South Korean telecom titan KT Corp. is moving to buy Enswers Inc., a Seoul-based video search technology provider, to prop up its cloud computing business, industry sources said Sunday.
The deal could fetch Enswers as much as 40 billion won (US$36 million), the sources said, all speaking on the condition of anonymity because the matter is not public.
The acquisition, if successful, will help KT's bid to roll out a service to compete with Apple Inc.'s iCloud, as it hopes to capitalize on growing demand for reliable online data storage, they said.
KT is South Korea's dominant fixed-line operator and the second-largest mobile carrier.
KT and Enswers have completed a term sheet, outlining the conditions of the deal worth between 37 billion and 40 billion won, one source said.
"They've finished writing the term sheet and the talk has moved onto the main stage," said the source. "KT proposed a sum of between 37 billion and 40 billion won, to which Enswers agreed."
A ranking official at Enswers confirmed that KT and Enswers are discussing various ways to expand their business collaborations, including a joint venture, additional investments and a merger.
The deal would give KT access to technologies that allow users to search online videos based on visual signals and visual data, an advancement from a system that relies mostly on text.
Founded in 2007, Enswers provides video fingerprinting technology that allows users to search multimedia content and index videos.
In 2009, the company won investments totaling 4.5 billion won from four investors including KT and NHN Corp., the operator of South Korea's most-visited search engine Naver.
Enswers posted at least 3 billion won in annual revenue last year and has 64 employees on its payroll. The company declined to reveal other details, including net income, shareholders and other data.
KT spokeswoman Kim Yoon-jeong declined to comment, but Enswers said it is open to mergers and acquisitions (M&A).
"It is common for a startup to consider M&A to drive business growth, but Enswers does not have a specific plan on this at the moment," Enswers said in an e-mail to Yonhap News.
KT is seeking to expand its cloud computing business globally by offering, for example, a remote data storage center to corporate customers, as growth in the fixed-line phone and wireless business has stagnated.
In May, KT and Japan's Softbank Telecom Corp. announced a plan to set up a joint venture in South Korea to offer online data storage services to Japanese corporations.
Since absorbing its mobile-phone unit KT Freetel Co. in June 2009, KT has developed its business portfolios outside telecom and mobile-phone services, ranging from mobile advertisements, car rentals, cloud computing, Internet-protocol TVs, mobile payment and robotics.