Their actions devastated News's competitors, and the resulting waves of high-tech piracy assisted News to bid for pay TV businesses at reduced prices – including DirecTV in the US, Telepiu in Italy and Austar. These targets each had other commercial weaknesses quite apart from piracy, the AFR says.

The Australian Competition and Consumer Commission is still deliberating on final details before approving Foxtel's $1.9 billion takeover bid for Austar, which will cement Foxtel's position as the dominant pay TV provider in Australia.

News Corp has categorically denied any involvement in promoting piracy and points to a string of court actions by competitors making similar claims, from which it has emerged victorious. In the only case that went to court, in 2008, the plaintiff EchoStar was ordered to pay nearly $19 million in legal costs.

The issue is particularly sensitive because Operational Security, which is headed by Reuven Hasak, a former deputy director of the Israeli domestic secret service, Shin Bet, operates in an area which historically has had close supervision by the Office of the Chairman, Rupert Murdoch.

The security group was initially set up in a News Corp subsidiary, News Datacom Systems (later known as NDS), to battle internal fraud and to target piracy against its own pay TV companies. But documents uncovered by the AFR reveal that NDS encouraged and facilitated piracy by hackers not only of its competitors but also of companies, such as Foxtel, for whom NDS provided pay TV smart cards. The documents show NDS sabotaged business rivals, fabricated legal actions and obtained telephone records illegally.