Satellite broadcaster BSkyB reported a hefty pre-tax loss yesterday as the cost of introducing digital television and its free decoder ate deeply into revenues.

The company trumpeted a sharp jump in the number of digital clients to well over one million at the end of July, but the aggressive sales drive left the broadcaster with an annual pre-tax loss of £388 million sterling.

BSkyB suspended its dividend payment, as earlier promised, when it decided in May to offer set-top digital decoders free to clients. About 660,000 boxes have since been "sold", BSkyB said, taking the number of subscribers to 1.21 million.

The dramatic initiative resulted in exceptional charges of £461 million weighing down on BSkyB's bottom line. Without the charges, pre-tax, pre-exceptional profits amounted to £73 million.