BSkyB survives shareholder revolt over buy-back plan

BSkyB, the satellite TV operator, narrowly avoided an embarrassing defeat yesterday over a controversial share buy-back plan that will allow Rupert Murdoch's News Corporation to increase its 37 per cent stake to 39 per cent.

Shareholders representing nearly half the votes not controlled by News Corp defied the BSkyB board by voting against a waiver that allows Mr Murdoch's media empire to increase its shareholding without being forced into a full takeover.

Despite the opposition of UK investor lobbying groups such as the National Association of Pension Funds and the Association of British Insurers to the waiver, BSkyB scraped home with 54.6 per cent in favour and 45.4 per cent against.

Several UK institutions, including Legal & General and Standard Life, opposed the plan, warning of News Corp's "creeping control" of the company. Many of the same shareholders had been uncomfortable about the appointment of Rupert Murdoch's son James as chief executive two years ago, believing the company might not be sufficiently independent of the Murdoch empire.

Shareholders attending BSkyB's annual meeting at London's QE2 Centre were greeted by an underwhelming first-quarter results statement that revealed a worrying increase in the number of people who had cancelled subscriptions, sending the shares 5 per cent lower.

James Murdoch preferred to concentrate on Sky's profits, which rose 14 per cent to £215m in the quarter, and its 8 per cent rise in revenues to £1.023bn. "The team has met or overachieved core performance measures including sales, operating profit and earnings per share, notwithstanding an increase in churn," he said.

BSkyB's deputy chairman Jacob Rothschild, told shareholders the group would not repeat its controversial share buy-back scheme next year, and said News Corp had signed a legal agreement that would prevent it raising its voting power above its current level.

This did not satisfy Daniel Summerfield, of the Universities Superannuation Scheme, and other shareholder groups. Dr Summerfield said: "Even though it would appear an agreement has been reached between BSkyB and News Corp to cap the latter's voting rights, we are concerned this agreement is not as watertight as you would have us believe. This scepticism emanates from our experience with an agreement brokered between News Corp and its shareholders prior to the company reincorporating from Australia to Delaware."

Mr Murdoch replied thatthe issues at News Corp, where John Malone's Liberty has an influential shareholding, were nothing to do with Sky.

Insiders blamed the increased churn rate on recent price rises - which have increased bills by £3 a month - the tough economic environment and growing competition from the likes of Freeview. On the positive side, Sky pointed to a 139,000 rise in the number of households taking Sky+, the group's sophisticated personal video recorder, and a 103,000 increase in the number taking Sky in more than one room.

BSkyB shares closed down 25.5p at 501.5p.