BT hails customer growth before Champions League debut

* BT adds record number of subscribers to fibre network

* No details on charges for new Champions League coverage

* Earnings come in just ahead of forecast (Adds CEO comments, shares)

By Paul Sandle

LONDON, May 7 (Reuters) - BT Group (LSE: BT-A.L - news) said it was confident it could retain its edge over rivals Sky (Other OTC: BSYBF - news) and Virgin in the broadband market when it starts charging customers to watch European Champions League soccer this year.

The British market leader, which is buying mobile network EE for 12.5 billion pounds ($19 billion), added a record number of customers to its fibre network in the last quarter of its financial year, helping it beat expectations for annual earnings and raise its free cash flow outlook.

BT has invested heavily on sports rights to fight pay-TV group Sky in the battle for British consumers, offering its share of English Premier League soccer for no extra charge to its broadband subscribers.

Sky has retaliated with its own broadband deals after BT outbid it to win rights to screen the Champions League for the first time from next season.

BT Chief Executive Gavin Patterson said competition was fierce -- with rivals offering up to two years of free broadband -- but BT was still adding customers.

"We are not going to chase customers at any cost; we are disciplined in terms of how much promotion we are prepared to take," he told reporters.

"We know we've got a strong product (and) with Champions League coming on later in the year, we know we'll have even more content to differentiate our services."

Patterson said pricing for Champions League would be announced closer to the start of the season in August. The group had said there would be a charge to watch all the matches.

Some 266,000 BT retail customers upgraded to fibre in the quarter, nearly 10 percent more than its rivals which also use its network, including Sky and TalkTalk, combined.

The strong performance in fibre, combined with costs cuts, helped BT report core earnings of 6.27 billion pounds ($9.6 billion) versus market expectations of 6.22 billion.

Its shares, which reached a 14-year high of 472 pence last week, were trading down 0.5 percent at 452 pence at 0920 GMT.

BT retained it outlook for "modest growth" in core earnings this year, despite the impact of regulatory changes and the costs of buying more soccer rights. It also said it would post free cashflow of about 2.8 billion pounds, an upgrade on its previous 2.6 billion pound forecast. ($1 = 0.6560 pounds) (Editing by Keith Weir)