October 12, 2017 / 8:07 AM / a year ago

UPDATE 2-In shadow of Fox bid, James Murdoch re-elected Sky chairman

* James Murdoch backed by a majority of independents

* Sky says revenue and subscriber numbers growing

* Murdoch bid for full control under review

* Independent director says "pretty confident" about deal review (Add AGM quotes, results of shareholder vote)

By Paul Sandle

LONDON, Oct 12 (Reuters) - James Murdoch was re-elected as Sky chairman by a slim majority of independent shareholders on Thursday, despite questions being raised about whether he can be neutral due to his role as chief executive at bidder Twenty-First Century Fox.

The Murdoch family's Fox is trying to buy the 61 percent of Sky it does not already own.

Its bid, which is strongly opposed by some lawmakers and is subject to lengthy regulatory scrutiny, hangs over the European pay-TV group, which reported quarterly results earlier on Thursday.

The British government referred Fox's $15 billion bid for a detailed investigation by the Competition and Markets Authority (CMA) last month to assess the Murdoch family's commitment to British broadcasting standards and its influence in the media.

Royal London, which holds a 44 million pound ($58 million) stake in Sky, was one of the investors which planned to vote against James Murdoch's re-election, saying he could not effectively represent independent shareholders while he was chief executive of Fox.

Its view was not held by the majority, however, with Murdoch winning the backing of 51 percent.

A year ago he was opposed by a narrow majority, but he was secure thanks to the 39 percent stake held by his family.

Murdoch told the meeting that he expected the regulatory process to conclude by the middle of 2018.

"On both sides, Twenty-First Century Fox and Sky, both are engaged constructively with the regulatory authorities, and I am confident we will get to a conclusion by the middle of next year," he said.

James Murdoch was questioned about corporate governance at Twenty-First Century Fox, where there have been allegations of sexual and racial harassment.

"Are you confident that the CMA won't unearth new Fox scandals which derail the bid?," Alaphia Zoyab from activist group Avaaz asked.

Murdoch passed the question to independent director Martin Gilbert, who led an independent board assessment of the Fox bid.

"I am not going to comment on the Twenty-First Century Fox issues because this is the AGM of Sky, but I am pretty confident that it will not have an effect on the CMA's investigation," he said.

Earlier on Thursday, Sky reported like-for-like first-quarter revenue of 3.3 billion pounds ($4.4 billion) and core earnings of 582 million pounds, up 11 percent in the three months to end of September.

"We are especially pleased with the strength of the company's performance given the challenging consumer environment," Murdoch said.

Chief Executive Jeremy Darroch said Sky was growing both revenue and profit in a tougher consumer market thanks to its new products, and a TV line-up that includes thriller "Riviera", its most successful original production to date, and "Game of Thrones".

Sky offers broadband and fixed and mobile telecoms in addition to pay-TV in its biggest market in Britain and Ireland, as well as pay-TV in Germany, Austria and Italy.

"We continue to see strong customer demand for our products and services, so net customer additions in the quarter are 50 percent higher than last year," Darroch told reporters.

"The total number of subscription products in our base of homes now sits comfortably above 60 million."

He said the company was seeing good demand for its flagship Sky Q product as well as for its streaming service Now TV.

"Our growth is coming at the top and at the entry end as well," he said.

Sky's shares were trading at 9.29 pounds at 1505 GMT, up 1.7 percent but still well adrift of the 10.75 pounds-a-share offer. ($1 = 0.7543 pounds) (Editing by Keith Weir and Adrian Croft)

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