BT Helping Italian Prosecutors With Criminal Inquiry Into Accounting Practices
27 January 2017 - 11:30PM
Dow Jones News
Simon Zekaria and Manuela Mesco
LONDON--BT Group PLC on Friday said it was assisting Italian
prosecutors who opened a criminal investigation into the British
telecommunications group's Italian business, which was rocked by a
deeper-than-expected accounting scandal.
Fabio De Pasquale, a prosecutor in Milan working on the case,
said the probe, which is general at this stage and isn't yet
implicating individuals, centers on allegations of false accounting
and embezzlement.
A spokesman for BT said the operator was providing "whatever
assistance" it could to Italian authorities.
The spokesman also said BT's head of continental Europe, Corrado
Sciolla, was leaving the company in the wake of the scandal,
details of which sent the stock reeling earlier this week.
BT lost a fifth of its value Tuesday after saying it had
underestimated the severity of yearslong "improper" accounting
practices and transactions in Italy, where it serves business
customers and has no consumer-focused brand.
Following an investigation into the unit, which included an
independent review by auditing firm KPMG LLP, BT took a write-down
of £530 million pounds ($665 million). This was more than three
times its previous estimate, which followed an internal
inquiry.
Several executives in Italy have left the business, BT said, and
the company has also appointed a new chief executive in Italy, to
take charge Feb. 1.
The write-down hit BT's earnings. On Friday, it reported that
its net profit in the third fiscal quarter to Dec. 31 slumped 51%
year-over-year to £374 million.
Chief Executive Gavin Patterson said that coordinated,
"sophisticated manipulation of the profitability of the business"
by a "handful" of individuals besmirched the company's reputation
and overshadowed its financial performance but that "90% of the
business is doing very well."
BT said earnings before interest, taxes, depreciation and
amortization, or Ebitda, on an adjusted basis--a key measure--rose
18% to £1.87 billion, in line with company forecasts and powered by
its consumer business.
On Tuesday, BT lowered its forecasts for revenue, earnings, and
cash flow over the next two years, citing the problems in Italy. BT
also gave a downbeat outlook for trading in the U.K. public sector
and in international corporate markets.
In early deals Friday, BT shares slipped near 1%.
Write to Simon Zekaria at simon.zekaria@wsj.com and Manuela
Mesco at manuela.mesco@wsj.com
(END) Dow Jones Newswires
January 27, 2017 07:15 ET (12:15 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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