The ABC will lose its Australia Network contract next week, but the government will not be able to pocket the entire saving because there will be costs associated with the national broadcaster having to break commercial agreements.

Senior Coalition figures have been making it clear since before the federal election they intend to axe the $223m contract which the ABC secured under the previous Labor government – and all expectations point to confirmation in next week’s budget.

Before it lost office in September, Labor tried to lock in the ABC as the default broadcaster within the region. The ALP inserted a provision in legislation making it clear the ABC was the only organisation the Commonwealth could fund to carry out international broadcasting – not a private company. The ABC charter also requires the ABC to provide international broadcasting.

Subscription TV company Sky News has wanted the regional broadcasting service for some time, but lost out to the ABC in a tender process that was badly botched by Labor and became tangled up in the leadership tensions between Kevin Rudd and Julia Gillard.

Sky is part-owned by BSkyB, a British company controlled by 21st Century Fox, sister company to Australia’s News Corp.

As a consequence of Labor’s efforts to shore up the contract for the ABC beyond the change of government, the Coalition would have to legislate if it wanted to offer a new tender for a commercial broadcaster, such as Sky, to operate the Australia Network.

The Australia Network contract is due to run for another seven years and the timing of the termination is not yet known.

The ABC has just struck a deal with China to make content from the network and the ABC available in the country in a partnership with Shanghai Media Group. Through that contract Australia is only the third country in the world with broadcast rights in China.

The costs of unwinding agreements and other associated exit costs are not known, but any saving booked on Tuesday would have to take account of those factors.

Labor and the Greens have attacked the government for its direction on the Australia Network. Greens communication spokesperson Scott Ludlam said on Thursday the termination would be a broken promise.

“This will sever a two-way street of information in and out of Australia. This cut will mean fewer journalists delivering news content into Australia on the ABC network, as well as information from Australia into Asia,” he said. “The next election is just two years away and I will campaign continuously to ensure the public do not forget Abbott’s broken promise to not cut funding to the ABC.”