Japan’s request for Naver to shed Line control ‘unprecedented': CEO

TOKYO – South Korea’s tech giant Naver Corp. said on Friday that Japan’s administrative guidance for Naver to sell down its control in LY Corp., the operator of popular mobile messenger app Line in Japan, is unprecedented.

Choi Soo-yeon, chief executive of Naver, said she is undecided on Naver’s relationship with LY. However, Naver is ready to accept Tokyo’s request to separate its information technology infrastructure from LY.

“An administrative directive demanding a reduction in (capital) control over a company is highly unusual,” she said during a conference call with analysts after announcing Naver’s first-quarter earnings in Seoul. “That is a matter to be decided based on our mid- to long-term business strategy. We have yet to determine our stance on the matter.”

Choi said Naver’s infrastructure revenue will be affected by Japan’s administrative guidance that some infrastructure Naver provides to LY should be separated.

She said Naver is in “close communication” with the Korean government, including the Ministry of Science and ICT, over how to handle the issue.

TRIGGERED BY PERSONAL DATA LEAKS

In March, Japan’s Ministry of Internal Affairs and Communications asked LY, the operator of Line app and internet portal Yahoo Japan, to reduce its reliance on Naver and review its relationship with Naver.

The comments were part of the ministry’s guidance against LY following a series of personal information leaks online, including an incident last November where LY’s servers were hacked and Line app user information was leaked.

According to several Japanese media reports, the ministry cited LY’s heavy dependence on Naver in terms of systems and network configurations among the causes of the incident.

LY is majority-owned by A Holdings, a 50-50 joint venture between Naver and Japan's SoftBank Corp., a telecommunications company affiliated with the tech conglomerate SoftBank Group.

CONTROL OVER LINE, YAHOO AT STAKE

Industry officials said Naver is reviewing all possibilities, including reducing its clout over the Line app and Yahoo Japan.

Earlier this week, industry sources said Naver and SoftBank are in talks over what to do with their stakes in A Holdings, indicating a possible change in their ownership of the JV.

Established in 2021, A Holdings owns a 65.4% stake in LY. Should SoftBank buy an additional stake in A Holdings, the Japanese company will control LY’s management, analysts said.

Mobile messenger app Line became popular in Japan after an earthquake in March 2011 disrupted landline telecommunications.

The app, which also offers messenger services in Southeast Asia, including Taiwan, Thailand and Indonesia, now boasts over 200 million users across the globe.

Write to Ji-Eun Jeong and Il-Gue Kim at jeong@hankyung.com

In-Soo Nam edited this article.