BT is being sued by consultancy Magenta netLogic for £88m for alleged breach of contract.

The firm claims it signed a contract with BT to investigate potential savings at BT Global Services - the company would then be paid a percentage of any savings the telco made by acting on Magenta's advice.

Magenta is seeking £80m in damages and £8.1m for unpaid invoices. The company, which trades as Global Capacity, claims that in January last year BT asked it to identify savings of between £300m and £400m in exchange for a payment of between ten and 20 per cent of any savings made.

The consultancy claims that BT never acted on its cost-cutting advice for Germany and the US. Nor has the telco paid it for local lines rented in Germany and the US.

BT said: "BT does not accept it is responsible for breach of contract. In fact, BT considers that Global Capacity failed in its duty properly to perform those services it was obliged to under the contract. Their alleged cost-cutting plan did not bear up to scrutiny and the results identified were demonstrated very quickly to be hopelessly flawed.

"BT will vigorously defend Global Capacity's claim for damages and wholly disputes the invoices they have raised for US$11.25m." ®