BT profits dive by 40% after £225m payout over Italian scandal

BT profits

Telecoms giant forced to pay Deutsche Telekom and Orange to settle claim relating to the sale of EE.

BT’s profits slumped more than 40 per cent in the first quarter of its new financial year after it was forced to pay out £225m to two shareholders following the accounting scandal at its Italian operation, The Guardian reports.

Deutsche Telekom and Orange became shareholders in BT after the company struck a £12.5bn cash and shares deal to buy mobile company EE in 2015.

As part of that deal the two companies were issued a warranty as a protection against a slump in BT’s performance.

DT and Orange triggered a claim under the warranty after BT’s stock market value plunged by almost £8bn, after the company revealed the extent of a £530m accounting scandal at its Italian operation. BT’s share price remains more than 20 per cent lower that it was a year ago.

BT said the £225m payout represents a “full and final settlement in respect of these issues”.

The charge hurt BT’s financial performance badly, with pre-tax profits slumping 42 per cent from £717m to £418m in the three months to the end of June.