Alleged violations in the acquisition of AVG have forced both firms to cut their losses as an investigation looms.
Vietnam’s third largest telco MobiFone Telecommunications Corporation and private pay TV operator Audio Visual Global JSC, better known as AVG, have decided that the state-run telco should withdraw its entire investment from AVG.
The move comes after Vietnam’s Communist Party instructed the government to look into MobiFone’s acquisition of AVG following reports of violations by inspectors last Friday.
In early 2016, MobiFone captured public attention by announcing it was breaking into the pay TV market through the acquisition of a 95 percent stake in AVG, without revealing any information about the deal.
The two sides agreed on Monday to scrap the acquisition contract, meaning MobiFone will transfer 344.66 million shares worth VND8.89 trillion (over $390 million) back to AVG, while the pay TV firm will return all the investment to MobiFone.
AVG said it will not seek compensation from the state-owned company.
Aside from the 95-percent stake, MobiFone said it had invested in projects such as hiring consultants for the acquisition, and AVG has agreed to cover all those expenses.
AVG said it had asked MobiFone to cancel the deal because the telco had not followed the development plan that the two parties had agreed on, and missed out on opportunities for AVG to expand.
The TV firm also said that MobiFone had only paid for 95 percent of the acquisition, and that it would need the remainder to balance the books.
After the government launched an investigation into MobiFone and its acquisition in September last year, both AVG and MobiFone’s reputations had been damaged, so scrapping the contract appeared to be the best solution for both of them, according to AVG.
A MobiFone representative told the meeting that the government inspection was the main reason for its late payment to AVG.
The company explained that it had to complete its own balance sheet for the investment in AVG before making full payment in line with regulations applied to a state-owned firm, but the inspection had interrupted that process.
As for now, AVG will return 30 percent of the investment to MobiFone in the next 10 days and the rest in the next 30 days, while MobiFone will transfer ownership back to AVG’s shareholders.
In August 2016, the Vietnamese government ordered an across-the-board inspection into the acquisition.
Deputy Prime Minister Truong Hoa Binh directed the Government Inspectorate and relevant agencies to start the investigation, saying any violations would be subject to a criminal probe.
“The acquisition is a big investment for the company [MobiFone], so it should be looked at carefully,” Mai Tien Dung, chairman of the Government Office, said at the time.
Any organization or individual who unlawfully takes advantage of their position or authority for personal gain will be strictly punished according to the law, and this will be publicized, Dung added.
The Government Inspectorate, the country’s top watchdog, announced it had launched a probe into MobiFone in September 2017.
MobiFone was hoping the acquisition would help it rival other giants Viettel and VNPT, both already present in the pay TV market.
The company had set a target of luring one million customers to its television service in 2016 and becoming one of the three biggest pay TV providers in Vietnam by 2020.
Source: VnExpress