Vietnam’s state inspectorate began looking into what it said was a non-transparent and problematic deal in 2016
Two companies, including a state-run mobile carrier, have agreed to nullify a deal in which one would acquire a 95 percent stake in the other, nearly two years after the ‘secret contract’ came under Vietnam’s state inspection.
In late 2015, mobile network operator Mobifone announced it had acquired 95 percent of AVG, the operator of the An Vien Television payment television service, under an undisclosed agreement.
Mobifone then renamed AVG MobiTV.
The deal however sparked suspicion from Vietnam’s government, with the state inspectorate later tasked with launching an urgent and complete inspection into the Mobifone-AVG contract.
On Monday, the two companies gathered for a reported six-hour meeting, after which they both agreed to cancel AVG’s transfering 344.66 million of its shares to Mobifone, and “to return what they had received from each other.”
The holding transfer contract was worth VND8,889.8 billion (US$392 million), according to VnExpress.
Pursuant to the newly reached agreement, AVG will return all payments it received from Mobifone, and the mobile carrier will return the shares and other assets it took over from the pay TV operator.
The two sides were also committed to trying to minimize damages for both.
Pham Nhat Vu, who represented AVG in Monday’s meeting, said his company would seek no penalty or compensation from Mobifone for the contract termination, and would cover all the expenses the mobile carrier had spent on having the deal processed.
Even though Mobifone has never disclosed the value of its contract with AVG, it has been alleged that the deal was overpriced.
Vu, the boss of AVG, said at the meeting that AVG is “a valuable asset,” and some South Korean and Russian partners had offered even heftier prices before he decided to sell it to Mobifone.
One of the reasons for the Mobifone-AVG deal to come under state inspection was the mobile carrier’s persistence to keep the contract value secret.
Mobifone, which is entirely owned by the state, has been put under the management of the Ministry of Information and Communications since December 2014
As a state-run company, it is Mobifone’s responsibility to publicize its investment and financial activities to taxpayers.
On August 3, Party General Secretary Nguyen Phu Trong requested that the government and state inspectorate soon announce the results of their inspection into the Mobifone-AVG deal.
VnExpress quoted an AVG representative as saying that the deal was canceled due to several reasons, including Mobifone’s failure to operate and develop the company upon acquisition as planned.
The second reason is that Mobifone only paid 95 percent of the contract value for AVG and repeatedly ignored requests to clear payment for the remaining five percent from the TV operator.
AVG also admitted that the government’s probe into the deal has resulted in many issues that affect the reputation of both companies, so terminating the contract would help protect their images.
Mobifone responded by saying that the late payment was due to the strict procedure a state-run company like it had to follow when it comes to financial activities.
The mobile carrier added that it was too busy dealing with challenges in the telecom market and had to delay plans to develop AVG.
Introduced in 2011, AVG is considered the worst-performing player in Vietnam’s pay TV sector. As of 2016, it had aggregated only 400,000 users among Vietnam’s 9.9 million pay TV subscribers.
Mobifone had pledged to send the AVG subscribers to one million by 2016 and develop it into one of the country’s top three leading pay TV operators.
The company has done nothing to realize these plans, except for renaming it MobiTV.