ITN's coverage of the 11 September attacks had been praised

Until terms are agreed, details of the rival bids will remain confidential.

Stewart Purvis, chief executive of ITN, said: "We believe that ITV's decision to select ITN as the preferred bidder reflects the quality of our news provision and the value for money of the ITN tender."

The editor of ITV News, Nigel Dacre, said the news service would now focus on trying to "further strengthen the position of ITV as the country's most popular channel".

Richard Huntingford, chairman of the unsuccessful bidder Channel 3 News, said that the company was "naturally disappointed" by the decision.

Channel 4 news: Read by Jon Snow, provided by ITN

"We believed - and still do - that our proposals would give ITV a high quality service at excellent value for money, to the benefit of viewers, advertisers and shareholders," he said.

"We remain ready to talk further to ITV about our proposal whenever they wish.

"We will, of course, look closely at ITV's reasons for choosing ITN's proposal as a basis for further negotiation."

The backers of Channel 3 News include the satellite broadcaster BSkyB, Chrysalis, Ulster Television, the financial news group Bloomberg and the American network CBS.

Long-established

The consortium offered to set up a service from scratch with new technology - and said that by providing news only for ITV, it could be more cost-effective.

ITN is a broadcasting institution as long-established as ITV itself.

It is owned by Granada and Carlton Communications - both major shareholders in ITV. Other backers include United Business Media, Daily Mail & General Trust and the Reuters Group.

It now provides bulletins for commercial broadcasters including Channel 4 and Channel 5, 250 commercial radio stations and several 24-hour news services.

It has already seen off challenges for the Channel 4 and Channel 5 bulletins from BSkyB, the owner of Sky News.

And executives always maintained that it was confident of retaining this, its first and most important contract - which it has said is worth �46m a year.

Praise for the ITN coverage of the 11 September attacks on the US may also have helped it retain the contract.