LG Uplus poised to acquire homegrown OTT platform Watcha

South Korea’s third-largest mobile carrier LG Uplus Corp. is slated to acquire homegrown over-the-top (OTT) platform Watcha Inc., investment banking sources said on Dec. 5.

The mobile carrier is poised to become Watcha’s largest shareholder by purchasing 40 billion won ($30.3 million) worth of shares to be issued. LG Uplus has reached an agreement with Watcha on the deal value and is in the final stage of negotiations, according to the sources. 

Watcha’s existing shareholders are not likely to oppose the sale of the company as the OTT platform can’t maintain its business without further investments, a source from Watcha’s investor said on condition of anonymity.

The OTT platform’s pre-value, or the value before investment, is calculated at 20 billion won to 30 billion won. It is less than one-eleventh of 338 billion won, its enterprise value in October 2021 when it attracted 49 billion won by issuing convertible bonds.

Established as a movie review aggregator in 2011, Watcha launched the current content subscription service in 2015. It has received investments of 107.2 billion won since its inception from Korean venture capital firms such as Atinum Investment Co., Kakao Ventures Corp. and Company K Partners Co. as well as the state-run Korea Development Bank.

Watcha attempted to attract a pre-IPO investment of 100 billion won during the first half of this year in hopes of a 500 billion won enterprise value. But it failed to draw investor attention amid interest rate hikes and market volatility.

The local OTT platform, once regarded as a rival to Netflix in the Korean market, posted operating losses of 15.4 billion won in 2020 and 24.8 billion won last year.

The number of its monthly active users (MAU) in the country was 1.1 million as of end-June, compared with Netflix’s 11.2 million.

LG Uplus aims to expand its OTT platform business amid growing competition in the on-demand video streaming market. Korea’s top mobile carrier SK Telecom Co. runs the OTT service Wavve in collaboration with three local major broadcasting companies, while the second-largest mobile carrier KT Corp. announced in July its OTT platform Seezn will be merged with CJ ENM’s TVing. 

If LG Uplus completes the deal, the mobile carrier will provide the streaming service through product bundles to its 19.5 million users, as well as merge Watcha with Kids Land and attract investment to its OTT business, a source said.

Write to Jun-Ho Cha and Chae-Yeon Kim at chacha@hankyung.com
Jihyun Kim edited this article.