Ado over Line stokes anti-Japanese sentiment in Korea, discontent among Naver employees

Posted on : 2024-05-13 17:15 KST Modified on : 2024-05-13 17:15 KST
Despite negotiations being acknowledged by all sides, it’s unlikely that a clear-cut resolution will be reached anytime soon
A person walks by SoftBank’s headquarters in Tokyo, Japan, on May 9, 2024. (Yonhap)
A person walks by SoftBank’s headquarters in Tokyo, Japan, on May 9, 2024. (Yonhap)

The brouhaha over Line messenger’s capital relationship with Naver, prompted by the Japanese government's administrative directives, continues to head into murky territory, with little likelihood of a clear-cut resolution anytime soon. 

The developments have rapidly generated controversy over the stoking of anti-Japanese sentiment by Korean politicians, and following the government’s belated expression of “regret” to Japan last week, discontent is on the rise among employees of Naver affiliates in Korea. 

Currently, both parties to the divestiture negotiations, SoftBank and Naver, expect discussions to drag on due to disagreements over the terms. Employees at Naver's Korean affiliates, which were key to Line’s development, appear poised to take action, asserting that they “cannot let Line be taken away.”

At a press conference at the National Assembly on Sunday, Democratic Party lawmakers Jo Seoung-lae (vice chairperson of the National Assembly’s Science, ICT, Broadcasting, and Communications Committee) and Lee Yong-sun (vice chairperson of the Foreign Affairs and Unification Committee) described the situation surrounding LY Corp., the operator of Line, as a “Japanese attempt to seize Line” and urged for a response by the National Assembly. 

On Wednesday, LY, SoftBank and Naver formalized the divestiture negotiations, and each party has issued statements on the matter since then. Thus, it has been confirmed that Naver’s divestiture, previously perceived as being pressured by the Japanese Ministry of Internal Affairs and Communications, has been under negotiation among these companies. 

Takeshi Idezawa, the CEO of LY, shared on Wednesday that altering the division of shares so that SoftBank holds the majority share is the “major premise” of the negotiations. Following this, Naver officially acknowledged for the first time on Friday that it was “engaged in discussions, including those on the sale of shares.”

As the issue has suddenly become engulfed in controversy and inflamed anti-Japanese sentiment among the Korean public, Naver's options appear limited. 

A person walks through the Line offices. (courtesy of Japan’s Line HR blog)
A person walks through the Line offices. (courtesy of Japan’s Line HR blog)

Currently, Naver controls an equal 50% stake in the Line operator’s parent company, A Holdings, with SoftBank, under a co-management structure. While Naver has demanded a control premium for the sale of its shares during the negotiation process, SoftBank has shown tepid interest in this. The value of Naver's stake in LY, including this premium, is estimated to be in the tens of trillions of won. Citing a source at SoftBank, Japan’s Nikkei newspaper reported Thursday that “the difference in the amount makes the prospect [of negotiations] unclear.”

Already under Japanese government pressure, Naver is put into an even more difficult situation due to anti-Japanese sentiment in Korea as it reviews its mid-to-long-term business strategies and engages in the ongoing shareholding negotiations. 

"Even though Naver would prefer to sell at a favorable price, giving up its shares under the current diplomatic tensions could lead to accusations of yielding to Japan,” an industry insider noted. Thus, it is becoming increasingly likely that the situation involving the capital relationship between the two sides will drag on.

Experts warn against fueling anti-Japanese sentiments and stress the importance of the Korean government sending a more decisive signal to Japan. 

“Tying this issue to anti-Japanese sentiments domestically could inadvertently provoke Japanese right-wing backlash, complicating the issue and significantly harming Naver, rather than helping it,” said Kim Yang-hee, a professor of economics and finance at Daegu University and former director-general of the Department of Economy, Trade and Development Studies at the Korea National Diplomatic Academy, in an interview with Hankyoreh on Sunday. 

“The Korean government must continue to send strong and clear signals that it will not stand idly by, given the unreasonable demands the Japanese government is making on a Korean company, all while emphasizing that Korea and Japan are ‘like-minded countries sharing common values and ideologies,’” she further stressed. 

Internally, Naver is experiencing rising discontent and anxiety among employees towards the management and government. In particular, following the resignation of Shin Jung-ho, the chief product officer who had played a crucial role in the launch and management of Naver's Line messenger app since 2011, from the board on Wednesday, 2,500 employees from Line Plus Corp. and other Korean Line affiliates are set to receive an explanation from the company this Tuesday. Naver’s labor union also plans to send an official inquiry to the management of Naver and Line Plus on Monday.

By Lim Ji-sun, staff reporter; Park Min-hee, senior staff writer

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