State-owned telecoms operator China Network Communications (CNC) is to become the largest shareholder in Hong Kong's leading carrier PCCW, the <i>Financial Times</i> reported. The arrangement, which is the latest installment in a long-running saga over the sale of Richard Li's 23% stake in the company, is likely to arouse concerns in Hong Kong about Beijing's influence over the telecoms network. Li agreed to sell his stake to banker Francis Leung in July for US$1.18 billion, but the new arrangement will see Leung hold only 2.65% of the company. Spain's Telefonica is to take an 8% stake while Li's father, tycoon Li Ka-shing, will buy the remaining 12%. Telefonica said it would join its stake with the near-20% CNC holding in a special purpose vehicle. Beijing-backed CNC was said to have earlier opposed the sale of Li's PCCW stake to foreign private equity groups on nationalistic grounds. Telefonica, which bought a 5% stake in CNC's overseas-listed arm China Netcom last year, will swap its PCCW shares for Netcom shares after two years.