Naver's report submitted to Japan does not contain information about 'stake sale'

Naver's report submitted to Japan does not contain information about 'stake sale'

President's Office: "There will be absolutely no disadvantages.

There will be no sale of shares due to Japanese pressure."

It is expected that the action report that Line Yahoo must submit to the Japanese government by July 1 will not include any information related to management rights, such as the sale of shares in Naver.

Regarding the Line Yahoo incident, a senior official in the President's Office said in a phone call with the Korea Economic Daily on the 14th, "We have been in constant communication with Naver, and the report that Line Yahoo will submit to the Japanese government will not contain information related to the sale of Naver's shares." said. He emphasized, “The Japanese government should not penalize Naver just because the sale of shares was not included in the report.” Another government official also explained, “This means that there will be no sale of shares under the administrative guidance of the Japanese government.”Japan's Ministry of Internal Affairs and Communications issued administrative guidance to Line Yahoo in March last year, taking issue with the leakage of Line app user information in November of last year and February of this year. It pointed to Naver Cloud as the cause of the information leak and included a request to reexamine the capital relationship with Naver. Since Line was first developed at Naver's Japanese branch, Naver and Naver Cloud have been providing various technical support necessary for Line operation. Line Yahoo must submit a report on actions taken according to administrative guidance to the Japanese government by July 1.

Naver and Softbank each own half of the shares of A Holdings, the largest shareholder of Line Yahoo. Japan's logic was that since Naver is both a consignment company and a major shareholder of Line Yahoo, security problems could arise.

For this reason, Line Yahoo and Softbank each announced in their recent earnings announcements that they had requested Naver to sell shares of A Holdings. Naver also announced that it is discussing various options, including selling its shares.However, as the controversy has expanded into the Japanese government pressuring private companies over management rights, it appears to be expanding into a diplomatic issue between the governments of Korea and Japan. Following the Ministry of Science and ICT expressing regret to the Japanese government on the 10th, the President's Office also held an unusual briefing on this issue for two consecutive days starting on the 13th.

The report submitted by Naver this time is expected to focus on measures to strengthen information security. However, the possibility of selling Naver's shares has not completely disappeared. It is for the same reason that the President's Office focused on the 'July 1st Report'. This means that the sale of shares will not be decided according to the time suggested by the Japanese government.

The industry predicts that the negotiations between Naver and Softbank will last for years. This is because Naver's overseas business strategy will inevitably need to be revised following changes in Line Yahoo's governance structure. Aside from Japan, Line has close to 100 million users in other countries such as Taiwan, Thailand, and Indonesia. Naver's overseas business is also closely connected to Line. In a conference call announcing earnings on the 9th of this month, Softbank CEO Junichi Miyakawa said, “Share negotiations with Naver may take a long time,” and “It is very difficult to conclude negotiations by July 1.”