Vodafone (LON:VOD) is teaming up with Virgin Media owner Liberty Global to create a Dutch broadband and mobile phone powerhouse.
The UK-based mobile phone operator is combining its Vodafone Netherlands arm with Liberty's Ziggo fibre broadband network in a 50-50 joint venture.
The pair expect the tie-up to result in €3.5bn of cost, capital spending and revenue savings.
Vodafone will make a cash payment to Liberty Global of €1bn to equalise ownership in the joint venture and will contribute Vodafone Netherlands on a debt- and cash-free basis.
The deal is expected to close around the end of 2016 and is subject to regulatory approvals and consultations with European works councils.
At the end of last year, Ziggo had revenue of about €2.5bn and operating cash flow of €1.35bn. Vodafone Netherlands had revenue of €1.9bn and underlying earnings of €643mln.
The move represents Vodafone's latest bid to develop broadband, TV, fixed line and mobile services in Europe, having taken over Kabel Deutschland in Germany in 2013 and Hellas Online in Greece in November 2014.
Vodafone chief executive Vittorio Colao said: "The combination of Vodafone's leading mobile business with Ziggo's successful broadband and TV business creates a strong and competitive integrated communications player.
"This transaction marks a continuation of Vodafone's market-by-market convergence strategy."
Shares in Vodafone fell 1.05p to 208.4p in early trading in London.