Italy has frozen plans to license new digital TV frequencies for free — a blow for former prime minister Silvio Berlusconi’s Mediaset TV empire.

On Friday the recently installed government, headed by Mario Monti, suspended for 90 days the so-called “beauty contest” tender, set up under Berlusconi’s administration to award new DTT frequencies.

The tender assigned frequencies for free to broadcasters committed to massive investments, and had come under attack by critics claiming it favored incumbents, including Mediaset.

Mediaset, Italy’s top commercial broadcaster, blasted the decision in a statement, defending the beauty contest as legitimate and vowed to take action to keep the old rules.

But industry minister Corrado Passera indicated that the government, under pressure to raise cash, is likely to scrap it.

“The beauty contest was chosen in an economical and social context different from the current one,” he said.

“At a time when the government is asking for sacrifices from its citizens — and since TV frequencies are a scarce and precious resource — we are taking some time to find solutions that are more coherent with the growth, equity and austerity plan of this government.”

In September, 10 companies, including Rupert Murdoch’s Sky Italia, applied for one frequency band in the contest.

But Sky Italia pulled out last month, citing a convoluted process that favored existing players.

Italo merchant bank Mediobanca has estimated that if the government auctions the licenses it could raise up to $2 billion.