BT's shares dive amid Italian accounting imbroglio

BT's market valuation nosedives by over £7bn as it admits fall out from 'inappropriate behaviour' in Italy will lead to a far greater write-down than first thought

BT's shares have plunged by almost a fifth (19 per cent) after the telecoms giant publicised that the accounting errors made by its Italian business were "far greater than previously identified", forcing the firm into a £530m (€614.61m) write-down .

The telecom company's shares fell to a low of 308.55p today, a 19.88 per cent drop on 382.55p when trading closed yesterday, amounting to a drop of around £7.2bn in market capitalisation.

BT carried out an initial internal investigation in October, when it announced a £145m write-down due to accounting errors in the Italian business. But the telecoms firm now claims that the "inappropriate behaviour" - which includes "improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions" - was worse than initially thought, causing BT to adjust the write-down to £530m.

The telecom firm expects the deduction to hit its fiscal year revenues and profits. BT is expecting its adjusted revenues and adjusted EBITDA for its third financial quarter ending 30 December to take a £120m hit.

For the firm's financial year ending 31 March, the firm expects a £200m decrease in adjusted revenue and a £175m drop in EBITDA, and for its fourth financial quarter the firm now expects a double-digit year-on-year percentage decline in underlying EBITDA, adjusted for its acquisition of EE announced in 2015.

BT claims that it has taken "immediate steps" to rectify the financial practices of its Italian business. The firm has suspended members of its Italian senior management team, who have now left the business, and appointed a new chief executive of BT Italy to take charge as of 1 February.

Gavin Patterson, chief executive of BT Group, 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 claims that its Italian business contributed to around one per cent of its overall group EBITDA for its fiscal year 2015/16 ending 31 March 2016.