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13 September 2021

KT Corporation boosts international data expansion with Epsilon acquisition

Korea’s KT is emulating some regional peers such as NTT by engaging in strategic partnerships to expand its international reach and its service model. Together with private equity firm Daishin, it has acquired Epsilon Global Communications for $145m, and plans further acquisitions to create a significant international data services business.

KT will be the majority owner and will have full management control of Epsilon, while Daishin will take a 42% stake purely as a financial investor. The company was bought from previous owners the Kuok Group and the Stone Family.

Epsilon was originally founded in the UK in 2003 but is now headquartered in Singapore. It has more than 250 points of presence in 41 cities across 20 countries (including China). It owns 75 of these directly while the rest are owned by partners. Its business centers on three large regional data centers in London, New York and Singapore.

It has also developed an on-demand, network-as-a-service (NaaS) platform called Infiny, which may have been one of the chief attractions for KT, given the expected rise in demand for NaaS services from enterprises and service providers, and the opportunity to evolve this model into something more scalable and flexible by adding network slicing to the mix. KT has deployed some virtualized mobile networks, though these are highly customized, and they can support some forms of 5G slicing, so it seems logical that this experience might be incorporated into the Epsilon platform in future to expand the model both geographically and in terms of services.

In the immediate future, KT will be able to expand its international business beyond Asia and into North America and Europe. It said it would initially look to “secure new customers such as domestic companies that enter overseas market and foreign companies that expand into Asia” by offering services such as international leased lines, data center interconnect (DCI), multi-cloud networking and SD-WAN.

The market for enterprise and wholesale data services is forecast to grow from about $62bn in 2020 to about $86bn in 2025, according to Gartner. Last year, Epsilon generated revenues of $51m – about 64% from data services, 22% from colocation services, and 14% from voice traffic.

This is also part of a broader transformation of KT, that will target new enterprise revenues and will lead to further acquisitions. The operator said it wants to “accelerate the transformation into Digico, a digital platform company”, by combining the infrastructure and services of a global data business with its efforts, in other parts of its business, to develop AI services (under the GiGA Genie brand), robotics and digital transformation services.

KT said it plans to use Epsilon as a core platform for its projected global data business and will also pursue “strategic M&A (bolt-on M&A) with companies in essential fields of global communications, such as IT platform solutions, data centers and submarine optical cable infrastructure,” the operator said in a statement.