PCCW Ltd, which scrapped a plan to sell a stake in its HKT Group Holdings Ltd unit to buyout firms, may allow shareholder China Network Communications Group Corp to take a direct holding in the subsidiary, CLSA Ltd said.

"It makes sense for Netcom to take the place of the private-equity firms," Francis Cheung, Hong Kong-based head of Asian telecommunications research at CLSA, said by phone with Bloomberg News yesterday. PCCW this week cancelled a plan to sell as much as 45 percent in HKT Group, after getting lower-than-expected offers from buyout firms amid the global financial crisis.

PCCW shares, removed from Hong Kong's benchmark Hang Seng Index in June, fell to a nine-year low on Monday after the company failed to bring in new investors to HKT Group. The stock was suspended from trading the following day, a move that was likely to preempt a possible "change in shareholding structure," Cheung said.

China Network may swap its 20-percent holding in PCCW for a stake in HKT Group, Cheung said. The subsidiary controls the phone company's main telecommunications businesses, including fixed-line, broadband and pay-television services, which accounted for 86 percent of the parent's sales last year.

Li Tao, a Beijing-based spokesman for China Network, couldn't be reached at his office or on his mobile phone for comment.

In 2006, state-owned China Network blocked a plan by PCCW, the city's biggest phone company, to sell its main telecommunications businesses to private-equity investors including TPG Inc and Macquarie Group Ltd on the grounds that the assets should be controlled by local companies. "Telecommunications is a strategic asset," Cheung said. "Hong Kong is a major Chinese city."