Virgin Media and O2 have confirmed a £31bn merger to create a new UK “national champion” to challenge BT and Sky.

The joint venture will be a 50-50 split between Liberty Global, which owns Virgin, and the owner of O2, Telefonica.

O2 is the UK’s largest mobile operator and Virgin is the largest cable company in the UK.

The new company will challenge BT and Sky by offering consumers competitive bundles of TV, mobile and broadband packages.

It will also start with 46 million customers and £11bn in revenue.

Mike Fries, Chief Executive of Liberty Global, said:

“Our rationale was that it was just a matter of time, convergence has been slower in this market.

With Virgin Media and O2 together the future of convergence is here today.”

Fries will be the first chairman on the board of directors, which will be an eight-strong team made up of four each from Liberty Global and Telefonica.

The new company will invest £10bn in areas including gigabit-speed broadband and 5G networks.

José María Alvarez-Pallete, Chief Executive of Telefonica, said: “Even considering Brexit we have been investing heavily in the UK.

It is the right time to commit to the future of the UK by building this value proposition.”

The deal is expected to complete in the middle of 2021 and there’s a chance that there will be an option to float the venture on the UK stock market in three years.

The deal will include recapitalisations which will see Telefonica receive £5.7bn in proceeds, and Liberty Global £1.4bn.

The new venture will also have £18bn in long-term debt.