Shares of China Netcom Group Corp (Hong Kong) Ltd, the smaller of the nation's two fixed-line telephone operators, fell as much as 7 percent on a report the company may scale back its businesses in Shanghai and Guangdong .

The stock fell 4.9 percent to HK$19.82 as of 3:10 pm yesterday in Hong Kong. China Netcom may sell assets in Guangdong and Shanghai back to its parent, which currently owns most of Netcom's southern China business, the South China Morning Post said on Saturday, citing an unidentified industry official.

A withdrawal by Netcom would underscore its failure to loosen China Telecom's dominance in the southern regions of the country.

In Shanghai and Guangdong, which have about 47 million fixed-line users, China Telecom has an estimated 95 percent market share, according to estimates by Credit Suisse Group analyst Jeffrey Tan.

"China Netcom may sell the southern assets back to its parent and focus on the north, as it's encountering difficulties breaking China Telecom's monopoly in the south," said Marvin Lo, an analyst at BNP Paribas SA in Hong Kong who rates China Netcom stock "neutral."

China Netcom is examining ways to restructure the company's operations, Xu Song, a China Netcom spokeswoman in Beijing , said yesterday, declining to specify a timetable.

China Netcom provides phone and Internet services in 10 northern regions, including Beijing and Tianjin and provinces such as Hebei, Henan, Shandong and Liaoning .

Parent China Network Communications Group was formed when the government broke up the former telecom monopoly in 2002. The group was given networks in the northern provinces, while China Telecom, which controls Hong Kong-listed China Telecom Corp, received assets in the southern and western provinces.

As of the end of September, China Netcom had 119.5 million fixed-line users, 30 million of whom were subscribers to a citywide wireless service called Little Smart, which competes with the nation's mobile phone duopoly, China Mobile (Hong Kong) Ltd and China Unicom Ltd. China Netcom had 14.3 million broadband users at the end of September.

China Telecom had 221.1 million users at the end of Octo ber. The shares fell 1.8 percent to HK$3.91 in Hong Kong.

Separately, China Netcom's Xu said the company has no immediate plans to sell yuan-denominated shares on the mainland.

China Mobile, China Netcom and China Telecom, which are listed in Hong Kong, plan to sell shares on the mainland to raise as much as 100 billion yuan to build high-speed wireless networks, the Xinhua News Agency reported late on Saturday.

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