KT to join MBK, IMM in Megazone Cloud's $400 mn funding

KT Corp., South Korea's No. 2 telecom operator, has decided to invest 130 billion won ($110 million) in Megazone Cloud Corp., the country's largest cloud services provider, according to people with knowledge of the matter on Monday.

KT is taking part in Megazone's Series C funding round of 530 billion won ($440 million), along with MBK Partners and IMM Private Equity. The largest-ever fundraising for a Korean cloud computing firm helped it gain unicorn status, or a company with a valuation of over $1 billion. 

MBK Partners and IMM Private Equity will each be investing 200 billion won in Megazone, the first South Korean business partner of Amazon Web Service (AWS).

The investment is expected to lead to a partnership between KT and Megazone and to speed up KT's transformation into a digital platform.

KT has chosen artificial intelligence, big data and cloud computing as its core pillars. To that end, it is considering spinning off its cloud-based services and internet data centers into new companies in the first half of this year.

The latest deal is set to become KT's second major investment of over 100 billion won in a startup since its investment in K Bank, its digital banking unit in 2019. 

In the same year, KT participated in Megazone's Series A funding via its venture capital unit KT Investment Inc. 

Megazone in 2012 was selected as the first Korean partner of Amazon Web Service (AWS) as then an in-house division of Megazone Corp., which provides computer system design services.

With the country’s cloud service market projected to exceed 5 trillion won in revenue this year, established IT services providers such as Samsung SDS Co. and LG CNS Co. are venturing into the market.

NHN Corp., South Korea’s first-generation game developer, is splitting off its cloud services business into a separate entity in April of this year, a move seen as part of an effort to attract substantial funding from outside investors.

"Cloud business requires a large amount of initial capital to secure infrastructure," said an industry source. "By splitting off cloud services into a new subsidiary, they can raise money from strategic investors to finance their full-fledged entry into the market." 

Write to Si-Eun Park and Jun-Ho Cha at seeker@hankyung.com
Yeonhee Kime edited this article