BT shares plunge on cost of Italian accounting scandal

LONDON (AP) - Shares in telecoms giant BT plunged by almost a fifth Tuesday after the London-based company warned that the cost of an accounting scandal at its Italian business is bigger than expected and will weigh on its earnings.

BT had said in October that it was investigating the practices of its Italian business, BT Italia, and had taken a charge of 145 million pounds ($182 million.) On Tuesday, it said that it was increasing those charges to 530 million pounds following a more in-depth, independent review of the situation.

BT said the investigation revealed improper accounting practices and improper sale, purchase and leasing of deals. "These activities have resulted in the overstatement of earnings in our Italian business over a number of years," the company said in a statement.

"We are deeply disappointed with the improper practices which we have found in our Italian business," said Gavin Patterson, CEO of BT Group Plc.

BT suspended a number of senior managers in Italy who have now left the company and appointed a new CEO for the unit who will start on Feb. 1.

The company is due to publish its earnings on Friday but by law is forced to disclose any news that might materially affect the share price as soon as it is confirmed.

BT reduced its earnings outlook as a result of the scandal. It said that for the fiscal year 2016-17 it expects a drop in adjusted revenue of 200 million pounds.

Shares in BT were down 18 percent at 314.90 pence in London on Tuesday morning.

The company provides broadband, mobile and TV cable services and has sought to expand in recent years. It invested heavily in the rights to broadcast European soccer matches and in 2015 acquired mobile operator EE.