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BEIJING - China Netcom Corp., China's second-biggest phone company, said Monday its 2006 profits dropped 6.7 percent amid falling subscriber numbers as potential customers opted for mobile service.

Netcom's earnings were 12.96 billion yuan ($1.7 billion), down from 13.89 billion yuan, the Beijing-based fixed-line provider said. Revenues rose just over 1 percent to 86.9 billion yuan ($11.2 billion).

The number of subscribers stood at 114.9 million, representing the first decline in Netcom's history, the company said. It gave no figures for 2005, but said in August that it had 119.4 million subscribers at that time.

China has the world's biggest telephone market, but traditional fixed-line carriers have seen growth slow sharply as potential customers opt increasingly for mobile service.

Netcom and its bigger rival, China Telecom Corp., are promoting Internet, Web-based television and other new services in hopes of reviving revenue growth.

Netcom's fixed-line business faced "severe challenges," chairman Zhang Chunjiang said in a statement.

The company is trying to evolve into a "broadband communications and multimedia-services provider," Zhang said.

Sales of broadband, business and other services rose 31.6 percent last year, increasing their share of Netcom's total revenues to 26 percent, up 5.8 percentage points from 2005.

"High-growth businesses helped offset revenue decline in traditional fixed-line businesses and was the biggest drive for sustainable and effective growth in 2006," Zhang said in a statement.

The biggest drag on earnings was a 1.5 billion yuan ($195 million) deficit for a revaluation of fixed assets, Netcom said but gave no details.

China had 461 million mobile phones and 368 million fixed-line phones as of January, according to the government. It says the number of mobile phones is expected to grow by 60 million this year and the number of fixed-line phones to rise by 10 million.

China Telecom said last week its 2006 profits slid 2.7 percent to 27.1 billion yuan ($3.5 billion) as fixed-line growth slowed. It said revenues from Internet services rose 32 percent.