BSKYB, THE satellite broadcasting group, has signed up 1.2 million subscribers to its digital television service, passing its one million target two months ahead of schedule.

Digital TV subscriptions soared after the company launched its free set- top box offer in May. A total of 660,000 boxes were given away in the first three months of the offer, equivalent to a three-fold increase in demand.

BSkyB, which is locked in a bitter digital battle with OnDigital and the cable television companies, said 55 per cent of sales since July were to new customers who had not been signed up to Sky's analogue service. Sky said yesterday that it plans to switch off its analogue signal a year earlier than its original date of 2002.

Tony Ball, BSkyB's chief executive, admitted that the surge in demand had caused installation delays, with some customers having to wait four to six weeks to be connected.

But he said that 5,000 extra staff had been recruited by its services division, which can now handle 50,000 installations a week.

BSkyB said only 1 per cent of digital customers had cancelled their subscriptions, while Sky's over all annual cancellation rate was 13.4 per cent. This compares with the 15.1 per cent last year if the one-off effect of sports promotion in the first quarter is stripped out.

The strong subscriber figures indicate that BSkyB has maintained its lead over its main competitor, OnDigital, which has said that it signed up 247,000 subscribers by the end June. However, Sky claimed the true number was 204,000.

OnDigital responded by saying that figure related to people actually connected while the higher figure related to sales which included people who had signed up but had not yet switched on.

But digital TV costs continued to cast a shadow on BSkyB's profits, which fell to pounds 73m in the year to June. BSkyB's profits, which excluded a previously announced pounds 315m charge for the company's transition to digital TV, fell in line with analysts' forecasts of pounds 62-84m. The pre-tax loss was pounds 285m but the company said it expects to return to profit this year.

The shares rose 22p at 583p.