This morning telco giant BT saw its share price fall 19% in early trading after being forced to devalue its Italian business by £530m.
The telco giant blamed years of “inappropriate behaviour” in its accounting department which were “far greater than previously realised”. The drop in share price is expected to remove an estimated £7 billion from the company’s value.
The Italian division of the company had been under investigation for its accounting practices since October of last year after allegations surfaced last summer.
The independent review, conducted by accountancy firm KPMG, led BT to conclude that “a complex set of improper sales” had led to “the overstatement of earnings in our Italian business over a number of years.”
The company was expected to make an announcement devaluing the Italian division following the review but it was estimated the amount would be closer to £145m. Today’s revelation has seen that number triple and prompted the company to issue a profit warning for both 2017 and 2018.
BT Group chief executive, Gavin Patterson, said: “We are deeply disappointed with the improper practices which we have found in our Italian business.”
“We have undertaken extensive investigations into that business and are committed to ensuring the highest standards across the whole of BT for the benefit of our customers, shareholders, employees and all other stakeholders.”
BT said that it had suspended a number of its Italian senior management as a response to the findings, including chief executive Gianluca Cimini and chief operating officer Stefania Truzzoli. A new chief executive has been appointed but is not expected to take over until the start of next month, and with stricter adherence to the BT Group ethics and compliance standards.
The telecommunications company also warned that it is expecting a double digit decline in fourth quarter revenue from it’s UK public sector and international corporate business.