MILAN/MADRID (Reuters) - Italy's Telecom Italia (TIM) (MI:TLIT) and Spanish lender Banco Santander (MC:SAN) have agreed to set up a joint venture to provide consumer-credit services in Italy, the companies said on Thursday, confirming earlier reporting by Reuters.
The deal should help TIM to free up capital and reduce its credit risk, while establishing Santander as a leading provider of consumer finance in Italy.
Initially the unit will offer TIM's clients loans to buy mobile devices and will subsequently expand to offer consumer finance and insurance, the companies said.
Santander will control 51% of the new company, which is set to begin operations in 2020, while TIM will hold a 49% stake.
TIM's Chief Executive Luigi Gubitosi said earlier this year that setting up a credit consumer operation would reduce the company's debt by 500-600 million euros.
Meanwhile Santander is looking to shore up its squeezed margins.
Like other banks across Europe, Spanish lenders have turned to more profitable enterprises, such as consumer lending, in a bid to lift earnings as low interest rates put pressure on financial margins.
Earlier this week, Santander announced it had taken a 350 million pound ($453 million) majority stake in UK-based Ebury as part of a digital strategy to boost growth through new ventures.