Italian woes continue to weigh on telco giant BT

BT has been investing heavily in broadband roll-out. Picture: Iain MacDonald
BT has been investing heavily in broadband roll-out. Picture: Iain MacDonald
Share this article
0
Have your say

Former telecoms monopoly BT has seen its profits dented by charges linked to its Italian accounting scandal.

The group will cough up £225 million to Deutsche Telekom and Orange in a bid to avoid legal action after its share price slumped in the wake of the scandal, which saw BT book a £530m write down earlier this year.

The payout relates to the sale of mobile giant EE by the pair to BT for £12.5 billion, which left Deutsche and Orange with stakes in the UK firm. The share slide following the Italian scandal left it exposed to legal action from shareholders.

BT’s pre-tax profit tumbled 42 per cent to £418m in the latest quarter, though adjusted Ebitda was only fractionally lower.

Hargreaves Lansdown analyst George Salmon noted: “The accounting scandal in Italy has led to another £225m of nasties turning up in first-quarter numbers, to add to the £530m the group originally set aside back in January.

“In addition to this, misdemeanours at Openreach mean a total of £340m is to be paid in fines and compensation, and another £300m is needed to cover the cost of restructuring a number of divisions, including Global Services.

“All the while the circa £16bn pension and debt pile looms over the group.

“However, it’s probably unfair to paint an entirely gloomy picture. BT has shaken off demands to fully separate the higher-margin Openreach division, and assuming there aren’t any more skeletons in the closet, the cash flows from EE and the growing Consumer division are potentially attractive.”

Click here to ‘Like’ The Scotsman Business on Facebook