BT share price: Investigation uncovers senior involvement in Italian fraud

on Apr 23, 2019
Updated: Sep 17, 2019

A criminal investigation into accounting fraud inside BT Group’s (LON:BT.A) Italian business has uncovered more evidence of the involvement of senior executives in artificially inflating the division’s financial performance, Reuters has reported. The former telecoms monopoly  was forced to write down the value of its Italian business by £530 million back in 2017 following the discovery of inappropriate accounting behaviour at the unit.

This Tuesday has seen the BT share price drop 0.46 percent to 228.80p as of 09:47 BST. The stock is underperforming the benchmark FTSE 100 index which has climbed into positive territory and currently stands 0.36 percent higher at 7,486.48 points. The group’s shares have given up more than six percent of their value over the past year, as compared with about a 1.2-percent gain in the Footsie.

Accounting scandal update

Reuters reported today that it had reviewed emails seized by the police which showed for the first time why Italian prosecutors allege that top BT employees were at the heart of the problem, contrary to the group’s assertions that managers at head office knew nothing about the misconduct.

“A series of emails between the top financial executives of BT Plc and managers of the (Italian) unit point to the existence of ‘insistent’ requests by the leadership of the parent company aimed at achieving ambitious economic targets, even using aggressive, anomalous and knowingly wrong accounting practices,” Italy’s financial police said in a 353-page report, as quoted by the newswire.

The newswire notes that the report contains emails from Brian More O’Ferrall, currently finance director at BT Wholesale, who was previously chief financial officer  for BT Europe, the European part of Global Services.

Analysts on blue-chip telco

Credit Suisse reaffirmed the former telecoms monopoly as ‘neutral’ last week, without specifying a target on the BT share price, while earlier this month, Goldman Sachs, which sees the company as a ‘buy,’ lowered its valuation on the shares from 320p to 300p. According to MarketBeat, BT currently has a consensus ‘hold’ rating and an average price target of 273.75p.