Liberty Global and Vodafone will merge their operating businesses in the Netherlands to form a 50:50 joint venture that will offer a converged threat to incumbent KPN.

The joint venture will operate under both the Vodafone and Ziggo brands and will have over 15 million revenue generating units, of which 5.3 million are mobile, 4.2 million are video, 3.2 million are high-speed broadband and 2.6 million are fixed-line telephony.

Ziggo will provide triple-play services to Vodafone’s consumers while its own customers will benefit from the mobile operator’s services.

Vodafone will pay Liberty €1 billion to equalise ownership in the JV, reflecting the €2 billion difference in the two companies’ equity value.

“By combining Ziggo’s Horizon TV product suite, 200 Mb/s nationwide broadband internet and Wi-Fi network, together with Vodafone’s 4G mobile propositions, Dutch consumers will enjoy a high-quality customer experience with superior connectivity and entertainment both in and outside the home”, Vodafone said in a statement.

The joint venture is expected to generate what the partners term “significant efficiencies”, with run-rate cost and capex synergies of €280 million on an annual basis by the fifth full year post closing, equivalent to a net present value of approximately €2.5 billion after integration costs.

The key expected sources of synergies include use of existing infrastructure to provide services for each entity’s customers at a lower cost compared to standalone/wholesale capabilities as well as a combination of regional and national network infrastructures and IT systems.

To achieve these, the JV expects to incur approximately €350 million integration costs, mostly in the first three years.

The supervisory board of the joint entity will likely be made up of three representatives from Liberty Global, three from Vodafone and two nominated by the Works Council.

The post of chairman will be held for alternating 12 month periods by a Liberty Global or Vodafone appointed director.

Key management positions will be announced after completion of the transaction, which is subject to prior regulatory approval and is expected to conclude by the end of the year.

According to Vodafone Group CEO, Vittorio Colao, “This transaction marks a continuation of Vodafone’s market-by-market convergence strategy and we look forward to partnering with Liberty Global to create a fully integrated provider in one of our core European markets.”

Mike Fries, Liberty’s CEO, recently said “Europe is evolving into a quadplay market, unlike the US,” and that over the next three years, the company wants to enhance or add mobile, as well as develop advanced video platforms for smartphones and extend its cable network to 7 million more homes in the continent, Financial Times reported.

Earlier this month, Liberty reportedly withdrew from the bidding process to acquire T-Mobile Netherlands, instead opting to pursue a tie-up with Vodafone.

At the time, Vodafone confirmed the talks, adding that the “discussions are ongoing and do not extend beyond the creation of a joint venture in the Netherlands”.

Both companies had been embroiled in talks last summer over a wider merger of European assets, before negotiations broke down in September over a valuation issue.