Sharepoint 2007 NTLM issue with ASP.NET Web App hosted on Sharepoint server

ListServiceWrapper listService = new ListServiceWrapper();

/*Pass credentials to service call object*/
listService.Credentials = new NetworkCredential(spUserName, spPassword, spDomain);

/*Set the Url property of the service for the path to a subsite.*/
listService.Url = ConfigurationManager.AppSettings.Get("rootSite") + "/_vti_bin/lists.asmx";