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BT says profits tumble on Italy scandal

British telecoms and television broadcasting firm BT Group's pre-tax profits tumbled to £418 million ($550 million, 470 million euros) in the three months to the end of June

British telecoms and television broadcasting firm BT Group on Friday posted a 42-percent slump in profits during its first quarter, rocked by fresh fallout from an Italian accounting scandal.

The news sent BT shares sliding four percent, with the company heading the fallers' board in morning deals on London's FTSE 100 index.

Pre-tax profits tumbled to £418 million ($550 million, 470 million euros) in the three months to the end of June, BT said in a results statement.

Revenues rose one percent from the same period last year to £5.84 billion.

BT took a new £225-million charge to settle a warranty claim with two key investors -- Germany's Deutsche Telekom and France's Orange -- arising from the Italy scandal.

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The British company purchased mobile operator EE from Deutsche Telekom and Orange last year, in a £12.5-billion deal under which the pair also became BT shareholders.

BT had first revealed in October that an independent review had uncovered improper accounting practices and transactions at its troubled Italian division.

In January, the group warned that the scandal -- which lead to an overstatement of profits over a number of years -- would cost it £530 million.

In a fresh blow in March, BT was slapped with a bill of around £340 million in fines and compensation following delays to high-speed cable installations by its broadband unit Openreach.

In Friday morning deals, BT shares sank 4.4 percent to 302.25 pence on the FTSE 100 index, which stood 0.54-percent lower at 7,402.98 points.

"BT Group is... lower as the company looks to get to grips with the problems in its Italian business," noted CMC Markets analyst Michael Hewson.

"The underlying business saw revenues in line with forecasts, but due to a £225-million charge in respect of the problems relating to its Italian business, profits in the first quarter fell."