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.

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.

A source with knowledge of the matter said Merlyn was

considering filing its own slate of nominees for TIM's board.

Even if it did that, however, the fund would not oppose

the KKR's deal, though it would put forward its own proposals

for actions TIM's current management is not considering, the

source said.

Last year Merlyn Advisors, the London-based 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.

TIM shares recorded their sharpest fall on record after

Labriola presented a plan for the company left after the network

sale, as investors fretted about debt rising further in the

short term and the new TIM not generating cash before 2026,

despite projected robust core profit growth.

Backed by the Italian government and worth up to 22

billion euros, the KKR deal has been opposed by TIM's top

investor Vivendi, which has questioned the

sustainability of the remaining business.

With its 24% stake, Vivendi could stand in the way of

Labriola's reappointment if an alternative slate of board

candidates emerged ahead of the April AGM.

(Reporting by Elvira Pollina; Editing by Gavin Jones and

Valentina Za)