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Interview

Yahoo Japan parent eyes acquisitions in Asian expansion: CEO

Merger partner Line plans banking businesses in Taiwan, Thailand and Indonesia

Z Holdings president and CEO Kentaro Kawabe speaks at Nikkei Forum "Innovative Asia" in Singapore on Jan 16. (Photo by Ken Kobayashi)

SINGAPORE -- SoftBank Group-backed Yahoo Japan will accelerate its expansion in Asia together with messaging app Line as the two groups plan to merge later this year, with Line aiming to start banking businesses in Thailand, Taiwan and Indonesia.

In an interview with the Nikkei Asian Review here Thursday, Kentaro Kawabe, president and CEO of Z Holdings, parent of Yahoo Japan, said that he expected Line to start banking services in the four markets.

"Line's existing customer bases in some Asian markets are an asset for us," he said on the sidelines of the "Innovative Asia" forum organized by Nikkei. "So the basic strategy is to capitalize on that asset to make Line a super app."

Created in Japan, Line has about 185 million monthly users globally, with Taiwan, Thailand, Indonesia and Vietnam serving as its key overseas markets.

So-called super apps are one-stop apps that offer various digital consumer services such as ride-hailing, e-commerce and mobile payments. This has become a major business model for Asia's fast-growing internet companies such as Indonesia's Gojek and Singapore's Grab.

Banking and financial services could become the core business if the merged company wants to gain super app status, Kawabe said. "Finance is one of the areas that provide big business opportunities in tandem with digitalization," he said, adding that finance was also an area in which big U.S. internet groups were not yet active.

Line obtained a banking license in Taiwan last year as a part of a consortium and it aims to launch services in Indonesia, Thailand and Japan through partnerships with local banks.

Z Holdings and Line agreed last November to merge by October 2020, with the deal currently under review by the relevant authorities. Kawabe will become the president and co-CEO of the new entity.

Though both companies have a huge presence in the Japanese market, they felt a sense of crisis that they could not individually compete with U.S. and Chinese internet groups such as Google, Alibaba Group Holding and Tencent Holdings.

In order to challenge these powerhouses, one of the key strategies for Z Holdings and Line is regional expansion.

In the interview, Kawabe also said his company would consider acquiring Asian startups, such as ride-hailing and food delivery operators. "It is difficult for internet services to get accepted in a new market. So we will consider acquiring companies that provide good services in individual markets."

His company did not have a specific budget allocated for overseas acquisitions, but it would consider opportunities on a case-by-case basis if and when they arose, he said. Minority investments through its venture capital arm would also be an option, he added.

Kawabe said one of the strategies to challenge the global internet groups was to develop services that address Japan's particular social issues, such as population aging and natural disaster management. He said he also wanted to bring such business models to the rest of Asia. Possible services could be online travel booking for wealthy seniors and robotics to address labor shortages, he said.

"As a mature country, Japan has many social issues. Southeast Asia will experience the same issues in the future," he said.

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