LG CNS (064400.KS) has secured a roughly 600 billion won deal by bringing in Naver Cloud as a tenant at its data center.
LG CNS disclosed on July 1 that it signed a colocation lease agreement with Naver Cloud for its Samsong data center in Goyang, Gyeonggi Province. According to materials released by Naver Cloud, the contract is valued at 603.4 billion won ($441 million). Given that LG CNS posted revenue of 6.1295 trillion won last year, the single contract amounts to approximately 10% of its annual sales.
The deal marks the largest colocation lease contract in LG CNS's data center business to date. Colocation services refer to arrangements in which a company rents space in a data center built by another firm. The data center operator provides space for installing servers and network equipment, along with infrastructure such as power and cooling facilities. Servers, the core equipment in a data center, are typically procured by the tenant.
Considering that data center colocation leases are generally structured as long-term contracts, LG CNS's actual revenue from the deal could grow further over time. The disclosed contract value was calculated as a liability based on the present value, taking into account factors such as inflation. As a result, the total rent Naver Cloud pays to LG CNS may differ from the disclosed figure. The lease runs for approximately 10 years, from July this year through May 2035. "The disclosed amount is 603.4 billion won, but that figure reflects the present value of long-term lease payments," a data center industry official said. "The actual revenue LG CNS books over the 10-year period will likely exceed 600 billion won."
Separately, LG CNS disclosed that it also generated revenue from the consigned operation of the Samsong data center. The facility is owned by Igis Asset Management, with LG CNS handling the design, build, and operate (DBO) services under consignment. LG CNS receives 182 billion won from Igis Asset Management for providing DBO services. LG CNS began construction of the Samsong data center for Igis Asset Management in August 2023. In December last year, it also started the second phase of construction. The first-phase contract value was not disclosed, while the second-phase construction contract was disclosed at 240.1 billion won.