SK Telecom (US:SKM)2025-04-29 10:16Certain Defined Terms and Conventions Used in This Annual Report Key terms, abbreviations, and conventions are defined, noting IFRS compliance and a change in MSIT subscriber data reporting - Consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB)16 - Beginning December 31, 2023, the Ministry of Science and ICT (MSIT) started publishing subscriber data for mobile phone services only, which is not comparable to prior years' overall wireless service subscriber data15 Forward-Looking Statements Forward-looking statements are identified, subject to risks and uncertainties regarding 5G, AI, and capital expenditures - Plans for capital expenditures in 2025 include investments to maintain and enhance 5G/LTE/Wi-Fi networks, develop IoT and AI solutions, data infrastructure, and further research and development of 5G and 5G-Advanced technologies, with an emphasis on incorporating AI technology into various business areas20 - The company aims to make significant investments to build and develop next-generation growth businesses in cloud computing, data centers, subscription services, AI B2C/B2B services, and other innovative products, actively integrating AI technology20 - Forward-looking statements are subject to risks and uncertainties, including changes in the regulatory environment, technology changes, competitive pressures, political changes, foreign exchange currency risks, foreign ownership limitations, and credit risks21 Part I Item 1. Identity of Directors, Senior Management and Advisers Information regarding directors, senior management, and advisers is stated as 'Not applicable' for this section Item 1.A. Directors and Senior Management Item 1.B. Advisers Item 1.C. Auditors Item 2. Offer Statistics and Expected Timetable Information regarding offer statistics and expected timetable is stated as 'Not applicable' Item 3. Key Information Item 3.A. [Reserved] Item 3.B. Capitalization and Indebtedness Item 3.C. Reasons for the Offer and Use of Proceeds Item 3.D. Risk Factors Various risks are detailed, including competition, regulation, technology, cybersecurity, foreign ownership, and Korean-specific factors - The company faces substantial competition across all businesses, including from three mobile and fixed network operators (KT, LG U+) and Mobile Virtual Network Operators (MVNOs); MVNOs' combined market share increased from 15.5% in 2023 to 16.9% in 2024303133 - The company's businesses are subject to extensive government regulation, including rate regulation (e.g., mandated discounts, introduction of mid-tier/low-tier 5G plans), technology standards, frequency allocation, MVNO network leasing obligations, interconnection rates, and competition regulation as a 'market-dominating business entity'; new regulations related to AI technology are also emerging4547495354 - Failure to implement or adapt to technological advancements (e.g., 5G-Advanced, successor to 5G) in a timely and cost-effective manner, or to recoup significant capital expenditures for network development, could adversely affect the business414244 - A malware attack on April 19, 2025, resulted in the leakage of certain USIM information of 5G and LTE network subscribers; the company is investigating and implementing mitigation measures, but cannot predict the full extent of harm or regulatory actions87 - The Telecommunications Business Act limits aggregate foreign ownership of voting stock to 49.0%; if SK Inc. (30.6% owner) is deemed a foreign entity, this limit could be exceeded, leading to voting rights restrictions and potential corrective orders from the MSIT949698 - The company is exposed to political, economic, legal, and regulatory risks specific to Korea, including global economic volatility, domestic political instability (e.g., impeachment of former President Yoon, tariffs on exports), and heightened tensions with North Korea99100104 Item 4. Information on the Company Item 4.A. History and Development of the Company The company's history as Korea's leading wireless provider, its 2021 spin-off, and market shares are outlined - SK Telecom is Korea's leading wireless telecommunications services provider, with 24.6 million mobile phone subscribers and a 43.7% market share as of December 31, 2024120 - Effective November 1, 2021, the company conducted a horizontal spin-off of its semiconductor and certain other non-telecommunications businesses to SK Square, a newly established holding company; concurrently, a 5-to-1 stock split of common stock was executed122123 Korean Telecommunications Industry Penetration (as of December 31, 2024) | Metric | Value | | :--------------------------------- | :------ | | Population of Korea | 51,217 thousand | | Mobile Phone Subscribers | 56,185 thousand | | Mobile Phone Subscribers per 100 Population | 109.7 | | Telephone Lines in Service | 10,325 thousand | | Telephone Lines per 100 Population | 20.2 | | Number of Smartphones | 56,112 thousand | | Penetration of Smartphones | 99.9% | Korean Wireless Telecommunications Market Share (as of December 31, 2024) | Operator | Market Share (%) | | :------- | :--------------- | | SK Telecom | 43.7 | | KT | 30.0 | | LG U+ | 26.2 | | MVNOs (combined) | 16.9 | Item 4.B. Business Overview Business segments, strategic vision to become an 'AI Company,' network infrastructure, and regulatory landscape are outlined - The company's operations are reported in three segments: cellular services (wireless voice/data, device sales, IoT, cloud, smart factory, subscription, advertising, curated shopping, AI B2C/B2B), fixed-line telecommunications services (fixed-line telephone, broadband Internet, advanced media, business communications), and other businesses (T-commerce and miscellaneous)135 - The strategic vision is to transform into an 'AI Company' by developing and expanding AI infrastructure, applying AI technology to innovate core business lines and promote new growth businesses, and developing innovative AI services (e.g., 'A.' and 'A*')141 - The company formed the Global Telco AI Alliance (GTAA) with Deutsche Telecom, e&, Singtel, and Softbank to establish a joint venture for telecommunications-tailored large-language models and explore AI-related business opportunities142 - Operational efficiency efforts include utilizing AI in marketing and customer services, shifting 5G network capital expenditure focus to quality, and reorganizing non-essential businesses through disposals (e.g., SK M&Service, NATE Communications Corporation, F&U Credit Information, Kakao Corp. shares)146 Mobile Phone Subscribers by Network (SK Telecom, as of December 31, 2024) | Network | Subscribers (thousands) | | :------ | :---------------------- | | 5G | 17,052 | | LTE | 7,536 | | WCDMA | 325 | | Total | 24,913 | - SK Telecom's 5G network provided the fastest upload and download speeds among the three mobile network operators in Korea in December 2024, with a nationwide average download speed of 1,065 Mbps; 5G penetration reached 50.6% of total subscribers[180](index=180&type=chunk