Following long-running negotiations, CK Hutchison and VimpelCom have agreed to form a 50-50 joint venture combining their two operations (3 Italia and Wind) in Italy.

Combining the two businesses will enable the combined entity to more effectively compete in Europe’s fourth largest mobile telecoms market, the two companies claimed.

A statement promised that investment will follow any merger: “The combination of the two networks, together with significant additional investment, will provide Italian mobile users with unmatched network quality and will accelerate the availability of high-speed mobile and fixed broadband services throughout Italy.”

Any deal will of course need regulatory approval, including from the EU. The partners expect the deal will complete within 12 months.

The entity will have more than 31 million mobile customers and 2.8 million fixed line customers (of which 2.2 million are fixed broadband customers).

The deal is expected to generate significant Capex and Opex benefits with a net present value, less integration costs, in excess of €5 billion. The joint revenue of both companies in FY14 was €6.4 billion and the transaction is one of the largest M&A deals to be done in Italy since 2007, the partners claimed.

A joint venture holding company (Hutchison 3G Italy Investments) will own 3 Italia and WIND, and each of CK Hutchison and VimpelCom will indirectly hold 50 percent of the shares in the joint venture. After the transaction is completed, there will be no additional obligations to contribute funds by either parent company.

The combined business will be led by Maximo Ibarra, the current CEO of Wind.  Vincenzo Novari, the current CEO of 3 Italia, will be appointed as a senior adviser for Italy to CK Hutchison and will serve as a CK Hutchison nominee on the holding company board after the transaction completes.

Dina Ravera, 3 Italia’s COO, will lead the merger integration process and will remain in a senior operating role in the combined business. Stefano Invernizzi, current CFO of 3 Italia, will become CFO of the combined business.

The management will be supported by a board of six, three of whom will be nominated by each parent company respectively. The Chairman of the board will rotate between the two parent companies every 18 months and will have a casting vote on what is termed “certain fundamental business matters”.