Telecoms Contracting Best Practices: Success Clauses Help Avoid Fallout From Provider Spin-Offs, Sell-Off, Market Exit
Posted by Brownlee Thomas on June 1, 2010
Enterprise telecoms market consolidation can disrupt your service delivery if your service provider is acquired by a competitor. Other disruptions that might have a negative impact on the quality of service delivery and/or account management by your provider of choice include your provider’s decision to spin off or sell assets and business operations that support services you depend on, or if they opt to exit a local market entirely – offering you just 60 days (and sometimes less) for you to make alternative arrangements.
If you don’t have a succession clause in your telecoms contracts today, consider adding one the next time you renew or sign a new contract for network and telecoms services, even if the service provider in question is not providing essential connectivity or other services. If you depend heavily on a single provider for supporting most of your network and telecoms service needs – such as local access, long-distance and international voice, and your data WAN – take the time at the earliest opportunity to discuss your options with your provider’s account team, with the aim of amending an in-progress contract. This should be done if you have more than 12 months remaining on a contract term, or if you have a revenue commitment that is less than 75% met. A clearly spelled out succession clause contributes to a successful commercial relationship between customer and service provider.
Assuming your business is considered important by the service provider, and if you expect to expand or renew your service agreement with them, it’s reasonable to expect that they will accommodate your request for a contract amendment to include a succession clause. You want to avoid if at all possible a soured relationship – which too often happens following the acquisition of a preferred supplier by another company. This happens when the account team is changed, and clear communication by the provider is not forthcoming about their plans for your account. It’s even more egregious when you both lose your account team and experience problems with service delivery and don’t know where to turn or escalate to get things fixed. You also want to avoid “going legal” – a last resort – where you’d need to prove material failure by the provider in meeting their contractual obligations, in order to terminate the contract.
If they prove unresponsive or slow to act, start peppering them with emails and also cc your legal counsel – so there’s a virtual trail that will stand as proof to make your case first to the provider’s executive team, and if it comes to it, which we always hope it won’t. Think of succession clauses as your “Plan B” contingency plan. You hope not to need it, but are grateful it’s there if you do.
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