BSkyB shares yesterday passed 600p for the first time since August 2004 after the satellite broadcaster showed better than expected subscriber growth in the wake of the dispute with Virgin Media.

The satellite broadcaster, which is 39.1 per cent owned by News Corporation, parent company of The Times, said that its customers had increased by 51,000 – higher than the 27,400 forecast by City analysts – implying that Sky had won customers from Virgin Media.

Sky refused to spell out how many subscribers that it thought it had won over from Virgin Media, although the cable company said yesterday that it had expected to lose some customers after Sky News, Sky One and Sky Sports News were withdrawn on March 1.

The strong subscriber growth, taking Sky’s total pay-television base to 8.49 million in its seasonally weak third quarter – between January and March – lifted the shares 5.5 per cent to 616½p.

The shares were last above 600p when James Murdoch, the company’s then newly appointed chief executive, announced that investment would have to rise to sustain growth back in the summer of 2004.

However, a strategy to cut customer discounts meant that churn – the proportion of subscribers who leave Sky – rose by 1.8 percentage points to 13.7 per cent. That helped to boost average annual revenues per customer by £12 to £406.

Simon Wallis, of Collins Stewart, a broker that has a “sell” recommendation on Sky, was unconvinced by the improvement in average revenues. In a note to clients, Mr Wallis said that he was “sceptical and of the general view that Sky can push prices at the expense of churn, but not achieve good results on both value-drivers at the same time”.

Pretax profits in the third quarter were down 9.5 per cent at £200 million, partly reflecting a £113 million investment in developing consumer broadband services. Broadband customers increased by 264,000 in the quarter, to 457,000, and rose to 553,000 by April 29.

The broadcaster reiterated a warning that operating profits would be hit by £15 million to £20 million this year because of loss of carriage fees from Virgin Media, although Paul Richards, of Numis, said that the company could “largely absorb” the hit in the 2006-07 financial year. However, if the dispute continued, it could cost Sky a further £50 million next year.

Despite the upbeat figures, Sky executives adopted a low profile after conflict with Virgin Media and a regulatory inquiry into the buying of a 17.9 per cent stake in ITV, principally confining themselves to analyst presentations. Mr Murdoch said that disputes and inquiries were not distracting, adding: “We’ve got a dedicated legal team dealing with the regulatory issues and litigation. Our entire focus is on customers and customer growth.”

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