Edgar Filing: SK TELECOM CO LTD

Committee Structure and Activities of the Board of Directors

Independent non-executive Director Nomination Committee

Organization

SK Telecom Co., Ltd

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF FEBRUARY 2007

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

11, Euljiro2-ga, Jung-gu

Seoul 100-999, Korea

(Address of principal executive offices)

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F þ Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(1):

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(7):

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes o No þ

If “Yes” is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b):
82-

QUARTERLY REPORT

(From January 1, 2006 to September 30, 2006)

THIS IS A SUMMARY OF THE QUARTERLY REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SUPERVISORY COMMISSION.

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A NON-CONSOLIDATED BASIS IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN KOREA, OR KOREAN GAAP, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

Contents


I.		Overview

II.		Business

III.		Financial Information

IV.		Auditor’s Opinion

V.		Management Structure

VI.		Shares

VII.		Employees

VIII.		Transactions with Interested Parties

IX.		Other Relevant Matters

Attachment: Korean GAAP Non-consolidated Financial Statements

I. OVERVIEW

1. Corporate Purpose of SK Telecom Co., Ltd. (the “Company”)

Business Objectives

1.		Information and communication business

2.		Handset sales and lease business

3.		New media business

4.		Advertisement business

5.		Communication sales business

6.		Personal property and real property lease business

7.		Research and technology development related to Clause 1 through 4

8.		Overseas business and trading business related to Clause 1 through 4

9.		Manufacturing and distribution business related to Clause 1 through 4

10.		Tourism

11.		Other businesses related to the above

2. Company History

A. Changes Since Incorporation

(1)

Date of Incorporation

—

March 29, 1984 (date of shareholders’ meeting for the incorporation): Incorporated as Korea Mobile Communications Service Co., Ltd.
(Authorized capital: Won 500 million / Paid-in capital: Won 250 million)

(2)

Location of Headquarters

	—		22 Dohwa-dong, Mapo-gu, Seoul (July 11, 1988)
	—		16-49 Hangang-ro 3-ga, Yongsan-gu, Seoul (November 19, 1991)
	—		267 Namdaemun-ro 5-ga, Jung-gu, Seoul (June 14, 1995)
	—		99 Seorin-dong, Jongro-gu, Seoul (December 20, 1999)
	—		11, Euljiro 2-ga, Jung-gu, Seoul (December 13, 2004)

B. Mergers

(1)

Target: Shinsegi Communication Co., Ltd.

	—		Date: January 13, 2002
	—		Registration: January 16, 2002

(2)

Target: SK IMT Co., Ltd.

	—		Date: May 1, 2003
	—		Registration: May 7, 2003

C. Significant Recent Business Events

(1)

Cancellation of Treasury Stock

Pursuant to the resolutions of the Company’s board of directors dated July 28, 2006 and August 31, 2006, the Company acquired 491,000 shares of the Company’s common stock (at a purchase price of Won92,518,373,000) between August 1 and August 14, 2006 and 592,000 shares of the Company’s common stock (at a purchase price of Won 116,559,060,000) between September 4 and September 27,

2006, respectively, and cancelled such shares of treasury stock as of August 17 and September 29, 2006, respectively.

(2) Interim Dividends

On July 28, 2006, the Company’s board of directors approved a resolution to pay an interim dividend as follows:

	—		Dividend amount: Won 1,000 per share (Total amount: Won 73,713,657,000)
	—		Market dividend rate: 0.5%
	—		Record date: June 30, 2006
	—		Dividend payment date: August 16, 2006

3. Information Regarding Shares

A. Total number of shares


(As of September 30, 2006)		(Unit: shares)


	Share type
Classification	Common shares		—		Total		Remarks
I. Total number of issuable shares		220,000,000		—		220,000,000		—
II. Total number of shares issued to date		89,278,946		—		89,278,946		—
III. Total number of shares retired to date		8,085,235		—		8,085,235		—
1. Capital reduction		—		—		—		—
2. Share cancellation		8,085,235		—		8,085,235		—
3. Redeemed shares		—		—		—		—
4. Others		—		—		—		—
IV. Total number of shares (II-III)		81,193,711		—		81,193,711		—
V. Number of treasury shares		8,563,054		—		8,563,054		—
VI. Number of shares outstanding (IV-V)		72,630,657		—		72,630,657		—

B. Capital Stock and Price per Share


(As of September 30, 2006)		(Unit: Won, shares)

Capital (total face value)

Price per share

Capital amount

Total amount of

Capital/

in financial

Total number of

distributed

Par value

Total number of

Number of distributed

statements

issued shares

shares

per share

issued shares

shares

Classification

Type

(a)

(IV of A×b)

(VI of A×b )

(b)

(a / IV of A.)

(a / VI of A.)

Registered

Common shares

44,639,473,000

40,596,855,500

36,315,328,500

500

549.8

614.6

Total

44,639,473,000

40,596,855,500

36,315,328,500

500

549.8

614.6

C. Acquisition and Disposition of Treasury Shares

(1)

Status of Acquisition and Disposition of Treasury Shares


		Amount at the								Amount at the end
Acquisition method	Type of share	beginning of period		Acquisition (+)		Disposition (-)		Retirement (-)		of period
Direct acquisition pursuant to Article 189-2 (1) of the relevant Act	Common share Preferred share		4,697,735 —		1,083,000 —		99,361 —		1,083,000 —		4,598,374 —
Direct acquisition based on causes other than those stipulated in Article 189-2 (1) of the relevant Act	Common share Preferred share		77,970 —		— —		— —		— —		77,970 —
Sub-total	Common share Preferred share		4,775,705 —		1,083,000 —		99,361 —		1,083,000 —		4,676,344 —
Indirect acquisition through trust and other agreements	Common share Preferred share		3,886,710 —		— —		— —		— —		3,886,710 —
Total	Common share Preferred share		8,662,415 —		1,083,000 —		99,361 —		1,083,000 —		8,563,054 —


* Of the 4,676,344 shares of treasury stocks directly acquired based on causes other than those provided in Article 189-2 (1) of the relevant Act, 1,685,816 shares were deposited with the Korea Securities Depository as of September 30, 2006 for any exchange of the Company’s overseas exchangeable bonds.

Employee Stock Ownership Program

(1)

Transactions with the Employee Stock Ownership Program

On August 23, 1999, the Company lent Won 118.6 billion of purchase funds for employee stock ownership to the Employee Stock Ownership Program, and the Employee Stock Ownership Program re-lent the amount to the Company’s employees in accordance with its internal allotment standards.

	—		Terms of the loan: 10-year installment repayment plan following a three-year grace period

	—		The loan is deducted from wages for each individual to repay the Employee Stock Ownership Program, and is subsequently repaid to the company.

Repayment amount during the first to the third quarter of 2006: Won 5,986,736,183

—

Details of the loan repayment


(As of September 30, 2006)		(Unit: in thousand Won)


Classification	Amount		Remarks
Initial loan amount		118,577,755	Lent on August 23, 1999 to 3,540 persons
Accumulated repayment amount		109,978,284	Including Won 5.99 billion repaid during the first to the third quarter of 2006
Balance		8,599,471	Full repayment by June 2010

(2) Voting Rights of the Employee Stock Ownership Program

During a designated period, to be 7 days or longer, each individual member of the Program may exercise his voting rights by expressing his intention on the shareholders’ meeting agenda through a written power of attorney to a designated proxy.

(3) Shareholdings of the Employee Stock Ownership Program

(Unit: shares)

Balance at the beginning

Balance at the end

Account classification

Types of share

of period

E.S.O.P. account

—

Member account

Common share

297,246

211,493


* As the relevant law requires an immediate transfer of the shares directly purchased by the employees to the account of the individual purchasers, the Company transfers and holds the employees’ stocks in separate individual accounts within the program once the number of shares for each individual member is determined.

4. Status of Voting Rights


(As of September 30, 2006)		(Unit: shares)


Classification		Number of shares		Remarks
Total outstanding shares (A)	Common share		81,193,711		—
	Preferred share		—
Number of shares without voting right (B)	Common share		8,563,054	Treasury shares
	Preferred share		—
Shares with restricted voting right under the Stock Exchange Act and other laws (C)	Common share		—		—
Shares with reestablished voting right (D)	—		—		—
The number of shares with exercisable voting right	Common share		72,630,657		—
(E = A - B - C + D)	Preferred share		—

5. Dividends and Others


		(Unit: in million Won except per share value)
		Year ended December 31,
Classification		2006(Half year)		2005		2004
Par value per share			500		500		500
Current net income			710,498		1,871,380		1,494,852
Net income per share			9,648		25,421		20,307
Income available for distribution as dividend			712,210		1,930,626		1,377,007
Total cash dividend			73,714		662,529		758,227
Total stock dividend			—		—		—
Percentage of cash dividend to available income (%)			10.4		35.4		50.7
Cash dividend yield ratio (%)	Common share		0.5		4.9		5.2
	Preferred share		—		—		—
Stock dividend yield ratio (%)	Common share		—		—		—
	Preferred share		—		—		—
Cash dividend per share	Common share		1,000		9,000		10,300
	Preferred share		—		—		—
Stock dividend per share	Common share		—		—		—
	Preferred share		—		—		—

* Half year interim dividend for the year 2006 was paid on August 16, 2006

* The total amount of cash dividend for the year ended December 31, 2005 includes the interim dividend amount of Won 73,614 million, and the cash dividend amount per share of Won 9,000 for the same period includes the interim dividend amount of Won 1,000 per share.

* The cash dividend per share of Won 10,300 for the year ended December 31, 2004 includes the regular dividend of Won 5,100 (including the interim dividend amount of Won 1,000) and a special dividend of Won 5,200.

II. BUSINESS

1. Business Summary

A. Industry Status

(1) Characteristics of the Industry

As of September 30, 2006, the number of domestic mobile phone subscribers reached 39.70 million and with a 82.0% penetration rate, and the Korean mobile communication market can be considered to have reached its maturation stage. However, considering the number of European countries with penetration rates exceeding 90%, additional future growth of the domestic market may be possible.

The Korean mobile communications market continues to improve with the help of advances in network-related technology evidenced by the world’s first commercialization of CDMA2000 1x, CDMA 1x EV-DO, and the development of highly advanced handsets that enables the provision of convergence services for multimedia contents, mobile commerce, telematics, satellite DMB, digital home services and other related contents.

(2) Industry Growth


										(Unit: 1,000 persons)
		As of September 30,
Classification		2006		End of 2005		End of 2004		End of 2003		End of 2002		End of 2001
	Penetration rate (%)		82.0		79.4		75.9		70.1		67.9		60.9
Number of subscribers	SK Telecom		20,032		19,530		18,783		18,313		17,220		11,867
	Shinsegi Communication		—		—		—		—		—		3,312
	PCS		19,671		18,812		17,803		15,279		15,123		13,867
	Total		39,703		38,342		36,586		33,592		32,342		29,046

(Data: Ministry of Information and Communication website)

(3) Market Characteristics

The Korean mobile communication market includes the entire population of Korea with mobile communication service needs, and almost every Korean is considered a potential user. With the market penetration rate reaching as high as 82.0% (as of the end of September 2006), the customer base is continuing to expand to include elementary school and pre-school children. Although demand to date has primarily been in the domestic market, as the business territory expands to overseas market, the size of overseas sales is expected to grow in the near future. Seasonal and economic fluctuations have much less impact on the Korean mobile communication market compared to other industries.

B. Company Status

(1) Market Share

* Historical market share of the Company

(Unit: %)

As of

Classification

September 30, 2006

2005

2004

2003

Mobile phone

50.5

50.9

51.3

54.5

* Comparative market share


(As of September 30, 2006)		(Unit: %)

Classification

SK Telecom

KTF

LG Telecom

Market share

50.5

32.2

17.4

(Data: Ministry of Information and Communication website)

(2)

New Business Contents and Prospects

Expansion of U.S. market operations through commencement of “Helio” service

	—		Resolution for capital investment regarding Mobile Virtual Network Operator (MVNO) service in the U.S. (January 26, 2005)

	—		Investment amount: US$220 million (From 2005 to 2007)

	—		Investment method: Establishment of a joint venture with EarthLink, which is one of the three major Internet service providers in the U.S.

	—		Service provided: MVNO (Mobile Virtual Network Operator)

•

Subscriber recruitment and service provision based on service facilities and fee plans

	•		Combination of the Company’s mobile communications business capabilities and data service technology with the local customer base, marketing infrastructure and brand power of EarthLink

	•		Planning to provide additional services related with music, games and messaging for target customers

Commencement of Commercial High Speed Downlink Packet Access (“HSDPA”) Service (May 16, 2006)

	•		Building on an advanced WCDMA network for data transmission, improve the Company’s long-term growth base through the development of new products with strong visual components (such as video phones and other video content) and the expansion of global roaming services;

	•		Planning to increase customer preference for HSDPA by capturing the early adopter and heavy user markets and to raise awareness of HSDPA as a premium service;

	•		Nationwide HSDPA network expected to be completed in the first half of 2007.

Commencement of Commercial Wireless Broadband (“WiBro”) Service (June 30, 2006)

	•		On January 20, 2005, the Company, along with Korea Telecom, obtained rights to the WiBro business following the review of the Information and Communications Policy Review Committee

	•		Currently servicing six HotZone areas in the Korea University, Shinchon, Hanyang University, Myungdong and Euljiro areas in Seoul;

	•		Plan to expand HotZone service and to introduce partial flat rate plans in light of various customers’ different usage patterns.

2. Major Products

A. Status of Major Products


			(Unit: in million Won, %)
Business field	Sales type	Item	Major trademarks	Sales amount (ratio)
Information and communication	Services	Mobile phone	June, NATE and others	7,800,540 (98.85%)
		Others	Others	90,637 (1.15%)

B. Price Trend of Major Products


		Quarter ended
Item		September 30, 2006		During 2005		During 2004
Mobile phone (Based on	Basic fee (per month)		13,000		13,000		13,000
standard call charge)	Service fee (per 10 seconds)		20		20		20


* Caller ID service became free of charge beginning January 2006.

3. Investment Status

A. Investments in Progress

(Unit: Won 100 million)

Investment

Subject of

Total

Amount
already

Future

Business field

Classification

period

investment

Investment effect

investments

invested

investment

Network/Common

Upgrade/
New installation

2006

Network, systems and others

Capacity increase and quality improvement; systems improvement

16,000

7,195

8,805


* Amount already invested is the cumulative amount expended through the quarter ended September 30, 2006.

B. Future Investment Plan

(Unit: Won 100 million)

Expected investment amount

Expected investment for each year

Business field

Asset type

Amount

2006

2007

2008

Investment effect

Network/Common

Network, systems and others

8,805

N/A

Upgrades to the existing services and provision of new services

Total

8,805

N/A

—


* The expected investment amount of Won 880.5 billion is the future investment amount for 2006, which is the total investment amount for 2006 less the cumulative amount expended through the quarter ended September 30, 2006.

4. Derivative Products and Others

A. Derivatives Contracts

(1)

FX Swap

	a)		Purpose of Contracts: Currency Exchange Risk Hedging

	b)		Contract Terms

	—		Cross Currency Swap

(As of September 30, 2006)

(Unit: in million Won)

Income/loss on

Contract amount

Contract party

Contract date

Proceeds payment method

valuation

US$125 million

Citibank

March 23, 2004

Exchange on the date immediately preceding the principal and interest payment date

(37,063

)

US$125 million

Credit Suisse

March 23, 2004

Same as above

(38,336

)

US$50 million

BNP Paribas

March 23, 2004

Same as above

(14,783

)

Total: US$300 million

—

(90,182

)

* Income/loss on valuation was calculated using the cash flow hedge accounting and was appropriated for capital adjustment.

— FX Swap

(As of September 30, 2006)

(Unit: in million Won)

Contract amount

Contract party

Contract date

Proceeds payment method

Income on valuation

US$100 million

Credit Suisse

May 27, 2004

Exchange before principal payment date

(21,798

)

US$300 million

Hana Bank

June 30, 2006

Payment of US Dollars and receipt of Korean Won on July 5, 2007

4,358

US$140 million

Shinhan Bank

US$140 million

Woori Bank

US$140 million

Korea Exchange Bank

US$140 million

Citibank

US$140 million

Barclays Capital

(2)

Interest Rate Swap

	a)		Purpose of Contracts: Interest Rate Risk Hedging

	b)		Contract Terms

	—		IRS

(As of September 30, 2006)

(Unit: in million Won)

Income/loss on

Contract amount

Contract party

Contract date

Proceeds payment method

valuation

2,000

Shinhan Bank

June 28, 2006

Fixing of interest payment date/
exchange of floating interest rate

(2,747

)

* Income/loss on valuation was calculated using the cash flow hedge accounting and was appropriated for capital adjustment.

5. R&D Investments


								(Unit: in thousand Won)
		Quarter ended
Category		September 30, 2006			2005			2004			Remarks
Raw material			106,872			234,889			255,320			—
Labor			27,359,460			35,191,759			36,026,539			—
Depreciation			98,926,079			121,335,301			122,097,858			—
Commissioned service			62,880,554			86,536,635			85,646,995			—
Others			21,646,814			41,730,732			39,951,341			—
Total R&D costs			210,919,779			285,029,316			283,978,053			—
Accounting	Sales and administrative expenses		202,995,538			273,223,885			272,290,385			—
	Development expenses (Intangible assets)		7,924,241			11,805,431			11,687,668			—
R&D cost / sales amount ratio (Total R&D costs / Current sales amount×100)			2.67	%		2.81	%		2.93	%		—

6. Other Matters

A. External Fund Procurement Summary

* Domestic procurement


							(Unit: in million Won)
	Beginning		New		Reduction from		Ending
Source of procurement	balance		procurement		repayment		balance		Remarks
Bank		—		200,000		—		200,000		—
Insurance company		—		—		—		—		—
Merchant banking		—		—		—		—		—
Loan specialty financial company		—		—		—		—		—
Mutual savings bank		—		—		—		—		—
Other financial institutions		24,543		—		10,889		13,654		—
Total procurement from financial institutions		24,543		200,000		10,889		213,654		—
Corporate bond (public offering)		2,500,000		200,000		350,000		2,350,000		—
Corporate bond (private offering)		—		—		—		—		—
Paid-in capital increase (public offering)		—		—		—		—		—
Paid-in capital increase (private offering)		—		—		—		—		—


							(Unit: in million Won)
	Beginning		New		Reduction from		Ending
Source of procurement	balance		procurement		repayment		balance		Remarks
Asset-backed securitization (public offering)		—		—		—		—		—
Asset-backed securitization (private offering)		—		—		—		—		—
Others		—		—		—		—		—
Total procurement from capital market		2,500,000		200,000		350,000		2,350,000		—
Borrowings from shareholder, officer and affiliated company		—		—		—		—		—
Others		—		—		—		—		—
Total		2,524,543		400,000		360,889		2,563,654		—


* Overseas procurement


									(Unit: in million Won)
					Reduction in
	Beginning				repayment and		Ending
Procurement source	balance		New procurement		others		balance		Remarks
Financial institutions		—		—		—		—		—
Overseas securities (Corporate bonds)		303,900		—		20,340		283,560	Exchange rate adjustment
Overseas securities (shares and others)		385,885		—		21,576		364,309	Stock conversion
Asset-backed securitization		—		—		—		—		—
Others		—		—		—		—		—
Total		689,785		—		41,916		647,869		—

B. Credit Ratings

(1) Corporate Bonds


	Subject of		Credit rating entity
Credit rating date	valuation	Credit rating	(Credit rating range)	Evaluation classification
March 12, 2004	Corporate bond	AAA	Korea Ratings	Current valuation
March 15, 2004	Corporate bond	AAA	National Information on Credit Evaluation, Inc.	Current valuation
April 23, 2004	Corporate bond	AAA	Korea Investors Service, Inc.	Current valuation


	Subject of		Credit rating entity
Credit rating date	valuation	Credit rating	(Credit rating range)	Evaluation classification
April 23, 2004	Corporate bond	AAA	Korea Ratings	Current valuation
December 6, 2004	Corporate bond	AAA	Korea Investors Service, Inc.	Current valuation
December 6, 2004	Corporate bond	AAA	National Information on Credit Evaluation, Inc.	Current valuation
March 11, 2005	Corporate bond	AAA	Korea Investors Service, Inc.	Current valuation
March 11, 2005	Corporate bond	AAA	Korea Ratings	Current valuation
March 14, 2005	Corporate bond	AAA	Korea Ratings	Regular valuation
June 14, 2005	Corporate bond	AAA	National Information on Credit Evaluation, Inc.	Regular valuation
June 13, 2006	Corporate bond	AAA	National Information on Credit Evaluation, Inc.	Regular valuation
June 21, 2006	Corporate bond	AAA	Korea Ratings	Regular valuation
June 22, 2006	Corporate bond	AAA	Korea Investors Service, Inc.	Regular valuation
September 1^st, 2006	Corporate bond	AAA	National Information on Credit Evaluation, Inc.	Current valuation
September 1^st, 2006	Corporate bond	AAA	Korea Ratings	Current valuation
September 1^st, 2006	Corporate bond	AAA	Korea Investors Service, Inc.	Current valuation


*Rating definition:		“AAA” — The certainty of principal and interest payment is at the highest level with extremely low investment risk, and is stable in that there is no influence of any environmental change under reasonable expectation conditions.

(2) Commercial Paper (“CP”)


			Credit rating entity	Evaluation
Credit rating date	Subject of valuation	Credit rating	(Credit rating range)	classification
January 26, 2004	CP	A1	National Information on Credit Evaluation, Inc.	Regular valuation
June 8, 2004	CP	A1	National Information on Credit Evaluation, Inc.	Current valuation
June 11, 2004	CP	A1	Korea Ratings	Current valuation
June 11, 2004	CP	A1	Korea Investors Service, Inc.	Current valuation
June 13, 2005	CP	A1	Korea Investors Service, Inc.	Current valuation
June 14, 2005	CP	A1	National Information on Credit Evaluation, Inc.	Current valuation
June 16, 2005	CP	A1	Korea Ratings	Current valuation
June 13, 2006	CP	A1	Korea Investors Service, Inc.	Current valuation
June 21, 2006	CP	A1	National Information on Credit Evaluation, Inc.	Current valuation
June 22, 2006	CP	A1	Korea Ratings	Current valuation


*Rating definition:		“A1” — Timely repayment capability is at the highest level with extremely low investment risk, and is stable in that there is no influence of any environmental change under reasonable expectation conditions.

(3) International Credit Ratings


		Credit rating	Credit rating company
Date of credit rating	Subject of valuation	of securities	(Credit rating range)	Evaluation type
June 14, 2005	Issuer Rating	A	Fitch (England)	Current valuation
July 14, 2005	Global Bonds	A2	Moody’s (U.S.A.)	Current valuation
July 14, 2005	Exchangeable Bonds	A2	Moody’s (U.S.A.)	Current valuation
July 27, 2005	Global Bonds	A	S&P (U.S.A.)	Current valuation
July 27, 2005	Exchangeable Bonds	A	S&P (U.S.A.)	Current valuation

III. FINANCIAL INFORMATION

1. Summary Financial Statements


(Unit: in million Won)
	Quarter ended
	September 30,			Year ended December 31,
Classification	2006			2005			2004			2003			2002
Current assets		4,121,627			4,172,485			3,854,345			3,460,706			2,746,991
— Quick assets		4,104,736			4,166,500			3,843,384			3,452,682			2,736,273
— Inventory		16,891			5,985			10,961			8,024			10,718
Fixed assets		10,882,707			10,349,191			10,166,360			9,915,253			9,974,227
— Investments		3,341,456			2,366,760			2,112,488			1,763,359			3,132,330
— Tangible assets		4,371,898			4,595,884			4,605,253			4,551,626			4,451,548
— Intangible assets		3,169,353			3,386,547			3,448,619			3,600,268			2,390,350
Total assets		15,004,334			14,521,676			14,020,705			13,375,959			12,721,218
Current liabilities		2,927,373			2,747,268			2,859,711			4,231,974			4,015,859
Fixed liabilities		3,392,550			3,516,528			4,033,902			3,202,147			3,168,412
Total liabilities		6,319,923			6,263,796			6,893,613			7,434,121			7,184,271
Capital		44,639			44,639			44,639			44,639			44,576
Capital surplus		2,963,880			2,966,198			2,983,166			2,915,964			2,884,385
— Surplus from share issuance		2,915,887			2,915,887			2,915,887			2,915,964			2,884,385
— Other capital surplus		47,993			50,311			67,279			—			—
Income surplus		7,565,455			7,269,861			6,156,708			5,140,349			4,897,099
Capital adjustment		(1,889,564	)		(2,022,817	)		(2,057,422	)		(2,159,114	)		(2,289,112	)
Total capital		8,684,410			8,257,881			7,127,091			5,941,838			5,536,948
Sales		7,891,177			10,161,129			9,703,681			9,520,244			8,634,049


(Unit: in million Won)
	Quarter ended
	September 30,		Year ended December 31,
Classification	2006		2005		2004		2003		2002
Operation income		2,045,510		2,653,570		2,359,581		3,080,660		2,683,676
Ordinary income		1,650,637		2,554,613		2,115,778		2,714,194		2,179,993
Current net income		1,167,300		1,871,380		1,494,852		1,942,750		1,511,278


*		See the attached Korean GAAP Non-consolidated Financial Statements.

IV. AUDITOR'S OPINION

1. Auditor


Quarter ended
September 30, 2006	September 30, 2005	2005	2004
Deloitte Anjin LLC	Deloitte Anjin LLC	Deloitte Anjin LLC	Deloitte Hana Anjin LLC

2. Audit Opinion


Term	Auditor’s opinion	Issues noted
Quarter ended September 30, 2006	Appropriate	—
Quarter ended September 30, 2005	Appropriate	—
Year ended December 31, 2005	Appropriate	—
Year ended December 31, 2004	Appropriate	—

3. Remuneration for Independent non-executive Auditors for the Past Three Fiscal Years

A. Audit Contracts

(Unit: in thousand Won)

Term

Auditors

Contents

Fee

Total hours

Quarter ended September 30, 2006

Deloitte Anjin LLC

Semi-annual review
Quarterly review
Non-consolidated financial statements audit
Consolidated financial statements
audit

656,000

7,637

Year ended December 31, 2005

Deloitte Anjin LLC

Semi-annual review
Quarterly review
Non-consolidated financial
statements audit
Consolidated financial statements
audit

447,000

5,177

Year ended December 31, 2004

Deloitte Hana Anjin LLC

Semi-annual review
Quarterly review
Non-consolidated financial
statements audit
Consolidated financial statements
audit

360,000

4,808

B. Non-Audit Services Contract with External Auditors


(Unit: in thousand Won)
Term	Contract date	Service provided	Service period	Fee
Quarter ended September 30, 2006	April 30, 2006	Tax consulting	7 days		45,000
	July 26, 2006	Financial consulting	7 days		40,000
Year ended December 31, 2005	February 4, 2005	Advisory service regarding the set up of the internal control	9 days		46,080
	March 30, 2005	— Form 20-F for the year ended December 31, 2003	10 days		20,200
		— Response to the U.S. S.E.C. comments regarding the Form 6-K including the U.S. GAAP consolidated financial statements for the six months ended June 30, 2004
	March 31, 2005	Tax adjustment for the year ended December 31, 2004	7 days		24,920
	April 15, 2005	Tax consulting	3 days		5,000
	April 29, 2005	Tax consulting	7 days		19,000
	June 1, 2005	2004 English audit	20 days		86,000
	July 18, 2005	Tax consulting	5 days		13,500
	December 31, 2005	Tax consulting	All year (100 hours)		10,000
Year ended December 31, 2004	March 2, 2004	Consulting on the issuance of overseas unsecured debenture	17 days		49,500
	March 30, 2004	Tax adjustment for the year ended December 31, 2003	5 days		22,650
	April 1, 2004	Financial due diligence	6 days		6,100
	April 10, 2004	Thailand tax consulting	4 days		12,000
	April 14, 2004	Consulting on issuance of overseas exchangeable bond	15 days		48,800
	May 10, 2004	Indonesia tax consulting	4 days		9,600
	September 30, 2004	U.S. GAAP Consolidated Audit (yearly basis)	20 days		86,000
	September 30, 2004	U.S. GAAP Consolidated Audit (Semi-annual basis)	30 days		114,000
	October 15, 2004	Consulting on internal control	50 days		171,000
		recommendations

V. MANAGEMENT STRUCTURE

1. Summary of Management Structure

A. Board of Directors

(1) Authority of the Board of Directors

Authority of the board of directors under Article 7 of the Regulations of the Board of Directors

	—		Convocation of shareholders’ meeting and submission of agenda

	—		Prior approval of financial statements

	—		Decisions on issuance of new shares

	—		Long-term borrowings, issuance of corporate bonds and redemptions

	—		Capital transfer of reserves

	—		Election of CEO and representatives

	—		Appointment of executive directors

	—		Establishment, transfer or closure of branches

	—		Enactment of and revision to the Regulations for the Board of Directors

	—		Annual business plan and budgeting

	—		Approval of investments of Won 15 billion or above

	—		Planned budget increases and changes for investments or Won 15 billion or above

	—		Diversification into new businesses

	—		Investments and joint ventures of Won 15 billion or above (excluding matters subject to prior approval by independent non-executive directors)

		—		Establishment of subsidiaries

		—		Guarantees of Won 15 billion or above (excluding matters subject to prior approval by independent non-executive directors)

		—		Transactions undertaken with related parties equal to or above the lesser of an amount equivalent to 10% of capital or Won 10 billion, and any material changes to such transactions in accordance with the Anti-trust Law and Fair Trade Act

		—		Enactment of and amendment to the Internal Trading Procedures

		—		Other matters considered necessary by the Board of Directors and those requiring Board of Directors’ approval under applicable laws

Reporting items under Article 7.2 of the Regulations of the Board of Directors

—

The representative director must report the following to the Board of Directors within two months after the date of occurrence:

		•		Results for the six months ended June 30 of each year

		•		Execution of investments between Won 5 billion and Won 15 billion

		•		New investments and joint ventures under Won 15 billion

		•		Acquisition of non-operational fixed assets

		•		Disposition of fixed assets of Won 15 billion or above

		•		Matters related to guarantees of under Won 15 billion

		•		Internal trading not subject to approval by the Board of Directors

		•		Matters delegated to the representative director that the Board of Directors requires to be reported

(2) Publication of Information on Director Candidates Prior to the Shareholders’ Meeting for the Election of Directors and Shareholders’ Nomination

	a)		On February 16, 2006, through the convocation of the shareholders’ meeting, information on candidates Kim Yong Woon and Lim Hyun Jin was publicly disclosed.

	b)		There was no nomination by the shareholders.

(3) Significant Activities of the Board of Directors


Meeting	Date	Agenda	Approval
264^th(the first meeting of 2006)	January 23, 2006	— Financial statements for the year ended December 31, 2005	Approved as proposed

		— Annual business report for the year ended December 31, 2005	Approved as proposed

		— Organization of Independent non-executive Director Nomination Committee	Approved as proposed

		— Amendment of regulation for the Compensation Review Committee	Amendment to be proposed to the Board of Directors in April, 2006


Meeting	Date	Agenda	Approval
265^th (the second meeting of 2006)	February 14, 2006	— Convocation of the 22^nd General Meeting of Shareholders	Approved as proposed

266^th (the third meeting of 2006)	March 31, 2006	— Election of committee members	Approved as proposed

		— Amendment of regulations for the Compensation Review Committee	Approved after amendment


267^th (the fourth meeting of 2006)	April 26, 2006	— Election of committee member for the Compensation Review Committee	Approved as proposed

		— Establishment of the Service &Technology Center (STC)	Approved as proposed

		— Exercise of the iHQ call option	Approved as proposed

268^th (the fifth meeting of 2006)	May 26, 2006	— Issuance of overseas convertible bonds and approval of related treasury stock disposition plan, as amended	Approved as proposed

269^th (the sixth meeting of 2006)	June 20, 2006	— Acquisition of China Unicom convertible bonds	Approved as proposed

		— Long-term borrowings	Approved as proposed

270^th (the seventh meeting of 2006)	July 28, 2006	— Interim dividends	Approved as proposed

		— Acquisition of the Company’s common stock for cancellation	Approved as proposed

		— Establishment of Global Committee and election of members	Approved after amendment

		— Issuance of corporate bonds and long-term borrowings	Approved as proposed

271th (the eighth meeting of 2006)	August 31, 2006	— Acquisition of the Company’s common stock for cancellation	Approved as proposed

		— Expansion of WCDMA investment	Approved as proposed

		— Construction of TD-SCDMA Test-bed and investment for development of related services	Approved as proposed

272th (the ninth meeting of 2006)	September 29, 2006	— Report on activities in July and August 2006	—

273th (the tenth meeting of 2006)	October 27, 2006	— Issuance of corporate bonds	Approved as proposed

(As of September 30, 2006)


	Members
Number of Persons	Company Directors	Independent non-executive Directors
4	Jung Nam Cho, Sung Min Ha	Jae Seung Yoon, Sang Jin Lee

Activities

* The Independent Non-executive Director Nomination Committee is a committee established under the provisions of the Articles of Incorporation.

b)	Compensation Review Committee

	¾	Organization

(As of September 30, 2006)


	Members
Number of Persons	Company Directors	Independent non-executive Directors
7 persons	—	Dae Sik Kim, Yong Woon Kim, Dae Kyu Byun, Seung Taik Yang, Jae Seung Yoon, Sang Jin Lee, Hyun Jin Lim

Activities


Meeting	Date	Number of Attendees	Details
The first meeting of 2006	May 25, 2006	7 persons/ 7 persons	Election of chairman
The second meeting of 2006	June 20, 2006	5 persons/ 7 persons	Discussion of operation of the Compensation Review Committee
The third meeting of 2006	July 27, 2006	7 persons/ 7 persons	same as above
The fourth meeting of 2006	August 30, 2006	7 persons/ 7 persons	same as above
The fifth meeting of 2006	October 26, 2006	6 persons/ 7 persons	same as above

The Compensation Review Committee is a committee established by the resolution of the Board of Directors.

Capex Review Committee

—

Organization

(As of September 30, 2006)


	Members
Number of Persons	Company Directors	Independent non-executive Directors
5 persons	Lee Bang Hyung	Byon Dae Kyu, Yang Seung Taek, Yoon Jae Seung, Lee Sang Jin

—

Activities


Meeting	Date	Number of Attendees	Details
The first meeting of 2006	February 13, 2006	4 persons/5 persons	— Additional report on the investment plan for 2006
The second meeting of 2006	April 25, 2006	4 persons/5 persons	— Establishment of the Service & Technology Center
			— Exercise of the iHQ call option
The third meeting of 2006	April 26, 2006	4 persons/5 persons	— Election of chairman
			— Approval of plans for investment in contents business and restrictions thereof
The fourth meeting of 2006	August 30, 2006	5 persons/5 persons	— Construction of TD-SCDMA Test-bed and investment for development of related services
			— Expansion of WCDMA investment

The Capex Review Committee is a committee established by the resolution of the Board of Directors.

Global Committee

—

Organization

(As of September 30, 2006)


	Members
Number of Persons	Company Directors	Independent non-executive Directors
4 persons	Ha Sung Min	Kim Dae Sik, Byon Dae Kyu, Lee Sang Jin

—

Activities


Meeting	Date	Number of Attendees	Details
The first meeting of 2006	July 27, 2006	4 persons/ 4 persons	— Report on Vietnam (S-Fone) and United States (HELIO) operations
			— Discussion on operation of Globalization Committee
The second meeting of 2006	September 28, 2006	4 persons/ 4 persons	— Election of chairman


*		The Global Committee is a committee established by the resolution of the Board of Directors.

Audit Committee: See “B. Audit System” below.


*		The Audit Committee is a committee established under the provisions of the Articles of Incorporation.

B. Audit System

(1)

Establishment and Organization of the Audit Committee

	a)		The Audit Committee is composed of three or more directors. However, independent non-executive directors must account for 2/3 or more, and the members are elected by the resolution of the Board of Directors each year.

	b)		The Audit Committee is convened when deemed necessary by the chairman or is requested by two or more of the committee members.

	c)		The quorum for resolution is majority attendance with majority consent of the attending members.

(2)

Authority of the Audit Committee

Includes authority to inquire on the subsidiary companies, right to investigate the business operations and asset conditions, and right to request for a business status report pursuant to the Audit Committee Regulations.

(3)

Members of the Audit Committee

Audit Committee Members are directors Kim Dae Sik, Kim Yong Woon and Im Hyun Jin.

(4)

Major Activities of the Audit Committee


Meeting	Date	Agenda	Approval	Remarks
The first meeting of 2006	January 20, 2006	— Report on operation of internal accounting controls	—	—
The second meeting of 2006	February 13, 2006	— Audit report for the year ended December 31, 2005	Approved as proposed	—
		— Evaluation of internal accounting controls	Approved as proposed


Meeting	Date	Agenda	Approval	Remarks
The third meeting of 2006	February 27, 2006	— Auditor’s opinion on the internal audit system	Approved as proposed
		— Management audit schedule for 2006	—	—
		— Proposal for the election of outside auditor for 2006-2008 period	—
The fourth meeting of 2006	March 8, 2006	— Election of outside auditor for 2006-2008 period	Approved as proposed	—
The fifth meeting of 2006	April 25, 2006	— Election of chairman	Approved as proposed
		— Remuneration for outside auditor	Approved as proposed	—
		— Collective re-approval of outside auditor’s service schedule for 2006	Approved as proposed
		— Management report	—
The sixth meeting of 2006	May 25, 2006	— Report on issuance of overseas convertible bonds and approval of related treasury stock disposition plan, as amended	—	—
The seventh meeting of 2006	June 20, 2006	— Audit report for 2005 US GAAP financial statements	—	—
The eighth meeting of 2006	July 5, 2006	— Report on operation of Ethics Counseling Center
		— Report on activities relating to the prevention of ethical issues	—	—
		— Report on the Company’s current operations
The ninth meeting of 2006	July 27, 2006	— Interim dividend plan
		— Plan to acquire the Company’s common stock for cancellation	—	—
		— Management audit results for the first half of 2006
The tenth meeting of 2006	August 30, 2006	— Plans for issuance of corporate bonds and long-term borrowings
		— Plan to acquire the Company’s common stock for cancellation	—	—
		— Report on the Company’s current operations
The eleventh meeting of 2006	October 26, 2006	— Report on status of internal accounting controls
		— Plan for issuance of corporate bonds	—	—
		— Report on the Company’s current operations

C. Exercise of Voting Rights by the Shareholders

(1)

Use of the Cumulative Voting System

		a) Pursuant to the Articles of Incorporation, the cumulative voting system was first introduced in the General Meeting of Shareholders in 2003.

		b) Articles of Incorporation

	—		Article 32 (3) (Election of Directors): Cumulative voting under Article 382-2 of the Commercial Code will not be applied for the election of directors.

	—		Article 4 of the 12^th Supplement to the Articles of Incorporation (Interim Regulation): Article 32 (3) of the Articles of Incorporation shall remain effective until the day immediately preceding the date of the general shareholders’ meeting of 2003.

D. Compensation of Officers and Others

(1) Compensation of Directors (including Independent non-executive Directors) and Members of the Audit Committee

(Unit: in million Won)

Total amount

approved by the

Meeting of

Average payment

Classification

Total payment

Shareholders

per person

Remarks

Company directors (4 persons)

4,026

12,000

1,007

—

Independent non-executive
directors (8 persons)

460

Including members of the Audit Committee (4 persons)

(2)

Granting and Exercise of Stock Options

(As of September 30, 2006)

(Unit: in thousand Won, shares)

Amount

Grant

Method of

Type of

Changes

not

Exercise

Final

Grantees

Relationship

date

grant

shares

Granted

Exercised

Cancelled

exercised

period

price

Cho Jung Nam

Registered officer

March 8, 2002

Distribution of treasury or new shares

Common stock

6,150

—

6,150

Within two years following the third year after the date of grant (March 8, 2002)

267

215

Kim Young Jin

—

March 8, 2002

Common stock

790

—

790

Kim Sin Bae

Registered officer

March 8, 2002

Common stock

1,650

—

1,650

Ha Sung Min

Registered officer

March 8, 2002

Common stock

690

—

690

Lee Sang Jin

Registered officer

March 8, 2002

Common stock

1,000

—

1,000

Kim Dae Sik

Registered officer

March 8, 2002

Common stock

1,000

—

1,000

Nam Sang Ku

Registered officer

March 8, 2002

Common stock

1,000

—

1,000

Sung Ki Jung

—

March 8, 2002

Common stock

1,000

—

1,000

Byon Dae Kyu

Registered officer

March 8, 2002

Common stock

1,000

—

1,000

Yoon Jae Seung

Registered officer

March 8, 2002

Common stock

1,000

—

1,000

Lee Bang Hyung

Registered officer

March 8, 2002

Common stock

1,620

—

1,620

Kim Dae Ki and 58 others

—

March 8, 2002

Common stock

48,830

—

48,830

Sub-total

—

65,730

—

65,730

—

Total

—

65,730

—

65,730

—

* The stock options granted on March 8, 2002 may be exercised between March 8, 2005 and March 7, 2007.

* The final price was calculated as of November 13, 2006.

* Although the total amount granted in or after 2001 is 109,550 shares, the outstanding number of options after deducting the number of options that have expired is 65,730 shares.

2. Affiliated Companies

(1)

Summary of Corporate Group

— Name: SK Group

(2)

Capital Investments between Affiliated Companies



(As of September 30, 2006)				* Based on common shares


	Invested companies
Investing company	SK Corporation			SK Networks			SK Telecom			SK Chemicals			SKC			SK E&C			SK Shipping			SK Securities
SK Corporation					40.64	%		21.75	%					44.37	%					72.13	%
SK Networks								1.34	%								0.02	%		17.71	%		22.71	%
SK Telecom
SK Chemicals																	58.03	%
SKC											3.39	%								10.16	%		12.41	%
SK E&C
SK Shipping
SK Securities
Walkerhill
SK C&C		11.16	%
SK incheon oil
Daehan City Gas
SK Telink
Busan City Gas
SK E&S
SK Communications
iHQ
WiderThan
Total affiliated
companies		11.16	%		40.64	%		23.09	%		3.39	%		44.37	%		58.05	%		100.00	%		35.12	%


	Invested companies
Investing companies	Walkerhill			SK E&S			SK Gas			SK C&C			DOPCO			Cheongju Gas			Gumi Gas			Pohang Gas
SK Corporation					51.00	%								32.38	%
SK Networks		9.68	%								15.00	%		4.61	%
SK Telecom											30.00	%
SK Chemicals		0.25	%
SKC		7.50	%
SK E&C
SK Shipping
SK Securities
Walkerhill
SK C&C
SK incheon oil														5.23	%
Daehan City Gas
SK Telink
Busan City Gas
SK E&S								45.53	%								100.00	%		100.00	%		100.00	%
SK Communications
iHQ
WiderThan
Total affiliated companies		17.43	%		51.00	%		45.53	%		45.00	%		42.23	%		100.00	%		100.00	%		100.00	%


	Invested companies
Investing companies	Daehan City Gas			Daehan Engineering			SK Sci-tech			SK Capital			K-Power			SK NJC			SK Telink			Busan City Gas
SK Corporation														65.00	%
SK Networks
SK Telecom											100.00	%								90.77	%
SK Chemicals								50.00	%								60.00	%
SKC
SK E&C
SK Shipping
SK Securities
Walkerhill
SK C&C
SK incheon oil
Daehan City Gas					100.00	%																	7.84	%
SK Telink
Busan City Gas
SK E&S		40.00	%																				40.00	%
SK Communications
iHQ
WiderThan
Total affiliated companies		40.00	%		100.00	%		50.00	%		100.00	%		65.00	%		60.00	%		90.77	%		47.84	%


	Invested companies
	Stellar			Jeonnam			Gangwon City			Iksan City			Iksan			OK Cashbag			Chungnam			SK
Investing companies	Shipping			Gas			Gas			Iksan City Gas			Energy			Service			City Gas			Wyverns
SK Corporation																	89.18	%
SK Networks
SK Telecom																	3.86	%					99.99	%
SK Chemicals
SKC
SK E&C
SK Shipping		80.82	%
SK Securities
Walkerhill
SK C&C
SK incheon oil
Daehan City Gas
SK Telink
Busan City Gas
SK E&S					100.00	%		100.00	%		100.00	%		100.00	%					100.00	%
SK Communications
iHQ
WiderThan
Total affiliated companies		80.82	%		100.00	%		100.00	%		100.00	%		100.00	%		93.04	%		100.00	%		99.99	%


	Invested companies
Investing companies	Infosec			MRO Korea			WiderThan			SK Communications			SK Telesys			Innoace			AirCROSS
SK Corporation
SK Networks					51.00	%
SK Telecom								10.10	%		86.45	%					14.25	%		38.10	%
SK Chemicals
SKC		20.63	%											77.13	%
SK E&C
SK Shipping
SK Securities
Walkerhill
SK C&C		48.14	%
SK incheon oil
Daehan City Gas
SK Telink											1.19	%
Busan City Gas
SK E&S
SK Communications
iHQ
WiderThan																	7.50	%		42.86	%
Total affiliated companies		68.77	%		51.00	%		10.10	%		87.64	%		77.13	%		21.75	%		80.95	%


	Invested companies
										Dongshin
Investing companies	Encar network			Global C&I			Oil chain			Pharmaceutical			Paxnet			TU Media			SK Utis			SK CTA
SK Corporation		50.00	%					50.00	%														50.00	%
SK Networks
SK Telecom					50.00	%								65.90	%		29.58	%
SK Chemicals											40.14	%								60.00	%
SKC
SK E&C
SK Shipping
SK Securities					40.00	%
Walkerhill
SK C&C
SK incheon oil
Daehan City Gas
SK Telink
Busan City Gas
SK E&S
SK Communications
iHQ
WiderThan
Total affiliated companies		50.00	%		90.00	%		50.00	%		40.14	%		65.90	%		29.58	%		60.00	%		50.00	%


	Invested companies
Investing companies	Seoul Records			In2Gen			Independence			SK Petrochemical			SK Mobile Energy			SKC Media			SK Incheon Oil
SK Corporation														88.34	%					90.63	%
SK Networks
SK Telecom		60.00	%
SK Chemicals					45.03	%					100.00	%
SKC														11.66	%		100.00	%
SK E&C
SK Shipping
SK Securities
Walkerhill
SK C&C								67.78	%
Daehan City Gas
SK Telink
Busan City Gas
SK Capital
SK E&S
Jeonnam City Gas
Gangwon City Gas
WiderThan
Total affiliated companies		60.00	%		45.03	%		67.78	%		100.00	%		100.00	%		100.00	%		90.63	%


	Invested companies
Investing companies	iHQ			YTN Media			I Film Co.			NTREEV Soft			SK I-Media
SK Corporation
SK Networks
SK Telecom		34.28	%
SK Chemicals
SKC
SK E&C
SK Shipping
SK Securities
Walkerhill
SK Gas
SK C&C														40.00	%
SK incheon oil
Daehan City Gas
SK Telink
Busan City Gas
SK E&S
SK Communications														60.00	%
IHQ					51.42	%		45.00	%		51.00	%
WiderThan
Total affiliated companies		34.28	%		51.42	%		45.005			51.00	%		100.00	%

VI. SHARES

1. Distribution of Shares

A. Shareholdings of Major Shareholders and other Related Parties



(As of September 30, 2006)		(Unit: share, %)


			Number of shares owned (equity rate)
			Beginning				Increase		Decrease		Ending				Cause
		Types of	Number of		Ownership		Number of		Number of		Number of		Ownership		of
Name	Relationship	shares	shares		ratio		shares		shares		shares		ratio		change
SK Corporation	Parent company	Common stock		17,663,127		21.47		—		—		17,663,127		21.75		—
SK Networks	Affiliated company	Common stock		1,085,325		1.32		—		—		1,085,325		1.34		—
Tae Won Choi	Officer of affiliated company	Common stock		100		0.00		—		—		100		0.00		—
Shin Won Choi	Officer of affiliated company	Common stock		700		0.00		—		—		700		0.00		—
Shin Bae Kim	Director	Common stock		1,270		0.00		—		—		1,270		0.00		—
Dae Kyu Byun	Director	Common stock		50		0.00		—		—		50		0.00		—
Jae Seung Yoon	Director	Common stock		200		0.00		—		—		200		0.00		—
Bang Hyung Lee	Director	Common stock		1,630		0.00		—		1,230		400		0.00		—
Sung Min Ha	Director	Common stock		738		0.00		—		—		738		0.00		—
Total		Common stock		18,753,140		22.79		—		1,230		18,751,910		23.10		—
		Preferred stock		0		0		—		—		0		0
Total				18,753,140		22.79		—		1,230		18,751,910		23.10

Largest sharedholder: SK Corporation Number of related parties: 8 persons

B. Shareholders with More than 5% Shareholding



(As of September 30, 2006)		(Unit: share, %)


		Common share				Preferred share				Sub-total
		Number of		Ownership		Number of		Ownership		Number of		Ownership
Rank	Name (title)	shares		ratio		shares		ratio		shares		ratio
1	Citibank ADR		22,330,137		27.50		—		—		22,330,137		27.50
2	SK Corporation		17,663,127		21.75		—		—		17,663,127		21.75
3	SK Telecom		8,563,054		10.55		—		—		8,563,054		10.55
Total			48,556,318		59,80		—		—		48,556,318		59.80

C. Shareholder Distribution

(As of June 30, 2006)
	Number of				Number of
Classification	shareholders		Ratio (%)		shares		Ratio (%)		Remarks
Total minority shareholders		20,018		99.95		30,266,748		36,78		—
Minority shareholders (corporate)		953		4.75		12,596,711		15.31		—
Minority shareholders (individual)		19,065		95.19		17,670,037		21.47		—
Largest shareholder		1		0.00		17,663,127		21.47		—
Major shareholders		—		—		—		—		—
Other shareholders		8		0.03		34,346,836		41.74		—
Other shareholders (corporate)		6		0.02		10,995,387		13.36		—
Other shareholders (individual)		2		0.00		23,351,449		28.38		—
Total		20,027		100.00		82,276,711		100.00		—

2. Share Price and Trading Volume in the Last Six Months

A. Domestic Securities Market



		(Unit: Won, shares)


		September
Types		2006		August 2006		July 2006		June 2006		May 2006		April 2006
Common share	Highest		205,500		202,500		205,000		234,000		237,500		225,000
	Lowest		189,000		179,000		188,500		193,000		207,500		188,500
Monthly transaction volume			4,634,645		5,158,605		3,069,172		4,301,579		3,653,171		5,258,280

B. Overseas Securities Market



New York Stock Exchange		(Unit: US$, ADR)


		September
Types		2006		August 2006		July 2006		June 2006		May 2006		April 2006
Depository receipt	Highest		24.16		22.43		23.75		26.75		27.70		26.70
	Lowest		22.20		21.14		21.87		22.54		24.91		23.31
Monthly transaction volume			15,993,800		18,427,807		15,287,500		25,627,800		23,618,694		16,620,193

VII. EMPLOYEES



(As of September 30, 2006)		(Unit: persons, in million Won)


	Number of employees
	Office										Total		Average
	managerial		Production						Average		quarterly		wage per
Classification	positions		positions		Others		Total		service year		wage		person		Remarks
Male		3,741		—		—		3,741		9.6		170,937		45.7		—
Female		534		—		—		534		8.0		20,297		38.0		—
Total		4,275		—		—		4,275		9.4		191,234		44.7		—

VIII. TRANSACTIONS WITH RELATED PARTIES

1. Transactions with the Largest Shareholder

A. Provisional Payment and Loans (including loans on marketable securities)



		(Unit: in million Won)

Name

Account

Change details

Accrued

(Corporate name)

Relationship

category

Beginning

Increase

Decrease

Ending

interest

Remarks

SK Wyverns

Affiliated company

Long-term and short-term loans

5,857

—

575

5,282

356

—

B. Equity Investments



		(Unit: in million Won)



Name		Details
(Corporate name)	Relationship	Types of Investment	Beginning		Increase		Decrease		Ending		Note
SLD Telecom, Pte. Ltd.	Affiliated company	Common share		93,987		97,285		—		191,272		—
SKT U.S.A. Holdings	Affiliated company	Common share		123,214		75,499		—		198,713		—
SK Mobile	Affiliated company	Common share		—		10,322		—		10,322		—
SKT-HP Fund	Affiliated company	Common share		6,415		—		6,415		—
iHQ	Affiliated company	Common share		14,440		27,352		—		41,792
Cyworld Japan Co., Ltd.	Affiliated company	Common share		1,309		1,832		—		3,141
China STC	Affiliated company	Common share		—		1,343		—		1,343
Total				239,365		213,633		6,415		446,583		—

C. Transfer of Assets

(Unit: in thousand won)

Transfer details

Amount

Name

Transfer

Transfer (out)

Transfer (in)

(Corporate name)

Relationship

Objective

purpose

date

amount

Remarks

EnCar Network

Affiliated company

12 vehicles

Disposition of surplus vehicles

January to
June 2006

—

120,819

—

Total

—

120,819

Transactions with Shareholders (excluding the largest shareholder and others), Officers, Employees and other Interested Parties

A. Provisional Payment and Loans (including loans on marketable securities)

* Agents

(Unit: in million Won)

Account

Change details

Accrued

Name (Corporate name)

Relationship

category

Beginning

Increase

Decrease

Ending

interest

Remarks

‘A1’ and others

Agency

Long-term and short-term loans

62,776

74,783

76,533

61,026

—


* Overseas investment companies

(Unit: in million Won)

Name

Account

Change details

(Corporate name)

Relationship

category

Beginning

Increase

Decrease

Ending

Accrued interest

Remarks

DSS Mobile Com. (India)

Overseas Investment
company

Long-term loans

18,887

—

18,887

—

Payment guarantee

Equity Investments


(Unit: in million Won)
			Details
Name (Corporate name)	Relationship	Types of Investment	Beginning		Increase		Decrease		Ending		Remarks
Flarion Technologies, Inc.	Affiliated party	Convertible preferred share		3,638		—		3,638		—	—

Qualcomm, Inc.	Affiliated party	Common share		—		2,756		—		2,756	—

Mobile Welcome Co.	Affiliated party	Common share		1,000		—		1,000		—	—

Cyper Casting	Affiliated party	Common share		—		141		—		141
	Total			4,638		2,897		4,638		2,897	—

IX. OTHER RELEVANT MATTERS

1. Developments in the Items mentioned in prior Reports on Important Business Matters

A. Status and Progress of Major Management Events

Summary Minutes of the Shareholders’ Meeting


Date	Agenda	Resolution
Meeting of Shareholders for the year ended December 31, 2005 (March 10, 2006)	1. Approval of the financial statements for the year ended December 31, 2005 2. Amendment of the Articles of Incorporation 3. Remuneration limit for Directors 4. Election of Directors (Election of Independent non-executive directors as Audit Committee members)	Approved (Cash dividend, Won 8,000 per share) Approved (Addition of business objective: travel business) Approved (Won 12 billion) Approved (Kim Yong Woon and Im Hyun Jin)

3.		Contingent Liabilities

A.		Material Legal Proceedings

(1)		Action Seeking to Vacate Judgment of the Intellectual Property Tribunal Nullifying Patent Registration Related to Caller Ring Service

	a)		Parties to the litigation: Park Won Sup (plaintiff) vs. the Company (defendant)

	b)		Overview: Mr. Park Won Sup (the representative director of Ad Ring Systems Co., Ltd.) claimed that certain technology the Company uses to provide the caller ring service infringed upon his patent rights, and the Company 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 and Mr. Park appealed the decision.

	c)		Progress: The Patent Court dismissed plaintiff’s claim (September 2005), after which the plaintiff appealed.

	d)		Impact on business: In the event that the case is decided against the Company, there is a risk of material future royalty obligations. However, given the progress of the proceedings, the estimated impact should not be large; however, the actual impact may differ depending on future events.

(2)

Actions for the Cancellation of the International Registration for Satellite Network

a) Parties to the litigation: Korea Multinet Co., Ltd. (“Korea Multinet”) vs. the Ministry of Information and Communication (“MIC”; the Company is participating in the action on behalf of MIC)

b) Overview: Korea Multinet brought an administrative action against MIC to cancel the Company’s international satellite frequency registration related to the satellite DMB business.

c) Progress: The trial court found for the defendant and the appellate court affirmed the judgment of the trial court (June 30, 2004). The plaintiff appealed and the case is currently pending at the Supreme Court.

d) Impact on business: Given the progress of the proceedings, no significant impact on the Company’s business is expected; however, the actual impact may differ depending on future events.

(3)

Actions for the Cancellation of Key Communication Business Licenses and Allotment of Satellite DMB Frequency

a) Parties to the litigation: Korea Multinet vs. MIC (the Company is participating in the action on behalf of MIC)

b) Overview: Korea Multinet brought an administrative action against MIC to cancel the Company’s key communication business licenses and the allotment of the Company’s satellite DMB frequency.

c) Progress: Trial currently in progress

Impact on business: The Company plans to provide full support to MIC in the action although no significant impact to the Company’s business is expected; however, the actual impact may differ depending on future events.

SK TELECOM CO., LTD.

NON-CONSOLIDATED FINANCIAL STATEMENTS
THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

Independent Accountants’ Review Report

English Translation of a Report Originally Issued in Korean

To the Stockholders and Board of Directors of
SK Telecom Co., Ltd. :

We have reviewed the accompanying non-consolidated balance sheet of SK Telecom Co., Ltd. (the “Company”) as of September 30, 2006 and the related non-consolidated statements of income and cash flows for the three months and nine months ended September 30, 2006 and 2005, all expressed in Korean won. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our reviews.

We conducted our reviews in accordance with standards for review of interim financial statements in the Republic of Korea. Those standards require that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data, and this provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Based on our reviews, nothing has come to our attention that causes us to believe that the financial statements referred to above are not presented fairly, in all material respects, in conformity with accounting principles generally accepted in the Republic of Korea.

We have previously audited, in accordance with auditing standards generally accepted in the Republic of Korea, the non-consolidated balance sheet of the Company as of December 31, 2005, and the related non-consolidated statements of income, appropriations of retained earnings and cash flows for the year then ended (not presented herein); and in our report dated February 3, 2006, we expressed an unqualified opinion on those non-consolidated financial statements. The accompanying balance sheet as of December 31, 2005, which is comparatively presented, does not differ in material respects from such audited non-consolidated balance sheet.

Our reviews also comprehended the translation of the Korean won amounts into U.S. dollar amounts and nothing has come to our attention that causes us to believe that such translation has not been made in conformity with the basis stated in Note 2(a). Such U.S. dollar amounts are presented solely for the convenience of readers outside of Korea.

Accounting principles and review standards and their application in practice vary among countries. The accompanying financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying financial statements are for use by those knowledgeable about Korean accounting principles and review standards and their application in practice.

October 27, 2006

/s/ Deloitte Anjin LLC
Seoul, Republic of Korea

Notice to Readers

This report is effective as of October 27, 2006, the accountants’ review report date. Certain subsequent events or circumstances may have occurred between the accountants’ review report date and the time the accountants’ review report is read. Such events or circumstances could significantly affect the accompanying financial

statements and may result in modification to the accountants’ review report.

SK TELECOM CO., LTD.
NON-CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2006 AND DECEMBER 31, 2005
(See Independent Accountants’ Review Report)


					Translation into U.S. dollars
	Korean won				(Note 2)
	September 30,		December 31,		September 30,		December 31,
	2006		2005		2006		2005
	(In millions)				(In thousands)
ASSETS

CURRENT ASSETS :
Cash and cash equivalents (Notes 2 and 11)	W	331,520	W	151,766	$	350,444	$	160,429
Short-term financial instruments		121,467		73,062		128,401		77,233
Trading securities (Notes 2 and 3)		483,114		745,360		510,691		787,907
Current portion of long-term investment securities (Notes 2 and 3)		125		—		132		—
Accounts receivable — trade, net of allowance for doubtful accounts of W108,530 million as of September 30, 2006 and W121,319 million as of December 31, 2005 (Notes 2, 11 and 21)		1,575,379		1,607,596		1,665,305		1,699,362
Short-term loans, net of allowance for doubtful accounts of W9,181 million at September 30, 2006 and W648 million at December 31, 2005 (Notes 2, 5 and 21)		58,889		64,150		62,251		67,812
Accounts receivable — other, net of allowance for doubtful accounts of W18,464 million at September 30, 2006 and W14,246 million at December 31, 2005 (Notes 2, 11 and 21)		1,319,083		1,333,238		1,394,379		1,409,342
Inventories (Note 2)		16,891		5,986		17,855		6,328
Prepaid expenses		125,177		101,274		132,322		107,055
Current deferred income tax assets, net (Notes 2 and 16)		67,637		61,152		71,498		64,643
Currency swap (Notes 2 and 23)		4,358		—		4,607		—
Advanced payments and other		17,987		28,901		19,014		30,550


Total Current Assets		4,121,627		4,172,485		4,356,899		4,410,661


NON-CURRENT ASSETS :
Property and equipment, net (Notes 2, 6, 10, 20 and 21)		4,371,898		4,595,883		4,621,457		4,858,227
Intangible assets, net (Notes 2 and 7)		3,169,353		3,386,547		3,350,267		3,579,859
Long-term investment securities (Notes 2 and 3)		1,855,225		1,203,333		1,961,126		1,272,022
Equity securities accounted for using the equity method (Notes 2 and 4)		1,246,803		925,904		1,317,974		978,757
Long-term loans, net of allowance for doubtful accounts of W23,720 million at September 30, 2006 and W23,737 million at December 31, 2005 (Notes 2, 5 and 21)		12,502		14,204		13,216		15,015
Guarantee deposits, net of allowance for doubtful accounts of W163 million as of September 30, 2006 and W312 million at December 31, 2005 (Notes 2, 11 and 21)		117,262		122,846		123,956		129,858
Long-term deposits and other (Note 18)		109,663		100,474		115,922		106,210


Total Non-Current Assets		10,882,706		10,349,191		11,503,918		10,939,948


TOTAL ASSETS	W	15,004,333	W	14,521,676	$	15,860,817	$	15,350,609

(Continued)

SK TELECOM CO., LTD.
NON-CONSOLIDATED BALANCE SHEETS (CONTINUED)
SEPTEMBER 30, 2006 AND DECEMBER 31, 2005
(See Independent Accountants’ Review Report)


							Translation into U.S. dollars
	Korean won						(Note 2)
	September 30,			December 31,			September 30,			December 31,
	2006			2005			2006			2005
	(In millions)						(In thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES :
Accounts payable (Notes 11 and 21)	W	1,044,347		W	971,558		$	1,103,961		$	1,027,017
Income tax payable		270,024			366,579			285,438			387,504
Accrued expenses (Notes 2 and 22)		328,269			362,178			347,007			382,852
Dividend payable		294			298			311			315
Withholdings		297,810			205,060			314,810			216,765
Current portion of long-term debt, net (Notes 2, 8 and 10)		946,823			809,490			1,000,870			855,698
Current portion of subscription deposits (Note 9)		15,769			14,875			16,669			15,724
Advanced receipts and other		24,037			17,230			25,409			18,214


Total Current Liabilities		2,927,373			2,747,268			3,094,475			2,904,089


LONG-TERM LIABILITIES :
Bonds payable, net (Notes 2 and 8)		2,094,360			2,314,208			2,213,911			2,446,309
Long-term borrowings (Note 8)		200,000			—			211,416			—
Subscription deposits (Note 9)		21,666			23,770			22,903			25,127
Long-term payables — other, net of present value discount of W45,756 million as of September 30, 2006 and W58,413 million as of December 31, 2005 (Note 2)		514,244			591,587			543,598			625,356
Obligations under capital lease (Notes 2 and 10)		3,397			10,204			3,591			10,786
Accrued severance indemnities, net (Notes 2 and 21)		24,847			64,029			26,265			67,684
Non-current deferred income tax liabilities, net (Notes 2 and 16)		392,128			409,715			414,512			433,103
Long-term currency swap (Notes 2 and 23)		111,980			73,450			118,372			77,643
Long-term interest rate swap (Notes 2 and 23)		2,747			—			2,904			—
Guarantee deposits received and other (Note 21)		27,181			29,565			28,733			31,252


Total Long-Term Liabilities		3,392,550			3,516,528			3,586,205			3,717,260


Total Liabilities		6,319,923			6,263,796			6,680,680			6,621,349


STOCKHOLDERS’ EQUITY :
Capital stock (Notes 1 and 12)		44,639			44,639			47,187			47,187
Capital surplus (Notes 2 and 12)		2,963,880			2,966,198			3,133,066			3,135,516
Retained earnings (Note 13) :
Appropriated		6,679,235			5,470,701			7,060,502			5,782,982
Before appropriations		886,220			1,799,160			936,808			1,901,860
Capital adjustments :
Treasury stock (Note 14)		(2,023,624	)		(2,047,105	)		(2,139,137	)		(2,163,959	)
Unrealized gains (losses) on valuation of long-term investment securities, net (Notes 2, 3 and 16)		89,739			(42,134	)		94,862			(44,539	)
Equity in capital adjustments of affiliates, net (Notes 2, 4 and 16)		64,353			77,119			68,025			81,521
Loss on valuation of currency swap, net (Notes 2, 16 and 23)		(21,287	)		(14,178	)		(22,502	)		(14,987	)
Loss on valuation of interest rate swap, net (Notes 2, 16 and 23)		(1,991	)		—			(2,105	)		—
Stock options (Notes 2,15 and 21)		3,246			3,480			3,431			3,679


Total Stockholders’ Equity		8,684,410			8,257,880			9,180,137			8,729,260


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	W	15,004,333		W	14,521,676		$	15,860,817		$	15,350,609

See accompanying notes to non-consolidated financial statements.

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(See Independent Accountants’ Review Report)


	Korean won												Translation into U.S. dollars (Note 2)
	2006						2005						2006						2005
	Three months			Nine months			Three months			Nine months			Three months			Nine months			Three months			Nine months
	ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30
	(In millions)												(In thousands)
OPERATING REVENUE (Notes 2 and 21)	W	2,712,531		W	7,891,177		W	2,595,485		W	7,534,571		$	2,867,369		$	8,341,625		$	2,743,642		$	7,964,663


OPERATING EXPENSES (Notes 2 and 21)
Labor cost (Note 21)		(100,339	)		(320,169	)		(98,112	)		(295,684	)		(106,067	)		(338,445	)		(103,712	)		(312,562	)
Commissions paid		(806,258	)		(2,397,787	)		(747,222	)		(2,176,985	)		(852,281	)		(2,534,659	)		(789,875	)		(2,301,253	)
Depreciation and amortization (Notes 2, 6, 7 and 10)		(383,545	)		(1,057,068	)		(379,392	)		(1,080,445	)		(405,438	)		(1,117,408	)		(401,049	)		(1,142,119	)
Network interconnection		(207,954	)		(712,292	)		(238,966	)		(697,319	)		(219,825	)		(752,951	)		(252,607	)		(737,124	)
Leased line		(99,339	)		(296,950	)		(98,252	)		(290,309	)		(105,010	)		(313,901	)		(103,860	)		(306,881	)
Advertising		(68,453	)		(206,116	)		(67,234	)		(189,587	)		(72,360	)		(217,882	)		(71,072	)		(200,409	)
Research and development (Note 2)		(51,539	)		(153,294	)		(51,772	)		(149,236	)		(54,481	)		(162,044	)		(54,727	)		(157,755	)
Rent		(47,948	)		(141,588	)		(43,814	)		(130,897	)		(50,685	)		(149,670	)		(46,315	)		(138,369	)
Frequency usage		(40,174	)		(118,484	)		(38,555	)		(116,288	)		(42,467	)		(125,247	)		(40,756	)		(122,926	)
Repair		(34,844	)		(97,785	)		(33,671	)		(80,175	)		(36,833	)		(103,367	)		(35,593	)		(84,752	)
Cost of goods sold		(11,666	)		(24,286	)		(4,323	)		(8,678	)		(12,332	)		(25,672	)		(4,570	)		(9,173	)
Other		(102,352	)		(319,848	)		(123,239	)		(320,183	)		(108,193	)		(338,106	)		(130,274	)		(338,459	)


Sub-total		(1,954,411	)		(5,845,667	)		(1,924,552	)		(5,535,786	)		(2,065,974	)		(6,179,352	)		(2,034,410	)		(5,851,782	)


OPERATING INCOME		758,120			2,045,510			670,933			1,998,785			801,395			2,162,273			709,232			2,112,881


OTHER INCOME :
Interest income (Note 3)		12,917			49,275			12,521			35,830			13,654			52,088			13,236			37,875
Dividends		4,969			20,345			5,076			21,506			5,253			21,506			5,366			22,734
Commissions (Note 21)		9,261			27,220			7,295			23,369			9,790			28,774			7,711			24,703
Equity in earnings of affiliates (Notes 2 and 4)		14,415			47,831			22,318			40,484			15,238			50,561			23,592			42,795
Foreign exchange and translation gains (Note 2)		288			2,332			861			1,384			304			2,465			910			1,463
Reversal of allowance for doubtful accounts		—			—			—			428			—			—			—			452
Gain on disposal of investment assets		2,494			4,963			176,053			177,010			2,636			5,246			186,103			187,114
Gain on disposal of property, equipment and intangible assets		302			1,056			140			744			319			1,116			148			786
Gain on transaction and valuation of currency swap (Notes 2 and 23)		4,930			4,358			1,669			4,314			5,211			4,607			1,764			4,560
Other		13,686			35,930			6,506			26,045			14,468			37,981			6,877			27,533


Sub-total		63,262			193,310			232,439			331,114			66,873			204,344			245,707			350,015

(Continued)

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(See Independent Accountants’ Review Report)


	Korean won												Translation into U.S. dollars (Note 2)
	2006						2005						2006						2005
	Three months			Nine months			Three months			Nine months			Three months			Nine months			Three months			Nine months
	ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30
	(In millions)												(In thousands)
OTHER EXPENSES :
Interest and discounts	W	(61,744	)	W	(178,534	)	W	(59,588	)	W	(191,520	)	$	(65,268	)	$	(188,725	)	$	(62,989	)	$	(202,452	)
Donations		(20,960	)		(42,479	)		(13,358	)		(31,076	)		(22,156	)		(44,904	)		(14,121	)		(32,850	)
Foreign exchange and translation losses (Note 2)		(1,197	)		(2,637	)		(344	)		(1,068	)		(1,265	)		(2,788	)		(364	)		(1,129	)
Loss on transaction and valuation of currency swap (Notes 2 and 23)		—			(8,553	)		—			—			—			(9,041	)		—			—
Equity in losses of affiliates (Notes 2 and 4)		(55,762	)		(112,054	)		(20,326	)		(57,524	)		(58,945	)		(118,450	)		(21,486	)		(60,808	)
Loss on disposal of investment assets		(489	)		(3,194	)		(1	)		(63	)		(517	)		(3,376	)		(1	)		(67	)
Loss on disposal of property, equipment and intangible assets		(1,385	)		(15,019	)		(498	)		(3,982	)		(1,464	)		(15,876	)		(526	)		(4,209	)
Special severance indemnities (Note 2)		—			(144,021	)		—			—			—			(152,242	)		—			—
Other		(33,910	)		(81,692	)		(19,666	)		(57,176	)		(35,846	)		(86,356	)		(20,789	)		(60,440	)


Sub-total		(175,447	)		(588,183	)		(113,781	)		(342,409	)		(185,461	)		(621,758	)		(120,276	)		(361,955	)


ORDINARY INCOME		645,935			1,650,637			789,591			1,987,490			682,807			1,744,859			834,663			2,100,941


INCOME BEFORE INCOME TAXES		645,935			1,650,637			789,591			1,987,490			682,807			1,744,859			834,663			2,100,941

PROVISION FOR INCOME TAXES (Notes 2 and 16)		(189,133	)		(483,337	)		(201,713	)		(564,085	)		(199,930	)		(510,927	)		(213,227	)		(596,285	)


NET INCOME	W	456,802		W	1,167,300		W	587,878		W	1,423,405		$	482,877		$	1,233,932		$	621,436		$	1,504,656


NET INCOME PER SHARE (In Korean won and U.S. dollars) (Note 17)	W	6,231		W	15,875		W	7,986		W	19,336		$	6,587		$	16,781		$	8,442		$	20,440


DILUTED NET INCOME PER SHARE (In Korean won and U.S. dollars) (Note 17)	W	6,135		W	15,641		W	7,849		W	19,024		$	6,485		$	16,534		$	8,297		$	20,110

See accompanying notes to non-consolidated financial statements.

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(See Independent Accountants’ Review Report)


	Korean won												Translation into U.S. dollars (Note 2)
	2006						2005						2006						2005
	Three months			Nine months			Three months			Nine months			Three months			Nine months			Three months			Nine months
	ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30
	(In millions)												(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES :

Net income	W	456,802		W	1,167,300		W	587,878		W	1,423,405		$	482,877		$	1,233,932		$	621,436		$	1,504,656


Expenses not involving cash payments :
Provision for severance indemnities		6,866			33,710			10,563			29,137			7,258			35,634			11,166			30,800
Depreciation and amortization		416,780			1,155,994			409,075			1,168,603			440,571			1,221,981			432,426			1,235,310
Allowance for doubtful accounts		17,897			47,479			31,906			66,781			18,919			50,189			33,727			70,593
Foreign translation loss		712			1,237			—			63			753			1,308			—			67
Loss on transaction and valuation of currency swap		—			8,553			—			—			—			9,041			—			—
Equity in losses of affiliates		55,762			112,054			20,326			57,524			58,945			118,450			21,486			60,808
Loss on disposal of investment assets		489			3,194			1			63			517			3,376			1			67
Loss on disposal of property, equipment and intangible assets		1,385			15,019			498			3,982			1,464			15,876			526			4,209
Amortization of discounts on bonds and other		12,082			36,513			12,128			37,095			12,771			38,598			12,821			39,212


Sub-total		511,973			1,413,753			484,497			1,363,248			541,198			1,494,453			512,153			1,441,066


Income not involving cash receipts :
Foreign translation gain		(93	)		(312	)		(93	)		(96	)		(98	)		(330	)		(98	)		(101	)
Reversal of allowance for doubtful accounts		—			—			—			(428	)		—			—			—			(452	)
Equity in earnings of affiliates		(14,415	)		(47,831	)		(22,318	)		(40,484	)		(15,238	)		(50,561	)		(23,592	)		(42,795	)
Gain on disposal of investment assets		(2,494	)		(4,963	)		(176,053	)		(177,010	)		(2,636	)		(5,246	)		(186,103	)		(187,114	)
Gain on disposal of property, equipment and intangible assets		(302	)		(1,056	)		(140	)		(744	)		(319	)		(1,116	)		(148	)		(786	)
Gain on transaction and valuation of currency swap		(4,929	)		(4,358	)		(1,668	)		(4,314	)		(5,210	)		(4,607	)		(1,763	)		(4,562	)
Other		—			(1,532	)		—			—			—			(1,620	)		—			—


Sub-total		(22,233	)		(60,052	)		(200,272	)		(223,076	)		(23,501	)		(63,480	)		(211,704	)		(235,810	)

(Continued)

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(See Independent Accountants’ Review Report)


	Korean won												Translation into U.S. dollars (Note 2)
	2006						2005						2006						2005
	Three months			Nine months			Three months			Nine months			Three months			Nine months			Three months			Nine months
	ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30
	(In millions)												(In thousands)
Changes in assets and liabilities related to operating activities :
Accounts receivable — trade		(W74,179	)		(W3,275	)		(W22,864	)		(W75,558	)		($78,413	)		($3,462	)		($24,169	)		($79,871	)
Accounts receivable — other		(12,775	)		9,315			(79,074	)		(39,107	)		(13,504	)		9,847			(83,588	)		(41,339	)
Inventories		(8,944	)		(10,425	)		(2,512	)		(3,030	)		(9,455	)		(11,020	)		(2,655	)		(3,203	)
Prepaid expenses		19,361			48,332			3,885			6,529			20,466			51,091			4,107			6,902
Advanced payments and other		1,507			10,895			(2,528	)		(25,508	)		1,593			11,517			(2,672	)		(26,964	)
Accounts payable		129,442			73,094			36,047			(380,162	)		136,831			77,266			38,105			(401,863	)
Income taxes payable		(61,051	)		(107,008	)		(88,650	)		(25,216	)		(64,536	)		(113,116	)		(93,710	)		(26,655	)
Accrued expenses		(127,816	)		(33,909	)		58,058			114,689			(135,112	)		(35,845	)		61,372			121,236
Withholdings		3,392			92,750			(5,955	)		54,288			3,586			98,044			(6,295	)		57,387
Current portion of subscription deposits		314			893			371			1,202			332			944			392			1,271
Advance receipts and other		4,044			6,989			(28,004	)		(16,757	)		4,275			7,388			(29,603	)		(17,714	)
Deferred income taxes		(25,021	)		(60,630	)		(16,028	)		4,347			(26,449	)		(64,091	)		(16,943	)		4,595
Severance indemnity payments		(869	)		(257,989	)		(3,402	)		(17,937	)		(919	)		(272,716	)		(3,596	)		(18,961	)
Deposits for group severance indemnities and other deposits		41			183,685			1,998			9,624			43			194,171			2,112			10,173
Dividends received from affiliate		—			1,318			—			600			—			1,393			—			634


Sub-total		(152,554	)		(45,965	)		(148,658	)		(391,996	)		(161,262	)		(48,589	)		(157,143	)		(414,372	)


Net Cash Provided by Operating Activities		793,988			2,475,036			723,445			2,171,581			839,312			2,616,316			764,742			2,295,540

(Continued)

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(See Independent Accountants’ Review Report)


	Korean won												Translation into U.S. dollars (Note 2)
	2006						2005						2006						2005
	Three months			Nine months			Three months			Nine months			Three months			Nine months			Three months			Nine months
	ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30
	(In millions)												(In thousands)
CASH FLOWS FROM INVESTING ACTIVITIES :
Cash inflows from investing activities :
Decrease in short-term financial instruments, net	W	62,298		W	—		W	—		W	—		$	65,854		$	—		$	—		$	—
Decrease in trading securities, net		440,219			262,246			—			—	#		465,348			277,216			—			—
Decrease in current portion of long-term investment securities		—			—			—			3,600			—			—			—			3,805
Collection of short-term loans		21,584			80,292			20,009			51,495			22,816			84,875			21,151			54,434
Proceeds from sales of long-term investment securities		190,876			304,621			2,271			3,985			201,772			322,010			2,401			4,212
Proceeds from sales of equity securities accounted for using the equity method		—			5,079			290,979			290,979			—			5,369			307,589			307,589
Decrease in guarantee deposits		4,227			24,526			7,194			125,021			4,468			25,926			7,605			132,158
Decrease in other non-current assets		1,195			9,970			10,729			26,944			1,263			10,539			11,341			28,483
Proceeds from disposal of property and equipment		469			2,283			488			18,948			496			2,413			516			20,030
Proceeds from disposal of intangible assets		68			124			—			53			72			131			—			56


Sub-total		720,936			689,141			331,670			521,025			762,089			728,479			350,603			550,767


Cash outflows for investing activities :
Increase in short-term financial instruments, net		—			(48,405	)		(7,339	)		(24,942	)		—			(51,168	)		(7,758	)		(26,366	)
Increase in trading securities, net		—			—			(10,030	)		(34,976	)		—			—			(10,603	)		(36,973	)
Extension of short-term loans		(22,022	)		(73,942	)		(8,172	)		(52,136	)		(23,279	)		(78,163	)		(8,638	)		(55,112	)
Acquisition of long-term investment securities		(957,200	)		(960,250	)		—			(12,615	)		(1,011,839	)		(1,015,063	)		—			(13,335	)
Acquisition of equity securities accounted for using the equity method		(67,746	)		(213,634	)		(101,425	)		(208,569	)		(71,613	)		(225,829	)		(107,215	)		(220,475	)
Extension of long-term loans		(4,917	)		(7,902	)		(852	)		(2,397	)		(5,198	)		(8,353	)		(901	)		(2,534	)
Increase in guarantee deposits and other non-current assets		(17,789	)		(110,129	)		(25,676	)		(66,908	)		(18,805	)		(116,415	)		(27,142	)		(70,726	)
Acquisition of property and equipment		(283,309	)		(714,441	)		(412,654	)		(777,921	)		(299,481	)		(755,223	)		(436,209	)		(822,327	)
Acquisition of intangible assets		(10,165	)		(15,815	)		(12,670	)		(136,690	)		(10,745	)		(16,718	)		(13,393	)		(144,493	)


Sub-total		(1,363,148	)		(2,144,518	)		(578,818	)		(1,317,154	)		(1,440,960	)		(2,266,932	)		(611,859	)		(1,392,341	)


Net Cash Used in Investing Activities		(642,212	)		(1,455,377	)		(247,148	)		(796,129	)		(678,871	)		(1,538,453	)		(261,256	)		(841,574	)

(Continued)

SK TELECOM CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(See Independent Accountants’ Review Report)


	Korean won												Translation into U.S. dollars (Note 2)
	2006						2005						2006						2005
	Three months			Nine months			Three months			Nine months			Three months			Nine months			Three months			Nine months
	ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30			ended September 30
	(In millions)												(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES :
Cash inflows from financing activities :
Issuance of bonds	W	197,362		W	197,362		W	—		W	193,683		$	208,628		$	208,628		$	—		$	204,739
Proceeds from long-term borrowings		—			200,000			—			—			—			211,416			—			—
Increase in guarantee deposits received and other		65			1,241			1,706			22,257			69			1,312			1,803			23,527


Sub-total		197,427			398,603			1,706			215,940			208,697			421,356			1,803			228,266


Cash outflows for financing activities :
Repayment of short-term borrowings		—			—			(300,000	)		(200,000	)		—			—			(317,125	)		(211,416	)
Repayment of current portion of long-term debt		(3,400	)		(10,889	)		—			(500,000	)		(3,594	)		(11,511	)		—			(528,541	)
Repayment of bonds		(350,000	)		(350,000	)								(369,979	)		(369,979	)		—			—
Payment of dividends		(73,879	)		(662,815	)		(73,623	)		(758,153	)		(78,096	)		(700,650	)		(77,826	)		(801,430	)
Decrease in facility deposits		(692	)		(2,103	)		(1,100	)		(6,838	)		(732	)		(2,223	)		(1,163	)		(7,228	)
Acquisition of treasury stock		(209,077	)		(209,077	)		—			—			(221,012	)		(221,012	)		—			—
Other		(1,762	)		(3,624	)		(550	)		(17,127	)		(1,863	)		(3,829	)		(581	)		(18,105	)


Sub-total		(638,810	)		(1,238,508	)		(375,273	)		(1,482,118	)		(675,276	)		(1,309,204	)		(396,695	)		(1,566,720	)


Net Cash Used in Financing Activities		(441,383	)		(839,905	)		(373,567	)		(1,266,178	)		(466,579	)		(887,848	)		(394,892	)		(1,338,454	)


NET INCREASE IN CASH AND CASH EQUIVALENTS		(289,607	)		179,754			102,730			109,274			(306,138	)		190,015			108,594			115,512

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD		621,127			151,766			119,510			112,966			656,582			160,429			126,332			119,414


CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	W	331,520		W	331,520		W	222,240		W	222,240		$	350,444		$	350,444		$	234,926		$	234,926

See accompanying notes to non-consolidated financial statements.

SK TELECOM CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

GENERAL

SK Telecom Co., Ltd. (the “Company”) was incorporated in March 1984 under the laws of the Republic of Korea to engage in providing nationwide cellular telephone communication services in the Republic of Korea. The Company mainly provides wireless telecommunications in the Republic of Korea and recently acquired foreign wireless telecommunications operations in Vietnam, Mongolia and the United States of America. The Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange (formerly “Korea Stock Exchange”) and the New York and London Stock Exchanges, respectively. As of September 30, 2006, the Company’s total issued shares are held by the following:


			Percentage of
	Number of shares		total shares issued (%)
SK Group		18,748,522		23.09
POSCO Corp.		2,341,569		2.88
Institutional investors and other minority shareholders		51,540,566		63.48
Treasury stock		8,563,054		10.55


		81,193,711		100.00

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the Republic of Korea, using the same accounting policies which were adopted in preparing the annual financial statements. Significant accounting policies followed in preparing the accompanying financial statements are summarized as follows:

a. Basis of Presentation

The Company’s statutory financial statements have been prepared in the Korean language (Hangul) in conformity with the accounting principles generally accepted in the Republic of Korea (“Korean GAAP”). Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with accounting principles generally accepted in other countries. Accordingly, these financial statements are intended for use by those who are informed about Korean accounting principles and practices. The accompanying financial statements have been condensed, restructured and translated into English with certain expanded descriptions from the Korean language financial statements. Certain information included in the Korean language financial statements, but not required for a fair presentation of the Company’s financial position, results of operations or cash flows, is not presented in the accompanying financial statements.

The official accounting records of the Company are maintained and expressed in Korean won, the currency of the country in which the Company is incorporated and operates. The translation of Korean won amounts into U.S. dollar amounts is included solely for the convenience of readers outside of the Republic of Korea and has been made at the rate of W 946.00 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 nine months ended September 30, 2006. Such translations into U.S. dollars should not be construed as representations that the Korean won amounts could be converted into U.S. dollars at that or any other rate.

Adoptions of New Statements of Korea Accounting Standards (“SKAS”)

On January 1, 2006, the Company adopted SKAS No. 18 through No. 20, which are effective from the fiscal year beginning after December 31, 2005. Such adoption of SKASs did not have an effect on the non-consolidated financial position of the Company as of September 30, 2006 or the non-consolidated ordinary income and net income of the Company for the three months and nine months ended September 30, 2006.

Cash Equivalents

Cash equivalents are highly liquid investments and short term financial instruments, which are readily convertible without significant transaction cost, do not have significant risk of changes in interest rates, and with original maturities of three months or less.

Allowance for Doubtful Accounts

Allowance for doubtful accounts is provided based on the estimated collectibility of individual accounts and historical bad debt experience.

Inventories

Inventories, which consist mainly of replacement units for wireless telecommunication facilities and supplies for sales promotion, are stated at the lower of cost or market value, with cost determined using the moving average method. The Company maintains perpetual inventory systems, which are adjusted to physical inventory counts performed at fiscal year end. When the market value of inventories is less than the acquisition cost, the carrying amount is reduced to the market value and any difference is charged to current operations as operating expenses. There was no such loss for the three months and nine months ended September 30, 2006 and 2005.

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 impairment is other than temporary. 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 are amortized or accreted, respectively. The Company recognizes write-downs resulting from 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 asset section of the balance sheet if their maturities are within one year; otherwise such securities are recorded in the non-current section of the balance sheet.

Equity Securities Accounted for Using the Equity Method

Investment securities of affiliated companies, in which the Company has the ability to exercise significant influence, 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 stockholders’ equity of the investee. Differences between the purchase cost and the acquisition date net asset fair value of the investee are amortized over 5 to 20 years using the straight-line method. When applying the equity method of accounting, unrealized inter-company gains and losses are eliminated (See Note 4). In addition, the Company provides for additional losses for those investments accounted for using the equity method that are reduced to zero to the extent that the Company has other investment assets related to the equity method investees.

When the Company’s share of equity interest in the equity method investees increases as a result of capital transactions of the investees with (or without) consideration, the increase in the Company’s proportionate shares in the investees are treated as goodwill or negative goodwill and when the Company’s share of equity interest in the equity method investees decreases as a result of capital transactions of the investees with (or without) consideration, the decrease in the Company’s proportionate shares in the investees are accounted for as gain or loss on disposal. However, if equity method investees are subsidiaries, such differences in the Company’s proportionate shares in the investees are accounted for as capital adjustments of affiliates in the Company’s shareholders’ equity.

In translating the foreign currency forward statements of the Company’s investees operating overseas, the Company applies (a) the foreign exchange rate at the balance sheet date to the investee’s balance sheet items (except historical rates applied for shareholders’ equity), and (b) the average foreign exchange rate for the current period for income statements items. After translating the balance sheet and income statements items as noted above, the Company’s portion of the amount after deducting the translated total liabilities from translated total assets and equity is recorded as capital adjustment of affiliates in the Company’s shareholders’ equity.

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 the straight-line method) over the estimated useful lives (4~30 years) of the related assets (See Note 6).

Interest expense and other financing charges for borrowings related to the manufacture or construction of property and equipment are charged to current operations as incurred.

Intangible Assets

Intangible assets are recorded at cost, less amortization computed using the straight-line method over 5 to 20 years. The amortization for the nine months ended September 30, 2006 and 2005 were W260,627 million and W245,212 million, respectively, and for the three months ended September 30, 2006 and 2005 were W89,367 million and W81,639 million, respectively.

With its application for a license to provide IMT 2000 service, the Company has a commitment to pay W1,300,000 million to the Ministry of Information Communication (“MIC”). W650,000 million was paid in March 2001 by SK IMT Co., Ltd. (a former subsidiary of the Company), which was merged into the Company on May 1, 2003, and the remainder is required to be paid over 10 years with an annual interest rate equal to the 3-year-maturity government bond rate minus 0.75% (4.08% as of September 30, 2006). The future payment obligations are W90,000 million (related present value discount: W1,206 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 2000 license from MIC, and recorded the total license cost as an intangible asset. As a result of the merger with SK IMT Co., Ltd., the Company acquired such IMT license of W1,259,253 million and assumed the related long-term payable with a principal amount of W650,000 million on May 1, 2003 (the date of merger). 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. As of September 30, 2006, the present value discount related to the current portion and long-term portion of payments to be made to MIC totaled W1,206 million and W45,756 million, respectively.

Convertible Bonds

The proceeds from issuance of convertible bonds are allocated between the conversion rights and the debt issued; and the portion allocable to the conversion rights is accounted for as capital surplus with a corresponding conversion right adjustment 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.

Discounts on Bonds

Discounts on bonds are amortized to interest expense using the effective interest rate method over the redemption period of the bonds.

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.

Provisions, Contingent Liabilities and Contingent Assets

The Company recognizes a provision when i) it has a present obligation as a result of a past event, ii) it is probable that a disbursement of economic resources will be required to settle the obligation, and iii) a reliable estimate can be made of the amount of the obligation (See Note 22).

The Company does not recognize the following contingent obligations as liabilities:

	—	Possible obligations related to past events, for which the existence of a liability can only be confirmed upon occurrence of uncertain future event or events outside the control of the Company.

	—	Present obligations arising out of past events or transactions, for which i) a disbursement of economic resources to fulfill such obligations is not probable or ii) a disbursement of economic resources is probable, but the related amount cannot be reasonably estimated.

In addition, the Company does not recognize potential assets related to past events or transactions, for which the existence of an asset or future benefit can only be confirmed upon occurrence of uncertain future event or events outside the control of the Company.

Accrued Severance Indemnities

In accordance with the Company’s policy, all employees with more than one year of service are entitled to receive severance indemnities upon termination of their employment based on length of service and rate of pay. 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 has 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 deposits with outside insurance companies, where the beneficiaries are the Company’s employees, totaling W3,418 million and W187,103 million as of September 30, 2006 and December 31, 2005, respectively, are deducted from accrued severance indemnities.

In accordance with the Korean National Pension Fund Law, the Company transferred a portion of its accrued severance indemnities to the National Pension Fund through March 1999. Such transfers, amounting to W54 million and W5,172 million as of September 30, 2006 and December 31, 2005, respectively, are deducted from accrued severance indemnities.

Actual payment of severance indemnities amounted to W257,989 million and W17,937 million for the nine months ended September 30, 2006 and 2005, respectively, and W869 million and W3,402 million for the three months ended September 30, 2006 and 2005, respectively.

Effective March 31, 2006, the Company changed its policy for the severance indemnities applicable to those employees who joined the Company before or on December 31, 2002 from cumulative method, where employees are entitled to get paid more than one month of salary each year depending on the length of service, to simple multiplier method, where employees are paid one month of salary each year regardless of their service period in accordance with the resolution of the Company’s joint labor-management conference held on March 16, 2006. As a result of such policy change, the Company has decided to distribute early settlements to those eligible employees on their accumulated severance indemnities as of March 31, 2006 on a mandatory basis. In addition, the Company paid the additional bonuses of W125,890 million for those employees who received the mandatory distribution for their early settlement as compensation for those employees. The Company recorded such compensation costs as special severance indemnities in other expenses for the nine months ended September 30, 2006. In addition, the Company executed the early retirement program and the related special bonus of W18,131 million were paid to eligible employees and accounted for as special severance indemnities in other expenses. Such costs are recorded as other expenses for the nine months ended September 30, 2006.

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 15). 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. In addition, recognized compensation costs related to stock options expired due to such stock options not being exercised within the exercisable period are transferred to other capital surplus from capital adjustments (See Note 12).

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 other expenses. For operating leases, the future minimum lease payments are expensed ratably over the lease term while contingent rentals are expensed as incurred (See Note 10).

Research and Development Costs

The Company charges substantially all research and development costs to expense as incurred. The Company incurred internal research and development costs of W153,294 million and W149,236 million for the nine months ended September 30, 2006 and 2005, respectively, and W51,539 million and W51,772 million for the three months ended September 30, 2006 and 2005, respectively. In addition, external research and development costs were W49,702 million and W51,394 million for the nine months ended September 30, 2006 and 2005, respectively, and W16,354 million and W17,131 million for the three months ended September 30, 2006 and 2005, respectively.

Accounting for Foreign Currency Transactions and Translation

Transactions denominated in foreign currencies are recorded in Korean won based on the prevailing rate of exchange at the dates of transactions. Monetary assets and liabilities denominated in foreign currency are translated into Korean won at the Base Rates announced by Seoul Money Brokerage Services, Ltd. on the balance sheet date, which were W945.20 and W1,013.00 to US$1.00 at September 30, 2006 and December 31, 2005, respectively. The resulting gains or losses arising from the translation or settlement of such assets and liabilities are included in current operations.

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 portions of the gains or losses on the hedging instruments are recorded as a separate component of stockholders’ equity and credited/charged to operations at the time the hedged transactions affect earnings, and the ineffective portions of the gains or losses are credited/charged immediately to operations.

Revenue Recognitions

Operating revenue is recognized when cellular telephone communication services are provided.

Income Tax

Income tax expense is determined by adding or deducting the total income tax and surtaxes to be paid for the current period and the changes in deferred income tax assets and liabilities.

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits. Deferred tax liabilities are generally recognized for all taxable temporary differences with some exceptions and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. Deferred income tax assets and liabilities are classified into current and non-current based on the classification of related assets or liabilities for financial reporting purposes (See Note 16).

Handset Subsidiaries to Long-term Mobile Subscribers

Effective March 27, 2006, the Telecommunication Law of Korea was revised to allow wireless carriers to provide handset subsidiaries to customers who have maintained their wireless account with the same carrier for 18 months or longer. The Company commenced its handset subsidy program on the effective date of the revised Telecommunications Law and included a clause in the service contract which allows the Company to change the terms of its subsidy program, including the Company’s ability to terminate the program at any time after a thirty day notice to its customers. The Company charges such handset subsidiaries to commissions paid as the related payments are made.

Reclassifications

Certain reclassifications have been made in prior period’s financial statements to conform to classifications used in the current period. Such reclassifications did not have an effect on the previously reported net assets as of December 31, 2005 and ordinary income and net income for the three months and nine months ended September 30, 2005.

3. INVESTMENT SECURITIES

a. Trading Securities

Trading securities as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):

December 31, 2005

September 30, 2006

Fair value and

Acquisition cost

Fair value

Carrying amount

carrying amount

Beneficiary certificates

483,114

745,360

b. Long-term Investment Securities

Long-term investment securities as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


	September 30, 2006			December 31, 2005
Available-for-sale equity securities	W	841,446		W	907,069
Available-for-sale debt securities		1,013,904			296,264


Total		1,855,350			1,203,333
Less : current portion		(125	)		—


Long-term portion	W	1,855,225		W	1,203,333

b-(1). Available-for-sale Equity Securities

Available-for-sale equity securities as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


	Number of		Percentage		Acquisition
	shares at		(%) at		cost at		Fair value at			Carrying amount
	September		September		September		September			September		December
	30, 2006		30, 2006		30, 2006		30, 2006			30, 2006		30, 2006
(Investments in listed companies)
Digital Chosunilbo Co., Ltd.		2,890,630		7.8	W	5,781	W	4,437		W	4,437	W	5,796
hanarotelecom incorporated.		11,045,000		4.8		121,677		77,204			77,204		56,440
KRTnet Corporation (Formerly Korea Radio Wave Basestation Management)		234,150		4.4		1,171		2,365			2,365		2,646
POSCO		2,481,310		2.8		332,662		607,921			607,921		501,225
Comas Interactive Co., Ltd. (Formerly INNOTG Co., Ltd.)		59,473		0.4		1,695		70			70		83
eXtended Computing Environment Co., Ltd.		133,333		3.3		10		917	(Note a)		917		10

Sub-total						462,996		692,914			692,914		566,200



(Investments in non-listed companies)
LG Powercomm Co., Ltd. (Formerly Powercomm Co., Ltd.)		7,500,000		5.0	W	240,243	W	77,130	(Note b)	W	77,130	W	77,130
Japan MBCO		54,000		7.3		27,332	(Note c)				27,332		27,332
Eonex Technologies Inc.		144,000		12.6		3,600	(Note c)				4,593		4,593
The Korea Economic Daily		2,585,069		13.8		13,964	(Note c)				13,964		13,964
Others						119,313	(Notes c and d)				22,075		22,815

Sub-total						404,452					145,094		145,834


(Investments in funds)
Korea IT Fund						—	(Note e)				—		190,000
Others						3,438	(Note c)				3,438		5,035

Sub-total						3,438					3,438		195,035


Total					W	870,886				W	841,446	W	907,069


(Note a)		Common stocks of extended Computing Environment Co., Ltd. were listed on the Korea Securities Dealers Automated Quotation during the three months ended September 30, 2006.

(Note b)		The Company recorded its investments in common stock of LG Powercomm Co., Ltd. at its fair value, which was estimated by an outside professional valuation company using the present value of expected future cash flows and the unrealized loss on valuation of investments amounting to W118,257 million (net of tax effect of W44,856 million) as of December 31, 2005 was recorded as a capital adjustment. Based on the opinion of the outside professional valuation company, there was no significant change in LG Powercomm Co., Ltd.’s operation and financial results, which have an effect on the fair value of the common stocks, for the nine months ended September 30, 2006. No additional unrealized loss or recovery on valuation of such investments was recorded accordingly.

(Note c)		As a reasonable estimate of fair value could not be made, the investment is stated at acquisition cost. The investment in common stock of Eonex Technologies Inc. was reclassified to available-for-sale securities from equity securities accounted for using the equity method during 2003, as the Company’s ownership in such investees decreased to less than 20% and the Company no longer exercises significant influence. 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 d)		Due to the impairment of the Company’s investments in common stock of TeleMerc.com, the Company recorded impairment loss on such investments of W1,793 million in the 4^th quarter of 2005.

(Note e)		The investment in Korea IT Fund was reclassified to equity securities accounted for using the equity method during the nine months ended September 30, 2006 as the Company has the ability to exercise significant influence on the investee.

b-(2). Available-for-sale Debt Securities

Available-for-sale debt securities as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


		Acquisition cost			Carrying amount
		as of September			September 30,			December 31,
	Maturity	30, 2006			2006			2005
Public bonds	(Note a)	W	1,888		W	1,888		W	1,590
Currency stabilization bonds	(Note b)		—			—			294,674
Convertible bonds of Real Telecom Co., Ltd. (Note c)	March, 2007		10,656			—			—
Convertible bonds of China Unicom Ltd. (Note d)	July, 2009		957,055			1,012,016			—


Total			969,599			1,013,904			296,264
Less current portion			(125	)		(125	)		—


Long-term available-for-sale debt securities		W	969,474		W	1,013,779		W	296,264

The interest income incurred from available-for-sale debt securities for the nine months ended September 30, 2006 and 2005 were W6,904 million and W 645 million, respectively, and for the three months ended September 30, 2006 and 2005 were W 18 million and W 15 million, respectively.


(Note a)		The maturities of public bonds as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


Maturity	September 30, 2006		December 31, 2005
Within one year	W	125	W	—
After one year but within five years		1,763		1,229
After five years but within ten years		—		361


	W	1,888	W	1,590


(Note b)		The maturities of currency stabilization bonds as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


Maturity	September 30, 2006		December 31, 2005
After one year but wthin five years	W	—	W	294,674


(Note c)		The convertible bonds of Real Telecom Corp. with a principal amount of W10,656 million can be converted into 371,018 shares of common stock of Real Telecom Corp. at W28,721 per share during the period from September 29, 2004 to March 28, 2007. Due to the impairment of such bonds, the Company recorded an impairment loss of W10,656 million prior to December 31, 2004.


(Note d)		On July 5, 2006, the Company purchased zero coupon convertible bonds of China Unicom Ltd. with maturity of three years and principal amount of US$1,000,000,000 for US$1,000,000,000. Such convertible bonds have initial conversion price of US$1.111426 per share of common stock of China Unicom Ltd. The bond holders may redeem their notes at 102.82% of the principal amount on July 5, 2008 (2 years from the issuance date). The conversion right may be exercised during the period from July 5, 2007 to June 29, 2009 and the number of common shares to be converted as of September 30, 2006 is 899,745,075 shares. Unless either previously redeemed or converted, the notes are redeemable at 104.26% of the principal amount at maturity. The Company recorded the convertible bonds of China Unicom Ltd. at its fair value, which was estimated by an outside professional valuation company using Cox, Ross & Rubinstein Model (1979) and discount rate of 5.9138%.

b-(3). Changes in Unrealized Gains (Losses) on Investments in Common Stock

The changes in unrealized gains (losses) on investments in available-for-sales securities for the nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won):


	For the nine months ended September 30, 2006
							Transferred
							to
	Beginning			Increase/			realized			Ending
	balance			(decrease)			gain (loss)			balance
Available-for-sales equity securities:
Digital Chosunilbo Co., Ltd.	W	14		W	( 1,358	)	W	—		W	( 1,344	)
hanarotelecom incorporated		(65,237	)		20,764			—			(44,473	)
KRTnet Corporation		1,475			(281	)		—			1,194
POSCO		168,563			106,696			—			275,259
Comas Interactive Co., Ltd.		(1,611	)		(13	)		—			(1,624	)
eXtended Computing Environment Co., Ltd.		—			907			—			907
LG Powercomm Co., Ltd.		(163,113	)		—			—			(163,113	)
Eonex Technologies Inc.		2,011			—			—			2,011
Currency stabilization bonds		(218	)		895			(677	)		—
Convertible bonds of China Unicom Ltd.		—			54,961			—			54,961


Sub-total		(58,116	)		182,571			(677	)		123,778
Less tax effect		15,982			(50,207	)		186			(34,039	)


Total	W	(42,134	)	W	132,364		W	(491	)	W	89,739


	For the nine months ended September 30, 2005
							Transferred to
	Beginning			Increase/			realized			Ending
	balance			(decrease)			gain (loss)			balance
Available-for-sales equity securities:
Digital Chosunilbo Co., Ltd.	W	( 3,758	)	W	1,532		W	—		W	(2,226	)
hanarotelecom incorporated		(50,657	)		(10,382	)		—			(61,039	)
KRTnet Corporation		1,007			73			—			1,080
POSCO		131,343			116,621			—			247,964
Comas Interactive Co., Ltd.		(1,543	)		(100	)		—			(1,643	)
SINJISOFT Corporation		460			—			(460	)		—
Cowon System, Inc.		—			491			—			491
LG Powercomm Co., Ltd.		(168,678	)		—			—			(168,678	)
Eonex Technologies Inc.		2,011			—			—			2,011
WiderThan Co., Ltd.		(27	)		—			—			(27	)


Sub-total		(89,842	)		108,235			(460	)		17,933
Less tax effect		—			(4,932	)		—			(4,932	)


Total	W	(89,842	)	W	103,303		W	(460	)	W	13,001

4. EQUITY SECURITIES ACCOUNTED FOR USING THE EQUITY METHOD

Equity securities accounted for using the equity method of accounting as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


	September 30, 2006									Carrying Amount
			Ownership
	Number		percentage		Acquisition		Net asset			September		December
	of shares		(%)		cost		value			30, 2006		31,2005
Pantech Co., Ltd.		25,570,306		22.7	W	26,309	W	44,438		W	44,929	W	55,634
SK Capital Co., Ltd.		10,000,000		100.0		50,000		37,506			37,506		37,501
SK Communications Co., Ltd.		7,844,454		86.4		175,441		153,564			173,208		158,170
SK Telink Co., Ltd.		943,997		90.8		5,296		82,629			82,629		70,863
SK C&C Co., Ltd.		300,000		30.0		19,071		213,799			218,365		198,251
SK Wyverns Baseball Club Co., Ltd.		199,997		100.0		1,000		—			—		—
STIC Ventures Co., Ltd.		1,600,000		21.9		8,000		8,379			8,379		8,308
Paxnet Co., Ltd.		5,590,452		65.9		26,563		11,373			28,805		27,372
Global Credit & Information Co., Ltd.		300,000		50.0		2,410		2,649			3,245		3,276
TU Media Corp.		12,922,266		29.6		64,611		12,252			13,088		32,393
Aircross Co., Ltd.		600,000		38.1		300		966			966		970
WiderThan Co., Ltd.		2,000,000		10.1		1,000		11,503	(Note a)		11,503		12,827
IHQ, Inc.		13,000,000		34.3		41,793		14,739			40,846		13,935
Seoul Records, Inc.		9,582,321		60.0		27,874		23,345			26,403		27,242
Harex Info Tech, Inc.		225,000		21.2		3,375		1,128			2,267		2,568
SK Mobile				42.5		10,322		6,217	(Note b)		9,090		—
SLD Telecom PTE. Ltd.		180,476,700		73.3		191,273		125,778			126,168		55,358
Skytel Co., Ltd.		1,756,400		28.6		2,159		4,852			4,852		4,872
SK China Company Ltd.		28,160		20.7		3,195		1,571			485		483
SK Telecom China Co., Ltd.		6,150,000		100.0		7,340		6,564			6,564		6,927
ULand Company Ltd.		14,100,100		70.1		17,511		4,057			8,623		12,564
SK Telecom USA Holdings, Inc.		1,000		100.0		198,713		113,997	(Note c)		113,997		103,751
SK Telecom International, Inc.		1,099		100.0		17,467		24,978			24,978		25,957
SK USA, Inc.		49		49.0		3,184		3,352			3,352		3,353
Korea IT Fund				63.3		190,000		195,569	(Note d)		195,569		—
Centurion IT Investment Association				37.5		3,000		3,076			3,076		3,635
1st Music Investment Fund of SK-PVC				69.3		6,925		6,995			6,995		6,990
2nd Music Investment Fund of SK-PVC				79.3		7,925		7,966			7,966		7,966
SK-KTB Music Investment Fund				74.3		14,850		15,248			15,248		14,999
IMM Cinema Fund				48.4		12,000		11,944			11,944		11,884
SKT-HP Ventures, LLC.				—		—		—			—		5,272
Other investments in affiliates						16,257		—	(Note e)		15,757		12,583


Total					W	1,155,164				W	1,246,803	W	925,904


(Note a)		Effective January 1, 2005, the investment in common stock of WiderThan Co., Ltd. was reclassified to equity securities accounted for using the equity method. Although the Company’s ownership in WiderThan Co., Ltd. is less than 20%, the Company exercises significant influences on the selection of directors and the investee has significant transactions with the Company.

(Note b)		On March 31 2006, the Company acquired 42.5% interests of common stock of SK Mobile from Pantech Co., Ltd. and others.

(Note c)		In 2005, the Company incorporated SK Telecom USA Holdings, Inc. with an investment of US$122 million in order to invest in and manage Helio, Inc., a joint venture company in the Untied States of America, which was established in order to provide wireless telecommunication services in the United States of America. In addition, the Company invested an additional US$78.5 million in SK USA Holdings, Inc. for the nine months ended September 30, 2006 (See Note 24).

(Note d)		The investment in Korea IT Fund was reclassified to equity securities accounted for using the equity method for the nine months ended September 30, 2006 as the Company has ability to exercise significant influence on the investee.

(Note e)		As allowed under Korean GAAP, investments in equity securities of SK Telecom Europe Limited and others were not accounted for using the equity method of accounting, as changes in the Company’s portion of stockholders’ equity of such investees were not expected to be material.

Details of the changes in investments in affiliates accounted for using the equity method for the three months and nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won):


		For the nine months ended September 30, 2006
									Equity in
						Equity in			capital surplus						Other
		Beginning				earnings			and capital			Dividend			increase			Ending
		balance		Acquisition		(losses)			adjustments			received			(decrease)			balance
Pantech Co., Ltd.	(Note a)	W	55,634	W	—	W	(12,654	)	W	1,949		W	—		W	—		W	44,929
SK Capital Co., Ltd.	(Note b)		37,501		—		5			—			—			—			37,506
SK Communications Co., Ltd	(Note a)		158,170		—		13,079			1,959			—			—			173,208
SK Telink Co., Ltd.	(Note a)		70,863		—		11,729			37			—			—			82,629
SK C&C Co., Ltd.	(Notes a and c)		198,251		—		17,234			3,870			(990	)		—			218,365
SK Wyverns Baseball Club Co., Ltd.	(Note b)		—		—		—			—			—			—			—
STIC Ventures Co., Ltd.	(Note b)		8,308		—		71			—			—			—			8,379
Paxnet Co., Ltd.	(Note a)		27,372		—		1,178			255			—			—			28,805
Global Credit & Information Co., Ltd.	(Note b)		3,276		—		(31	)		—			—			—			3,245
TU Media Corp.	(Note a)		32,393		—		(19,305	)		—			—			—			13,088
Aircross Co., Ltd.	(Note b)		970		—		(4	)		—			—			—			966
WiderThan Co., Ltd.	(Notes b and d)		12,827		—		(500	)		(54	)		—			(770	)		11,503
IHQ, Inc.	(Notes a and d)		13,935		27,352		(2,332	)		793			—			1,098			40,846
Seoul Records, Inc.	(Note a)		27,242		—		(839	)		—			—			—			26,403
Harex Info Tech, Inc.	(Note b)		2,568		—		(301	)		—			—			—			2,267
SK Mobile	(Note a)		—		10,322		(1,117	)		(115	)		—			—			9,090
SLD Telecom PTE Ltd.	(Note a)		55,358		97,285		(11,816	)		(14,659	)		—			—			126,168
Skytel Co., Ltd.	(Notes b and c)		4,872		—		111			197			(328	)		—			4,852
SK China Company Ltd.	(Note b)		483		—		2			—			—			—			485
SK Telecom China Co., Ltd.	(Note a)		6,927		—		(301	)		(62	)		—			—			6,564
ULand Company Limited.	(Note a)		12,564		—		(4,967	)		1,026			—			—			8,623
SK Telecom USA Holdings, inc.	(Note a)		103,751		75,499		(57,197	)		(8,056	)		—			—			113,997
SK Telecom International, Inc.	(Note a)		25,957		—		695			(1,674	)		—			—			24,978
SK USA, Inc.	(Note b)		3,353		—		(75	)		74			—			—			3,352
Korea IT Fund	(Notes a and e)		—		—		3,395			2,174			—			190,000			195,569
Centurion IT Investment Association	(Note b)		3,635		—		(615	)		56			—			—			3,076
1st Music Investment Fund of SK-PVC	(Note b)		6,990		—		5			—			—			—			6,995
2nd Music Investment Fund of SK-PVC	(Note b)		7,966		—		—			—			—			—			7,966
SK-KTB Music Investment Fund	(Note a)		14,999		—		249			—			—			—			15,248
IMM Cinema Fund	(Note a)		11,884		—		60			—			—			—			11,944
SKT-HP Ventures, LLC	(Note f)		5,272		—		18			—			—			(5,290	)		—


Total		W	913,321		210,458		(64,223	)		(12,230	)		(1,318	)		185,038		W	1,231,046

Less six months ended June 30, 2006					145,888		(22,876	)		(13,852	)		(1,318	)		(597	)

Three months ended September 30, 2006				W	64,570	W	(41,347	)	W	1,622		W	(—	)	W	185,635


(Note a)		Investments were recorded using the equity method of accounting based on unaudited and unreviewed financial statements as of and for the nine months ended September 30, 2006 In order to verify the reliability of such unaudited and unreviewed financial statements, the Company has performed the following procedures and found no significant errors:

		i)		obtained the signature from the chief executive officer of the equity method investee asserting that the unaudited and unreviewed financial statements are accurate

		ii)		checked whether the major transactions identified by the Company, including public disclosures, were appropriately reflected in the unaudited and unreviewed financial statements

		iii)		performed an analytical review on the unaudited and unreviewed financial statements


(Note b)		Investments in equity securities are carried using the equity method of accounting based on the financial statements as of December 31, 2005 as information as of September 30, 2006 was not available and the change in the Company’s portion of stockholders’ equity of the investee for the nine months ended September 30, 2006 was immaterial.

(Note c)		The Company received dividends from SK C&C Co., Ltd. and Skytel Co., Ltd. and the corresponding amount was deducted from the carrying amount of equity method securities.

(Note d)		Other increase (decrease) in investments in equity securities of WiderThan Co., Ltd. and IHQ, Inc. represent gains (losses) on disposal of investments in equity securities, which have resulted from the dilution of the Company’s ownership as a result of investees’ sale of their unissued shares to third parties.

(Note e)		Other increase in investments in Korea IT Fund is the carrying amount transferred from available-for-sale equity securities.

(Note f)		Investment was fully liquidated due to dissolution of SKT-HP Ventures, LLC for the nine months ended September 30, 2006.


		For the nine months ended September 30, 2005
									Equity in
						Equity in			capital surplus
		Beginning				earnings			and capital			Dividend			Other increase			Ending
		balance		Acquisition		(losses)			adjustments			received			(decrease)			balance
SKY Teletech Co., Ltd.		W	190,896	W	—	W	(15,338	)	W	108		W	—		W	(115,478	)	W	60,188
SK Capital Co., Ltd.	(Note a)		34,891		—		—			—			—			—			34,891
SK Communications Co., Ltd			143,096		—		8,494			(797	)		—			—			150,793
SK Telink Co., Ltd.			56,182		—		13,228			32			—			—			69,442
SK C&C Co., Ltd.			201,353		—		13,359			16,468			(600	)		—			230,580
SK Wyverns Baseball Club Co., Ltd.			—		—		(3,904	)		—			—			—			—
STIC Ventures Co., Ltd.	(Note a)		7,321		—		(284	)		441			—			—			7,478
Paxnet Co., Ltd.			25,244		—		1,510			—			—			—			26,754
Global Credit & Information Co., Ltd.	(Note a)		3,054		—		(31	)		—			—			—			3,023
TU Media Corp.			34,607		—		(18,788	)		(4	)		—			—			15,815
Aircross Co., Ltd.	(Note a)		944		—		(4	)		—			—			—			940
IHQ, Inc.			—		14,440		166			(10	)		—			—			14,596
Seoul Records, Inc.			—		27,874		209			—			—			—			28,083
SLD Telecom PTE Ltd.			59,804		—		(5,235	)		(442	)		—			—			54,127
Skytel Co., Ltd.	(Note a)		3,633		—		88			(8	)		—			—			3,713
SK China Company Ltd.	(Note a)		803		—		35			(8	)		—			—			830
SK Telecom China Co., Ltd.	(Note a)		9,212		—		178			(178	)		—			—			9,212
ULand Company Limited			—		17,511		(3,128	)		2,098			—			—			16,481
SK Telecom USA Holdings, Inc.			—		123,214		(10,535	)		3,235			—			—			115,914
SK Telecom International, Inc.	(Note a)		21,995		—		3,048			(62	)		—			—			24,981
SK USA, Inc.	(Note a)		3,184		—		168			(297	)		—			—			3,055
Centurion IT Investment Association	(Note a)		3,205		—		(277	)		—			—			—			2,928
SKT-QC Wireless Development Fund	(Note a)		5,145		—		1			—			—			—			5,146
SKT-HP Ventures, LLC	(Note a)		5,284		—		—			(3	)		—			—			5,281


Total		W	809,853		183,039		(17,040	)		20,573			(600	)		(115,478	)	W	884,251

Less six months ended June 30, 2005					97,878		(19,031	)		(10,158	)		(600	)		—

Three months ended September 30, 2005				W	85,161	W	1,991		W	30,731		W	—		W	(115,478	)


(Note a)		Investments in equity securities are carried using the equity method of accounting based on the financial statements as of December 31, 2004 as information as of September 30, 2005 was not available and the change of the Company’s portion of shareholders’ equity of the investee for the nine months ended September 30, 2005 was not expected to be material.

Details of changes in the differences between the acquisition cost and net asset value of equity method investees at the acquisition date for the three months and nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won):


	For the nine months ended September 30, 2006
	Beginning							Ending
	balance		Increase		Amortization			balance
Pantech Co., Ltd.	W	793	W	—	W	(32	)	W	761
SK Communications Co., Ltd.		23,814		—		(1,048	)		22,766
SK C&C Co., Ltd.		4,870		—		(304	)		4,566
Paxnet Co., Ltd.		18,237		—		(805	)		17,432
Global Credit & Information Co., Ltd.		628		—		(31	)		597
TU Media Corp.		993		—		(157	)		836
IHQ, Inc.		6,267		21,948		(2,108	)		26,107
Seoul Records, Inc.		3,670		—		(612	)		3,058
Harex Info Tech, Inc.		1,402		—		(263	)		1,139
SK Mobile		—		3,192		(319	)		2,873
SLD Telecom PTE. Ltd.		406		—		(16	)		390
ULand Company Ltd.		3,628		1,131		(193	)		4,566


Total	W	64,708		26,271		(5,888	)	W	85,091

Less six months ended June 30, 2006				4,252		(3,201	)

Three months ended September 30, 2006			W	22,019	(W	2,687	)


	For the nine months ended September 30, 2005
	Beginning								Ending
	balance		Increase			Amortization			balance
Pantech Co., Ltd.	W	3,287	W	(2,155	)	W	(100	)	W	1,032
SK Communications Co., Ltd.		24,622		—			(459	)		24,163
SK C&C Co., Ltd.		5,276		—			(304	)		4,972
Paxnet Co., Ltd.		19,310		—			(805	)		18,505
Global Credit & Information Co., Ltd.		670		—			(31	)		639
IHQ, Inc.		—		7,401			(185	)		7,216
Seoul Records, Inc.		—		4,078			(51	)		4,027
SLD Telecom PTE. Ltd.		428		—			(17	)		411
ULand Company Ltd.		—		3,922			(245	)		3,677


Total	W	53,593		13,246			(2,197	)	W	64,642

Less six months ended June 30, 2005				7,401			(1,169	)

Three months ended September 30, 2005			W	5,845		W	(1,028	)

Details of changes in unrealized inter-company gains incurred from sales of assets for the three months and nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won):


	For the nine months ended September 30, 2006
	Beginning							Ending
Subsidiary	balance		Increase		Decrease			balance
Pantech Co., Ltd.	W	—	W	270	W	—		W	270
SK Communications Co., Ltd.		4,016		—		(894	)		3,122
SK China Company Ltd.		1,086		—		—			1,086


Total	W	5,102		270		(894	)	W	4,478

Less: six months ended June 30, 2006				270		(686	)

Three months ended September 30, 2006			W	—	W	(208	)


	For the nine months ended September 30, 2005
	Beginning							Ending
Subsidiary	balance		Increase		Decrease			balance
SK Communications Co., Ltd.	W	—	W	3,688	W	—		W	3,688
SK China Company Ltd.		1,206		—		(120	)		1,086


Total	W	1,206		3,688		(120	)	W	4,774

Less: six months ended June 30, 2005				3,688		(120	)

Three months ended September 30, 2005			W	—	W	—

Details of market price of the equity securities accounted for using the equity method as of September 30, 2006 are as follows (In millions of Korean won, except for market price per share):


	Market price		Number of
	per share		shares owned by
	(In Korean won)		the Company		Market price
Pantech Co., Ltd.	W	5,500		25,570,306	W	140,637
WiderThan Co., Ltd.		15,832		2,000,000		31,664
IHQ, Inc.		7,800		13,000,000		101,400
Seoul Records, Inc.		3,870		9,582,321		37,084

The condensed financial information of the investees as of and for the nine months ended September 30, 2006 is as follows (In millions of Korean won):


	Total		Total				Net
	assets		liabilities		Revenue		income (loss)
Pantech Co., Ltd.	W	1,121,241	W	927,201	W	1,001,528	W	(55,161	)
SK Communications Co., Ltd.		243,204		57,108		132,364		17,780
SK Telink Co., Ltd.		136,491		45,844		141,993		14,324
SK C&C Co., Ltd.		1,661,359		948,694		681,075		58,578
Paxnet Co., Ltd.		22,305		4,445		23,591		2,956
TU Media Corp.		355,953		314,536		60,080		(64,561	)
IHQ, Inc.		71,675		26,644		37,401		(2,775	)
Seoul Records, Inc.		46,182		7,273		19,820		(355	)
SK Mobile		16,301		1,674		796		(2,814	)
SLD Telecom PTE Ltd.		228,689		57,141		—		(14,999	)
SK Telecom China Co., Ltd.		6,843		279		11,450		(23	)
ULand Company Limited		7,640		1,856		5,285		(6,301	)
SK Telecom USA Holdings, Inc.		154,079		40,081		—		(56,572	)
SK Telecom International, Inc.		26,301		1,324		9,279		1,196
Korea IT Fund		308,794		—		14,494		3,043
SKT-KTB Music Investment Fund		20,637		81		445		341
IMM Cinema Fund		24,685		2		336		122

LOANS TO EMPLOYEES

Short-term and long-term loans to employees as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


	September 30, 2006						December 31,
	Short-term		Long-term		Total		2005
Loans to employees’ stock ownership association	W	2,327	W	6,271	W	8,598	W	14,586
Loans to employees for housing and other		78		221		299		433


Total	W	2,405	W	6,492	W	8,897	W	15,019

PROPERTY AND EQUIPMENT

Property and equipment as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


	Useful lives
	(years)		September 30, 2006			December 31, 2005
Land		—	W	462,587		W	461,513
Buildings and structures		30,15		1,480,719			1,477,838
Machinery		6		10,748,336			10,376,529
Vehicles		4		20,669			20,442
Other		4		833,281			807,534
Construction in progress		—		396,038			264,309


				13,941,630			13,408,165
Less accumulated depreciation				(9,569,732	)		(8,812,282	)


Property and equipment, net			W	4,371,898		W	4,595,883

The standard value of land declared by the government as of September 30, 2006 and December 31, 2005 are W504,069 million and W412,829 million, respectively.

Details of change in property and equipment for the three months and nine months ended September 30,

2006 and 2005 are as follows (In millions of Korean won):


	For the nine months ended September 30, 2006
	Beginning													Ending
	balance		Acquisition		Disposal			Transfer			Depreciation			balance
Land	W	461,513	W	7	W	(344	)	W	1,411		W	—		W	462,587
Buildings and structures		1,145,497		1,969		(607	)		1,755			(41,596	)		1,107,018
Machinery		2,429,564		8,755		(1,704	)		487,220			(791,570	)		2,132,265
Vehicles		2,786		994		(113	)		—			(1,286	)		2,381
Other		292,214		423,457		(13,548	)		(369,599	)		(60,915	)		271,609
Construction in progress		264,309		279,259		—			(147,530	)		—			396,038

Total	W	4,595,883		714,441		(16,316	)		(26,743	)		(895,367	)	W	4,371,898

Less six months ended June 30, 2006				431,132		(14,730	)		(15,896	)		(567,954	)

Three months ended September 30, 2006			W	283,309	W	(1,586	)	W	(10,847	)	W	(327,413	)


	For the nine months ended September 30, 2005
	Beginning													Ending
	balance		Acquisition		Disposal			Transfer			Depreciation			balance
Land	W	463,656	W	719	W	(504	)	W	1,503		W	—		W	465,374
Buildings and structures		1,163,070		7,663		(782	)		18,531			(41,216	)		1,147,266
Machinery		2,585,118		13,697		(17,901	)		368,028			(820,928	)		2,128,014
Vehicles		4,030		753		(116	)		70			(1,626	)		3,111
Other		251,377		500,868		(2,718	)		(267,494	)		(59,621	)		422,412
Construction in progress		138,002		254,221		—			(149,255	)		—			242,968


Total	W	4,605,253		777,921		(22,021	)		(28,617	)		(923,391	)	W	4,409,145

Less six months ended June 30, 2005				365,267		(21,189	)		(19,972	)		(595,955	)

Three months ended September 30, 2005			W	412,654	W	(832	)	W	(8,645	)	W	(327,436	)

INTANGIBLE ASSETS

Intangible assets as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


	September, 2006							December 31, 2005
	Acquisition		Accumulated			Carrying		Acquisition		Accumulated			Carrying
	cost		amortization			amounts		cost		amortization			amounts
Goodwill	W	2,335,532	W	(611,144	)	W	1,724,388	W	2,335,532	W	(514,648	)	W	1,820,884
Frequency use rights		1,384,433		(279,115	)		1,105,318		1,384,433		(200,141	)		1,184,292
Software development costs		229,121		(183,559	)		45,562		221,913		(160,657	)		61,256
Computer software		521,966		(267,670	)		254,296		489,807		(210,050	)		279,757
Other		107,717		(67,928	)		39,789		103,974		(63,616	)		40,358


	W	4,578,769	W	(1,409,416	)	W	3,169,353	W	4,535,659	W	(1,149,112	)	W	3,386,547

Details of changes in intangible assets for the three months and nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won):


	For the nine months ended September 30, 2006
	Beginning												Ending
	balance		Increase		Decrease			Transfer		Amortization			balance
Goodwill	W	1,820,884	W	—	W	—		W	—	W	(96,496	)	W	1,724,388
Frequency use rights		1,184,292		—		—			—		(78,974	)		1,105,318
Software development costs		61,256		—		—			7,208		(22,902	)		45,562
Computer software		279,757		12,019		(1	)		20,189		(57,668	)		254,296
Other		40,358		3,796		(53	)		275		(4,587	)		39,789


Total	W	3,386,547		15,815		(54	)		27,672		(260,627	)	W	3,169,353

Less six months ended June 30, 2006				5,650		(20	)		17,053		(171,260	)

Three months ended September 30, 2006			W	10,165	W	(34	)	W	10,619	W	(89,367	)


	For the nine months ended September 30, 2005
	Beginning												Ending
	balance		Increase		Decrease			Transfer		Amortization			balance
Goodwill	W	1,949,546	W	—	W	—		W	—		(W96,496	)	W	1,853,050
Frequency use rights		1,163,319		117,380		—			—		(72,305	)		1,208,394
Software development costs		100,579		35		—			—		(31,023	)		69,591
Computer software		190,744		17,804		(3	)		29,364		(39,735	)		198,174
Other		44,431		1,471		(214	)		600		(5,653	)		40,635

Total	W	3,448,619		136,690		(217	)		29,964		(245,212	)	W	3,369,844

Less six months ended June 30, 2005				124,020		(203	)		20,763		(163,573	)

Three months ended September 30, 2005			W	12,670	W	(14	)	W	9,201	W	(81,639	)

The book value as of September 30, 2006 and residual useful lives of major intangible assets are as follows (In millions of Korean won):


	Amount		Description	Residual useful lives
Goodwill	W	1,724,388	Goodwill related to acquisition of Shinsegi Telecomm, Inc.	13 years and 6 months
IMT license		988,094	Frequency use rights relating to W-CDMA Service	(Note a)
WiBro license		110,331	WiBro Service	(Note b)
DMB license		6,893	DMB Service	9 years and 9 months


(Note a)		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 (13 years) of the IMT license which expires in December 2016.

(Note b)		The Company purchased the WiBro license from MIC on March 30, 2005. The license period is seven years from the purchase date. Amortization of the WiBro license commenced when the Company started its commercial WiBro services on June 30, 2006 using the straight line basis over the remaining useful life.

BONDS PAYABLE AND LONG-TERM BORROWINGS

a. Bonds payable

Bonds payable as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won and thousands of U.S. dollars):


		Annual
		interest		September 30,			December 31,
	Maturity year	rate (%)		2006			2005
Domestic general bonds	2006		5.0 — 6.0	W	450,000		W	800,000
”	2007		5.0 — 6.0		700,000			700,000
”	2008		5.0		300,000			300,000
”	2009		5.0		300,000			300,000
”	2010		4.0		200,000			200,000
”	2011		3.0		200,000			200,000
”	2016		5.0		200,000			—
Dollar denominated bonds (US$300,000)	2011		4.25		283,560			303,900
Convertible bonds (US$311,030)	2009		—		364,309			385,885


Total					2,997,869			3,189,785
Less discounts on bonds					(30,185	)		(40,016	)
conversion right adjustments					(48,973	)		(65,219	)
Add long-term accrued interest					23,421			24,808


Net					2,942,132			3,109,358
Less portion due within one year					(847,772	)		(795,150	)


Long-term portion				W	2,094,360		W	2,314,208

All of the above bonds will be paid in full at maturity.

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, which was greater than market value at the date of issuance. Subsequently, the initial conversion price was changed to W217,062 per share in accordance with anti-dilution protection. 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 September 30, 2006 is 1,685,816 shares. During the nine months ended September 30, 2006, the conversion price was changed from W218,098 to W217,062 and the number of shares to be converted was changed from 1,677,812 shares to 1,685,816 shares due to the payment of interim dividends in accordance with the resolution of the Company’s board of directors dated July 28, 2006.

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 that may be 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. During the nine months ended September 30, 2006, the convertible bonds with a principal amount of US$18,420,000 were converted into 99,361 shares of treasury stock (See note 14), and the principal amount of the convertible bonds decreased from US$329,450,000 to US$311,030,000. In addition, the consideration for conversion right (capital surplus) decreased by W2,728 million (net of tax effect of W1,034 million) as a result of this conversion.

b. Long-term borrowings

Long-term borrowings as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won and thousands of U.S. dollars):


		Final	Annual interest	September 30,	December 31,
	Lender	maturity year	rate (%) (Note)	2006	2005
Long-term floating rate discount bill	Shinhan Bank	June 29, 2011	91 days CD yield + 0.25%	W200,000	W —

The above borrowings are classified as long-term borrowings as the borrowings are to be rolled-over exceeding 1 year from September 30, 2006 in accordance with the loan agreement.

(Note) 91 days CD yield as of September 30, 2006 is 4.6%.

SUBSCRIPTION DEPOSITS

The Company receives subscription deposits from customers of cellular services at the subscription date. The Company has no obligation to pay interest on subscription deposits but is required to return them to subscribers upon termination of the subscription contract.

Long-term subscription deposits held as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won except deposit per subscriber amounts):

Deposit

Service type

per subscriber

September 30, 2006

December 31, 2005

Cellular

200,000

21,666

23,770

		The Company offers existing and new cellular subscribers the option of obtaining credit insurance from Seoul Guarantee Insurance Company (“SGIC”) in lieu of the subscription deposits. Existing subscribers who elect this option are refunded their subscription deposits. As a result, the balance of subscription deposits has been decreasing.

10.		LEASES

		The Company acquired certain computer equipment and software from SK C&C Co., Ltd. and succeeded certain capital lease agreements between SK C&C Co., Ltd. and HP Financial Service. Details of capital lease assets acquired and liabilities assumed from SK C&C Co., Ltd. as of and for the nine months ended September 30, 2006 and as of and for the year ended December 31, 2005 are as follows (In millions of Korean won):


		September 30, 2006		December 31, 2005
Acquisition cost	Office equipment	W	16,096	W	16,919
	Computer software		7,609		7,625


		W	23,705	W	24,544


Accumulated depreciation	Office equipment	W	6,802	W	744
	Computer software		1,268		127


		W	8,070	W	871


Carrying amounts	Office equipment	W	9,294	W	16,175
	Computer software		6,341		7,498


		W	15,635	W	23,673


Depreciation expenses	Office equipment	W	6,197	W	744
	Computer software		1,142		127


		W	7,339	W	871

The Company’s minimum future lease payments as of September 30, 2006 are as follows (In millions of Korean won):


	Annual lease payments		Interest			Principal
October 2006 ~ September 2007	W	10,758		(W501	)	W	10,257
October 2007 ~ September 2008		3,467		(70	)		3,397


Total	W	14,225		(W571	)		13,654

Less: portion due within one year							(10,257	)


Capital lease liabilities						W	3,397

11.		MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

		The details of monetary assets and liabilities denominated in foreign currencies (except for bonds payable denominated in foreign currencies described in Note 8) as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won, thousands of U.S. dollars, thousands of HK dollars, thousands of Japanese yen, thousands of Great Britain pounds, thousands of Singapore dollars, thousands of Swiss Franc and thousands of Euros, thousands of Chinese yuan, thousands of Canada dollars):


	September 30, 2006				December 31, 2005
	Foreign		Korean won		Foreign		Korean won
	currencies		equivalent		currencies		equivalent
Cash and cash equivalents	US$	1,179	W	1,115	US$	4,175	W	4,229
”		—		—	EUR	3		3
Accounts receivable — trade	US$	18,242		17,242	US$	9,390		9,512
”	EUR	248		298	EUR	248		298
Accounts receivable — other	US$	4,113		3,888	US$	3,364		3,408
Guarantee deposits	US$	17		16	JPY	16,156		139
”	JPY	21,536		173		—		—


			W	22,732			W	17,589

Accounts payable	US$	12,188	W	11,520	US$	15,633	W	15,836
”	JPY	32,758		263	JPY	8,498		73
”	HK$	136		16	HK	254		33
”	GBP	58		102	GBP	453		792
”	SG$	12		7	SG$	22		13
”	EUR	580		696	EUR	504		604
”	CNY	2		1	CHF	19		15
”	CA$	354		301		—		—


			W	12,906			W	17,366

12.		CAPITAL STOCK AND CAPITAL SURPLUS

		The Company’s capital stock consists entirely of common stock with a par value of W500. The number of authorized and issued shares as of September 30, 2006 and December 31, 2005 are as follows:


	September 30, 2006		December 31, 2005
Authorized shares		220,000,000		220,000,000
Issued shares		81,193,711		82,276,711
Outstanding shares, net of treasury stock		72,630,657		73,614,296

Significant change in capital stock and capital surplus for the nine months ended September 30, 2006 and for the year ended December 31, 2005 are as follows (In millions of Korean won except for share data):


	Number of
	shares
	Issued			Capital stock		Capital surplus
At January 1, 2005		82,276,711		W	44,639	W	2,983,166

Deferred tax liabilities deducted from capital surplus (Note a)		—			—		(18,501	)
Transferred from stock options in capital adjustment (Note b)		—			—		1,533


At December 31, 2005		82,276,711			44,639		2,966,198


Consideration for conversion right (Note c)		—			—		(2,728	)
Transferred from stock options in capital adjustment (Note d)		—			—		234
Gains on disposal of treasury stock (Note e)		—			—		176
Retirement of treasury stock (Note f)		(1,083,000	)		—		—


September 30, 2006		81,193,711		W	44,639	W	2,963,880


(Note a)		The tax effects of consideration for conversion rights, which resulted in temporary differences, were deducted directly from related components of stockholders’ equity, pursuant to adoption of SKAS No. 16 for the year ended December 31, 2005.

(Note b)		During the year ended December 31, 2005, the exercisable period for the stock options representing 17,800 shares, of which recognized compensation costs were W1,533 million, expired and the related stock options of W1,533 million in capital adjustments were transferred to capital surplus in accordance with Korean GAAP [See Note 2 (o)].

(Note c)		During the nine months ended September 30, 2006, the convertible bonds with a face value of US$18,420,000 were converted and the capital surplus amount (in connection with the related conversion rights) decreased by W2,728 million (net of tax effect of W1,034 million).

(Note d)		During the nine months ended September 30, 2006, the exercisable period for the stock options representing 43,390 shares, of which recognized compensation costs were W234 million, expired and the related stock options of W234 million in capital adjustments were transferred to capital surplus in accordance with Korean GAAP [See Note 2 (o)].

(Note e)		In relation to the conversion of convertible bonds, 99,361 shares of treasury stock were issued and W176 million of gain on disposal of treasury stock were recorded.

(Note f)		The Company retired 491,000 shares and 592,000 shares of treasury stock on August 17, 2006 and September 29, 2006, respectively, and reduced retained earnings before appropriation in accordance with Korean Commercial laws.

13.		RETAINED EARNINGS

	Retained earnings as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


	September 30, 2006		December 31, 2005
Appropriated	W	6,679,235	W	5,470,701
Before appropriations		886,220		1,799,160


	W	7,565,455	W	7,269,861

The details of appropriated retained earnings as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


	September 30, 2006		December 31, 2005
Legal reserve	W	22,320	W	22,320
Reserve for improvement of financial structure		33,000		33,000
Reserve for loss on disposal of treasury stock		477,182		477,182
Reserve for research and manpower development		880,595		822,061
Reserve for business expansion		5,266,138		4,116,138


Total	W	6,679,235	W	5,470,701

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 gain (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.		Reserves for Loss on Disposal of Treasury Stock and Research and Manpower Development

		Reserves for 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 for tax purposes. These reserves will be reversed from appropriated retained earnings in accordance with the relevant tax laws. Such reversal will be included in taxable income in the year of reversal.

d.		Reserve for Business Expansion

		The reserve for business expansion is voluntary and was approved by the board of directors and stockholders.

14.		TREASURY STOCK

		Upon 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 77,970 shares for W6,110 million through 2005. In addition, the Company acquired 8,584,445 shares of treasury stock in the market or through the trust funds for W2,040,995 million through 2005 in order to stabilize the market price of its stock. In addition, during the nine months ended September 30, 2006, the convertible bonds with a principal amount of US$18,420,000 were converted into 99,361 shares of common stock. Such conversion was settled by the Company by using its treasury stock with carrying value totaling W23,481 million, which resulted in the Company recording W176 million of gain on disposal of treasury stock.

		On August 17, 2006, the Company retired 491,000 shares of treasury stock, which were acquired by the Company during the period from August 1, 2006 through August 14, 2006 for W92,518 million in accordance with a resolution of the board of directors dated July 28, 2006.

		On September 29, 2006, the Company retired 592,000 shares of treasury stock, which were acquired by the Company during the period from September 4, 2006 through September 27, 2006 for W116,559 million in accordance with a resolution of the board of directors dated August 31, 2006.

		In connection with the retired treasury stocks discussed above, the Company reduced its retained earnings before appropriations by W209,077 million in accordance with Korean Commercial law.

15.		STOCK OPTIONS

		On March 17, 2000, March 16, 2001 and March 8, 2002, in accordance with the approval of its stockholders or 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, 43,820 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 for two years from the first exercisable date. Upon exercise of stock options, the Company will issue its common stock. If the employees leave the Company within three years after the grant of stock options, such employees forfeit their unvested stock options awarded. Stock options representing 530 shares for which total compensation cost was W3 million were forfeited during the year ended December 31, 2004.

		The value of stock options granted is determined using the Black-Scholes option-pricing model, without considering the 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 per share for 2000, 2001 and 2002. Under these assumptions, total compensation cost, the recognized compensation cost (included in labor cost) for the three months and nine months ended September 30, 2006 and 2005 and the outstanding balance of stock options in capital adjustment as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


			Recognized				Recognized
			compensation cost				compensation cost				Stock options in
	Total		for the three months				for the nine months				capital adjustment
	Compensation		ended September 30,				ended September 30,				September 30,		December 31,
Grant date	cost		2006		2005		2006		2005		2006		2005
March 17, 2000(Note a)	W	1,533	W	—	W	—	W	—	W	—	W	—	W	—
March 16, 2001(Note b)		234		—		—		—		—		—		234
March 8, 2002		3,246		—		—		—		180		3,246		3,246


	W	5,013	W	—	W	—	W	—	W	180	W	3,246	W	3,480


(Note a)		During the year ended December 31, 2005, the exercisable period expired for stock options representing 17,800 shares, for which the Company had recognized compensation cost of W1,533 million. The related capital adjustment of W1,533 million was transferred to capital surplus.

(Note b)		During the nine months ended September 30, 2006, the exercisable period expired for stock options representing 43,820 shares, for which the Company had recognized compensation cost of W234 million. The related capital adjustment of W234 million was transferred to capital surplus.

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), the pro forma total compensation cost would be W15,967 million (W3,738 million for options granted in 2000, W3,617 million for options granted in 2001 and W8,613 million for options granted in 2002) and the recognized compensation cost for the three months and nine months ended September 30, 2006 would be nil, and the pro forma net income and net income per common share for the three months and nine months ended September 30, 2006, 2005, and 2004 are as follows:


	For the three months ended September 30,
	2006		2005		2004
Pro forma ordinary income (In millions of Korean won)	W	645,935	W	789,591	W	553,022
Pro forma ordinary income per share (In Korean won)		6,231		7,986		5,367
Pro forma net income (In millions of Korean won)		456,802		587,878		395,088
Pro forma net income per share (In Korean won)		6,231		7,986		5,367


	For the nine months ended September 30,
	2006		2005		2004
Pro forma ordinary income (In millions of Korean won)	W	1,650,637	W	1,987,193	W	1,632,891
Pro forma ordinary income per share (In Korean won)		15,875		19,332		15,557
Pro forma net income (In millions of Korean won)		1,167,300		1,423,107		1,145,248
Pro forma net income per share (In Korean won)		15,875		19,332		15,557

16.

INCOME TAX

	a.		Details of income tax expense

			Income tax expenses for the nine months ended September 30, 2006 and 2005 consist of the following (In millions of Korean won):


	2006			2005
Current	W	544,033		W	559,738
Deferred (Note a)		(60,696	)		4,347


Income tax expenses		483,337			564,085
Less: six months ended June 30,		(294,204	)		(362,372	)


Three months ended September 30,	W	189,133		W	201,713

(Note a)

Changes in net deferred tax liabilities for the nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won):


	2006			2005
Ending balance of net deferred tax liabilities	W	324,490		W	377,423
Beginning balance of net deferred tax liabilities		(348,563	)		(323,096	)
Adjustment to the beginning net deferred income tax liabilities based on tax return filed		10,453			8,536
Tax effect of temporary differences charged or credited directly to related components of stockholders’ equity		(47,076	)		(58,516	)


	W	(60,696	)	W	4,347

b.		Reconciling items between accounting income and taxable income

		Reconciling items between accounting income and taxable income for the nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won):


	2006			2005
(Temporary Differences)
Additions:
Allowance for doubtful accounts	W	149,075		W	117,877
Accrued interest income — prior period		3,931			4,423
Reserves for research and manpower development		141,000			98,600
Reserves for loss on disposal of treasury stock		177,675			—
Equity in losses of affiliates		64,373			117,488
Unrealized loses on valuation of long-term investment securities		47,442			9,411
Accrued expenses		15,300			5,586
Depreciation		40,973			11,977
Loss on impairment of other assets		1,488			8,115
Loss on valuation of currency swap		4,195			—
Loss on valuation of currency swap (capital adjustments)		9,807			23,845
Accrued severance indemnities		23,960			17,443
Deposits for severance indemnities		148,610			9,686
Consideration of conversion right		16,246			12,642
Other		45,319			8,597

Sub-total		889,394			445,690



Deductions:
Reserves for research and manpower development		(135,000	)		(97,500	)
Allowance for doubtful accounts — prior period		(124,184	)		(59,612	)
Depreciation — prior period		(14,867	)		(59,360	)
Accrued interest income		(7,287	)		(7,061	)
Equity in earnings of affiliates		—			(40,484	)
Unrealized gains on valuation of long-term investment securities		(229,335	)		(116,725	)
Accrued expenses		(21,906	)		(12,282	)
Accrued severance indemnities		(155,633	)		(9,686	)
Deposits for severance indemnities		(3,424	)		(17,443	)
Loss on impairment of other assets — prior period		(5,109	)		(21,070	)
Loss on disposal of property, equipment		(38,656	)		—
Gain on valuation of currency swap		—			(4,314	)
Gain on valuation of currency swap (capital adjustments)		—			(23,845	)
Other		(8,606	)		(35,219	)

Sub-total		(744,007	)		(504,601	)

Total Temporary Differences		145,387			(58,911	)


(Permanent Differences)		328,066			281,935


Total	W	473,453		W	223,024

c.		Change in cumulative temporary differences and deferred tax liabilities

		Changes in cumulative temporary differences for the nine months ended September 30, 2006 and 2005 and deferred tax assets and liabilities as of September 30, 2006 and 2005 are as follows (In millions of Korean won):

		For the nine months ended September 30, 2006


	January 1,			Increase			Decrease			September 30,
Description	2006			(Note a)			(Note a)			2006
Current:
Allowance for doubtful accounts	W	122,561		W	129,119		W	124,184		W	127,496
Accrued interest income		(3,931	)		(3,987	)		(3,931	)		(3,987	)
Accrued expenses		61,967			15,514			21,906			55,575
Other		189,548			10,710			4,834			195,424


Total		370,145			151,356			146,993			374,508
Temporary differences unlikely to be realized		(147,774	)		—			(19,219	)		(128,555	)


Total current cumulative temporary differences-net	W	222,371		W	151,356		W	127,774		W	245,953


Current deferred tax assets-net (Note b)	W	61,152								W	67,637


Non-current:
Property and equipment	(W	196,446	)	W	12,228		W	10,964		(W	195,182	)
Loss on impairment of long-term investment securities		108,145			—			—			108,145
Loss on impairment of other long-term assets		7,461			—			5,973			1,488
Reserves for research and manpower development		(768,000	)		(135,000	)		(141,000	)		(762,000	)
Reserves for loss on disposal of treasury stock		(474,081	)		—			(177,675	)		(296,406	)
Equity in (earnings) losses of affiliates		(5,025	)		56,156			328			50,803
Equity in capital adjustment of affiliates		(109,468	)		—			(10,862	)		(98,606	)
Unrealized loss on valuation of long-term investment securities		58,116			219			182,113			(123,778	)
Accrued severance indemnities		148,465			24,106			155,633			16,938
Deposits for severance indemnities		(148,465	)		(3,568	)		(148,610	)		(3,423	)
Loss on valuation of currency swap		13,244			4,195			—			17,439
Loss on valuation of currency swap (capital adjustment)		19,554			9,807			—			29,361
Loss on valuation of interest rate swap (capital adjustment)		—			2,747			—			2,747
Considerations for conversion right		(67,279	)		—			(3,762	)		(63,517	)
Other		(10,647	)		60,117			(1,911	)		51,381


Total		(1,424,426	)		31,007			(128,809	)		(1,264,610	)
Temporary differences unlikely to be realized		(65,447	)		(97,197	)		(1,336	)		(161,308	)


Total non-current cumulative temporary differences-net	(W	1,489,873	)	(W	66,190	)	(W	130,145	)	(W	1,425,918	)


Total non-current deferred tax liabilities-net (Note b)	(W	409,715	)							(W	392,128	)


(Note a)		These changes include adjustment to reflect the change in accumulated temporary differences based on the prior year tax return.


(Note b)		The tax rate used in measuring deferred tax assets and liabilities is 27.5%.

For the nine months ended September 30, 2005


	January 1,			Increase			Decrease			September 30,
Description	2005			(note b)			(note b)			2005
Current :
Allowance for doubtful accounts	W	59,622		W	117,867		W	59,612		W	117,877
Accrued interest income		(7,796	)		(3,688	)		(4,423	)		(7,061	)
Other		235,000			5,079			17,206			222,873


Total		286,826		W	119,258		W	72,395			333,689

Temporary differences unlikely to be realized (note a)		(128,555	)								(128,555	)


Total current cumulative temporary differences-net	W	158,271								W	205,134


Current deferred tax assets-net (note c)	W	43,525								W	56,412


Non-current :
Property and equipment		(127,822	)		(44,551	)		5,924			(178,297	)
Loss on impairment of long-term investment securities		106,752			(400	)		—			106,352
Loss on impairment of other long-term assets		21,070			8,116			21,070			8,116
Reserves for research and manpower development		(709,467	)		(97,500	)		(98,600	)		(708,367	)
Reserves for loss on disposal of treasury stock		(474,081	)		—			—			(474,081	)
Equity in (earnings) losses of affiliates		(89,441	)		79,291			—			(10,150	)
Equity in capital adjustment of affiliates		—			(144,730	)		—			(144,730	)
Unrealized loss on valuation of long-term investment securities		—			(17,933	)		—			(17,933	)
Accrued severance indemnities		139,524			14,057			9,686			143,895
Deposits for severance indemnities		(139,524	)		(14,057	)		(9,686	)		(143,895	)
Loss on valuation of derivative instruments		15,789			—			4,313			11,476
Loss on valuation of derivative instruments -capital adjustment		—			25,607			—			25,607
Considerations for conversion right		—			(67,279	)		—			(67,279	)
Other		(122,004	)		254,690			144,112			(11,426	)


Total		(1,379,204	)	(W	4,689	)	W	76,819			(1,460,712	)

Temporary differences unlikely to be realized (note a)		46,038									(116,869	)


Total non-current cumulative temporary differences-net	(W	1,333,166	)							(W	1,577,581	)


Total non-current deferred tax liabilities-net (note c)	(W	366,621	)							(W	433,835	)


(note a)		Through 2004, the tax effects of temporary differences, which are unlikely to be realized, and temporary differences directly adjusted to capital surplus or capital adjustments, such as net unrealized loss on valuation of long-term investment securities, were excluded in determining the net deferred tax assets or liabilities. However, effective January 1, 2005, pursuant to adoption of SKAS No. 16, “Income Taxes”, temporary differences are presented on a gross basis, including temporary differences which are unlikely to be realized. In addition, tax effects of temporary differences related to adjustments made directly to capital surplus or capital adjustments are included in determining the net deferred tax assets or liabilities.


(note b)		These changes include adjustment to reflect the change in accumulated temporary differences based on the prior year tax return.


(note c)		The statutory tax rate used in measuring deferred tax asset and liabilities is 27.5%.

Deferred tax assets and liabilities before offsetting each other are as follows (In millions of Korean won):


	September 30, 2006			December 31, 2005
Deferred tax assets	W	149,393		W	192,044
Deferred tax liabilities		(473,884	)		(540,607	)


Deferred tax assets (liabilities), net	(W	324,491	)	(W	348,563	)


Current, net	W	67,637		W	61,152
Non-current, net	(W	392,128	)	(W	409,715	)

d.		Deferred tax assets (liabilities) added to (deducted from) capital surplus or capital adjustments

		Deferred tax assets (liabilities) added to (deducted from) capital surplus or capital adjustments as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):


	September 30, 2006			December 31, 2005
Gains on disposal of treasury stock	(W	30,226	)	(W	30,576	)
Considerations for conversion right		(17,467	)		(18,502	)
Unrealized loss on valuation of long-term investment securities		(34,039	)		15,982
Equity in capital adjustment of affiliates, net		(34,242	)		(32,350	)
Loss on valuation of currency swap		8,074			5,377
Loss on valuation of interest rate swap		755			—


Total	(W	107,145	)	(W	60,069	)

e.		Effective tax rate

		Effective tax rates for the three months and nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won):


	For the						For the
	three months ended						nine months ended
	September 30,			September 30,			September 30,			September 30,
	2006			2005			2006			2005
Income before income tax	W	645,935		W	789,591		W	1,650,637		W	1,987,490
Income tax expenses		189,133			201,713			483,337			564,085


Effective tax rate		29.28	%		25.55	%		29.28	%		28.38	%

17.		NET INCOME AND ORDINARY INCOME PER SHARE

		The Company’s net income and ordinary income per share amounts for the three months and nine months ended September 30, 2006 and 2005 are computed as follows (In millions of Korean won, except for per share income per share):

		Net income and ordinary income per share


	For the				For the
	three months ended				nine months ended
	September 30,		September 30,		September 30,		September 30,
	2006		2005		2006		2005
Net income and ordinary income	W	456,802	W	587,878	W	1,167,300	W	1,423,405
Weighted average number of common shares outstanding		73,314,653		73,614,296		73,531,415		73,614,296


Net income and ordinary income per share	W	6,231	W	7,986	W	15,875	W	19,336

		Net income and ordinary income per share for the year ended December 31, 2005 were W25,421 and net income and ordinary income per share for the three months ended March 31, 2006 and 2005 are W4,580 and W5,005, respectively, and for the three months ended June 30, 2006 and 2005 are W5,068 and W6,345, respectively.

		The weighted average number of common shares outstanding for the three months and nine months ended September 30, 2006 and 2005 is calculated as follows:


	Number of			Weighted		Weighted
	shares			number of days		number of shares
For the three months ended September 30, 2006
Outstanding common stocks at July 1, 2006		82,276,711			92/92		82,276,711
Treasury stocks at July 1, 2006		(8,563,054	)		92/92		(8,563,054	)
Retirement of treasury stock (Note a)		(1,083,000	)	34 / 92 (Note a)			(399,004	)


Total		72,630,657					73,314,653


For the nine months ended September 30, 2006
Outstanding common stocks at January 1, 2006		82,276,711			273/273		82,276,711
Treasury stocks at January 1, 2006		(8,662,415	)		273/273		(8,662,415	)
Conversion of convertible bonds into treasury stock (Note b)		99,361		142 / 273 (Note b)			51,582
Retirement of treasury stock (Note a)		(1,083,000	)	34 / 273 (Note a)			(134,463	)


Total		72,630,657					73,531,415


(Note a)		The Company retired treasury stocks which were acquired on two different dates during the nine months ended September 30, 2006, and weighted number of shares was calculated considering each transaction date.


(Note b)		Treasury stocks were used to settle the conversion of the convertible bonds on several different dates during the nine months ended September 30, 2006 and weighted number of shares was calculated considering each transaction date.


	Number of			Weighted		Weighted
	shares			number of days		number of shares
For the three months ended September 30, 2005
Issued common stocks at July 1, 2005		82,276,711			92/92		82,276,711
Treasury stocks at July 1, 2005		(8,662,415	)		92/92		(8,662,415	)


Total		73,614,296					73,614,296


For the nine months ended September 30, 2005
Issued common stocks at January 1, 2005		82,276,711			273/273		82,276,711
Treasury stocks at January 1, 2005		(8,662,415	)		273/273		(8,662,415	)


Total		73,614,296					73,614,296

		Diluted net income and ordinary income per share amounts for the three months and nine months ended September 30, 2006 and 2005 are computed as follows (In millions of Korean won, except for share data):

		Diluted net income and ordinary income per share


	For the				For the
	three months ended				nine months ended
	September 30,		September 30,		September 30,		September 30,
	2006		2005		2006		2005
Adjusted net income and ordinary income	W	460,152	W	591,305	W	1,177,231	W	1,433,099
Adjusted weighted average number of common shares outstanding		75,000,469		75,332,996		75,265,373		75,332,996


Diluted net income and ordinary income per share	W	6,135	W	7,849	W	15,641	W	19,024

		Diluted net income and ordinary income per share for the year ended December 31, 2005 are W25,015 and diluted net income and ordinary income per share for the three months ended March 31, 2006 and 2005 are W4,516 and W4,932, respectively, and for the three months ended June 30, 2006 and 2005 are W4,996 and W6,243, respectively.

		Adjusted net income and ordinary income per share and the adjusted weighted average number of common shares outstanding for the three months and nine months ended September 30, 2006 and 2005 are calculated as follows (In millions of Korean won, except for share data):


	For the				For the
	three months ended				nine months ended
	September 30,		September 30,		September 30,		September 30,
	2006		2005		2006		2005
Net income and ordinary income	W	456,802	W	587,878	W	1,167,300	W	1,423,405
Effect of stock options (Note a)		—		—		—		—
Effect of convertible bonds (Note b)		3,350		3,427		9,931		9,694


Adjusted net income and ordinary income	W	460,152	W	591,305	W	1,177,231	W	1,433,099


	For the				For the
	three months ended				nine months ended
	September 30,		September 30,		September 30,		September 30,
	2006		2005		2006		2005
Weighted average number of common shares outstanding		73,314,653		73,614,296		73,531,415		73,614,296
Effect of stock options (Note a)		—		—		—		—
Effect of convertible bonds (Note b)		1,685,816		1,718,700		1,733,958		1,718,700

Adjusted weighted average number of common shares outstanding		75,000,469		75,332,996		75,265,373		75,332,996


(Note a)		For the three months and nine months ended September 30, 2006 and 2005, the outstanding stock options did not have a dilutive effect because the exercise price exceeded the average market price of common stock for the three months and nine months ended September 30, 2006 and 2005 and for the year ended December 31, 2005, respectively.


(Note b)		The effect of convertible bonds increased net income related to interest expenses that would not have incurred, and increase in the weighted average number of common shares outstanding related to common shares that would have been issued, assuming that the conversion of convertible bonds was made at the beginning of the period.

18.

RESTRICTED DEPOSITS

	a.		At September 30, 2006, the Company has restricted guarantee deposits for its checking accounts totaling W26 million, which are recorded as long-term deposits.

	b.		The Company entered into a contract with First Data Corporation to sell the investment in common stock of KPMS Corporation, which was held by the Company and accounted for as available-for-sale securities. At September 30, 2006, certain portion of proceeds from sales of such investment totaling W1,137 million is kept in escrow accounts in accordance with the Escrow Agreement, which is restricted for use until November 16, 2007, the final settlement date, and recorded as long-term deposits.

19.

INTERIM DIVIDENDS

In accordance with the resolution of the Company’s board of directors dated July 28, 2006, the Company declared and paid cash dividends during the three months ended September 30, 2006 based on outstanding number of common shares at June 30, 2006 as follows (in millions of Korean won except for per share data) :


Number of shares
outstanding as of June 30, 2006	Par value per share		Dividend ratio			Dividends
73,713,657	W	500		200	%	W	73,714

20.		INSURANCE

		As of September 30, 2006, certain Company’s assets are insured with local insurance companies as follows (In millions of Korean won and thousands of U.S. dollars):

Insured

Risk

Carrying value

Coverage

US$

58,115

Property and equipment

Fire and comprehensive liability

3,335,730

7,255,411

In addition, the Company carries directors and officers liability coverage insurance totaling W50,000 million.

21.

RELATED PARTY TRANSACTIONS

a. Holding company and subsidiaries

As of September 30, 2006 and December 31, 2005, parent company and subsidiaries of the Company are as follows:


		Ownership	Types of
Type	Company	percentage (%)	business
Parent company	SK Corporation	22.8 (Note a)	Manufacturing and selling petrochemicals

Subsidiary	SK Capital Co., Ltd.	100	In arrangement to commence the business
"	SK Telink Co., Ltd.	90.8	Telecommunication service
"	SK Communications Co., Ltd.	86.5	Internet website services
"	SK Wyverns Baseball Club Co., Ltd.	100.0	Business related sports
"	Global Credit & Information Co., Ltd.	50.5	Credit and collection services
"	PAXNet Co., Ltd.	65.9	Internet website services
"	Seoul Records, Inc.	60.0	Release of music disc
"	SLD Telecom PTE Ltd.	73.3	Telecommunication service
"	SK Telecom China Co., Ltd.	100.0	Telecommunication service
"	U-Land Company Ltd	70.1	Telecommunication service
"	IHQ, Inc.	34.3	Entertainment management
"	SK Telecom USA Holdings, Inc.	100.0	Telecommunication service
"	SK Telecom International Inc.	100.0	Telecommunication service
"	Centurion IT Investment Association	37.5	Investment association
"	The First Music Investment Fund of SK-PVC	69.3	Investment association
"	The Second Music Investment Fund of SK-PVC	79.3	Investment association
"	SK-KTB Music Investment Fund	74.3	Investment association
"	IMM Cinema Fund	48.4	Investment association
"	Cyworld, Inc.	100.0 (Note b)	Internet website services
"	Cyworld Japan Co., Ltd.	100.0	Internet website services
"	SK Cyberpass Inc.	70.5 (Note b)	Telecommunication service
"	Masoolpiri	51.4 (Note b)	Film production
"	YTN Media Inc.,	51.4 (Note b)	Broadcasting program production
"	Ntreev Soft Co., Ltd	51.0 (Note b)	Game program production
"	Ifilm Co., Ltd.	45.0 (Note b)	Film production
"	IHQ USA, Inc.	100.0 (Note b)	Surveying marketing information
"	SK Telecom Europe Ltd.	100.0	Wireless telecommunication related business
"	SK Telecom Advanced Tech & Service Center	100.0	Research & Development
"	Cyworld Europe GmbH	50.2 (Note b)	Internet Website services


(Note a)		The ownership percentage represents parent company’s ownership over the Company.


(Note b)		The ownership percentage represents subsidiaries’ ownership over their subsidiaries, in which the Company has no direct investment.

b. Transactions and balances with related parties

Significant related party transactions for the three months and nine months ended September 30, 2006 and 2005, and account balances as of September 30, 2006 and December 31, 2005 are as follows (In millions of Korean won):

b-(1) Transactions


	For the three months ended September 30, 2006						For the nine months ended September 30, 2006
	Purchases of		Commissions		Commissions		Purchases of		Commissions		Commissions
	property and		paid and		earned and		property and		paid and		earned and
	equipment		other expenses		other income		equipment		Other expenses		other income
Parent Company:
SK Corporation	W	5	W	9,274	W	1,663	W	859	W	25,233		W	6,759

Subsidiaries:
SK Communications Co., Ltd.		40		10,884		541		51		30,984			1,949
Global Credit & Information Co., Ltd.		—		10,043		292		—		26,413			927
PAXNet Co., Ltd.		—		1,726		322		—		6,539			1,176
SK Telink Co., Ltd.		—		2,684		4,268		—		10,998			12,724
Others		8		5,656		2		12		17,828			2

Equity Method Investees:
WiderThan Co., Ltd.		374		29,795		9		1,341		77,791			981
Helio, LLC.		—		—		15,123		—		—			28,044
SK C&C Co., Ltd.		41,493		68,729		1,770		87,269		210,607			5,637
TU Media Corp.		—		414		14,500		573		1,055			36,394
Others		950		5,845		297		3,896		13,153			7,641

Others :
SK Engineering & Construction Co., Ltd.		76,868		2,224		520		123,072		3,299			1,911
SK Networks Co., Ltd.		821		118,703		3,049		2,705		336,834			8,514
Innoace Co., Ltd.		3,010		579		49		4,394		3,445			156
SK Telesys Co., Ltd.		49,920		1,020		758		133,659		2,187			1,807
Others		147		3,100		920		176		6,351			2,269


Total	W	173,636	W	270,676	W	44,083	W	358,007	W	772,717		W	116,891


	For the three months ended September 30, 2005						For the nine months ended September 30, 2005
	Purchases of		Commissions		Commission		Purchases of		Commissions		Commission
	property and		paid and		and		property and		paid and		and
	equipment		other expenses		other income		equipment		Other expenses		other income
Parent Company:
SK Corporation	W	457	W	10,741	W	1,309	W	927	W	33,814	W	5,478

Subsidiaries:
SK Communications Co., Ltd.		31		12,428		186		157		31,338		671
Global Credit & Information Co., Ltd.		—		9,585		292		—		25,547		766
PAXNet Co., Ltd.		—		2,664		766		—		12,050		1,773
SK Telink Co., Ltd.		—		3,179		4,592		—		9,587		11,745
Others		—		3,601		—		576		17,632		976

Equity Method Investees:
WiderThan Co., Ltd.		1,547		24,948		209		6,109		70,821		241
SK C&C Co., Ltd.		39,182		80,173		1,990		67,239		223,272		6,232
TU Media Corp.		—		908		8,337		—		1,009		17,142
Others		7		4,276		540		97		11,065		898

Others:
SK Engineering & Construction Co., Ltd.		61,591		2,220		524		111,738		2,814		1,420
SK Networks Co., Ltd.		6,499		108,260		2,284		7,626		313,404		9,505
Innoace Co., Ltd.		3,363		379		55		8,009		1,495		165
SK Telesys Co., Ltd.		78,415		863		106		145,219		2,400		296
Others		1,001		3,161		583		1,288		6,394		1,650


Total	W	192,093	W	267,386	W	21,773	W	348,985	W	762,642	W	58,958

b-(2) Account balances


	As of September 30, 2006
											Guarantee
	Accounts		Short-term		Long-term		Guarantee		Accounts		deposits
	receivable		loans		loans		deposits		payable		received
Parent Company:
SK Corporation.	W	860	W	—	W	—	W	291	W	5,308	W	6,174

Subsidiaries:
SK Communications Co., Ltd.		1,062		—		—		—		6,420		3,681
SK Wyverns Baseball Club Co., Ltd.		276		575		4,707		—		—		—
Global Credit & Information Co., Ltd.		5		—		—		—		3,446		—
PAXNet Co., Ltd.		147		—		—		—		1,005		—
SK Telink Co., Ltd.		930		—		—		—		853		826

Equity Method Investees:
WiderThan Co., Ltd.		12		—		—		—		4,953		—
SK C&C Co., Ltd.		214		—		—		—		49,153		346
Helio, LLC.		15,096		—		—		—		—		—
Others		7,850		—		—		—		4,865		3,242

Others:
SK Engineering & Construction Co., Ltd.		183		—		—		—		676		942
SK Networks Co., Ltd.		940		—		—		113		37,651		2,967
Innoace Co., Ltd.		20		—		—		—		1,082		2,291
SK Telesys Co., Ltd.		11		—		—		—		37,340		—
Others		683		—		—		900		1,569		—


Total	W	28,289	W	575	W	4,707	W	1,304	W	154,321	W	20,469


	As of December 31, 2005
											Guarantee
	Accounts		Short-term		Long-term		Guarantee		Accounts		deposits
	receivable		loans		loans		deposits		payable		received
Parent Company:
SK Corporation	W	1,643	W	—	W	—	W	1,307	W	6,767	W	6,174

Subsidiaries:
SK Communications Co., Ltd.		195		—		—		—		5,891		3,681
SK Wyverns Baseball Club Co., Ltd.		527		1,150		4,706		—		—		—
Global Credit & Information Co., Ltd.		70		—		—		—		6,533		—
PAXNet Co., Ltd.		401		—		—		—		2,077		—
SK Telink Co., Ltd.		436		—		—		—		1,179		514
Others		2		—		—		—		2,755		70

Equity Method Investees:
WiderThan Co., Ltd.		4		—		—		—		17,398		—
SK C&C Co., Ltd.		91		—		—		—		174,884		346
Helio, LLC.		11,914		—		—		—		—		—
Others		6,048		—		—		—		4,154		3,062

Others:
SK Engineering & Construction Co., Ltd.		97		—		—		—		21,326		942
SK Networks Co., Ltd.		1,760		—		—		113		20,465		2,700
Innoace Co., Ltd.		—		—		—		—		6,100		2,138
SK Telesys Co., Ltd.		3		—		—		—		65,496		—
Others		223		—		—		900		7,495		—


Total	W	23,414	W	1,150	W	4,706	W	2,320	W	342,520	W	19,627

c. Compensation for the key management

The Company considers registered directors who have substantial roles and responsibility for planning, operating, and controlling of the business as key management, and the considerations given to the key management for the three months and the nine months ended September 30, 2006 are as follows(In millions of Korean won):

For the three months ended

For the nine months ended

September 30, 2006

September 30, 2006 (Note)

Severance

Payee

Payroll

indemnities

Total

Payroll

indemnities

Total

12 Registered directors (including outside directors)

507

136

643

3,687

799

4,486


(Note)		Compensation for an ex-outside director who resigned during the three months ended June 30, 2006 is included.

In addition, on March 8, 2002, the Company granted stock options to its nine key members of the management, representing 15,110 shares at an exercise price of W267,000 per share. The stock options fully vested after three years from the date of grant and are exercisable for two years upon vesting. Upon exercise of stock options, the Company will issue its common stock or deliver treasury stock.

22.		PROVISION FOR MILEAGE POINTS

		The Company, for its marketing purposes, grants certain mileage points (“Rainbow Points”) to its subscribers based on their usage of the Company’s services. Rainbow Points provision was provided based on the historical usage experience and the Company’s marketing policy. Such provision was recorded as accrued expenses and details of change in the provisions for such mileage points for the nine months ended September 30, 2006 and 2005 are as follows (In millions of Korean won):


	September 30, 2006			September 30, 2005
	(Note a)			(Note a)
Beginning balance	W	52,172		W	61,596
Increase		9,679			9,065
Decrease		(9,381	)		(12,403	)


Ending balance	W	52,470		W	58,258


(Note a)		Beginning and ending balances for the nine months ended September 30, 2006 are stated at their discounted values in accordance with SKAS No. 17 and beginning and ending balances for the nine months ended September 30, 2005 are stated at their nominal values.

Rainbow Points expire after 5 years; thus, all unused points are expired on their fifth anniversary.

The expected year when unused Rainbow Points as of September 30, 2006 are expected to be used and the respective estimated monetary amount to be paid in a given year are as follows (In millions of Korean won):


	Estimated amount to be paid
Expected usage for the year ended September 30,	In nominal value (Note b)		Current value (Note b)
2007	W	26,532	W	25,311
2008		15,870		14,443
2009		8,452		7,340
2010		4,364		3,615
2011		2,228		1,761


Ending balance	W	57,446	W	52,470


(Note b)		The above expected year of the usage and the current value of the estimated amount to be paid are estimated based on historical usage experience.

23.

DERIVATIVE INSTRUMENTS

	a.		Currency swap contract to which the cash flow hedge accounting is applied

			The Company has entered into a fixed-to-fixed cross currency swap contract with Citibank, BNP Paribas and Credit Suisse First Boston International to hedge the foreign currency risk of unguaranteed U.S. dollar denominated bonds with face amounts totaling US$300,000,000 at annual fixed interest rate of 4.25% issued on April 1, 2004. As of September 30, 2006, in connection with unsettled foreign currency swap contract to which the cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to W21,287 million (excluding tax effect totaling W8,074 million and foreign exchange translation gain arising from unguaranteed U.S. dollar denominated bonds totaling W60,821 million) was accounted for as a capital adjustment.

	b.		Currency swap contract to which the cash flow hedge accounting is not applied

			The Company has entered into a fixed-to-fixed cross currency swap contract with Credit Suisse First Boston International to hedge foreign currency risk of unguaranteed U.S. dollar denominated convertible bonds with face amounts of US$329,450,000 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, loss on valuation of currency swap of W8,553 million for the nine months ended September 30, 2006 and gains on valuation of currency swap of W4,314 million for the nine months ended September 30, 2005 were charged to current operations.

			In addition, the company has entered into a fixed-to-fixed cross currency swap contract with Hana Bank, Korea Exchange Bank, Woori Bank, Shinhan Bank, Citibank and Barclays Bank to hedge foreign currency risk of unguaranteed U.S. dollar denominated convertible bonds issued by China Unicom which was acquired on July 5, 2006. In connection with unsettled fixed-to-fixed cross currency swap contract to which the cash flow hedge accounting is not applied, gain on valuation of currency swap of W4,358 million for the nine months ended September 30, 2006 were charged to current operations.

	c.		Interest rate swap

			The Company has entered into a floating-to-fixed interest rate swap contract with Shinhan Bank to hedge the interest rate risk of floating rate discounted bill with face amounts totaling W200,000 million borrowed on June 29, 2006. As of September 30, 2006, in connection with unsettled interest rate swap contract to which the cash flow hedge accounting is applied, an accumulated loss on valuation of derivatives amounting to W1,991 million (excluding tax effect totaling W755 million) was accounted for as a capital adjustment.

			As of September 30, 2006, fair values of above derivatives recorded in long-term liabilities and details of derivative instruments as of September 30, 2006 are as follows (In thousands of U.S. dollars and millions of Korean won):

Fair value

Designated

Face

Duration

as cash

Not

Type

Hedged item

Amount

of contract

flow hedge

designated

Total

Current assets:

Fix-to-fixed cross
currency swap

U.S. dollar denominated convertible bond issued by China Unicom

US1,000,000

July 5, 2006
~ July 5, 2007

—

4,358

—

4,358

Non-current liabilities:

Fix-to-fixed cross
currency swap

U.S. dollar denominated bonds

US$300,000

March 23, 2004
~ April 1, 2011

90,182

—

90,182

Fix-to-fixed cross
currency swap

U.S. dollar denominated convertible bond

US$100,000

May 27, 2004
~ May 27, 2009

—

21,798

90,182

21,798

111,980

Floating-to-fixed
Interest rate swap

Long-term floating rate
discounted bill

W 200,000

June 29, 2006
~ June 29, 2010

2,747

—

2,747

92,929

21,798

114,727

24.		COMMITMENTS

		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 ‘Helio, LLC.’, a joint venture company, in the United States of America in February 2005 in order to provide wireless telecommunication service across the United States of America. The Company, via SK Telecom USA Holdings, Inc., its wholly-owned subsidiary in the United States of America, has invested US$200.5 million from 2005 through September 30, 2006 and will additionally invest US$19.5 million through 2007 to maintain a 50% equity interest in the joint venture company. Helio, LLC. launched cellular voice and data services extensively across the United States of America in May 2006, by renting networks from network operators throughout the United States of America also known as partial mobile virtual network operator (MVNO) system.

25.		STATEMENTS OF CASH FLOWS

		The statements of cash flows are prepared using the indirect method and significant non-cash transactions for the three months and nine months ended September 30, 2006 are as follows (In millions of Korean won):


	For the three months		For the nine months
	ended September 30, 2006		ended September 30, 2006
Conversion of convertible bonds	W	—	W	21,575
Retirement of treasury stock		209,077		209,077

There was no significant non-cash transaction for the three months and nine months ended September 30, 2005.

26.		SUBSEQUENT EVENTS

		The Company is expected to sell 2,000,000 shares of WiderThan Co., Ltd. held by the Company, representing 10.10% of the total outstanding common stock of WiderThan Co., Ltd., for US$34.1 million (US$17.05 per share), to RealNetworks, Inc., a U.S.A. company, on October 31, 2006.

Forward-Looking Statement Disclaimer

The material above contains forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. We do not make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. Additional information concerning these and other risk factors are contained in our latest annual report on Form 20-F and in our other filings with the U.S. Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		SK Telecom Co., Ltd.
		(Registrant)

		By: /s/ Tae Jin Park

		(Signature)
		Name:	Tae Jin Park
		Title:	Vice President

Date: February 5, 2007