Line Yahoo to sever tech ties with Naver by year-end: LY CEO

TOKYO – Japan’s LY Corp., the operator of the country’s top mobile messenger app Line, plans to sever technological and system ties with South Korean tech giant Naver Corp. by the end of this year, ahead of its earlier announcement for 2026.

During LY’s shareholders’ meeting on Tuesday, Chief Executive Takeshi Idezawa said the company will move up the schedule to accelerate its separation plan.

“We now aim to complete our system separation with Naver Cloud by the end of this year. We expect to end our relationship with Naver in almost all services in Japan,” he said.

Industry watchers said such a separation usually takes a couple of years, and the LY CEO’s announcement to sever all ties with Naver in just half a year could be intended to "show LY’s determination to the Japanese government.”

At Tuesday’s shareholders’ meeting, Jungho Shin, LY’s chief product officer and its only Korean board member, was replaced by a Japanese executive, making all the board members Japanese.

Last month, Shin, often referred to as the “father of Line,” said he would step down from the board, taking responsibility for a data leak in November 2023.

LY TO CLOSE NAVER-DEVELOPED LINE PAY SERVICE

Work is already underway for LY, also known as Line Yahoo, to sever its relationship with Naver.

Earlier this month, Naver said in a public filing that LY would close Line Pay, a smartphone payment service developed by Naver, by April next year and transfer the service to SoftBank Corp., which operates PayPay, a simple digital payment service.

LY, established in 2021 through a merger of Naver’s Line, the most popular mobile messenger app in Japan, and SoftBank's Yahoo Japan, is at the center of the red-hot issue between the two neighboring countries.

LY is operated under a Naver and Softbank JV, A Holdings, in which the two companies each hold a 50% stake.

A conflict flared up last November when Naver Cloud Corp., a unit of the Korean tech giant, suffered a cyberattack, resulting in the breach of some 510,000 Line users’ personal data.

The Japanese government responded not just with a call for tighter cybersecurity but also administrative guidance suggesting a complete severance of ties between Naver and LY’s IT infrastructure.

The situation escalated to the point where Japan's Ministry of Internal Affairs and Communications in March began pushing for Naver to sell its stake in A Holdings.

If SoftBank acquires an additional stake in A Holdings, it would thus control LY.

SoftBank CEO Junichi Miyakawa said in May that it is in talks with Naver over the fate of their joint management of LY, and that the two parties are working to reach an agreement by July.

NAVER-SOFTBANK BREAKUP LIKELY TO BE OUTLINED NEXT MONTH

Analysts said a detailed Naver-SoftBank breakup scenario would be outlined after July 1, the deadline for LY to respond to the government’s second administrative guideline.

On Tuesday, LY CEO Idezawa said: “Nothing has been decided yet. If we have to report anything, including a review of our capital relation with Naver, we will make it public immediately.”

Industry officials said the Line Yahoo-Naver issue has escalated into a diplomatic issue between Korea and Japan, making it hard for the companies to handle.

In mid-May, Seoul’s presidential office said it would resolutely respond if Tokyo takes any “unfair” measures against Naver.

A Naver official said on Wednesday that the company will deal with the matter in a way that improves its business competitiveness.

Write to Ji-Eun Jeong and Il-Gue Kim at jeong@hankyung.com

In-Soo Nam edited this article.