The British businesses of Liberty Global Plc and Telefonica SA will merge to create a major new player in UK mobile and broadband communications in a deal valued at around 31 billion pounds ($38 billion) including debt.

Liberty Global plc and Telefonica SA today announced an agreement to merge their operating businesses in the U.K. to form a 50:50 joint venture. The combination of Virgin Media and O2 will create an integrated communications provider with over 46 million video, broadband and mobile subscribers and £11 billion of revenue.

Combining Virgin Media’s v6 video service and giga-ready broadband network, together with O2’s 5G ready mobile propositions will benefit U.K. consumers, ofering them superior connectivity and entertainment both inside and outside the home.

In addition, the JV will become a challenger in the B2B space as the combination will accelerate the adoption of converged fixed-mobile services to Virgin Media’s and O2’s existing business customers and offer new services using both companies’ digital skills, networks and product portfolios, such as cloud, big data, Internet of Things and cybersecurity services.

After taking into account the recapitalizations, Telefonica is expected to receive £5.7 billion in total proceeds from the transaction. Liberty Global is expected to receive £1.4 billion in total, including approximately £800 million from the recapitalization of its retained and 100% owned Virgin Media Ireland business. As part of the transaction, a syndicate of banks has underwritten a £4 billion standalone undrawn financing on the O2 business.

With respect to the equalization payments, based upon the enterprise value of each business, and after deducting debt and debt-like items, Liberty Global will make a cash payment to Telefonica of £2.5 billion. However, this payment by Liberty Global will be offset by receipt of proceeds from the recapitalizations such that at closing Liberty Global receives cash proceeds from the transaction.

The JV expects to incur approximately £700 million of integration costs, most of which should be incurred in the first four years after the closing.

Executive leadership of the JV will be agreed prior to the closing. The board will consist of eight members, four from each of Liberty Global and Telefonica. Mr. Fries, CEO of Liberty Global, and Mr. Alvarez-Pallette, CEO of Telefonica, will sit on the board.

The JV will invest 10 billion pounds in the UK market over the next five years.

Liberty Global and Telefonica anticipate that closing of the transaction is expected to take place around the middle of 2021.

The transaction is subject to regulatory approval.