Vodafone is suing NTL over allegations that the cableco overcharged the mobile phone giant for the rental of fixed line telephony services.

NTL denies the claims and is currently in talks with Vodafone to try and resolve the dispute. The cableco is hoping that the matter can be sorted without costly court proceedings.

The proceeding were issued earlier this month but only came to light after NTL disclosed the action in a filing with the Securities and Exchange Commission (SEC).

NTL warns that if Vodafone is successful that it could have an "adverse effect on NTL's financial position".

Indeed, there are concerns that the legal action could have an impact on NTL's bid to emerge form Chapter 11 bankruptcy protection later this month.

Meanwhile, the Sunday Telegraph reports that NTL is set to rule out a possible merger with Telewest, the UK's second biggest cableco. A tie-up between the two outfits had been seen a natural progression for the cablecos, which operate in different franchise areas. ®