RCom, after months of talks, said on Monday that Sistema would take a 10 per cent equity stake in RCom, valued at $290 million at current market prices.
In exchange, RCom would acquire all the equity of Sistema Shyam Teleservices, which has less than one percent market share, with some 9 million customers and Rs 1,500 crore ($229 million) in annual revenue.
RCom also said it would pay what SSTL owes for its broadband specturm, which works out to Rs 390 crore per year for the next 10 years.
Consolidation in India's crowded telecoms sector is not common, partly due to complicated government rules on mergers.
The government's latest round of spectrum auctions, concluded earlier this year, left companies more financially stretched, and this is expected to spur more deals.
SSTL said the company "intends to pay off its existing debt" before the transaction closed.
As of 12:55 p.m., shares in Reliance Communications were trading 2 per cent higher at Rs 76.75 apiece on the BSE, whose benchmark Sensex index was down 0.8 per cent.
© Thomson Reuters 2015