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Goto the account settings page of your google account from your desktop like this, or if you are using a mobile now, see the next step.
Since the desktop view option won't be available when you goto Google.com in mobile browser, google "Google Account Settings" and choose the first link like I got here.
Now choose the Desktop view option in the bottom. (If you are on a desktop, you won't need to do this step)
So this is how your google account settings page look like. Find the section that says, "SMS for Hangouts" and choose "Edit settings"
Add your mobile phone number like I have here. That's it, you are done. From now on you will receive Hangouts conversations as SMS when you are not currently active on Hangouts.
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