British-based company Vodafone is buying TelstraClear for $840 million.
Vodafone will acquire TelstraClear's voice and data-based services, network infrastructure and New Zealand customer base.
Parent company Telstra revealed in June this year that it was in talks with Vodafone about the future of TelstraClear, its New Zealand operation which has struggled in recent years.
The purchase gives Vodafone a much stronger presence in the phone and broadband market, and complements its dominance in the mobile phone sector.
The news knocked its main rival, Telecom, whose share price declined about 1% immediately after the announcement on Thursday.
Analysts say the combined company will provide stronger competition to Telecom, though Telecommunications Users Association chief executive Paul Brislen says it also has the potential to be a cosy duopoly.
Mr Brislen says the amount of money spent by Vodafone should mean it wants to get a good return on its investment.
However, Vodafone New Zealand chief executive Russell Stanners says there won't be any lessening of competition and customers can expect to see innovation and good deals.
The deal still requires regulatory approval, including from the Commerce Commission and Overseas Investment Office.