Murdoch had been looking to take on Associated Newspaper's paid-for Evening Standard and freesheet Metro through his News International group, publisher of The Sun and The Times. The group was looking at signing a £4m deal with Railtrack, which would see its newspaper distributed at London mainline stations.
However, reports say that Associated has renewed its contract with Railtrack to give it essential access to the London commuter market.
The plan had been to publish the paper twice daily, with an initial print run of 240,000 in the morning, aimed at Metro readers, and a second 400,000 run in the afternoon, aimed at the capital's paid-for evening paper audience.
Associated thwarted a similar assault on its evening territory in the 1980s, when Robert Maxwell launched the London Daily News, seeing the businessman lose £50m in the process.
Murdoch would have had an equally difficult challenge of making a dent in Associated's grip on the market, as Associated has a long-term deal signed with London Underground, giving it access to hundreds of thousands of tube passengers each day.
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