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Government Inspectorate releases report on MobiFone - AVG deal

Released at: 14:39, 17/03/2018

Government Inspectorate releases report on MobiFone - AVG deal

Photo from danviet.vn

Real risk of great damage to State capital from purchase, inspection finds.

by Van Chi

Wrongdoings in the acquisition of the Audio Visual Global Joint Stock Company (AVG) by State-owned MobiFone are attracting public attention, with expectations that the case will be handled strictly and lost State assets recovered, according to a report from VNA, the State-owned news agency.

An inspection of the acquisition began last September but due to the complex nature and seriousness of the deal, the Government Inspectorate (GI) only released its conclusion on March 14.

The purchase was a major deal between a State-owned enterprise and a private company, but what made it come under the spotlight was the lack of transparency. In the first quarter of 2016, MobiFone announced its decision to conduct the purchase but did not disclose the value of the transaction. The company’s leadership refused to answer media questions, claiming that it was confidential. The matter was raised repeatedly at the National Assembly (NA) and many press conferences after the Cabinet’s regular meetings.

“What were the needs and the basis for MobiFone to use State capital to buy AVG? What was the real value of the acquisition? How did AVG operate after the acquisition and did the business outcome match the investment?” were among the questions posed by Mr. Le Thanh Van, Member of the NA’s Committee on Financial-Budgetary Affairs, at the fourth session of the 14th NA last November.

The answer to those questions came in the GI’s conclusion released on March 14. It stressed that this is a very serious economic case, with real risk of damage of over VND7 trillion ($307.5 million) to State capital in MobiFone. The damage included VND1.134 trillion ($49.8 million) worth of AVG debt.

The obscure deal has had a negative impact on MobiFone’s image, reducing the value of its shares during the equitization process.

Lack of transparency in State-owned enterprises’ (SOEs’) operations poses major risks of losses and waste of State resources.

The inspection was conducted under instructions from the Party and the government so that an accurate final conclusion in line with the law would be reached while preserving the company’s value and maintaining the operations of a large-scale SOEs during preparations for equitization.

At the 12th meeting of the Central Steering Committee for Corruption Prevention and Fighting, Party General Secretary and Head of the Committee Nguyen Phu Trong requested urgent inspections and an early conclusion, along with clarification of the causes and responsibilities of those involved in nine major loss-making projects of public concern, including MobiFone’s acquisition of AVG.

The Party Central Committee Secretariat recently asked the government standing board to instruct relevant agencies to handle the case quickly in an objective and accurate manner in line with the Party’s guidelines and State laws, to ensure that punishment is meted out to the right people and lost State assets are recovered.

In its conclusion, the GI not only made clear that there were legal violations in the transaction but also clarified the responsibilities of related agencies and proposed measures and tasks to deal with the violations, in both administrative and economic terms.

Among such measures, it recommended recovering the amount of money MobiFone paid for the acquisition, enforcing decisions on the case issued by relevant agencies, and collecting VND1.3 billion ($57,000) in corporate income tax arrears from MobiFone, among others.

The clear conclusion, along with directions on the strict handling of the case, demonstrated the determination of the Party and the State to tighten discipline and rules, enhance publicity and transparency, and fight negative phenomena, corruption and waste, thus creating a healthy and stable environment for the sustainable development of the national economy.

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