Line Yahoo begins to reduce Naver’s control over its management

Line homepage

Line Yahoo, the operator of Japan's popular messaging app Line, on May 8 confirmed that Naver and Japan's SoftBank were negotiating to sell their stakes in the company. Line Yahoo has decided to clean up its consignment relationship with Naver, which has grown Line for 13 years, and Shin Joong-ho, the chief product officer (CPO), who was the only Korean on Line Yahoo’s board of directors, will step down from his position. It seems that Line Yahoo has begun a full-scale purge of Naver, which co-manages the company with SoftBank.

“(We are) strongly asking for changes in the parent company's capital,” Line Yahoo CEO Takeshi Idezawa said in a press conference call to announce the company’s first quarter earnings. “Nothing has been decided. The details are not under our control, but the general premise is that SoftBank will become the largest shareholder,” he added. Line Yahoo's largest shareholder is A Holdings (64.5 percent), a joint venture established by Naver and SoftBank with 50 percent investment each. If Naver hands over just one share to SoftBank, it will lose control of Line Yahoo’s management.

The Japanese government has placed Line Yahoo under administrative guidance twice since this March, after a cyber attack on NAVER Cloud in November last year leaked hundreds of thousands of Line users' information. The Japanese government's directive requests the improvement of the management system, including “reviewing the capital relationship” with Naver. As criticism has been raised that the Japanese government is pressuring Naver to hand over its management rights of Line Yahoo to Softbank, there is a growing concern that it can spill over to a diplomatic conflict between Korea and Japan.

Idezawa said that the company will seek independence from the technical cooperation by sequentially ending its consignment relationship with Naver. It plans to end the consignment relationship not only in the operation of the internal network system but also in services and business areas, such as online search of “Yahoo! JAPAN.”

CPO Shin will step down as a board member of Line Yahoo, but maintains his position as CPO. Shin, who used to work at Naver, oversaw the launch project of Line and made Line into a global messaging service. Shin's departure from the board is believed to be related to his responsibility for the data breach that occurred at Line Yahoo last November. However, Idezawa said, “Please don't see it as a dismissal,” explaining that the company is reducing the number of inside directors and increasing that of outside directors to separate management and execution. SoftBank's Chief Strategy Officer Taku Oketani also stepped down from the board. With this change, all new six members of the board of directors will be Japanese.

At a press conference on the second anniversary of his inauguration, Minister of Science and ICT Lee Jong-ho said, “We are in close consultation with Naver, communicating with relevant ministries and monitoring the situation.” However, he did not offer any concrete countermeasures.

Despite the Japanese government's insistence that it is not pressuring Naver to sell its stake, the move to reduce Naver’s control of Line Yahoo continues. The preparatory committee for the "Citizens' Alliance for IT Fairness and Justice" urged the previous day, "It is necessary to properly respond to the Japanese government's unfair measures by forming a national task force, including the government and private experts, as well as the National Assembly."

A Naver official said, "The composition of Line Yahoo’s board of directors was decided by its judgment and irrelevant to the capital relationship," adding, "There is no change in our basic position that it is a matter to be decided based on mid- to long-term business strategies."

※This article has undergone review by a professional translator after being translated by an AI translation tool.