France wins 'momentous' $39 bln Australia submarine contract

France on April 26 beat off competition from Germany and Japan to win an Aus$50 billion ($39 billion) contract to design and build Australia's next generation of submarines, a decision Tokyo called "deeply regrettable."

The announcement by Prime Minister Malcolm Turnbull culminates years of planning to replace Australia's ageing diesel and electric-powered Collins Class submarines, which are due to leave service from around 2026.

Turnbull said the 12 new subs to be delivered by French contractor DCNS under Australia's biggest-ever defense contract "will be the most sophisticated naval vessels being built in the world".

"This is a momentous national endeavor," he said at an Adelaide shipyard where the submarines will be constructed.

The deal came as tensions grow between China and Australia's allies Japan and the United States. Beijing is flexing its muscles in the region by developing airstrips and other facilities on reclaimed reefs in the contested South China Sea.

French President Francois Hollande hailed the decision as historic.

"It marks a decisive advance in the strategic partnership between the two countries who will cooperate over 50 years," his office said in a statement.

A Japanese government-backed consortium led by Mitsubishi Heavy Industries, and German group ThyssenKrupp Marine Systems, were also in the running. But Canberra said DCNS was considered "best to meet all of our unique capability requirements".

Japan was the early favorite and last November Tokyo said handing it the contract would help bolster regional security. Some senior U.S. officials, including former deputy secretary of state Richard Armitage, also backed a Japanese build.     

For Australia, cooperating...