Naver CEO Choi Soo-yeon, left, and SoftBank Chairman & CEO Masayoshi Son / Korea Times file

Naver is in a dilemma over what to do with Line, its mobile messenger app that dominates the Japanese market, as it faces growing pressure from the Japanese government and local business partners to sell its 50 percent stake in a joint venture that controls the messenger, according to industry officials and experts, Friday.Many say that Naver may sell a portion of its stake in Line’s operator, LY Corp., to resolve the situation, which has escalated to a diplomatic issue between Korea and Japan due to the possible loss of a service nurtured by a Korean company to a Japanese one.“The most likely scenario is for Naver to sell a stake of about 20-30 percent in A Holdings, the controlling shareholder of LY Corp. Although Naver could use legal or political means to try to hold on to its 50 percent stake in A Holdings, we believe this scenario is less likely due to potential backlash from the Japanese government,” said Douglas Kim, an analyst at Smartkarma, Singapore-based investment research firm.

The largest portal service company in Korea has been under pressure to divest its stake in LY Corp., as Japan’s Ministry of Internal Affairs and Communication said it asked LY Corp. to reconsider its capital relationship with Naver, twice in March and April.Line is a service developed through Naver in 2011. Naver formed a business integration with SoftBank in 2019 and established the joint venture, A Holdings, in 2021. A Holdings, equally owned by Naver and SoftBank, is the largest shareholder of LY Corp., which operates Line and the popular portal site Yahoo! Japan, with a stake of 64.5 percent.The administrative guidance from the Japanese government came after LY Corp. experienced a data breach last November that affected about 519,000 cases of personal data through Naver Cloud’s 스포츠토토존 server.

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