James Murdoch wants to build a major presence in broadband

BSkyB added 82,000 digital satellite subscribers in the three months to 30 September, its best first-quarter performance in three years.

The country's leading pay-TV operator now has 8.25 million subscribers.

But profits fell from �200m to �166m, as the August launch of Sky's phone and broadband service pushed up costs.

Broadband battle

BSkyB said it had seen a "great response" to its broadband offer, announced in July, receiving 113,000 orders by the end of October.

It has connected 74,000 customers so far, on average within 15 days of receiving their orders.

About a million Sky TV customers have expressed interest in the offer and the firm is currently receiving about 20,000 orders a week.

We are becoming an increasingly well positioned challenger in the �20bn combined industry for pay television, broadband and telephone services James Murdoch, BSkyB chief executive See BSkyB shares

But the cost of promoting the service, handling customer enquiries and managing subscriptions has told on the company's balance sheet.

The residential broadband service made a �35m loss over the period, while Easynet, the broadband internet provider acquired last year, made a �7m loss.

Despite this, BSkyB said it was pleased about customer reaction to the service and its ability to manage demand.

"We are building on our leadership in pay television and are becoming an increasingly well positioned challenger in the �20bn combined industry for pay television, broadband and telephone services," said chief executive James Murdoch.

Competition is fierce in the fast-growing broadband market and suppliers have been willing to incur considerable start-up costs to market their services and sign up customers.

Carphone Warehouse made a �45m broadband loss in the past six months, after struggling to cope with demand for its offer.