UPDATE 1-France's TF1 Q1 advertising revenue up 6 pct

(Adds details from AGM)

By Dominique Vidalon

PARIS, April 17 (Reuters) - Leading French commercial broacaster TF1 (TFFP.PA) said on Tuesday advertising revenue grew 6 percent in the first quarter as outlays by French retailers helped offset slower spending in the telecoms and music sectors.

Chairman and Chief Executive Patrick Le Lay also told the annual shareholders meeting that TF1, which is preparing for a change in its top management amid competition from the Internet and digital television, was "well armed to respond to the challenges of the future".

TF1 is banking on Internet expansion, notably in music, and on the development of its thematic channels such as Eurosport and LCI, which are expected to break even this year and make a profit next year, he said.

Le Lay also denied a report that TF1 planned to merge its LCI information channel with Vivendi's (VIV.PA) i-tele channel.

Commenting on advertising revenue for the first three months of the year, Claude Cohen, the head of advertising, said: "We are ... at 6 percent growth on the TF1 channel in the first quarter". TF1 unveils first-quarter figures on April 24.

In February, TF1 forecast advertising revenues would increase by 6 to 8 percent this year -- an acceleration from 3.7 percent growth in 2006 -- helped by the opening of TV advertising to French retailers for the first time and a recovery in ad spending by the food industry.

SMOOTH SUCCESSION

Le Lay, who will be 65 in June and has headed the group since its privatisation in 1987, told shareholders that, as previously announced, he would propose at a board meeting slated for end-May splitting his current functions into two.

Le Lay, whose mandate as a board member was renewed for two years at the AGM, would stay on as TF1 non-executive chairman while Bouyges Telecom's (BOUY.PA) Deputy CEO Nonce Paolini, 57, will become TF1's new CEO.

Le Lay said that once he decides to leave the TF1 group he would do so "without any golden parachute", describing the sucession process as a "smooth transition."

"Nonce Paolini will come at end-May as CEO. He will be in charge of developing new businesses. We will all be there to help him," he said. "Nonce Paolini knows TF1 very well. He is not going to be alone. I am staying on to help and from September (senior vice-president) Etienne Mougeotte will help him," he added.

Martin Bouygues, chairman of construction and telecoms group Bouygues and TF1's top shareholder with a 42.9 percent stake, said last week in a magazine interview that Le Lay would join his group as an adviser on expansion in new businesses while remaining "for a while" non-executive chairman of TF1.

Etienne Mougeotte, TF1's senior executive vice-president since 1989 and head of programming, would "take a step back" from his current responsibilities while taking a role as advisor to Paolini, Bouguyes had said.