Rupert Murdoch's News Corp had a secret unit that promoted pirating of pay-TV rivals, an Australian newspaper reported on Wednesday, adding to pressure on the Murdoch empire which is already under siege over hacking claims in Britain.

The Australian Financial Review, citing internal documents it dug up during a four-year investigation, said News Corp had used a special unit, Operational Security, set up in the mid-1990s, to sabotage its competitors.

The unit, staffed by former police and intelligence officers, cracked the codes of smartcards issued to customers of rival pay-TV services and then sold black-market smartcards giving viewers free access to those services, costing rivals millions of dollars, the business daily said.

The unit, housed within News Corp' NDS subsidiary, had originally been set up to hunt pirates targeting Murdoch's own operations but later turned into a dirty-tricks campaign, it added.

News Corp has denied any part in promoting pay TV piracy, the newspaper said.

News Corp sold NDS this month to Cisco Systems for $5 billion. James Murdoch sits on the NDS board.

NDS sabotaged business rivals, fabricated legal actions and obtained telephone records illegally, the newspaper said.

It said the moves helped News Corp take over competitors like DirecTV in the United States and Telepiu in Italy cheaply.

News Corp owns 25 percent of Australia's top pay-TV firm, Foxtel, which is looking to take over rival Austar.

The report follows a BBC Panorama documentary broadcast on Monday that alleged NDS had hired a consultant to post the encryption codes of ITV Digital, a key rival of Murdoch's then Sky TV, on his website.

Widespread piracy after the online publication of the codes contributed to the 2002 collapse of ITV Digital, which had been set up by the parties that later formed ITV, Britain's leading free-to-air commercial broadcaster, in 1998.

(Reporting by Sonali Paul; Editing by Mark Bendeich)