

The following summarizes our contractual cash obligations at December 31, 2004, and the effect such obligations are expected to have on liquidity and cash flow in future periods:


	Payments Due by Period

			Less Than						After
	Total		1 Year		1-3 Years		4-5 Years		5 Years

	(In billions of Won)
Bonds(1)	W	3,499.0	W	500.0	W	1,500.0	W	985.9	W	513.1
Long-term Borrowings		—		—		—		—		—
Capital lease Obligations		—		—		—		—		—
Operating Leases		—		—		—		—		—
Purchase Obligations		—		—		—		—		—
Other Long-term Payables(2)		650.0		—		90.0		240.0		320.0

Total Contractual Cash Obligations(3)	W	4,149.0	W	500.0	W	1,590.0	W	1,225.9	W	833.1


(1)	In March 2004, we issued Won-denominated notes in the principal amount of Won 150.0 billion with a maturity of five years and an interest rate of 5.0%. In April 2004, we issued notes in the principal amount of US$300,000,000 with a maturity of seven years and an interest rate of 4.25%. In May 2004, we issued Won-denominated notes in the principal amount of Won 150.0 billion with a maturity of five years and an interest rate of 5.0%. The proceeds of the offerings in March and April 2004 were used to pay maturing debt. The proceeds of the offering in May 2004 were used for our operations. In late May 2004, we sold US$329.5 million in zero coupon convertible notes due 2009. We intend to use the proceeds of the zero coupon convertible notes for general corporate purposes, including for measures to improve shareholders’ return in their investment in our common stock through payment of dividends or share repurchase programs.

(2)	Related to acquisition of IMT license. See note 2(i) of the notes to our consolidated financial statements.

(3)	This amount does not include our future investments in the CDMA market in Vietnam through our subsidiary SLD Telecom Pte. Ltd. under a business cooperation contract with Saigon Post & Telecommunication Service Corporation. See “Information on the Company — Business Overview — Other Investments and Relationships” and “Operating and Financial Review and Prospects — Off Balance Sheet Arrangements”.

(4)	See note 2[m] of the notes to our consolidated financial statements for the expected payments of severance indemnity obligations.

See note 20 of the notes to our consolidated financial statements for details related to our other commitments and contingencies.

Subsequent Note Obligations


	*Unguaranteed Domestic Bonds due March 18, 2010*

We issued unguaranteed domestic bonds with face amounts totaling Won 200,000 million on March 18, 2005 at an annual rate of 4%. These domestic bonds will be repaid in full at its maturity on March 18, 2010.

Under the terms of certain of our debt obligations, our ability to grant security interest in certain of our property is limited, which may affect our ability to borrow funds in the future.

Inflation

We do not consider that inflation in Korea has had a material impact on our results of operations in recent years. According to data published by The Bank of Korea, annual inflation in Korea was 2.7% in 2002, 3.6% in 2003 and 3.0% in 2004.

U.S. GAAP Reconciliation

Our consolidated financial statements are prepared in accordance with Korean GAAP, which differs in certain significant respects from U.S. GAAP. For a discussion of significant differences between Korean GAAP and U.S. GAAP, see notes 30 and 31 of our notes to consolidated financial statements.

Our net income in 2002 under U.S. GAAP is lower than under Korean GAAP by Won 186.0 billion, primarily due to differences in the treatment of nonrefundable activation fees and loss on impairment of investment securities which were partially off-set by non-amortization of goodwill under U.S. GAAP. Our losses on impairment of investment securities for the year ended December 31, 2002 were higher by Won 252.0 billion under U.S. GAAP due to differences in the treatment of write-down for declines of fair value. Such write-downs were made in connection with securities held in Powercomm and Hanaro Telecom. See note 3 of our notes to consolidated financial statements. Our net income in 2003 under U.S. GAAP is higher than under Korean GAAP by Won 90.6 billion, primarily due to non-amortization of goodwill under U.S. GAAP and capitalization under U.S. GAAP of interest expense related to tangible assets, which were offset in part by difference in treatment of non-refundable acquisition fees, deferred income taxes and intangible assets. Our net income in 2004 under U.S. GAAP is higher than under Korean GAAP by Won 61.6 billion, primarily due to non-amortization of goodwill under U.S. GAAP which was partially offset by loss on valuation of currency swap.

Our shareholders’ equity at December 31, 2002 under U.S. GAAP is higher than under Korean GAAP by Won 124.3 billion primarily due to the differing treatment of loss on impairment of investment securities, minority interest in equity of consolidated affiliates and cancellation of amortization of goodwill. Our shareholders’ equity at December 31, 2003 under U.S. GAAP is higher than under Korean GAAP by Won 920.8 billion primarily due to increases from differing treatment of loss on impairment of investment securities and cancellation of amortization of goodwill, which were partially offset by decreases from differing treatment of non-refundable acquisition fees and minority interest of equity in consolidated affiliates. Our shareholders’ equity at December 31, 2004 under U.S. GAAP is higher than under Korean GAAP by Won 1,031.3 primarily due to cancellation of amortization of goodwill which was partially offset by nonrefundable activation fees.

On January 17, 2003, the FASB issued Interpretation No. 46 (“FIN 46”) — “Consolidation of Variable Interest Entities”, which addresses consolidation by business enterprises where equity investors do not bear the residual economic risks and rewards. These entities have been commonly referred to as “Special purpose entities (“SPEs”).” The underlying principle behind the new Interpretation is that if a business enterprise has the majority financial interest in an entity, which is defined in the guidance as a variable interest entity, the assets, liabilities and results of the activities of the variable interest entity should be included in the consolidated financial statements with those of the business enterprise. The Interpretation also explains how to identify variable interest entities and how an enterprise should assess its interest in an entity when deciding whether or not it will consolidate that entity. In December 2003, the FASB released a revision of FIN No. 46 (“FIN No. 46R”) in which the calculation of expected losses and expected residual returns have been altered to reduce the impact of decision maker and guarantor fees. In addition, FIN No. 46R changes the definition of a variable interest. Certain special purpose companies (SPC) established by us have been consolidated from the date of their establishment (See note 30[q] of our consolidated financial statements for the years ended 2002, 2003 and 2004). We, as a foreign private issuer, applied either FIN 46 or FIN 46R to variable interest entities (“VIEs”) created after January 31, 2003 and the Company fully adopted FIN 46R as of June 30, 2004. The adoption of this Interpretation did not have a significant impact on our consolidation financial position or results of operations.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an Amendment of ARB No. 43, Chapter 4.” SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. The Statement is effective for inventory costs incurred during fiscal year beginning after June 15, 2005. Management does not expect this statement will have a material impact on our consolidated financial position or results of operations.

In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payments” of SFAS 123R. This statement eliminates the option to apply the intrinsic value measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” to stock compensation awards issued to employees. Rather, SFAS 123R requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-data fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award (usually the vesting period). SFAS 123R applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. SFAS 123R will be effective for our fiscal year ending June 30, 2006. Management does not expect that adoption of this statement will have a material impact on our consolidated financial position or results of operations.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nomonetary Assets — an amendment of APB Opinion No. 29” (“SFAS 153”), which amends Accounting Principles Board Opinion No. 29, “Accounting for Nonmonetary Transactions” to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for nonmonetary assets exchanges occurring in fiscal periods beginning after June 15, 2005. Management does not anticipate that the adoption of this statement will have a material effect on our consolidated financial position or results of operations.

Significant Changes in Korean GAAP

On January 1, 2003, the Company and its subsidiaries adopted SKAS No. 2 through No. 9, except for SKAS No. 6, which was early adopted in 2002. As a result, we reclassified the accounts relating to securities as explained in note 2[f] of our consolidated financial statements for the years ended 2002, 2003 and 2004, and changed the accounting policy for capitalization of interest and other financing costs to charge such interest expense and other financing cost to current operations as incurred as explained in notes 2[h] and 2[i] to our consolidated financial statements for the years ended December 31, 2002, 2003 and 2004. If financing costs had been capitalized, our consolidated net income for the year ended December 31, 2003 would have increased by Won 32.3 billion (net of income tax effect of Won 13.6 billion). In addition, in accordance with the application of SKAS No. 3, “Intangible Assets”, effective from January 1, 2003 organization costs which were recorded in intangible assets through 2002, are charged to expenses as incurred and the cumulative effect of this accounting change was charged to beginning retained earnings as of January 1, 2003.

On January 1, 2004, we adopted SKAS No. 10, No. 12 and No. 13. Such adoptions of new SKAS did not have an effect on our consolidated financial position as of December 31, 2004 or our consolidated ordinary income and net income for the year ended December 31, 2004.

Critical Accounting Policies, Estimates And Judgments

Our consolidated financial statements are prepared in accordance with Korean GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgments including those related to revenue recognition, allowances for doubtful accounts, inventories, useful lives of property and equipment, investments, employee stock option compensation plans and income taxes. We base our estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We also provide a summary of significant differences between accounting principles followed by us and our subsidiaries and U.S. GAAP. We believe that of our significant accounting policies, the following may involve a higher degree of judgment or complexity:


	*Revenue Recognition*

Our revenues are principally derived from telecommunications service revenue including data services and wireless handset sales. Telecommunications service consists of fixed monthly charges, usage-related charges and non-refundable activation fees. Fixed monthly charges are recognized in the period earned. Usage-related charges are recognized at the time services are rendered. Non-refundable activation fees and costs are recognized when the activation service was performed.

Our subsidiaries also sell wireless handsets to customers and such sales are recognized at the time products are delivered.


	*Allowances for Doubtful Accounts*

An allowance for doubtful accounts is provided based on a review of the status of individual receivable accounts at end of the year. We maintain allowances for doubtful accounts for estimated losses that result from the inability of our customers to make required payments. We base our allowances on the likelihood of recoverability of accounts receivable based on past experience and taking into account current collection trends that are expected to continue. If economic or specific industry trends worsen beyond our estimates, we increase our allowances for doubtful accounts by recording additional expenses.


	*Inventories*

Inventories are stated at the lower of cost, determined using the moving average method, or market value. Inventories consist of supplies for wireless telecommunications facilities, handsets and raw materials for handsets.


	*Estimated Useful Lives and Impairment of Long-lived Assets*

We estimate the useful lives of long-lived assets in order to determine the amount of depreciation and amortization expense to be recorded during any reporting period. The useful lives are estimated at the time the asset is acquired and are based on historical experience with similar assets as well as taking into account anticipated technological or other changes. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation and amortization expense in future periods.

Alternatively, these technological changes could result in the recognition of an impairment charge to reflect the write-down in value of the asset. We review these types of assets for impairment annually, or when events or circumstances indicate that the carrying amount may not be recoverable over the remaining lives of the assets. In assessing impairments, we use cash flows that take into account management’s estimates of future operations.


	*Impairment of Investment Securities*

When the declines in fair value of individual available-for-sale and held-to-maturity securities below their acquisition cost are other than temporary and there is objective evidence of impairment, the carrying value of the securities is adjusted to their fair value with the resulting valuation loss charged to current operations.

As part of this review, the investee’s operating results, net asset value and future performance forecasts as well as general market conditions are taken into consideration. If we believe, based on this review, that the market value of an equity security or a debt security may realistically be expected to recover, the loss will continue to be classified as temporary. If economies or specific industry trends worsen beyond our estimates, valuation losses previously determined to be recoverable may need to be charged as an impairment loss in current operations.

Significant management judgment is involved in the evaluation of declines in value of individual investments. The estimates and assumptions used by management to evaluate declines in value can be impacted by many factors, such as the financial condition, earnings capacity and near-term prospects of the company in which we have invested and, for publicly-traded securities, the length of time and the extent to which fair value has been less than cost. The evaluation of these investments is also subject to the overall condition of the economy and its impact on the capital markets.


	*Employee Stock Option Compensation Plan*

We adopted the fair value based method of accounting for the employee stock option compensation plan. The plan was established, effective as of March 17, 2000, to reward the performance of management who have contributed, or have the ability to contribute, significantly to our company. 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, we exclude the volatility factor in estimating the value of our stock options, 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 life of the option, dividends on the stock, or the risk-free interest rate.


	*Income Taxes*

Current tax expense is determined based on taxable income for the year computed using prevailing tax rates.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for deductible temporary differences to the extent that it is expected that taxable income will be available in future periods against which the deductible temporary differences can be utilized.

Deferred tax is calculated at the tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the statement of income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also charged or credited directly to equity.

Deferred tax assets and liabilities are presented on the balance sheet as a non-current number.

Research and development


	*Overview*

In conformity with the MIC’s guidance, we have maintained a high level of spending on research and development activity. Prior to 1996, the majority of our research and development expense consisted of the MIC-directed donations to several Korean research institutes and educational organizations. More recently, we have sharply increased our spending for our internal research activity resulting in such amounts exceeding our spending on external research. We believe that we must maintain a substantial in-house technology capability to achieve our strategic goals.

The following table sets forth our annual research and development expenses:

As of and For the Year Ended

December 31,

2002

2003

2004

(In billions of Won)

Internal R&D Expenses

194.3

235.8

267.1

External R&D Expenses

59.0

64.4

69.0

Total R&D Expenses

253.3

300.2

336.1

The MIC has the statutory power to recommend levels of spending by telecommunications service providers on research and development activity and the allocation of expenditures between internal and external research. In practice, the MIC has issued guidelines regarding the amount and allocation of research spending. In its May 1995 guidelines, the MIC recommended that our minimum level of total research and development spending (set as a percentage of budgeted revenue and calculated according to MIC guidelines which differ from our accounting treatment of such expenses) be: 9.0% from 1995 through 1997; 9.5% for 1998; and 10.0% for 1999 through 2001. With respect to the level of contribution specifically for external research and development, in July 1998, the MIC reduced the recommended minimum level of contribution to the MIC-run Fund for Development of Information and Telecommunications to 1.5% from 2.0%. In 2001, the recommended minimum level of contribution was further reduced to 1.0%. In 2002, the contribution became mandatory, and the required minimum level of contribution was further reduced to 0.75%. In 2003 and 2004, the required minimum level of contribution is 0.75%, the same as 2002. We are not obligated to make donations to any other external research institutes.


	*Internal Research and Development*

The main focus of our internal research and development activity is the development of 3G technologies and services and value-added technologies and services for our CDMA network, such as wireless data communications. We spent approximately Won 267.1 billion on internal research and development in 2004.

Our internal research and development activity is centered at a research center with state-of-the-art facilities and equipment established in January 1999 in Bundang-gu, Sungnam-si, Kyunggi-do, Korea. As of December 31, 2004 our research center housed 522 research engineers (including both full time and temporary research engineers). Their work focuses on cell planning, network management, digital wireless technologies, multimedia, information processing and other wireless telecommunications areas. Our research center includes a team that is helping to develop a fourth generation wireless technology, which is expected to enable wireless data transmissions at speeds of up to 155 Mbps, 70 times faster than W-CDMA technology.

Each business unit has its own research team that can concentrate on specific short-term research needs. Such research teams permit our research center to concentrate on long-term, technology-intensive research

projects. We aim to establish strategic alliances with selected domestic and foreign companies with a view to exchanging or jointly developing technologies, products and services.


	*External Research and Development*

In addition to conducting research in our own facilities, we have been a major financial supporter of other Korean research institutes, and we have helped coordinate the Government’s effort to commercialize the CDMA digital technology. We do not have any independently-owned intellectual property rights in the technologies or products developed by any external research institute.

OFF BALANCE SHEET ARRANGEMENTS

We have sold certain receivables in 2002 and 2003 in five separate transactions described under “— Liquidity and Capital Resources — Liquidity” to Nate First Special Purpose Company, Nate Second Special Purpose Company, Nate Third Special Purpose Company, Nate Fourth Special Purpose Company and Nate Fifth Special Purpose Company in asset-backed securitization transactions. Under Korean GAAP, we accounted for these transactions as sales of the receivables to the special purpose companies. See note 3 of the notes to our consolidated financial statements. Under U.S. GAAP, we are required to consolidate these entities as these entities do not meet the qualifications for a qualifying special purpose entity. See “— U.S. GAAP Reconciliation” and note 30 of our notes to consolidated financial statements.

PaxNet Co. Ltd., our subsidiary, has guaranteed the repayment of the borrowings of Finger Co., Ltd., a former affiliated company of ours. The outstanding balance of such guarantee as of December 31, 2004 was approximately Won 332 million.

SLD Telecom, the Company’s overseas subsidiary, entered into a business cooperation contract with Saigon Post & Telecommunication Services Corporation to establish cellular mobile communication services and provide CDMA service throughout Vietnam. In accordance with this contract, in the event that the cash inflow for the Business is insufficient to cover the cash outflow necessary to cover the joint expenditure of the Business (“cash shortfall”), SLD Telecom and Saigon Post & Telecommunication Services Corporation will contribute the necessary funds to Business and bear additional cash shortfalls according to their gross profit sharing ratios at that time. With respect to the Company’s involvement in the Business, the Company’s maximum exposure to loss was approximately Won 58.6 billion as of December 31, 2004.

In accordance with the resolution of our board of directors dated January 26, 2005, we and EarthLink, Inc., an Internet service provider in the U.S., agreed to establish “SK-EarthLink”, a joint venture company, in the U.S. in February 2005 in order to provide wireless telecommunication services across the U.S. We, via SK Telecom USA Holdings, Inc., our wholly-owned subsidiary in the U.S., will invest US$220 million for a 50% equity interest in the joint venture company from 2005 through 2007.

Item. 6 Directors, Senior Management and Employees

DIRECTORS AND SENIOR MANAGEMENT

Our board of directors has ultimate responsibility for the management of our affairs. Under our articles of incorporation, our board is to consist of at least three but no more than twelve directors, more than a half of whom must be outside directors. We currently have a total of eleven directors, seven of whom are outside directors. We elect our directors at a general meeting of shareholders with the approval of at least a majority of those shares present or represented at such meeting. Such majority must represent at least one-fourth of our total issued and outstanding shares with voting rights.

As required under relevant Korean laws and our articles of incorporation, we have a committee for recommendation of outside directors within the board of directors or Recommendation Committee. Outside directors are appointed from among those candidates recommended by the Recommendation Committee.

The term of offices for directors is until the close of the third annual general shareholders meeting convened after he or she commences his or her term. Our directors may serve consecutive terms. Our shareholders may remove them from office by a resolution at a general meeting of shareholders adopted by the holders of at least two-thirds of the voting shares present or represented at the meeting, and such affirmative votes also represent at least one-third of our total voting shares then issued and outstanding.

Representative directors are directors elected by the board of directors with the statutory power to represent our company.

The following are the names and positions of our standing and non-standing directors. The business address of all of our directors is the address of our registered office at 11, Euljiro 2-ga, Jung-gu, Seoul 100-999, Korea.

Standing directors are our full-time employees and executive officers, and they also comprise the senior management, or the key personnel who manage us. Their names, date of birth and positions at our company and other positions are set forth below:

Other Principal

Director

Expiration

Directorships

Name

Date of Birth

Since

of Term

Position

and Positions

Business Experience

Jung Nam Cho

Nov. 20, 1941

1995

2007

Vice-Chairman and Representative Director

President & COO, SK Telecom

Shin Bae Kim

Oct. 15, 1954

2002

2008

CEO and Representative Director

Chairman, Korea Association of RFID/USN

Head of Strategic Planning Group, Shinsegi Telecomm; Director, SK Telecom; Senior Vice President, SK Telecom; Director, KORMS

Bang Hyung Lee

Aug. 20, 1955

2005

2008

Executive Vice- President, Chief Marketing Officer and Head of Business Center

Head of Internet Business Group, SK Telecom; Head of Marketing Group, SK Telecom; Senior Accountant, Deloitte Haskin & Sells, USA

Sung Min Ha

Mar. 24, 1957

2004

2007

Senior Vice President and Chief Financial Officer

Representative Director, SK Capital

Head of Strategic Planning Group, SK Telecom; Director, SK Telink; Auditor, SK C&C; Chairman and Representative Director, SLD Telecom; Auditor, SK Teletech

Our current non-standing directors are:

Sang Koo Nam

Aug. 20, 1946

1998

2007

Outside Director

Professor, Korea University

University of Pennsylvania, MBA (1975), Ph.D. (1981); President, Korean Financial Association

Sang C. Lee

Jan. 24, 1941

1999

2008

Outside Director

IT Consultant

Chairman, Communication Network Interface, Inc.; Chairman and CEO, Spectron Corp., President, Scovill Fasteners, Inc.; Director of Organization, ITT Worldwide Corp.; Vice President, ITT Asia Pacific Corp.

Other Principal

Director

Expiration

Directorships

Name

Date of Birth

Since

of Term

Position

and Positions

Business Experience

Jae Seung Yoon

Nov. 9, 1962

2002

2008

Outside Director

CEO & Representative Director; Daewoong Pharmaceutical Co., Ltd.; Vice-president, Insung Information Co., Ltd.

Public Prosecutor, The Seoul/Busan District Public Prosecutors’ Office; Auditor and Vice President, Daewoong Pharmaceutical Co., Ltd.

Yong Woon Kim

Oct. 4, 1943

2003

2006

Outside Director

Non-Standing Auditor, Pohang University of Science and Technology

Senior Executive Vice President (Legal Department, Seoul Office, Investment and Finance) and Director, POSCO; Standing Advisor, POSCO Research Institute

Dae Sik Kim

Jan. 11, 1955

2005

2008

Outside Director

Professor, Hanyang University; Committee Member, MOFE Advisory Committee on Financial Development

University of Pennsylvania, MBA (1981), Ph.D. (1987)

Dae Kyu Byun

Mar. 8, 1960

2005

2008

Outside Director

CEO & Representative Director, Humax Co., Ltd.; Head Vice- President, Korea Venture Business Association

Director, the Federation of Korea Information Industries; Representative Director, Guin Co.; Co-founder, Venture Leaders Club

Seung Taik Yang

Oct. 24, 1939

2005

2008

Outside Director

President, Tong-Myung University of Information Technology

Polytechnic Institute of Brooklyn, Ph.D.; 7th Minister, Ministry of Information and Communication

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

In February 2004, certain members of our board of directors and executive officers resigned following a finding of accounting misconduct at SK Networks and the resulting movement to improve corporate governance in companies in the SK Group. The resignations were tendered by Mr. Tae Won Chey, former non-standing director of SK Telecom and chairman and CEO of SK Corporation, Mr. Kil Seung Son, former Chairman, Chief Executive Officer and Representative Director of SK Telecom and representative director of SK Networks and non-standing director of SK Corporation, Mr. Jae Won Chey, former executive vice president of SK Telecom and Mr. Moon Soo Pyo, former president of SK Telecom. None of these resignations were related to any allegations of wrongdoing in connection with their role in our business, and SK Telecom was not implicated in any of the charges against SK Network’s management. For details of the charges against Mr. Tae Won Chey and Mr. Kil Seung Son, see “Key Information — Risk Factors — Financial difficulties and charges of financial irregularities at our affiliate, SK Networks (formerly SK Global), may cause disruptions in our business”.

COMPENSATION OF DIRECTORS AND OFFICERS

The aggregate of the remuneration paid and in-kind benefits granted to the directors (both standing directors, who also serve as our executive officers, and non-standing directors) during the year ended December 31, 2004 totaled approximately Won 4.3 billion.

Remuneration for the directors is determined by shareholder resolutions. Severance allowances for directors are determined by the board of directors in accordance with our regulation on severance allowances for officers, which was adopted by shareholder resolutions. The regulation provides for monthly salary, performance bonus, severance payment and fringe benefits. The amount of performance bonuses is independently decided by a resolution of the board of directors.

In March 2001 and 2002, pursuant to the resolutions of the shareholders, and in accordance with our articles of incorporation, certain of our directors and officers were granted options to purchase our common shares. 42 and 70 officers, respectively, in 2001 and 2002, were granted options to purchase 43,820 and 65,730 common shares. The exercise price for the shares are Won 211,000 and Won 267,000, respectively, for 2001 and 2002. Each stock option agreement also provides for adjustments to the amount and exercise price of the shares in cases where the share price may become diluted as a result of issuance of new shares, stock dividends or mergers. The officers may exercise their options during a two-year period starting from March 2004 (for shares granted in 2001) or from March 2005 (for shares granted in 2002). The board of directors may, by resolution, cancel any director’s or officer’s stock options under certain circumstances. Since 2003, none of our directors and officers were granted options to purchase our common shares.

The following table shows the share allotment for the directors under our 2001 and 2002 stock option program. There has been no stock option program since 2003.


				Number of Shares
				Allotted						Number of
										Options
Name		Position		2002		2003		2004		Exercised

Jung Nam Cho			Director		6,150		0		0		0
Shin Bae Kim			Director		1,650		0		0		0
Bang Hyung Lee			Director		1,620		0		0		0
Sung Min Ha			Director		690		0		0		0
Sang Koo Nam			Outside Director		1,000		0		0		0
Sang C. Lee			Outside Director		1,000		0		0		0
Jae Seung Yoon			Outside Director		1,000		0		0		0
Dae Kyu Byun			Outside Director		1,000		0		0		0
Seung Taik Yang			Outside Director		0		0		0		0
Dae Sik Kim			Outside Director		1,000		0		0		0
Yong Woon Kim			Outside Director		0		0		0		0
Other Officers					49,620		0		0		0

	Total				65,730		0		0		0

BOARD PRACTICES

Termination of Directors, Services

Directors are given a retirement and severance payment upon termination of employment in accordance with our internal regulations on severance payments. Upon retirement, directors who have made significant contributions to our company during their term may be appointed to serve either as an advisor to us or as an officer of an affiliate company.

Audit Committee

Under relevant Korean laws and our articles of incorporation, we are required to have an audit committee under the board of directors. The committee is composed of at least three members, two-third of whom must be

outside directors independent with respect to applicable rules. They are appointed annually by a resolution of the board of directors. They are required to:


	•	examine the agenda for the general meeting of shareholders;

	•	examine financial statements and other reports to be submitted by the board of directors to the general meeting of shareholders;

	•	review the administration by the board of directors of our affairs; and

	•	examine the operations and asset status of us and our subsidiaries.

In addition, the audit committee must appoint independent certified public accountants to examine our financial statements. An audit and review by certified public accountants of our financial statements is required for the purposes of a securities report. Listed companies must provide such report on an annual, semi-annual and quarterly basis to the Financial Supervisory Commission of Korea and the KRX.

Our audit committee is composed of 3 outside directors: Sang Koo Nam, Dae Sik Kim and Yong Woon Kim, each of whom must be financially literate and independent under the rules of the New York Stock Exchange as applicable. The board of directors has determined that Dae Sik Kim is an “audit committee financial expert” as defined under the applicable rules of the Securities and Exchange Commission. See “Audit Committee Financial Expert”.

Outside Director Nomination Committee

This committee is devoted to recommending outside directors for the board of directors. The objective of the committee is to help promote fairness and transparency in the nomination of candidates for these positions. The board of directors decide from time to time who will comprise the members of this committee.

In addition, we have the following committees that make recommendations to our board of directors.

Capex review committee

This committee is responsible for reviewing our business plan (including the budget). It also examines major capital expenditure revisions, and routinely monitors capital expenditure decisions that have already been executed. The board of directors decide from time to time who will comprise the members of this committee.

Compensation review committee

This committee oversees our overall compensation scheme for the Chief Executive Officer and directors. The committee consists of three outside directors and is in charge of reviewing the criteria for and levels of directors’ compensation packages and benefits. The board of directors decide from time to time who will comprise the members of this committee.

Remuneration

We do not have an independent internal remuneration committee. Remuneration for the directors and officers are determined by shareholder resolutions. Severance allowances for directors are determined by the board of directors in accordance with our internal regulation on remuneration of officers, which was also adopted by shareholder resolutions and provides for monthly salary, performance bonus, severance payment and fringe benefits. The amount of performance bonuses is independently decided by a resolution of the board of directors. The regulation on payment of remuneration to company officers also provides for a special contribution bonus upon retirement, which provide for additional compensation in addition to the basic severance package to any officer or director who during his term of service makes special contributions to the company. We may also reimburse our outside directors for expenses they incurred in performance of their services. See “— Compensation of Directors and Officers”. We are currently receiving consulting services on creating a remuneration committee under the Board of Directors.

Differences in Corporate Governance Practices

Pursuant to the rules of the New York Stock Exchange applicable to foreign private issuers like us that are listed on the New York Stock Exchange, we are required to disclose significant differences between the New York Stock Exchange’s corporate governance standards and those that we follow under Korean law. The following is a summary of such significant differences.


NYSE Corporate Governance Standards		SK Telecom Corporate Governance Practice


Director Independence

Listed companies must have a majority of independent directors.		Of the 11 members of our board of directors, 7 of them are independent directors.

Executive Session

Listed companies must hold meetings solely attended by non-management directors to more effectively check and balance management directors.		Our Audit Committee comprising solely of three members of our independent directors holds meetings whenever there are matters related to management directors, and such meetings are generally held once every month.

Nomination/ Corporate Governance Committee

Listed companies must have a nomination/corporate governance committee composed entirely of independent directors.		Although we do not have a separate nomination/ corporate governance committee, we maintain an Independent Director Recommendation Committee composed of independent directors and management directors.

Audit Committee

Listed companies must have an audit committee that satisfied the requirements of Rule 10A-3 under the Exchange Act.		We maintain an Audit Committee comprised solely of three independent directors.

Audit committee additional requirements

Listed companies must have an audit committee that is composed of more than three directors.		Our Audit Committee has three independent directors.
Shareholder Approval of Equity Compensation Plan

Listed companies must allow its shareholders to exercise their voting rights with respect to any material revision to the company’s equity compensation plan.		We currently have two equity compensation plans. A stock option plan for officers and directors and employee stock ownership plan for employees (“ESOP”). Our Articles of Incorporation provides for all the relevant matters relating to such compensation scheme, amendment of which is subject to shareholder’s approval while the matters relating to ESOP are not subject to such approval under Korean law.

Corporate Governance Guidelines

Listed companies must adopt and disclose corporate governance guidelines.		Although we do not maintain separate corporate governance guidelines, we are in compliance with the Korean Commercial Law in connection with such matter, including the governance of the board of directors.


NYSE Corporate Governance Standards		SK Telecom Corporate Governance Practice

Code of Business Conduct and Ethics

Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.		We have adopted a Code of Business Conduct and Ethics for all of our directors, officers and employees and such code is also available on our website at www.sktelecom.com.

EMPLOYEES

The following table sets forth the numbers of our regular employees, temporary employees and total employees as of the dates indicated:


	Regular		Temporary
	Employees		Employees		Total

December 31, 2002		4,641		1,600		6,241
December 31, 2003		5,447		1,474		6,921
December 31, 2004		6,421		932		7,353
As of April 30, 2005		7,111		951		8,062

Throughout 2000, we experienced voluntary and involuntary termination of a large number of temporary employees in non-core business departments such as the customer hotline center. The number of our regular employees increased in 2001 and 2002 due to periodic hiring of new employees.

The following table sets forth numbers of our regular employees and temporary employees by categories of activity as of April 30, 2005:


	Marketing		Production		Research		Support		New Business		Total

Regular Employees		2,282		1,873		1,135		1,105		716		7,111
Temporary Employees		623		139		29		146		14		951

Total		2,905		2,012		1,164		1,251		730		8,062

As of December 31, 2004, we had a company union comprised of 2,887 regular employees. We have never experienced a work stoppage of a serious nature. Every two years, the union and management negotiate and enter into a new collective bargaining agreement that has a two-year duration, which is focused on employee benefits and welfare, except for employee wage which is separately negotiated on an annual basis. Our wage negotiations completed on May 24, 2004 resulted in an average wage rate increase of 3.4% for 2004 from 2003. Our wage negotiations for 2005 is expected to begin in mid June 2005.

Since April 1999, we have been required to contribute an amount equal to 4.5% of employee wages toward a national pension plan. Employees are eligible to participate in an employee stock ownership association. We are not required to, and we do not, make any contributions to the employee stock ownership association, although through the Employee Welfare Fund we subsidize the employee stock ownership association by providing low interest rate loans to employees desiring to purchase stock through the plan in the case of a capitalization by the association. As of December 31, 2004, the employee stock ownership association owned approximately 0.46% of our issued common stock.

We are required to pay a severance amount to eligible employees who voluntarily or involuntarily cease working for us, including through retirement. This severance amount is based upon the employee’s length of service with us and the employee’s salary level at the time of severance. As of December 31, 2004, the accrued and unpaid retired and severance benefits of Won 236.2 billion for all of our employees are reflected in our non-consolidated financial statements as a liability, and a portion of our retirement and severance liabilities, totaling Won 155.2 billion was funded. Under Korean laws and regulations, we are prevented from involuntarily terminating a full-time employee except under certain limited circumstances. In September 2002, we entered into an employment stabilization agreement with the union. Among other things, this agreement provides for a one-

year guarantee of the same wage level in the event that we reorganize a department into a separate entity or we outsource an employee to a separate entity where the wage is lower. If the new entity is our subsidiary, of which we own at least a 50% stake, employment is guaranteed for three years.

We are also required by law to contribute up to 5.0% of our annual earnings before tax for employee welfare. We contributed 3% of our revenues annually for years prior to 2002. Beginning in 2003, we have decided to negotiate an exact amount each year if necessity arises. In 2003 and 2004, we did not negotiate contribution amounts for year 2002 and 2003, respectively. We expect to negotiate the contribution amount for 2004 in the latter half of 2005.

We consider our relations with our employees to be good.

SHARE OWNERSHIP

The following table sets forth the share ownership by our standing and non-standing directors as of April 30, 2005:


		Number of		Percentage of			Special
		Shares		Total Shares			Voting
Name	Position	Owned		Outstanding			Rights		Options

Standing Directors
Jung Nam Cho	Vice-Chairman and Representative Director		—		—			None		16,500
Shin Bae Kim	CEO and Representative Director		1,270		—			None		1,650
Bang Hyung Lee	Executive Vice-President		1,630		—			None		3,390
Sung Min Ha	Chief Financial Officer and Head of Strategic Planning Divisional Group		738		—			None		690
Non-Standing Directors
Sang Koo Nam	Outside Director		—		—			None		2,500
Sang C. Lee	Outside Director		—		—			None		2,500
Jae Seung Yoon	Outside Director		200		—	*		None		1,000
Dae Sik Kim	Outside Director		—		—			None		2,000
Dae Kyu Byun	Outside Director		—		—			None		2,000
Seung Taik Yang	Outside Director		—		—			None		—
Yong Woon Kim	Outside Director		—		—			None		0


*	Less than 1.0%

Item. 7 Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

As of December 31, 2004, approximately 51.6% of our issued shares were held in Korea by approximately 20,000 shareholders. The following table sets forth certain information as of the close of our shareholders’ registry on December 31, 2004 with respect to any person known to us to be the beneficial owner of more than

5.0% of the shares of our common stock and with respect to the total amount of such shares owned by our employees and our officers and directors, as a group:


				Percentage			Percentage
		Number of		Total Shares			Total Shares
Shareholder/Category		Shares		Issued			Outstanding

Domestic Shareholders
	SK Group(1)		19,772,914		24.03	%		26,86	%
	POSCO		4,098,496		4.98			5.57
	Employees(2)		480,586		0.58			0.65
	Treasury shares(3)		8,662,415		10.53			N/A
	Officers and Directors(4)		2,608		—			—
	Other Domestic Shareholders		9,467,103		11.52			13.76
Foreign Shareholders(5)			39,792,589		48.36	%		54.06	%

	Total Issued Shares		82,276,711		100.00	%		100.00	%


(1)	The SK Group’s ownership interest consists of the following as of December 31, 2004:


			Percentage			Percentage
	Number of		Total Shares			Total Shares
SK Group Member	Shares		Issued			Outstanding

SK Corporation		17,663,127		21.47	%		23.99	%
SK Securities Co., Ltd.		7		0.00			0.00
SK Networks*		2,097,740		2.55			2.85
SK Life Insurance Co., Ltd.		12,040		0.01			0.02

		19,772,914		24.03	%		26.86	%


	*	SK Networks sold 418,000 shares in January 2004 and currently owns 2,097,740 shares.

The SK Group is a group of affiliated entities. As of December 31, 2004, the ownership interest among the SK Group were, among others: SK Corporation owned 21.47% of SK Telecom Co., Ltd., 41.32% of SK Networks, 47.27% of SKC and 72.13% of SK Shipping Co., Ltd. SK Networks owned 2.55% of SK Telecom Co., Ltd., 17.71% of SK Shipping, 15% of SK Computer & Communications Co., Ltd., and 28.95% of SK Securities Co., Ltd. SK Chemicals owned 2.39% of SK Corporation, 39.40% of SK Engineering and Construction. SKC owns 6.2% of SK Chemicals and 10.16% of SK Shipping Co., Ltd. SK Shipping Co., Ltd. owns 30.94% of SK Engineering and Construction. SK Computer & Communications Co., Ltd. owns 11.22% of SK Corporation. We own 30.0% of SK Computer & Communications Co., Ltd.


(2)	Represents shares owned by our employee stock ownership association. See “Information on the Company — Employees”.

(3)	Treasury shares do not have any voting rights; Includes 1,710,750 treasury shares that were deposited with Korea Securities Depository to be reserved and used to satisfy the conversion rights of the holders of US$329.5 million in zero coupon convertible notes that were sold in May 2004.

(4)	Less than 0.01%.

(5)	Includes 5,445,282 shares of our common stock or approximately 6.62% of our issued common stock, represented by American Depositary Shares (ADSs) held by Momenta (Cayman), a special purpose vehicle incorporated in the Cayman Islands.

The following table sets forth significant changes in the percentage ownership held by our major shareholders during the past three years:


		As of December 31,

Shareholder		2002			2003			2004

		(As a percentage of total
		issued shares)(1)
SK Group			24.43	%		24.60	%		24.03	%
	SK Corporation(2)		19.81			21.47			21.47
	SK Life Insurance		0.00			0.01			0.01
	SK Investment Trust Management		0.07			0.06			—
	SK Networks(3)		4.53			3.06			2.55
KT Corporation(4)			9.27			0.00			0.00
POSCO(5)			6.50			4.98			4.98


(1)	Includes shares held in treasury of 4,852,972, 8,662,403 and 8,662,415 as of December 31, 2002, 2003 and 2004, respectively. The treasury share amount as of December 31, 2002 excludes 4,465,635 shares of the Company’s common stock acquired from KT Corporation pursuant to a stock swap on December 30, 2002.

(2)	On July 25, 2002, SK Corporation sold our ADSs representing 5,117,500 shares of our common stock to Momenta (Cayman), which in turn sold bonds exchangeable initially into such ADSs. On the same day, SK Corporation sold 1,122,223 shares of our common stock represented by ADRs to foreign investors.

(3)	On January 4, 2002, SK Networks issued bonds exchangeable into an aggregate of 1,730,104 shares of our common stock. On January 31, 2002, bank trust funds controlled by us purchased from SK Networks an aggregate of 1,367,180 shares of our common stock, or approximately 1.5% of our outstanding common stock. On July 25, 2002, SK Networks sold 1,100,000 shares of our common stock represented by ADRs to foreign investors. SK Networks sold 418,000 shares in January 2004 and currently owns 2,097,740 shares.

(4)	On April 15, 2002, KT Corporation sold an aggregate of 1,000,000 shares, or approximately 1.1%, of our outstanding common stock to investors. On December 30, 2002, KT Corporation sold an aggregate of 4,457,635 shares, on approximately 5.0%, of our outstanding common stock to us. On January 10, 2003, KT Corporation sold its remaining stake in us, an aggregate of 3,809,288 shares, or approximately 4.3%, of our outstanding common stock to us. On May 23, 2002, we acquired a 9.6% equity interest (29,808,333 shares of common stock) in KT Corporation for Won 1,609 billion. Pursuant to the terms of an agreement between us and KT Corporation dated November 14, 2002, we sold all of our shares of KT Corporation. Under the terms of the agreement, we exchanged 29,808,333 shares of KT Corporation’s common stock for 8,266,923 shares of our common stock and settled the difference in the price in cash on December 30, 2002 and January 10, 2003. The exchange was made at Won 50,900 per share of KT Corporation’s common stock and Won 224,000 per share of our common stock.

(5)	POSCO acquired these shares in connection with our acquisition of a 27.7% equity interest in Shinsegi.

Other than companies in the SK Group and POSCO, no other persons or entities known by us to be acting in concert, directly or indirectly, jointly or severally, own in excess of 3.0% of our total shares outstanding or exercise control or could exercise control over our business.On January 4, 2002, in transactions exempt from registration under the U.S. Securities Act, SK Networks issued bonds exchangeable into an aggregate of 1,730,104 shares of our common stock, subject to anti-dilution adjustments. By December, 2004, most of these bonds have been exchanged in an aggregate of 1,520,200 shares of our common stock and the rest was settled in cash.

On January 31, 2002, bank trust funds controlled by us purchased from SK Networks an aggregate of 1,367,180 shares of our common stock, or approximately 1.5% of our outstanding common stock.

On July 25, 2002, in transactions exempt from registration under the U.S. Securities Act, SK Corporation sold our ADSs representing 5,117,500 shares of our common stock to Momenta (Cayman), a special purpose vehicle incorporated in the Cayman Islands, which in turn sold bonds exchangeable initially into such ADSs. The

5,244,450 shares of our common stock, or approximately 6.26% of our issued common stock, held by Momenta (Cayman) are reflected on the foreign shareholders line in the first table under this “Major Shareholders” section. Pursuant to the terms and conditions of such bonds, if investors do not otherwise exchange the bonds for our ADSs, all or a portion of such ADSs may ultimately be returned to SK Corporation. On the same day, SK Corporation and SK Networks each sold 1,122,223 and 1,100,000 shares, respectively, of our common stock represented by ADRs to foreign investors.

Although no announcements have been made, SK Corporation and SK Networks may dispose of additional shares of our common stock in one or more transactions. As of December 31, 2004, SK Corporation held 21.47% of our shares of common stock. For a description of our foreign ownership limitation, see “Key Information — Risk Factors — If SK Corporation breaches the foreign ownership limitations on SK Telecom, it may result in a change of control of us.” and “Information on the Company — Law and Regulation — Foreign Ownership and Investment Restrictions and Requirements”. As a result of significant financial difficulties and prosecutors’ discovery of alleged fraudulent accounting practices at SK Networks, SK Networks sold 418,000 of the shares it owns in SK Telecom in January 2004. As a result of such sale, SK Networks currently owns 2.55% of our shares. In the event that either SK Corporation or SK Networks announces plans of a sale of our shares, we expect to be able to discuss the details of such sale with them in advance, and will endeavor to minimize any adverse effects on our share prices as a result of such sale.

There is currently a 49% limit on the aggregate foreign ownership of our issued shares. As of December 31, 2004, SK Corporation owns 17,663,127 shares of our common stock, or approximately 21.47%, of our issued shares. As of December 31, 2004, a foreign investment fund and its related parties collectively held a 14.85% stake in SK Corporation. Under a newly adopted amendment to the Telecommunications Business Law, which became effective on May 9, 2004, a Korean entity, such as SK Corporation, is deemed to be a foreign entity if its largest shareholder (determined by aggregating the shareholdings of such shareholder and its related parties) is a foreigner and such shareholder (together with the shareholdings of its related parties) holds 15% or more of the outstanding voting stock of the Korean entity. Thus, effective from May 9, 2004, if the foreign investment fund and its related parties increase their shareholdings in SK Corporation to 15% or more and such foreign investment fund and its related parties collectively constitute the largest shareholder of SK Corporation, SK Corporation will be considered a foreign shareholder of SK Telecom, and its shareholding in SK Telecom would be included in the calculation of the aggregate foreign shareholding of SK Telecom.

If SK Corporation’s shareholding in SK Telecom is included in the calculation of the aggregate foreign shareholding of SK Telecom, then the aggregate foreign shareholding in SK Telecom assuming foreign ownership level as of December 31, 2004 (which we believe was 48.33%), would reach 69.8%, exceeding the 49% ceiling on foreign shareholding. If the aggregate foreign shareholding limit in SK Telecom is exceeded, the MIC may issue a corrective order to SK Telecom, the breaching shareholder (including SK Corporation if the breach is caused by an increase in foreign ownership of SK Corporation) and the foreign investment fund and its related parties who own in the aggregate 15% or more of SK Corporation. Furthermore, SK Corporation may not exercise its voting rights with respect to the shares held in excess of the 49% ceiling, which may result in a change in control of us. In addition, the MIC may refuse to grant us licenses or permits necessary for entering into new telecommunications businesses until the aggregate foreign shareholding of SK Telecom is reduced to below 49%.

If a corrective order is issued to us by the MIC arising from the violation of the foregoing foreign ownership limit, and we do not comply within the prescribed period under such corrective order, the MIC may (1) suspend all or part of our business, or (2) if the suspension of business is deemed to result in significant inconvenience to our customers or be detrimental to the public interest, impose a one-time administrative penalty of up to 3% of our sales revenues. The amendment to the Telecommunications Business Law in May 2004 also authorizes the MIC to assess monetary penalties of up to 0.3% of the purchase price of the shares for each day the corrective order is not complied with, as well as a prison term of up to one year and a penalty of Won 50 million. See “Key Information — Risk Factors — If SK Corporation breaches the foreign ownership limitations on SK Telecom, it may result in a change of control of us.” and “Information on the Company — Law and Regulation — Foreign Ownership and Investment Restrictions and Requirements”.

On August 11, 2003 we concluded a stock buyback program which we commenced on June 30, 2003. We acquired a total of 2,544,600 shares of our outstanding common stock, all of which were cancelled on August 20, 2003. The total purchase price for the stock buyback was Won 524.4 billion (or an average of approximately Won 206,078.6 per share), with the price per share ranging from Won 192,000 (on July 24, 2003) to Won 216,000 (on July 15-16, 2003). As a result of the stock buyback and subsequent cancellation of shares, the total number of our outstanding common stock declined from 84,821,311 to 82,276,711 as of December 31, 2003.

Other than as disclosed herein, there are no other arrangements, to the best of our knowledge, which would result in a material change in the control of us. Our major shareholders do not have different voting rights.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

SK Networks

We are a party to several contracts with SK Networks, including:


	•	A series of real property sale and purchase contracts in November 2000 pursuant to which we purchased from SK Networks the building and land where our new corporate headquarters is located. The aggregate purchase price was Won 114.4 billion; and

	•	A series of sale and purchase agreements pursuant to which we and our subsidiary, SK Teletech, sell handsets to SK Networks. The aggregate sales to SK Networks pursuant to these contracts were Won 381.9 billion in 2002, Won 481.2 billion in 2003 and Won 581.6 billion in 2004.

If SK Networks is required to sell off its leased line business, this may result in a disruption of the service provided to us. However, we currently believe that it is not likely that the creditors will require SK Networks to sell this business unit. In 2004, KT and SK Networks provided approximately 21.0% and 65.0%, respectively, of our leased lines. In order to reduce our dependence on the fixed network lines of our competitor, KT, we are considering leasing a majority of our fixed lines from SK Networks in the future.

SK Networks also serves as our distributor of handsets to network of dealers. Samsung Electronics Co. Ltd., LG Electronics Inc, Motorola Korea, Inc. and Pantech & Curitel suspended their supply of handsets to SK Networks on April 7, 2003. In May 2003, all suppliers resumed their supply of handsets on the condition that payment on their mobile phones be made in cash within one week of delivery. Previously, SK Networks issued three-month promissory notes for payment to handset suppliers.

As of December 31, 2004, we had Won 104.1 billion of accounts receivables from SK Networks primarily in connection with handset sales of our subsidiary, SK Teletech. As of the same date, we had Won 20.0 billion of accounts payable to SK Networks, mainly consisting of leased line charges and commissions to dealers owned by SK Networks. For more information on SK Networks, see “Key Information — Risk Factors — Financial difficulties and charges of financial statement irregularities at our affiliate, SK Networks (formerly SK Global), may have a material adverse impact on our business and financial condition”.

Other Related Parties

In December 2000, we entered into an agreement with SK Corporation for the sale and leaseback of our head office, located at 99 Seorin-dong, Chongro-gu, Seoul, with a lease period from December 19, 2000 through March 31, 2004. Rent expense for the period from December 19, 2000 to December 31, 2000 was approximately Won 417 million. Under the lease agreement, in January 2001, we deposited Won 80.1 billion in refundable leasehold key money with SK Corporation. In 2003, we extended our contract through February 28, 2005 by depositing an additional Won 23.6 billion in refundable leasehold key money. Although there were no monthly rent payments, we paid a monthly management fee of Won 366.8 million. Upon the completion of the construction of our new headquarters in December 2004, we terminated the lease agreement as of January 31, 2005 on which date SK Corporation refunded the deposit, without interest, pursuant to the lease agreement.

decided to purchase the shares for strategic reasons in order to address overhang concerns arising from POSCO’s ownership of our shares. As of December 31, 2004, POSCO owned 4.98% of our shares.

We are party to an agreement with SKC&C pursuant to which SKC&C provides us with information technology services. This agreement will expire on December 31, 2009 but may be terminated by us at any time without cause on six months’ prior notice. The agreement provides that the parties will agree annually on the specific services to be provided and the monthly fees to be paid by us. We also enter into agreements with SKC&C from time to time for specific information technology-related projects. The aggregate fees we paid to SKC&C for information technology services amounted to Won 231.5 billion for 2002, Won 284.2 billion for 2003 and Won 295.6 billion for 2004. We also purchase various information technology-related equipment from SKC&C from time to time. The total amount of such purchases was Won 197.3 billion for 2002, Won 182.8 billion for 2003 and Won 130.2 billion for 2004.

We are part of the SK Group of affiliated companies. See “Major Shareholders and Related Party Transactions — Major Shareholders.” As disclosed in note 22 of our consolidated financial statements, we had related party transactions with a number of affiliated companies of the SK Group during the year ended December 31, 2004. In October 2003, the FTC ordered us to pay a fine of Won 5.1 billion in connection with our payment of advertisements on behalf of certain companies in the SK Group. We paid the fine in December 2003.

In September 1994, we provided DSS Mobile Communications, Ltd. guarantee of loan from Sumitomo Bank in the amount of US$18,118,863. We paid the loan obligation of DSS Mobile Communications, Ltd. to Sumitomo Bank in 2001 and has a claim against DSS Mobile Communications, Ltd. for such payment.

All other loans were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and did not involve more than the normal risks of non-collection or present other unfavorable features.

Item. 8 Financial Information

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See “Financial Statements” and pages F-1 through F-68.

LEGAL PROCEEDINGS

FTC Proceedings

On July 22, 2002, members of the SK Group (including SK Telecom, SK Corporation and SK Networks) concurrently with several other large Korean conglomerates, received a notice from the FTC requesting that these companies submit certain information, including financial statements and information about related party transactions, to the FTC by August 3, 2002. This deadline was extended to August 9, 2002, and we provided the requested information to the FTC on that date. After concluding its investigation, on October 29, 2002, the FTC ordered us to pay a fine of Won 175 million for violating the disclosure rules concerning related party transactions, which we paid in full.

On November 7, 2002, the FTC ordered us to pay a fine of Won 1.04 billion in connection with certain misleading advertisements relating to Moneta, our mobile credit card. We, along with LG Telecom and KT Freetel, advertised that there would be a Won 100,000 to Won 300,000 discount on the purchase of wireless handsets when paid with a mobile credit card, such as Moneta. The advertisements were found to be misleading by the FTC because the FTC concluded that we did not duly inform the subscribers of an annual interest rate up to 9% to be accrued on the credit amount. KT Freetel and LG Telecom were also fined Won 672 million and Won 384 million, respectively, for similar violations. The FTC also ordered us to make a public announcement of such violation. We made such payment and the public announcement of such violation as directed by the FTC in December 2002.

In October 2003, the FTC ordered us, SK Corporation and SKC&C to pay fines of Won 1.0. billion, Won 0.9 billion, Won 0.9 billion, respectively, in connection with loans extended to SK Life. FTC charged that the interest on the loans was below market-price. We paid the fine in December 2003. However, we have filed an appeal, as we believe that the interest on the loans was not below the interest rates customarily charged in the market. The appeal is currently pending.

In October 2003, the FTC ordered us to pay a fine of Won 4.1 billion in connection with our payment of advertisements on behalf of certain companies in the SK Group. We paid the fine in December 2003.

In March 2004, the FTC ordered us to pay a fine of Won 228 million for certain allegedly misleading advertisements made by us with respect to our competition and the nature of our services, which we paid in full in May 2004. LG Telecom and KT Freetel were also fined in connection with related offenses.

MIC Proceedings

In March 2002, the MIC indicated its belief that certain incentive payments made to wireless handset dealers by us and other wireless network service providers were being passed on to purchasers of wireless handsets and therefore constituted improper handset subsidies. Consequently, beginning in April 2002, we eliminated such incentives, and believe that other wireless network service providers eliminated such incentives. On April 8, 2002, we, KT Freetel, LG Telecom and KT Corporation were fined an aggregate of Won 20.0 billion by the MIC in respect of these incentive payments. We paid in full a fine of Won 10.0 billion in April 2002. See “Operating and Financial Review and Prospects — Overview — Revenue”.

In July 2002 the MIC imposed on us (i) a total fine of Won 30 million for our and two of our branches’ refusal (a fine of Won 10 million for each) to comply with the MIC’s request for documents during the MIC’s spot investigations of possible handset subsidies, and (ii) a fine of Won 1 billion for a temporary stoppage of KT Corporation’s short messaging service on our networks for 17 hours without prior notice. We paid the fine in full in September 2002.

On November 15, 2002, we received an order from the MIC prohibiting us from signing on new subscribers for 30 days (from November 21, 2002 through December 20, 2002) for violating MIC’s handset subsidy regulation. KT Freetel and LG Telecom were also prohibited from signing on new subscribers for 20 days.

On March 26, 2003, we were ordered by the MIC to pay a fine of Won 300 million and to make public announcements in four major newspapers for violating certain provisions of the Telecommunications Business Act by not entering into written contracts with and checking personal identification of such subscribers for subscription of pre-paid wireless handsets, which is required to prevent handsets from being used for criminal purposes. KT Freetel and LG Telecom were also fined Won 200 million and Won 120 million, respectively, for the same violations. We made such payment and made such public announcements in April 2003.

In February 2004, the MIC imposed a total fine of Won 2.0 billion on us in connection with our marketing efforts related to the number portability system that was adopted by us in January 2004. The fine was imposed in response to (i) the adoption of a voice recording identifying our network upon connection of each outgoing call made on our network without the consent of our subscribers and (ii) “reverse-marketing” calls made between January 1, 2004 and January 9, 2004 informing our subscribers of benefits that they would lose by switching to another operator. We were ordered to make public announcements of these violations in major newspapers in Korea. In February 2004, the MIC also imposed fines of Won 250 million and Won 150 million on KT Freetel and LG Telecom, respectively, for their failure to accept cancellations of service by certain of their subscribers. We made such payment in March 2004.

In February 2004, the MIC imposed upon us a fine of Won 21.7 billion with respect to another incentive payments that were deemed by the MIC to constitute improper handset subsidies and thereby disrupt fair competition. We paid the fine in March 2004. In February 2004, KT Freetel and KT Corporation were also fined Won 7.5 billion and Won 4.1 billion, respectively, in respect of such incentive payments. We filed an appeal, but MIC upheld the fine in April 2004.

In April 2004, the MIC ordered us, KT Freetel, KT Corp. and LG Telecom, to pay fines of Won 650 million, Won 170 million, Won 20 million and Won 100 million, respectively, for failing to establish sufficient safeguards against the execution of telecommunications service contracts by users using false names. We were found to have conveyed payment delinquency information to credit rating companies without confirming that the names on the service contracts belonged to the actual users of our services. We, along with KT Freetel, KT Corp. and LG Telecom, were ordered to publish the violations in newspapers. We complied with such order and made such payment.

In addition, when the MIC approved the merger of Shinsegi into SK Telecom in January 2002, the MIC imposed certain conditions on SK Telecom. The MIC periodically reviews our compliance with the conditions related to our merger with Shinsegi. On May 25, 2004, a policy advisory committee to the MIC announced the results of its review and stated that the committee believed that our market dominance may significantly restrict competition in the telecommunications market and that we have violated the conditions related to our merger with Shinsegi by providing subsidies to handset buyers. The committee stated that it will recommend that the MIC extend the post-merger monitoring period by two years until January 2007 and take appropriate corrective measures against us for providing subsidies to handset buyers. In June 2004, the MIC made a formal decision as to the policy advisory committee’s findings and imposed a Won 11.9 billion fine on us and extended the post-merger monitoring period until January 2007 pursuant to the policy advisory committee’s recommendation. On May 25, 2004, we voluntarily undertook to limit our market share to 52.3% of the wireless telecommunications market through the end of 2005, the level of our market share at the time of the approval of our merger with Shinsegi in January 2002. We can give no assurance that the MIC will not take action that may have a material adverse effect on our business, operations and financial condition. See “Key Information — Risk Factors — Our businesses are subject to extensive Government regulation and any change in Government policy relating to the telecommunications industry could have a material adverse effect on our results of operations and financial condition”.

On June 7, 2004, the MIC issued a suspension that prohibited us from acquiring new subscribers for a period of 40 days beginning on August 20, 2004. The MIC also issued suspension to our three largest competitors that prohibited them from acquiring new subscribers for periods ranging from 20 to 30 days. KT Freetel Co. Ltd. was issued a 30 day suspension beginning on July 21, 2004; LG Telecom Ltd. was issued a 30 day suspension beginning on June 21, 2004; and Korea Telecom was issued a 20 day suspension beginning on July 21, 2004. These suspensions resulted from MIC’s determination that we violated the ban on providing subsidies to handset purchasers. During the suspensions, each company was able to continue regular business activities, including replacement of handsets, changes in user names, changes in mobile phone numbers and changes in tariff plans applicable to the existing subscribers.

On December 29, 2004, the MIC ordered us, KT Freetel and LG Telecom, to pay fines of Won 7.5 billion, Won 2 billion and Won 600 million, respectively, with respect to our payment of improper handset subsidies. We were more heavily fined than the other two companies as the FTC found that our efforts to remedy such violations were not sufficient and that our payment of such subsidies was in violation of the conditions related to our merger with Shinsegi in January 2002. We paid such payment in January 2005.

On March 21, 2005, the MIC ordered us, KT Freetel and LG Telecom, to pay fines of Won 1.4 billion, Won 360 million and Won 230 million, respectively, for changing calling plans and adding value-added services to the subscribers without obtaining express consents of such subscribers. We paid such fine in April 2005.

In May 2005, the MIC ordered us to pay fines of Won 23.1 billion with respect to our payment of improper handset subsidies. LG Telecom and KT Freetel were also fined Won 2.7 billion and Won 1.1 billion, respectively, in respect of such subsidy payments. We were more heavily fined than the other two companies as the FTC found that our efforts to remedy such violations were not sufficient and that our payment of such subsidies was in violation of the conditions related to our merger with Shinsegi in January 2002. We plan to make payment of such fine in June 2005.

Former Shinsegi Shareholders’ Litigation

Former shareholders of Shinsegi approved the merger of Shinsegi into SK Telecom on November 16, 2001 at an extraordinary shareholders’ meeting. However, 28 former minority shareholders of Shinsegi, including Jin Kap Park, filed a lawsuit against Shinsegi with the Seoul District Court in December 2001 to void the shareholders’ resolution approving the merger. In the lawsuit, the plaintiffs argued that the merger did not meet certain requirements of a “small scale” merger under the Korean Commercial Code and that the merger ratio was unfair and illegal. The Seoul District Court dismissed the lawsuit on April 25, 2002 on the grounds that the requirements of a “small scale” merger as claimed by the plaintiffs are not required under the correct interpretation of the Korean Commercial Code and that there is no evidence supporting the plaintiffs, claim as to the unfairness of the merger ratio. The plaintiffs appealed the decision on May 8, 2002, but the High Court denied the appeal. The plaintiffs further appealed to the Supreme Court but the claim was dismissed on December 9, 2004.

GNI Enterprise Litigation

On October 18, 2002, GNI Enterprise Inc. filed lawsuits against SK Communications Co. Ltd., our subsidiary, asserting that the contract for usage of Lycos brand between GNI Enterprise and SK Communications was effective. SK Communications believes that any liability that it may be subject to thereunder will be immaterial. The ultimate outcome of this lawsuit cannot be determined. In addition, in the lawsuit filed on November 15, 2002, GNI Enterprise Inc. asserted that the merger of Netsgo Co., Ltd. into SK Communications Co., Ltd. was not legitimate. On January 11, 2004, this lawsuit was terminated as GNI Enterprise Inc. withdrew its claims.

Multinet Litigation

In October 2002, Korea Multinet Inc. (“Multinet”) filed a lawsuit against the MIC in the Seoul Administrative Court to revoke the MIC’s registration with the International Telecommunication Union for the frequency spectrum necessary for DMB business. Multinet had been previously granted the right to use this frequency by the MIC, but their right had been granted on the condition that Multinet would renounce its right to use the frequency upon implementation of a DMB business (to the extent necessary for the operation of our DMB business) and that Multinet would comply with any directive of the MIC to reallocate the frequency. The Seoul Administrative Court ruled in favor of the MIC in December 2002. Multinet filed an appeal with the Seoul High Court, but the Seoul High Court ruled in favor of the MIC in June 2004. Based on the application and registration with the International Telecommunication Union for such frequency, the MIC has allotted us a frequency with a license to run DMB business as a network service operator. Multinet, in June 2004 and September 2004, filed two lawsuits against the MIC to revoke such allotment by the MIC.

Except as described above, neither we nor any of our subsidiaries are involved in any litigation, arbitration or administrative proceedings relating to claims which may have, or have had during the twelve months preceding the date hereof, a significant effect on our financial position or the financial position of our subsidiaries taken as a whole, and, so far as we are aware, no such litigation, arbitration or administrative proceedings are pending or threatened.

Coloring Litigation

In November 2002, in connection with certain technology used in the provision of Coloring service, Mr. Park Won-Seop filed a lawsuit against us in the Seoul Central District Court. In the lawsuit, Mr. Park alleged that we have infringed upon his patent rights relating to Coloring service. While the lawsuit is currently pending before the Seoul Central District Court, we sought an administrative action to nullify Mr. Park’s patent rights in the Intellectual Property Tribunal. The Tribunal upheld the nullification of Mr. Park’s patent rights. Mr. Park appealed the decision, and the appeal is currently pending before the Patent Court.

DIVIDENDS

Annual dividends, if any, on our outstanding shares must be approved at the annual general meeting of shareholders. This meeting is generally held in March of the following year, and the annual dividend is generally paid shortly after the meeting. Since our shareholders have discretion to declare annual dividends, we cannot give any assurance as to the amount of dividends per share or that any dividends will be declared at all. Interim dividends, if any, can be approved by a resolution of our board of directors. Once declared, dividends must be claimed within five years, after which the right to receive the dividends is extinguished and reverted to us.

We pay cash dividends to the ADR depositary in Won. Under the terms of the deposit agreement, cash dividends received by the ADR depositary generally are to be converted by the ADR depositary into Dollars and distributed to the holders of the ADSs, less withholding tax, other governmental charges and the ADR depositary’s fees and expenses. The ADR depositary’s designated bank in Korea must approve this conversion and remittance of cash dividends. See “Additional Information — Korean Foreign Exchange Controls and Securities Regulations” and “Additional Information — Taxation — Korean Taxation”.

The following table sets forth the dividend per share, the aggregate total amount of dividends, as well as the number of outstanding shares entitled to dividends to the shareholders of record on December 31 of the years indicated. The dividends set out for each of the years below were paid in the immediately following year.


					Number of Shares
	Dividend		Total Amount of		Entitled to
Year Ended December 31,	Per Share		Dividends		Dividend

	(In Won)		(In billions of Won)
1997	W	90	W	5.6		62,169,720
1998		118		7.6		64,258,670
1999		185		15.4		83,284,110
2000		540		48.1		89,079,034
2001		690		57.3		82,993,404
2002		1,800		151.7		84,299,698
2003		5,500		404.9		73,614,308
2004		10,300		758.2		73,614,296


(1)	Dividend per share and amount of shares entitled to dividend have been adjusted to give effect to the 10-for-1 stock split of our common shares which became effective on April 21, 2000.

We distribute dividends to our shareholders in proportion to the number of shares owned by each shareholder. The common shares represented by the ADSs have the same dividend rights as other outstanding common shares.

Holders of non-voting shares are entitled to receive dividends in priority to the holders of common shares. The dividend on the non-voting shares is between 9.0% and 25.0% of the par value as determined by the board of directors at the time of their issuance. If the dividends for common shares exceed the dividends for non-voting shares, the holders of non-voting shares will be entitled to participate in the distribution of such excess amount with the holders of common shares. If the amount available for dividends is less than the aggregate amount of the minimum required dividend, holders of non-voting shares will be entitled to receive such accumulated unpaid dividend from dividends payable in the next fiscal year before holders of common shares. There are no nonvoting shares issued or outstanding.

We declare dividends annually at the annual general meeting of shareholders which is generally held within three months after the end of the fiscal year. We pay the annual dividend shortly after the annual general meeting to the shareholders of record or registered pledgees as of the end of the preceding fiscal year. We may distribute the annual dividend in cash or in shares. However, a dividend of shares must be distributed at par value. If the market price of the shares is less than their par value, dividends in shares may not exceed one-half of the annual dividend. Our obligation to pay dividend expires if no claim to dividend is made for five years from the payment date.

Under the Korean Commercial Code, we may pay an annual dividend only out of the excess of our net assets, on a non-consolidated basis, over the sum of (1) our stated capital and (2) the total amount of our capital surplus reserve and legal reserve accumulated up to the end of the relevant dividend period. In addition, we may not pay an annual dividend unless we have set aside as legal reserve an amount equal to at least 10.0% of the cash portion of the annual dividend or until we have accumulated a legal reserve of not less than one-half of our stated capital. As a KRX Stock Market-listed company, we are also required under the relevant laws and regulations to set aside in reserve a certain amount each fiscal year until our own capital ratio is at least 30%. We may not use legal reserve to pay cash dividends but may transfer amounts from legal reserve to capital stock or use legal reserve to reduce an accumulated deficit.

In addition, the Korean Commercial Code and our articles of incorporation provide that, in addition to annual dividends, we may pay interim dividends once during each fiscal year. Unlike annual dividends, the decision to pay interim dividends can be made by a resolution of the board of directors and is not subject to shareholder approval. Any interim dividends must be paid in cash to the shareholders of record as of June 30 of the relevant fiscal year. In August 2004, we distributed such interim dividends at Won 1,000 per share to our shareholders for a total amount of Won 73.6 billion in August 2005.

Under the Korean Securities and Exchange Act, the total amount of interim dividends payable in a fiscal year shall not be more than the net assets on the balance sheet of the immediately preceding fiscal year, after deducting (1) a company’s capital in the immediately preceding fiscal year, (2) the aggregate amount of its capital reserves and legal reserves accumulated up to the immediately preceding fiscal year, (3) the amount of earnings for dividend payments confirmed at the annual shareholders’ meeting with respect to the immediately preceding fiscal year and (4) the amount of legal reserve that should be set aside for the current fiscal year following the interim dividend payment. Furthermore, the rate of interim dividends for non-voting shares must be the same as that for our common shares.

Our obligation to pay interim dividends expires if no claims to such dividends are made for a period of five years from the payment date.

Item. 9 The Offer and Listing

MARKET PRICE INFORMATION

The principal trading market for our common stock is the KRX Stock Market. As of May 24, 2005, 82,276,711 shares of our common stock were outstanding.

The ADSs are traded on the New York Stock Exchange and the London Stock Exchange. The ADSs have been issued by the ADR depositary and are traded on the New York Stock Exchange under the symbol “SKM”. Each ADS represents one-ninth of one share of common stock. As of May 30, 2004, 202,629,978 ADSs representing 22,514,442 shares of our common stock were outstanding.

Shares of Common Stock

The following table sets forth the high, low and closing prices and the average daily trading volume of the shares of common stock on the KRX Stock Market since January 1, 2000:


			Prices(1)
									Average Daily
Calendar Year			High(2)		Low(2)		Close		Trading Volume

									(Number of shares)
			(Won per share)
2000				481,000		216,000		253,000		262,660
	First Quarter			481,000		323,000		360,000		238,762
	Second Quarter			406,000		263,500		365,000		311,828
	Third Quarter			379,000		216,000		272,000		239,913
	Fourth Quarter			288,000		230,000		253,000		261,753
2001				295,000		165,000		268,000		242,254
	First Quarter			293,500		182,000		183,000		253,393
	Second Quarter			235,500		165,000		191,500		312,070
	Third Quarter			233,000		184,500		208,000		154,785
	Fourth Quarter			295,000		220,000		268,000		250,676
2002				299,000		209,500		229,000		261,482
	First Quarter			299,000		242,000		290,000		263,168
	Second Quarter			292,000		239,000		269,500		227,115
	Third Quarter			279,500		209.500		237,000		241,154
	Fourth Quarter			252,500		220,000		229,000		314,019
2003				235,000		142,000		199,000		327,689
	First Quarter			235,000		142,000		153,000		497,115
	Second Quarter			210,000		157,500		204,000		298,346
	Third Quarter			216,000		183,000		184,000		267,821
	Fourth Quarter			212,500		185,000		199,000		247,332
2004				238,500		154,500		197,000		179,712
	First Quarter			238,500		207,500		214,500		243,681
	Second Quarter			213,000		179,000		190,000		188,095
	Third Quarter			186,000		154,500		175,500		137,559
	Fourth Quarter			205,000		174,500		197,000		151,903
2005 (through May 24)				200,500		163,500		176,000		173,530
	First Quarter			200,500		171,000		171,000		202,857
		January		200,500		179,000		179,000		175,817
		February		184,000		176,500		181,000		266,888
		March		184,500		171,000		171,000		179,188
	Second Quarter (through May 24)			176,500		163,500		176,000		124,651
		April		172,000		163,500		163,500		148,913
		May (through May 24)		176,500		168,000		176,000		94,324

Source: KRX


(1)	The price give effect to the 10-for-1 stock split of our common shares which became effective on April 21, 2000 and resulted in the par value of each share being reduced from Won 5,000 to Won 500.

(2)	Both high and low prices are based on the daily closing prices for the period.

American Depositary Shares

The following table sets forth the high, low and closing prices and the average daily trading volume of the ADSs on the New York Stock Exchange since January 1, 2000:


			Prices(1)
									Average Daily
			High(2)		Low(2)		Close		Trading Volume

					(US$ per ADS)				(Number of ADSs)
2000				50.69		20.56		23.56		832,301
	First Quarter			50.69		33.50		39.00		964,229
	Second Quarter			43.31		28.25		36.31		781,578
	Third Quarter			43.44		20.56		25.63		810,021
	Fourth Quarter			28.19		21.31		23.56		773,376
2001				28.94		13.50		21.62		710,410
	First Quarter			28.94		15.18		15.18		743,602
	Second Quarter			21.05		13.50		16.90		817,532
	Third Quarter			20.21		16.15		18.44		655,302
	Fourth Quarter			25.29		18.26		21.62		623,611
2002				26.75		19.25		21.35		684,421
	First Quarter			24.70		20.30		24.60		488,958
	Second Quarter			26.75		20.20		24.40		555,865
	Third Quarter			26.36		19.25		21.23		963,578
	Fourth Quarter			22.81		19.30		21.35		717,859
2003				21.85		12.83		18.65		743,316
	First Quarter			21.85		12.83		13.62		971,259
	Second Quarter			19.40		14.07		18.86		723,959
	Third Quarter			20.83		17.71		17.84		724,406
	Fourth Quarter			19.90		17.46		18.65		564,023
2004				25.01		17.28		22.25		911.823
	First Quarter			25.01		19.43		21.30		1,331,177
	Second Quarter			21.83		19.15		20.99		832,175
	Third Quarter			20.76		17.28		19.45		768,117
	Fourth Quarter			23.10		19.30		22.25		727,683
2005 (through May 24)				22.19		18.96		20.11		748,222
	First Quarter			22.19		19.41		19.72		798,390
		January		22.19		19.96		19.96		767,815
		February		21.30		19.74		21.30		931,705
		March		21.62		19.41		19.72		711,050
	Second Quarter (through May 24)			20.22		18.96		20.11		667,689
		April		19.60		18.96		19.46		699,167
		May (through May 24)		20.22		19.42		20.11		628,806

Source: New York Stock Exchange


(1)	The price give effect to the 10-for-1 stock split of our common shares which became effective on April 21, 2000 and resulted in the par value of each share being reduced from Won 5,000 to Won 500.

(2)	Both high and low prices are based on the daily closing prices for the period.

THE KOREAN SECURITIES MARKET

The Korea Exchange Inc.

With the enactment of the Korea Stock and Futures Exchange Act, which came into effect on January 27, 2005, the three existing spot and futures exchanges (which were the Korea Stock Exchange, Korean Futures Exchange, and KOSDAQ) and Kosdaq Committee, a sub-organization of Korea Stock Dealers Association, were merged and integrated into a newly established joint-stock company called the Korea Exchange Inc. (the “KRX”). There are three different markets run by the KRX: , the Stock Market (the “KRX Stock Market”), the Kosdaq Market(the “KRX KOSDAQ Market”), and the Futures Market(the “KRX Futures Market”). The KRX, headquartered in Pusan, has one branch located in Seoul. Currently, the KRX is the only stock exchange in Korea and is run by membership, having most of Korean securities companies and some Korean branches of foreign securities companies as its members.

As of May 20, 2005, the aggregate market value of equity securities listed on the KRX Stock Market was approximately Won 442.1 trillion. The average daily trading volume of equity securities for 2004 was approximately 372.9 million shares with an average transaction value of Won 2,232.1 billion and for the period from January 1, 2005 through May 20, 2005 was approximately 458.0 million shares with an average transaction value of Won 2,515.2 billion.

The KRX has the power in some circumstances to suspend trading in the shares of a given company or to de-list a security. The KRX also restricts share price movements. All listed companies are required to file accounting reports annually, semi-annually and quarterly and to release immediately all information that may affect trading in a security.

The Government has in the past exerted, and continues to exert, substantial influence over many aspects of the private sector business community which can have the intention or effect of depressing or boosting the market. In the past, the Government has informally both encouraged and restricted the declaration and payment of dividends, induced mergers to reduce what it considers excess capacity in a particular industry and induced private companies to offer publicly their securities.

The KRX publishes the Korea Composite Stock Price Index, or KOSPI, every ten seconds, which is an index of all equity securities listed on the KRX Stock Market. On January 1, 1983, the method of computing KOSPI was changed from the Dow Jones method to the aggregate value method. In the new method, the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980.

Movements in KOSPI are set out in the following table together with the associated dividend yields and price to earnings ratios:


									Period Average

												Price
									Dividend			Earnings
Year	Opening		High		Low		Closing		Yield(1)(%)			Ratio(2)

1980		100.00		119.36		100.00		106.87		20.9			2.6
1981		97.95		165.95		93.14		131.37		13.2			3.1
1982		123.60		134.49		106.00		127.31		10.5			3.4
1983		122.52		134.46		115.59		121.21		6.9			3.8
1984		116.73		142.46		114.37		142.46		5.1			4.5
1985		139.53		163.37		131.40		163.37		5.3			5.2
1986		161.40		279.67		153.85		272.61		4.3			7.6
1987		264.82		525.11		264.82		525.11		2.6			10.9
1988		532.04		922.56		527.89		907.20		2.4			11.2
1989		919.61		1,007.77		844.75		909.72		2.0			13.9
1990		908.59		928.77		566.27		696.11		2.2			12.8
1991		679.75		763.10		586.51		610.92		2.6			11.2
1992		624.23		691.48		459.07		678.44		2.2			10.9
1993		697.41		874.10		605.93		866.18		1.6			12.7
1994		879.32		1,138.75		860.47		1,027.37		1.2			16.2
1995		1,013.57		1,016.77		847.09		882.94		1.2			16.4
1996		888.85		986.84		651.22		651.22		1.3			17.8
1997		653.79		792.29		350.68		376.31		1.5			17.0
1998		385.49		579.86		280.00		562.46		1.9			10.8
1999		587.57		1,028.07		498.42		1,028.07		1.1			13.5
2000		1,059.04		1,059.04		500.60		504.62		1.6	(3)		18.6	(3)
2001		520.95		704.50		468.76		693.70		2.0	(3)		14.2	(3)
2002		724.95		937.61		584.04		829.44		1.4	(3)		17.9	(3)
2003		653.17		822.16		515.24		810.71		2.1	(3)		11.7	(3)
2004		821.26		936.06		719.59		895.92		2.6	(3)		7.1	(3)
2005 (through May 20)		893.71		1,022.79		870.84		952.19		N/A			N/A

Source: KRX


(1)	Dividend yields are based on daily figures. Before 1983, dividend yields were calculated at the end of each month. Dividend yields after January 3, 1984 include cash dividends only.

(2)	The price to earnings ratio is based on figures for companies that record a profit in the preceding year.

(3)	Starting in April 2000, dividend yield and price earnings ratio of KOSPI 200, an index of 200 equity securities listed on the KRX Stock Market. Starting in April 2000, excludes classified companies, companies which did not submit annual reports to the KRX, and companies which received disqualified opinion from external auditors.

Shares are quoted “ex-dividend” on the first trading day of the relevant company’s accounting period. Since the calendar year is the accounting period for the majority of listed companies, this may account for the drop in KOSPI between its closing level at the end of one calendar year and its opening level at the beginning of the following calendar year.

With certain exceptions, principally to take account of a share being quoted “ex-dividend” and “ex-rights”, permitted upward and downward movements in share prices of any category of shares on any day are limited

under the rules of the KRX to 15.0% of the previous day’s closing price of the shares, rounded down as set out below:


	Rounded Down
Previous Day’s Closing Price (Won)	to (Won)

Less than 5,000	W	5
5,000 to less than 10,000		10
10,000 to less than 50,000		50
50,000 to less than 100,000		100
100,000 to less than 500,000		500
500,000 or more		1,000

As a consequence, if a particular closing price is the same as the price set by the fluctuation limit, the closing price may not reflect the price at which persons would have been prepared, or would be prepared to continue, if so permitted, to buy and sell shares. Orders are executed on an auction system with priority rules to deal with competing bids and offers.

Due to a recent deregulation of restrictions on brokerage commission rates, the brokerage commission rate on equity securities transactions may be determined by the parties, subject to commission schedules being filed with the KRX by the securities companies. In addition, a securities transaction tax will generally be imposed on the transfer of shares or certain securities representing rights to subscribe for shares. A special agricultural and fishery tax of 0.15% of the sales prices will also be imposed on transfer of these shares and securities on the KRX Stock Market. See “Additional Information Taxation — Korean Taxation”.

The following table sets forth the number of companies listed on the KRX Stock Market, the corresponding total market capitalization and the average daily trading volume at the end of the periods indicated:


	Market Capitalization
	on the Last Day of Each Period
							Average Daily Trading Volume & Value
	Number of
	Listed		(Millions of		(Thousands of		Thousands		(Millions of		(Thousands of
Year	Companies		Won)		Dollars)(1)		of Shares		Won)		Dollars)(1)

1980		352	W	2,526,553	US$	3,828,691		5,654	W	3,897	US$	5,905
1981		343		2,959,057		4,224,207		10,565		8,708		12,433
1982		334		3,000,494		4,407,711		9,704		6,667		8,904
1983		328		3,489,654		4,386,743		9,325		5,941		7,468
1984		336		5,148,460		6,222,456		14,847		10,642		12,862
1985		342		6,570,404		7,380,818		18,925		12,315		13,834
1986		355		11,994,233		13,924,115		31,755		32,870		38,159
1987		389		26,172,174		33,033,162		20,353		70,185		88,584
1988		502		64,543,685		94,348,318		10,367		198,364		289,963
1989		626		95,476,774		140,489,660		11,757		280,967		414,431
1990		669		79,019,676		110,301,055		10,866		183,692		256,500
1991		686		73,117,833		96,182,364		14,022		214,263		281,850
1992		688		84,711,982		107,502,515		24,028		308,246		391,175
1993		693		112,665,260		139,419,948		35,130		574,048		676,954
1994		699		151,217,231		191,729,721		36,862		776,257		984,223
1995		721		141,151,399		182,201,367		26,130		487,762		629,614
1996		760		117,369,988		139,031,021		26,571		486,834		575,733
1997		776		70,988,897		50,161,742		41,525		555,759		392,707
1998		748		137,798,451		114,090,455		97,716		660,429		471,432
1999		725		349,503,966		305,137,040		278,551		3,481,620		3,039,654
2000		704		188,041,490		150,162,898		306,163		2,602,211		2,078,028
2001		689		225,850,076		194,784,979		473,241		1,997,420		1,520,685
2002		683		258,680,756		218,167,122		851,242		3,041,592		2,414,362
2003		684		355,362,626		297,960,530		542,010		2,216,636		1,858,580
2004		683		412,588,138		427,069,982		372,894		2,232,108		2,310,455
2005 (through May 24)		655		442,054,261		445,148,641		458,023		2,515,201		2,532,808

Source: KRX


(1)	Converted at the noon buying rate in The City of New York for cable transfers in Won per US$1.00 as certified for customs purposes by the Federal Reserve Bank of New York.

The Korean securities markets are principally regulated by the Financial Supervisory Commission of Korea and the Korean Securities and Exchange Act. The Korean Securities and Exchange Act was amended fundamentally numerous times in recent years to broaden the scope and improve the effectiveness of official supervision of the securities markets. As amended, the law imposes restrictions on insider trading and price manipulation, requires specified information to be made available by listed companies to investors and establishes rules regarding margin trading, proxy solicitation, takeover bids, acquisition of treasury shares and reporting requirements for shareholders holding substantial interests.

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Further Opening of the Korean Securities Market

A stock index futures market was opened on May 3, 1996 and a stock index option market was opened on July 7, 1997, in each case at the Korea Stock Exchange. Remittance and repatriation of funds in connection with investment in stock index futures and options are subject to regulations similar to those that govern remittance and repatriation in the context of foreign investment in Korean stocks.

In addition, the Korea Stock Exchange opened new option markets for stocks of seven companies including our shares of common stock and common stock of six other companies on January 28, 2002. Foreigners will be permitted to invest in such options for individual stocks subject to certain procedural requirements.

Starting from May 1, 1996, foreign investors were permitted to invest in warrants representing the right to subscribe for shares of a company listed on the Korea Stock Exchange or registered on the KOSDAQ, subject to certain investment limitations. A foreign investor may not acquire such warrants with respect to shares of a class of a company for which the ceiling on aggregate investment by foreigners has been reached or exceeded.

As of December 30, 1997, foreign investors were permitted to invest in all types of corporate bonds, bonds issued by national or local governments and bonds issued in accordance with certain special laws without being subject to any aggregate or individual investment ceiling. The Financial Supervisory Commission of Korea sets forth procedural requirements for such investments. The Government announced on February 8, 1998 its plans for the liberalization of the money market with respect to investment in money market instruments by foreigners in 1998. According to the plan, foreigners have been permitted to invest in money market instruments issued by corporations, including commercial paper, starting February 16, 1998 with no restrictions as to the amount. Starting May 25, 1998, foreigners have been permitted to invest in certificates of deposit and repurchase agreements.

Currently, foreigners are permitted to invest in securities including shares of all Korean companies which are not listed on the KRX Stock Market nor the KRX KOSDAQ Market and in bonds which are not listed.

Protection of Customer’s Interest in Case of Insolvency of Securities Companies

Under Korean law, the relationship between a customer and a securities company in connection with a securities sell or buy order is deemed to be consignment and the securities acquired by a consignment agent (i.e., the securities company) through such sell or buy order are regarded as belonging to the customer in so far as the customer and the consignment agent’s creditors are concerned. Therefore, in the event of a bankruptcy or reorganization procedure involving a securities company, the customer of the securities company is entitled to the proceeds of the securities sold by the securities company.

When a customer places a sell order with a securities company which is not a member of the KRX and this securities company places a sell order with another securities company which is a member of the KRX, the customer is still entitled to the proceeds of the securities sold received by the non-member company from the member company regardless of the bankruptcy or reorganization of the non-member company.

Under the Korean Securities and Exchange Act, the KRX is obliged to indemnify any loss or damage incurred by a counterparty as a result of a breach by its members. If a securities company which is a member of the KRX breaches its obligation in connection with a buy order, the KRX is obliged to pay the purchase price on behalf of the breaching member.

When a customer places a buy order with a non-member company and the non-member company places a buy order with a member company, the customer has the legal right to the securities received by the non-member company from the member company because the purchased securities are regarded as belonging to the customer in so far as the customer and the non-member company’s creditors are concerned.

As the cash deposited with a securities company is regarded as belonging to the securities company, which is liable to return the same at the request of its customer, the customer cannot take back deposited cash from the securities company if a bankruptcy or reorganization procedure is instituted against the securities company and, therefore, can suffer from loss or damage as a result. However, the Depositor Protection Act provides that Korea Deposit Insurance Corporation will, upon the request of the investors, pay investors up to Won 50 million per

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investor in case of the securities company’s bankruptcy, liquidation, cancellation of securities business license or other insolvency events. Pursuant to the Securities and Exchange Act, as amended, subject to certain exceptions, securities companies are required to deposit the cash received from its customers with the Korea Securities Finance Corporation, a special entity established pursuant to the Securities and Exchange Act. Set-off or attachment of cash deposits by securities companies is prohibited. The premiums related to this insurance under the Depositor Protection Act are paid by securities companies.

Item. 10 Additional Information

DESCRIPTION OF CAPITAL STOCK

This section provides information relating to our capital stock, including brief summaries of material provisions of our articles of incorporation, the Korean Securities and Exchange Act of 1962 (the “Korean Securities and Exchange Act”), the Korean Commercial Code and related laws of Korea, all as currently in effect. The following summaries are subject to, and are qualified in their entirety by reference to, our articles of incorporation and the applicable provisions of the Korean Securities and Exchange Act and the Korean Commercial Code. We have filed or incorporated by reference copies of our articles of incorporation and these laws as exhibits to our most recently filed annual report.

General

The name of our company is SK Telecom Co., Ltd. We are registered under the laws of Korea under the commercial registry number of 110111-0371346. As specified in Article 2 (Objectives) of our articles of incorporation, the company’s objectives are the rational management of the telecommunications business, development of telecommunications technology, and contribution to public welfare and convenience. In order to achieve these objectives, we are engaged in the following:


	•	information and communication business;

	•	sale and lease of subscriber handsets;

	•	new media business;

	•	advertising business;

	•	mail order business;

	•	business of leasing available and real estate property;

	•	research and technology development relating to the first four items above;

	•	overseas and import/ export business relating to the first four items above;

	•	manufacture and distribution business relating to the first four items above; and

	•	any business or undertaking incidental or conducive to the attainment of the objectives stated above.

Currently, our authorized share capital is 220,000,000 shares, which consists of shares of common stock, par value Won 500 per share and shares of non-voting stock, par value Won 500 per share (common shares and non-voting shares together are referred to as “shares”). Under our articles of incorporation, we are authorized to issue up to 5,500,000 non-voting preferred shares. As of May 20, 2005, 82,276,711 common shares were issued, of which 8,662,415 shares were held by us in treasury. We have never issued any non-voting preferred shares. All of the issued and outstanding common shares are fully-paid and non-assessable and are in registered form. We issue share certificates in denominations of 1, 5, 10, 50, 100, 500, 1,000 and 10,000 shares.

Board of Directors

Meetings of the board of directors are convened by the representative director as he or she deems necessary or upon the request of three or more directors. The board of directors determines all important matters relating to

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our business. In addition, the prior approval of the majority of the outside directors is required for certain matters, which includes:


	•	investment by us or any of our subsidiaries in a foreign company or equity or other overseas assets in an amount equal to 5.0% or more of our shareholders’ equity under our most recent balance sheet; and

	•	contribution of capital, loans or guarantees, acquisition of our subsidiaries’ assets or similar transactions with our affiliated companies in excess of Won 10 billion through one or a series of transactions.

Resolutions of the board are adopted in the presence of a majority of the directors in office and by the affirmative vote of a majority of the directors present. No director who has an interest in a matter for resolution may exercise his or her vote upon such matter.

There are no specific shareholding requirements for director’s qualification. Directors are elected at a general meeting of shareholders if the approval of a majority vote of the shareholders present at such meeting is obtained, and such majority also represents at least one-fourth of the total number of shares outstanding. Under the Korean Securities and Exchange Act, unless stated otherwise in the articles of incorporation, holders of an aggregate of 1% or more of the outstanding shares with voting rights may request cumulative voting in any election for two or more directors. Our articles of incorporation permit cumulative voting starting from the ordinary general meeting of shareholders in 2003.

The term of office for directors shall be until the close of the third annual general shareholders’ meeting convened after he or she commences his or her term. Our directors may serve consecutive terms and our shareholders may remove them from office at any time by a special resolution adopted at a general meeting of shareholders.

Dividends

We declare dividends annually at the annual general meeting of shareholders which is generally held within three months after the end of the fiscal year. We pay the annual dividend shortly after the annual general meeting to the shareholders of record or registered pledges as of the end of the preceding fiscal year. We may distribute the annual dividend in cash or in shares. However, a dividend of shares must be distributed at par value. If the market price of the shares is less than their par value, dividends in shares may not exceed one-half of the annual dividend. Our obligation to pay dividend expires if no claim to dividend is made for five years from the payment date.

Under the Korean Commercial Code, we may pay an annual dividend only out of the excess of our net assets, on a non-consolidated basis, over the sum of (1) our stated capital and (2) the total amount of our capital surplus reserve and legal reserve accumulated up to the end of the relevant dividend period. In addition, we may not pay an annual dividend unless we have set aside as legal reserve an amount equal to at least 10.0% of the cash portion of the annual dividend or unless we have accumulated a legal reserve of not less than one-half of our stated capital. As a Korea Stock Exchange-listed company, we are also required under the relevant laws and regulations to set aside in reserve a certain amount each fiscal year until our own capital ratio is at least 30%. We may not use legal reserve to pay cash dividends but may transfer amounts from legal reserve to capital stock or use legal reserve to reduce an accumulated deficit.

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Under the Korean Securities and Exchange Act, the total amount of interim dividends payable in a fiscal year shall not be more than the net assets on the balance sheet of the immediately preceding fiscal year, after deducting (1) a company’s capital in the immediately preceding fiscal year, (2) the aggregate amount of its capital reserves and legal reserves accumulated up to the immediately preceding fiscal year, (3) the amount of earnings for dividend payments confirmed at the general shareholders’ meeting of the immediately preceding fiscal year and (4) the amount of legal reserve that should be set aside for the current fiscal year following the interim dividend payment.

Our obligation to pay interim dividends expires if no claims to such dividends are made for a period of five years from the payment date.

Distribution of Free Shares

In addition to paying dividends in shares out of our retained or current earnings, we may also distribute to our shareholders an amount transferred from our capital surplus or legal reserve to our stated capital in the form of free shares. We must distribute such free shares to all our shareholders in proportion to their existing shareholdings.

Preemptive Rights and Issuance of Additional Shares

We may at times issue authorized but unissued shares, unless otherwise provided in the Korean Commercial Code, on terms determined by our board of directors. All our shareholders are generally entitled to subscribe to any newly-issued shares in proportion to their existing shareholdings. We must offer new shares on uniform terms to all shareholders who have preemptive rights and are listed on our shareholders’ registry as of the relevant record date. We must give public notice of the preemptive rights regarding new shares and their transferability at least two weeks before the relevant record date. Our board of directors may determine how to distribute shares for which preemptive rights have not been exercised or where fractions of shares occur.

Under the Korean Commercial Code and our articles of incorporation, we may issue new shares pursuant to a board resolution to persons other than existing shareholders only if (1) the new shares are issued for the purpose of issuing depositary receipts in accordance with the relevant regulations or through an offering to public investors and (2) the purpose of such issuance is deemed necessary by us to achieve a business purpose, including, but not limited to, the introduction of new technology for the improvement of our financial condition. Under our articles of incorporation, only our board of directors is authorized to set the terms and conditions with respect to such issuance of new shares.

In addition, we may issue convertible bonds or bonds with warrants, each up to an aggregate principal amount of Won 400 billion, to persons other than existing shareholders, where such issuance is deemed necessary by us to achieve a business purpose, including, but not limited to, the introduction of new technology or the improvement of our financial condition.

Members of our employee stock ownership association, whether or not they are our shareholders, generally have a preemptive right to subscribe for up to 20.0% of the shares publicly offered pursuant to the Korean Securities and Exchange Act. This right is exercisable only to the extent that the total number of shares so acquired and held by members of our employee stock ownership association does not exceed 20.0% of the sum of the number of shares then outstanding and the number of newly-issued shares. As of December 31, 2004, approximately 0.46% of the issued shares were held by members of our employee stock ownership association.

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General Meeting of Shareholders

We generally hold the annual general meeting of shareholders within three months after the end of each fiscal year. Subject to a board resolution or court approval, we may hold an extraordinary general meeting of shareholders:


	•	as necessary;

	•	at the request of holders of an aggregate of 3.0% or more of our outstanding common shares;

	•	at the request of shareholders holding an aggregate of 3.0% or more of our outstanding shares for at least six months; or

	•	at the request of our audit committee.

Holders of non-voting shares may request a general meeting of shareholders only after the non-voting shares become entitled to vote or “enfranchised,” as described under “— Voting Rights” below.

We must give shareholders written notice setting out the date, place and agenda of the meeting at least two weeks before the date of the general meeting of shareholders. However, for holders of less than 1.0% of the total number of issued and outstanding voting shares, we may give notice by placing at least two public notices in at least two daily newspapers at least two weeks in advance of the meeting. Currently, we use The Korea Economic Daily News and Mail Business Newspaper, both published in Seoul, for this purpose. Shareholders who are not on the shareholders’ registry as of the record date are not entitled to receive notice of the general meeting of shareholders or attend or vote at the meeting. Holders of non-voting shares, unless enfranchised, are not entitled to receive notice of or vote at general meetings of shareholders.

Our general meetings of shareholders have historically been held in or near Seoul.

Voting Rights

Holders of our common shares are entitled to one vote for each common share, except that voting rights of common shares held by us (including treasury shares and shares held by bank trust funds controlled by us), or by a corporate shareholder that is more than 10.0% owned by us either directly or indirectly, may not be exercised. Under the Korean Securities and Exchange Act, unless stated otherwise in the articles of incorporation, holders of an aggregate of 1% or more of the outstanding shares with voting rights may request cumulative voting in any election for two or more directors. Our articles of incorporation permit cumulative voting starting from the ordinary general meeting of shareholders in 2003. Under this voting method, each shareholder would have multiple voting rights corresponding to the number of directors to be appointed in a particular election and may exercise all voting rights cumulatively to elect one director.

Our shareholders may adopt resolutions at a general meeting by an affirmative majority vote of the voting shares present or represented at the meeting if the proportion of affirmative votes also represent at least one-fourth of our total voting shares then issued and outstanding. However, under the Korean Commercial Code and our articles of incorporation, the following matters, among others, require approval by the holders of at least two-thirds of the voting shares present or represented at a meeting, and such affirmative votes also represent at least one-third of our total voting shares then issued and outstanding:


	•	amending our articles of incorporation;

	•	removing a director;

	•	effecting any dissolution, merger or consolidation of us;

	•	transferring the whole or any significant part of our business;

	•	effecting our acquisition of all of the business of any other company or a part of the business of any other company having a material effect on our business;

	•	reducing our capital; or

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	•	issuing any new shares at a price lower than their par value.

In general, holders of non-voting shares are not entitled to vote on any resolution or receive notice of any general meeting of shareholders. However, in the case of amendments to our articles of incorporation, or any merger or consolidation of us, or in some other cases which affect the rights or interests of the non-voting shares, approval of the holders of non-voting shares is required. We may obtain the approval by a resolution of holders of at least two-thirds of the non-voting shares present or represented at a class meeting of the holders of non-voting shares, where the affirmative votes also represent at least one-third of our total issued and outstanding non-voting shares. In addition, if we are unable to pay dividends on non-voting shares as provided in our articles of incorporation, the holders of non-voting shares will become enfranchised and will be entitled to exercise voting rights until the dividends are paid. The holders of enfranchised non-voting shares have the same rights as holders of common shares to request, receive notice of, attend and vote at a general meeting of shareholders.

Shareholders may exercise their voting rights by proxy. A shareholder may give proxies only to another shareholder, except that a corporate shareholder may give proxies to its officers or employees.

Holders of ADRs exercise their voting rights through the ADR depositary, an agent of which is the record holder of the underlying common shares. Subject to the provisions of the deposit agreement, ADR holders are entitled to instruct the ADR depositary how to vote the common shares underlying their ADSs.

Rights of Dissenting Shareholders

In some limited circumstances, including the transfer of all or a significant part of our business or our merger or consolidation with another company (with certain exceptions), dissenting shareholders have the right to require us to purchase their shares. To exercise this right, shareholders, including holders of non-voting shares, must submit to us a written notice of their intention to dissent before the general meeting of shareholders. Then, within 20 days after the relevant resolution is passed at a meeting, the dissenting shareholders must request us in writing to purchase their shares. We are obligated to purchase the shares of such dissenting shareholders within one month after the expiration of the 20-day period. The purchase price for the shares is required to be determined through negotiation between the dissenting shareholders and us. If we cannot agree on a price through negotiation, the purchase price will be the average of (1) the weighted average of the daily share prices on the KRX Stock Market for the two-month period before the date of the adoption of the relevant board resolution, (2) the weighted average of the daily share price on the KRX Stock Market for the one month period before the date of the adoption of the relevant resolution and (3) the weighted average of the daily share price on the KRX Stock Market for the one week period before such date of the adoption of the relevant resolution. However, the Financial Supervisory Commission of Korea may adjust this price if we or 30.0% or more of dissenting shareholders do not accept the purchase price. Holders of ADSs will not be able to exercise dissenter’s rights unless they have withdrawn the underlying common stock and become our direct shareholders.

Registry of Shareholders and Record Dates

Our transfer agent, Kookmin Bank, maintains the registry of our shareholders at its office in Seoul, Korea. It records and registers transfers of shares on the registry of shareholders upon presentation of the share certificates.

The record date for annual dividends is December 31. For the purpose of determining the shareholders entitled to annual dividends, the registry of shareholders is closed for the period from January 1 to January 31 of the following year. Further, for the purpose of determining the shareholders entitled to some other rights pertaining to the shares, we may, on at least two weeks’ public notice, set a record date and/or close the register of shareholders for not more than three months. The trading of shares and the delivery of share certificates may continue while the register of shareholders is closed.

Annual Report

At least one week before the annual general meeting of shareholders, we must make our annual report and audited non-consolidated financial statements available for inspection at our principal office and at all of our

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branch offices. In addition, copies of annual reports, the audited non-consolidated financial statements and any resolutions adopted at the general meeting of shareholders will be available to our shareholders.

Under the Korean Securities and Exchange Act, we must file with the Financial Supervisory Commission of Korea and the KRX (1) an annual securities report within 90 days after the end of our fiscal year, (2) a half-year report within 45 days after the end of the first six months of our fiscal year, and (3) quarterly reports within 45 days after the end of the third month and the ninth month of our fiscal year. Copies of these reports are or will be available for public inspection at the Financial supervisory Commission of Korea and the KRX.

Transfer of Shares

Under the Korean Commercial Code, the transfer of shares is effected by the delivery of share certificates. However, to assert shareholders’ rights against us, the transferee must have his or her name, seal and address registered on our registry of shareholders, maintained by our transfer agent. A non-Korean shareholder may file a sample signature in place of a seal, unless he or she is a citizen of a country with a sealing system similar to that of Korea. In addition, a non-resident shareholder must appoint an agent in Korea authorized to receive notices on his or her behalf and file his or her mailing address in Korea. These requirements do not apply to holders of ADSs.

Under current Korean regulations, Korean securities companies and banks, including licensed branches of non-Korean securities companies and banks, investment management companies, futures trade companies, internationally recognized foreign custodians and the Korea Securities Depository may act as agents and provide related services for foreign shareholders. Certain foreign exchange controls and securities regulations apply to the transfer of shares by non-residents or non-Koreans. See “— Korean Foreign Exchange Controls and Securities Regulations”.

Our transfer agent is Kookmin Bank, located at 24-3, Yoido-dong, Yongdungpo-ku, Seoul, Korea.

Restrictions Applicable to Shares

Pursuant to the Telecommunications Business Law, the maximum aggregate foreign shareholding in us is limited to 49.0%. See “Information on the Company — Business Overview — Law and Regulation — Foreign Ownership and Investment Restrictions and Requirements”. In addition, certain foreign exchange controls and securities regulations apply to the acquisition of securities by nonresidents or non-Koreans. See “— Korean Foreign Exchange Controls and Securities Regulations”.

Acquisition of Shares by Us

Under the Korean Commercial Code, we may not acquire our own shares except in limited circumstances, such as a reduction in capital. However, we may acquire our own shares under the relevant provisions of the Securities and Exchange Act. In such cases, we may acquire shares through purchases on the KRX Stock Market or through a tender-offer after filing the required report with the Financial Supervisory Commission of Korea and the KRX. We may also acquire interests in our own shares through agreements with trust companies, securities investment companies and securities investment trust companies after filing a report with the Financial Supervisory Commission and the KRX. The aggregate purchase price for the shares may not exceed the total amount available for distribution of dividends, subject to certain procedural requirements.

Under the Korean Commercial Code, except in the case of a reduction in capital, we must resell or transfer any shares we acquire to a third party within a reasonable time. In general, corporate entities in which we own more than 50% equity interest may not acquire our shares. Under the Korean Securities and Exchange Act, we are subject to certain selling restrictions for the shares we acquire. In the case of a reduction in capital, we must immediately cancel the shares we acquire. On October 26, 2001, in accordance with the approval of our board of directors, we announced plans to establish trust funds with four Korean banks with a total funding of won 1.3 trillion for the purpose of acquiring our shares at market prices or within a range of five percent of market prices. For more details on the trust funds, see “Operating and Financial Review and Prospects — Liquidity and Capital Resources”.

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Liquidation Rights

In the event of our liquidation, assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among shareholders in proportion to their shareholdings. Holders of non-voting shares have no preference in liquidation. Holders of debt securities have no preference over other creditors in the event of liquidation.

DESCRIPTION OF AMERICAN DEPOSITARY SHARES

The following is a summary of the deposit agreement dated as of May 31, 1996, as amended by amendment no. 1 dated as of March 15, 1999, amendment no. 2 dated as of April 24, 2000 and amendment no. 3 dated as of July 24, 2002, among us, Citibank, N.A., as ADR depositary, and all holders and beneficial owners of ADSs, as supplemented by the side letter dated as of August 1, 2002 by and between us and Citibank, N.A., as ADR depositary, and as supplemented by the side letter dated as of October 1, 2002 by and between us and Citibank, N.A., as ADR depositary. The deposit agreement is governed by the laws of the State of New York. Because it is a summary, this description does not contain all the information that may be important to you. For more complete information, you should read the entire deposit agreement and the ADR. The deposit agreement has been filed as an exhibit to our registration statement on Form F-3 (File No. 333-91304) filed with the United States Securities and Exchange Commission. Copies of the deposit agreement are available for inspection at the principal New York office of the ADR depositary, currently located at 111 Wall Street, 20th Floor, New York, New York 10043, and at the principal London office of the ADR depositary currently located at Cottons Centre, Hays Lane, London SE1 2QT, England.

American Depositary Receipts

The ADR depositary will execute and deliver the ADRs evidencing the ADSs. Each ADR evidences a specified number of ADSs, each ADS representing one-ninth of one share of our common stock to be deposited with the ADR depositary’s custodian in Seoul, or the Custodian. The Custodian is Korea Securities Depository, located at 36-5 Yoido-dong, Yongdungpo-ku, Seoul, Korea. Korea Securities Depository is also the institution authorized under applicable law to effect book-entry transfers of our common shares, known as the “Custodian”. An ADR may represent any number of ADSs. We and the ADR depositary will treat only persons in whose names ADRs are registered on the books of the registrar as holders of ADRs.

Deposit and Withdrawal of Shares of Common Stock

Notwithstanding the provisions described below, under the terms of the deposit agreement, as amended by the side letter dated as of October 1, 2002, the deposit of shares and issuance of ADSs may only be made if the total number of shares represented by ADRs after such deposit does not exceed a specified maximum, 13,598,544 shares as of October 1, 2002. This limit will be adjusted in certain circumstances, including (1) increases upon the cancellation of existing ADRs (up to a maximum of 5,605,839 shares), (2) increases upon future offerings of ADSs by us or our shareholders, (3) increases upon issuances of ADSs upon the exchange of outstanding exchangeable bonds issued by Momenta (Cayman) (a special purpose vehicle incorporated in the Cayman Islands, which sold bonds exchangeable initially into such ADSs, see, “Major Shareholders and Related Party Transactions — Related Party Transactions”), (4) increases for rights offerings and (5) adjustments for share reclassifications. The limit also may be decreased in certain circumstances, including in connection with purchases of ADSs by Momenta (Cayman) in accordance with the terms of its exchangeable bonds. Notwithstanding the foregoing, the ADR depositary and the custodian may not accept deposits of shares of common stock for issuance of ADSs (other than in the case of an exercise of the exchange rights of the exchangeable bonds issued by Momenta (Cayman)) (i) if it has been notified by us in writing that we block deposits to prevent a violation of applicable Korean laws or regulations or a violation of our articles of incorporation or (ii) from a person intending to make a deposit that identifies itself to the depositary and that has been identified in writing by us as a holder of at least 3% of our shares of common stock on October 7, 2002.

The shares of common stock underlying the ADSs are delivered to the ADR depositary’s custodian in book-entry form. Accordingly, no share certificates will be issued for them, and the ADR depositary will hold the

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shares of common stock through the book-entry settlement system of the Custodian. The delivery of the shares of common stock pursuant to the deposit agreement will take place through the facilities of the Custodian in accordance with its applicable settlement procedures. The ADR depositary will execute and deliver ADRs if you or your broker deposit shares or evidence of rights to receive shares of common stock with the Custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the ADR depositary will register the appropriate number of ADSs in the names you designate and will deliver an ADR or ADRs for those ADSs to the persons you designate. The ADR depositary and the ADR depositary’s custodian will refuse to accept shares of common stock for deposit whenever we restrict transfer of shares of common stock to comply with ownership restrictions under applicable law or our articles of incorporation or whenever the deposit would cause the total number of shares of common stock deposited to exceed a level we determine from time to time. We may instruct the ADR depositary to take certain actions with respect to a holder of ADSs who holds in excess of the ownership limitation set forth in the deposit agreement, including the mandatory sale or disposition of the shares represented by the ADSs in excess of such ownership limitations if, and to the extent, permitted by applicable law.

You may surrender your ADRs to the ADR depositary to withdraw the underlying shares of our common stock. Upon payment of the fees and any governmental charges and taxes provided in the deposit agreement, and subject to applicable laws and regulations of Korea and our articles of incorporation, you will be entitled to physical delivery or electronic delivery to an account in Korea or, if permissible under applicable Korean law, outside Korea, of the shares of common stock evidenced by the ADRs and any other property at the time represented by ADRs you surrendered. If you surrender an ADR evidencing a number of ADSs not evenly divisible by nine, the ADR depositary will deliver the appropriate whole number of shares of common stock represented by the surrendered ADSs, and will execute and deliver to you a new ADR evidencing ADSs representing any remaining fractional shares of common stock.

If you request withdrawal of shares of common stock, you must deliver to the ADR depositary a written order directing the ADR depositary to cause the shares of common stock being withdrawn to be delivered outside the United States to or upon the written order of the person designated in your order, subject to applicable Korean laws and the provisions of the deposit agreement.

Under the provisions of the deposit agreement, the ADR depositary may not lend shares of common stock or ADSs. However, subject to the provisions of the deposit agreement and limitations established by the ADR depositary, the ADR depositary may execute and deliver ADSs before deposit of the underlying shares of common stock. This is called a pre-release of the ADS. The ADR depositary may also deliver shares of common stock upon cancellation of pre-released ADSs (even if the cancellation occurs before the termination of the pre-release) or upon receipt of other ADSs. The ADR depositary may pre-release ADSs only under the following circumstances:


	•	before or at the time of the pre-release, the person to whom the pre-release is being made must represent to the ADR depositary in writing that it or its customer owns the shares of common stock or ADRs to be deposited and show evidence of the ownership to the ADR depositary’s satisfaction;

	•	before or at the time of such pre-release, the person to whom the pre-release is being made must agree in writing that he will hold the shares of common stock or ADSs in trust for the ADR depositary until their delivery to the ADR depositary or custodian, reflect on his records the ADR depositary as owner of such shares of common stock or ADSs and deliver such shares of common stock upon the ADR depositary’s request;

	•	the pre-release must be fully collateralized with cash or U.S. government securities;

	•	the ADR depositary must be able to terminate the pre-release on not more than five business day’s notice; and

	•	the pre-release is subject to further indemnities and credit regulations as the ADR depositary deems appropriate.

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The ADR depositary may retain for its own account any compensation received by it in connection with the pre-release, such as earnings on the collateral.

If you want to withdraw the shares of common stock from the depositary facility, you must register your identity with the Financial Supervisory Service of Korea before you acquire the shares of common stock unless you intend to sell the shares of common stock within three months. See “Korean Foreign Exchange Controls and Securities Regulations — Restrictions Applicable to Shares”.

Dividends, Other Distributions and Rights

If the ADR depositary can, in its judgment and pursuant to applicable law, convert Won (or any other foreign currency) into Dollars on a reasonable basis and transfer the resulting Dollars to the United States, the ADR depositary will as promptly as practicable convert all cash dividends and other cash distributions received by it on the deposited shares of common stock into Dollars and to distribute the Dollars to you in proportion to the number of ADSs representing shares of common stock held by you, after deduction of the fees and expenses of the ADR depositary. If the ADR depositary determines that in its judgment any currency other than Dollars it receives from us cannot be converted and distributed on a reasonable basis, the ADR depositary may distribute the currency it receives to the extent permitted under applicable law or hold the currency for your account if you are entitled to receive the distribution. The ADR depositary will not be liable for any interest. Before making a distribution, the ADR depositary will deduct any withholding taxes that must be paid.

In the event that the ADR depositary or the ADR depositary’s custodian receives any distribution upon any deposited shares of common stock in property or securities (other than shares of common stock, non-voting shares or rights to receive shares of common stock or non-voting shares), the ADR depositary will distribute the property or securities to you in proportion to your holdings in any manner that the ADR depositary deems, after consultation with us, equitable and practicable. If the ADR depositary determines that any distribution of property or securities (other than shares of common stock, non-voting shares or rights to receive shares of common stock or non-voting shares) cannot be made proportionally, or if for any other reason the ADR depositary deems the distribution not to be feasible, the ADR depositary may, after consultation with us, dispose of all or a portion of the property or securities in such amounts and in such manner, including by public or private sale, as the ADR depositary deems equitable or practicable. The ADR depositary will distribute to you the net proceeds of any such sale, or the balance of the property or securities, after the deduction of the fees and expenses of the ADR depositary.

If a distribution by us consists of a dividend in, or free distribution of, our shares of common stock, the ADR depositary may, with our approval, and will, if we request, deposit the shares of common stock and either (1) distribute to you, in proportion to your holdings, additional ADSs representing those shares of common stock, or (2) reflect on the records of the ADR depositary the increase in the aggregate number of ADSs representing those number of shares of common stock, in both cases, after the deduction of the fees and expenses of the ADR depositary. If the ADR depositary deems that such distribution for any reason is not feasible, the ADR depositary may adopt, after consultation with us, any method as it may deem equitable and practicable, including by public or private sale of all or part of the shares of common stock received. The ADR depositary will distribute to you the net proceeds of any such sale in the same way as it does with cash. The ADR depositary will only distribute whole ADSs. If the ADR depositary does not distribute additional ADSs, then each outstanding ADS will also represent the new shares so distributed.

If a distribution by us consists of a dividend in, or free distribution of, non-voting shares, the ADR depositary will deposit the non-voting shares under a non-voting shares deposit agreement to be entered into among us, the ADR depositary and all holders and beneficial owners of depositary shares. The ADR depositary will deliver to you, in proportion to your holdings of ADSs, depositary shares issued under the non-voting shares deposit agreement representing the number of non-voting shares received as such dividend or distribution. If the ADR depositary deems such distribution for any reason is not feasible, the ADR depositary may adopt, after consultation with us, any method as it may deem equitable and practicable, including by public or private sale of all or part of the nonvoting shares received. The ADR depositary will distribute to you the net proceeds of any

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such sale in the same way as it does with cash. The ADR depositary will only distribute whole depositary shares. We are not obligated to list depositary shares representing non-voting shares on any exchange.

If we offer holders of our securities any rights to subscribe for additional shares of common stock or any other rights, the ADR depositary may make these rights available to you. The ADR depositary must first determine whether it is lawful and feasible to do so. If the ADR depositary determines that it is not lawful or feasible to make these rights available to you, then upon our request, the ADR depositary will sell the rights and distribute the proceeds in the same way as it would do with cash. The ADR depositary may allow these rights that are not distributed or sold to lapse. In that case, you will receive no value for these rights.

If we issue any rights with respect to non-voting shares, the securities issuable upon any exercise of such rights by holders or beneficial owners will be depositary shares representing those non-voting shares issued under the provisions of a non-voting share deposit agreement.

If a registration statement under the U.S. Securities Act is required with respect to the securities to which any rights relate in order for us to offer the rights to you and to sell the securities represented by these rights, the ADR depositary will not offer such rights to you until such a registration is in effect, or unless the offering and sale of such securities and such rights to you are exempt from the registration requirements of the U.S. Securities Act or any required filing, report, approval or consent has been submitted, obtained or granted. We or the ADR depositary will not be obligated to register the rights or securities under the U.S. Securities Act or to submit, obtain or request any filing, report, approval or consent.

The ADR depositary may not be able to convert any currency or to sell or dispose of any distributed or offered property or rights in a timely manner or at a specified price, or at all.

Record Dates

The ADR depositary will fix a record date, after consultation with us, in each of the following situations:


	•	any cash dividend or other cash distribution becomes payable;

	•	any distribution other than cash is made;

	•	rights are issued with respect to deposited shares of common stock;

	•	the ADR depositary causes a change in the number of shares of common stock that are represented by each ADS; or

	•	the ADR depositary receives notice of any shareholders’ meeting.

The record date will, to the extent practicable, be as near as the record date fixed by us for the shares of common stock. The record date will determine (1) the ADR holders who are entitled to receive the dividend, distribution or rights, or the net proceeds of the sale of the rights; or (2) the ADR holders who are entitled to receive notices or exercise rights.

Voting of the Underlying Shares of Common Stock

We will give the ADR depositary a notice of any meeting or solicitation of shareholder proxies immediately after we finalize the form and substance of such notice but not less than 14 days before the meeting. As soon as practicable after it receives our notice, the ADR depositary will fix a record date, and upon our written request, the ADR depositary will mail to you a notice that will contain the following:


	•	the information contained in our notice to the ADR depositary including an English translation, or, if requested by us, a summary of the information provided by us;

	•	a statement that the ADR holders as of the close of business on a specified record date will be entitled to instruct the ADR depositary as to how to exercise their voting rights for the number of shares of deposited shares of common stock, subject to the provisions of applicable Korean law and our articles of incorporation, which provisions, if any, will be summarized in the notice to the extent that they are material; and

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	•	a statement as to the manner in which the ADR holders may give their instructions.

Upon your written request received on or before the date set by the ADR depositary for this purpose, the ADR depositary will endeavor, in so far as practicable, to vote or cause to be voted the deposited shares of common stock in accordance with the instructions set forth in your written requests. The ADR depositary may not itself exercise any voting discretion over any deposited shares of common stock. You may only exercise the voting rights in respect of 9 ADSs or multiples of 9 ADSs. ADR holders may not be entitled to give instruction to vote the shares represented by the ADSs if, and to the extent, the total number of shares represented by the ADSs of an ADR holder exceeds the limit set under applicable law. We can give no assurance to you, however, that we will notify the ADR depositary sufficiently in advance of the scheduled date of a meeting or solicitation of consents or proxies to enable the ADR depositary to make a timely mailing of notices to you, or that you will receive the notices sufficiently in advance of a meeting or solicitation of consents or proxies to give instructions to the ADR depositary.

Inspection of Transfer Books

The ADR depositary will keep books at its principal New York office which is currently located at 111 Wall Street, 20th Floor/ Zone 7, New York, New York 10043, for the registration and transfer of ADRs. You may inspect the books of the ADR depositary as long as the inspection is not for the purpose of communicating with holders in the interest of a business or object other than our business or a matter related to the deposit agreement or the ADRs.

Reports and Notices

On or before the first date on which we give notice, by publication or otherwise, of any meeting of shareholders, or of any adjourned meeting of shareholders, or of the taking of any action in respect of any cash or other distributions or the offering of any rights in respect of the shares of common stock, we will transmit to the Custodian and the ADR depositary sufficient copies of the notice in English in the form given or to be given to shareholders. We will furnish to the ADR depositary English language versions of any reports notices and other communications that we generally transmit to holders of our common stock, including our annual reports, with annual audited consolidated financial statements prepared in conformity with Korean GAAP and, if prepared pursuant to the Securities Exchange Act of 1934, as amended, a reconciliation of net earnings for the year and stockholders’ equity to U.S. GAAP, and unaudited non-consolidated semiannual financial statements prepared in conformity with Korean GAAP. The ADR depositary will arrange for the prompt mailing of copies of these documents, or, if we request, a summary of any such notice provided by us to you or, at our request, make notices, reports (other than the annual reports and semiannual financial statements) and other communications available to you on a basis similar to that for the holders of our common stock or on such other basis as we may advise the ADR depositary according to any applicable law, regulation or stock exchange requirement.

Notices to you under the deposit agreement will be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission, confirmed by letter, addressed to you at your address as it appears on the transfer books of the ADR depositary or at such other address as you have notified the ADR depositary.

In addition, the ADR depositary will make available for inspection by holders at its principal New York office and its principal London office any notices, reports or communications, including any proxy soliciting materials, received from us that we generally transmit to the holders of our common stock or other deposited securities, including the ADR depositary. The ADR depositary will also send to you copies of reports and communications we will provide as provided in the deposit agreement.

Changes Affecting Deposited Shares of Common Stock

In case of a change in the par value, or a split-up, consolidation or any other reclassification of shares of our common stock or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting us, any securities received by the ADR depositary or the Custodian in exchange for, in conversion of or in respect of deposited shares of our common stock will be treated as new deposited shares of common stock under the deposit

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agreement. In that case, ADSs will, subject to the terms of the deposit agreement and applicable laws and regulations, including any registration requirements under the U.S. Securities Act, represent the right to receive the new deposited shares of common stock, unless additional ADRs are issued, as in the case of a stock dividend, or unless the ADR depositary calls for the surrender of outstanding ADRs to be exchanged for new ADRs.

Amendment and Termination of the Deposit Agreement

We may agree with the ADR depositary to amend the deposit agreement and the ADSs without your consent for any reason. If the amendment adds or increases fees or charges, except for taxes and other governmental charges or certain expenses of the ADR depositary, or prejudices any substantial existing right of ADR holders, it will only become effective 30 days after the ADR depositary notifies you of the amendment. If you continue to hold your ADSs at the time an amendment becomes effective, you will be considered to have agreed to the amendment and to be bound by the deposit agreement as amended. Except as otherwise required by any mandatory provisions of applicable law, no amendment may impair your right to surrender your ADSs and to receive the underlying deposited securities.

The ADR depositary will terminate the deposit agreement if we ask it to do so with 90 days’ prior written notice. The ADR depositary may also terminate the deposit agreement if the ADR depositary has notified us at least 90 days in advance that it would like to resign and we have not appointed a new depositary. In both cases, the ADR depositary must notify you at least 30 days before the termination date.

If any ADRs remain outstanding after the date of termination, the ADR depositary will stop performing any further acts under the deposit agreement, except:


	•	to collect dividends and other distributions pertaining to the deposited shares of common stock;

	•	to sell property and rights and the conversion of deposited shares of common stock into cash as provided in the deposit agreement; and

	•	to deliver deposited shares of common stock, together with any dividends or other distributions received with respect to the deposited shares of common stock and the net proceeds of the sale of any rights or other property represented by those ADSs in exchange for surrendered ADRs.

At any time after the expiration of six months from the date of termination, the ADR depositary may sell any remaining deposited shares of common stock and hold uninvested the net proceeds in an unsegregated account, together with any other cash or property then held, without liability for interest, for the pro rata benefit of the holders of ADSs that have not been surrendered by then.

Charges of ADR Depositary

The fees and expenses of the ADR depositary as agreed between us and the ADR depositary include:


	•	taxes and other governmental charges;

	•	registration fees applicable to transfers of shares of common stock on our shareholders’ register, or that of any entity acting as registrar for the shares, to the name of the ADR depositary or its nominee, or the Custodian or its nominee, when making deposits or withdrawals under the deposit agreement;

	•	cable, telex and facsimile transmission expenses that are expressly provided in the deposit agreement;

	•	expenses incurred by the ADR depositary in the conversion of foreign currency into Dollars under the deposit agreement;

	•	a fee of up to US$5.00 per 100 ADSs, or portion thereof, for execution and delivery of ADSs and the surrender of ADRs under the deposit agreement; and

	•	a fee of up to US$0.02 per ADS held for cash distributions, a sale or exercise of rights or the taking of any other corporate action involving distributions to shareholders.

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General

Neither we nor the ADR depositary will be liable to you if prevented or delayed by law, governmental authority, any provision of our articles of incorporation or any circumstances beyond our or its control in performing our or its obligations under the deposit agreement. The deposit agreement provides that the ADR depositary will hold the shares of common stock for your sole benefit. Our obligations and those of the ADR depositary under the deposit agreement are expressly limited to performing, in good faith and without negligence, our and its respective duties specified in the deposit agreement.

The ADSs are transferable on the books of the ADR depositary; provided, however, that the ADR depositary may, after consultation with us, close the transfer books at any time or from time to time, when deemed expedient by it in connection with the performance of its duties. As a condition precedent to the execution and delivery of any ADSs, registration of transfer, split-up, combination of any ADR or surrender of any ADS for the purpose of withdrawal of deposited shares of common stock, the ADR depositary or the Custodian may require payment from the depositor of the shares of common stock or a holder of ADSs of a sum sufficient to reimburse the ADR depositary for any tax or other governmental charge and any stock transfer or registration fee and payment of any applicable fees payable by the holders of ADSs.

Any person depositing shares of common stock, any holder of an ADS or any beneficial owner may be required from time to time to file with the ADR depositary or the Custodian a proof of citizenship, residence, exchange control approval, payment of applicable Korean or other taxes or governmental charges, or legal or beneficial ownership and the nature of their interest, to provide information relating to the registration on our shareholders’ register (or our appointed agent for the transfer and registration of shares of common stock) of the shares of common stock presented for deposit or other information, to execute certificates and to make representations and warranties as we or the ADR depositary may deem necessary or proper or to enable us or the ADR depositary to perform our and its obligations under the deposit agreement. The ADR depositary may withhold the execution or delivery or registration of transfer of all or part of any ADR or the distribution or sale of any dividend or other distribution of rights or of the proceeds from their sale or the delivery of any shares deposited under the deposit agreement and any other securities, property and cash received by the ADR depositary or the Custodian until the proof or other information is filed or the certificates are executed or the representations and warranties are made. The ADR depositary shall provide us, unless otherwise instructed by us, in a timely manner, with copies of any these proofs and certificates and these written representations and warranties.

The delivery and surrender of ADSs and transfer of ADSs generally may be suspended during any period when our or the ADR depositary’s transfer books are closed, or if that action is deemed necessary or advisable by us or the ADR depositary at any time or from time to time in accordance with the deposit agreement. We may restrict, in a manner as we deem appropriate, transfers of shares of common stock where the transfers may result in ownership of shares of common stock in excess of limits under applicable law. Except as described in “Deposit and Withdrawal of Shares of Common Stock” above, notwithstanding any other provision of the deposit agreement, the surrender of outstanding ADRs and withdrawal of Deposited Securities (as defined in the deposit agreement) represented by the ADRs may be suspended, but only as required in connection with (1) temporary delays caused by closing the transfer books of the ADR depositary or the issuer of any Deposited Securities (or the appointed agent or agents for such issuer for the transfer and registration of such Deposited Securities) in connection with voting at a shareholders’ meeting or the payment of dividends, (2) payment of fees, taxes and similar charges, or (3) compliance with any United States or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of the Deposited Securities.

Governing Law

The deposit agreement and the ADRs will be interpreted under, and all rights under the deposit agreement or the ADRs are governed by, the laws of the State of New York.

We have irrevocably submitted to the non-exclusive jurisdiction of New York State or United States Federal Courts located in New York City and waived any objection to legal actions or proceedings in these courts whether on the ground of venue or on the ground that the proceedings have been brought in an inconvenient forum.

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This submission was made for the benefit of the ADR depositary and the holders and shall not limit the right of any of them to take legal actions or proceedings in any other court of competent jurisdiction nor shall the taking of legal actions or proceedings in one or more jurisdictions preclude the taking of legal actions or proceedings in any other jurisdiction (whether concurrently or not), to the extent permitted under applicable law.

Information Relating to the ADR Depositary

Citibank, N.A. has been appointed as ADR depositary pursuant to the deposit agreement. Citibank is a wholly-owned subsidiary of Citicorp, a Delaware corporation whose principal office is located in New York, New York, which in turn is a wholly-owned subsidiary of Citigroup Inc. Citibank is a global financial services organization serving individuals, businesses, governments and financial institutions in approximately 100 countries around the world.

Citibank was originally organized on June 16, 1812, and now is a national banking association organized under the National Bank Act of 1864 of the United States of America. Citibank is primarily regulated by the United States Office of the Comptroller of the Currency. Its principal office is at 399 Park Avenue, New York, NY 10022.

The consolidated balance sheets of Citibank are set forth in Citicorp’s Annual Reports on Form 10-K, and in Citicorp’s quarterly financial reviews and Forms 10-Q. Citicorp’s Annual Reports on Form 10-K and quarterly financial reviews and Forms 10-Q are filed periodically with the United States Securities and Exchange Commission, or SEC.

Citibank’s Articles of Association and By-laws, each as currently in effect, together with Citicorp’s most recent annual and quarterly reports will be available for inspection at the Depositary Receipt office of Citibank, N.A., 111 Wall Street, 20th Floor/ Zone 7, New York, New York 10043.

MATERIAL CONTRACTS

We did not enter into any material contracts during the period from January 1, 2002 through May 31, 2005, other than in the ordinary course of our business. For information regarding our agreements and transactions with entities affiliated with the SK Group see “Major Shareholders and Related Party Transactions — Related Party Transactions”. For a description of certain agreements entered into during the past three years related to our capital commitments and obligations, see “Operating and Financial Review and Prospects — Capital Requirements and Resources”.

KOREAN FOREIGN EXCHANGE CONTROLS AND SECURITIES REGULATIONS

General

The Foreign Exchange Transaction Act and the Presidential Decree and regulations under that Act and Decree, collectively referred to as the Foreign Exchange Transaction Laws, regulate investment in Korean securities by non-residents and issuance of securities outside Korea by Korean companies. Under the Foreign Exchange Transaction Laws, non-residents may invest in Korean securities only to the extent specifically allowed by these laws. The Financial Supervisory Commission of Korea has also adopted, pursuant to its authority under the Securities and Exchange Act, regulations that restrict investment by foreigners in Korean securities and regulate issuance of securities outside Korea by Korean companies.

Subject to certain limitations, the MOFE has authority to take the following actions under the Foreign Exchange Transaction Laws:


	•	if the Government deems it necessary on account of war, armed conflict, natural disaster or grave and sudden and significant changes in domestic or foreign economic circumstances or similar events or circumstances, the MOFE may temporarily suspend performance under any or all foreign exchange transactions, in whole or in part, to which the Foreign Exchange Transaction Laws apply (including suspension of payment and receipt of foreign exchange) or impose an obligation to deposit, safe-keep or

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		sell any means of payment to The Bank of Korea or certain other governmental agencies or financial institutions; and

	•	if the Government concludes that the international balance of payments and international financial markets are experiencing or are likely to experience significant disruption or that the movement of capital between Korea and other countries are likely to adversely affect the Won, exchange rate or other macroeconomic policies, the MOFE may take action to require any person who intends to effect or effects a capital transaction to deposit all or a portion of the means of payment acquired in such transactions with The Bank of Korea or certain other governmental agencies or financial institutions.

Government Review of Issuances of ADSs

In order for us to issue ADSs outside Korea, we are required to submit a report to the MOFE or our designated foreign exchange bank (depending on the aggregate issuance amount) with respect to the issuance of the ADSs. The transfer of the shares to the ADR depositary must be reported immediately to the Governor of the Financial Supervisory Service. The ADR depositary must report to the Financial Supervisory Service (1) the entry into, renewal or termination of a deposit agreement with a Korean company immediately upon occurrence of such event and (2) the balance of the issued depositary receipts within 20 days from the last day of each quarter. Furthermore, at the time of making any payment under the ADSs or any amount as provided in the deposit agreement, relevant documents should be submitted to a foreign exchange bank to enable such foreign exchange bank to verify (1) that the amount being remitted conforms to the amount required to be paid under the relevant documents, and (2) whether or not any necessary approval or report requirement, if any, has been met. No further governmental approval is necessary for the offering and issuance of the ADSs.

Under current Korean laws and regulations, the ADR depositary is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between:


	•	the aggregate number of common shares deposited by us or with our consent for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs); and

	•	the number of common shares on deposit with the ADR depositary at the time of such proposed deposit. We can give no assurance that we would grant our consent, if our consent is required. In addition to such restrictions under Korean laws and regulations, there are also restrictions on the deposits of our common shares for issuance of ADSs. See “Additional Information — Description of American Depositary Shares”. Therefore, a holder of ADRs who surrenders ADRs and withdraws shares may not be permitted subsequently to deposit those shares and obtain ADRs.

Reporting Requirements for Holders of Substantial Interests

Under the Korean Securities and Exchange Act, any person whose direct or beneficial ownership of shares with voting rights, whether in the form of shares or ADSs, certificates representing the rights to subscribe for shares and equity-related debt securities including convertible bonds and bonds with warrants (collectively referred to as “Equity Securities”), together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with the person, accounts for 5.0% or more of the total outstanding Equity Securities is required to report the status and purpose (in terms of whether the purpose of shareholding is to affect control over management of the issuer) of the holdings to the Financial Supervisory Commission of Korea and the KRX within five business days after reaching the 5.0% ownership interest threshold. In addition, any change (i) in the ownership interest subsequent to the report which equals or exceeds 1.0% of the total outstanding Equity Securities, or (ii) in the shareholding purpose is required to be reported to the Financial Supervisory Commission of Korea and KRX within five business days from the date of the change. However, reporting deadline of such reporting requirement is extended to institutional investors who hold shares for purposes other than management control by the tenth day of the month immediately following the month of share acquisition or change in their shareholding. Those who reported the purpose of shareholding is to affect control over management of the issuer are prohibited from exercising their voting rights and acquiring additional shares for five days subsequent to the report under the recently amended Korean Securities and Exchange Act.

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Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment and may result in a loss of voting rights with respect to the ownership of unreported Equity Securities exceeding 5.0%. Furthermore, the Financial Supervisory Commission of Korea may issue an order to dispose of such non-reported Equity Securities.

In addition to the reporting requirements described above, any person whose direct or beneficial ownership of our common shares accounts for 10% or more of the total issued and outstanding shares with voting rights (a “major shareholder”) must report the status of his/her shareholding to the Securities and Futures Commission and the Korean Securities Dealers Association by the tenth day of the calendar month immediately following the month in which any changes in shareholding have occurred. Violations of these reporting requirements may subject a person to criminal sanctions, such as fines or imprisonment.

Restrictions Applicable to ADSs

No Korean governmental approval is necessary for the sale and purchase of ADSs in the secondary market outside Korea or for the withdrawal of shares underlying ADSs and the delivery of shares in Korea in connection with the withdrawal, provided that a foreigner who intends to acquire the shares must obtain an investment registration card from the Financial Supervisory Service, as described below. The acquisition of the shares by a foreigner must be reported by the foreigner or his standing proxy in Korea immediately to the Governor of the Financial Supervisory Service.

Persons who have acquired shares as a result of the withdrawal of shares underlying the ADSs may exercise their preemptive rights for new shares, participate in free distributions and receive dividends on shares without any further governmental approval.

Restrictions Applicable to Shares

As a result of amendments to the Foreign Exchange Transaction Laws and the regulations of Financial Supervisory Commission of Korea, together referred to as the Investment Rules, adopted in connection with the stock market opening from January 1992 and after that date, foreigners may invest, with limited exceptions and subject to procedural requirements, in all shares of Korean companies, whether listed on the KRX Stock Market or the KRX KOSDAQ Market, unless prohibited by specific laws. Foreign investors may trade shares listed on the KRX Stock Market or the KRX KOSDAQ Market only through the KRX Stock Market or the KRX KOSDAQ Market, except in limited circumstances, including, among others:


	•	odd-lot trading of shares;

	•	acquisition of shares by a foreign company as a result of a merger;

	•	acquisition or disposal of shares in connection with a tender offer;

	•	acquisition of shares by exercise of warrant, conversion right under convertible bonds, exchange right under exchangeable bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company (“Converted Shares”);

	•	acquisition of shares through exercise of rights under securities issued outside of Korea;

	•	acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends;

	•	over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded; and

	•	acquisition of shares by direct investment under the Foreign Investment Promotion Law.

For over-the-counter transactions of shares between foreigners outside the KRX Stock Market or the KRX KOSDAQ Market for shares with respect to which the limit on aggregate foreign ownership has been reached or exceeded, a securities company licensed in Korea must act as an intermediary. Odd-lot trading of shares outside the KRX Stock Market or the KRX KOSDAQ Market must involve a licensed securities company in Korea as the

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other party. Foreign investors are prohibited from engaging in margin transactions through borrowing shares from securities companies with respect to shares which are subject to a foreign ownership limit.

The Investment Rules require a foreign investor who wishes to invest in shares for the first time on the KRX Stock Market or the KRX KOSDAQ Market (including Converted Shares) and shares being publicly offered for initial listing on the KRX Stock Market or the KRX KOSDAQ Market to register its identity with the Financial Supervisory Service prior to making any such investment; however, the registration requirement does not apply to foreign investors who acquire Converted Shares with the intention of selling such Converted Shares within three months from the date of acquisition of the Converted Shares or who acquire the shares in an over-the-counter transaction or dispose of shares where such acquisition or disposal is deemed to be a foreign direct investment pursuant to the Foreign Investment Promotion Law. Upon registration, the Financial Supervisory Service will issue to the foreign investor an investment registration card which must be presented each time the foreign investor opens a brokerage account with a securities company or financial institution in Korea. Foreigners eligible to obtain an investment registration card include foreign nationals who are individuals residing in Korea for six months or longer, foreign governments, foreign municipal authorities, foreign public institutions, international financial institutions or similar international organizations, corporations incorporated under foreign laws and any person in any additional category designated by decree of the MOFE. All Korean offices of a foreign corporation as a group are treated as a separate foreigner from the offices of the corporation outside Korea for the purpose of investment registration. However, a foreign corporation or depositary issuing depositary receipts may obtain one or more investment registration cards in its name in certain circumstances as described in the relevant regulations.

Upon a foreign investor’s purchase of shares through the KRX Stock Market or the KRX KOSDAQ Market, no separate report by the investor is required because the investment registration card system is designed to control and oversee foreign investment through a computer system. However, where a foreign investor acquires or sells shares outside the KRX Stock Market and the KRX KOSDAQ Market and the circumstances in connection with such sale or acquisition do not fall within the exceptions made for certain limited circumstances described above, such acquisition or sale of shares must be reported by the foreign investor or his standing proxy to the Governor at the time of each such acquisition or sale; provided, however, that a foreign investor must ensure that any acquisition or sale by it of shares outside the KRX Stock Market or the KRX KOSDAQ Market in the case of trades in connection with a tender offer, odd-lot trading of shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to the Governor by the securities company engaged to facilitate such transaction. In the event a foreign investor desires to acquire or sell shares outside the KRX Stock Market or the KRX KOSDAQ Market and the circumstances in connection with such sale or acquisition do not fall within the exceptions made for certain limited circumstances described above, then the foreign investor must obtain the prior approval of the Governor. In addition, in the event a foreign investor acquires or sells shares outside the KRX Stock Market or the KRX KOSDAQ Market, a prior report to the Bank of Korea may also be required in certain circumstances. A foreign investor must appoint one or more standing proxies from among the Korea Securities Depository, foreign exchange banks, including domestic branches of foreign banks, securities companies, including domestic branches of foreign securities companies, investment trust companies, futures trading companies and internationally recognized custodians which will act as a standing proxy to exercise shareholders’ rights, or perform any matters related to the foregoing activities if the foreign investor does not perform these activities himself. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the Governor in cases deemed inevitable by reason of conflict between laws of Korea and the home country of the foreign investor.

Certificates evidencing shares of Korean companies must be kept in custody with an eligible custodian in Korea. Only foreign exchange banks, including domestic branches of foreign banks, securities companies, including domestic branches of foreign securities companies, the Korea Securities Depository, investment trust companies, futures trading companies and internationally recognized custodians are eligible to act as a custodian of shares for a non-resident or foreign investor. A foreign investor must ensure that his custodian deposits its shares with the Korea Securities Depository. However, a foreign investor may be exempted from complying with this deposit requirement with the approval of the Governor in circumstances where compliance with that requirement is made impracticable, including cases where compliance would contravene the laws of the home country of such foreign investor.

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Under the Investment Rules, with certain exceptions, foreign investors may acquire shares of a Korean company without being subject to any foreign investment ceiling. As one such exception, designated public corporations are subject to a 40.0% ceiling on the acquisition of shares by foreigners in the aggregate. Designated public corporations may set a ceiling on the acquisition of shares by a single person within 3.0% of the total number of shares in their articles of incorporation. Currently, Korea Electric Power Corporation is the only designated public corporation which has set such a ceiling. Furthermore, an investment by a foreign investor of not less than 10.0% of the outstanding shares with voting rights of a Korean company is defined as a direct foreign investment under the Foreign Investment Promotion Law, which is, in general, subject to the report to, and acceptance by, the Ministry of Commerce, Industry and Energy of Korea, which delegates its authority to foreign exchange banks or the Korea Trade-Investment Promotion Agency under the relevant regulations. The acquisition of our shares by a foreign investor is also subject to the restrictions prescribed in the Telecommunications Business Law. The Telecommunications Business Law generally limits the maximum aggregate foreign shareholdings in us to 49.0% of the outstanding shares. Foreign investors may hold shares of our common stock in excess of the 49% limitation acquired as a result of the exercise of certain exchange-traded stock options for individual corporations; provided, however, that any such foreign investor must dispose of any of shares of our common stock in excess of the 49% limitation within one day after settlement of the option. A foreigner who has acquired shares in excess of such restriction described above may not exercise its voting rights with respect to the shares exceeding such limitations, and may be subject to corrective orders.

Under the Foreign Exchange Transaction Laws, a foreign investor who intends to make a portfolio investment in shares of a Korean company listed on the KRX Stock Market or the KRX KOSDAQ Market must designate a foreign exchange bank at which he must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at a securities company. Funds in the foreign currency account may be remitted abroad without any governmental approval.

Dividends on shares are paid in Won. No governmental approval is required for foreign investors to receive dividends on, or the Won proceeds of the sale of, any such shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any such shares held by a non-resident of Korea must be deposited either in a Won account with the investor’s securities company or the investor’s Won account. Funds in the investor’s Won account may be transferred to his foreign currency account or withdrawn for local living expenses, provided that any withdrawal of local living expenses in excess of a certain amount is reported to the tax authorities by the foreign exchange bank at which the Won account is maintained. Funds in the investor’s Won account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of preemptive rights.

Securities companies and investment trust companies are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors’ stock investments in Korea. Through these accounts, these securities companies and investment trust companies may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors, without the investors having to open their own accounts with foreign exchange banks.

Further Opening of the Korean Securities Market

In addition, the Korea Stock Exchange opened new option markets for stocks of seven companies including our shares of common stock and common stock of six other companies on January 28, 2002.

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Foreigners will be permitted to invest in such options for individual stocks subject to certain procedural requirements.

Protection of Customer’s Interest in case of Insolvency of Securities Companies

Under the Securities and Exchange Act, the KRX is obliged to indemnify any loss or damage incurred by a counterparty as a result of a breach by its members. If a securities company which is a member of the KRX breaches its obligation in connection with a buy order, the KRX is obliged to pay the purchase price on behalf of the breaching member.

However, the Depositor Protection Act provides that Korea Deposit Insurance Corporation will, upon the request of the investors, pay investors up to Won 50 million per investor in case of the securities company’s bankruptcy, liquidation, cancellation of securities business license or other insolvency events. Pursuant to the Securities and Exchange Act, as amended, subject to certain exceptions, securities companies are required to deposit the cash received from its customers with the Korea Securities Finance Corporation, a special entity established pursuant to the Securities and Exchange Act. Set-off or attachment of cash deposits by securities companies is prohibited. The premiums related to this insurance under the Depositor Protection Act are paid by securities companies.

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TAXATION

The following summary is based on the tax laws of the United States and Korea as in effect on the date of this report, and is subject to any change in United States or Korean law that may come into effect after such date. We advise investors in ADSs or shares to consult their own tax advisors as to the United States, Korean or other tax consequences of the purchase, ownership and disposition of such securities, including, in particular, the effect of any national, state or local tax laws.

U.S. Federal Income Tax Consequences

The following is a summary of the anticipated material U.S. federal income tax consequences to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of American Depository Shares of the Company (“ADSs”) or shares of common stock of the Company.

This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences that may apply to a U.S. Holder as a result of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. federal, U.S. state and local, and foreign tax consequences of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company.

Scope of This Disclosure


	*Authorities*

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings of the Internal Revenue Service (“IRS”), published administrative positions of the IRS, the Convention Between The United States Of America And The Republic Of Korea For The Avoidance Of Double Taxation, as amended (the “Tax Convention”), and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this Annual Report. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive basis. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive basis.


	*U.S. Holders*

For purposes of this summary, a “U.S. Holder” is a beneficial owner of ADSs or shares of common stock of the Company that, for U.S. federal income tax purposes, is (a) an individual who is a citizen or resident of the U.S., (b) a corporation, or any other entity classified as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the U.S. or any state in the U.S., including the District of Columbia, (c) an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of such income, or (d) a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.


	*Non-U.S. Holders*

For purposes of this summary, a “non-U.S. Holder” is a beneficial owner of ADSs or shares of common stock of the Company other than a U.S. Holder. This summary does not address the U.S. federal income tax consequences of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company to non-U.S. Holders. Accordingly, a non-U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. federal, U.S. state and local, and foreign tax consequences (including the potential

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application of and operation of any tax treaties) of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company.


	*U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed*

This summary does not address the U.S. federal income tax consequences of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company to U.S. Holders that are subject to special provisions under the Code, including the following U.S. Holders: (a) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are financial institutions, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) U.S. Holders that have a “functional currency” other than the U.S. dollar; (e) U.S. Holders that are liable for the alternative minimum tax under the Code; (f) U.S. Holders that own ADSs or shares of common stock of the Company as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (g) U.S. Holders that acquired ADSs or shares of common stock of the Company in connection with the exercise of employee stock options or otherwise as compensation for services; (h) U.S. Holders that hold ADSs or shares of common stock of the Company other than as a capital asset within the meaning of Section 1221 of the Code; or (i) U.S. Holders that own, directly or indirectly, 10% or more, by voting power or value, of the outstanding shares of the Company. U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal, U.S. state and local, and foreign tax consequences of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company.

If an entity that is classified as partnership (or “pass-through” entity) for U.S. federal income tax purposes holds ADSs or shares of common stock of the Company, the U.S. federal income tax consequences to such partnership (or “pass-through” entity) and the partners of such partnership (or owners of such “pass-through” entity) generally will depend on the activities of the partnership (or “pass-through” entity) and the status of such partners (or owners). Partners of entities that are classified as partnerships (or owners of “pass-through” entities) for U.S. federal income tax purposes should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company.


	*Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed*

This summary does not address the U.S. state and local, U.S. federal estate and gift, or foreign tax consequences to U.S. Holders of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company. Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. state and local, U.S. federal estate and gift, and foreign tax consequences of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company.

U.S. Federal Income Tax Consequences of the Acquisition, Ownership, and Disposition of ADSs or Shares of SK Telecom


	*Treatment of ADSs*

A U.S. Holder of ADSs should be treated, for U.S. federal income tax purposes, as the owner of such U.S. Holder’s proportionate interest in the shares of common stock of the Company held by the ADR depositary (or its custodian) that are represented and evidenced by such ADSs.


	*Distributions*


	General Taxation of Distributions

A U.S. Holder that receives a distribution, including a constructive distribution, with respect to the ADSs or shares of common stock of the Company will be required to include the amount of such distribution in gross

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income as a dividend (without reduction for any foreign income tax withheld from such distribution) to the extent of the current or accumulated “earnings and profits” of the Company. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated (a) first, as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in the ADSs or shares of common stock of the Company

and, (b) thereafter, as gain from the sale or exchange of such ADSs or shares of common stock of the Company. (See more detailed discussion at “Disposition of ADSs or Shares of Common Stock of the Company” below).


	Reduced Tax Rates for Certain Dividends

For taxable years beginning after December 31, 2002 and before January 1, 2009, a dividend paid by the Company generally will be taxed at the preferential tax rates applicable to long-term capital gains if (a) the Company is a “qualified foreign corporation” (as defined below), (b) the U.S. Holder receiving such dividend is an individual, estate, or trust, and (c) such dividend is paid on ADSs or shares of common stock of the Company that have been held by such U.S. Holder for at least 61 days during the 121-day period beginning 60 days before the “ex-dividend date”.

The Company generally will be a “qualified foreign corporation” under Section 1(h)(11) of the Code (a “QFC”) if (a) the Company is incorporated in a possession of the U.S., (b) the Company is eligible for the benefits of the Tax Convention, or (c) the ADSs or shares of common stock of the Company are readily tradable on an established securities market in the U.S. However, even if the Company satisfies one or more of such requirements, the Company will not be treated as a QFC if the Company is a “passive foreign investment company” (as defined below) for the taxable year during which the Company pays a dividend or for the preceding taxable year. In 2003, the U.S. Department of the Treasury (the “Treasury”) and the IRS announced that they intended to issue Treasury Regulations providing procedures for a foreign corporation to certify that it is a QFC. Although these Treasury Regulations were not issued in 2004, the Treasury and the IRS have confirmed their intention to issue these Treasury Regulations. It is expected that these Treasury Regulations will obligate persons required to file information returns to report a distribution with respect to a foreign security issued by a foreign corporation as a dividend from a QFC if the foreign corporation has, among other things, certified under penalties of perjury that the foreign corporation was not a “passive foreign investment company” for the taxable year during which the foreign corporation paid the dividend or for the preceding taxable year.

As discussed below, the Company does not believe that it was a “passive foreign investment company” for the taxable year ended December 31, 2004, and does not expect that it will be a “passive foreign investment company” for the taxable year ending December 31, 2005. (See more detailed discussion at “Additional Rules that May Apply to U.S. Holders” below). However, there can be no assurance that the IRS will not challenge the determination made by the Company concerning its “passive foreign investment company” status or that the Company will not be a “passive foreign investment company” for the current or any future taxable year. Accordingly, although the Company expects that it should be a QFC, there can be no assurances that the IRS will not challenge the determination made by the Company concerning its QFC status, that the Company will be a QFC for the current or any future taxable year, or that the Company will be able to certify that it is a QFC in accordance with the certification procedures issued by the Treasury and the IRS.

If the Company is not a QFC, a dividend paid by the Company to a U.S. Holder, including a U.S. Holder that is an individual, estate, or trust, generally will be taxed at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains). The dividend rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the dividend rules.


	*Distributions Paid in Foreign Currency*

The amount of a distribution paid to a U.S. Holder in foreign currency generally will be equal to the U.S. dollar value of such distribution based on the exchange rate applicable on the date of receipt. A U.S. Holder that does not convert foreign currency received as a distribution into U.S. dollars on the date of receipt generally will have a tax basis in such foreign currency equal to the U.S. dollar value of such foreign currency on the date

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of receipt. Such a U.S. Holder generally will recognize ordinary income or loss on the subsequent sale or other taxable disposition of such foreign currency (including an exchange for U.S. dollars).


	*Dividends Received Deduction*

Dividends paid on the ADSs or shares of common stock of the Company generally will not be eligible for the “dividends received deduction.” The availability of the dividends received deduction is subject to complex

limitations that are beyond the scope of this discussion, and a U.S. Holder that is a corporation should consult its own financial advisor, legal counsel, or accountant regarding the dividends received deduction.


	*Disposition*

A U.S. Holder will recognize gain or loss on the sale or other taxable disposition of ADSs or shares of common stock of the Company in an amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received and (b) such U.S. Holder’s tax basis in the ADSs or shares of common stock of the Company sold or otherwise disposed of. Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if the ADSs or shares of common stock of the Company are held for more than one year. Gain or loss recognized by a U.S. Holder on the sale or other taxable disposition of ADSs or shares of common stock of the Company generally will be treated as “U.S. source” for purposes of applying the U.S. foreign tax credit rules. (See more detailed discussion at “Foreign Tax Credit” below).

Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses and net capital losses are subject to complex limitations. For a U.S. Holder that is an individual, estate, or trust, capital losses may be used to offset capital gains and up to U.S.$3,000 of ordinary income. An unused capital loss of a U.S. Holder that is an individual, estate, or trust generally may be carried forward to subsequent taxable years, until such net capital loss is exhausted. For a U.S. Holder that is a corporation, capital losses may be used to offset capital gains, and an unused capital loss generally may be carried back three years and carried forward five years from the year in which such net capital loss is recognized.


	*Foreign Tax Credit*

A U.S. Holder who pays (whether directly or through withholding) foreign income tax with respect to dividends paid on the ADSs or shares of common stock of the Company generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such foreign income tax paid. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” In addition, this limitation is calculated separately with respect to specific categories of income (including “passive income,” “high withholding tax interest,” “financial services income,” “general income,” and certain other categories of income). Dividends paid by the Company generally will constitute “foreign source” income and generally will be categorized as “passive income” or, in the case of certain U.S. Holders, “financial services income.” However, for taxable years beginning after December 31, 2006, the foreign tax credit limitation categories are reduced to “passive income” and “general income” (and the other categories of income, including “financial services income,” are eliminated). The foreign tax credit rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the foreign tax credit rules.

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	*Information Reporting; Backup Withholding Tax*

Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from certain sales or other taxable dispositions of, ADSs or shares of common stock of the Company generally will be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS. Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the information reporting and backup withholding tax rules.

Additional Rules that May Apply to U.S. Holders

If the Company is a “passive foreign investment company” (as defined below), the preceding sections of this summary may not describe the U.S. federal income tax consequences to U.S. Holders of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company.

The Company generally will be a “passive foreign investment company” under Section 1297 of the Code (a “PFIC”) if, for a taxable year, (a) 75% or more of the gross income of the Company for such taxable year is passive income or (b) 50% or more of the assets held by the Company either produce passive income or are held for the production of passive income, based on the fair market value of such assets (or on the adjusted tax basis of such assets, if the Company is not publicly traded and either is a “controlled foreign corporation” or makes an election). “Passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.

For purposes of the PFIC income test and assets test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another foreign corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other foreign corporation and (b) received directly a proportionate share of the income of such other foreign corporation. In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents, or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.

If the Company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company will depend on whether such U.S. Holder makes an election to treat the Company as a “qualified electing fund” or “QEF” under Section 1295 of the Code (a “QEF Election”) or a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder.”

Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of ADSs or shares of common stock of the Company, and any “excess distribution” (as defined in Section 1291(b) of the Code) paid on the ADSs or shares of common stock of the Company, must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the ADSs or shares of common stock of the Company. The amount of any such gain or excess distribution allocated to prior years of such Non-Electing U.S. Holder’s holding period for the ADSs or shares of common stock of the Company generally will be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such prior year. A Non-Electing U.S. Holder will be required to pay interest on the resulting tax liability for each such prior year, calculated as if such tax liability had been due in each such prior year.

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A U.S. Holder that makes a QEF Election generally will not be subject to the rules of Section 1291 of the Code discussed above. However, a U.S. Holder that makes a QEF Election generally will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the “net capital gain” of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) and the “ordinary earnings” of the Company, which will be taxed as ordinary income to such U.S. Holder. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each taxable year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company.

A U.S. Holder that makes a Mark-to-Market Election generally will not be subject to the rules of Section 1291 of the Code discussed above. A U.S. Holder may make a Mark-to-Market Election only if the ADSs or shares of common stock of the Company are “marketable stock” (as defined in Section 1296(e) of the Code). A U.S. Holder that makes a Mark-to-Market Election will include in gross income, for each taxable year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the ADSs or shares of common stock of the Company as of the close of such taxable year over (b) such U.S. Holder’s tax basis in such ADSs or shares of common stock of the Company. A U.S. Holder that makes a Mark-to-Market Election will, subject to certain limitations, be allowed a deduction in an amount equal to the excess, if any, of (a) such U.S. Holder’s adjusted tax basis in the ADSs or shares of common stock of the Company over (b) the fair market value of such ADSs or shares of common stock of the Company as of the close of such taxable year.

The Company does not believe that it was a PFIC for the taxable year ended December 31, 2004, and does not expect that it will be a PFIC for the taxable year ending December 31, 2005. There can be no assurance, however, that the IRS will not challenge the determination made by the Company concerning its PFIC status or that the Company will not be a PFIC for the current or any future taxable year.

The PFIC rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of ADSs or shares of common stock of the Company.

Korean Taxation

The following summary of Korean tax considerations applies to you so long as you are not:


	•	a resident of Korea;

	•	a corporation organized under Korean law; or

	•	engaged in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected.

Dividends on the Shares or ADSs

We will deduct Korean withholding tax from dividends paid to you at a rate of 27.5% (including resident surtax). If you are a qualified resident in a country that has entered into a tax treaty with Korea, you may qualify for a reduced rate of Korean withholding tax. For example, if you are a qualified resident of the United States for purposes of the income tax treaty between the United States and Korea, and you are the “beneficial owner” of a dividend, generally, a reduced withholding tax at the rate of 16.5% will apply.

In order to obtain the benefits of a reduced withholding tax rate under the treaty, you must submit to us, prior to the dividend payment date, such residence as may be required by the Korean tax authorities. Residence may be submitted to us through the ADR depositary. In addition, on or after July 1, 2002, to obtain the benefit of a tax exemption available under applicable tax treaties, you should submit an application for exemption prior to the time of the first dividend payment, together with a certificate of your tax residence issued by a competent authority of your country of tax residence. Excess taxes withheld are generally not recoverable, even if you subsequently produce evidence that you were entitled to have tax withheld at a lower rate.

If we distribute to you free shares representing transfer of certain capital reserves or asset revaluation reserves into paid-in capital, that distribution may be regarded as dividend and, as such, subject to Korean withholding tax.

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Taxation Of Capital Gains

You may be exempt from Korean taxation on capital gains from the shares, if you have owned, together with certain related parties, less than 25.0% of our total issued and outstanding shares at any time during the year of sale and the five calendar years before the year of sale, and the sale is made through the KRX Stock Market. As for the ADSs, according to a ruling issued by Korean taxation authorities, capital gains earned by a non-resident holder from the transfer of ADSs outside Korea are not subject to Korean taxation, irrespective of whether or not such holder has a permanent establishment in Korea. Under the Tax Benefit Limitation Law, capital gains earned by a non-resident holder (whether or not such holder has a permanent establishment in Korea) from the transfer outside Korea of securities issued outside Korea by a Korean company, which are denominated in foreign currency or satisfy certain criteria established by the Ministry of Finance and Economy are exempt from Korean taxation. The Korean tax authorities have issued a tax ruling confirming that receipts (which would include the ADSs) are deemed to be securities issued outside Korea by the issuer of the underlying stock. Further, capital gains earned by a non-resident from the transfer of stocks issued by a Korean company are also exempt from Korean taxation, if listed or registered and sold through an overseas securities exchange having functional similarity to the KRX Stock Market or the KRX KOSDAQ Market under the Korean Securities and Futures Exchange Act.

If you are subject to tax on capital gains with respect to the sale of ADSs, or of shares which you acquired as a result of a withdrawal, your gain will be calculated based on your cost of acquiring the ADSs representing such shares, although there are no specific Korean tax provisions or rulings on this issue. In the absence of the application of a tax treaty which exempts or reduces the rate of tax on capital gains, the amount of Korean tax imposed on your capital gains will be the lesser of 11.0% (including resident surtax) of the gross realization proceeds or, subject to production of satisfactory evidence of acquisition cost and transfer expenses of the ADSs, 27.5% of the net capital gains. Under the Korea-United States Tax Treaty, a U.S. resident is generally exempt from Korean taxation on gains from the sale, exchange or other disposition of our Shares or ADSs, subject to certain exceptions.

If you sell your shares or ADSs, the purchaser or, in the case of the sale of shares on the KRX Stock Market or through a licensed securities company in Korea, the licensed securities company, is required to withhold Korean tax from the sales price in an amount equal to 11.0% of the gross realization proceeds and to make payment of such amounts to the Korean tax authority, unless you establish your entitlement to an exemption or lower rate of taxation under an applicable tax treaty or produce satisfactory evidence of your acquisition and transfer costs for the ADSs. To obtain the benefit of an exemption or reduced rate of tax pursuant to a tax treaty, you must submit to the purchaser or the securities company (or through the ADR depositary), as the case may be, prior to or at the time of payment, such evidence of your tax residence as the Korean tax authorities may require in support of your claim for treaty protection. In addition, Korean tax law requires a non-resident seller to submit to the relevant tax office (through the payer of the income, subject to certain exceptions) an application for exemption by the 9th day of the month following the month in which the first payment date falls, with a certificate of tax residence of the seller issued by a competent authority of the seller’s residence country, to obtain the benefit of a tax treaty exemption available under applicable tax treaties. However, this requirement will not apply to exemptions under Korean tax law. Excess taxes withheld are generally not recoverable even if you subsequently produce evidence that you were entitled to have taxes withheld at a lower rate.

Inheritance Tax And Gift Tax

If you die while holding an ADS or transfer an ADS as a gift, it is unclear whether you will be treated as the owner of the shares underlying the ADSs for Korean inheritance and gift tax purposes. If you are treated as the owner of the shares, the heir or the donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance or gift tax presently at the rate of 10.0% to 50.0%.

If you die while holding a share or donate a share, the heir or donee (or in certain circumstances, you as the donor) will be subject to Korean inheritance or gift tax at the same rate as indicated above.

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Securities Transaction Tax

You will not pay a securities transaction tax on your transfer of ADSs. If you transfer shares, you will be subject to a securities transaction tax at the rate of 0.15% and an agricultural and fishery special tax at the rate of 0.15% of the sale price of the share when traded on the KRX Stock Market. If your transfer is not made on the KRX Stock Market, subject to certain exceptions, you will be subject to a securities transaction tax at the rate of 0.5% and will not be subject to an agricultural and fishery special tax.

According to a tax ruling issued by the Korean tax authorities, foreign shareholders will not be subject to a securities transaction tax upon the deposit of underlying shares and receipt of depositary shares or upon the surrender of depositary shares and withdrawal of originally deposited underlying shares. Moreover, to date, the imposition of securities transaction tax has not been enforced on the transfers of ADSs. However, the Ministry of Finance and Economy recently issued a ruling on February 25, 2004 to the Korean National Tax Service, holding that depositary shares fall under the meaning of share certificates that are subject to the securities transaction tax. In the ruling, the Ministry of Finance and Economy treats the transfers of depositary shares the same as the transfer of the underlying Korean shares. Under Korean tax laws, transfers of depositary shares listed or registered on the New York Stock Exchange, Nasdaq National Market, or other foreign exchanges designated by the Ministry of Finance and Economy (which are the Tokyo Stock Exchange, London Stock Exchange, Deutsche Stock Exchange, and a stock exchange with functions similar to (i), (ii) or (iii) above, on which trading is done by standardized procedure as set forth in the Enforcement Regulation of the Korean Securities and Exchange Act) will be exempted from the securities transaction tax.

Securities transaction tax, if applicable, must be paid in principle by the transferor of the shares or the rights to subscribe to such shares. When the transfer is effected through a securities settlement company, the settlement company is generally required to withhold and pay the tax to the tax authority. When the transfer is made through a securities company, the securities company is required to withhold and pay the tax. Where the transfer is effected by a non-resident without a permanent establishment in Korea, other than through a securities settlement company or a securities company, the transferee is required to withhold the securities transaction tax.

The failure to pay the securities transaction tax will result in a penalty of 10% of the tax amount due, plus interest at 10.95% per annum on the unpaid tax amount for the period from the day immediately following the last day of tax payment period to the day of issuance of tax notice. The penalty is imposed on the party responsible for paying the securities transaction tax or, if the securities transaction tax is to be withheld, the penalty is imposed on the party that has the withholding obligation.

Documents On Display

We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to apply to foreign private issuers. You the may rules and regulations of the SEC that read and copy any materials filed with the SEC at the Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20459. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. As a foreign private issuer, we are not required to make filings with the SEC by electronic means, although we may do so. Any filings we make electronically will be available to the public over the Internet at the SEC’s Website at http://www.sec.gov.

Documents filed with this report and documents filed or submitted to the SEC are also available for inspection at our principal business office during normal business hours. Our principal business office is located at 11, Euljiro 2-ga, Jung-gu, Seoul 100-999, Korea.

Item. 11 Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk


	*Exchange Rate and Interest Rate Risks*

We are exposed to foreign exchange rate and interest rate risk primarily associated with underlying liabilities. In the first quarter of 2004, we entered into currency swap agreements and currency forward contracts

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with three banks to reduce our foreign currency exposure with respect to our issuance of US$300 million notes on April 1, 2004. In addition, we have entered into a currency swap contract with a bank to hedge the foreign currency risk of unguaranteed US dollar denominated convertible bonds with face amount of US$329,450 thousand issued on May 27, 2004. See note 23 of the notes to our consolidated financial statements. We may consider in the future entering into other such transactions solely for hedging purposes.

The following discussion and tables, which constitute “forward looking statements” that involve risks and uncertainties, summarize our market-sensitive financial instruments including fair value, maturity and contract terms. These tables address market risk only and do not present other risks which we face in the normal course of business, including country risk, credit risk and legal risk.


	*Exchange Rate Risk*

Korea is our main market and, therefore, substantially all of our cash flow is denominated in Won. We are exposed to foreign exchange risk related to foreign currency denominated liabilities. These liabilities relate primarily to foreign currency denominated debt, all in Dollars and Yen. A 10% change in the exchange rate between the Won and all foreign currencies would result in a change in net liabilities (total monetary liabilities minus total monetary assets) of approximately 9.1% or Won 66.4 billion as of December 31, 2004.


	*Interest Rate Risk*

We are also subject to market risk exposure arising from changing interest rates. The following table summarizes the carrying amounts and fair values, maturity and contract terms of our exchange rate and interest sensitive short-term and long-term liabilities of as of December 31, 2004:


				Maturities

				2005			2006			2007			2008			2009			Thereafter			Total		Fair Value

				(In billions of Won, except for percentage data)
Local currency:
	Fixed rate			W	898.3		W	788.8		W	687.7		W	297.0		W	297.2		W	187.8		W	3,156.8	W	3,277.0
	Average weighted rate(1)				4.90	%		5.50	%		5.57	%		5.00	%		5.00	%		3.00	%
	Variable rate				—			—			—			—			—			—			—
	Average weighted rate(1)

		Sub-total		W	898.3		W	788.8		W	687.7		W	297.0		W	297.2			187.8		W	3,156.8	W	3,277.0

Foreign currency:
	Fixed rate			W	25.5			—			—			—			323.7			309.6		W	658.8	W	696.0
	Average weighted rate(1)				2.51	%		0.00	%		0.00	%		0.00	%		0.00	%		4.25	%
	Variable rate			W	—		W	—		W	—			—			—			—		W	—	W	—
	Average weighted rate(1)				0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%

		Sub-total		W	25.5		W	—		W	—			—		W	323.7		W	309.6		W	658.8	W	696.0

			Total	W	923.8		W	788.8		W	687.7		W	297.0		W	620.9		W	497.4		W	3,815.6	W	3,973.0


(1)	Weighted average rates of the portfolio at the period end.

A 1.0% change in interest rates would result in a change of approximately 2.72% in the fair value of our liabilities resulting in a Won 96.4 billion change in their value as of December 31, 2004 and a Won 255 million annualized change in interest expenses.

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Item. 12 Description of Securities other than Equity Securities

Not applicable.

Item. 13 Defaults, Dividend Arrearage and Delinquencies

None.

Item. 14 Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item. 15 Controls and Procedures

Disclosure Controls And Procedures

In light of the new regulatory framework introduced by the Sarbanes-Oxley Act of 2002, we established a formal disclosure committee. Our disclosure committee consists of the head of each divisional group, including (among others) the heads of the investor relations office, legal office and strategic planning office. The committee, together with our Chief Executive Officer and Chief Financial Officer, has the responsibility for the evaluation of the effectiveness of our new disclosure and control procedures and may generally take all actions deemed necessary or desirable to ensure compliance with such procedures.

Our disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the objectives of the control system. As such, disclosure controls and procedures or internal control systems may not prevent all error and all fraud. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 of the United States Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes In Internal Controls Over Financial Reporting

During the period covered by this annual report on Form 20-F, no changes occurred in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item. 16A Audit Committee Financial Expert

The board of directors has determined that Dae Sik Kim is an “audit committee financial expert” and “independent” as defined under the applicable rules of the Securities and Exchange Commission. See “Directors, Senior Management and Employees — Board Practices — Audit Committee” for additional information regarding our Audit Committee.

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Item. 16B Code of Ethics

Code of Ethics for Chief Executive Officer, Chief Financial Officer and Controller

We have a code of ethics that applies to our Chief Executive Officer, senior accounting officers and employees. We also have internal control and disclosure policy designed to promote full, fair, accurate, timely and understandable disclosure in all of our reports and publicly filed documents. A copy of the Company’s code of ethics is attached to this annual report as Exhibit 11.1.

Item. 16C Principal Accountant Fees and Services

The table sets forth the fees we paid to our independent auditors, Deloitte HanaAnjin LLC (formerly “Deloitte & Touche LLC (Hana)”) for the year ended December 31, 2004 and 2003, respectively, and Ahn Kwon & Co. for the year ended December 31, 2002:

Years Ended December 31,

2004

2003

2002

(In millions of Won)

Audit

841.3 million

727.7 million

913.9 million

Audit Related

127.7 million

13.7 million

122.0 million

Tax

110.1 million

143.0 million

74.7 million

All Other Fees

2,418.0 million

12,006.2 million

11,058.4 million

Total

3,497.1 million

12,890.6 million

12,169.0 million

“Audit Fees” are the aggregate fees billed by Deloitte HanaAnjin LLC in 2004 and 2003, respectively, for the audit of our consolidated annual financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements.

“Audit-Related Fees” are fees charged by Deloitte HanaAnjin LLC in 2004 and 2003, respectively, for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees”. This category comprises fees billed for advisory services associated with our financial reporting.

“Tax Fees” are fees for professional services rendered by Deloitte HanaAnjin LLC in 2004 and 2003, respectively, for tax compliance, tax advice on actual or contemplated transactions.

Fees disclosed under the category “All Other Fees” are fees for professional services rendered by Deloitte HanaAnjin LLC in 2004 and 2003, respectively, primarily for business consulting.

Pre-Approval of Audit and Non-Audit Services Provided by Independent Auditors

Our audit committee pre-approves all audit services to be provided by Deloitte HanaAnjin LLC, our independent registered public accounting firm. Our audit committee’s policy regarding the pre-approval of non-audit services to be provided to us by our independent auditors is that all such services shall be pre-approved by the Audit Committee. Non-audit services that are prohibited to be provided to us by our independent auditors under the rules of the Securities and Exchange Commission and applicable law may not be pre-approved. In addition, prior to the granting of any pre-approval, our audit committee must be satisfied that the performance of the services in question will not compromise the independence of our independent registered public accounting firm.

Our audit committee did not pre-approve any non-audit services under the de minimis exception of Rule 2-01 (c)(7)(i)(C) of Regulation S-X as promulgated by the Securities and Exchange Commission.

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Item. 16D Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item. 16E Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On August 11, 2003, we concluded a stock buyback program which we commenced on June 30, 2003. We acquired a total of 2,544,600 shares of our outstanding common stock, all of which were cancelled on August 20, 2003. The total purchase price for the stock buyback was Won 525.2 billion (or an average of approximately Won 206,388 per share), with the price per share ranging from Won 192,000 (on July 24, 2003) to Won 216,000 (on July 15-16, 2003). As a result of the stock buyback and subsequent cancellation of shares, the total number of our outstanding common stock declined from 84,821,311 to 82,276,711 as of December 31, 2003.

Set forth in the following table is information with respect to purchases made by or on behalf of the issuer or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) of the Exchange Act) of our Common Shares.


						Total Number of		Maximum Number
		Total				Shares Purchased as		of Shares that May
		Number of		Average		Part of Publicly		Yet be Purchased
		Shares		Price Paid		Announced Plans		Under the Plans
Period		Purchased		Per Share		or Programs		or Programs

January			—	W	—		—		—
February			12	W	173,500		—		—
March			—	W	—		—		—
April			—	W	—		—		—
May			—	W	—		—		—
June			—	W	—		—		—
July			—	W	—		—		—
August			—	W	—		—		—
September			—	W	—		—		—
October			—	W	—		—		—
November			—	W	—		—		—
December			—	W	—		—		—

	Total		12	W	—		—		—

We exchanged 29,808,333 shares of KT Corporation’s common stock at Won 50,900 per share for 8,266,923 shares of our common stock at Won 224,000 per share and settled the difference of Won 334.5 billion between the aggregate sale and purchase prices in cash on December 30, 2002 and January 10, 2003, under a mutual agreement on stock exchange between us and KT Corporation dated November 14, 2002. Of the 8,266,923 shares of our common stock exchanged, 4,457,635 shares of our common stock were subsequently cancelled and 3,809,288 shares were designated as treasury stock for use in future mergers and acquisitions transactions and strategic alliances or for other corporate purposes to be determined by us. As a result of the share swap, all crossshareholdings between KT Corporation and us have been completely eliminated.

In late May 2004, we sold US$329.5 million in zero coupon convertible notes due 2009. These convertible notes are convertible by the holders into shares of our common stock at the rate of Won 235,625 per share. In connection with the issuance of the zero coupon convertible notes, we deposited 1,645,000 shares of our common stock with Korea Securities Depository to be reserved and used to satisfy the note holders’ conversion rights. This will be deemed as the repurchase of treasury stock and cancellation thereof for the purposes of Korean law. On March 14, 2005, we filed a report with the Financial Supervisory Services to disclose that we adjusted the conversion price of the convertible notes issued in late May 2004 in the principal amount of US$329,450,000 from Won 235,625 to Won 226,566 and made additional deposit of its common stocks accordingly so that the total number of shares of common stock deposited with Korea Securities Depository to satisfy the note holders’

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conversion rights increase from 1,644,978 to 1,710,750. Such adjustment of conversion price has been made as a result of the payment of cash dividend in excess of 1% of the market capitalization in the fiscal year of 2004.

Item. 17 Financial Statements

Item. 18 Financial Statements

Not applicable.

133

INDEX TO FINANCIAL STATEMENTS


	Page

Report of Independent Registered Public Accounting Firm of Deloitte HanaAnjin LLC for the years ended December 31, 2002, 2003 and 2004		F-3
Consolidated Balance Sheets as of December 31, 2002, 2003 and 2004		F-5
Consolidated Statements of Income for the Years Ended December 31, 2002, 2003 and 2004		F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2003 and 2004		F-11
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2002, 2003 and 2004		F-9
Notes to Consolidated Financial Statements		F-15

F-1

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2002, 2003 and 2004 and

Report of Independent Registered Public Accounting Firm

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

SK Telecom Co., Ltd.

We have audited the accompanying consolidated balance sheets of SK Telecom Co., Ltd. (the “Company”) and its subsidiaries as of December 31, 2002, 2003 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years then ended (all expressed in Korean won). These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of SK Telecom Co., Ltd. and its subsidiaries at December 31, 2002, 2003 and 2004, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles 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 consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside of the Republic of Korea.

As described in Note 29(a) to the accompanying consolidated financial statements, the Company, together with KT Corporation and HanaroTelecom, acquired the license for WiBro, a portable internet service which is scheduled to start commercial operations in June 2006, as a result of the decision of the Committee of Information and Communication Policy of the Republic of Korea dated January 20, 2005. With regard to this service, the Company made a contribution of W117 billion and received the WiBro license from the Ministry of Information and Technology in March 2005.

As described in Note 29(b) to the accompanying 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 services across the United States of America. The Company, via SK Telecom USA Holdings, Inc., its wholly-owned subsidiary in the United States of America, 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 29(d) to the accompanying consolidated financial statements, in accordance with the resolution of the Company’s board of directors dated May 3, 2005, the Company decided to sell 4,542,000 shares of 6,747,421 shares of SK Teletech Co., Ltd. (“SKTT”) held by the Company, representing 60% of the total outstanding common stock of SKTT for a total selling price of W300 billion (W66,050 per share), to Curitel Communications, Inc., a handset maker in Korea. As a result of such trade, the Company’s ownership in SKTT will decrease from 89.1% to 29.1% and the Company’s management rights of SKTT is expected to be transferred to Curitel Communications, Inc. by the end of June 2005.

F-3

Accounting principles generally accepted in the Republic of Korea vary in certain respects from accounting principles generally accepted in the United States of America. Application of accounting principles generally accepted in the United States of America would have affected the determination of net income for the years ended December 31, 2002, 2003 and 2004 and the determination of shareholders’ equity and financial position as of December 31, 2002, 2003 and 2004 to the extent summarized in Notes 30 and 31 to the consolidated financial statements.

/s/ DELOITTE HANAANJIN LLC

May 16, 2005

Seoul, Korea

F-4

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2002, 2003 and 2004


			2002		2003		2004		2004

			In millions of Korean won						In thousands of
									U.S. dollars
									(Note 2)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents (Note 12)		W	664,117	W	317,488	W	370,630	$	358,062
	Short-term financial instruments (Notes 12 and 20)			202,905		154,922		12,730		12,298
	Trading securities (Notes 2 and 3)			754,219		893,217		654,779		632,576
	Current portion of long-term investment securities (Notes 2 and 3)			70,267		85,861		3,709		3,583
	Accounts receivable — trade, net of allowance for doubtful accounts of W60,542 million, W65,327 million and W71,090 million at December 31, 2002, 2003 and 2004, respectively (Notes 2 ,12 and 22)			1,442,135		1,579,153		1,720,201		1,661,869
	Accounts receivable — other, net of allowance for doubtful accounts of W23,355 million, W16,768 million and W15,622 million at December 31, 2002, 2003 and 2004, respectively (Notes 2, 12 and 22)			852,873		867,120		1,406,553		1,358,857
	Inventories (Notes 2 and 21)			27,460		31,516		52,321		50,547
	Short-term loans and other (Note 5)			99,748		140,248		169,770		164,014

		Total Current Assets		4,113,724		4,069,525		4,390,693		4,241,806

NON-CURRENT ASSETS:
	Property and equipment, net (Notes 2, 6, 11, 20 and 21)			4,569,417		4,641,547		4,703,922		4,544,413
	Intangible assets (Notes 2 and 7)			3,721,235		3,674,944		3,522,903		3,403,442
	Long-term investment securities (Notes 2 and 3)			1,394,697		879,193		948,101		915,951
	Equity securities accounted for using the equity method (Notes 2 and 4)			81,247		183,709		304,028		293,718
	Long-term bank deposits (Note 20)			177		352		10,351		10,000
	Long-term loans, net of allowance for doubtful accounts of W19,486 million, W19,552 million and W19,273 million at December 31, 2002, 2003 and 2004, respectively (Notes 2 and 5)			52,688		40,819		30,442		29,410
	Guarantee deposits (Notes 12 and 22)			249,331		270,255		289,015		279,215
	Other			46,194		57,873		83,903		81,058

		Total Non-Current Assets		10,114,986		9,748,692		9,892,665		9,557,207

TOTAL ASSETS			W	14,228,710	W	13,818,217	W	14,283,358	$	13,799,013

F-5

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS — (Continued)

December 31, 2002, 2003 and 2004


			2002			2003			2004			2004

			In millions of Korean won									In thousands of
												U.S. dollars
												(Note 2)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable (Notes 12 and 22)		W	1,697,502		W	1,317,162		W	1,205,682		$	1,164,798
	Short-term borrowings (Note 12)			687,296			786,096			425,496			411,068
	Income taxes payable			383,900			402,559			273,495			264,221
	Accrued expenses (Note 12)			408,521			420,995			394,354			380,982
	Current portion of long-term debt (Notes 8, 9 and 11)			922,209			1,364,264			498,278			481,382
	Current portion of facility deposits			18,415			12,881			13,405			12,950
	Other			185,543			226,953			256,183			247,495

		Total Current Liabilities		4,303,386			4,530,910			3,066,893			2,962,896

LONG-TERM LIABILITIES:
	Bonds payable, net (Notes 2 and 8)			2,908,496			2,261,868			2,891,843			2,793,781
	Long-term borrowings (Note 9)			10,284			1,633			—			—
	Facility deposits (Note 10)			46,850			44,197			31,440			30,374
	Long-term payables — other, net of present value discount of W98,017 million, W85,881 million and W72,663 million at December 31, 2002, 2003 and 2004, respectively (Note 2)			551,983			564,119			577,337			557,760
	Obligations under capital leases (Notes 2, 11 and 12)			121			—			—			—
	Accrued severance indemnities, net (Note 2)			48,519			67,824			80,984			78,238
	Deferred income tax liabilities (Notes 2 and 17)			104,770			226,029			306,052			295,674
	Long-term currency swap (Notes 2 and 23)			—			—			96,743			93,462
	Guarantee deposits received and other (Note 22)			22,401			27,790			26,322			25,429

		Total Long-Term Liabilities		3,693,424			3,193,460			4,010,721			3,874,718

		Total Liabilities		7,996,810			7,724,370			7,077,614			6,837,614

COMMITMENTS AND CONTINGENCIES (Note 20)
SHAREHOLDERS’ EQUITY:
	Capital stock (Notes 1 and 13)			44,576			44,639			44,639			43,125
	Capital surplus (Note 13)			2,884,382			2,911,556			2,968,301			2,867,647
	Retained earnings (Note 14)			4,873,205			5,139,911			6,152,898			5,944,255
	Capital adjustments:
		Treasury stock (Note 15)		(2,192,449	)		(2,047,103	)		(2,047,105	)		(1,977,688	)
		Unrealized loss on valuation of long-term investment securities (Notes 2 and 3)		(104,117	)		(160,622	)		(92,975	)		(89,822	)
		Equity in capital adjustment of affiliates (Notes 2 and 4)		(5,171	)		42,581			134,376			129,819
		Loss on valuation of currency swap (Notes 2 and 23)		—			—			(49,452	)		(47,775	)
		Stock options (Notes 2 and 16)		2,452			3,741			4,833			4,669
		Foreign-based operations’ translation adjustment (Note 2)		3,515			3,159			(7,969	)		(7,699	)
	Minority interest in equity of consolidated subsidiaries (Note 2)			725,507			155,985			98,198			94,868

		Total Shareholders’ Equity		6,231,900			6,093,847			7,205,744			6,961,399

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			W	14,228,710		W	13,818,217		W	14,283,358		$	13,799,013

See accompanying Notes to Consolidated Financial Statements.

F-6

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31, 2002, 2003 and 2004


		2002			2003			2004			2004

		In millions of Korean won, except for									In thousands of
		income per share									U.S. dollars,
											except for
											income per
											share
											(Note 2)
OPERATING REVENUE (Notes 2, 22 and 28)		W	9,323,993		W	10,272,081		W	10,570,615		$	10,212,168
OPERATING EXPENSES (Notes 2, 20 and 22)
	Labor cost		(318,346	)		(407,243	)		(464,778	)		(449,017	)
	Commissions paid (Note 22)		(1,964,797	)		(2,314,558	)		(2,812,318	)		(2,716,953	)
	Depreciation and amortization (Notes 6 and 7)		(1,435,041	)		(1,510,545	)		(1,607,478	)		(1,552,969	)
	Network interconnection (Note 28)		(752,144	)		(771,553	)		(913,688	)		(882,705	)
	Leased line		(280,113	)		(306,527	)		(375,227	)		(362,503	)
	Advertising		(448,784	)		(376,424	)		(352,877	)		(340,911	)
	Cost of goods sold		(509,055	)		(560,859	)		(479,257	)		(463,006	)
	Other		(818,070	)		(919,265	)		(1,125,243	)		(1,087,086	)

	Sub-total		(6,526,350	)		(7,166,974	)		(8,130,866	)		(7,855,150	)

OPERATING INCOME			2,797,643			3,105,107			2,439,749			2,357,018

OTHER INCOME:
	Interest		86,013			86,485			80,459			77,731
	Dividends		207			25,923			23,843			23,034
	Commissions		73,515			80,180			26,891			25,979
	Foreign exchange and translation gains (Note 2)		41,439			6,131			20,559			19,862
	Gain on disposal and valuation of trading securities (Note 2)		11,893			188			2,548			2,462
	Gain on disposal of property, equipment and intangible assets		1,206			2,750			2,067			1,997
	Gain on transaction of currency swap (Notes 2 and 23)		—			—			2,850			2,753
	Equity in earnings of affiliates (Notes 2 and 4)		813			—			—			—
	Other		44,070			59,787			40,202			38,839

			259,156			261,444			199,419			192,657

F-7

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME — (Continued)

Years Ended December 31, 2002, 2003 and 2004


		2002			2003			2004			2004

		In millions of Korean won, except for									In thousands of
		income per share									U.S. dollars,
											except for
											income per
											share
											(Note 2)
OTHER EXPENSES:
	Interest and discounts		(311,132	)		(391,482	)		(303,410	)		(293,121	)
	Donations		(127,517	)		(91,487	)		(89,232	)		(86,206	)
	Foreign exchange and translation losses (Note 2)		(13,547	)		(10,230	)		(9,074	)		(8,766	)
	Loss on disposal and valuation of trading securities (Note 2)		—			(3,974	)		(232	)		(224	)
	Loss on disposal and impairment of property, equipment and intangible assets (Notes 2 and 3)		(221,681	)		(13,784	)		(19,208	)		(18,557	)
	Loss on impairment of long-term investment securities (Notes 2, 3 and 27)		(68,882	)		(5,749	)		(33,654	)		(32,513	)
	Loss on disposal of investment assets		(51,618	)		(45,403	)		(1,539	)		(1,487	)
	Loss on transaction and valuation of currency swap (Notes 2 and 23)		—			—			(15,818	)		(15,282	)
	Equity in losses of affiliates (Notes 2 and 4)		—			(6,975	)		(11,954	)		(11,549	)
	Other		(44,158	)		(43,131	)		(31,872	)		(30,792	)

			(838,535	)		(612,215	)		(515,993	)		(498,497	)

ORDINARY INCOME			2,218,264			2,754,336			2,123,175			2,051,178
EXTRAORDINARY GAIN			504			—			—			—

						.
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST			2,218,768			2,754,336			2,123,175			2,051,178
INCOME TAXES (Notes 2 and 17)			(698,507	)		(789,059	)		(629,761	)		(608,406	)

INCOME BEFORE MINORITY INTEREST			1,520,261			1,965,277			1,493,414			1,442,772
MINORITY INTEREST IN NET LOSS (GAIN) OF CONSOLIDATED SUBSIDIARIES			(33,110	)		823			(1,935	)		(1,869	)

NET INCOME		W	1,487,151		W	1,966,100		W	1,491,479		$	1,440,903

NET INCOME PER SHARE (Notes 2 and 18) (In Korean won and U.S. dollars)		W	17,647		W	26,187		W	20,261		$	19.57

See accompanying Notes to Consolidated Financial Statements.

F-8

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years Ended December 31, 2002, 2003 and 2004


		Common		Capital			Retained			Capital			Minority			Shareholders’
		Stock		Surplus			Earnings			Adjustments			Interest			Equity

		(In millions of Korean won)
Balance, January 1, 2002		W	44,576	W	3,449,698		W	3,443,319		W	(1,492,634	)	W	704,345		W	6,149,304
	Net income		—		—			1,487,151			—			—			1,487,151
	Treasury stock transactions (Notes 13 and 15)		—		81,984			—			(766,597	)		—			(684,613	)
	Cash dividends paid (Note 19)		—		—			(57,265	)		—			—			(57,265	)
	Excess unallocated purchase price (Note 13)		—		(647,025	)		—			—			—			(647,025	)
	Unrealized loss on valuation of long-term investment securities (Notes 2 and 3)		—		—			—			(28,327	)		—			(28,327	)
	Equity in capital surplus and capital adjustment changes of affiliates (Note 2)		—		(275	)		—			(12,513	)		—			(12,788	)
	Stock compensation plans (Notes 2 and 16)		—		—			—			1,492			—			1,492
	Foreign-based operations’ translation adjustment (Note 2)		—		—			—			2,809			—			2,809
	Increase in minority interest in equity of consolidated subsidiaries		—		—			—			—			21,162			21,162

Balance, December 31, 2002			44,576		2,884,382			4,873,205			(2,295,770	)		725,507			6,231,900

	Net income		—		—			1,966,100			—			—			1,966,100
	Acquisition of treasury stock (Note 15)		—		—			—			(1,379,337	)		—			(1,379,337	)
	Retirement of treasury stock (Note 15)		—		—			(1,545,281	)		1,524,683			—			(20,598	)
	Cash dividends paid (Note 19)		—		—			(151,739	)		—			—			(151,739	)
	Excess unallocated purchase price (Note 13)		—		(230	)		—			—			—			(230	)
	Issuance of common stock for the merger with SK IMT Co., Ltd. (Note 13)		63		31,809			—			—			—			31,872
	Gain on disposal of investments in common stock of subsidiary		—		58			—			—			—			58
	Equity in beginning retained earnings change of affiliates (Notes 2 and 4)		—		—			(33	)		—			—			(33	)
	Cumulative effect of an accounting change (Note 2)		—		—			(2,341	)		—			(515	)		(2,856	)
	Unrealized loss on valuation of long-term investment securities (Notes 2 and 3)		—		—			—			(56,505	)		—			(56,505	)
	Equity in capital surplus and capital adjustment changes of affiliates (Note 2)		—		(4,463	)		—			47,752			—			43,289
	Stock compensation plans (Notes 2 and 16)		—		—			—			1,289			—			1,289
	Foreign-based operations’ translation adjustment (Note 2)		—		—			—			(356	)		—			(356	)
	Decrease in minority interest in equity of consolidated subsidiaries		—		—			—			—			(569,007	)		(569,007	)

Balance, December 31, 2003			44,639		2,911,556			5,139,911			(2,158,244	)		155,985			6,093,847

F-9

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY — (Continued)

Years Ended December 31, 2002, 2003 and 2004


		Common		Capital			Retained			Capital			Minority			Shareholders’
		Stock		Surplus			Earnings			Adjustments			Interest			Equity

		(In millions of Korean won)
Balance, January 1, 2004			44,639		2,911,556			5,139,911			(2,158,244	)		155,985			6,093,847
	Net income		—					1,491,479			—			—			1,491,479
	Cash dividends paid (Note 19)		—		—			(404,878	)		—			—			(404,878	)
	Cash dividends paid (interim) (Note 19)		—		—			(73,614	)		—			—			(73,614	)
	Excess unallocated purchase price (Note 13)		—		(77	)		—			—			—			(77	)
	Consideration for conversion rights (Notes 2 and 13)		—		67,279			—			—			—			67,279
	Acquisition of treasury stock (Note 15)		—		—			—			(2	)		—			(2	)
	Equity in capital surplus and capital adjustment changes of affiliates (Note 2)		—		(10,457	)		—			91,795			—			81,338
	Unrealized gain on valuation of long-term investment securities (Notes 2 and 3)		—		—			—			67,647			—			67,647
	Loss on valuation of currency swap		—		—			—			(49,452	)		—			(49,452	)
	Stock compensation plans (Notes 2 and 16)		—		—			—			1,092			—			1,092
	Foreign-based operations’ translation adjustment (Note 2)		—		—			—			(11,128	)		—			(11,128	)
	Decrease in minority interest in equity of consolidated subsidiaries		—		—			—			—			(57,787	)		(57,787	)

Balance, December 31, 2004		W	44,639	W	2,968,301		W	6,152,898		W	(2,058,292	)	W	98,198		W	7,205,744

		(In thousands of U.S. dollars) (Note 2)
Balance, January 1, 2004		$	43,125	$	2,812,826		$	4,965,618		$	(2,085,058	)	$	150,696		$	5,887,207
	Net income		—		—			1,440,903			—			—			1,440,903
	Cash dividends paid		—		—			(391,149	)		—			—			(391,149	)
	Cash dividends paid (interim)		—		—			(71,117	)		—			—			(71,117	)
	Excess unallocated purchase price		—		(74	)		—			—			—			(74	)
	Consideration for conversion rights		—		64,998			—			—			—			64,998
	Acquisition of treasury stock		—		—			—			(2	)		—			(2	)
	Equity in capital surplus and capital adjustment changes of affiliates		—		(10,103	)		—			88,682			—			78,579
	Unrealized gain on valuation of long-term investment securities		—		—			—			65,353			—			65,353
	Loss on valuation of currency swap		—		—			—			(47,775	)		—			(47,775	)
	Stock compensation plans		—		—			—			1,055			—			1,055
	Foreign-based operations’ translation adjustment		—		—			—			(10,751	)		—			(10,751	)
	Decrease in minority interest in equity of consolidated subsidiaries		—		—			—			—			(55,828	)		(55,828	)

Balance, December 31, 2004		$	43,125	$	2,867,647		$	5,944,255		$	(1,988,496	)	$	94,868		$	6,961,399

See accompanying Notes to Consolidated Financial Statements.

F-10

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2002, 2003 AND 2004


			2002			2003			2004			2004

			In millions of Korean won									In thousands
												of U.S. dollars
												(Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income		W	1,487,151		W	1,966,100		W	1,491,479		$	1,440,903

	Expenses not involving cash payments:
		Depreciation and amortization		1,543,335			1,649,902			1,752,530			1,693,102
		Provision for severance indemnities		45,509			65,375			58,151			56,179
		Provision for bad debts		20,981			23,304			43,144			41,681
		Foreign currency translation loss		5,397			2,546			2,179			2,105
		Loss on disposal and valuation of trading securities		—			3,974			232			224
		Loss on disposal and impairment of property, equipment and intangible assets		221,681			13,784			19,208			18,557
		Loss on impairment of long-term investment securities		68,882			5,749			33,654			32,513
		Loss on disposal of investment assets		51,618			45,403			1,539			1,487
		Loss on transaction and valuation of currency swap		—			—			15,818			15,282
		Equity in losses of affiliates		—			6,975			11,954			11,549
		Minority interest in net gain of consolidated subsidiaries		33,110			—			1,935			1,869
		Amortization of discounts on bonds and other		51,630			73,655			46,274			44,704

		Sub-total		2,042,143			1,890,667			1,986,618			1,919,252

	Income not involving cash receipts:
		Reversal of allowance for doubtful accounts		(6,365	)		(1,555	)		(759	)		(733	)
		Foreign currency translation gain		(30,282	)		(668	)		(3,367	)		(3,253	)
		Gain on disposal and valuation of trading securities		(11,893	)		(188	)		(2,548	)		(2,462	)
		Gain on disposal of property, equipment and intangible assets		(1,206	)		(2,750	)		(2,067	)		(1,997	)
		Gain on transaction of currency swap		—			—			(2,850	)		(2,753	)
		Equity in earnings of affiliates		(813	)		—			—			—
		Minority interest in net loss of consolidated subsidiaries		—			(823	)		—			—
		Other		(7,812	)		(14,046	)		(14,133	)		(13,654	)

		Sub-total		(58,371	)		(20,030	)		(25,724	)		(24,852	)

F-11

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

Years Ended December 31, 2002, 2003 AND 2004


		2002			2003			2004			2004

		In millions of Korean won									In thousands
											of U.S. dollars
											(Note 2)
Changes in assets and liabilities related to operating activities:
	Accounts receivable — trade		(277,685	)		(159,160	)		(170,891	)		(165,096	)
	Accounts receivable — other		224,640			(48,789	)		(552,343	)		(533,613	)
	Inventories		39,092			(4,056	)		(20,982	)		(20,271	)
	Other current assets		(30,764	)		(30,417	)		(5,549	)		(5,360	)
	Accounts payable		614,005			(396,700	)		(90,977	)		(87,892	)
	Income taxes payable		12,946			(11,597	)		(125,430	)		(121,177	)
	Accrued expenses		67,026			24,385			(26,622	)		(25,719	)
	Current portion of facility deposits		3,801			(3,418	)		2,580			2,493
	Other current liabilities		125,767			49,194			22,608			21,841
	Deferred income taxes		81,963			120,879			78,356			75,699
	Severance indemnity payments		(20,378	)		(24,516	)		(27,582	)		(26,647	)
	Deposits for group severance indemnities and other deposits		(43,521	)		(24,727	)		(19,489	)		(18,828	)
	Transfer of accrued severance indemnities from affiliates and related companies		—			955			—			—

	Sub-total		796,892			(507,967	)		(936,321	)		(904,570	)

Net Cash Provided by Operating Activities			4,267,815			3,328,770			2,516,052			2,430,733

F-12

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

Years Ended December 31, 2002, 2003 AND 2004


		2002			2003			2004			2004

		In millions of Korean won									In thousands
											of U.S. dollars
											(Note 2)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Decrease in short-term financial instruments	W	231,219		W	95,123		W	90,034		$	86,981
	Decrease (increase) in trading securities		(103,256	)		(137,618	)		240,204			232,059
	Decrease (increase) in short-term loans		24,474			(8,533	)		33,019			31,899
	Decrease (increase) in long-term bank deposits		21			(350	)		(9,999	)		(9,660	)
	Proceeds from sale of current portion of long-term investment securities		—			70,267			85,861			82,949
	Proceeds from sale of long-term investment securities		1,084,945			762,896			17,658			17,059
	Proceeds from sale of equity securities accounted for using the equity method		53,230			3,510			1,023			988
	Decrease in long-term loans		19,920			9,980			4,746			4,585
	Decrease in guarantee deposits		77,490			67,410			22,096			21,347
	Proceeds from disposal of property and equipment		23,211			12,828			10,116			9,773
	Proceeds from disposal of intangible assets		1,198			2,248			2,291			2,213
	Acquisition of long-term investment securities		(2,062,355	)		(437,076	)		(54,132	)		(52,296	)
	Acquisition of equity securities accounted for using the equity method		(208,913	)		(7,158	)		(21,086	)		(20,371	)
	Increase in long-term loans		(24,376	)		(15,578	)		(35,291	)		(34,094	)
	Increase in guarantee deposits		(55,986	)		(88,223	)		(40,957	)		(39,568	)
	Increase in other non-current assets		(22,022	)		(3,332	)		(46,556	)		(44,976	)
	Acquisition of property and equipment		(2,024,655	)		(1,647,639	)		(1,631,941	)		(1,576,602	)
	Acquisition of intangible assets		(77,580	)		(56,745	)		(72,376	)		(69,922	)
	Acquisition of minority interest		—			(36,442	)		(64,247	)		(62,068	)

	Net Cash Used in Investing Activities		(3,063,435	)		(1,414,432	)		(1,469,537	)		(1,419,704	)

F-13

SK TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

Years Ended December 31, 2002, 2003 AND 2004


		2002			2003			2004			2004

		In millions of Korean won									In thousands
											of U.S. dollars
											(Note 2)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Increase in short-term borrowings	W	91,942		W	108,669		W	—		$	—
	Issuance of bonds payable		1,166,451			688,737			1,205,727			1,164,841
	Increase in long-term borrowings		24,682			13,532			—			—
	Payment of short-term borrowings		(578,696	)		(12,087	)		(359,133	)		(346,955	)
	Payment of current portion of long-term debt		(719,779	)		(939,176	)		(1,370,611	)		(1,324,134	)
	Repayment of bonds payable		—			—			(5,068	)		(4,896	)
	Payment of dividends		(58,716	)		(151,739	)		(478,318	)		(462,098	)
	Decrease in facility deposits		(25,278	)		(2,654	)		(12,757	)		(12,324	)
	Transaction of currency swap and currency forward		—			—			2,821			2,725
	Net increase in treasury stock		(1,351,243	)		(1,379,337	)		(2	)		(2	)
	Increase in minority interest in equity of consolidated subsidiaries		17,405			22,278			45,065			43,537
	Other		15,035			(609,262	)		3,706			3,579

	Net Cash Used in Financing Activities		(1,418,197	)		(2,261,039	)		(968,570	)		(935,727	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DUE TO CHANGES IN CONSOLIDATED SUBSIDIARIES			10,654			72			(24,803	)		(23,962	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(203,163	)		(346,629	)		53,142			51,340
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR			867,280			664,117			317,488			306,722

CASH AND CASH EQUIVALENTS AT END OF THE YEAR		W	664,117		W	317,488		W	370,630		$	358,062

Cash paid for interest (net of amounts capitalized)		W	248,234		W	328,890		W	264,224		$	255,264

Cash paid for income taxes		W	693,999		W	675,122		W	679,262		$	656,228

See accompanying Notes to Consolidated Financial Statements

F-14

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2002, 2003 AND 2004


1.	GENERAL

SK Telecom Co., Ltd. (the “Company”) was incorporated in March 1984 under the laws of Korea to engage in providing cellular telephone communication services in the Republic of Korea. The Company’s common shares and depositary receipts (DRs) are listed on the KRX Stock Market 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:


			Percentage of
	Number of		Total Shares
	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.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying 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 13. Significant accounting policies followed in preparing the accompanying consolidated financial statements are summarized as follows:


a.	Basis of Presentation

The official accounting records of the Company are expressed in Korean won and are maintained in accordance with the relevant laws and regulations of the Republic of Korea. The accounting principles and reporting practices followed by the Company and generally accepted in Korea (“Korean GAAP”) may differ in certain respects from accounting principles and reporting practices generally accepted in other countries and jurisdictions. To conform more closely to presentations customary in filings with the Securities and Exchange Commission of the United States of America, the accompanying consolidated financial statements have been condensed, restructured and translated into English. The conversion into U.S. dollars was made at the rate of W1,035.10 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 conversion 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. Certain supplementary information included in the statutory Korean language consolidated financial statements, not required for a fair presentation of the Company and subsidiaries’ financial position or results of operations, is not presented in the accompanying consolidated financial statements.


b.	Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. 20% to 50% owned affiliates are accounted for using the equity method.

F-15

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s subsidiaries are as follows:


	Year of				Ownership
Subsidiary	Establishment		Primary business		Percentage (%)

SK Teletech Co., Ltd.		1995		Engineering and maintenance		89.13
SK Capital Co., Ltd.		1995		Finance		100.00
SK Telink Co., Ltd.		1998		Telecommunication services		90.77
SK Communications Co., Ltd.		1999		Internet website services		93.44
SK Wyverns Baseball Club Co., Ltd.		2000		Business related sports		99.99
Centurion IT Investment Association		2001		Investment association		37.50
Global Credit & information Corp.		1998		Credit and collection services		50.00
PAXNet Co., Ltd.		1999		Internet website services		67.10
SK Telecom International Inc.		1995		Internet website services		100.00
SLD Telecom PTE Ltd.		2000		Telecommunication services		55.10
SK Telecom China Co., Ltd.		2002		Telecommunication services		100.00

In August 2002, the Company purchased a 78.3% interest in SK Communications Co., Ltd. (formerly known as Lycos Korea) and on November 1, 2002, SK Communications Co., Ltd. merged with NetsGo Co., Ltd., a subsidiary of the Company. In December 2002, the Company purchased a 67.1% interest in PAXNet Co., Ltd.

Effective January 1, 2004, TU Media Corp. that was included in the consolidated financial statements for the year ended December 31, 2003 is excluded from the consolidation as the Company’s equity interest in TU Media Corp. decreased from 100% to 46.1%, effective January 1, 2004 and to 28.5%, effective May 21, 2004.

Effective January 1, 2004, SK Telecom China, Ltd. is included in the consolidation of the accompanying financial statements as its total assets at the beginning of the fiscal year were more than W7 billion, in accordance with Korean GAAP. As allowed under Korean GAAP, the financial statements of prior years have not been restated to include the financial statements of this entity.


c.	Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in Korea and the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.


d.	Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided based on the estimated collectibility of individual accounts and historical bad debt experience.

F-16

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Activity in the allowance for doubtful accounts receivable — trade for 2002, 2003 and 2004 is as follows (in millions of Korean won):


	2002			2003			2004

Beginning balance	W	81,681		W	60,542		W	65,327
Increase in allowance from newly consolidated subsidiaries		2,056			—			—
Additions		22,281			22,378			29,181
Reductions		(45,476	)		(17,593	)		(23,418	)

Ending balance	W	60,542		W	65,327		W	71,090


e.	Inventories

Inventories, which consist mainly of replacement units for wireless telecommunication facilities, handsets and raw material for handsets, 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, 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, 2002, 2003 and 2004.


f.	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 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 a 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 a 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 intent to hold and their maturities from the balance sheet date.


g.	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’

F-17

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 similar to the method used in preparing consolidated financial statements.


h.	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 straight-line method) over the estimated useful lives (3 – 30 years) of the related assets.

Through 2002, interest expense and other financing charges for borrowings related to the manufacture or construction of property and equipment were capitalized until such manufacture or construction activities were complete. Effective January 1, 2003, in accordance with the application of SKAS No. 7, “Capitalization of Financing Costs”, the Company changed the accounting policy for capitalization of interest costs to charge such interest expense and other financial charges to current operations as incurred. In accordance with this statement, this accounting change has been applied prospectively. If such financing costs had been capitalized, total assets of the Company and its subsidiaries as of December 31, 2003 and net income for the year then ended would have increased by W20,345 million and W14,303 million (net of income tax effect of W6,042 million), respectively. For the year ended December 31, 2002, the Company capitalized financing cost amounting to W14,830 million related to the manufacture or construction of property and equipment.


i.	Intangible Assets

Intangible assets are stated at cost less amortization computed using the straight-line method over 4 to 20 years.

With its application for a license to provide IMT services, the Company has a commitment to pay W1,300,000 million to the Ministry of Information Communication (“MIC”). SK IMT Co., Ltd., which was merged into the Company on May 1, 2003, paid W650,000 million in March 2001 and the Company is required to pay the remainder 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). The future payment obligations are W90,000 million in 2007, W110,000 million in 2008, W130,000 million in 2009, W150,000 million in 2010 and W170,000 million in 2011. On December 4, 2001, SK IMT Co., Ltd. received the IMT license from the MIC, and recorded the total license cost as an intangible asset. 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. The Company determined the IMT license has a finite life, considering that renewal cost is expected to be substantial.

Through 2002, interest expense and other financing charges for borrowings related to the purchase of intangible assets were capitalized until the assets were put in use. Effective January 1, 2003, in accordance with the application of SKAS No. 7, “Capitalization of Financing Costs”, the Company changed the accounting policy for capitalization of interest to charge such interest and other financing charges to current operations as incurred. In accordance with this statement, this accounting change has been applied prospectively. If such financing costs had been capitalized, the total balance of intangible assets of the Company as of December 31, 2003 and net income for the year then ended would have increased by W25,594 million and W17,993 million (net of income tax effect of W7,601 million), respectively. For the year ended December 31, 2002, the Company

F-18

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and its subsidiaries capitalized financing costs amounting to W69,372 million related to intangible assets. Changes in intangible assets for 2002, 2003 and 2004 are as follows (in millions of Korean won):


		2002			2003			2004

Beginning balance		W	3,816,373		W	3,721,235		W	3,674,944
Additions:
	IMT license		(40,393	)		—			—
	Other		144,180			175,793			184,235
Reductions:
	Amortization		(187,218	)		(214,809	)		(332,020	)
	Write-off		(6,669	)		—			(42	)
	Disposal		(5,038	)		(7,275	)		(4,214	)

Ending balance		W	3,721,235		W	3,674,944		W	3,522,903


j.	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 a corresponding conversion right adjustment which is deducted from the 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.


k.	Discounts on Bonds

Discounts on bonds are amortized to interest expense using the effective interest rate method over the redemption period of the bonds.


l.	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.


m.	Accrued Severance Indemnities

In accordance with the policies of the Company and its subsidiaries, 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 and certain subsidiaries have 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, where the beneficiaries are their employees, totaling W120,413 million, W144,861 million and W164,643 million as of December 31, 2002, 2003 and 2004, respectively, were deducted from accrued severance indemnities in accordance with Korean GAAP.

F-19

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In accordance with the Korean National Pension Fund Law, the Company and its domestic subsidiaries transferred a portion of its accrued severance indemnities to the National Pension Fund through March 1999. Such transfers, amounting to W6,860 million, W6,229 million and W5,687 million as of December 31, 2002, 2003 and 2004, respectively, are deducted from accrued severance indemnities. Changes in accrued severance indemnities for 2002, 2003 and 2004 are as follows (in millions of Korean won):


	2002			2003			2004

Beginning balance	W	61,620		W	48,519		W	67,824
Provision		49,599			67,693			60,523
Payments to employees		(20,378	)		(24,516	)		(27,582	)
Transfer from affiliated and related companies		—			955			—
Increase in accrued severance indemnities from newly consolidated subsidiaries		1,673			77			—
Deposits for severance indemnities		(43,995	)		(24,904	)		(19,781	)

Ending balance	W	48,519		W	67,824		W	80,984

In addition, the Company and certain subsidiaries expect to pay the following future benefits for the next 10 years to their employees upon their normal retirement age as follows (in millions of Korean won):


Year ending December 31,

2005		W2,225
2006		—
2007		976
2008		166
2009		951
2010Y2014		7,612

	Total	W11,930

The above amounts were determined based on the employees’ current salary rates and the number of service years that will be accumulated upon their retirement date. These amounts do not include amounts that might be paid to employees that will cease working with the Company before their normal retirement age.


n.	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.


o.	Research and Development Costs

The Company and its subsidiaries charge substantially all research and development costs to expense as incurred. The Company and its subsidiaries incurred internal research and development costs of W194,332 million, W235,551 million and W267,107 million for the years ended December 31, 2002, 2003 and

F-20

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2004, respectively, and external research and development costs of W58,974 million, W64,893 million and W69,016 million for the years ended December 31, 2002, 2003 and 2004, respectively.


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 Recognition

The revenues of the Company and its subsidiaries are principally derived from telecommunication service revenue including data services, and telephone sales. Telecommunication service consists of fixed monthly charges, usage-related charges and non-refundable activation fees. Fixed monthly charges are recognized in the period earned. Usage-related charges are recognized at the time services are rendered. Non-refundable activation fees and costs are recognized when the activation service was performed.

The Company’s subsidiaries also sell telephones to customers and telephone sales are recognized at the time products are delivered.


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.


s.	Net Income Per Share

Net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period.


t.	Foreign-Based Operations’ Translation Adjustment

In translating the foreign currency financial statements of the Company’s overseas subsidiaries into Korean won, the Company presents the translation gain or loss as a foreign-based operations’ translation adjustment in the capital adjustment section of the balance sheet. The translation gain or loss arises from the application of different exchange rates; the year-end rate for balance sheet items except shareholders’ equity, the historical rate for shareholders’ equity and the daily average rate for statement of income items.


u.	Accounting for Foreign Currency Transactions and Translation

The Company and its domestic subsidiaries maintain their accounts in Korean won. Transactions in foreign currencies are recorded in Korean won based on the prevailing rate of exchange at the dates of transactions. As allowed under Korean GAAP, monetary assets and liabilities denominated in foreign currencies are translated in the accompanying consolidated financial statements at the Base Rates announced by Seoul Money Brokerage Services, Ltd. on the balance sheet dates, which, for U.S. dollars, were W1,200=US$1, W1,197=US$1

F-21

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and W1,043=US$1 at December 31, 2002, 2003 and 2004, respectively. The resulting gains and losses arising from the translation or settlement of such assets and liabilities are included in current operations.


v.	Accounting for Employee Stock Option Compensation Plan

The Company adopted the fair value based method of accounting for its employee stock option compensation plan (see Note 16). 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.


w.	Adoption of New Statements of Korea Accounting Standards (“SKAS”)

On January 1, 2003, the Company and its subsidiaries adopted SKAS No. 2 through No. 9, except for SKAS No. 6, which was early adopted in 2002. As a result, the Company and its subsidiaries reclassified the accounts relating to securities as explained in Note 2-(f), and changed the accounting policy for capitalization of interest and other financing costs to charge such interest expense and other financing cost to current operations as incurred as explained in Notes 2-(h) and 2-(i). If financing costs had been capitalized, net income of the Company and its subsidiaries for the year ended December 31, 2003 would have increased by W32,296 million (net of income tax effect of W13,643 million). In addition, in accordance with the application of SKAS No. 3, “Intangible Assets”, effective from January 1, 2003 organization costs which were recorded in intangible assets through 2002, are charged to expenses as incurred and the cumulative effect of this accounting change was charged to beginning retained earnings as of January 1, 2003.

On January 1, 2004, the Company and its subsidiaries adopted SKAS No. 10, No. 12 and No. 13. Such adoptions of new SKAS did not have an effect on the consolidated financial position of the Company and its subsidiaries as of December 31, 2004 or consolidated ordinary income and net income of the Company and its subsidiaries for the year ended December 31, 2004.


3.	INVESTMENT SECURITIES


a.	Trading Securities

Trading securities as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


	Acquisition Cost		Fair Value at		Carrying Amount
	at December 31,		December 31,
	2004		2004		2002		2003		2004

Stocks	W	450	W	368	W	—	W	—	W	368
Public bonds		—		—		37		18,499		—
Corporate bonds		—		—		—		4,383		—
Beneficiary certificates		652,372		654,411		754,182		870,335		654,411

Total	W	652,822	W	654,779	W	754,219	W	893,217	W	654,779

F-22

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


b.	Long-term Investment Securities

Long-term investment securities at of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


	2002			2003			2004

Available-for-sale equity securities	W	1,334,197		W	824,392		W	896,508
Available-for-sale debt securities		12,500			14,315			5,158
Held-to-maturity securities		118,267			126,347			50,144

Total		1,464,964			965,054			951,810
Less current portion		(70,267	)		(85,861	)		(3,709	)

Long-term portion	W	1,394,697		W	879,193		W	948,101

F-23

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Available-for-sale equity securities as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won, except for share data):


				Ownership		Acquisition					Unrealized
				Percentage (%)		Cost at		Fair Value			Gain (Loss)			Carrying Amount
		Number of		at Dec. 31,		Dec. 31,		at Dec. 31,			at Dec. 31,
		Shares		2004		2004		2004			2004			2002		2003		2004

(Investments in listed companies)
Digital Chosunilbo Co., Ltd.			2,890,630		7.8	W	5,781		W 2,023		W	(3,758	)	W	2,428	W	2,847		2,023
Hanaro Telecom Inc.			22,090,000		4.8		121,676		71,019			(50,657	)		49,586		26,838		71,019
Korea Radio Wave Basestation Management			234,150		4.5		1,171		2,178			1,007			2,693		2,669		2,178
POSCO Corporation			2,481,310		2.7		332,662		464,005			131,343			—		404,454		464,005
KT Corporation			—		—		—		—			—			730,602		—		—
INNOTG Co., Ltd.			594,737		3.9		1,695		152			(1,543	)		—		—		152
SINJISOFT Corporation			78,000		2.3		130		590			460			—		—		590
SK Securities Co., Ltd.			3,608,856		1.1		5,551		2,418			(3,133	)		5,052		1,877		2,418

	sub-total						468,666					73,719			790,361		438,685		542,385

(Investments in non-listed companies)
Powercomm Co., Ltd.			7,500,000		5.0		240,243		71,565			(168,678	)		240,243		68,407		71,565
Real Telecom Co., Ltd.			398,722		8.3		5,981		(note c	)		—			5,981		5,981		—
Japan MBCO			54,000		7.3		27,332		(note a	)		—			27,209		42,517		27,332
Enterprise Networks Co., Ltd.			423,244		4.0		14,438		(note c	)		—			14,438		14,438		—
SK Life Insurance Co., Ltd.			4,702,000		8.7		14,890		(note a	)		—			14,890		14,890		14,890
Eonex Technologies Inc.			144,000		14.1		3,600		(note a	)		2,011			4,593		4,593		4,593
WideThan Co., Ltd.			2,000,000		14.3		1,000		(note a	)		(27	)		—		3,188		3,188
Other							123,396		(notes a and b	)		—			43,971		38,475		36,149

	sub-total						430,879					(166,694	)		346,732		189,301		157,717

(Investments in funds)
Korea IT Fund									(note a	)		—			190,000		190,000		190,000
Others									(notes a and b	)		—			7,104		6,406		6,406

	sub-total											—			197,104		196,406		196,406

Total											W	92,975		W	1,334,197	W	824,392	W	896,508


(note a)	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 securities 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%. Such securities were transferred to available-for-sale securities at the carrying amount valued using the equity method of accounting prior to the reclassification.

(note b)	Due to the impairment of their investments in common stock of CCK Van, Biznet Tech, Hanse Telecom, Cybird Korea and Venture Korea in 2003 and Mobilewelcom Co., Ltd., CXP Inc., LoveHunt Inc. and others in 2004, the Company and certain subsidiaries recorded impairment losses of W5,749 million and W2,580 million for the years ended December 31, 2003 and 2004, respectively.

F-24

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(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.

The net unrealized loss on investments in common stock of KT Corporation, Digital Chosunilbo Co., Ltd., Hanaro Telecom, Inc., Korea Radio Wave Basestation Management and SK Securities Co., Ltd. as of December 31, 2002 totaling W104,117 million, the net unrealized gain on investments in common stock of Digital Chosunilbo Co., Ltd., Hanaro Telecom Inc., Korea Radio Wave Basestation Management, SK Securitie Co., Ltd. and POSCO Corporation as of December 31, 2003 totaling W11,213 million and, the net unrealized gain on investments in common stock of Digital Chosunilbo Co., Ltd., Hanaro Telecom Inc., Korea Radio Wave Basestation Management, POSCO Corporation, SK Securities Co., Ltd., INNOTG Co., Ltd. and SINJISOFT Corporation as of December 31, 2004 totaling W73,719 million, were recorded as a capital adjustment.

On May 23, 2002, the Company acquired a 9.6% equity interest (29,808,333 shares of common stock) in KT Corporation for W1,609 billion as a result of participation in the privatization of KT Corporation. The Company sold all of these shares on December 30, 2002 and January 10, 2003, under the Mutual Agreement on Stock Exchange between the Company and KT Corporation. The investments in 14,353,674 shares of KT Corporation’s common stock as of December 31, 2002, which were not sold until January 10, 2003, were reported at the agreed sales price (W50,900 per share) with unrealized losses amounting to W44,496 million reported as impairment losses in the year ended December 31, 2002, as the decline in the carrying value was not recoverable.

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 flow, and the unrealized loss on valuation of investments amounting to W171,836 million and W168,678 million as of December 31, 2003 and 2004, respectively, were recorded as a capital adjustment.

b-(2). Available-for-sale Debt Securities

Available-for-sale debt securities as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


				Acquisition
				Cost at		Carrying Amount
				December 31,
	Maturity			2004		2002			2003			2004

Public bonds		(note a	)	W	1,328	W	586		W	971		W	1,328
Convertible bonds of Real Telecom Co., Ltd.		March 2004			10,655		9,514			9,514			—
Convertible bonds of Eonex Technologies, Inc.(1st)		May 2003			—		2,000			—			—
Convertible bonds of Eonex Technologies, Inc.(3rd)		January 2005			3,600		—			3,600			3,600
Other					230		400			230			230

Total							12,500			14,315			5,158
Less current portion of available-for-sale debt securities							(2,000	)		(9,514	)		(3,700	)

Long-term available-for-sale debt securities						W	10,500		W	4,801		W	1,458

F-25

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(note a)	The maturities of public bonds as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


Maturity	2002		2003		2004

Within five years	W	583	W	857	W	904
Within ten years		3		114		424

	W	586	W	971	W	1,328

The convertible bonds of Real Telecom Co., Ltd. with a principal amount of W10,655 million can be converted into 371,018 shares of common stock of Real Telecom Co., Ltd. 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 Co., Ltd. will increase to 14.8%. Meanwhile, due to the impairment in such bonds, the Company recorded an impairment loss of W10,655 million for the year ended December 31, 2004.

The convertible bonds of Eonex Technologies, Inc. (3rd) with a principal amount of W3,600 million could 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. Such bonds were all repaid at the maturity date.

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

Held-to-maturity securities as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


				Acquisition
				Cost at		Carrying Amount
				December 31,
	Maturity			2004		2002			2003			2004

Public bonds		(note a	)	W	144	W	—		W	—		W	144
Subordinated bonds of SK Life Insurance Co., Ltd.		April 2006			50,000		50,000			50,000			50,000
Subordinated bonds of Nate First Special Purpose Company		June 2003			—		40,506			—			—
Subordinated bonds of Nate Second Special Purpose Company		December 2003			—		27,761			—			—
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							118,267			126,347			50,144
Less current portion of held-to-maturity securities							(68,267	)		(76,347	)		(9	)

Long-term held-to-maturity securities						W	50,000		W	50,000		W	50,135

F-26

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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


Maturity	2004

Within one year	W	9
Within five years		105
Within ten years		30

	W	144

On June 20, 2002, December 3, 2002, May 2, 2003, September 4, 2003 and December 15, 2003, the Company sold W631,447 million, W650,641 million, W577,253 million, W549,256 million and W498,426 million, respectively, of accounts receivable resulting from its mobile phone dealer financing plan to Nate First Special Purpose Company, Nate Second Special Purpose Company, 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. All such subordinated bonds were repaid in 2003 and 2004.


4.	EQUITY SECURITIES ACCOUNTED FOR USING THE EQUITY METHOD

Equity securities accounted for using the equity method as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won, except for share data):


			Ownership
	Number of		Percentage		Acquisition		Net Asset
	Shares at		(%) at		Cost at		Value at				Carrying Amount
	December 31,		December 31,		December 31,		December 31,
	2004		2004		2004		2004				2002		2003		2004

SK C&C Co., Ltd.		300,000		30.0		W19,071		W196,208			W	39,687	W	92,844	W	201,484
STIC Ventures Co., Ltd.		1,600,000		24.1		8,000		7,477				6,885		7,086		7,477
Eonex Technologies, Inc.		—		—		—		—	(note a	)		4,615		—		—
WiderThan Co., Ltd.		—		—		—		—	(note b	)		1,750		3,188		—
VCASH Co., Ltd.		—		—		—		—	(note c	)		2,232		1,048		—
Skytel Co., Ltd.		1,756,000		28.6		2,159		3,713				2,576		3,401		3,713
SK China Company Ltd.		28,160		20.7		3,195		1,915				3,482		1,683		830
SKT-QC Wireless Development Fund				50.0		6,540		5,146				5,993		5,901		5,146
SKT-HP Ventures, LLC				50.0		6,415		5,281				5,990		5,960		5,281
CDMA Mobile Phone Center				50.0		45,687		25,117				—		49,444		25,117
TU Media Corp.		7,800,000		28.5		39,000		34,592	(note d	)		—		—		34,592
SK USA, Inc.		49		49.0		3,184		3,056	(note e	)		3,184		3,184		3,056
Aircross Co., Ltd.		600,000		38.1		300		940	(note e	)		300		300		940
DSS Mobile Communications Ltd.		—		—		—		—	(note f	)		—		—		—
Other investments in affiliates						16,893			(note g	)		4,553		9,670		16,392

Total											W	81,247	W	183,709	W	304,028


(note a)	As the Company’s ownership in Eonex Technologies, Inc. decreased to 16.1% from 22.5%, during the first quarter of 2003, investments in common stock of Eonex Technologies, Inc. were reclassified to available-for-sale securities at the end of the first quarter of 2003.

F-27

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(note b)	As the Company’s ownership in WiderThan Co., Ltd. decreased to 14.3% from 20% in 2004, investments in common stock of WiderThan Co., Ltd. are reclassified to available-for-sale securities in 2004.

(note c)	The investments in common stock of VCASH Co., Ltd. were sold to Korea Railway Transportation Promotion Foundation in 2004.

(note d)	As the Company’s ownership in TU Media Corp. decreased from 100% to 28.5% in 2004, TU Media Corp. was excluded from the consolidation, effective January 1, 2004. And, the investment in common stock of TU Media Corp. are accounted for using the equity method of accounting.

(note e)	As their total assets at the beginning of 2004 were over W7 billion, effective January 1, 2004, investments in equity securities of SK USA, Inc. and Aircross Co., Ltd. are accounted for using the equity method of accounting.


(note f)	DSS Mobile Communication Ltd., an Indian company, has a negative capital since March 31, 1998 and the investment in common stock of DSS Mobile Communication Ltd. were sold in 2004.


(note g)	As allowed under Korean GAAP, investments in equity securities of SK Telecom Europe Limited, UNISK Information Technology Co., Ltd. and certain others were not accounted for using the equity method of accounting, as their total assets at the beginning of 2004 were less than W7 billion.

Details of changes in investments in affiliates accounted for using the equity method for the years ended December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


	For the Year Ended December 31, 2002

										Equity in
					Equity in			Equity in		Capital Surplus
	Beginning				Earnings			Retained		and Capital			Dividends					Ending
	Balance		Acquisition		(Losses)			Earnings		Adjustments			Received			Decrease		Balance

SK C&C Co., Ltd.	W	43,475	W	—	W	3,401		W	—	W	(6,589	)	W	(600	)	W	—	W	39,687
STIC IT Venture Capital		8,038		—		(1,137	)		—		(16	)		—			—		6,885
Eonex Technologies, Inc. (note a)		3,600		—		(996	)		—		2,011			—			—		4,615
WiderThan Co., Ltd. (note a)		1,000		—		750			—		—			—			—		1,750
VCASH		3,417		—		(1,192	)		—		7			—			—		2,232
Skytel Co., Ltd.		2,352		675		29			—		(480	)		—			—		2,576
SK China Co., Ltd.		3,869		—		(21	)		—		(366	)		—			—		3,482
SKT QC Wireless Development Fund, LLC		6,540		—		(9	)		—		(538	)		—			—		5,993
SKT-HP Ventures, LLC		6,415		—		(12	)		—		(413	)		—			—		5,990

	W	78,706	W	675	W	813		W	—	W	(6,384	)	W	(600	)	W	—	W	73,210


(note a)	As their total assets at the beginning of 2002 were over W7 billion, effective January 1, 2002, investments in equity securities of Eonex Technologies, Inc. and WiderThan Co., Ltd. are accounted for using the equity method of accounting.

F-28

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	For the Year Ended December 31, 2003

								Equity in			Equity in
					Equity in			Retained			Capital Surplus						Decrease
	Beginning				Earnings			Earning			and Capital			Dividend			(Notes c			Ending
	Balance		Acquisition		(Losses)			(Note b)			Adjustments			Received			and d)			Balance

SK C&C Co., Ltd.	W	39,687	W	—	W	7,962		W	—		W	45,795		W	(600	)	W	—		W	92,844
STIC Ventures Co., Ltd.		6,884		—		44			(3	)		161			—			—			7,086
Eonex Technologies, Inc.		4,615		—		(22	)		—			—			—			(4,593	)		—
WiderThan Co., Ltd.		1,750		—		1,465			—			(27	)		—			—			3,188
VCASH Co., Ltd.		2,232		—		(1,353	)		(30	)		199			—			—			1,048
Skytel Co., Ltd.		2,576		—		694			—			152			(21	)		—			3,401
SK China Co., Ltd.		3,482		—		(1,864	)		—			65			—			—			1,683
SK-QC Wireless Development Fund		5,993		—		(79	)		—			(13	)		—			—			5,901
SKT-HP Ventures, LLC		5,990		—		17			—			(47	)		—			—			5,960
CDMA Mobile Phone Center (note a)		63,354		—		(13,839	)		—			—			—			(71	)		49,444

	W	136,563	W	—	W	(6,975	)	W	(33	)	W	46,285		W	(621	)	W	(4,664	)	W	170,555


(note a)	As its total assets at the beginning of 2003 were over W7 billion, effective January 1, 2003, investment in equity securities of CDMA Mobile Phone Center held by SLD Telecom PTE Ltd., a overseas subsidiary of the Company, is accounted for using the (note a) equity method of accounting.

(note b)	Effective January 1, 2003, the Company’s investees including STIC Ventures Co., Ltd. and VCASH 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)	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.

(note d)	The decrease in investments in equity securities of CDMA Mobile Phone Center represents a translation loss incurred from translating the foreign currency financial statements of SLD Telecom PTE Ltd., a overseas subsidiary of the Company, which makes investments in CDMA Mobile Phone Center, into Korean won.

F-29

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	For the Year Ended December 31, 2004

								Equity in
					Equity in			Capital Surplus						Decrease
	Beginning				Earnings			and Capital			Dividend			(Notes b			Ending
	Balance		Acquisition		(Losses)			Adjustments			Received			and c)			Balance

SK C&C Co., Ltd.	W	92,844	W	-	W	13,322		W	95,918		(W	600	)	W	-		W	201,484
STIC Ventures Co., Ltd.		7,086		—		(123	)		514			—			—			7,477
WiderThan Co., Ltd.		3,188		—		—			—			—			(3,188	)		—
VCASH Co., Ltd.		1,048		—		(657	)		—			—			(391	)		—
Skytel Co., Ltd.		3,401		—		1,070			(603	)		(155	)		—			3,713
SK China Co., Ltd.		1,683		—		(595	)		(258	)		—			—			830
SK-QC Wireless Development Fund		5,901		—		4			(759	)		—			—			5,146
SKT-HP Ventures, LLC		5,960		—		62			(741	)		—			—			5,281
CDMA Mobile Phone Center		49,444		5,979		(21,651	)		—			—			(8,655	)		25,117
TU Media Corp.		38,681		—		(4,213	)		124			—			—			34,592
SK USA, Inc. (note a)		3,184		—		168			(296	)		—			—			3,056
Aircross Co., Ltd. (note a)		300		—		659			(19	)		—			—			940

	W	212,720	W	5,979	(W	11,954	)	W	93,880		(W	755	)	(W	12,234	)	W	287,636


(note a)	As their total assets at the beginning of 2004 were over W7 billion, effective January 1, 2004, investments in equity securities of SK USA, Inc. and Aircross Co., Ltd. are accounted for using the equity method of accounting.

(note b)	As the Company’s ownership in WiderThan Co., Ltd. decreased to 14.3% from 20% in 2004, investments in common stock of WiderThan Co., Ltd. are reclassified to available-for-sale securities in 2004.

(note c)	SLD Telecom PTE Ltd. (“SLD”), an oversea subsidiary of the Company, accounted for the in-kind contribution of network equipment to CDMA Mobile Phone Center as an increase in the investment securities and the reimbursement in the amount equal to depreciation of such network equipment in accordance with the Business Co-Operation Contract between SLD and Saigon Post and Telecommunication Service Corp., a Vietnamese counterparty, was accounted for as a decrease in the investment. During the year ended December 31, 2004, SLD got such reimbursement of W4,046 million from CDMA Mobile Phone Center and decreased the investment in CDMA Mobile Phone Center by the same amount. In addition, translation loss of W4,609 million incurred from translating the foreign currency financial statement of SLD Telecom PTE Ltd. into Korean won was accounted for as a decrease in the investment in CDMA Mobile Phone Center.


5.	LOANS TO EMPLOYEES

Short-term and long-term loans to employees as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


	2002		2003		2004

Loans to employees’ stock ownership association	W	45,906	W	33,788	W	22,546
Loans to employees for housing and other (3 - 4%)		10,556		8,587		8,859

	W	56,462	W	42,375	W	31,405

F-30

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


6.	PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


	Useful
	Lives
	(Years)		2002			2003			2004

Land			W	439,915		W	449,377		W	466,459
Buildings and structures		15, 30		977,045			1,081,134			1,445,593
Machinery		3-6		6,998,088			8,440,624			9,584,526
Vehicles		3-4		19,368			19,741			21,710
Other		3-4		878,006			794,495			791,829
Construction in progress				352,932			323,490			138,002

Total				9,665,354			11,108,861			12,448,119
Less accumulated depreciation				(5,095,937	)		(6,467,314	)		(7,744,197	)

Property and equipment, net			W	4,569,417		W	4,641,547		W	4,703,922

The government’s declared standard value of land owned as of December 31, 2002, 2003 and 2004 are W356,360 million, W396,103 million and W404,385 million, respectively.

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


		For the Year Ended December 31, 2003

		Beginning													Ending
		Balance		Acquisition		Disposal			Transfer			Depreciation			Balance

Land		W	439,915	W	6,381	W	(4,793	)	W	7,874		W	—		W	449,377
Buildings and structures			778,832		9,393		(4,599	)		100,341			(40,166	)		843,801
Machinery			2,475,663		125,332		(4,996	)		1,360,240			(1,285,271	)		2,670,968
Vehicles			6,353		1,012		(123	)		63			(3,137	)		4,168
Other			515,722		861,333		(4,329	)		(916,464	)		(106,519	)		349,743
Construction in progress			352,932		644,188		—			(673,630	)		—			323,490

	Total	W	4,569,417	W	1,647,639	W	(18,840	)	W	(121,576	)	W	(1,435,093	)	W	4,641,547

F-31

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


		For the Year Ended December 31, 2004

		Beginning													Ending
		Balance		Acquisition		Disposal			Transfer			Depreciation			Balance

Land		W	449,377	W	3,395	W	(2,684	)	W	16,372		W	—		W	466,460
Buildings and structures			843,801		7,239		(7,849	)		366,296			(42,945	)		1,166,542
Machinery			2,670,968		108,238		(8,098	)		1,143,335			(1,271,336	)		2,643,107
Vehicles			4,168		3,744		(425	)		674			(3,370	)		4,791
Other			349,743		740,752		(5,481	)		(697,135	)		(102,859	)		285,020
Construction in progress			323,490		768,573		(756	)		(953,305	)		—			138,002

	Total	W	4,641,547	W	1,631,941	W	(25,293	)	W	(123,763	)	W	(1,420,510	)	W	4,703,922


7.	INTANGIBLE ASSETS

Intangible assets as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


	Acquisition		Accumulated			Accumulated
	Cost at		Amortization at			Impairment at			Carrying Amounts
	December 31,		December 31,			December 31,
	2004		2004			2004			2002		2003		2004

Goodwill	W	2,401,306	W	(406,897	)	W	(70	)	W	2,255,868	W	2,129,980	W	1,994,339
Frequency use rights		1,267,053		(103,734	)		—			1,259,253		1,251,278		1,163,319
Software development costs		228,757		(122,301	)		(501	)		91,337		137,810		105,955
Other		490,625		(229,909	)		(1,426	)		114,777		155,876		259,290

	W	4,387,741	W	(862,841	)	W	(1,997	)	W	3,721,235	W	3,674,944	W	3,522,903

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


	For the Year Ended December 31, 2003

	Beginning													Ending
	Balance		Acquisition		Disposal			Transfer			Amortization			Balance

Goodwill	W	2,255,868	W	9,374	W	—		W	(111	)	W	(135,151	)	W	2,129,980
Software development costs		91,337		26,665		—			56,512			(36,704	)		137,810
Frequency use rights		1,259,253		—		—			—			(7,975	)		1,251,278
Other		114,777		28,982		(7,275	)		54,371			(34,979	)		155,876

	W	3,721,235	W	65,021	W	(7,275	)	W	110,772		W	(214,809	)	W	3,674,944


	For the Year Ended December 31, 2004

	Beginning															Ending
	Balance		Acquisition		Disposal			Transfer		Amortization			Impairment			Balance

Goodwill	W	2,129,980	W	647	W	—		W	—	W	(136,288	)	W	—		W	1,994,339
Software development costs		137,810		6,235		(3,349	)		10,545		(45,244	)		(42	)		105,955
Frequency use rights		1,251,278		—		—			7,800		(95,759	)		—			1,163,319
Other		155,876		65,494		(865	)		93,514		(54,729	)		—			259,290

	W	3,674,944	W	72,376	W	(4,214	)	W	111,859	W	(332,020	)	W	(42	)	W	3,522,903

F-32

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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


				Residual
	Amount		Description	Useful Lives

Goodwill	W	1,949,546	Goodwill related to acquisition of Shinsegi Telecomm, Inc.		16 years
Frequency use rights		1,155,575	IMT license received on December 4, 2001		(note	)
Software development costs		105,955	Software for business use		1-5 years


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


8.	BONDS PAYABLE

Bonds payable as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won and thousands of U.S. dollars):


				Maturity		Annual Interest
				Year		Rate (%)		2002			2003			2004

Domestic general bonds					2003		5.0-9.9	W	910,000		W	—		W	—
			”		2004		5.0-7.0		1,120,000			1,120,000			—
			”		2005		6.0		500,000			500,000			500,000
			”		2006		5.0-6.0		400,000			800,000			800,000
			”		2007		5.0-6.0		700,000			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		240,173			239,653			—
	(US$300,000)				2011		4.25		—			—			313,140
Convertible bonds (US $329,450)					2009		—		—			—			385,885
Bonds with stock purchase
	warrants (US $4,000)				2006		6M Libor-0.3		4,802			4,791			—

									3,874,975			3,664,444			3,499,025
		Less discounts on bonds							(60,467	)		(47,553	)		(51,467	)
Less conversion right adjustments									—			—			(82,245	)
Add long-term accrued interest									252			491			24,808

Net									3,814,760			3,617,382			3,390,121
Less portion due within one year									(906,264	)		(1,355,514	)		(498,278	)

Long-term portion								W	2,908,496		W	2,261,868		W	2,891,843

All of the above bonds will be paid in full at maturities.

F-33

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The bonds with stock purchase warrants were issued on December 11, 2001 by PAXNet Co., Ltd., in which the Company purchased a 67.1% interest in December 2002. The stock purchase warrants are detachable and the bonds are unsecured oversea public bonds. These bonds were in full redeemed for cash at the option of the bondholders in 2004, at 114.79% of the principal amount. The stock purchase warrants, however, are still effective and may be exercised at any time after 3 months from the issuance date and up to 1 month before the original maturity date of the bonds. As of December 31, 2004, the exercise price per common stock of PAXNet Co., Ltd. is W5,000.

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 that is greater than market value at the date of issuance and do not change, except under antidilution protection, subject to certain redemption rights. 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 a predetermined period. On the 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 reduce the effect of fluctuation with respect to cash settlement payments 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.


9.	LONG-TERM BORROWINGS

Long-term borrowings denominated in foreign currency as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won and thousands of U.S. dollars):


	Final		Annual Interest
Lender	Maturity Year		Rate (%)		2002			2003			2004

Korea Development Bank		2004		3M Libor + 3.45	US$	13,434		US$	4,478		US$	—
Woori Bank		2005		Floating rate + 0.2		6,815			4,089			—

Total in foreign currency					US$	20,249		US$	8,567		US$	—

Equivalent in Korean won					W	24,307		W	10,262		W	—
Less portion due within one year						(14,023	)		(8,629	)		—

Long-term portion					W	10,284		W	1,633		W	—


10.	SUBSCRIPTION DEPOSITS

The Company receives facility guarantee deposits from customers of cellular services at the subscription date. The Company has no obligation to pay interest on these deposits and returns all amounts to subscribers upon termination of the subscription contract.

F-34

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Long-term subscription guarantee deposits by service type held as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won, except deposit per subscriber amounts):

Deposit per

Service type

Subscriber

2002

2003

2004

Cellular

W200,000

W46,850

W44,197

W31,440

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


11.	LEASES

The Company and its subsidiaries lease certain machinery and equipment under capital leases. The Company and its subsidiaries have 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, 2002, 2003 and 2004 were W428 million, W250 million and W37 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.

The Company and its subsidiaries leased certain machinery and equipment under an operating lease and the related lease expenses for the years ended December 31, 2002, 2003 and 2004 were W7,649 million, W1,774 million and W261 million, respectively. These operating leases were terminated in 2004.


12.	ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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, 2002, 2003 and 2004 are as follows (in millions of Korean won, thousands of U.S. dollars, thousands of HK dollars, thousands of Japanese yen, thousands of Singaporean dollars, thousands of Euros, thousands of Great Britain pounds, thousands of Swiss francs, thousands of Chinese Yuan and thousands of Australian dollars):


	Foreign Currencies						Korean won Equivalent

	2002		2003		2004		2002		2003		2004

Cash and cash equivalents		US$46,025		US$24,407		US$4,875		W55,247		W29,234		W5,088
		¥12		¥8		¥6		—		—		—
		EUR2		EUR17		—		3		26		—
		—		GBP5		—		—		10		—
Short-term financial instruments		US$35,281		US$31,492		—		42,351		37,721		—
Accounts receivable — trade		US$19,477		US$8,627		US$19,284		23,382		10,333		20,129
		¥240		SG$743		—		2		522		—
Accounts receivable — other		US$9,639		US$12,844		US$2,989		11,571		15,385		3,120
Guarantee deposits		US$187		US$193		US$142		225		232		149
		—		¥16,337		¥15,756		—		183		159

Total assets								W132,781		W93,646		W28,645

F-35

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Foreign Currencies						Korean won Equivalent

	2002		2003		2004		2002		2003		2004

Accounts payable — trade		US$23,975		US$15,432		US$17,406		W28,779		W18,485		W18,169
		¥1,198,724		¥555,277		¥26,240		12,141		6,217		266
		EUR180		—		—		227		—		—
Short-term borrowings		US$32,928		US$26,853		US$19,392		39,526		32,164		20,241
		¥2,603,467		¥2,255,431		¥438,499		26,370		25,252		4,438
		—		EUR7		EUR207		—		10		294
		—		—		GBP260		—		—		522
Accounts payable — other		US$37,228		US$35,759		US$13,539		44,689		42,832		14,132
		¥229,641		¥20,606		¥60,678		2,326		231		614
		HK$825		HK$267		HK$217		127		41		29
		CNY61		CNY140		CNY1		9		20		—
		GBP1		GBP304		GBP118		1		648		237
		SG$24		SG$5		SG$5		17		3		3
		EUR8		EUR10		EUR348		11		15		495
		AU$1		AU$1		—		1		1		—
		—		CHF4		—		—		4		—
Accrued expenses		—		US$71		US$84		—		86		88
		—		¥1,300		—		—		15		—
		—		EUR 23		—		—		1		—
Obligation under capital leases including current portion		US$482		US$101		—		578		121		—

Total liabilities								W154,802		W126,146		W59,528


13.	CAPITAL STOCK AND CAPITAL SURPLUS

The Company’s outstanding capital stock consists entirely of common stock with a par value of W500. The number of authorized, issued and outstanding common shares as of December 31, 2002, 2003 and 2004 are as follows:


	2002		2003		2004

Authorized shares		220,000,000		220,000,000		220,000,000
Issued shares		89,152,670		82,276,711		82,276,711
Outstanding shares, net of treasury stock		79,842,063		73,614,308		73,614,296

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.

F-36

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Significant changes in common stock and capital surplus in 2002, 2003 and 2004 are as follows (in millions of Korean won, except for share data):


		Number of					Capital
		Shares Issued			Common Stock		Surplus

At January 1, 2002			89,152,670		W	44,576	W	3,449,698
	Excess unallocated purchase price (note a)		—			—		(647,025	)
	Gain on disposal of treasury stock (note b)		—			—		81,984
	Equity in capital surplus changes of affiliates		—			—		(275	)

At December 31, 2002			89,152,670			44,576		2,884,382
	Excess unallocated purchase price (note a)		—			—		(230	)
	Retirement of treasury stock (note c)		(7,002,235	)		—		—
	Issuance of common stock for the merger with SK IMT Co., Ltd. (note d)		126,276			63		31,809
	Gain on disposal of investments in common stock of subsidiary		—			—		58
	Equity in capital surplus changes of affiliates		—			—		(4,463	)

At December 31, 2003			82,276,711			44,639		2,911,556
	Excess unallocated purchase price (note a)		—			—		(77	)
	Considerations for conversion right (note e)		—			—		67,279
	Equity in capital surplus changes of affiliates		—			—		(10,457	)

	At December 31, 2004		82,276,711		W	44,639	W	2,968,301


(note a)	The excess unallocated purchase price of W299,121 million for the additional 19.2% equity interest acquired in 2001 and W647,025 million for the distribution of 2,677,653 shares of treasury stock to minority shareholders of Shinsegi Telecomm, Inc. upon the merger dated January 13, 2002, were deducted from capital surplus, in accordance with Korean GAAP. In addition, during the years ended December 31, 2003 and 2004, the Company paid W230 million and W77 million, respectively, to certain former shareholders of Shinsegi Telecomm, Inc. in accordance with the ruling of the court and deducted it from capital surplus in accordance with Korean GAAP.

(note b)	The gain on disposal of treasury stock of W81,984 million resulting from the distribution of treasury stock to minority shareholders of Shinsegi Telecomm, Inc. upon the merger dated January 13, 2002 was recorded as an increase in other capital surplus.

(note c)	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 the Korean Commercial Laws.

(note d)	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 in accordance with Korean GAAP.

(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 considerations for conversion right of W67,279 million was added to capital surplus in accordance with Korean GAAP (See Note 2(j)).

F-37

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


14.	RETAINED EARNINGS

Retained earnings as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


	2002		2003		2004

Appropriated	W	3,379,922	W	4,743,822	W	4,733,936
Unappropriated		1,493,283		396,089		1,418,962

	W	4,873,205	W	5,139,911	W	6,152,898

The details of appropriated retained earnings as of December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


	2002		2003		2004

Legal reserve	W	17,200	W	22,288	W	22,320
Reserve for improvement of financial structure		33,000		33,000		33,000
Reserve for business rationalization		169,493		—		—
Reserve for loss on foreign investment		29,192		—		—
Reserve for loss on disposal of treasury stock		240,000		221,197		477,182
Reserve for research and manpower development		365,300		559,198		776,296
Reserve for business expansion		2,525,737		3,908,139		3,425,138

	W	3,379,922	W	4,743,822	W	4,733,936


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 gains (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.	Reserve for Business Rationalization

Through 2001, the Tax Exemption and Reduction Control Law required that the amount of tax benefit associated with certain tax exemptions and tax credits be appropriated as a reserve for business rationalization. The revised Tax Exemption and Reduction Control Law no longer requires providing the reserve for business rationalization. Thus, since 2002, the Company has transferred the reserve for business rationalization to voluntary reserve that may be utilized for cash dividends.

F-38

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


d.	Reserves for Loss on Foreign Investment, Loss on Disposal of Treasury Stock and Research and Manpower Development

Reserves for loss on foreign investment, 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.


e.	Reserve for Business Expansion

The reserve for business expansion is voluntary and was approved by the board of directors and shareholders.


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 W

F-39

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3 million, were forfeited. During the year ended December 31, 2002 and 2003, there was no forfeited or expired stock options.

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, 2002, 2003 and 2004, 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, 2002, 2003 and 2004 are as follows (in millions of Korean won):


			Recognized								Stock Option in Capital
	Total		Compensation Cost						Compensation		Adjustment
	Compensation								Cost to be
Grant Date	Cost		2002		2003		2004		Recognized		2002		2003		2004

March 17, 2000	W	1,533	W	511	W	128	W	—	W	—	W	1,405	W	1,533	W	1,533
March 16, 2001		234		79		79		10		—		145		224		234
March 8, 2002		3,246		902		1,082		1,082		180		902		1,984		3,066

	W	5,013	W	1,492	W	1,289	W	1,092	W	180	W	2,452	W	3,741	W	4,833

The pro forma ordinary income, net income, ordinary income per common share 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, 2002, 2003 and 2004 are as follows:


	2002		2003		2004

Pro forma ordinary income (in millions of Koran won)	W	2,215,401	W	2,751,221	W	2,121,238
Pro forma ordinary income per common shares		17,603		26,145		20,234
Pro forma net income (in millions of Korean won)		1,483,784		1,962,986		1,489,542
Pro forma net income per common shares		17,607		26,145		20,234


17.	INCOME TAXES

The provision for income taxes for the years ended December 31, 2002, 2003 and 2004 consists of the following (in millions of Korean won):


	2002		2003		2004

Currently payable	W	616,544	W	668,180	W	551,405
Deferred		81,963		120,879		78,356

Recorded income taxes	W	698,507	W	789,059	W	629,761

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SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a reconciliation between financial accounting income and taxable income, together with a computation of income taxes, for the years ended December 31, 2002, 2003 and 2004 (in millions of Korean won):


		2002			2003			2004

Income before income taxes		W	2,218,768		W	2,754,336		W	2,123,175
Additions (deductions):
	Allowance for bad debts		(66,940	)		2,081			(3,406	)
	Loss on impairment of investment securities		68,882			(53,161	)		7,866
	Accrued interest income		(2,107	)		(3,096	)		(2,133	)
	Foreign exchange loss		(8,211	)		(8,449	)		(2,815	)
	Depreciation		(3,803	)		(34,070	)		(162,670	)
	Equity in losses (earnings) of affiliates		(813	)		6,975			11,954
	Amortization of goodwill		128,662			128,662			128,662
	Loss on impairment of tangible assets and intangible assets		8,212			22,459			—
	Tax-free reserves		(175,096	)		(468,775	)		(45,765	)
	Net operating loss carryforwards		(7,060	)		—			(14,750	)
	Other		101,950			135,324			54,373

Net taxable income		W	2,262,444		W	2,482,286		W	2,094,493

Corporate income taxes at statutory Korean corporate income tax rates of 27%		W	612,890		W	670,144		W	566,280
Tax credit for investments, technology and human resource development and others			(62,974	)		(75,149	)		(77,490	)

Corporate income taxes payable			549,916			594,995			488,790
Resident surtax payable			54,992			59,500			48,879
Special surtax for agriculture and fishery industries and other			11,636			13,685			13,736

Total income taxes currently payable		W	616,544		W	668,180		W	551,405

F-41

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The difference between income taxes computed using the statutory Korean corporate income tax rates and the recorded income taxes for the years ended December 31, 2002, 2003 and 2004 is attributable to the following (in millions of Korean won):


	2002			2003			2004

Income taxes at statutory income tax rate of 27%	W	599,067		W	743,671		W	573,257
Resident surtax payable		59,907			74,367			57,326
Tax credit for investments, technology and human resource development and others		(37,309	)		(83,826	)		(89,080	)
Special surtax for agriculture and fishery industries and other		11,636			13,685			13,736
Goodwill amortization not deductible for tax purpose		38,213			38,213			35,382
Undistributed earnings (unrecognized deficit) of subsidiaries		12,295			(5,909	)		11,011
Effect of the change in income tax rate (note a)		—			(20,204	)		—
Other permanent differences		1,520			15,327			28,581
Increase (decrease) in valuation allowance		13,178			13,735			(452	)

Recorded income taxes	W	698,507		W	789,059		W	629,761

Effective tax rate		31.48	%		28.65	%		29.66	%


(note a)	Pursuant to a revision in the Korean Corporate Income Tax Law during 2003, statutory corporate income tax rate including resident surtax is changed from 29.5% 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 W20,204 million.

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SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tax effects of each type of temporary difference that gave rise to a significant portion of the deferred tax assets and liabilities at December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


		2002			2003			2004

Allowance for doubtful accounts		W	23,251		W	22,039		W	19,649
Write-off of doubtful accounts			9,715			9,587			9,764
Trading securities			—			1			(561	)
Accrued interest income			(2,902	)		(2,026	)		(2,463	)
Depreciation			12,609			3,712			(40,220	)
Loss on disposition of properties			—						11,480
Loss on impairment of investment securities			48,588			30,757			32,851
Foreign currency translation loss			3,345			774			—
Equity in losses of affiliates			(5,090	)		(6,593	)		(12,671	)
Unrecognized deficit (undistributed earnings) of subsidiaries			(9,012	)		(3,364	)		(9,434	)
Tax free reserve for research and manpower development			(133,920	)		(182,518	)		(195,103	)
Tax free reserve for loss on disposal of treasury stock			(64,775	)		(130,373	)		(130,372	)
Tax credit carryforwards			—			1,162			5,003
Net operating loss carryforwards			17,290			29,575			25,371
Other			20,851			39,693			18,510

Total deferred tax assets (liabilities)			(80,050	)		(187,574	)		(268,196	)
Valuation allowance for:
	Depreciation		(1,081	)		—			(5,321	)
	Net operating loss carryforwards		(17,290	)		(29,575	)		(24,980	)
	Other		(6,349	)		(8,880	)		(7,555	)

Net deferred tax assets (liabilities)		W	(104,770	)	W	(226,029	)	W	(306,052	)

The net operating loss carryforwards and tax credit carryforwards of the Company’s certain subsidiaries as of December 31, 2004 will expire as follows (in millions of Korean won):


	Net Operating Loss		Tax Credit
Year Ending December 31,	Carryforwards		Carryforwards

2005	W	753	W	—
2006		18,567		—
2007		24,611		—
2008		45,373		—
2009		2,953		5,003

Total	W	92,257	W	5,003

F-43

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


18.	INCOME PER SHARE

Net income and ordinary income per share for the years ended December 31, 2002, 2003 and 2004 are computed as follows (in millions of Korean won, except for share data):

Net income per share


	2002		2003		2004

Net income	W	1,487,151	W	1,966,100	W	1,491,479
Weighted average number of common shares outstanding		84,270,450		75,078,219		73,614,297

Net income per share	W	17,647	W	26,187	W	20,261

Ordinary income per share


	2002			2003		2004

Net income	W	1,487,151		W	1,966,100	W	1,491,479
Extraordinary gain		(504	)		—		—
Income tax effect of extraordinary gain		149			—		—

Ordinary income		1,486,796			1,966,100		1,491,479
Weighted average number of common shares outstanding		84,270,450			75,078,219		73,614,297

Ordinary income per share	W	17,643		W	26,187	W	20,261

The weighted average number of common shares outstanding for 2002, 2003 and 2004 is calculated as follows:


							Weighted		Weighted
				Number of			Number of		Number of
		Date		Shares			Days		Shares

For 2002:
	At January 1, 2002		—		89,152,670			365/ 365		89,152,670
	Treasury stock, at the beginning		—		(6,159,266	)		365/ 365		(6,159,266	)
	Distribution of treasury stock for merger with Shinsegi		Jan. 13		2,673,474			349/ 365		2,556,280
	Treasury stock		(note a)		(5,824,815	)		—		(1,279,234	)

	Total				79,842,063					84,270,450

F-44

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


									Weighted		Weighted
						Number of			Number of		Number of
			Date			Shares			Days		Shares

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			Jan. 10			(3,809,288	)		356/365		(3,715,360	)
	Purchase of fractional shares			Feb. 3			(52	)		332/365		(47	)
	Purchase of fractional shares			May 1			(91	)		233/365		(58	)
	Issuance of common stock			May 1			126,276			233/365		80,609
	Treasury stock			(note a	)		(2,544,600	)		—		(1,128,988	)

		Total					73,614,308					75,078,219

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 shares			Feb. 20			(12	)		316/366		(11	)

Total							73,614,296					73,614,297


(note a)	Such treasury stock was acquired or disposed of on several different dates in 2002 and 2003, and the weighted number of shares was calculated according to each transaction date.

Diluted net income and ordinary income per share amounts for the years ended December 31, 2002, 2003 and 2004 are computed as follows (in millions of Korean won except for share data):

Diluted net income per share


	2002		2003		2004

Adjusted net income	W	1,487,230	W	1,966,100	W	1,499,026
Adjusted weighted average number of common shares outstanding (note b)		84,277,598		75,078,219		74,596,777

Diluted net income per share	W	17,647	W	26,187	W	20,095

Diluted ordinary income per share


	2002		2003		2004

Adjusted ordinary income	W	1,486,875	W	1,966,100	W	1,499,026
Adjusted weighted average number of common shares outstanding (note b)		84,277,598		75,078,219		74,596,777

Diluted ordinary income per share	W	17,643	W	26,187	W	20,095

(note b)

In 2002 and 2004, for the calculation of diluted income per share, the weighted average number of common shares outstanding is adjusted for dilutive effects of assuming the exercise of stock options on January 1, 2002 and the conversion of and convertible bonds on May 27, 2004 (see Note 8), respectively. The weighted average number of common shares outstanding for basic and diluted earnings per share calculations are the same for the year ended December 31, 2003 as there is no item that dilutes the earnings per share for that year.

F-45

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The numerator and denominator of basic and diluted income per share for the years ended December 31, 2002 and 2004 are as follows:

Diluted net income per share

Average Weighted

Net Income

Number of Shares

Per-share Amount

(In Millions of

(In Korean Won)

Korean Won)

For 2002

Basic net income per share

W1,487,151

84,270,450

W17,647

Effect of stock option

7,148

Diluted net income per share

W1,487,230

84,277,598

W17,647

For 2004

Basic net income per share

W1,491,479

73,614,297

W20,261

Effect of convertible bonds

7,547

982,480

Diluted net income per share

W1,499,026

74,596,777

W20,095

Diluted ordinary income per share


				Average Weighted
		Net Income		Number of Shares		Per-share Amount

		(In Millions of				(In Korean Won)
		Korean Won)
For 2002
	Basic ordinary income per share	W	1,486,796		84,270,450	W	17,643

	Effect of stock option		79		7,148

	Diluted ordinary income per share	W	1,486,875		84,277,598	W	17,643

For 2004
	Basic ordinary income per share	W	1,491,479		73,614,297	W	20,261

	Effect of convertible bonds		7,547		982,480

	Diluted ordinary income per share	W	1,499,026		74,596,777	W	20,095

F-46

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


19.	DIVIDEND DISCLOSURE

Details of dividends which were declared for the years ended December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won except for share data):


Fiscal		Number of			Face		Dividend
Year	Dividend Type	Shares Outstanding			Value		Ratio		Dividends

2002	Cash dividends		84,299,698	(note)	W	500		360%	W	151,739

2003	Cash dividends		73,614,308		W	500		1,100%	W	404,878

2004	Cash dividends (interim)		73,614,308		W	500		200%	W	73,614
	Cash dividends (year-end)		73,614,296		W	500		1,860%	W	684,613

	Total								W	758,227


(note)	4,457,635 shares of the Company’s common stock acquired through the stock exchange with KT Corporation on December 30, 2002 were included in the number of shares outstanding, as the dividend right date was December 27, 2002.

Dividends payout ratios for the years ended December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won and %):


	2002			2003			2004

Dividends	W	151,739		W	404,878		W	758,227
Net income		1,487,151			1,966,100			1,491,479

Dividends payout ratio		10.20	%		20.59	%		50.84	%

Dividends yield ratios for the years ended December 31, 2002, 2003 and 2004 are as follows (in Korean won and %):


	2002			2003			2004

Dividend per share	W	1,800		W	5,500		W	10,300
Stock price at the year-end		229,000			199,000			197,000

Dividends yield ratio		0.79	%		2.76	%		5.23	%


20.	COMMITMENTS AND CONTINGENCIES

a. The Company and its subsidiaries have credit lines with several local banks that provide for borrowings of up to W483,995 million. At December 31, 2004, the borrowings under these credit lines were W25,496 million at an average interest rate of approximately 2.09% and the net availability under these credit lines was W458,499 million.

b. At December 31, 2004, certain short-term financial instruments amounting to W394 million are secured for payment guarantee of accounts payable and other.

c. At December 31, 2004, the Company and its subsidiaries have guarantee deposits restricted for their checking accounts totaling W51 million.

d. The Company’s warranty obligations under mobile network system development service contracts with Asia Pacific Broadband Wireless Communications Inc., a Taipei 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.

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SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

e. PAXNet Co., Ltd., a subsidiary of the Company, has guaranteed the repayment of borrowings for Finger Co., Ltd., which is a former affiliated company. The outstanding balance of such guarantees as of December 31, 2004 approximated W332 million.

f. SK Communications Co., Ltd., which is the Company’s subsidiary, had entered into a license agreement with Lycos Intangibles, LLC to use technology and pay royalties related to the Lycos License and TRIPOD totaling US$9,252,390 for two years from August 14, 2002. In accordance with this agreement, SK Communications Co., Ltd. paid US$4,626,195 and US$2,313,098 in royalty fees for the years ended December 31, 2002 and 2003, respectively. The license agreement expired on August 13, 2004. SK Communications Co., Ltd. entered into a new e-mail service and license agreement with Lycos Intangible, LLC to pay royalties totaling US$700,000 for two years from August 14, 2004 for the exclusive right to offer e-mail services to existing e-mail users who have Lycos e-mail accounts in the Republic of Korea. In accordance with this new agreement, SK Communications Corp. paid US$400,000 in advance on August 14, 2004 and the rest of royalties of US$300,000 will be paid on August 14, 2005. In addition, if the number of Lycos e-mail users as of August 14, 2005 exceeds two million, SK Communications Co., Ltd. is required to pay additional royalties.

g. On October 18, 2002 and November 15, 2002, GNI Enterprise Inc. filed lawsuits against SK Communications Co., Ltd., which is the Company’s subsidiary. In the lawsuit filed on October 18, 2002, GNI Enterprise Inc. asserted that the contract for usage of Lycos brand between GNI Enterprise Inc. and SK Communications Co., Ltd. was effective. A judgment in the first trial was made in favor of SK Communications Co., Ltd.; however, GNI Enterprise Inc. appealed the judgment and the appeal is in process. The ultimate outcome of this lawsuit cannot presently be determined. SK Communications Co., Ltd. believes that any liability that may be subject to thereunder will not be material. In addition, in the lawsuit filed on November 15, 2002, GNI Enterprise Inc. asserted that the merger of NetsGo Co., Ltd. into SK Communications Co., Ltd. was not legitimate. On January 11, 2004, GNI Enterprise Inc. withdrew this lawsuit.

h. In connection with the business combination of the Company with Shinsegi Telecomm Co., Ltd., SK Teletech Co., Ltd., which is the Company’s subsidiary, was ordered by the Fair Trade Commission on May 16, 2000 to limit its domestic yearly sales quantity of cellular handsets (excluding export sales and IMT-2000 handsets sales) not to exceed 1,200 thousand units per year from 2000 to 2005.


21.	INSURANCE

At December 31, 2004, certain of the Company and its subsidiaries’ assets are insured with local insurance companies as follows (in million of Korean won and thousands of U.S. dollars):

Asset

Risk

Book Value

Coverage

Inventories and property and

US$74,815

equipment

Fire and comprehensive liability

6,606,428

12,425,032

F-48

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


22.	TRANSACTIONS WITH AFFILIATED COMPANIES

Significant related party transactions and balances with affiliated companies as of and for the years ended December 31, 2002, 2003 and 2004 were as follows (in millions of Korean won):


Description		2002		2003		2004

Transactions
SK Engineering & Construction Co., Ltd.:
	Construction (note a)		289,311		324,260		419,871
	Commissions paid and other expense		23,981		7,662		6,148
	Commission income and other income		678		776		1,348
SK Networks (formerly known as SK Global):
	Purchases of property and equipment		11,055		3,853		3,144
	Commissions paid, leased line and other expense		83,234		214,101		411,053
	Sales of handsets and other income		383,138		491,978		1,177,249
SK Corporation:
	Purchases of property and equipment		52		3,831		4,071
	Commissions paid and other expense		37,249		35,612		55,921
	Commission income and other income		3,201		5,370		8,826
SK Life Insurance Co., Ltd.:
	Purchases of property and equipment		—		1,570		29,959
	Commissions paid and other expenses		—		1,637		1,630
	Commission income and other income		—		761		8,833
Kyocera Corp.:
	Purchase of raw materials and other		2,807		7,143		344
	Commissions paid and other expenses		—		59		—
	Commission income and other income		66,088		14,075		—
SK Group Japan:
	Purchase of raw materials for handsets and other expenses		9,784		5,292		—
SK Telesys:
	Purchases of property and equipment		187,205		188,111		188,822
	Commissions paid and other expenses		1,519		1,717		3,102
	Commission income and other income		290		385		879
SKC:
	Purchases of inventories		17,260		204,694		899,260
	Disposal of inventories and other		50,341		18		—
	Commissions paid and other expenses		—		3,120		2,192
	Commission income and other income		—		747		584
Innoace:
	Purchases of property and equipment		40,884		35,225		23,776
	Commissions paid and other expenses		9,454		314		4,337
	Commission income and other income		217		8,969		296

F-49

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Description		2002		2003		2004

WiderThan Co., Ltd.:
	Purchases of property and equipment		9,124		22,643		3,780
	Commissions paid and other expenses		24,218		49,939		82,380
	Commission income and other income		—		665		2,216
SK C&C Co., Ltd.:
	Purchases of property and equipment		197,250		182,774		130,243
	Commissions paid and other expenses (note b)		231,472		284,319		295,562
	Commission income and other income		6,691		8,200		7,918

F-50

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Description		2002		2003		2004

Balances
SK Engineering & Construction Co., Ltd.:
	Accounts receivable		241		92		76
	Accounts payable		65,773		63,442		135,213
	Guarantee deposits received		130		90		408
SK Networks (formerly known as SK Global):
	Accounts receivable		84,970		107,782		216,412
	Guarantee deposits		113		113		113
	Accounts payable		14,792		63,641		20,047
	Guarantee deposits received		255		719		955
SK Corporation:
	Accounts receivable		985		1,571		4,843
	Guarantee deposits (note c)		79,611		103,720		103,720
	Accounts payable		11,654		2,911		20,165
	Guarantee deposits received		9,885		10,194		10,194
SK Life Insurance Co., Ltd.:
	Deposits for severance indemnities		58,057		63,992		73,558
	Accounts receivable		117		1,119		1,100
	Guarantee deposits		60		60		60
	Guarantee deposits received		767		338		821
Kyocera Corp.:
	Accounts receivable		12,094		—		—
	Accounts payable		63		—		—
SK Group Japan:
	Accounts payable		1,557		—		—
SK Telesys:
	Accounts receivable		5		50		53
	Accounts payable		60,834		33,904		51,954
SKC:
	Accounts receivable		70,464		53,680		15,549
	Guarantee deposits		—		—		10,266
	Accounts payable		2,928		93,383		115,839
Innoace:
	Accounts payable		26,806		25,640		15,199
	Guarantee deposits received		2,138		1,069		2,138
WiderThan Co., Ltd.
	Accounts receivable		—		30		102
	Accounts payable		8,296		9,762		9,847

F-51

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Description		2002		2003		2004

SK C&C Co., Ltd.:
	Accounts receivable		287		245		480
	Accounts payable		116,235		72,715		77,871
	Guarantee deposits received		284		346		346


(note a)	The Company is a party to several contracts with SK Engineering and Construction Co., Ltd. related to the construction of its new corporate headquarters in Ulchiro 2-ga, Chongro-gu, Seoul. Construction of its new headquarters was completed at the end of 2004. The total payment to SK Engineering & Construction Co., Ltd. for the demolition of existing buildings on the site and construction of the new building was W209 billion.

(note b)	The Company and certain subsidiaries are party to an agreement with SK C&C Co., Ltd., pursuant to which SK C&C Co., Ltd. provides them with information technology services, dated as of December 28, 1998 and amended as of November 1, 1999. This agreement will expire on December 31, 2009, but may be terminated by the Company and certain subsidiaries without cause on a six months notice. The agreement provides that the parties will agree annually on the specific services to be provided and the monthly fees to be paid by the Company and certain subsidiaries. The Company and certain subsidiaries also enter into agreements with SK C&C Co., Ltd. from time to time for specific information technology-related projects.

(note c)	On December 19, 2000, the Company entered into an agreement with SK Corporation for the sale and leaseback of the Company’s head office with the lease period from December 19, 2000 to March 31, 2004. Under the lease agreement, in January 2001 the Company deposited refundable leasehold key money of W80,113 million and, as a result there will be no rent payment for the remaining lease period. On January 30, 2003, the Company prolonged the lease term to February 28, 2005 and deposited additional refundable leasehold key money of W20,027 million. In addition, in December 2003, the Company deposited additional refundable leasehold key money of W3,580 million. As a result, the refundable leasehold key money to SK Corporation as of December 31, 2004 totaled W103,720 million.


23.	DERIVATIVE INSTRUMENTS

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. The foreign currency forward contract was settled in 2004 and 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 the 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 the 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.

F-52

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Duration of

as Cash

Not

Type

Hedged Item

Face Amount

Contract

Flow Hedge

Designated

Fix-to-fixed cross currency

swap

Unguaranteed US dollar

US$

300,000

March 23, 2004-

80,953

—

denominated bonds

April 1, 2011

Fix-to-fixed cross currency

swap

Unguaranteed US dollar

US$

100,000

May 27, 2004-

—

15,790

denominated convertible bonds

May 27, 2009

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.


24.	MERGER WITH SK IMT CO., LTD.

On May 1, 2003, the Company merged with SK IMT Co., Ltd., which was a consolidated subsidiary when it merged into the Company, 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 shareholders of SK IMT Co., Ltd. were entitled to exercise dissenter’s right under Korean law. Shareholders holding 22,078,770 shares (or 36.8% of SK IMT Co., Ltd.’s issued and outstanding shares) exercised such right, and SK IMT Co., Ltd. repurchased the shares of these dissenting shareholders at a purchase price of W27,400 per share, totaling W604,958 million, before the completion of the merger with the Company. 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 excess of acquired net assets over the par value (W63 million) for the distribution of 126,276 shares of newly issued common stock to minority shareholders of SK IMT Co., Ltd. upon on the merger dated May 1, 2003, amounting to W31,809 million, was recorded as an increase in capital surplus in accordance with Korean GAAP.


25.	MERGER WITH CYWORLD CO., LTD.

On August 1, 2003, SK Communications Co., Ltd.., the Company’s subsidiary, merged with Cyworld Co., Ltd. in order to maximize synergy effects through enhanced management efficiency and strengthen the competitive power in the internet portal service market, in accordance with the approval of stockholders of SK Communications Co., Ltd. dated on June 16, 2003. The exchange ratio of common stock between SK Communications Co., Ltd. (par value: W500) and Cyworld Co., Ltd. (par value: W5,000) was 55.04697 to 1. Using such exchange ratio, SK Communications Corp. issued 12,770,877 shares of new common stock.

F-53

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The condensed balance sheets of Cyworld Co., Ltd. as of August 1, 2003 and December 31, 2002 and condensed statements of operations for the seven months ended July 31, 2003 and the year ended December 31, 2002 are as follows (in millions of Korean won):


		Aug. 1, 2003			Dec. 31, 2002

(Condensed balance sheets)
	Current assets	W	1,200		W	129
	Non-current assets		615			1,175

	Total assets	W	1,815		W	1,304

	Current liabilities	W	1,586		W	850
	Long-term liabilities		77			432

	Total liabilities		1,663			1,282

	Common stock		1,160			1,160
	Capital surplus		4,208			4,208
	Deficit		(5,216	)		(5,346	)

	Total equity		152			22

	Total liabilities and stockholders’ equity	W	1,815		W	1,304


		Period from
		Jan. 1, 2003 to			Year ended
		Jul. 31, 2003			Dec. 31, 2002

(Condensed statements of operations)
	Operating revenue	W	1,930		W	1,823
	Operating expenses		(2,244	)		(2,694	)

	Operating loss		(314	)		(871	)
	Other income		606			37
	Other expenses		(163	)		(721	)

	Net income (loss)	W	129		W	(1,555	)

The merger with Cyworld Co., Ltd. was accounted for using the purchase method of accounting, and generated a goodwill of W9,374 million as follows (in millions of Korean won):


Fair value of net assets merged				W	152
Merger cost
	Fair value of common stock issued	W	8,429
	Direct costs related to the merger (note)		1,097		9,526

Goodwill				W	9,374


(note)	The direct costs related to the merger are the liquidation income tax of W1,067 million paid for Cyworld Co., Ltd., and service fees of W30 million related to the merger.

In addition, SK Communications Co., Ltd. amortizes the goodwill using the straight-line method over five years, and goodwill amortization for the years ended December 31, 2003 and 2004 was W781 million and W1,875 million, respectively.

F-54

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


26.	ACQUISITION OF AND MERGER WITH SHINSEGI TELECOMM, INC.

In order to maximize shareholder value through voluntary restructuring of the domestic wireless telecom industry, Company management approved the acquisition of a 51.2% equity interest in Shinsegi Telecomm Inc.’s common stock on December 20, 1999 and, on December 28, 1999, the Company acquired a 23.5% equity interest through the purchase of Shinsegi Telecomm, Inc.’s common stock held by Kolon International Corporation and other minority interests for W1,088,819 million. The Company acquired the remaining 27.7% equity interest on April 27, 2000 from POSCO by the issuance of 5,794,924 shares of the Company’s common stock with a market value of W1,657,348 million on the issuance date.

The transaction was accounted for under the purchase method of accounting and generated W2,560,690 million in goodwill, which is being amortized on a straight-line basis over a twenty year period.

The acquisition of a 51.2% equity interest in Shinsegi Telecomm, Inc.’s common stock completed on April 27, 2000 is summarized as follows:


	In Millions of
	Korean Won

Fair value of assets acquired	W	1,183,633
Goodwill		2,560,690
Elimination of investment in unconsolidated affiliate		(1,067,180	)
Assumed liabilities		(1,018,710	)

Acquisition cost after adding incidental costs of W1,085 million	W	1,658,433

In 2001, the Company acquired an additional 19.2% equity interest in Shinsegi Telecomm, Inc. for W327,733 million. And on January 13, 2002, the Company merged with Shinsegi Telecomm, Inc. in accordance with a resolution of the Company’s board of directors dated September 21, 2001 and the approval of the shareholders of Shinsegi Telecomm, Inc. dated November 16, 2001. The exchange ratio of common stock between the Company and Shinsegi Telecomm, Inc. was 0.05696 to 1. Using such exchange ratio, the Company distributed 2,677,653 shares of treasury stock to minority shareholders of Shinsegi Telecomm, Inc. and the Company retired all shares of Shinsegi Telecomm, Inc. owned by the Company upon the merger.

The additional acquisition of equity interests in Shinsegi Telecomm, Inc. after its acquisition of a majority equity interest on April 27, 2000 was also accounted for under the purchase method of accounting whereby the purchase price was allocated to assets acquired and liabilities assumed based on the fair value at the date when the Company acquired a majority equity interest in Shinsegi Telecomm, Inc. The excess unallocated purchase prices of W299,121 million for the additional 19.2% equity interest acquired in 2001 and W647,025 million for the distribution of 2,677,653 shares of treasury stock to minority shareholders of Shinsegi Telecomm, Inc. upon the merger dated January 13, 2002, were recorded as decreases in capital surplus in accordance with Korean GAAP (see Note 13).


27.	LOSS ON IMPAIRMENT OF IDLE NETWORK EQUIPMENT OF SHINSEGI TELECOMM, INC.

In 2002, the Company integrated Shinsegi Telecomm, Inc.’s former operations with those of the Company and some portion of Shinsegi Telecomm, Inc.’s former network equipment was re-deployed in the Company’s network or sold for use outside Korea. The Company wrote off the remainder of the network equipment, excluding additional network equipment which will be re-deployed in the Company’s network, and an impairment loss of W185,847 million was recorded in the year ended December 31, 2002.

F-55

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


28.	NETWORK INTERCONNECTION CHARGES

The Company’s networks interconnect with the public switched telephone networks operated by KT Corporation and Hanaro and, through their networks, with the international gateways of KT Corporation, DACOM and Onse, as well as the networks of the other wireless telecommunications service providers in Korea. These connections enable the Company’s subscribers to make and receive calls from telephones outside the Company’s networks. Under Korean law, service providers are required to permit other service providers to interconnect to their networks for purposes of offering other services. If the new service provider desires interconnection and the incumbent service provider is unable to reach an agreement within 90 days, the new service provider can appeal to the Korean Communications Commission, a government agency under the MIC.

For the years ended December 31, 2002, 2003 and 2004, such interconnection revenues amounted to W1,043.2 billion, W1,017.1 billion and W849.4 billion, respectively, while aggregate interconnection expenses amounted to W752.1 billion, W771.5 billion and W913.7 billion, respectively.


29.	SUBSEQUENT EVENT


a.	Acquisition of WiBro License

The Company, together with KT Corporation and Hanaro Telecom Inc., acquired the license for WiBro, a portable internet service which is scheduled to start commercial operations in June 2006 as a result of the decision of the Committee of Information and Communication Policy dated January 20, 2005. With regard to this service, the Company made the contribution of W117 billion and received the Wibro license from the Ministry of Information and Technology in March 2005.


b.	Agreement for Establishing SK-EarthLink, a Joint Venture Company in the U.S.

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 U.S., agreed to establish “SK-EarthLink’, a joint venture company, in the United States of America in February 2005 in order to provide wireless telecommunication services across the United States of America. The Company, via SK Telecom USA Holdings, Inc., its wholly-owned subsidiary in the United States of America, 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 service 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.


c.	Issuance of unguaranteed domestic bonds

In accordance with the approval of its board of directors on March 11, 2005, the Company issued unguaranteed domestic bonds with face value totaling W200,000 million on March 18, 2005. The domestic bonds were issued at an annual rate of 4% for W194,560 million and will be repaid in full at its maturity date of March 18, 2010.


d.	Resolution to dispose of the Company’s investments in SK Teletech Co., Ltd.

In accordance with the resolution of the Company’s board of directors dated May 3, 2005, the Company decided to sell 4,542,000 shares of 6,747,421 shares of SK Teletech Co., Ltd. (“SKTT”) held by the Company, representing 60% of the total outstanding common stock of SKTT, for a total selling price of W300 billion (W66,050 per share), to Curitel Communications, Inc., a handset maker in Korea. As a result of such trade, the Company’s ownership in SKTT will decrease from 89.1% to 29.1% and the Company’s management rights of SKTT are expected to be transferred to Curitel Communications, Inc. by the end of June 2005.

F-56

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


e.	Fine for Providing Handset subsidies

On May 9, 2005, the Communications Commission of the Republic of Korea fined the Company W23.1 billion for improper marketing activities such as providing handset subsidies.


30.	RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Korea (“Korean GAAP”), which differ in certain respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). The significant differences are described below. Other differences do not have a significant effect on either consolidated net income or shareholders’ equity.


a.	Deferred Income Taxes (see Note 2)

Under U.S. GAAP, deferred tax assets and liabilities are separated into their current and non-current portions based on the classification of related assets or liability for financial reporting purposes. Under Korean GAAP, deferred tax assets and liabilities are presented on the balance sheet as a single non-current net number.

In addition, U.S. GAAP does not allow recognition of deferred tax assets on the difference between the tax bases and financial statement bases of investments in subsidiaries unless it is apparent that the difference will reverse in the foreseeable future which has generally been interpreted to be one year. Such deferred tax assets totaling W19,688 million, W27,030 million and W30,857 million as of December 31, 2002, 2003 and 2004, respectively, have been recognized for Korean GAAP purposes.


b.	Deferred Charges (see Note 2)

Korean GAAP requires that bond issuance costs be deducted from proceeds of bonds and certain development costs be recorded as intangible assets. Under U.S. GAAP, bond issuance costs are capitalized as deferred assets and amortized over the redemption period of the related obligation and research and development costs are charged to expense as incurred.


c.	Leases

Through 1998, leases whose present value of minimum lease payments exceed 90% of the fair value of the leased equipment were not capitalized under Korean GAAP, but are capitalized under U.S. GAAP. Therefore, with respect to lease contracts entered into prior to January 1, 1999, certain adjustments for equipment, obligations under capital leases, interest on capital leases and depreciation are required.


d.	Marketable Securities and Investments Securities (see Note 2)

Through 2002, under Korean GAAP, debt and equity securities were classified into marketable securities and investment securities. Effective January 1, 2003, Korean GAAP was revised to classify investment in securities into three separate categories; trading securities, available-for-sales securities and held-to-maturity securities in a similar manner of Statement of Financial Accounting Standards No. 115 (SFAS No. 115), “Accounting for Certain Investments in Debt and Equity Securities”, described below. The valuation method for each category is similar to SFAS No. 115; however, the accounting treatment for impairment of investment securities and recoveries under Korean GAAP differ from those under U.S. GAAP as described in Note 30-(e).

F-57

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Under U.S. GAAP, SFAS No. 115 requires that equity securities with readily determinable fair values and all debt securities be classified into three categories and accounted for as follows:


	•	Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost.

	•	Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in income.

	•	Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from income and reported in other comprehensive income.

Gross proceeds from the sale of such securities were W1,562,603 million, W945,854 million and W343,723 million for the years ended December 31, 2002, 2003 and 2004, respectively. Gross realized gains for the years ended December 31, 2002, 2003 and 2004 were W13,540 million, W2,122 million and W1,342 million, respectively. Gross realized losses for the years ended December 31, 2002, 2003 and 2004 were W50,958 million, W614 million and W517 million, respectively.

Information with respect to trading securities at December 31, 2002, 2003 and 2004 is as follows (in millions of Korean won):

Gross

Cost

Unrealized

(Amortized Cost)

Gains

Losses

Fair Value

At December 31, 2002:

Debt securities

754,219

—

754,219

At December 31, 2003:

Debt securities

895,401

—

2,184

893,217

At December 31, 2004:

Equity securities

450

—

368

Debt securities

652,372

2,039

—

654,411

Total

652,822

2,039

654,779

F-58

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Information with respect to long-term investment securities including the current portion affected by SFAS No. 115 at December 31, 2002, 2003 and 2004 is as follows (in millions of Korean won):


				Gross		Gross
		Cost		Unrealized		Unrealized		Impairment
		(Amortized Cost)		Gains		Losses		Losses		Fair Value

At December 31, 2002:
	Equity securities	W	938,975	W	1,522	W	3,852	W	146,284	W	790,361
	Debt securities		62,500		—		—		—		62,500

		W	1,001,475	W	1,522	W	3,852	W	146,284	W	852,861

At December 31, 2003:
	Equity securities	W	427,472	W	73,290	W	6,608	W	55,469	W	438,685
	Debt securities		64,315		—		—		—		64,315

		W	491,787	W	73,290	W	6,608	W	55,469	W	503,000

At December 31, 2004:
	Equity securities	W	468,666	W	137,621	W	—	W	63,902	W	542,385
	Debt securities		65,957		—		—		10,655		55,302

		W	534,623	W	137,621	W	—	W	74,557	W	597,687

Gross unrealized losses of W3,852 million and W6,608 million at December 31, 2002 and 2003, respectively, for which impairment has not been recognized, have been in a continuous unrealized loss position for less than twelve months.

The aggregate carrying amount of the Company’s cost method investments totaled W354,123 million at December 31, 2004. Investments with an aggregate cost of W131,051 million were not evaluated for impairment because (a) the Company did not estimate the fair value of those investments in accordance with paragraphs 14 and 15 of Statement 107 and (b) the Company did not identify any events or changes in circumstances that may have had a significant adverse effect on the fair value of those investments. The Company estimated that the fair value exceeded the cost of investments (that is, the investments were not impaired) for the remaining W223,072 million of cost method investments.


e.	Impairment of Investment Securities and Recoveries

Under U.S. GAAP, if the decline in fair value is judged to be other than temporary, the cost basis of the individual securities is written down to fair value as a new cost basis and the amount of the write-down is included in current earnings. Under Korean GAAP, if the collectible value from the securities is less than acquisition costs with objective evidence of impairment such as bankruptcy of investees, an impairment loss is recognized. Due to such differences, for U.S. GAAP purposes, losses on impairment of investment securities for the years ended December 31, 2002, 2003 and 2004 increased by W252,031 million, W21,716 million and W8,434 million, respectively, when compared to those under Korean GAAP. And, as certain available-for-sale securities for which the impairment losses had been recognized for the year ended December 31, 2002 for US GAAP purpose, but not for Korean GAAP purpose, were sold in 2003, some portion of losses of disposal of such available-for-sale securities that was recognized for the year ended December 31, 2003 for Korean GAAP purpose, amounting to W46,443 million, was reversed for US GAAP purpose.

Under Korean GAAP, the subsequent recoveries of impaired available-for-sale securities, held-to-maturity debt securities and equity securities without readily determinable fair value, result in an increase of their carrying amount up to the original acquisition cost, and the recovery gains are reported in current operations up to the

F-59

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

previously recognized impairment loss as reversal of loss on impairment of investment securities. Under U.S. GAAP, the subsequent increase in carrying amount of the impaired and written down held-to-maturity debt securities and equity securities without readily determinable fair value is not allowed. The subsequent increase in fair value of available-for-sale securities is reported in other comprehensive income.


f.	Comprehensive Income

Under Korean GAAP, there is no requirement to present comprehensive income. Under US GAAP, comprehensive income and its components must be presented in the financial statements. Comprehensive income includes all changes in shareholders’ equity during a period except those resulting from investments by, or distributions to, owners, including certain items not included in the current results of operations.


g.	Business Combinations and Intangible Assets

Effective July 1, 2001, U.S. GAAP requires the use of the purchase method of accounting for all business combinations. Resulting goodwill is no longer amortized; however, it will be subject to impairment tests on an annual basis and at any other time if events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable.

Circumstances that could trigger an impairment test include but are not limited to: a significant adverse changes in the business climate or legal factors; an adverse action or assessment by a regulator; unanticipated competition; loss of key personnel; the likelihood that a significant portion of a reporting unit will be sold or otherwise disposed; results of testing for recoverability of a significant asset group within a reporting unit.

To test impairment of goodwill, the fair value of a reporting unit which includes goodwill is compared with its carrying amount of a reporting unit, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the carrying amount of the reporting unit goodwill is compared with the implied fair value of goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recorded in current operations. The Company believes there is no impairment of goodwill for the years ended December 31, 2002, 2003 and 2004. The Company does not have any intangible assets with indefinite lives as of December 31, 2002, 2003 and 2004. Intangible assets with finite lives will continue to be amortized over their estimated useful lives.

Under Korean GAAP, business combinations involving other than commonly controlled entities are accounted for as either a purchase or a pooling of interests, depending on the specific circumstances. However, in the case of the Company, no business combinations have been accounted for using the pooling of interest method under Korean GAAP. In a purchase combination, the difference between the purchase consideration and the fair value of the net assets acquired is accounted for as goodwill or as negative goodwill. Goodwill and all other intangible assets are amortized over its estimated economic life, generally not to exceed 20 years.


h.	Determination of Acquisition Cost of Equity Interest in Subsidiary

Under U.S. GAAP, when a parent company acquires an equity interest in a subsidiary in exchange for newly issued common stock of the parent company, the acquisition cost of the equity interest in a subsidiary is determined at the market price of the parent company’s common stock for a reasonable period before and after the date the terms of the acquisition are agreed to and announced. Under Korean GAAP, the acquisition cost is determined at the closing market price of the parent company’s common stock when the common stock is actually issued. In addition, there are certain other differences in the methods of allocating cost to assets acquired. Due to such differences, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2002, 2003 and 2004 increased by W88,999 million, W64,052 million and W44,455 million, respectively, when compared to those under Korean GAAP.

F-60

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


i.	Additional Equity Investment in Subsidiaries

Under Korean GAAP, when additional interest is acquired after acquiring a majority interest in a subsidiary, the differences between the Company’s acquisition cost of the additional interest and the corresponding carrying amount of the acquired additional interest in a subsidiary is presented as an adjustment to capital surplus. Under U.S. GAAP, the cost of an additional interest would be allocated based on the fair value of net assets acquired, with the excess allocated to goodwill. Due to such differences, for U.S. GAAP purposes, the shareholders’ equity as of December 31, 2002, 2003 and 2004 increased by W944,559 million, W955,865 million and W965,102 million, respectively, when compared to those under Korean GAAP.


j.	Capitalization of Foreign Exchange Losses (or Gains) and Interest Expenses

Through 2002, under Korean GAAP, interest expenses and foreign exchange losses (or foreign exchange gains) incurred on debt used to finance the construction of property, plant and equipment were capitalized (or offset against property additions). Effective January 1, 2003, Korean GAAP was revised to allow a company to charge reflect such interest expense and foreign exchange losses (or foreign exchange gains) to current operations. For Korean GAAP purposes, the Company adopted the accounting policy not to capitalize such financing costs prospectively. Under U.S. GAAP, interest expenses incurred on debt used to finance the construction of property, plant and equipment are capitalized, while related foreign exchange losses (or gains) are charged to current operations as incurred.

Through 2002, under Korean GAAP, interest expense incurred on debt used to finance the purchase of intangible assets was capitalized until the asset was put in use. For U.S. GAAP purposes, the Company charges such interest to current operations as incurred. Effective January 1, 2003, Korean GAAP was revised to allow a company to charge such interest expense to current operations as incurred. For Korean GAAP purposes, the Company adopted the accounting policy not to capitalize such interest expense. And this accounting change has been applied prospectively.


k.	Nonrefundable Activation Fees

For U.S. GAAP purposes, the Company defers nonrefundable activation revenues and costs and amortizes them over the expected term of the customer relationship, which ranges from 41 months to 89 months.

Under Korean GAAP, there is no specific provision for the recognition of such activation fees and the Company recognizes these revenues and costs when the activation service is performed.


l.	Gain or Loss on Disposal of Subsidiary’s Stock

Under Korean GAAP, gains or losses on disposal of investments in common stock of subsidiaries are not recognized in the consolidated income statements but included in capital surplus, until such subsidiary has been excluded as a majority-owned subsidiary. Under U.S.GAAP, such gains or losses on disposal of the investments in common stock of subsidiary are recognized in the income statement at the time of disposal of such investments.


m.	Employee Stock Option Compensation Plan

For Korean and U.S. GAAP purposes, the Company charges to expense the value of stock options granted. Korean GAAP permits all entities to exclude the volatility factor in estimating the value of their stock options granted prior to December 31, 2003, which results in measurement at minimum value. Under U.S. GAAP, public entities are not permitted to exclude the volatility factor in estimating the value of their stock options.

The weighted average fair value of options granted in 2000, 2001 and 2002 was W210,000 per share, W120,070 per share and W48,724 per share, respectively.

F-61

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


n.	Loans Receivable for Stock Issued to Employee

U.S. GAAP requires that notes received for capital stock be reported as a reduction of stockholders’ equity, while Korean GAAP allows for recording such receivables as an asset.


o.	Discount on Leasehold Deposits

Under U.S. GAAP, when cash and other rights are exchanged for notes, notes (receivables or payables that represent contractual rights to receive money or contractual obligations to pay money on fixed or determinable dates, whether or not there is a stated provision for interest) should be stated at their present value and the difference between the face amount and the present value should be deducted from or added to the face amount of the note as a discount or premium and amortized over the term using effective interest method. Thus, leasehold key money deposits are stated at their present value. Under Korean GAAP, the leasehold key money deposits are stated at their face amounts.


p.	Asset Securitization Transactions

Under U.S. GAAP, a transfer of financial assets in an asset securitization is accounted for as a sale only if all three of the following conditions are met;


	•	The transferred assets have been isolated from the transferor and put beyond the reach of the transferor, or any consolidated affiliated of the transferor, and their creditors even in the event of bankruptcy or receivership of the transferor or any consolidated affiliate.

	•	The transferee is a qualifying special-purpose entity (“QSPE”) and each holder of its beneficial interests (including both debt and equity securities) has the right to pledge, or the right to exchange its interests. If the issuing vehicle is not a QSPE, then sale accounting is only permitted if the issuing vehicle itself has the right to pledge or the right to exchange the transferred assets.

	•	The transferor does not effectively maintain control over the transferred assets either through;


	(a) an agreement that calls for the transferor to repurchase the transferred assets (or to buy back securities of a QSPE held by third-party investors) before their maturity or

	(b) the ability to unilaterally cause the SPE or QSPE to return specific assets; other than through a cleanup call.

In addition, under U.S. GAAP, unless a transferee is a QSPE, a transferee with nominal capital investment and credit enhancement provided by transferor is generally consolidated into the transferor.

However, under Korea GAAP, when a transfer of financial assets in an asset securitization is conducted in accordance with the Korean Asset Securitization Act, such transfer is generally accounted for as a sale of financial assets and the securitization vehicle is generally not consolidated into the transferor.


q.	Considerations for conversion right

Under Korean GAAP, 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 being deducted from related bonds. Such conversion right adjustment is amortized into interest expenses over the period of convertible bonds. Under U.S. GAAP, convertible bonds are analyzed to evaluate whether conversion option are bifurcated and valued. If an embedded conversion option in convertible bond is net cash settled upon the occurrence of an event which is outside of an entity’s control, it generally requires bifurcation under US GAAP. Moreover, the change of the fair value of such embedded conversion option is included in current earnings.

F-62

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


r.	Currency Swap

Under Korean GAAP, when all critical terms of the hedging instrument and the hedged item are the same, a hedging relationship is considered to be highly effective without formally assessing hedge effectiveness. Under US GAAP, unless conditions to qualify for the shortcut method as described in SFAS No. 133, “Accounting for Derivative instruments and Hedging Activities”, as amended, are met, a formal hedge effectiveness should be assessed to qualify for a hedge accounting at inception of the hedge. The Company’s cross currency swap, which qualified as a cash flow hedge under Korean GAAP, did not qualify for the shortcut method under US GAAP and was recorded as non-hedge.


s.	Foreign Currency Translation

Under U.S. GAAP, monetary assets and liabilities denominated in foreign currencies are translated at the actual prevailing rates of exchange on the balance sheet dates. However, as described in Note 2(u), monetary assets and liabilities of the Company and its subsidiaries denominated in foreign currency are translated at the Base Rates announced by Seoul Money Brokerage Services, Ltd. on the balance sheet dates, as allowed under Korean GAAP. Accordingly, the resulting differences in the calculated foreign currency translation gain and loss amounts are considered as a U.S. GAAP adjustment.


t.	Presentation of Minority Interest as a Component of Shareholders’ Equity

Korean GAAP requires the classification of minority interest in equity of consolidated subsidiaries as a component of shareholders’ equity. Under U.S. GAAP, minority interest in equity of consolidated subsidiaries is presented separately from shareholders’ equity.

The following reconciles net income for the years ended December 31, 2002, 2003 and 2004 and shareholders’ equity as of December 31, 2002, 2003 and 2004 under Korean GAAP as reported in the consolidated financial statements to the net income and shareholders’ equity amounts determined under

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SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

U.S. GAAP, giving effect to adjustments for the differences listed above (in millions of Korean won, except per share amounts):


		Year Ended December 31,

		2002			2003			2004

Net income based on Korean GAAP		W	1,487,151		W	1,966,100		W	1,491,479
Adjustments:
	Deferred income tax adjustments due to difference in accounting principles		(8,481	)		(7,342	)		(3,827	)
	Tax effect of the reconciling items		121,976			(15,036	)		22,515
	Deferred charges		1,318			2,660			(60	)
	Capital leases		454			(906	)		1,534
	Intangible assets		(23,507	)		(22,303	)		(18,546	)
	Reversal of amortization of goodwill		138,041			135,557			136,694
	Capitalization of foreign exchange losses and interest expenses related to tangible assets		6,213			21,617			24,454
	Capitalization of interest expenses related to purchases of intangible assets		(69,372	)		427			5,285
	Nonrefundable activation fees		(104,263	)		(46,962	)		(36,048	)
	Loss (gain) on disposal of subsidiary shares		—			58			—
	Stock option compensation plan		(3,367	)		(3,114	)		(1,938	)
	Loss on sale of accounts receivable and other in asset securitization		7,039			7,437			(14,476	)
	Loss on impairment of investment securities		(252,031	)		24,727			(8,434	)
	Loss on valuation of currency swap		—			—			(49,452	)
	Discount on leasehold deposits		(45	)		(286	)		422
	Considerations for conversion right		—			—			1,016
	Foreign currency translation		—			—			2,458
	Recovery of impaired investment securities		—			115			—

Net income based on U.S. GAAP		W	1,301,126		W	2,062,749		W	1,553,076

Weighted average number of common shares outstanding			84,270,450			75,078,219			73,614,297

Earnings per share based on U.S.GAAP:
	Basic earnings per share	W	15,440		W	27,475		W	21,097

	Diluted earnings per share	W	15,439		W	27,475		W	20,921

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SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


		December 31,

		2002			2003			2004

Shareholders’ equity based on Korean GAAP		W	6,231,900		W	6,093,847		W	7,205,744
Adjustments:
	Deferred income tax adjustments due to difference in accounting principles		(18,997	)		(45,317	)		(70,067	)
	Tax effect of the reconciling items		151,554			136,517			159,032
	Deferred charges		(2,600	)		60			—
	Capital leases		1,144			239			1,773
	Intangible assets		1,033,558			1,019,917			1,009,557
	Reversal of amortization of goodwill		138,041			273,598			410,292
	Capitalization of foreign exchange losses and interest expenses related to tangible assets		(1,775	)		19,842			44,294
	Capitalization of interest expenses related to purchase of intangible assets		(69,372	)		(68,945	)		(63,660	)
	Nonrefundable activation fees		(192,212	)		(239,174	)		(275,222	)
	Loans receivable for stock issued to employees’ investor association		(45,906	)		(33,788	)		(22,546	)
	Minority interest in equity of consolidated affiliates		(725,507	)		(155,985	)		(98,198	)
	Loss on sale of accounts receivable and other in asset securitization		7,039			14,476			—
	Loss on impairment of investment securities		(150,243	)		—			—
	Discount on leasehold deposits		(367	)		(653	)		(231	)
	Considerations for conversion right		—			—			(66,263	)
	Foreign currency translation		—			—			2,458
	Recovery of impaired investment securities		(81	)		34			34

Shareholders’ equity based on U.S. GAAP		W	6,356,176		W	7,014,668		W	8,236,997

F-65

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Changes in shareholders’ equity based on U.S. GAAP for the years ended December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


		Year Ended December 31,

		2002			2003			2004

Balance, beginning of the year		W	5,820,051		W	6,356,176		W	7,014,668
	Net income for the year		1,301,126			2,062,749			1,553,076
	Dividends		(57,265	)		(151,739	)		(478,492	)
	Issuance of common stock		—			31,053			—
	Unrealized gains on valuation of securities, net of tax		51,644			50,033			55,156
	Equity in capital surplus, retained earnings and capital adjustments of affiliates (note a)		(12,789	)		50,166			89,448
	Retirement of treasury stock		—			(20,598	)		—
	Treasury stock transactions		(779,290	)		(1,379,337	)		(2	)
	Foreign-based operations’ translation adjustments		2,809			(356	)		(11,128	)
	Stock compensation plan		4,859			4,403			3,030
	Decrease in loans receivable for stock issued to employees’ investor association		25,031			12,118			11,241

Balance, end of the year		W	6,356,176		W	7,014,668		W	8,236,997

(note a)

This line item consists of the adjustments to the carrying amount of equity method investments based on the Company’s proportionate pickup in affiliates using the equity method of accounting, which are directly adjusted to stockholders’ equity of affiliates, such as unrealized gains or losses on valuation of available-for-sale securities, foreign-based operations’ translation adjustments in affiliates and stock transactions by affiliates.

F-66

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A reconciliation of the significant balance sheet accounts except for the above listed shareholders’ equity items to the amounts determined under U.S. GAAP as of December 31, 2002, 2003 and 2004 is as follows (in millions of Korean won):


			December 31,

			2002			2003			2004

Current assets:
	As reported		W	4,113,724		W	4,069,525		W	4,390,693
	U.S. GAAP adjustments:
		— loans receivable for stock issued to employees investor association		—			—			(4,123	)
		— deferred tax adjustments due to difference in accounting principles		60,619			73,500			51,344
		— tax effect of the reconciling items		(9,927	)		(8,297	)		25,234
		— discount on leasehold deposits		4,843			5,777			1,119
		— asset securitization transactions		582,742			478,298			—

	Current assets based on U.S. GAAP			4,752,001			4,618,823			4,464,267

Non-current assets:
	As reported			10,114,986			9,748,692			9,892,665
	U.S. GAAP adjustments:
		— loans receivable for stock issued to employees’ investor association		(45,906	)		(33,788	)		(18,423	)
		— intangible assets		1,034,972			1,015,801			1,004,774
		— cancellation of amortization of goodwill		138,041			273,598			410,292
		— discount on leasehold deposits		(5,210	)		(6,430	)		(1,349	)
		— loss on sale of accounts receivable and other in asset securitization		(68,267	)		—			—
		— recovery of impaired investment securities		(81	)		34			34
		— loss on impairment of investment securities		(150,243	)		—			—
		— nonrefundable activation fees		9,129			9,129			9,129
		— capital lease		5,820			3,301			1,773
		— capitalization of foreign exchange losses and interest expense related to tangible assets		(1,775	)		19,842			44,294
		— capitalization of interest expenses related to purchase of intangible assets		(69,372	)		(68,945	)		(63,660	)
		— deferred charges		6,564			6,154			12,969

	Non-current assets based on U.S. GAAP			10,968,658			10,967,388			11,292,498

Total assets based on U.S. GAAP			W	15,720,659		W	15,586,211		W	15,756,765

F-67

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


			December, 31

			2002			2003			2004

Current liabilities:
	As reported		W	4,303,386		W	4,530,910		W	3,066,893
	U.S. GAAP adjustments:
		— deferred charges		222			31			—
		— nonrefundable activation fees		46,723			68,665			86,082
		— asset securitization transactions		507,436			463,822			—
		— acquisition cost of equity interest in subsidiary		2,449			886			—
		— foreign currency translation		—			—			(26	)

	Current liabilities based on U.S. GAAP			4,860,216			5,064,314			3,152,949

Long-term liabilities:
	As reported			3,693,424			3,193,460			4,010,721
	U.S. GAAP adjustments:
		— deferred charges		8,942			5,844			12,969
		— Intangible assets		3,748			—			—
		— nonrefundable activation fees		154,618			179,638			198,269
		— capital leases		4,676			3,062			—
		— deferred tax adjustments due to difference in accounting principles		79,616			118,837			123,911
		— tax effect of the reconciling items		(166,264	)		(149,597	)		(141,080	)
		— considerations for conversion right		—			—			66,263
		— foreign currency translation		—			—			(2,432	)

	Long-term liabilities based on U.S. GAAP			3,778,760			3,351,244			4,268,621

Total liabilities based on U.S. GAAP			W	8,638,976		W	8,415,558		W	7,421,570

Minority interests:
	As reported		W	725,507		W	155,985		W	98,198
	U.S. GAAP adjustments:			—			—			—

Total minority interests based on U.S. GAAP			W	725,507		W	155,985		W	98,198

The following table reconciles cash flows from operating, investing and financing activities for the years ended December 31, 2002, 2003 and 2004 under Korean GAAP, as reported in the consolidated financial

F-68

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

statements to cash flows from operating, investing and financing activities for the years ended December 31, 2002, 2003 and 2004 under U.S. GAAP (in millions of Korean won):


		2002			2003			2004

Cash flows from operating activities based on Korean GAAP		W	4,267,815		W	3,328,770		W	2,516,052
Adjustments:
	Asset securitization transactions		(558,921	)		(47,496	)		469,883

Cash flows from operating activities based on US GAAP		W	3,708,894		W	3,281,274		W	2,985,935

Cash flows from investing activities based on Korean GAAP		W	(3,063,435	)	W	(1,414,432	)	W	(1,469,537	)
Adjustments:
	Asset securitization transactions		68,267			(8,080	)		76,347

Cash flows from investing activities based on US GAAP		W	(2,995,168	)	W	(1,422,512	)	W	(1,393,190	)

Cash flows from financing activities based on Korean GAAP		W	(1,418,197	)	W	(2,261,039	)	W	(968,570	)
	Adjustments:
	Asset securitization transactions		490,654			55,576			(546,230	)

Cash flows from financing activities based on US GAAP		W	(927,543	)	W	(2,205,463	)	W	(1,514,800	)

31. ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP


a.	Income Taxes

Income tax expense under U.S. GAAP for the years ended December 31, 2002, 2003 and 2004 is as follows (in millions of Korean won):


	Year Ended December 31,

	2002			2003		2004

Currently payable	W	616,544		W	668,180	W	551,405
Deferred		(31,532	)		143,257		59,669

	W	585,012		W	811,437	W	611,074

F-69

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The difference between the actual income tax expense and the tax expense computed by applying the statutory Korean corporate income tax rates to income before taxes for the years ended December 31, 2002, 2003 and 2004 is attributable to the following (in millions of Korean won):


	Year Ended December 31,

	2002			2003			2004

Income taxes at statutory income tax rate of 27%	W	518,197		W	776,030		W	584,843
Resident surtax payable		51,820			77,603			58,484
Tax credit for investments, technology, human resource development and others		(37,309	)		(83,826	)		(89,080	)
Special surtax for agriculture and fishery industries and other		11,636			13,685			13,736
Undistributed earnings of subsidiaries		12,295			(5,909	)		11,011
Effect of change in income tax rate		—			(7,943	)		—
Other permanent differences		6,714			20,719			28,705
Change in valuation allowance		21,659			21,078			3,375

Recorded income taxes	W	585,012		W	808,892		W	611,074

Effective tax rate		30.48	%		28.23	%		28.21	%

F-70

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tax effects of temporary differences that resulted in the deferred tax assets at December 31, 2002, 2003 and 2004 computed under U.S. GAAP, and a description of the financial statement items that created these differences are as follows (in millions of Korean won):


		December 31,

		2002			2003			2004

Current:
	Allowance for doubtful accounts	W	21,885		W	22,039		W	19,649
	Write-off of doubtful accounts		9,715			9,587			9,764
	Marketable trading securities		—			1			(561	)
	Accrued income		(2,844	)		(2,026	)		(2,463	)
	Accrued expenses and other		21,936			35,622			50,189

			50,692			65,223			76,578

Non-current:
	Depreciation		11,732			3,935			(34,371	)
	Loss on disposition of properties		—			—			11,480
	Loss on impairment and valuation of investment securities (note)		119,940			74,928			58,419
	Foreign exchange losses		3,345			774			—
	Equity in losses (earnings) of affiliates		(5,090	)		(6,593	)		(12,671	)
	Undistributed earnings of subsidiaries		(28,700	)		(3,364	)		(9,434	)
	Tax free reserve for technology development		(133,920	)		(182,518	)		(195,103	)
	Tax free reserve for loss on disposal of treasury stock		(64,775	)		(130,373	)		(130,372	)
	Tax credit carryforwards		—			1,162			5,003
	Net operating loss carryforwards		—			—			25,371
	Deferred charges and other		79,346			46,780			(7,205	)

			(18,122	)		(195,269	)		(288,883	)

Total deferred tax assets (liabilities)		W	32,570		W	(130,046	)	W	(212,305	)

(note)

As of December 31, 2002, unrealized loss on valuation of investment securities has been recorded as a separate component of shareholders’ equity, net of tax effect of W691 million, and unrealized gain on valuation of investment securities as of December 31, 2003 and 2004 was recorded as a separate component of shareholders’ equity, net of tax effect of W18,287 million and W39,210 million, respectively.

b. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of December 31, 2002, 2003 and 2004 for which it is practicable to estimate that value:

Cash and Cash Equivalents, Accounts Receivable (trade and other), Short-Term Loans, Accounts Payable and Short-term Borrowings

The carrying amount approximates fair value because of the short maturity of those instruments.

F-71

SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Trading Securities and Long-term Investment Securities

For investments in non-listed companies’ stock, a reasonable estimate of fair value could not be made without incurring excessive costs. Additional information pertinent to these investments is provided in Note 3. The fair value of investments in listed companies’ stock, public bonds, and other marketable securities are estimated based on quoted market prices for those or similar investments.

Long-Term Bank Deposits

The carrying amount approximates fair value as such long-term bank deposits bear interest rates currently available for similar deposits.

Long-Term Loans

The fair value of long-term loans is estimated by discounting the future cash flows using the current interest rate of time deposits with similar maturities.

Bonds Payable, Bonds with Stock Warrant, Convertible Bonds, Long-Term Borrowings, Long-Term Payable — Other and Obligation under Capital Leases

The fair value of these liabilities is estimated based on the quoted market prices for the same or similar issues or on the current interest rates offered for debt of the same remaining maturities.

The following summarizes the carrying amounts and fair values of financial instruments as of December 31, 2002, 2003 and 2004 (in millions of Korean won):


			2002				2003				2004

			Carrying				Carrying				Carrying
			Amount				Amount				Amount
			(Note a)		Fair Value		(Note a)		Fair Value		(Note a)		Fair Value

Financial assets:
	Cash and cash equivalents and short-term financial instruments		W	867,022	W	867,022	W	472,410	W	472,410	W	383,360	W	383,360
	Trading securities			754,219		754,219		893,217		893,217		654,779		654,779
	Accounts receivable (trade and other)			2,877,750		2,877,750		3,000,918		3,000,918		3,126,754		3,126,754
	Short-term loans			18,296		18,296		41,933		41,933		51,232		51,232
	Investment securities:
		Listed equity and debts (note b)		852,861		852,861		503,000		503,000		597,687		597,687
		Non- listed equity		543,836		N/A		385,707		N/A		354,123		N/A
	Long-term bank deposits			177		177		352		352		10,351		10,351
	Long-term loans			12,905		9,679		13,947		10,460		12,019		9,014

			W	5,927,066			W	5,311,484			W	5,190,305

Financial liabilities:
	Accounts payable		W	1,697,502	W	1,697,502	W	1,317,162	W	1,317,162	W	1,205,682	W	1,205,682
	Short-term borrowings			1,177,950		1,177,950		1,236,197		1,236,197		425,496		425,496
	Bonds payable, long-term borrowings, convertible bonds, long-term payables — other and obligation under capital leases, including current portion			4,413,130		4,704,752		4,201,707		4,283,402		4,044,258		4,211,926

			W	7,288,582			W	6,755,066			W	9,234,563

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SK TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(note a) These carrying amounts represent the amounts determined under U.S. GAAP.

(note b)

Investments in non — listed equity include the investments in the common stock of Powercomm Co., Ltd. (“Powercomm”). Korea Electric Power Corp. (“KEPCO”), the parent company of Powercomm, sold to Dacom Corporation 45.5% interest in Powercomm at W12,000 per share in 2002. Based on this transaction, the fair value of the Company’s investments in the common stock of Powercomm was determinable and the impairment loss on the investment of W150,243 million was recognized in 2002. The fair value of common stock of Powercomm as of December 31, 2003 and 2004 was estimated by an outside professional valuation company using the present value of expected future cash flows; and the additional impairment loss of W21,593 million was recognized in 2003. As of December 31, 2004, unrealized gain on valuation of investment in Powercomm of W3,158 million has been recorded as other comprehensive income.


c.	Comprehensive Income

Comprehensive income for the years ended December 31, 2002, 2003 and 2004 is as follows (in millions of Korean won):


			2002			2003			2004

Net income			W	1,301,126		W	2,062,749		W	1,553,076

Other comprehensive income:
	Available-for-sale securities
		Unrealized gain on investment securities		325,494			90,727			84,513
		Less impact of realized losses		(252,031	)		(21,716	)		(8,434	)
		Tax effect		(21,819	)		(18,978	)		(20,923	)

		Net change from available-for-sale securities		51,644			50,033			55,156

	Foreign-based operations translation adjustments			2,809			(356	)		(11,128	)

Total other comprehensive income				54,453			49,677			44,028

Comprehensive income			W	1,355,579		W	2,112,426		W	1,597,104


d.	Goodwill and other intangible assets

On January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized, however, they will be subject to periodic impairment tests as prescribed by the statement and intangible assets that do not have

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

indefinite lives are amortized over their useful lives. The following tables present the additional disclosures required by this statement.

Goodwill

Changes in the carrying amount of goodwill under U.S. GAAP for the years ended December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


		2002		2003			2004

Beginning of period		W	2,833,752	W	3,400,110		W	3,400,155
	Goodwill reclassifications to other intangibles assets		—		(16,437	)		—
	Goodwill acquired during the period		566,358		16,482			8,834
	Goodwill impairment losses		—		—			—

Ending of period		W	3,400,110	W	3,400,155		W	3,408,989

Other Intangible Assets

The major components and average useful lives of other acquired intangible assets under U.S. GAAP are as follows (in millions of Korean won):


		December 31, 2002					December 31, 2003					December 31, 2004

		Gross					Gross					Gross
		Carrying		Accumulated			Carrying		Accumulated			Carrying		Accumulated
		Amount		Amortization			Amount		Amortization			Amount		Amortization

Amortized intangible assets:
	IMT license (13 years)	W	1,189,881	W	—		W	1,188,547	W	(7,548	)	W	1,188,547	W	(98,183	)
	Customer lists (4 years)		99,783		(39,142	)		99,783		(64,088	)		99,783		(83,686	)
	Other (5 to 20 years)		344,708		(158,248	)		552,279		(258,802	)		718,291		(354,021	)

Total		W	1,634,372	W	(197,390	)	W	1,840,609	W	(330,438	)	W	2,066,621	W	(535,890	)

Intangible asset amortization expense for the years ended December 31, 2002, 2003 and 2004 was W62,037 million, W103,914 million and W209,991 million, respectively. It is estimated to be W203,665 million, W171,338 million, W163,123 million, W145,613 million and W113,946 million for the years ending December 31, 2005, 2006, 2007, 2008 and 2009, respectively, primarily related to the IMT license, customer lists and other.


e.	Other SK Group Companies

As described in Note 1, the Company is one of the SK Group affiliated companies. In early March 2003, the Prosecutor’s Office of the Republic of Korea filed charges against several SK Group executives for alleged accounting irregularities at SK Networks Co., Ltd. (“SK Networks”, formerly SK Global Co., Ltd.), and other alleged illegal transactions among certain SK Group affiliated companies. As a result of these charges, there are several legal actions against certain SK Group affiliated companies. On March 19, 2003, SK Networks was classified as a “financially distressed company” in accordance with the Corporate Restructuring Promotion Law of the Republic of Korea. Subsequent to this classification, there has been a restructuring, including cash buy-out of certain debt at less than face value and a management change, among the creditors of SK Networks and certain of its affiliates. In addition, SK Networks retired all common shares which SK Corporation owned and, on October 27, 2003, SK Corporation purchased new common shares of SK Networks in the amount of approximately $718.5 million, which have a certain disposal restriction. As of December 31, 2004 and for the year then ended, the Company and its subsidiaries had certain related party balances or transactions with

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SK Networks as disclosed in Note 22. Management of the Company believes that those legal matters will not have a material adverse effect on the Company and its subsidiaries’ financial position, operating results, or liquidity.


f.	Operating Revenue

Operating revenue for the years ended December 31, 2002, 2003 and 2004 are as follows (in millions of Korean won):


	2002		2003		2004

Wireless services	W	7,475,371	W	8,401,021	W	8,762,376
Interconnection		1,043,174		1,017,056		849,407
Digital handset sales		534,038		611,981		649,809
Other		167,147		180,306		272,974

Total operating revenue	W	9,219,730	W	10,210,364	W	10,534,566


g.	Segment

The Company has one reportable segment, cellular telephone communication service and all goodwill has been allocated to this segment.


h.	New Accounting Pronouncements

On January 17, 2003, the FASB issued Interpretation No. 46 (“FIN 46”) — “Consolidation of Variable Interest Entities”, which addresses consolidation by business enterprises where equity investors do not bear the residual economic risks and rewards. These entities have been commonly referred to as “Special purpose entities (“SPEs”).” The underlying principle behind the new Interpretation is that if a business enterprise has the majority financial interest in an entity, which is defined in the guidance as a variable interest entity, the assets, liabilities and results of the activities of the variable interest entity should be included in the consolidated financial statements with those of the business enterprise. The Interpretation also explains how to identify variable interest entities and how an enterprise should assess its interest in an entity when deciding whether or not it will consolidate that entity. In December 2003, the FASB released a revision of FIN No. 46 (“FIN No. 46R”) in which the calculation of expected losses and expected residual returns have been altered to reduce the impact of decision maker and guarantor fees. In addition, FIN No. 46R changes the definition of a variable interest. Certain special purpose companies (SPC) established by the Company have been consolidated from the date of their establishment (See Note 30(q)). The Company as a foreign private issuer applied either FIN 46 or FIN 46R to variable interest entities (“VIEs’) created after January 31, 2003 and the Company fully adopted FIN 46R as of June 30, 2004. The adoption of this Interpretation did not have a significant impact on the Company’s consolidation financial position or results of operations.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an Amendment of ARB No. 43, Chapter 4.” SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. The Statement is effective for inventory costs incurred during fiscal year beginning after June 15, 2005. Management does not expect this statement will have a material impact on the Company’s consolidated financial position or results of operations.

In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payments” (SFAS 123R). This statement eliminates the option to apply the intrinsic value measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” to stock compensation awards issued to employees. Rather, SFAS 123R requires companies to measure the cost of employee services received in exchange for an award of equity instruments

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award (usually the vesting period). SFAS 123R applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. SFAS 123R will be effective from January 1, 2006. Management does not expect that adoption of this statement will have a material impact on the Company’s consolidated financial position or results of operations.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nomonetary Assets — an amendment of APB Opinion No. 29” (“SFAS 153”), which amends Accounting Principles Board Opinion No. 29, “Accounting for Nonmonetary Transactions” to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for nonmonetary assets exchanges occurring in fiscal periods beginning after June 15, 2005. Management does not anticipate that the adoption of this statement will have a material effect on the Company’s consolidated financial position or results of operations.

F-76


Item. 19	*Exhibits*


Exhibit			Description

	1	.1	Articles of Incorporation, as amended and restated (English translation)*
	4	.1	Telecommunications Basic Law of 1983, as amended (English translation)**
	4	.2	Enforcement Decree of the Telecommunications Basic Law, as amended (English translation)*
	4	.3	Telecommunications Business Law of 1983, as amended (English translation)**
	4	.4	Enforcement Decree of the Telecommunications Business Law (English translation)*
	4	.5	Amendment to Telecommunications Business Law of 1983 dated February 9, 2004 (English translation)*
	4	.6	Korean Commercial Code (together with English translation) (Incorporated by reference herein from our Form 20-F filed on June 30, 2000)
	4	.7	Amendment to Korean Commercial Code dated December 29, 2001 (together with English translation) (Incorporated by reference herein from our Form 20-F filed on June 28, 2002)
	4	.8	Korean Securities and Exchange Act, as amended (English translation)*
	11	.1	Code of Ethics of SK Telecom Co., Ltd.*
	12	.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
	12	.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
	13	.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
	13	.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
	99	.1	Consent of Deloitte HanaAnjin LLC*


*	Filed herewith.


**	Filed previously as exhibits to our Form 20-F filed on June 3, 2003.

E-1

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.


	SK Telecom Co., Ltd.


	By:	/s/ Shin Bae Kim



	Name: Shin Bae Kim
	Title: Chief Executive Officer

Date: May 31, 2005