PM approves GI's inspection result over Mobifone - AVG scandal
The Prime Minister has approved the Government Inspectorate (GI)`s inspection results over Mobifone`s controversial acquisition 95% of multimedia company Audio Visual Global (AVG), informed the Government Office on March 19.
Following the Prime Minsiter's approval, the GI will hand over the case to the Ministry of Public Security to prosecute violators in accordance with the law.
Mobifone was irresponsible and violated a series of regulations during the acquisition of AVG.
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Specifically, since its establishment to March 2015 (the date of its valuation), AVG had been struggling to stay profitable and reported an accumulated loss of VND1.6 trillion (US$70.2 million), or 45% of its charter capital.
Mobifone, however, reported inaccurately on the financial situation of AVG to the Ministry of Information and Communications (MIC), the representative of the state capital in Mobifone. According to GI, the telco assessed the business and financial situation of AVG to be positive.
Mobifone is also to blame for its decision of choosing business valuation consultants, examining the business valuation's results, and using those results as the basis for buying AVG's shares.
The performance of these consultants, as GI concluded, was biased and lacked credibility, violating the government's regulations on business valuation.
In conclusion, GI stated that responsibility for the wrongdoings lied at the Board of Members, Board of Directors, and other relevant departments of Mobifone, along with other related ministries, which have given opinion and approval for the acquisition.
The Secretariat of the Party Central Committee, in an announcement released by the Party Central Committee's Office on March 8, stressing that this is a complex, serious, and sensitive case, drawing special attention from the public.
Under these circumstances, however, the Secretariat of the Party Central Committee requested the Government Inspectorate to take responsibility for its conclusions on the case and disclose their findings to the public in accordance with the law.
Any sign of violations, therefore, would be subject to criminal probes.
In a surprise move, Mobifone and AVG have agreed to cancel the acquisition deal on March 12, two days before GI announced its inspection results.
Under the agreement, AVG will refund the entire contracted amount, which is reportedly VND8.9 trillion (US$392 million), to Mobifone including interest.
Mobifone, in turn, will return the shares purchased along with AVG's assets included in the original deal.
Pham Nhat Vu, AVG's representative at the meeting, has agreed not to exercise the penalty clauses and request compensation after the deal was revoked. In addition to the refunded contract value, AVG will reimburse Mobifone for any expense during the transaction process.
The deal caused great controversy as its value was 2.58 times higher than AVG's charter capital of VND3.6 trillion (US$158 million) at the time of completing the transaction on January 2, 2016.
The investment in AVG was equivalent to 55% of Mobifone's charter capital (VND16.2 trillion or US$711 million) and 40% of its total assets (VND23.2 trillion or US$1.02 billion) as of June 30, 2016.
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