BT has reported a 37% plunge in third quarter profit after taking a hit from the accounting scandal at its Italian division.

The telecoms giant said on Tuesday that it will book a £530m writedown linked to “inappropriate behaviour” in Italy, up from a previous estimate of £145m.

The group said pre-tax profit fell to £526m in the three months to December 31, down from £832m in the same period a year ago.

BT said its total adjustments relating to the investigation of its Italian business amount to £268m for “prior year errors” and a specific item charge of £245m for changes in accounting estimates.

In better news for the group, revenue over the period rose 32% to £6.1bn.

BT chief executive Gavin Patterson said: “The good progress we’re making across most of the business has unfortunately been overshadowed by the results of our investigation into our Italian operations and our outlook.

“We’ve undertaken extensive investigations into our Italian business, including an independent review by KPMG, and I am deeply disappointed with the unacceptable practices by some that we’ve found. This has no place at BT, and it undermines the good work we’re doing elsewhere in the group. We are committed to ensuring the highest standards across the whole of BT.”

Mr Patterson again flagged a “challenging outlook in the UK public sector and international corporate markets”, but looked to reassure investors by highlighting record growth at EE and strong momentum in its consumer division.

The investigation into BT’s Italian arm revealed irregular accounting practices and a “complex set of improper sales, purchase, factoring and leasing transactions”, the firm said.

The net result is there has been an overstatement of earnings at BT’s Italian business over a number of years, leading to the upwards revision in the value of the writedown.