LONDON (Reuters) - British telecoms provider BT said it would offer Sky Sports TV channels at the lowest prices in the country, hoping to attract millions of customers to a broadband TV service that has sparked little interest.

But BSkyB raised its own retail and wholesale prices for the premium sports channels, saying it had no reason to fear customer defections, and ensuring that BT will make deeper initial losses on its new offering.

BSkyB has been forced by Britain's telecoms regulator to cut the prices at which it wholesales the channels. It is appealing the ruling and the difference between the regulated and unregulated prices is being held in an escrow account.

The satellite pay-TV broadcaster, whose major shareholder News Corp is proposing to buy outright, said the price increases were routine, and that it would be showing more live Premier League soccer from the season about to start.

UBS analyst Polo Tang wrote in a note: "Given the Sky wholesale prices, these prices suggest than rather than a zero gross margin as we had expected, this is a £4.70 to 9 loss on Sky Sports 1 and 2 before marketing costs for BT."

BT shares fell 2.54 percent to 126.8 pence by 0915 GMT and BSkyB shares were down 0.29 percent at 698.5 pence. Britain's FTSE 100 blue-chip index was down 1.3 percent.

BT customers will be able to subscribe to Sky Sports 1 and 2 for £16.99 ($25.37) per month, with the cheapest package starting at £6.99 per month for customers signing up to a bundle of services for two years.

BT said yesterday the latter bundle, which includes Walt Disney's ESPN, was roughly 200 to 300 pounds cheaper per year than equivalent deals from Sky and cable operator Virgin Media .

BSkyB's rivals had complained to the regulator that Sky Sports were a must-have for their customers but that it was not economically viable for them to do so at the prices BSkyB was formerly charging.

Sky raised its retail prices for subscribers by £3 per month, taking its top sports bundle to £38 per month and its entry-level package to £29 per month. It raised wholesale prices proportionately.

Virgin Media's prices range from £13.50 per month to £20.50 per month for its top sports package.

Gavin Patterson, chief executive of BT Retail, declined to declare a target for new BT Vision customers but said its research showed there were four million people in Britain who would like Sky Sports but not at current prices.

"We will make money over the long-term," he told journalists on a conference call.

BT Vision had 467,000 customers at the end of last year, compared with Sky's 10 million. It has a broadband customer base of 4.2 million and is launching a £30 million advertising campaign to market the new sports channels.