Two letters touching in Tefillin make them not Kosher. The reason for this is that the Torah says Ukesavtom and we learn out that the letters have to be Kesivah Tama. 

One of the ideas of Kesavah Tama is that the letters need to be separate from each other and be totally surrounded by Klaf. 

Being that these letters which are touching do not loose their own letter status or together form a third letter this is an easy fix, it is only necessary  to scrape the connection and it will then be Kosher.

Every letter needs to be surrounded by Klaf. Should the hole be along the letter it would make it not Kosher. 

As you can see here the Mem has a hole inside. but the hole is not touching the letter itself therefore it is still kosher.

This is a broken letter ה it is considered Nifsak Nirah Lihedia. which means that this is a break in a letter which seen by the naked eye.
There is a Machlokes between Achronim what to do in such a scenario the more lenient opinion says that this should be shown to a child who knows the Alef Beis well but does not yet know how to read. For only he can judge the letters individually and not read it in the context of the word. I brought this Shaloh to Rabbi Vosner and he advised it be shown to a child, The child read it as a ה so this was able to be fixed (a little ink was added to reconnect the roof of the ה) however the Tefillin would no longer be considered Mehudar because according to the more stringent opinion this would be not Kosher.