Japanese telco rumored to be chatting up Line, seeking stake in popular messaging app

The messaging app landgrab is on. Less than a week after Facebook bought out WhatsApp, and shortly after Rakuten acquired Viber, a report in Bloomberg suggests that Softbank (TYO:9984) is seeking a stake in Line.

Citing sources familiar with the matter, the report says that Masayoshi Son, SoftBank’s founder, has held talks with Line about a purchase. The overtures from Japan’s third biggest telco have even caused Line and its parent company, Naver (KRX:035420) to slow its preparations for a spin-off IPO for the messaging app.

While those are all just rumors for now, there’s a clear synergy in a telco taking a stake in such a popular chat app. Remember that SMS is dying off – indeed, WhatsApp seems to be sending more messages than the entire global SMS system – and so telcos need to find new ways of making money and differentiating themselves from rival services. Line has 350 million registered users around the world, though the company doesn’t disclose how many of those are active users.

Line does a lot more than just messaging. It makes most of its money from in-app purchases on games using its social gaming platform, plus it also pulls in revenue from paid stickers/emoticons and running flash sales in partnership with some brands. Those elements of mobile commerce and social gaming could also be attractive to Softbank. Line pulled in a total of $338 million in revenue in 2013.

(Source: Bloomberg)

(Editing by Josh Horwitz)