UK-based Vodafone, the world’s second-biggest mobile carrier, will own 51% of the combined company.
Sky will pay Vodafone NZ$1.25bn in cash and issue new shares at a 21% premium to its closing price on Wednesday.
Analysts say the deal might result in Vodafone leaving the New Zealand market.
“As far as Vodafone is concerned, it’s about them getting out of the New Zealand market altogether,” said Morningstar analyst Brian Han. Mr Han thinks that Vodafone might also be looking to exit the Australian market as well.
Vodafone NZ has more than 2.35 million mobile accounts, while Sky has 830,000 subscribers. Combined the business will be one of the biggest on the New Zealand Stock Exchange.
The head of Vodafone’s New Zealand operations Russell Stanners will be the chief executive of the new company.