BT Global Services failed to implement a cost-cutting strategy and failed to pay its bills, according to a legal claim filed by consultancy firm Magenta netLogic.
The £88 million lawsuit, filed in London’s High Court late last week, comprises £80 million in damages and £8.1 million in alleged unpaid bills.
BT denied any breach of contract and said it would “vigorously defend” itself against the claims.
The legal claims comes after the company made recent profit warnings and announced £340 million writedowns in its Global Services unit.
In its lawsuit, Magenta claims that it had identified how BT could cut by $78.8 million (£55.5 million) its $421.5 million (£296.7 million) spending on network circuits in Germany, Italy, the Netherlands, Belgium, Spain and the US. It also says it was never paid for work renting circuits in Germany and the US.
Magenta alleges that BT never implemented cost cutting recommendations in Germany and the US, and that a breach of contract deprived it of up to £80 million in fees, plus about $11 million in bills it says BT did not pay.
Magenta alleges that a BT manager told it in January 2008, that it was looking to Magenta to help it secure £300 to £400 million in annual cost savings, and said it would pay Magenta up to 20 percent of any savings realised.
BT said in a statement: “Global Capacity [the trading name of Magenta netLogic] failed in its duty properly to perform those services it was obliged to under the contract.”
The cost cutting plan Magenta offered it “did not bear up to scrutiny”, BT said, adding that it was “hopelessly flawed”.