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We revealed last week how BT had sent a mailshot to thousands of Tiscali customers, with the headline "Tiscali chief plots sell-off".

"We can understand why you're wondering what might happen to your Tiscali broadband service," the letter read, referring to Tiscali's much-publicised sell-off. "And because no one really knows the answer just yet, it could be a good time to look for an alternative broadband service." The letter then prompted readers to contact BT

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Tiscali claims the letter was misleading. "Tiscali UK Limited has issued proceedings against British Telecommunications PLC for defamation and malicious falsehood," a company statement reads.

"In a letter to us, BT has disputed the claim. The next stage is for us to file a further court document and we will then learn the terms on which BT intends to defend the claim, if at all."

BT denies any wrongdoing. "We take allegations like this very seriously," a statement from the company claims. "We recently approached a number of Tiscali customers, who may have already seen media reports suggesting that Tiscali was up for sale, and pointed out that we offer a great service.

"This is a legitimate and reasonable business tactic designed to help us acquire more customers - comparative marketing is an important aspect of a competitive market."

BT has also denied that it used data from its Wholesale or Openreach divisions - which are run as separate legal entities from its Retail division - to target the Tiscali customers. A BT spoeksman said the Tiscali customers' addresses came from "reputable third-party sources."