TIM wins €1 billion court rulingTIM wins €1 billion court ruling

This is good news for the Italian incumbent – as evidenced by a share price jump late morning – since it gets the cash in question onto its balance sheet. However, it is not the end of the case; there is still a Supreme Court ruling to be made in the case. But for now, TIM has a right to the money.

The case dates back some 15 years, although the disputed sum of money is a licence fee TIM paid to the government more than 25 years ago.

More specifically, it is the licence fee TIM paid to the state in 1998, at the time of market liberalisation in Italy. TIM submits that the state did not have the right to ask for the money under then market regulations. And it wants it back.

In April last year the Rome Court of Appeal sided with TIM and ordered the government to pay back a sum of over €528 million, plus interests and court costs, which meant a potential windfall of around €1 billion for the telco.

The government immediately announced plans to appeal, while TIM made it clear that it would take steps to get its hands on the money straight away, appeal or no appeal. As such, the state also applied for a suspension of the executive effects of the ruling, meaning it sought to stop TIM getting the cash ahead of the results of the appeal. It is that suspension that was this week rejected.

As Il Sole 24 Ore explains, the state had claimed that TIM would not be able to pay back the €1 billion in the event of a Supreme Court ruling against it, and therefore should not be able to receive it until after that ruling.

It also cited budgetary issues of its own that would make forking over the money difficult.

But the appeals court was having none of it, hence its decision to open the way for TIM to start claiming the money now.

It goes without saying that, as a European telecoms incumbent, TIM could use the cash. But in addition to the obvious financial benefit, there's an additional element to this story. The court decision could also help to push forward any discussions around the sale of Vivendi's stake in TIM, potentially smoothing the way for the French firm to step away from its – often problematic – position as the telco's largest shareholder in favour of a big investor.

In December the market reacted positively to a Bloomberg rumour that CVC Capital Partners was looking to buy Vivendi's 24% stake in TIM, and separate reports from the Italian press that also named Bain Capital and Apax Partners as would-be buyers. Brokering a deal with Vivendi is never going to be easy, but is further complicated by a couple of additional factors, including the uncertainty surrounding the licence fee dispute.

Getting that €1 billion onto the balance sheet makes it easier for an investment firm to price up the purchase of that stake.

For its part, TIM did not have a lot to say about the court ruling, other than acknowledging that it had gone in its favour. However, last year it did indicate that restarting shareholder payouts could be an option if it were to secure the money. Future investor events should give more clarity on that score.

As for whether or not it will get to keep the €1 billion, the signs are broadly positive. According to Reuters, the Supreme Court will likely rule round about a year from now. It notes that in a similar case in the past Vodafone came out victorious, which should give TIM some hope.