Naver says Tokyo's order to sell off Line 'highly unusual'

Naver CEO Choi Soo-yeon said the directive from Japanese authorities pushing for a stake reduction in Line defies standard practices, while Tokyo denied any such intent.

Naver CEO Choi Soo-yeon speaks during a signing ceremony for a business agreement between Naver and the Financial Supervisory Service held in western Seoul on April 3. [YONHAP]

The directive by Japanese authorities demanding that Naver consider reducing its stake in the messenger app Line is “highly unusual,” the IT company’s CEO said Friday, while Tokyo reportedly denied any intention to coerce a sale.

“An administrative directive demanding a reduction in control [over a company] is highly unusual,” Naver chief Choi Soo-yeon said during the company’s conference call that day.

“This is a decision that we need to make based on our mid- to long-term business strategy, and we are currently conducting an internal review on the matter,” Choi stressed, adding that “our stance has yet to be finalized, so we will come forward when details are settled.”

She also mentioned that Naver is closely working with the Korean government, including the Ministry of Science and ICT, to address the issue.

Launched in 2011, Line is the most popular messenger in Japan.

Tokyo had earlier demanded that Line Yahoo, which operates both Line and Yahoo Japan, file reports on its pre-emptive measures in response to a massive data breach in November resulting in the leakage of some 510,000 items of personal information through subcontractor Naver Cloud.

Line Yahoo is 64.5 percent owned by A Holdings, a 50:50 joint venture between Naver and Japan's SoftBank.

The administrative directive was issued twice, first in March and again in April, urging Line Yahoo to review its governance system, including its capital ties with Naver, blaming the company's dependency on the Korean firm for the data leak.

While the order has sparked concerns that Tokyo is attempting to drive Korean companies out of the country, a director-level government official of a telecommunications infrastructure bureau at Japan's Ministry of Internal Affairs and Communications said that the intention is to “request a review of security governance” and that “there is no phrase [in the directive] whatsoever demanding that any stake be sold,” Yonhap News Agency reported Thursday.

Meanwhile, Tokyo inquired whether Seoul's Personal Information Protection Commission (PIPC) would be willing to cooperate in an investigation into Naver’s cloud computing system via email last month, according to a source from the state data protection agency. The PIPC plans to respond after discussions with relevant agencies.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]