HONG KONG (XFN-ASIA) - China Netcom Group Ltd hopes that Spain's Telefonica SA will raise its stake in the mainland telecom operator to 9.9 pct by the end of this year, China Netcom chairman Zhang Chunjiang said.

Telefonica currently holds 5 pct of the Chinese fixed-line telecom operator. It told news media in Europe yesterday that it plans to raise its stake in China Netcom to 9.9 pct by end-2008.

However, China Netcom did not provide any reason for the differing target dates.

China Netcom will not issue new shares for Telefonica's planned stake increase but will instead come from its parent or other shareholders, Zhang said at a shareholders meeting.

He also said Telefonica currently has no plan to raise its stake in China Netcom to more than 10 pct.

Separately, Zhang noted that recent comments by top government officials about awarding mobile licenses to fixed-line operators appears to be an acknowledgement of their deteriorating situation.

Last month, Xi Guohua, vice minister of China's information industry ministry, said at a telecom forum held in Beijing that the government will grant fixed-line operators licenses for mobile telecom services "at an early date".

Regarding China Netcom's planned expansion into the southern regions, Zhang said it will not compete with China Telecom Corp Ltd in a hostile way.

China Netcom will not build networks in areas where China Telecom has already built them, but will instead try to rent networks in southern areas, he said.

However, he emphasized that China Netcom's priority is to expand its wideband operations vigorously.

Zhang also said the company currently has no plans to issue A-shares.

Shares China Netcom closed the morning session at 24.70 hkd, down 0.40 hkd or 1.59 pct.

(1 usd = 7.8 hkd)

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