TOKYO—A host of new services announced last week by Line Corp., which operates Japan's dominant smartphone messaging application, reflect the company's efforts to hold its ground against bigger players like Facebook, its chief executive says.
Facing slowing growth, Line is rapidly expanding the scope of its services in a bid to bolster its user base and create new sources of revenue. It plans to launch a low-cost mobile carrier and expand its mobile payment service, for example.
"There's no question that we're facing companies that are larger, with more resources and bigger market shares than us, so we need to keep on challenging," Chief Executive Takeshi Idezawa said in an interview Monday.
He didn't rule out seeking an initial public offering but said nothing had been decided.
Line's platform already offers a variety of features including games, streaming music and online shopping. It is the primary communication tool among young people in Japan.
Owned by South Korean Internet portal operator Naver Corp., Line boasted 215 million monthly active users as of the end of last year. But it added only three million in the fourth quarter, and over half of them are in Japan, Taiwan, Thailand and Indonesia.
Since taking over a year ago, Mr. Idezawa has said Line's primary focus is in Asia—and looking for new markets where it can become No. 1. But Line isn't available in China, where it is blocked, and globally trails well behind market leader WhatsApp, which Facebook Inc. acquired in 2014 for $19 billion, and Tencent Holdings Ltd.'s WeChat. WhatsApp has more than one billion active users, and WeChat has around 700 million, most of them in China.
Line's main source of revenue—which exceeded $1 billion for the first time last year—comes from sales of games and its emoticon stickers, as well as advertising.
"User growth is slowing and it faces larger rivals overseas, s o Line needs to find new sources of income," said Hitoshi Sato, senior analyst at InfoCom Research.
Line last year scrapped a plan to hold an IPO, casting doubt on its hopes of raising the money needed to develop the app in markets outside Japan. While some analysts say Line may hold an IPO this year, Mr. Idezawa said the company was still considering its options.
"Something may move this year, but I don't know if that will be this year or the next, or whether it would be an IPO," he said.
"When the scale of a company becomes bigger and the range of services increases, it's inevitable that funding becomes an issue. So speaking in general terms, it's something all companies should consider."
During an annual conference in Tokyo last week, Line said it would launch a mobile service this summer that offered plans as cheap as ¥500 ($4.42) a month, with unlimited use of Line's chat, call and music-streaming, as well as Facebook and Twitter . TWTR -2.77 %
More Japanese companies, including e-commerce giant Rakuten Inc., 4755 2.72 % are taking aim at established Japanese communications giants by entering the mobile virtual network operator business at cheaper prices. Such service providers don't own their own infrastructure but resell capacity on wireless networks. Line said it would be using the cellular network of NTT DoCoMo, Inc., Japan's largest mobile carrier.
Mr. Idezawa said he hoped the new service would help boost Japan's smartphone penetration rate, which is at around 50%, according to Nikkei BP Consulting, Inc. "I want to increase the number of smartphone and Line users," he said. Line's aim, he said, is to become a "smart portal," a one-stop platform where smartphone users can go to satisfy everyday needs from entertainment to taxi-hailing and shopping.
The five-year old company also said it would partner with a major Japanese credit card company to expand its mobile payment service.
Serkan Toto, a mobile industry consultant based in Tokyo, said Line has to secur e its existing user base by introducing new initiatives given strong competition in many areas, including news distribution and music streaming.
"They now have to try something new, and it seems they are focusing more on what they have—a lucrative Japanese market plus Thailand and Taiwan —instead of what they could become [by expanding beyond Asia]," he said.
Write to Alexander Martin at alexander.martin@wsj.com
Source: Line Messaging App Aims to Hold Ground With New Services
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