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Mexican mobile phone operator sues IBM for $2.5 billion

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[April 17, 2014]  By Nate Raymond

NEW YORK (Reuters)  Mexican mobile phone operator Iusacell SA de CV sued IBM Corp on Wednesday, accusing the U.S. technology giant of making fraudulent representations that caused it to lose $2.5 billion in profits.

The lawsuit, filed in federal district court in New York, centered on a contract that Iusacell said IBM induced it to enter into in Mexico.

"Events subsequent to the execution of the agreement have revealed that IBM both knowingly misrepresented and wrongfully concealed from Iusacell material facts both before and during the parties' relationship," Iusacell said in the complaint.

IBM said in a statement that the lawsuit was a "transparent attempt" by Iusacell, which is co-owned by media and retail mogul Ricardo Salinas' Grupo Salinas and broadcast giant Grupo Televisa, to avoid its contractual obligations.

IBM said it signed a long-term contract with Iusacell in 2010 under which IBM's Mexican unit made significant investments in Iusacell's business.

"Despite major improvement to Iusacell's information technology infrastructure and growth in Iusacell's revenues, Iusacell has failed to pay IBM Mexico what it is owed under the contract," IBM said in the statement.

IBM's Mexican unit already has filed an arbitration claim against Iusacell in an effort to enforce the contract, according to IBM, which called Wednesday's lawsuit an "ill-advised attempt to end-run" that case.

A spokesman for Grupo Salinas had no immediate comment on the case and a lawyer for Iusacell did not respond to a request for comment.

According to the lawsuit, Iusacell's management designed a plan to boost the market share and revenue of the company, which was then the third-largest mobile phone operator in Mexico.

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Doubtful its existing information technology systems could support the plan, Iusacell sought advice from IBM, the lawsuit said. Several pages of the complaint are then redacted, leaving it unclear what happened next.

Iusacell, however, said in the lawsuit that IBM's capacity limits crippled its performance.

It is not known why parts of the complaint were redacted. Companies sometimes seek to keep material confidential to protect trade secrets.

The lawsuit seeks $2.5 billion in damages. Iusacell said its claims are governed by Mexican law, which entitles it to both actual damages and lost profits that stemmed from its reliance on the alleged IBM misrepresentations.

The case is Iusacell SA de CV v. International Business Machines Corporation, U.S. District Court, Southern District of New York, No. 14-2697.

(Reporting by Nate Raymond in New York; additional reporting by Jon Stempel in New York and Michael O'Boyle and Dave Graham in Mexico City; editing by Paul Simao)

[ 2014 Thomson Reuters. All rights reserved.]

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