5 Telecom Commercial Terms Every Agreement Must Have

The Top 5 Telecom Contract Commercial Clauses

As part of your Telecom and IT Category Management duties, Contract Management is a vital component to the overall effectiveness of not only your supplier relationships, but the product and services you purchase and implement.

Negotiating supplier contracts for category managers involves aspects like ensuring that all aspects of the company’s contractual agreement(s) with Vendors and its business functions primarily with responsibility for overseeing the entire contracting lifecycle from leading the competitive bid process through contract negotiations, as well as management of active vendors through termination of the contract.

When negotiating new agreements or even renewing old agreements, here are the five key telecom contract commercial clauses which are frequently overlooked in telecoms contracts, but which will save you money and ensure you have commercially competitive terms across your contracts.

1. Right to Benchmark  Entering to an agreement especially for more than a 12 – month commitment can limit your ability to ensure commercial competitiveness throughout the term of the agreement. You should always ensure you have the ability to benchmark all of your services and prices against industry norms. Make sure that your vendor is prepared to match prices and services in line with the market at large and request a benchmarking review at regular intervals throughout your contract.

2. EPD (Early Pay Discount)  This can be a great savings nugget to consider for your organization and are often overlooked while negotiating contracts. An early payment discount is a reduction in the amount on a supplier’s invoice if the customer pays the supplier early. The early payment discount is also known as a cash discount.  A cash discount is a deduction allowed by some suppliers in order to motivate customers to pay within a specified time.   For example, assume that a supplier offers a cash discount and it is printed on its invoice as 5/10, net 30. Let’s also assume that a sales invoice is for $10,000. However, per the invoice the buyer may deduct $500 (5% of $10,000) if the buyer pays the seller $9,500 within 10 days of the invoice date.

Your keys to success here will be 2 fold: – 1) your organizations cash on hand and 2) the ability to process the payment in time to receive the discount.  However, if you negotiate the right discounts and manage this effectively this can add up to some nice bottom line savings!

3. Business Divesture  Without impact to commercial commitments – Let’s face it, business models company directions change. As a result, your organization may decide to sell off, close down a part of the business and if left out of your contract agreements, can expose your organization to spend commitments or service obligations that still need to be paid. Your goal in including a business divesture clause is to allow your organization some flexibility to not only terminate the services without penalty, but also reduce any spend commitments by the value of the aggregate of the services that were billing to the divested business.

4. The “Right” Commercial schedule and terms  Commercial Schedules should outline the products and services you plan to purchase from your supplier. The commercial rates included within your schedule should be based on the Pre-negotiatedand deal terms that you’ve agreed. Be specific include the actual rates, where necessary detail the physical locations, bandwidths, mobile device names, plans, cost per minutes etc.  Avoid any reference to “online guides” have your supplier add the actual rates into the agreement.

Strip out any products, services, or costs which you do not plan to purchase as part of the initial agreement.  ***Suppliers are clever and try to include other products and services which are not part of the initial deal but may be ordered at a later date as part of an upsell. By leaving these services in you’ll be less focused on ensuring the cost are competitive and have the right contractual terms for your business because it’s just not something you need today.  What’s even worse say for example you need to increase capacity from 100Meg to 1 Gig.  If as part of the initial agreement you’ve negotiated a competitive rate for 100Meg but not 1Gig and the 1Gig price has been added to your contract at list price, guess what you’ll pay –> that’s right list price, because that’s what you’ve just signed up to in your contract.

5. Rebates and Employee Discounts Entering into a LONG term committed spend agreements i.e. 36 – 60 months means BIG dollars for your suppliers and the overall relationship. In return add some benefits for your enterprise such that based on maintaining a threshold level of spend the supplier will provide rebates in the form of checks or credits against your billing accounts.  Be creative include tiers of spend levels which influence the percentage amount that could paid.  This rebate can be used as a carrot for both organizations as a means to not only save your business money but to also assist in your supplier up-selling services that contribute to the value of your rebate.

When negotiating with wireless carriers include within your corporate wireless agreements, employee discount schemes which grant employees discounts associated with their monthly fees and mobile products like phones and accessories (cases, charging units etc.)

The commercial terms outlined here can be achieved with a well thought out approach to your supplier negotiations.   However, adding great terms and shoving the contract into your file cabinet is nothing more than a waste of time. A key aspect post contract finalization is to keep track of your favorable commercial terms and communicate them out to your internal business partners, financial teams and where necessary corporate communication teams.  By doing so, finance teams can build internal forecasts around the agreed deal terms, your internal IT leads can plan to leverage the savings to build out future state network transformational goals and corporate comms can publish the favorable wireless discounts.  In addition as the contract manager you have the obligation to track billing to ensure the rates are in-line with your agreed terms.  Want to learn more?  Check out our 6 clauses you should always add to your telecom contract  post.