Line Yahoo "Immediate Capital Movement Difficult"... Sale Negotiations Likely to Prolong

Line Yahoo Submits Report to Japan's Ministry of Internal Affairs and Communications
"Ongoing Discussions Between Naver and SoftBank"

Line Yahoo stated that "short-term capital movement of the holding company A Holdings is difficult." While advancing the timeline for the termination of business consignment such as the separation of Naver and the system, they maintain the position of continuing discussions on the review of capital relations. Accordingly, negotiations between Naver and SoftBank, each holding half of A Holdings' shares, are expected to be prolonged.

On the 1st, Line Yahoo submitted a report on the administrative guidance from Japan's Ministry of Internal Affairs and Communications. This report is a response to the Ministry's administrative guidance issued twice in March and April this year regarding the personal information leakage incident of the messenger Line that occurred in November last year.

[Image source=Yonhap News]

Regarding the negotiation for the sale of A Holdings' shares, Line Yahoo explained, "SoftBank and Naver share the recognition that short-term capital movement is difficult," and "both companies have responded cooperatively and plan to continue efforts to advance discussions."

A Holdings is the parent company holding 65% of Line Yahoo's shares. Previously, Japan's Ministry of Internal Affairs and Communications requested Line Yahoo to review its capital relations. This was interpreted as pressure on Naver to sell its shares in A Holdings. Since then, SoftBank and Naver have been negotiating the sale of shares.

The report mainly included the intention of Line Yahoo and Naver to terminate business consignment early. Line Yahoo plans to end the consignment of Japanese services and businesses entrusted to Naver and Naver Cloud by the end of December 2025.

The report also specified the timing for ending collaboration on individual services. For example, by the end of September 2024, the linkage related to the search engine in Yahoo Search will be discontinued, and by the end of December 2024, the consignment for developing image search functions in Yahoo Camera Search will be terminated. Additionally, consignment for local services, commerce, advertising, entertainment services, and messenger will be ended by the end of September 2025 at the latest.

For the tasks whose consignment is terminated, Line Yahoo decided to internalize the technology or use third-party solutions. This means Line Yahoo will develop its own technology or collaborate with third parties other than Naver. They also plan to end the consignment relationship with Naver regarding internal systems or development tools used by Line Yahoo employees.

Industry insiders expect the negotiations for the sale of shares between Naver and SoftBank to be prolonged. This is because, while severing business relations with Naver, they only expressed a fundamental position on the review of capital relations.

Naver is keeping all possibilities open, including the sale of shares, but the negotiations are not simple. This is because Line Yahoo is Naver's overseas business outpost, and the shareholdings of Naver and SoftBank are intricately intertwined across various businesses including Line. Furthermore, the involvement of political circles in both countries and voices from Naver's executives and employees have complicated the interests. Accordingly, there are forecasts that the negotiations may extend beyond this year.

Meanwhile, the National Assembly's Science, Technology, Information and Broadcasting and Communications Committee (STIBC) has selected Naver CEO Choi Soo-yeon as a witness for the upcoming plenary session on the 2nd. Previously, CEO Choi was requested to appear as a reference witness for the STIBC's current issue inquiry on the 25th of last month but did not attend citing overseas schedules and other reasons.