The Government Inspectorate (GI) has asked Prime Minister Nguyen Xuan Phuc to relay its inspection results of a VND8.9 trillion (US$395 million) acquisition of Audio Visual Global (AVG) by State-owned communications giant Mobifone to the Ministry of Public Security for investigation.

This was part of an announcement released by the GI yesterday, saying the case was extremely serious.

The GI’s inspection found that Mobifone was irresponsible and broke regulations in the acquisition, especially in the assessment of AVG’s financial situation, allegedly leading to State budget losses of over VND7 trillion.

AVG faced difficulties from its establishment to the time of business valuation in March 2015, with accumulated losses of more than VND1.6 trillion, accounting for 45 per cent of its charter capital.

However, Mobifone was dishonest in reporting the financial situation of AVG to the Ministry of Information and Communications (MIC) during the acquisition process.

“Mobifone even positively evaluated the business and financial situation of AVG,” the GI said.

According to the GI, the assessment violated regulations in investment and managing and using State capital in enterprises.

The GI also found wrongdoings in choosing business valuation consultants, examining the business valuation’s results and using those results in buying AVG’s shares.

Specifically, Mobifone choose Vietcombank Securities Limited Company (VCBS) and AMAX Investment Consultant Company, without using the bidding process.

Mobifone’s use of AMAX’s valuation of AVG’s value of VND16.565 trillion without excluding the short-term debt payment of VND1.134 trillion in order to negotiate a high price for AVG’s shares was against regulations.

Additionally, the GI announced that during the acquisition, Mobifone didn’t consult the professional communications and television agency, leading to an unfeasible acquisition project, which was still then submitted to the MIC, the company’s State capital representative.

In conclusion, the GI stated that the responsibility for the wrongdoings went to the Board of Members, Board of Directors and other relevant departments of Mobifone.

Agreement ended

A day before the GI’s announcement, Mobifone and AVG decided to cancel the transfer of 344.66 million shares and refund each other the amount received under the agreement.

AVG shareholders will refund the entire amount paid by Mobifone, while Mobifone will return to AVG the number of shares and assets transferred. The two sides will also try to not let the other party suffer more damages.

Pham Nhat Vu, a representative of AVG in the negotiations with Mobifone, agreed not to impose a fine or claim compensation while cancelling the deal.

In addition to the amount paid to AVG, Mobifone said it had to pay some related expenses, such as consultants’ fees. AVG has agreed to share this expense with Mobifone.

AVG has made a deposit of VND450 billion to perform the agreement cancellation, Mobifone said in a press release on Tuesday.

According to the AVG representative, there are many reasons for cancelling the contract. First, since its acquisition, Mobifone has not operated and developed the AVG brand as planned and missed many opportunities to do so.

Second, Vu said since the contract was in effect, Mobifone had paid 95 per cent of the contract value. The deadline for payment has passed, but Mobifone had not yet fulfilled its obligations to pay the remaining 5 per cent despite repeated requests by AVG.

Since the inspection of the contract, the process of operating the AVG brand had caused many problems, damaging the reputation of both parties. According to Mobifone and AVG, the cancellation of the contract aims to repair the damage.

In early 2016, Mobifone announced the acquisition of AVG to expand its television network, one of the company’s four main business areas. The details of the deal were not disclosed.

In August 2016, the Government promulgated Document No 1344/TTg, asking the GI to investigate the acquisition.

Last Thursday, the Party Central Committee’s Secretariat issued a letter on the handling of Mobifone’s acquisition of 95 per cent of AVG shares, calling the issue a serious, complicated and sensitive matter, and asked the GI to soon release the inspection results.

The Secretariat said that the Government and the GI must be responsible for reviewing and settling cases in an objective and accurate manner to ensure that punishment is given to the right person and lost State assets are revoked. — VNS