3UK to terminate Ericsson service contract

3UK has given notice to Ericsson that it plans to terminate a multi-billion service contract when it completes in 2012. The operator has provided no reason for this notice of termination, but comes after Ericsson had received a High Court judgment over the contract's exit provisions.

The original US$2.2 billion services deal, which was Ericsson's largest managed-services deal when it was signed in 2005, is now thought to be valued at closer to US$3 billion when (if?) 3UK puts the services contract out to tender in 2012.

Mystery surrounds why the two firms have reached this level of apparent disharmony, but it would appear that 3UK was seeking to end the services deal at an earlier date than had been contractually agreed.

Ericsson took the case to the High Court to establish that the exit provisions on termination would remain in place. The court ruled that the exit terms could not be invoked more than twelve months before the deal ends in 2012.

The need by Ericsson to establish termination clauses in its contract would perhaps indicate that normal negotiations had broken down.

A possible reason for this failure could have been caused by complications surrounding the network sharing deals 3UK has with T-Mobile, and now Orange UK. Many within the industry remain confused about the implications of the deals concluded by 3UK, and possible conflicts with its services partner.

For more on this story:
- read Bloomberg

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