Ovo Energy has launched legal action against TalkTalk over a dispute stemming from a failed broadband customer transfer, adding pressure on both companies as they battle financial challenges.
The claim centres on a 2022 deal in which Ovo sold a telecoms business, originally acquired through its takeover of SSE Energy Services , to Talktalk, transferring around 135,000 broadband customers.
Under the agreement, Talktalk paid an upfront sum and committed to further payments tied to performance milestones.
However, the deal unravelled after large numbers of customers left the service, undermining the value of the transaction.
TalkTalk has since refused to pay the remaining sum, prompting Ovo to pursue legal action.
Dispute comes amid financial strain
The lawsuit lands at a sensitive moment for Ovo, which is seeking to shore up its finances through a £300m fundraising and exploring a potential sale of the business.
The supplier, which serves around four million customers, has faced mounting scrutiny since failing to meet stricter financial resilience tests introduced by regulator Ofgem following the 2022 energy crisis.
Bankers at Rothschild have been appointed to oversee the process, with options including new investment or a sale of the core business. Ovo has also embarked on a cost-cutting drive aimed at saving tens of millions of pounds.
The company reported losses of £135m in 2024, but it paid £27m in the same year to a company owned by founder Stephen Fitzpatrick, linked to a longstanding brand licensing arrangement that was later bought out in a £150m deal.
Meanwhile, the broadband group is grappling with around £1.4bn of debt, rising interest costs and ongoing losses, which have forced it to rely on repeated emergency funding from shareholders, including executive chairman Charles Dunstone.
A £115m cash injection in March marked the third such rescue package since late 2024, as the company struggles to stabilise its finances.
TalkTalk has also fallen behind on payments to suppliers, including Openreach, and is exploring options for a partial or full sale after potential buyers – including Virgin Media O2 – stepped back from talks.
Bondholders have meanwhile begun preparing for refinancing discussions ahead of upcoming debt maturities, underscoring concerns about the company’s financial position.
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