Australian government officials defended Thursday the decision to approve Singapore Telecommunication’s nine billion US dollar merger with second-ranked local phone company Cable and Wireless Optus. Government ministers have said they are satisfied with SingTel’s undertakings to safeguard the security of sensitive commercial and military communications traffic.

C and W Optus and the Australian defence force are partners in a 500 million dollar (270 million US) joint venture to launch a C1 telecommunications satellite next year.

Controversy erupted when prominent Australian defence analysts warned that the Singaporean government-controlled telco would be able to access information relayed by the satellite.

The decision to approve the takeover was announced by Australian Treasurer Peter Costello late Wednesday.

C and W Optus shares rose nearly three percent during Thursday’s trading session, closing 10 cents higher at 3.72 Australian dollars.

Foreign Minister Alexander Downer said Australia should not become entangled in conspiracy theories that espoused the presence of Singaporean intelligence operatives here, or the vulnerability of the C1 satellite to espionage.

“I wouldn’t get carried away with that sort of line on the SingTel bid for Optus,” Downer told the Australian Broadcasting Corporation.

Defence Minister Peter Reith said the government was satisfied with the assurances given by Singtel that military communications and commercially sensitive data would be protected.

“Defence has obviously been very closely in discussion” and was part of a deed of agreement governing the deal, Reith said.

“That deed of agreement together with contractual understandings and arrangements satisfies from defence’s point of view any concerns people might have about national security.”

But a former senior defence department official, Ross Babbage, said the takeover should be blocked because the Singaporean government was unlikely to allow such an opportunity to gain commercial advantage to pass.

“There are some people that have the view that Singaporeans almost can’t help themselves in some agencies when they get in a situation where they can collect some information,” Babbage said.

SingTel, which is 78 percent owned by the Singaporean government, must also allay US State Department concerns over the takeover under conditions stipulated by Treasurer Costello, because of the close military ties between Washington and Canberra.