UPDATE 3-Canadian regulator sets conditions for BCE deal

(Adds Teachers' comment)

By Wojtek Dabrowski

TORONTO, March 27 (Reuters) - Canada's telecom and broadcasting regulator has approved the C$34.8 billion ($34.1 billion) buyout of BCE Inc (BCE.TO: Quote, Profile, Research) by a group of private-equity investors led by the Ontario Teachers' Pension Plan, but subject to a number of conditions.

The Canadian Radio-television and Telecommunications Commission said on Thursday that it approved the deal, but added that BCE's board must have 13 directors, Canadian investors must at all times nominate six directors and that the company's chairman must be Canadian.

The approval comes after the CRTC expressed concerns about the board makeup at BCE after it is taken private and about whether the company will ultimately be controlled by Canadians.

BCE is Canada's biggest telecom company and offers wireless services, Internet, satellite television and wireline calling. It also has a minority stake in TV network and newspaper owner CTVglobemedia Inc.

The regulator's approval is one of the final hurdles the deal -- the world's largest leveraged buyout -- must clear before it can close, which is expected to happen by the end of the second quarter.

However, aside from a full slate of regulatory approvals, both BCE and Teachers' have had to convince jittery investors that the banks funding the debt portion of the deal would honor their commitments despite tight credit markets and the possibility that leveraged deals could fail.

Market watchers have dueled over whether the BCE buyout will close and virtually no analyst has been able or willing to come down with absolute certainty on either side of the issue.