Naver Corp., South Korea’s leading technology firm, is currently evaluating its operational strategy concerning LY Corp following Japan’s unprecedented administrative guidance. This directive demands that Naver decrease its control over LY, the Japanese operator of the widely-used mobile messaging app, Line. The request from Japan’s Ministry of Internal Affairs and Communications comes in the wake of concerns over data security and infrastructure dependency.
During a recent conference call with analysts after disclosing first-quarter earnings, Naver’s CEO, Choi Soo-yeon, expressed the company’s readiness to adjust its IT infrastructure services to LY but remained non-committal on reducing its capital control. “The decision to alter our share of control in LY Corp is complex and must align with our long-term business strategy,” Choi remarked. She also highlighted ongoing discussions with the Korean Ministry of Science and ICT to navigate this regulatory challenge effectively.
The issue arose after the Ministry of Internal Affairs and Communications pointed out LY’s over-reliance on Naver for systems and network configurations as a contributory factor to several security breaches. These included a significant incident last November, where a server hack led to a substantial leak of user data from the Line app.
LY Corp is currently majority-owned by A Holdings, a joint venture equally held by Naver and Japan’s SoftBank Corp. Speculations are rife that SoftBank may increase its stake in A Holdings, potentially shifting the management control of LY away from Naver. Discussions between Naver and SoftBank are ongoing, with the possibility of reshaping their stakes in the joint venture soon.
Since its inception after the devastating March 2011 earthquake in Japan, Line has grown to become a dominant player in the digital communication space in Asia, boasting over 200 million users globally, including significant markets like Taiwan, Thailand, and Indonesia.
As Naver deliberates on its next steps, the tech giant faces a pivotal moment that could redefine its international partnerships and operational strategies in the digital communications domain.
