BT has reported a 42% fall in Q1 profits due to a settlement with Deutsche Telekom and Orange over an Italian accounting scandal.
The German and French groups had bought into BT when they sold their joint venture, mobile operator EE, to the business.
BT, which revealed it had a £530m hole in its Italian accounts in January, said it had settled a warranty claim with the two investors, with a charge of £225m.
At the time the Italian accounts situation was revealed, BT issued a profit warning and Sky News reported that its market value had plunged by more than £7bn, with shares down by 21% in one day.
BT had first revealed details of accounting errors in its Italian business in October 2016 but an independent review in January found that “inappropriate behaviour” was “far greater than previously identified”.
The review found improper accounting practices as well as a “complex set” of improper transactions relating to sales, purchasing, leasing and factoring – the practice of selling invoices to a third party to collect.
These had resulted in “the overstatement of earnings on our Italian business over a number of years”, BT said.
BT said on Friday that its pre-tax profit for the first quarter fell to £418m, which was down one percent on an adjusted basis but well below the consensus of £751m.
But the company said it had seen solid demand for EE, with 210,000 net contract subscriber additions, along with 170,000 net fibre additions in its broadband sector.
Revenue and earnings were in line with forecasts.
Chief executive Gavin Patterson said the first quarter performance was “encouraging”.
He added: “Our businesses are leaders in their core segments and as we drive the business forward, I am confident in the outlook”.
BT shares were down 2.6% in early trading.
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Source: Sky