T-Mobile loses bid to reduce its Virgin spend
Stuck with a 'loss-making' agreement
T-Mobile lost out in a High Court judgement yesterday on a dispute over how much it should pay partially estranged partner/step-child Virgin Mobile for calls for rival networks to Virgin's subscribers.
Virgin Mobile is half-owned by T-Mobile, Deutche Telecom's mobile division, and a complex joint venture agreement exists between the two.
T-Mobile is the sole carrier of calls made by Virgin's 2.5 million subscribers. Each call by a Virgin subscriber results in a set payment to T-Mobile.
Here's where it gets more complicated.
T-Mobile also makes a fixed monthly payment the other way. Through this, Virgin gets a slice of the revenues T-Mobile makes from handling calls made by subscribers of other networks to Virgin's customers.
Essentially T-Mobile argues that, under current arrangements, it makes a loss from this deal.
T-Mobile, citing "termination provisions" in its contract with Virgin, went to court to reduce these fixed monthly payments from £4.56 per customer per month to £1.71 per customer per month, today's FT reports.
The paper reports that attempts by T-Mobile's UK managing director, Harris Jones, to get Virgin to agree to lower these payments last September failed. T-Mobile eventually decided to take the dispute to court.
In a lengthy judgement yesterday, partially quoted by the FT, judges ruled in Virgin's favour.
T-Mobile had "made a calculated decision to seek to use the termination provision of joint venture... in an attempt to secure commercial advantage," the court ruled.
Virgin is pleased with the result, while T-Mobile is stuck with a loss making agreement, unless it can get yesterday's judgement overturned. The FT reports that T-Mobile is "studying" the court's ruling. ®
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