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BSkyB Posts Strong Results on Broadband Success

U.K. pay-TV company BSkyB on Friday posted a 10% increase in full-year revenues and raised its dividend by 27% as its successful launch into the broadband market started to bear fruit.

The company, which revealed earlier this month that it was the fastest growing broadband provider in the country, said underlying operating profit had risen 6% on last year to 958 million pounds ($1.96 billion).

Revenue rose 10%, in line with forecasts, to 4.6 billion pounds and Chief Executive James Murdoch said the company started the new financial year with confidence.

"This year has been one of enormous importance and change for us, with the launch of our broadband and talk services transforming our business and our future prospects fundamentally," he said in a statement.

BSkyB's shares, which hit a three-year high after the company reported its non-financial metrics earlier this month, fell 0.5% to 671 pence, compared to a wider European media sector fall of 0.6%.

Analysts welcomed the dividend increase to 15.5 pence as a sign of confidence, with UBS saying it also demonstrated the company's commitment to provide returns to shareholders.

"In our view, Sky has the best product and pricing in the triple play space which should drive strong operational momentum and a re-rating," UBS analysts said.

Reported operating profit of 815 million pounds included an exceptional gain of 49 million pounds but it was still down on last year's 877 million pounds due to broadband investment.

On a conference call with reporters, Chief Financial Officer Jeremy Darroch said the group would not change its broadband spending forecast for 400 million pounds over three years.

BSkyB, Britain's dominant pay-TV provider, entered the highly competitive broadband market a year ago to increase customer loyalty and offer new services like video on demand

It announced a joint venture with Sony on Friday to offer PlayStation Portable owners in the U.K. and Ireland the opportunity to watch Sky's content through video on demand.

On July 11 it said it had signed 259,000 broadband customers in the three months to June 30, taking its total number of broadband customers to 716,000.

On Thursday, BT Group, which is the U.K.'s leading broadband provider, said its retail unit had signed 38% of all net DSL broadband additions during the quarter, giving it around 175,000 new additions in the quarter.

Broadband Additions

On that system, Murdoch told reporters that BSkyB had signed around 50% of the new additions to the market. Net DSL additions do not include new customers to broadband provided by cable operator Virgin Media.

The move by BSkyB into broadband and telephony has also been welcomed by analysts as increasing competition is driving up the price for premium content such as soccer.

"Continued successful execution of our strategy gives us confidence that we are well placed to capitalize on the significant opportunities available to us," Murdoch said in a statement.

Murdoch told reporters that there had been no development in the group's row with Virgin Media over carriage fees, which has led to Sky channels being withdrawn from the cable platform, and said he expected a hit of 15 million pounds to the operating profit for the next quarter.