New Delhi, Nov 2 (PTI): Reliance Communications Ltd, the country's fourth-largest telecom operator, on  Monday announced the acquisition of the Indian unit of Russian conglomerate Sistema, better known to users by its MTS brand, in an all-stock deal that will create an operator with 118 million subscribers.

Sistema Shyam offers mobile telephony services under the MTS brand across nine telecom circles in the country.

RCom will get Sistema Shyam’s 9 million or so customers and approximately Rs 1,500 crore of annual revenues by virtue of the transaction.

RCom will also gain access to spectrum or airwaves in the 850 Mhz band which can be used for 4G services that it plans to start by the year-end.

Also, it will be able to extend the validity of its licence by 12 years in eight high revenue generating circles of Delhi, Gujarat, Tamil Nadu, Karnataka, Kerala, Kolkata, UP (West) and West Bengal.

Sistema had ventured into Indian telecom space in 2007 when he bought 10 per cent stake in Shyam Telelink by paying USD 11.4 million. The stake was raised subsequently.

Once the government clears the deal, RCom will be able to future-proof almost half of the existing telecom circles where most of its licences are expiring in the next few years.

Its licence in West Bengal will expire in 2017 while around 10-12 licences will expire within 2022-23.

On the other hand, Sistema had bought licence in eight telecom circles such as Delhi NCR in 2013 and these are valid till 2033.

Mikhail Shamolin, President and CEO of Sistema, said, ”The merger of SSTL and RCom's telecom businesses is a milestone event. Despite the numerous challenges the sector faced in recent years, the combination of two leading data service providers is a clear sign of progress for the Indian telecom industry.

RCom ended 2014-15 fiscal with revenue of Rs 21,423 crore and a net profit of Rs 620 crore. Unlisted SSTL ended calendar year 2014 with revenues of Rs 1,347.2 crore. The company did not make public its net profit numbers.