Consultants hit BT Global Services with $123m breach of contract suit

Telecom consultancy firm Magenta netLogic is suing BT for up to £88 million ($123 million) in damages, alleging that BT failed to implement a cost-cutting plan for its Global Services division.

The suit alleges that the UK operator has failed to pay Magenta invoices totaling £8.1 million, the Financial Times said. These invoices include work renting network infrastructure in Germany and the US.

It claims that BT has yet to incorporate any of Magenta's cost-saving measures, including one which would have reduced BT Global's spending on capacity by $78.8 million.

These breaches of contract cost Magenta between £30-£80 million in lost revenue, the company said. It says BT had agreed to pay Magenta between 10%-20% of any cost savings achieved.

BT told the media it would "vigorously defend" the charges. The company believes that Magenta failed to fulfill the terms of their contract, stating that the alleged cost savings did not bear up to scrutiny.

The suit is yet another embarrassment for BT's global services division. The unit has dragged down group net profit by 81% after discovering that costs on its global IT and comms services contracts were higher than expected.