Bharti Airtel, India's biggest telecom operator, said it would buy the consumer mobile business of Tata Teleservices and Tata Teleservices Maharashtra, free of cost.
The deal would boost the subscriber base of billionaire Sunil Mittal-owned Bharti Airtel and provide relief to Tatas from their money-losing mobile unit.
The merger is being done on a "debt-free cash-free basis", except for Bharti Airtel assuming a small portion of the unpaid spectrum liability of Tata's towards its airwaves, the company said in a statement on Thursday.
The proposed merger will include transfer of all the customers and assets of Tata's consumer mobile business to Bharti Airtel, further augmenting Bharti Airtel's overall customer base and network.
Tata's consumer mobile business operations and services will continue as normal until the completion of the transaction, the company said.
The transaction will also provide Bharti Airtel the right to use for part of the existing fibre network of Tata.
Consolidation in the Indian telecom industry is gaining pace. Vodafone Group and Idea Cellular - the market's second and third biggest players, respectively, are in the process of combining their operations to create the market's biggest player, while Bharti Airtel had previously agreed to buy Telenor's India unit.
Tata chief Chandrasekaran said in the statement the group had evaluated "multiple options" for the telecoms business, calling the Bharti Airtel deal the "most optimal solution".
The boards of Tata Sons, Tata Teleservices and Tata Teleservices Maharashtra have approved the transaction, the company said.
Shares in Bharti Airtel fell 0.8 percent to Rs 400.25 while Tata Teleservices Maharashtra surged 10 percent on the Bombay Stock Exchange. Singtel, the majority shareholder in Bharti Airtel with a stake of about 36 percent, rose 0.3 percent to S$3.69 on the Singapore Exchange.