A Vietnamese mobile carrier altered the financial status of a pay-per-view TV firm before spending almost US$400 million acquiring nearly all of its stakes, in a scandal that put multiple ministries and high-ranking officials at risk of punishment, the state inspectorate has revealed.

Leading mobile network operator Mobifone, a state-run company under the management of the Ministry of Information and Communications, generously paid $392 million to possess 95 percent of AVG, a company with total assets valued at only VND208.5 billion ($9.19 million) at the time of investment.

In order to win approval for its investment proposal, Mobifone cooked the AVG books, turning a loss-making and debt-ridden company into a lucrative, asset-rich firm, according to Vietnam’s state inspectorate, which looked into the deal in 2016 and announced the probe results earlier this week.

An AVG billboard is seen in Hanoi. Photo: Tuoi Tre

Launched 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.

As of late 2015, when the acquisition deal was initiated, AVG was bogged down with total debts valued at VND1,266 billion ($55.77 million) and accumulated losses of VND1,632 billion ($71.89 million).

According to the conclusion of the state inspection, Mobifone had acknowledged the financial troubles of AVG, but still stated in a report to the information ministry that the company was “seeing its revenue and profit on a steady rise” and “enjoying all positive growth indicators.”

Mobifone's chairman and members of its board are being held as the key figures behind the inaccurate and negligent AVG evaluation, the state inspectors ruled.

An AVG billboard is seen in Hanoi. Photo: Tuoi Tre

According to the acquisition agreement, Mobifone would also take over AVG’s shares in two non-TV projects, including Mai Linh JSC, a silkworm firm, and An Vien BP, a minerals company.

The mobile carrier eventually acquired 3.96 million shares of Mai Linh for more than VND670 billion ($29.52 million), 17 times higher than the stock’s real value, according to state inspectors.

Similarly, Mobifone took over 15 million shares of An Vien BP for VND1.8 trillion ($79.3 million), 12 times the stock price.

Mai Linh runs a farm outside Hanoi and expected to turn the property into a real-estate project, but never took the project off the ground. An Vien BP also failed to obtain a license to begin its bauxite mining projects in the southern province of Binh Phuoc as expected.

The state inspectorate also ruled that the consultants hired by Mobifone to evaluate the AVG deal overestimated the company’s value.

A screenshot of the MobiTV, rebranded from AVG, website.

Four companies, AASC, VCBS, Hanoi Valu, and AMAX, respectively evaluated the pay TV company at VND33.29 trillion ($1.47 billion), VND24.54 trillion ($1.08 billion), VND18.51 trillion ($815.42 million) and VND16.56 trillion ($729.52 million),

All of these estimates were “proposed on shaky ground with little credibility and in violation of the evaluation standards,” according to state inspectors.

Mobifone eventually based the acquisition offer on the AMAX evaluation, which the state inspectorate said had been calculated on inaccurate input information, to process its deal with AVG.

According to the conclusion, the real equity of AVG at the time the deal was made was only VND1,983 billion ($87.36 million).

Given the price Mobifone actually paid to AVG, the deal led to a capital loss of nearly VND7 trillion ($87.36 million) to the state budget, the inspectors said.

A woman pushes her bicycle past one of the properties of AVG in Hanoi. Photo: Tuoi Tre

On Monday, Mobifone and AVG reached an agreement to nullify their scandalous contract, after which each side would repay what it has received from the other, including payment and the transferred shares and assets.

The move however is not likely to shield them from punishment, with the state inspectorate suggesting on Wednesday that a police probe be launched into the case to hold relevant people accountable for their misconduct.

Possible legal proceedings will be conducted after the police investigation, and some high-ranking officials and the Ministry of Information and Communications, Ministry of Public Security, and Ministry of Science and Technology all face punishment in the affair.

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