Sky is to make its full TV service of hundreds of channels available without the need for a satellite dish for the first time, as it looks to stem customer defections to rivals such as BT.

The pay-TV giant, which had an 18% plunge in profits at its UK business in the last six months of 2016 thanks to spiralling Premier League rights costs, said it would launch the broadband-delivered TV service next year.

Jeremy Darroch, the Sky chief executive, said it would allow Sky to target up to 6m households across Europe who cannot, or will not, have a satellite dish.

“This is the first time we have been able to offer the full Sky TV service without a satellite dish,” he said. “It is a big moment for the business.”

Customers can currently use the Now TV broadband service to watch a limited range of Sky channels without a dish, but the new offering will allow access to potentially all of its 270 channels.

The initiative, which could open up about 2m homes in the UK for Sky to target, comes as the company revealed that the rate of customers defecting to rivals has climbed significantly.

Sky said its churn rate, a key metric watched by the City, rose to 11.6% in the last six months of 2016. This is up significantly on the 10.2% in the same period the previous year.

Darroch blamed the jump in churn to the “highly promotional” and competitive UK market with broadband customers proving to be deal hunters more likely to switch to a rival.

Sky is also launching a loyalty programme to “reward and recognise members” based on how long they have been a customer as part of its strategy to stem customer churn.

Sky UK, which accounts for more than 90% of the pan-European broadcaster’s profits, experienced an 18% fall in profits to £620m in the second half of last year.

Sky, which had a 9% fall in total profits across its business to £679m, said that it was a resilient performance, down £65m year on year despite a £314m rise in Premier League rights costs. Total revenues rose 6% to £6.4bn.

Darroch also said Sky would not back down in the face of the threat made by Discovery, which has 12 channels including Eurosport and Animal Planet, to pull its UK programming from the end of the month.

Discovery says Sky is refusing to pay a “fair price” to air its channels and that it is using its “dominant market position” to pay it less than it received a decade ago.

Darroch said Discovery’s move to go public about the negotiations, which will result in the channels coming off Sky from 1 February if an 11th hour deal cannot be reached, was about “commercial self-interest”.

Pay-TV rivals have already voiced concerns about Sky’s potential dominance of sport, TV and film if Fox’s proposed £11.7bn takeover is allowed by competition regulators.

“This is a very real concern about being squeezed out of the market,” said Susanna Dinnage, the managing director of Discovery Networks UK & Ireland. “We have grave concerns about the impact on our business. We are in competition, in areas such as factual programming and sports rights, in the UK and Europe. There are a lot of lone voices out there, from consumers to other smaller broadcasters. We are one of the few people who can stand up and say enough is enough.”

Darroch distanced the breakdown in talks from a potential link with concerns of market dominance relating to the Fox/Sky deal.

“I don’t think this has got anything to do with the approach by 21st Century Fox,” said Darroch. “We have been talking to Discovery since April last year. We have extended deals with a whole range of companies.

“One thing we will ask for is performance from our partners. The fact is [Discovery’s] share of viewing on linear [TV] has been in long-term decline. When you look to the on-demand world, Discovery performs at best a third it does in linear. They are not hitting big shows people pay for.”

Darroch said its strategy in the upcoming battle for Champion’s League TV rights, currently controlled by BT, would not be impacted by the potential takeover by the deep-pocketed Fox.

“We go into all rights renewals this year in a good place,” he said. “The Fox approach has no effect at all on that. We have good options. We always look incrementally at where we might seek to invest and get better. We go into Champions League renewal from a position of strength across all our markets. We will bid according to the value we attribute to [those] right[s].”

Sky also announced that it has secured the exclusive rights to England matches in the new Uefa Nations League, including qualifiers for Euro 2020 and the 2022 World Cup.