Top office floats Naver's possible rejection of Line divestment

The presidential office said that Naver will be fully supported if it excludes divestment in Line Yahoo in its proposal of remedial measures to Tokyo.

An employee of Line Plus, Line Yahoo’s Korean subsidiary, enters the company’s headquarters in Pangyo, Gyeonggi, on Tuesday. Line Plus hosted a closed-door internal online briefing on Tuesday after Naver revealed that it was in discussions with Japan’s SoftBank regarding the country's administrative recommendation that it trim its equity in Line Yahoo, the operator behind Japan’s top messaging app, Line. [YONHAP]

The presidential office has ratcheted up its rhetoric against the Japanese government's pressure on Naver over its capital ties with Line Yahoo, with an official floating the possibility that the Korean internet portal giant may not divest its shares in the Japan-based unit.

A high-ranking official who wished to remain anonymous commented that this could even mean that “divestment may not be included in the report of measures on a response to the administrative guidance that LY submits to the Japanese government by July 1.”

This is the first time Seoul has indicated that an equity sale of LY might be excluded in an upcoming response to the Japanese government's administrative guidance.

It is the second briefing in as many days held by the presidential office proactively voicing concerns about shielding Naver from any discriminatory or unfair measures by Tokyo, which has been pressing the company to trim its equity in the operator of the Line messaging app.

“If LY intends to submit enhanced cybersecurity measures to the Japanese government exempting changes in capital ownership, the Korean government will fully support Naver in its implementation,” said Sung Tae-yoon, the director of national policy at the presidential office, in a Tuesday briefing. “This may include technical and administrative advice from relevant institutions within the country.

“Given that the Japanese government has repeatedly clarified that the administrative guidance does not involve divestment or changes in management control, it should never take any adverse actions against Naver regarding its capital structure if appropriate cybersecurity measures are submitted.”

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

Japan’s Ministry of Internal Affairs and Communications issued guidances in March and April requesting LY to pare back Naver’s ownership of the company and come up with specific measures by July 1.

Tokyo claimed that it did not mention divestment, but the guidances were nonetheless perceived as considerable pressure on the Korean company to reduce its ownership.

Naver said on Friday that discussions are underway with SoftBank “to explore all possibilities,” including a capital scale-down, although the Korean company's labor union has openly opposed the option, citing job insecurity and technological losses.

Line Plus, LY’s Korean subsidiary, convened a closed-door internal online briefing on Tuesday, during which Naver executives are speculated to have revealed more details about their discussions with SoftBank.

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