Hong Kong-listed China Netcom Group Corp, the mainland's No2 fixed-line operator, will sell back its loss-making networks in Guangdong and Shanghai to its parent, China Netcom Group, for 6.5 billion yuan, the firm said yesterday. China Netcom expects to record a 711 million yuan gain from the sale based on the networks' net asset value of 2.78 billion as of June last year. As part of the deal, the parent, China Netcom Group, will assume three billion yuan of debt owed by the operations in Guangdong Province and Shanghai Municipality to independent third-party creditors. The remaining 3.5 billion yuan will be paid in cash by the parent with the initial 1.05 billion yuan, 30 per cent of the total, paid on the first day immediately after the completion of the sale and 2.45 billion yuan within 30 days. The deal would be completed before the end of next month and was subject to the approval of independent shareholders and relevant authorities, the company said. Proceeds from the disposal of the networks will be used as general working capital. China Netcom's Guangdong and Shanghai networks are newly developed. Its main business is in the 10 northern provinces. The company said the disposed off business recorded a net loss of 49 million yuan after tax and extraordinary items for the six months to June last year. For the year to December 2005, the net loss was 174 million yuan after tax and extraordinary items, down from 240 million yuan in 2004. 'After the sale of the Guangdong and Shanghai assets, China Netcom will be well-positioned to concentrate our resources in the northern service region ...We are confident that this will lead to better financial results,' chairman Zhang Chunjiang said. The company said: 'Since the telecommunication services in Guangdong and Shanghai have not made a significant contribution to the group's past overall results in financial terms, the company believes the disposal will enable the group to grasp the growth in the northern service region.' Shares of China Netcom rose 0.11 per cent yesterday, closing at HK$19.02 before the announcement.