The Australian government's relationship with Rupert Murdoch's media empire has been further strained by a decision to bar a television network partly owned by News Corp. from running Australia's international broadcast service.
Sky News, one-third owned by News Corp.-controlled British broadcaster BSkyB, had bid against the state-owned Australian Broadcasting Corp. for the 223 million Australian dollar ($229 million) 10-year contract to broadcast Australia Network to 44 countries in the Asia-Pacific region.
Communications Minister Stephen Conroy said in a statement late Monday that the ABC, which currently operates the service, will continue to do so permanently.
Conroy says the bidding process, which was scrapped a month ago, had been compromised by leaks to the media. According to media reports of those leaks, an independent tender committee had twice preferred the Sky bid.
"The government believes it is unfortunate that this process did not reach a satisfactory solution, however, in light of the circumstances it is now in the national interest to make a clear decision about the future of the service rather than allowing uncertainty to continue," Conroy said.
"Having reflected upon the process to date, and what the service really needs to provide, the government has determined that Australia's international broadcasting service should be delivered by the national broadcaster," he added.
Sky News chief executive Angelos Frangopoulos told News Corp.'s The Australian newspaper that the decision was "extraordinary." Frangopoulos said he will demand compensation.
The government has accused the Murdoch empire, which owns 70 percent of Australia's newspapers, of being biased against the ruling Labor Party.
The government has opened an inquiry into potentially increasing newspaper regulation in Australia after News Corp. closed its top-selling British tabloid News of the World in July over illegal phone hacking allegations.