Shares in the British telecoms company were 15% lower at 326.05p Tuesday after investigations into its Italian operations revealed “far greater” misconduct than anticipated.
The investigation, headed by KPMG, showed that “the extent and complexity of inappropriate behaviour was far greater than previously identified,” requiring a reassessment of the negative financial impact, the firm said in an update to shareholders.
In its half-year update, BT estimated that the misdeeds of its Italian business would cost the group £145m. But after unearthing further improper accounting practices, sales and leasing transactions, the adjustments identified nearly quadrupled to £530m.
BT’s share price kept toppling into morning trading, landing at 313.9p at the time of writing. Over the last 12-months, the group’s share price has depreciated by over 33%.
This is the second major stumbling block for BT in the last several months, after Ofcom called for the legal split of Openreach and BT amidst competition concerns.
Hargreaves Lansdown research analyst Khalaf agreed that this was further unwelcome news for the telecoms giant.
“These issues were flagged last year, but the estimated revision was much smaller so this is a nasty shock to the market. This is a difficult time for them. They may potentially have to start paying more toward the separation of Openreach, and they also have a pension review coming up in June, as well as a £10bn pension deficit.”
Khalaf added that investors will also have to wait and see how BT’s customers react to rising prices.
