State-owned MobiFone Telecommunications Corporation and private pay TV firm AVG on December 18 officially struck an agreement to terminate and liquidate a highly controversial deal in which Mobifone had illegally acquired a 95% stake in AVG, reported the local media.

A customer makes transaction at an office of MobiFone where the logo of AVG is seen installed on the desk. MobiFone formally calls off its controversial AVG deal

Under the agreement, MobiFone, a unit of the Ministry of Information and Communications (MIC), was paid back all the money it had spent on the deal.

The sum amounted to VND8.775 trillion (roughly US$362 million), including the VND8.445 billion it had spent on purchasing the majority stake in AVG and other additional costs. MobiFone has also returned 344.66 million AVG shares to the private firm’s shareholders.

MobiFone made headlines early in 2016 when it announced it was venturing into the pay TV market with its acquisition of the controlling stake in AVG. At the time, MobiFone expected the deal to help it gain an additional one million subscribers in 2016 and become one of Vietnam’s top three pay TV firms by 2020.

In March this year, the Government Inspectorate concluded that the deal, which had not been approved by then-Prime Minister Nguyen Tan Dung, had violated investment laws and caused an estimated loss of some VND7 trillion (over US$300 million), including AVG’s liabilities of VND1.13 trillion, for the State budget.

The government watchdog found that the country’s third-largest telco had provided false and incomplete information and had falsified AVG’s financial status in its report to the MIC on the deal, which resulted in MobiFone paying VND8.89 trillion for the stake, well beyond its actual value.

The acquisition led to MobiFone’s poor performance from 2016 onward, with profits that year falling by VND321.7 billion against the previous year. As of late 2017, its accumulated losses amounted to more than VND1.98 trillion, which adversely affected its plan to go public.

MobiFone and AVG called off the deal in March this year, with AVG pledging to make a full refund. By May, AVG’s shareholders had returned more than VND8.5 trillion to MobiFone to reclaim the majority stake.

Since the Government probe, MobiFone has introduced innovations and reformed its organizational model and business units. After the difficult period, MobiFone said it had already met the profit target for this year.

In October, due to serious violations in the now-cancelled deal, Nguyen Bac Son, 65, was stripped of his title as the former Minister of Information and Communications for the 2011-2016 tenure, while his successor Truong Minh Tuan, who served then as deputy minister, lost his ministerial post.

One month later, former MobiFone General Director Cao Duy Hai and incumbent Deputy General Director Pham Thi Phuong Anh were arrested on mismanagement charges related to the infamous acquisition.

SGT