Quite the opposite – the City understood only too well that the telecoms giant had delivered a jolting triple-whammy that resulted in a profit warning slashing around a fifth off the group’s stock market value.
First, BT revealed that a more forensic independent examination by accountants KPMG had shown the accounting scandal at its Italian arm was deeper and more turbid than its own internal investigation had suggested last autumn.
The upshot is that the financial provision of £145 million initially made to cover the affair has now been hoisted to £530m, with a resulting £175m hit to this year’s group profits and a similar provision likely in the next financial year.
BT then poured on the bad news by disclosing trading had deteriorated in its international corporate market, and also among its UK public sector clients.
It looks like it has been paying the price of both macro-economic concerns overseas and the UK government’s austerity drive – losing both home and away for its football-loving chief executive Gavin Patterson.
It is believed that BT had hoped that cutbacks in government spending would be offset by greater regional authority revenues but that this has not happened.
The new financial pressures could not come at a worse time. It has debt of about £9.6 billion following the acquisition of mobile phone network EE last year, and a review of how to fund its bloated £9.5bn pension deficit is due this summer.
Such pressures will raise concerns among BT’s blue-chip institutional investors and extensive small shareholder base about the company’s generous dividend policy.
Following the irregularities at BT Italy, which are highly embarrassing, particularly BT’s hefty underestimate of the extent of the problem initially, a check is now being made of the financial processes and controls throughout the wider company.
Nothing untoward has been turned up yet, and Patterson will be praying that the embarrassment remains just a local matter: an Italian Job, so to speak. But until that review is complete, and in the midst of the trading headwinds, the share price is set to remain under a shadow for a while.