| 5. | Operating Segments |
The Group’s operating segments have been identified to be each business unit, by which the Group provides independent services and merchandise. The Group’s reportable segments are cellular services, which include wireless voice and data transmission services, sales of wireless devices, IoT solutions and platform services; fixed-line telecommunication services, which include fixed-line telephone services, broadband Internet services, advanced media platform services (including IPTV) and business communications services; e-commerce services, which include open marketplace platform, 11st, and other commerce solutions, and other businesses, which include online portal service, hardware business and other operations that do not meet the quantitative thresholds to be separately considered reportable segments.
(1) Segment information for the years ended December 31, 2017, 2016 and 2015 is as follows:
| (In millions of won) | ||||||||||||||||||||||||||||
| 2017 | ||||||||||||||||||||||||||||
| Cellular Services |
Fixed-line telecommu- nication services |
E-commerce Services |
Others | Sub-total | Adjustments | Total | ||||||||||||||||||||||
|
Total revenue |
￦ | 14,873,543 | 3,586,887 | 1,091,903 | 788,836 | 20,341,169 | (2,821,156 | ) | 17,520,013 | |||||||||||||||||||
|
Inter-segment revenue |
1,611,408 | 862,736 | 47,732 | 299,280 | 2,821,156 | (2,821,156 | ) | — | ||||||||||||||||||||
|
External revenue |
13,262,135 | 2,724,151 | 1,044,171 | 489,556 | 17,520,013 | — | 17,520,013 | |||||||||||||||||||||
|
Depreciation and amortization |
2,390,016 | 592,877 | 54,486 | 60,087 | 3,097,466 | — | 3,097,466 | |||||||||||||||||||||
|
Operating profit (loss) |
1,714,078 | 167,515 | (267,829 | ) | (77,138 | ) | 1,536,626 | (312,054 | ) | 1,224,572 | ||||||||||||||||||
|
Gain relating to investments in subsidiaries, associates and joint ventures, net |
2,245,732 | |||||||||||||||||||||||||||
|
Finance income |
366,561 | |||||||||||||||||||||||||||
|
Finance costs |
(433,616 | ) | ||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
|
Profit before income tax |
3,403,249 | |||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (In millions of won) | ||||||||||||||||||||||||||||
| 2016 | ||||||||||||||||||||||||||||
| Cellular Services |
Fixed-line telecommu- nication services |
E-commerce Services |
Others | Sub-total | Adjustments | Total | ||||||||||||||||||||||
|
Total revenue |
￦ | 14,635,720 | 3,349,905 | 1,177,323 | 726,374 | 19,889,322 | (2,797,506 | ) | 17,091,816 | |||||||||||||||||||
|
Inter-segment revenue |
1,630,811 | 698,712 | 176,007 | 291,976 | 2,797,506 | (2,797,506 | ) | — | ||||||||||||||||||||
|
External revenue |
13,004,909 | 2,651,193 | 1,001,316 | 434,398 | 17,091,816 | — | 17,091,816 | |||||||||||||||||||||
|
Depreciation and amortization |
2,262,363 | 551,811 | 68,298 | 59,414 | 2,941,886 | — | 2,941,886 | |||||||||||||||||||||
|
Operating profit (loss) |
1,799,127 | 132,459 | (365,194 | ) | (30,648 | ) | 1,535,744 | (232,326 | ) | 1,303,418 | ||||||||||||||||||
|
Gain relating to investments in subsidiaries, associates and joint ventures, net |
544,501 | |||||||||||||||||||||||||||
|
Finance income |
575,050 | |||||||||||||||||||||||||||
|
Finance costs |
(326,830 | ) | ||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
|
Profit before income tax |
2,096,139 | |||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (In millions of won) | ||||||||||||||||||||||||||||
| 2015 | ||||||||||||||||||||||||||||
| Cellular Services |
Fixed-line telecommu- nication services |
E-commerce Services |
Others | Sub-total | Adjustments | Total | ||||||||||||||||||||||
|
Total revenue |
￦ | 14,962,689 | 3,162,712 | 1,703,278 | 410,265 | 20,238,944 | (3,102,210 | ) | 17,136,734 | |||||||||||||||||||
|
Inter-segment revenue |
1,693,411 | 668,139 | 643,299 | 97,361 | 3,102,210 | (3,102,210 | ) | — | ||||||||||||||||||||
|
External revenue |
13,269,278 | 2,494,573 | 1,059,979 | 312,904 | 17,136,734 | — | 17,136,734 | |||||||||||||||||||||
|
Depreciation and amortization |
2,174,819 | 531,106 | 112,537 | 26,833 | 2,845,295 | — | 2,845,295 | |||||||||||||||||||||
|
Operating profit (loss) |
1,678,339 | 108,252 | (6,740 | ) | (71,845 | ) | 1,708,006 | (212,581 | ) | 1,495,425 | ||||||||||||||||||
|
Gain relating to investments in subsidiaries, associates and joint ventures, net |
786,140 | |||||||||||||||||||||||||||
|
Finance income |
103,900 | |||||||||||||||||||||||||||
|
Finance costs |
(350,100 | ) | ||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
|
Profit before income tax |
2,035,365 | |||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (2) | Reconciliation of total segment operating income to consolidated operating profit from continuing operations for the years ended December 31, 2017, 2016 and 2015 are as follows: |
| (In millions of won) | 2017 | 2016 | 2015 | |||||||||
|
Total segment operating income |
￦ | 1,536,626 | 1,535,744 | 1,708,006 | ||||||||
|
Other operating income: |
||||||||||||
|
Gain on disposal of property and equipment and intangible assets |
13,991 | 6,908 | 7,140 | |||||||||
|
Others(*1) |
18,006 | 59,640 | 23,795 | |||||||||
|
|
|
|
|
|
|
|||||||
| 31,997 | 66,548 | 30,935 | ||||||||||
|
Other operating expenses: |
||||||||||||
|
Impairment loss on property and equipment and intangible assets |
(54,946 | ) | (24,506 | ) | (35,845 | ) | ||||||
|
Loss on disposal of property and equipment and intangible assets |
(60,086 | ) | (63,797 | ) | (21,392 | ) | ||||||
|
Donations |
(112,634 | ) | (96,633 | ) | (72,454 | ) | ||||||
|
Bad debt for accounts receivable — other |
(5,793 | ) | (40,312 | ) | (15,323 | ) | ||||||
|
Others(*2) |
(110,592 | ) | (73,626 | ) | (98,502 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| (344,051 | ) | (298,874 | ) | (243,516 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Consolidated operating profit from continuing operations |
￦ | 1,224,572 | 1,303,418 | 1,495,425 | ||||||||
|
|
|
|
|
|
|
|||||||
| (*1) | Others for the year ended December 31, 2016 include ￦25 billion of penalty refund. |
| (*2) | Others for the years ended December 31, 2017, 2016 and 2015 primarily consist of ￦21.4 billion, ￦7.6 billion and ￦29.5 billion of penalties, respectively, and various other expenses with inconsequential amounts. |
Since there are no intersegment sales of inventory or depreciable assets, there is no unrealized intersegment profit to be eliminated on consolidation. Domestic revenue for the years ended December 31, 2017, 2016 and 2015 amounts to ￦17,374 billion, ￦16,940 billion and ￦17,083 billion, respectively. Domestic non-current assets (excluding financial assets, investments in associates and joint ventures and deferred tax assets) as of December 31, 2017, 2016 and 2015 amount to ￦15,554 billion, ￦15,949 billion and ￦14,474 billion, and non-current assets outside of Korea amount to ￦257 billion, ￦286 billion and ￦287 billion, respectively.
No single customer contributed 10% or more to the Group’s total sales for the years ended December 31, 2017, 2016 and 2015.
| (3) | The Group’s operating revenue by service type is as follows: |
| (In millions of won) | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
|
Cellular revenue: |
||||||||||||
|
Wireless service(*1) |
￦ | 10,638,961 | 10,582,963 | 10,720,518 | ||||||||
|
Cellular interconnection |
592,754 | 614,446 | 710,026 | |||||||||
|
Wireless device sales |
1,052,203 | 922,449 | 963,354 | |||||||||
|
Miscellaneous(*2) |
978,217 | 885,051 | 875,380 | |||||||||
|
|
|
|
|
|
|
|||||||
| 13,262,135 | 13,004,909 | 13,269,278 | ||||||||||
|
Fixed-line telecommunication services revenue: |
||||||||||||
|
Fixed line telephone service |
316,763 | 357,754 | 420,611 | |||||||||
|
Fixed line interconnection |
116,070 | 134,089 | 57,130 | |||||||||
|
Broadband internet service and advanced media platform service |
1,641,645 | 1,472,776 | 1,308,789 | |||||||||
|
International calling service |
89,412 | 95,986 | 99,106 | |||||||||
|
Miscellaneous(*3) |
560,261 | 590,588 | 608,937 | |||||||||
|
|
|
|
|
|
|
|||||||
| 2,724,151 | 2,651,193 | 2,494,573 | ||||||||||
|
E-commerce services revenue(*4) |
1,044,171 | 1,001,316 | 1,059,979 | |||||||||
|
Other revenue: |
||||||||||||
|
Portal service(*5) |
43,952 | 54,177 | 71,812 | |||||||||
|
Miscellaneous(*6) |
445,604 | 380,221 | 241,092 | |||||||||
|
|
|
|
|
|
|
|||||||
| 489,556 | 434,398 | 312,904 | ||||||||||
|
|
|
|
|
|
|
|||||||
|
Consolidated operating revenue |
￦ | 17,520,013 | 17,091,816 | 17,136,734 | ||||||||
|
|
|
|
|
|
|
|||||||
| (*1) | Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through monthly plan-based fees, usage charges for outgoing voice calls, usage charges for wireless data services and value-added service fees paid by our wireless subscribers. |
| (*2) | Miscellaneous cellular services revenue includes revenue from IoT solutions as well as other miscellaneous cellular services. |
| (*3) | Miscellaneous fixed-line telecommunication services revenue includes revenues from business communications services (other than fixed-line telephone service) provided by SK Broadband and VoIP services provided by SK Telink |
| (*4) | E-commerce service revenue includes revenues from 11st, open marketplace platform, and other commerce solutions. |
| (*5) | Portal service revenue includes revenues from Nate, and online portal service operated by SK Communications. |
| (*6) | Miscellaneous other revenue includes revenues from hardware business, security business operated by one of the Group’s subsidiaries, NSOK Co., Ltd., marketing and sales solutions business operated by one of the Group’s subsidiaries, SK m&service Co., Ltd., and online open marketplace for mobile applications among other operations. |