MILAN, March 19 (Reuters) - Merlyn Partners, a

Luxembourg based alternative investment fund, said it held 0.53%

of Telecom Italia (TIM) as of Tuesday.

The stake disclosure comes ahead of an annual general

meeting next month where TIM's CEO Pietro Labriola will seek a

new mandate as he works to finalise the sale of the company's

main asset, its fixed line grid, to U.S. fund KKR.

Last year Merlyn Advisors, the London-based investment firm

behind the fund, teamed up with a former TIM senior executive in

a bid to challenge Labriola's plan to sell the landline grid,

proposing an alternative revamp and a change at the helm of TIM.

The stake held by Merlyn is sufficient to allow its owner to

file a slate of nominees for the renewal of TIM's board, in a

potential threat to Labriola were the fund to support a

different CEO candidate.