CK Hutchison and VimpelCom will combine their telecom businesses — 3 Italia and WIND — in Italy by floating a 50:50 joint venture.
Capex and Opex benefits will be more than €5 billion or $5.4 billion.
The joint revenue of 3 Italia and WIND in FY 2014 was €6.4 billion.
There will be no obligation for their parent companies to invest further in Italy.
The combined business will have more than 31 million mobile customers and 0.6 million fixed line customers and 2.2 million fixed broadband customers.
Vimpelcom’s WIND is the country’s third-largest mobile network operator, while 3 Italia is the fourth-placed telecom operator.
The new company will compete with Telecom Italia and Vodafone. All the three operators will have almost similar market share in Italy.
A Reuters report said the new company would be valued at around 21.8 billion euros, with Wind’s contribution being assets worth 13.9 billion in 2014, while Hutchison had 7.9 billion euros.
3 Italia and WIND will gain the scale and more efficient cost structure to enable them to continue to offer competitively-priced telecoms services.
Additional investment and savings from the two networks will offer better mobile network quality to users. 3 Italia and WIND will accelerate the availability of high-speed mobile and fixed broadband services in Italy.
Both Hutchison and WimpleCom promise that Italian consumers and businesses can expect to benefit both from improved LTE network coverage, higher download speeds, higher network reliability and more advanced services.
The joint venture holding company called 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.
Maximo Ibarra, the current CEO of Wind, will head the joint venture. Vincenzo Novari, the current CEO of 3 Italia, will be senior adviser for Italy to CK Hutchison.
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.
Completion is subject to obtaining regulatory approvals including EU competition approval. It is expected that the deal will complete within 12 months.
Jean-Yves Charlier, CEO of VimpelCom said: “The two entities will become a leading operator in Europe’s 4th largest telecoms market, delivering a convergent player that will accelerate the ability to invest in the network, services and digital innovations.”