Yahoo Inc. said Friday it will close its South Korean operations by the end of this year, citing a challenging business environment as it struggles to compete in a market dominated by local web portals.

"The Korean operation has been faced with a lot of challenges and has slowed Yahoo's overall business growth for the past few years," Yahoo Korea, which began operations in 1997, said in a statement.

It has been fighting an uphill battle against local web portals such as NHN Corp's Naver and Daum Communications which account for the vast majority of search traffic in South Korea.

As of September, Naver led the local portal market with a 52 percent share, followed by Daum's 34 percent. Yahoo Korea had a 1.5 percent share, according to South Korean market research data firm KoreanClick.

Its Korean website will be automatically linked to an English website from early next year, a Yahoo Korea official said.

Yahoo, based in Sunnyvale, California, has been struggling to compete globally against rivals such as Google Inc. and more recently Facebook Inc.

-- Dow Jones Newswires contributed to this report --