Investigations into BT Continue
On Tuesday 24th January, BT dropped to the bottom of the FTSE 100 blue chip index when its market value dropped by £7.8 billion. Stocks fell as shareholders were informed of that the historical accounting errors from late last year were “far greater than previously identified”.
An investigation has now been opened into BT’s Italian division over alleged embezzlement and false accounting, according to Reuters.
Oddly, Britain’s oldest telecommunications company used this impromptu announcement to add fuel to fire. Fears for shareholders were amplified when BT said there has recently been a clear stoppage in UK public sector contracts. One example of this, is expensive sports rights that need to be “renewed” later in the year – the possibility of this renewal seems slim due to sizeable losses.
The firm are also still in talks over a new payment plan for its vast pension deficit.
“I am deeply disappointed with the inappropriate behaviour we found,” said Gavin Patterson, BT’s Chief Executive since 2013. “Public sector in the UK is also particularly challenging. Big contracts are completing and we’re not seeing them being replaced at this stage,” he added.
The group has said it has suspended numerous employees from its Italian senior management team and already assigned a new CEO to start February 1st for the same regional office.
BT‘s shares (already being a fifth down since 2015) closed 21 percent lower, wiping nearly 8 billion pounds from its worth.
“Prior to this morning’s news, BT investors had been concerned about BT’s large pension liabilities and the company’s relationship with its regulator, Ofcom. Today’s news is an unwelcome addition to those worries. Certainty on any of those issues would be welcomed by investors,” said Richard Marwood, a senior fund manager at Royal London Asset Management.
The senior fund manager has said he is extremely concerned by the enormity of the Italian write-down – the Mediterranean-based division confessed in October 2016 that a £530 million accounts “black-hole” had come to light.
Britain’s accounting watchdog, the Financial Reporting Council, said there could be some investigations into the auditors (PricewaterhouseCoopers) of BT Italia.
“Our historic concerns over the BT investment case have not been on Italy and Public Sector,” said Deutsche Bank analysts, who also pointed to ever-growing uncertainty over its forced separation of its Openreach business and EE mobile phone firm.
The firm has said it will be “conducting a broader review of financial processes, systems and controls across the group.” – What this space.