British regulator Ofcom has fined TalkTalk Telecom and subsidiary Tiscali UK 3 million pounds ($5 million) for sending thousands of customers incorrect bills.
Ofcom said it had received complaints after more than 62,000 consumers got bills for services they had not received.
The company was given until last December 2 to sort out the issue, but sent 3,000 more incorrect bills after the deadline.
Ofcom has therefore issued TalkTalk and Tiscali UK with a financial penalty to reflect the seriousness of their breach of the rules and to act as a deterrent to them and other telecoms companies, the regulator said on Thursday.
TalkTalk's much-criticised customer service suffered as it integrated an unwieldy customer base after it bought Tiscali UK from Italian parent Tiscali in 2009.
Chief executive Dido Harding said the group had taken steps to solve the problems, and that more than 2.5 million pounds had been paid to customers in reimbursements and compensation.
We are disappointed at the scale of the fine and feel it is a disproportionate penalty; however we are striving to improve and invest in customer experience and are pleased at the clear progress we are starting to make, she said.
Harding told Reuters last month complaints were reducing, though there was still much to be done.
Shares in TalkTalk, which competes with BT and Virgin Media, were 0.3 percent lower at 127.5 pence by 0751 GMT, outperforming a 1.1 percent weaker mid-cap index.
Ofcom said the level of the penalty reflected the fact the company had taken steps to comply with the rules and taken remedial action with refunds and goodwill payments.
($1 = 0.604 British Pounds)
(Reporting by Rosalba O'Brien and Paul Sandle; Editing by David Hulmes)