MILAN (Reuters) – U.S. hedge fund Elliott has raised its stake in Telecom Italia (TIM) to 9.4 percent, a SEC filing showed on Thursday, escalating a power battle over the Italian phone group with top shareholder Vivendi.

TIM has been caught up since early last year in a tug-of-war between French media group Vivendi and Elliott over how to revive Italy’s biggest telephone group, an underperforming business saddled with 25 billion euros ($28.7 billion) of debt.

Elliott had so far disclosed a stake of 8.8 percent, compared with Vivendi’s share of just under 24 percent.

TIM shares have fallen almost 40 percent in the past year, partially due to the governance battle between its top two shareholders, which other investors say is distracting top management from fixing the company’s operational problems.

TIM shares are “undervalued and represent an attractive investment opportunity”, Elliott said in the filing.

The stock jumped on the news and was up 5.25 percent by 1410 GMT.

The activist fund reiterated on Thursday there were several ways to boost value at TIM, including via a separation of its fixed-line network infrastructure, potential market consolidation and a conversion of saving shares.

Elliott last May managed to wrestle control of TIM’s board from Vivendi after accusing the French investor of serving only its own interests and promising a massive shake up at the former state phone monopoly.

The two adversaries will again face off on March 29 when shareholders will vote on Vivendi’s request to replace five directors appointed by Elliott.

In November, Luigi Gubitosi, one of the Elliott-appointed directors was named TIM’s new CEO, replacing a Vivendi ally.

Next month Gubitosi will present a new business plan in which he is expected to pursue the activist agenda proposed by Elliott. However that could be put into question were there to be another board overhaul.

The hedge fund said in Thursday’s filing “any change in composition of the board at this juncture would be detrimental to the execution and delivery” of TIM’s value creation plans.

Vivendi responded to Elliott’s stake building by accusing the fund of “acting as a pure financial investor” and “using an opportunistic approach” to take advantage of the heavy drop in TIM’s shares in recent months.

“The share price is currently so low because of Elliott’s own terrible governance since May 4. There is currently no industrial plan,” the French media group said in a statement.

According to the filing, Elliott bought the new shares between Dec. 27 and Jan. 30 at a price of between 0.46 and 0.525 euros per share.

Part of Elliott’s overall stake is covered by a collar agreement with JPMorgan that protects the buyer from falls in the stock price, and that agreement covers the same number of shares as before Elliott’s latest stake increase.

($1 = 0.8702 euros)

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