BT (LON:BT.A) has seen profits fall by 40 percent after the group was forced to pay £225 million to two shareholders following the accounting scandal in Italy.
Deutsche Telekom (ETR:DTE) and Orange became two important shareholders in BT after they accepted shares in part exchange for mobile operator EE in 2015, in a £12.5 billion deal.
“Whilst this is clearly disappointing. it is the best possible outcome for all shareholders as it avoids a potential protracted legal process,” said Gavin Patterson, the BT chief executive.
According to Patterson, the settlement is better than going through a long legal process that would have been triggered if an official claim was lodged.
“Whilst this is clearly disappointing. it is the best possible outcome for all shareholders as it avoids a potential protracted legal process,” he said.
The ongoing Italian accounting scandal saw Patterson’s pay be cut by £4 million, whilst also leading to a major restructuring with 4,000 jobs cut, about half of them in the UK.
BT does not blame the fall in profits solely on the accounting scandal, but also says it is due to pension costs, programme rights and the process of bringing the company’s call centre operations to the UK.
BT also paid £1.18 billion for Champions League football rights in March this year. This was 32 percent more than the previous deal. The increasing cost of sports rights has affected Sky (LON:SKY) as well as BT. Sky said on Thursday that the £629 million increase in Premier League rights costs led to a 14 percent fall in profits.
Patterson has said general, BT has delivered an “encouraging performance” in 2017’s first quarter. The group saw revenues increase by 1 percent to £5.8 billion.
“The broadband market is quiet. As the market matures and you can’t sell any more broadband it’s going to be about retention and selling more for more.”
They highlighted the 9 percent increase in broadband and TV revenue and the 4 percent rise at EE to £1.3 billion.