BT has taken a fresh profit hit in the wake of its Italian accounting scandal after agreeing to pay Deutsche Telekom and Orange £225m to avert potential litigation related to the sale of EE.

The two continental telecoms companies sold BT the mobile company for £12.5bn with both taking sizeable stakes in the British company.

The collapse of BT’s share price, triggered partly by the revelations of a “complex fraud” in Italy revealed in January, has however knocked the value of the business. Orange has already partly sold down its stake in BT at a loss while Deutsche Telekom took a €2.2bn hit on the value of its 12 per cent stake earlier this year.

That opened the door for litigation, with one person familiar with the situation arguing that legal options were on the table.

BT has decided to see off the threat by paying £225m to the former owners of EE. It still faces class actions in the US related to the Italian issue.

BT warned on profit in January when it revealed a complex fraud in the Italian business that triggered a huge write-off of £530m as it was forced to unwind dubious contracts signed by the unit. That triggered a management exodus with the heads of Global Services, its European division and its Italian unit all leaving.

Separately BT confirmed Sean Williams, its chief strategy officer, was leaving the company as revealed in the Financial Times last week. He will be replaced by Cathryn Ross, chief executive of Ofwat.

It also said that Marc Allera, the head of EE, is to become the chief executive of a merged EE-BT Consumer business. John Petter, the long-standing head of BT Consumer, will leave the company as part of the continued shake-up at the top of BT.

The merger of EE and BT Consumer to save costs was revealed in the Financial Times in May.

The company said that its revenue dipped 1 per cent to £5.8bn in the first quarter while pre-tax profit fell 42 per cent to £418m.

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