Broadband costs pull down BSkyB profits

British Sky Broadcasting Group reported a 9% drop in annual net profit, despite increasing revenues by 10%, because of the cost of starting up a broadband service to win customers from rivals including Virgin Media, an Associated Press report said.

The Associated Press report said BSkyB, which is 39% owned by Rupert Murdoch's News Corp., disclosed that net profit fell to 499 million pounds ($1 billion) from 551 million pounds the previous year.

Revenue jumped to 4.55 billion pounds ($9.3 billion) from 4.15 billion pounds a year earlier, the report said.

'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,' BSkyB CEO James Murdoch was quoted by the Associated Press report as saying.

'Continued successful execution of our strategy gives us confidence that we are well-placed to capitalize on the significant opportunities available to us, and the proposed 27% increase in the full-year dividend is a mark of that confidence,' he said.

BSkyB entered the broadband market when it bought Internet service provider Easynet. It is now facing stiff pricing competition in the 'triple play' market, where providers offer combined television, broadband and phone services, from BT Group and Virgin Media, the report further said.