Sky and Vodafone are to merge their New Zealand subsidiaries in a deal worth NZ$3.4 billion (€2.1 billion).

Sky is acquiring all the shares in Vodafone NZ and will issue a new set of shares in the combined business that represent a 21 percent premium on Sky's most recent closing price.

This will fund over half of the deal, with the pay-TV provider paying NZ$1.25 billion in cash.

Vodafone will hold a 51 percent stake in the new company, which becomes a consolidated subsidiary of the network operator.

The combined business brings together Vodafone’s 2.35 million mobile and 500,000 fixed connections with Sky’s 830,000 subscribers to create New Zealand’s biggest converged operator.

The two companies cited handset and set-top box development and procurement, enterprise services and central services as areas of differentiation.

The combined business is forecast to have 2017 revenues of NZ$2.9 billion and generate savings of NZ$415 million.

A further NZ$435 million of revenue synergies are also expected through the monetisation of content on mobile devices.

Current Vodafone NZ CEO Russell Stanners and Sky Chairman Peter Macourt will become CEO and Chairman of the new business. Sky CEO John Fellet has been given the role of CEO of Media and Content.

The two companies said they hoped to close the deal before the end of this year. Sky shareholders are set to vote on the matter next month.

Vodafone said there are restrictions on it increasing its 51 percent holding, without specifying what these were.

Stanners said: “The merger brings together Sky’s leading sports and entertainment content with our extensive mobile and fixed networks, enabling customers to enjoy their favourite shows or follow their team wherever they are.”

Macourt added: “The merger with Vodafone is a transformational strategic step for our company.”

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