Ameritech to Buy 20% of Bell Canada

Ameritech Corp., the local phone company set to be acquired by SBC Communications Inc., said it will buy a 20% stake in Bell Canada, Canada’s leading carrier, for $3.4 billion.

The deal with Bell Canada parent BCE Inc. would fill a key gap in the North American operations of SBC and Ameritech while giving them a stake in Canada’s recently deregulated phone market. It also follows AT&T; Corp.’s purchase of a stake in a rival Canadian phone company.

SBC, the leading provider of local phone service in the Southern and Western United States, already owns 10% of Mexico’s largest phone company, Telefonos de Mexico. Ameritech, meanwhile, is the biggest foreign investor in European phone companies.

By joining with Bell Canada, the combined SBC-Ameritech network could provide nearly seamless service across North America.

The merger, which still must be cleared by the Federal Communications Commission, passed a big hurdle Tuesday when the Justice Department said it would not object if the companies sold off overlapping cellular operations in 17 markets.

As part of Wednesday’s deal, Bell Canada would acquire Montreal-based BCE’s 65% interest in BCE Mobile Communications, 21.5% in Teleglobe Inc., and its stake in six regional Canadian telecommunications companies, three of which are merging into a company called AtlanticCo.

BCE would use the proceeds from the transaction to invest primarily in high-growth sectors such as electronic commerce, satellite services and systems integration.

The merger of San Antonio-based SBC and Chicago-based Ameritech, valued at $57 billion when it was announced in May, would unite two companies that control 57 million phone lines spread through 13 states.

Ameritech shares closed at $62.44, up $1.38; BCE rose 38 cents to close at $45. Both trade on the NYSE.