Talks with Naver about Line Yahoo scale-down underway: SoftBank CEO

SoftBank CEO Junichi Miyakawa speaks during a press conference call [SCREEN CAPTURE]

The CEO of SoftBank said on Thursday that discussions with Naver are underway on trimming the Korean company’s equity in Line Yahoo (LY), the Tokyo-based operator behind Japan’s top messaging app Line, with a deadline set for July 1.

“SoftBank is discussing with Naver changing capital ties, at the strong request of LY from the perspective of security governance and business strategy,” Junichi Miyakawa said at a conference call to announce the Japanese investment company's full-year earnings for 2023.

"We met yesterday to reach a conclusion but failed to. We are aiming to resolve the issue by July 1, but it may be difficult.”

On speculation that the Korean company is reluctant in the negotiations, the CEO said "that is not true."

LY is 64.5 percent owned by A Holdings, a 50:50 joint venture between Naver and SoftBank, which already operationally controls the company, according to Miyakawa.

“Softbank has more members in A Holdings’ board of directors,” he said. “Therefore, we are already controlling LY.”

A Naver spokesperson confirmed the matter but did not elaborate on the deadline for the settlement.

SoftBank's official stance on the issue comes as LY CEO Takeshi Idezawa publicly pressed Naver to reduce its capital ownership in the messaging app operator the previous day during the Japanese firm's conference call.

In line with LY's effort to scale back ties, its chief product officer and the sole Korean member of its board of directors, Shin Jung-ho, was also confirmed to be resigning from the position of internal director next month after the general shareholders’ meeting on June 18.

July 1 is the deadline set by the Japanese government’s administrative guidance to come up with measures to lessen the Korean company’s control after a massive data breach last October. The guidance not only pressed LY to reduce its reliance on Naver for data management but to comprehensively review its capital ties with the Korean firm.

“The administrative guidance in Japan is a unique aspect of Japanese culture in that despite it not being a legal measure, subjected companies are required to produce satisfactory results that align with the expectations of the government,” said ChungAng University Professor Wi Jong-hyun. “In other words, it’s an extremely potent measure that needs to be followed.”

Wi believes that the Korean internet platform giant is fearful of the consequence of clashing with Tokyo.

“The underlying concern for Naver is that the future of their business in Japan might become challenging, given the realistic situation in Japan.”

The data breach incident that sparked the ongoing corporate standoff resulted in the leakage of some 510,000 items of personal information about users, business partners, employees and other personnel through its subcontractor, Naver Cloud.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]