The combined entity would have almost 400 million customers, overtaking market leader Bharti Airtel (BRTI.NS) to account for about 40 percent of revenue of the world's second-biggest mobile phone services market by users after China.
The two companies, which announced in January that they were in talks, will have to shed spectrum in some areas to meet India's rules, although Colao said it would be "small".
The deal is expected to close in 2018.
Aditya Birla Group, the majority owner of Idea, will own 26 percent while other shareholders will own the remaining 28.9 percent.
The appointment of a chief executive officer and a chief operating officer would require the approval of both companies, which would get the right to nominate three board members each.