Triggering a significant consolidation in telecom business in the country, industrialist Anil Ambani-led Reliance Communications on Monday announced a major accord to acquire the Indian business of Russia's Sistema, which is operating under the 'MTS' brand, in a unique stock-cum-spectrum-fee payment deal.

The deal first calls for a demerger of the telecom business of the Russian group's Indian entity Sistema Shyam TeleServices, and then the acquisition of the demerged entity by Reliance Communications. Prior to that, Sistema Shyam TeleServices will pay off its existing debt. It will then get 10 percent stake in Reliance Communications post-merger, the two companies said.

"In addition, Reliance Communications will assume the liability to pay the Department of Telecom instalments for Sistema Shyam's spectrum, amounting to Rs.392 crore per annum for the next 10 years," the companies added.

Sistema Shyam Teleservices is an arm of Sistema -- a publicly-traded, holding company in Russia. It also owns the MTS brand.

For Reliance, the deal means an addition of 9 million customers and around Rs.1500 crore in annual revenues. 

This will also extend the validity of Reliance Communications spectrum in the 800 MHz and 850 MHz band in eight important circles by a period of 12 years from 2021 till 2033.

The development must also be read against the backdrop of chairman Anil Ambani's recent announcement that his company will partner with elder brother, Mukesh Ambani-controlled Reliance Jio.

"The combination of our wireless businesses, through the demerger of Sistema Shyam Teleservices wireless business into RCOM for stock consideration, will generate significant capex and opex synergies for mutual benefit," said Gurdeep Singh, president and chief executive for consumer business with Reliance Communications, reacting to Monday's deal.

"The merger is a milestone event. The combination of two leading data service providers is a clear sign of progress for the Indian telecom industry," added Mikhail Shamolin, president and chief executive of Sistema.