Italian government to appeal TIM's €1 billion windfall

The Rome Court of Appeal has ordered that the Italian incumbent be reimbursed for a licence fee of just over €500 million it paid – apparently incorrectly – as long ago as 1998, in addition to revaluation payments and accrued interest, bringing the total it is owed to around the €1 billion mark.

Understandably keen to get its hands on the dough, the troubled Italian telco said it will "immediately start procedures to recover the amount in question," noting that the ruling is immediately enforceable.

But the state was clearly ready for the verdict, announcing in an Italian language statement that it will appeal and "request the suspension of the executive effects of the ruling."

The Italian government's short statement also included slightly more detail on the case than TIM's, in that it shared that the licence fee in question comes in at €528 million.

The disputed licence fee dates back 25 years, while the legal battle has been running for 15. The ins and outs of it are pretty complicated, but essentially TIM believes – backed by the courts at present – that the state erred in demanding the 1998 licence fee because it did not meet with the rules of then ongoing market liberalisation. The government billed TIM under national regulations that should not have applied in that year.

The Court of Justice of the European Union intervened a number of times during the 15-year dispute, coming down on the side of TIM. The telco highlights in particular a 2020 ruling that states the government was not permitted to extend a licence fee, only to demand administrative costs linked to the licensing system.

Fascinating stuff. The case itself is probably only interesting to those with a penchant for debating the finer points of law, but the ruling is significant, financially at least, an appeal from Palazzo Chigi notwithstanding.

It comes as a rare piece of good news for cash-strapped TIM, triggering a brief spike in its share price, which remains depressed following last month's revelation that it expects debt to rise by well over €1 billion following the sale of its networks business.

The €18.8 billion sale of NetCo to KKR should be completed by 15 October, albeit with the possibility of an extension, Milano Finanza reported last week.

TIM has been aiming for a summer deadline, and cleared a major hurdle back in January when it secured the approval of the Italian government. Meanwhile KKR has been getting its ducks in a row with regard to lining up investors for the vehicle that will actually do the deal. The Canada Pension Plan Investment Board (CPP Investments), the Abu Dhabi Investment Authority's Azure Vista subsidiary and Italian infrastructure fund F2i are all involved. The pair are making progress, but there could well be other bumps in the road.

Similarly, TIM is upbeat on that €1 billion licence fee restitution award, but with the state challenging it, it could be a while before it is able to claim the cash.