BT has lost almost a fifth of its market value after an Italian accounting scandal compounded a slowdown in its British government business to force the firm to cut revenue, earnings and cash flow forecasts for the next two years. Sonia Legg reports
BT has a big repair job on its hands. Shares in the British telecoms firm fell almost 18 percent. It was their worst ever one day fall and reduced the value of the 171-year-old firm by a fifth. An accounting scandal in BT's Italian business was partly to blame. (SOUNDBITE) (English) KATHLEEN BROOK, SENIOR MARKETS ANALYST, CITY INDEX, SAYING: "They basically overstated profits there, they had set aside £150 million pounds to deal with it but that's now gone up to half a billion pounds." The Italian division only contributed around 1 percent of the group's core earnings for the year to the end of March. But the new writedown came with another profit warning. No revenue growth for the next two years, because of the deterioration in its core corporate and public sector business. (SOUNDBITE) (English) KATHLEEN BROOK, SENIOR MARKETS ANALYST, CITY INDEX, SAYING: "Public sector spending is falling, we know that in the UK and we expect to see more declines throughout the rest of this parliament and that's really starting to bite with BT as well. Remember the government was a big purchaser of their services. Now that that's fallen that's going to be a big problem." BT's Italy operation will get a new CEO next month to help sort out the problems there. It's also promising to increase its dividend per share despite lower cash flow forecasts. But it's the end of a steady recovery following the economic downturn which is worrying some. Valuable connections may be cut when Britain triggers Brexit.