Pigeons fly past Vodafone branding outside a retail store in London. File picture: Toby Melville

Tokyo - Vodafone Group and cable billionaire John Malone’s Liberty Global agreed to set up a 50-50 venture to combine their mobile and broadband businesses in The Netherlands, setting up a challenge to the largest Dutch carrier, Royal KPN NV.

The transaction will result in cost and revenue synergies of about 3.5 billion euros after integration costs, according to a joint statement from the companies on Tuesday. Vodafone will make a cash payment to Liberty Global of 1 billion euros to reflect the different valuations of their local units, the companies added.

The two companies confirmed earlier this month that they’re in talks about the combination, a deal that would offer more customers bundled broadband and mobile services and strike a blow to Deutsche Telekom AG’s plans for its T-Mobile unit.

Vodafone and Liberty Global had resumed talks about possible asset swaps in Europe since the start of the year, according to people with knowledge of the matter earlier this month. The Netherlands would be a focus of the talks, one of the people had said at the time.

The deal is expected to close around the end of 2016, subject to regulatory approvals, according to the statement.

Vodafone and Liberty Global have agreed to provide services to the joint venture, including IT and technology-related services, procurement, and brand management, they said.

A Vodafone representative declined to comment beyond the statement. Liberty Global couldn’t immediately be reached outside regular business hours.