The developer of the messaging app Line, who is a key South Korean executive at Japan’s LY Corp., owned by a joint venture between Naver and SoftBank, will step down from the board of the Japanese firm, according to executives at both Naver and LY on Thursday.
The planned departure of Shin Jung-ho, known as the “father” of Line in South Korea, has fanned media speculation that Naver, South Korea’s biggest internet company, may lose its influence on the messenger app, which is popular in Japan and Southeast Asia.
On a conference call Wednesday, LY President Takeshi Idezawa said Shin “will be stepping down from the board” via an English interpreter.
“We have started to terminate our outsourcing relationship with Naver in the area of services and business domains,” Idezawa said, according to an audio file of the conference call.
Idezawa said Naver and SoftBank have been in talks over the possibility of changing their ownership structure of LY amid Tokyo’s apparent pressure to shed Naver from the company.
“A
s for the capital transfer at the parent company, we are continuing to make requests, and negotiations are under way between SoftBank and Naver,” Idezawa said.
The move came after the Japanese ministry demanded LY, the operator of Line, take actions, including reducing its financial dependence on Naver, citing a recent data leak of personal information.
The measures include Naver divesting its stake in A Holdings, the 50-50 joint venture between Naver and SoftBank. A Holdings holds a 65 percent stake in LY.
An official at Naver also confirmed the planned departure of Shin, but it is “not related to the capital transfer.”
Also on Thursday in Tokyo, SoftBank President Junichi Miyakawa said in a conference call via an English interpreter the company is “currently discussing with Naver in terms of capital relationship and capital structure” but has “not reached any agreement yet.”
Miyakawa said there was a “strong request” from LY to review the capital ratio between SoftBank and Naver, noting his company wil
l “make a conclusion which would contribute to the further growth of LY.”
SoftBank is considering different options to increase its share, including adding only a little to its current 50 percent share or acquiring the remaining 50 percent share held by Naver. SoftBank also has a strong intention to step deeper into security issues as a telecommunications company, as Japan’s Ministry of Internal Affairs and Communications (MIC) requested, he added.
Miyakawa also noted Naver was very cooperative with LY in responding to the data leak incident and in negotiations with SoftBank.
Earlier this year, MIC issued the administrative guidance to LY regarding the data leak, urging it to decrease its dependence on Naver by handing over its stake to SoftBank.
In November, LY explained over 300,000 records of personal information of its users were leaked after Naver Cloud Corp., Naver’s cloud computing affiliate, came under a cyberattack, as the two companies share a common authentication system.
Following the inciden
t, LY has announced a set of measures aimed at strengthening its security, including separating its system from Naver and Naver Cloud.
Japan’s actions drew criticism in South Korea, with many viewing them as an attempt to diminish foreign influence on the widely used online platform in the country.
Line, developed by Naver in 2011, had around 96 million monthly active users (MAUs) in Japan, or 78 percent of the country’s population, as of last year, according to Line Plus Corp., Naver’s affiliate that operates the application in Korea.
The application is also popular in other Asian countries, with around 55 million MAUs in Thailand and 22 million in Taiwan.
Last week, Naver CEO Choi Soo-yeon said her company “has yet to determine its stance on the matter,” calling the Japanese move “very exceptional.”
“Rather than determining whether to follow the guidance or not, we see the matter as a decision that needs to be made according to our mid-to-long-term business strategy, and we are still pondering the matt
er,” Choi said.
Seoul’s science ministry has also said the South Korean government will keep making efforts to protect domestic companies from “unfair treatment” in overseas markets, regarding the matter, and provide Naver with necessary help.
Source: Yonhap News Agency