BCE Inc. said Monday it has launched a $3.42-billion deal to sell the Ottawa-based satellite operator Telesat Canada.

The buyers in the all-cash deal are the Public Sector Pension Investment Board, which is a Canadian Crown corporation, and Loral Space and Communications Inc., which is headquartered in New York City.

The new company will be known as Telesat and its headquarters will also be in Ottawa.

The pension plan will hold a 36 per cent economic stake in Telesat, but will hold voting control and a majority of seats on the company's board. Loral will hold a 64 per cent economic stake.

As part of the deal, Loral will contribute the fixed satellite services and network services assets of its Loral Skynet subsidiary, making Telesat the fourth-largest satellite operator in the world based on the number of satellites in orbit.

Dan Goldberg, the president and chief executive officer of Telesat, said the company will have 11 satellites in orbit, with four new ones slated for launch over the next three years.

The deal is expected to close in mid-2007.

Earlier in the year, BCE announced plans to sell a stake in Telesat. In September, the company filed papers for an initial public offering of Telesat shares.

But following BCE's decision not to proceed with an income trust conversion, CEO Michael Sabia said the company wasn't sure of its next step for the satellite subsidiary.

On Monday, Sabia said the sale of Telesat met his firm's ambitions.

"At the outset of this process, we set three goals," he said in a release.

"First, we were determined to surface the value of the asset. Second, we wanted to make certain any transaction fully protected the future of ExpressVu. And finally, we wanted to position Telesat as a truly global player in a rapidly consolidating industry.

He said the new company would be "global in scale, but Canadian-based and Canadian-controlled."

With about $30 billion in assets under management, PSP Investments is the pension fund manager for Canada's federal public service, the Canadian Forces and the Royal Canadian Mounted Police.

BCE has put in place a set of commercial arrangements between Telesat and Bell ExpressVu that guarantee ExpressVu access to current and expanded satellite capacity, including the launch of Nimiq 5 in 2009.

In the wake of the announcement, BCE shares gained 78 cents to close at $30.69 on the TSX.