Rupert Murdoch is going back to his roots, taking up the role of chairman of News Corp's Australian arm at a time when the publisher is battling a hostile government.

Murdoch announced on Wednesday that News Ltd Chairman and Chief Executive John Hartigan, a veteran journalist, was retiring and his roles would be split, with the head of pay-TV provider Foxtel coming in as chief executive.

Hartigan's retirement had been widely expected, and the appointment of Kim Williams from Foxtel as the new chief was no surprise, as he is seen as close to Murdoch.

The only interesting thing in the move is Rupert Murdoch is getting fully involved in all parts of the business instead of stepping away, as some had thought, said Rhett Kessler, a fund manager at Pengana Australian Equities Fund, which owns News Corp shares.

Investors in News Corp have been pressing for Murdoch and his son James to step back from the business after the phone hacking scandal in the United Kingdom.

The Australian unit represents a small but symbolically significant part of News Corp's business. Rupert Murdoch built his father's small South Australian newspaper business into a global media conglomerate both admired and reviled for its power and reach.

From what we've seen, it seems like a seamless transition. I wouldn't expect the overseas markets to put too much emphasis on it, said Simon Burge, chief investment officer at ATI Asset Management, a top 20 shareholder in News Corp's Australian shares.

Williams, 59, comes into the job facing a government that has slammed News Corp's Australian dailies over their political coverage and has scrapped a tender for broadcasting Australian TV into Asia, which News Corp's part-owned Sky News was tipped to win.

The government has also launched a probe into media laws in the wake of the News Corp phone hacking scandal in Britain.

Williams has headed Australia's largest pay TV business, Foxtel, which is partly owned by News Corp, for 10 years.

While Foxtel is 50 percent owned by top Australian phone company Telstra , News Corp has management control.

In his new role, Kim will be responsible for building a strong leadership position for News Limited in digital in Australia, Murdoch said in a statement.

A spokesman said Murdoch would want Williams to focus on being CEO and would provide personal support as the chair.

Williams was sanguine about the prickly relations News Corp has with the government.

Clearly there are a number of people within the government we appear to have a poor relationship with, he told Sky TV after his appointment was announced.. I think that any media organization that is doing its job will from time to time have very hostile reactions from those that it covers and scrutinizes, he said.

Williams will be replaced at Foxtel by Richard Freudenstein, head of News Digital Media in Australia and former chief operating officer of UK pay TV operator BSkyB.

Both Kim and Freudenstein are very well regarded within News Corp globally and have always been well regarded by Rupert Murdoch, Andrew Butcher, a former chief spokesman for News Corp, told Reuters.

Freudenstein will be taking on his new role around the same time as Australia's competition watchdog plans to rule on Foxtel's $2 billion takeover bid for rival Austar United Communications Ltd .

It won't disrupt the Austar deal, Foxtel spokesman Adam Suckling said of the changing of the guard. The two things are totally and absolutely unconnected.

(Additional reporting by Narayanan Somasundaram; Editing by Ed Davies and Lincoln Feast)

Australia