This would be the first consolidation in the Indian telecom sector.
In the non-cash deal, Sistema Shyam will hold 10 per cent of Reliance Communications' fully-diluted equity capital.
The deal will add nearly 90 lakh customers to Reliance Communications' subscriber base while its revenues will increase by around Rs 1,500 crore. Reliance Communications has a customer base of around 11.8 crore.
Reliance Communications will also acquire 800/850 MHz band of spectrum, which will make it the largest holder of spectrum in the band - aggregating 148.75 MHz - that can be used to offer 4G LTE services.
This will also extend the validity of Reliance Communications' spectrum in 800/850 MHz band in 8 circles by a period of 12 years from 2021 till 2033 (Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP - West and West Bengal).
However, Reliance Communications will have to pay instalments related to for Sistema Shyam's spectrum acquisition, amounting to Rs. 392 crore per annum for the next 10 years.
Sistema Shyam TeleServices is a joint venture between Russian telecom giant Sistema and the Shyam Group of India.
G Chokkalingam, founder of Equinomics Research & Advisory, termed the deal positive for Reliance Communications. The merger gives Reliance Communications access to valuation spectrum while in the future the Russian telecom giant company Sistema may increase stake in the company.
Reliance Communications shares ended 6.2 per cent higher at Rs 79.90 apiece on the BSE, compared to a 0.4 per cent decline in the Sensex.