Ensuite shower - replacement of partition wall

I am halfway through removing & replacing our ensuite Mira 88 shower which has been in for about 12 years since the house was built. I have removed all the old tiles today and found that that the wood underneath some of them on a partition wall is rotten and needing replacing.

I need to remove a section of this anyway to get to and replace the shower mixer unit behind but my questions are:- i) What is the best type of wood to use to now replace this small section of wall with? and ii) is there anything I can then coat it with before tiling to protect it from any water that might get through the new tiles?

Many thanks

andy - are you saying it's the studding (the structural timber supporting the plasterboard below the tiles) that's rotted, or is your wall made of ply or some other wood based material. If it's the studding just cut out and replace with pressure-treated timber and re-sheet with a cement board (Aquapanel or similar) then re-tile; never use plasterboard below tiles that are likely to get wet. If it's ply then replace as above.

Symtoms, many thanks for the quick response and the advice. It's the wall not the studding that's rotted so will buy some Aquapanel as you suggest. Rgds Andy