BT shares plunge on cost of Italian accounting scandal

AP News
|
Posted: Jan 24, 2017 12:03 PM
BT shares plunge on cost of Italian accounting scandal

LONDON (AP) — Shares in telecoms giant BT plunged by a fifth Tuesday after the London-based company warned of the cost of an accounting scandal at its Italian business and broad weakness in the global market.

BT had said in October that it was investigating the practices of its Italian business, BT Italia, and had taken a charge of 145 million pounds ($182 million.) On Tuesday, it said that it was tripling those charges to 530 million pounds following a more in-depth, independent review of the situation.

The investigation, BT says, revealed improper accounting practices that "have resulted in the overstatement of earnings in our Italian business over a number of years."

"We are deeply disappointed with the improper practices which we have found in our Italian business," said Gavin Patterson, CEO of BT Group Plc.

Shares in BT closed 21 percent lower at 303 pence in London, cutting the company's market value by about 8 billion pounds.

BT said it has suspended a number of senior managers in Italy who have now left the company and appointed a new CEO for the unit who will start on Feb. 1.

The company is due to publish its earnings on Friday but by law is forced to disclose any news that might materially affect the share price as soon as it is confirmed.

BT also warned that the outlook for both its international business and its deals with the British public sector has deteriorated.

As a result of that and the scandal's cost, it reduced its earnings outlook. It said that for the fiscal year 2016-17 it adjusted revenue to be broadly flat. That's about 200 million pounds less than previously estimated.

It dropped a key estimate for full-year pretax profit to 7.6 billion pounds from 7.9 billion pounds previously.

The company provides broadband, mobile and TV cable services and has sought to expand in recent years. It invested heavily in the rights to broadcast European soccer matches and in 2015 acquired mobile operator EE.