UPDATE:BSkyB Earnings Up On Strong HD Demand;Strikes HBO Deal

(Rewrites, adds detail.) By Lilly Vitorovich Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Takeover target British Sky Broadcasting Group PLC (BSY.LN) Thursday posted solid fourth-quarter earnings as the World Cup boosted demand for its high-definition service, and said it has struck a deal with HBO, home of television shows Sex and the City and the Sopranos, as part of wider efforts to differentiate its offering from rivals. Chief Executive Jeremy Darroch said it was "business as usual" at the U.K. pay-TV operator after last month's GBP7.8 billion, 700 pence a share, takeover proposal from News Corp. (NWS), BSkyB's biggest shareholder. "The management team remain focused on executing against our plans and creating value for all shareholders," Darroch said. "The economic outlook remains uncertain and, against that backdrop, we'll pursue the consistent set of priorities that have served us well so far. Executing on these plans will build a larger, more profitable business for the long term." Still, BSkyB shares fell 6p, or 0.8%, to 714 pence after "no new news" emerged on News Corp's bid, said Numis analyst Lorna Tilbian. She thinks News Corp. will have to increase its offer to at least 800p a share for this "prime asset." BSkyB's independent directors have rebuffed News Corp.'s current offer, but have said they would support an offer of over 800 pence a share. A spokeswoman for News Corp., which owns a roughly 39% stake in BSkyB, Thursday declined to comment on whether it would raise its offer. BSkyB added 90,000 net new customers in the fourth quarter ended June 30, taking its total customer base to 9.86 million. Existing customers also upgraded as the company sold 958,000 single products in the quarter. A further 429,000 customers signed up to Sky+HD, helped in large part by the football World Cup in South Africa. Operating profit before exceptional operating costs, a key figure tracked by U.K. media analysts, rose 24% to GBP237 million in the fourth quarter ended June 30 from GBP191 million last year, slightly ahead of market expectations of GBP233 million. BSkyB, which competes with Virgin Media Inc. (VMED) and BT Group PLC (BT.A.LN), posted a 12% rise in fourth quarter revenue to GBP1.53 billion from GBP1.36 billion. Average revenue per user rose 9.5% to GBP508 at June 30 from GBP464 a year ago. The group is on track to have 10 million customers by the end of 2010, Darroch said. Net profit rose more than three-fold to GBP336 million in the fourth quarter of fiscal 2010 from GBP90 million a year earlier on higher revenue and a gain of GBP241 million relating to its legal settlement with Electronic Data Systems. Meanwhile, BSkyB struck a deal with Time Warner Inc.'s (TWX) HBO to exclusively broadcast new shows in HD. The move comes after BSkyB was forced to wholesale its prized Premier League football content to rivals at regulated prices by U.K. competition authorities, creating a more pressing need to offer services that its rivals lack. The first HBO production to be shown as part of the deal will be 'Boardwalk Empire', a Prohibition-era drama from director Martin Scorsese and writer Terence Winter. The show is scheduled to make its U.S. debut on HBO in September, with a U.K. and Ireland premiere on Sky to follow shortly after. Financial details weren't disclosed. Right now, BSkyB and BT, through its BT Vision pay-TV service, offer some HBO shows on-demand. BSkyB is also preparing to launch Europe's first 3D channel Oct. 1, after it bought Virgin Media's channels business for around GBP160 million last month. BSkyB declared a final dividend of 11.525 pence, taking it to 19.40 pence for the year from 17.6 pence last time. -By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com (END) Dow Jones Newswires July 29, 2010 08:20 ET (12:20 GMT)