LY vows to keep Line Plus as Naver-SoftBank breakup drags on

Japan’s LY Corp., the operator of the country’s top mobile messenger app Line, said on Wednesday it will keep its South Korean affiliate Line Plus Corp. under its wing – a move analysts say could hurt Naver Corp.'s Asian business outside Japan.

Naver, a Korean tech giant, is in talks with Japan’s SoftBank Corp. over the fate of their joint venture, the operator of LY, following the Japanese government’s request that Naver significantly reduce its capital control in LY.

The Japanese government has also asked Naver to stop providing information technology services to LY by severing their IT infrastructure ties.

An LY official said on Wednesday that even if it discontinues its relationship with Naver, it plans to keep Line Plus, based in Korea, as its affiliate.

“There are no direct capital or personnel relationships between Naver and Line Plus. As an LY subsidiary, Line Plus will continue to oversee operations in Taiwan, Thailand and other countries,” he said.

LINE PLUS: OUTPOST FOR NAVER’S ASIAN BUSINESS

Line Plus was established in 2013 to expand Naver’s and Line’s global market presence outside of Japan. Line Plus is wholly owned by Z Intermediate Global Corp., a unit of LY.

In Taiwan, Line Plus offers Line Today, a news curation service, Line Pay, a fintech service, and Line Bank, an internet banking service. It also offers similar services in Thailand and Indonesia.

Headquartered in Pangyo, dubbed the Korean version of Silicon Valley, south of Seoul, Line Plus has about 2,500 Korean employees.

If Naver loses its control over LY, the Korean company’s Southeast Asian business through Line Plus will also lose steam, analysts said.

Some industry watchers have raised a Naver-SoftBank breakup scenario, in which SoftBank gains control of Line in Japan while Naver operates Line Plus for its business in Southeast Asia.

RED-HOT ISSUE BETWEEN KOREA, JAPAN

At the center of the red-hot issue between the two neighboring countries is LY, established in 2021 through a merger of Naver’s Line, the most popular mobile messenger app in Japan, and SoftBank's Yahoo Japan.

LY is operated under the Naver and Softbank JV, A Holdings, in which the two companies each hold a 50% stake. If SoftBank acquires an additional stake in A Holdings, it would thus control LY, also known as Line-Yahoo.

A conflict flared up last November when Naver Cloud Corp., a unit of the Korean tech giant, suffered a cyberattack, resulting in the breach of Line users’ personal data.

The Japanese government responded not just with a call for tighter cybersecurity but also administrative guidance suggesting a complete severance of ties between Naver and LY’s IT infrastructure.

The situation escalated to the point where Japan's Ministry of Internal Affairs and Communications in March began pushing for Naver to sell its stake in A Holdings.

This culminated in LY CEO Takeshi Idezawa's firm request earlier this month that Naver divest of its shares, citing the ministry's guidance. LY’s board also announced that Jungho Shin, LY’s chief product officer and its only Korean board member, would step down from the board.

SoftBank CEO Junichi Miyakawa said it is in talks with Naver over the fate of their joint management of LY, and that the two parties are working to reach an agreement by July.

Earlier this month, Naver Chief Executive Choi Soo-yeon said Japan’s administrative guidance for Naver to sell down its control in LY is “highly unusual.”

But she said Naver is ready to accept Tokyo’s request to separate its information technology infrastructure from LY.

Seoul’s Presidential Office said it will resolutely respond to any “unfair” measures by Tokyo against Naver.

Write to Ji-Eun Jeong at jeong@hankyung.com

In-Soo Nam edited this article.