BT Group plc (BT shares plunged to a three-and-a-half-year low Tuesday after the company trimmed its profit guidance and cautioned that writedowns in its Italian business linked to accounting irregularities will be much larger than expected.

BT shares fell as much as 18.75%, the biggest single-day decline in 8 years, to change hands at 312.7 pence each by 08:40 GMT, the lowest since June 2013.

The company's internal audit into its Italian unit, first announced in late October, will likely result in a writedown of £530 million ($661 million), well ahead of the originally estimated £145 million.

BT also said that, owing to "pressures in the UK public sector and international corporate markets", it now expects flat revenue underlying revenue growth in the 2016/2017 fiscal year and adjusted EBIDTA of around £7.6 billion from a previous guidance of £7.9 billion.

Earnings for the 2017/2018 year would be "flat" compared to the previous, BT said, with normalized free-cash of between £3 billion and £3.2 billion, a figure that also falls shy of the company's previous forecast.

"We are deeply disappointed with the improper practices which we have found in our Italian business," said CEO Gavin Patterson. "We have undertaken extensive investigations into that business and are committed to ensuring the highest standards across the whole of BT for the benefit of our customers, shareholders, employees and all other stakeholders." 

BT said the Italy probe "revealed that the extent and complexity of inappropriate behaviour in the Italian business were far greater than previously identified and have revealed improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions."

The impact is expected to hit third quarter earnings by around £120 million and free cash flow by around £100 million, the company said, even though it expects the final numbers to be "broadly in line with market expectations."