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* Elliot Asset Management owns 10.9 pct of Kabel Deutschland
* "goal is to renegotiate terms"- source familiar withElliot
* Vodafone says bid will lapse if fails to reach threshold
* Vodafone is looking for 75 pct acceptance
By Harro Ten Wolde and Arno Schuetze
FRANKFURT/LONDON, Sept 9 (Reuters) - Vodafone isfacing pressure from Kabel Deutschland's largestshareholder to raise its 7.7 billion euro ($10.1 billion) offerfor Germany's largest cable company, two sources familiar withthe situation said.
Activist investor Paul E. Singer, founder of U.S. hedge fundElliott Asset Management, more than doubled his stake to 10.9percent on Sept. 6, Kabel Deutschland said on Monday two daysbefore shareholders have to decide whether to accept Vodafone'soffer.
"Vodafone's offer is not ideal. The goal is to renegotiateterms," a person familiar with the hedge fund's thinking said.
A spokeswoman for Elliott, known for its battle for controlof U.S. oil firm Hess Corporation earlier this year,declined to comment.
A person familiar with Vodafone said Elliott was building upits stake in an attempt to force a better deal.
Vodafone urged Kabel Deutschland shareholders toaccept its 84.5 euro a share offer earlier on Monday and warnedthe bid would lapse if the holders of less than three quartersof the German company's shares agree to sell by Wednesday.
The British company, which last week agreed the sale of itsshare in U.S. operator Verizon Wireless for $130 billion, wantsto buy Kabel Deutschland to offer more television and fixed-lineservices in Germany, its largest European mobile market.
If the deal were to collapse, Vodafone would have to rely onrenting fixed lines from Deutsche Telekom, ratherthan owning its network. It also faces the risk of KabelDeutschland becoming a competitor in mobile phones, analystssaid.
"There will not be any additional acceptance period shouldthe 75 percent acceptance condition not be met by Wednesday, 11September," Vodafone said.
Another person familiar with the transaction said Elliottmay not attempt to block the deal, but could try to extract ahigher price once Vodafone owned at least 75 percent of KabelDeutschland.
Under German law, once Vodafone crosses this threshold itwould have to offer to buy out minority shareholders at the sameprice. At that point Elliott could sue Vodafone, a strategy itis pursuing at German crane maker Demag.
Investors in two other German companies - utility Mainovaand HVB Real Estate Bank - used this tactic successfully to getmore for their shares earlier this year.
Kabel Deutschland said on Monday that two other investorshad raised their stakes in the firm. U.S. hedge fund DavidsonKempner Capital Management LLC increased its holding to 3.4percent, while British bank Barclays upped its stake tojust above 5 percent of voting rights from less than 3 percent.
Davidson Kempner is known for its strategy of betting on thesuccess or failure of takeover offers, a tactic known as mergerarbitrage, or "arb" trading.
Neither Davidson Kempner nor Barclays were immediatelyavailable to comment.
RISK OF FAILURE
Shares in Kabel Deutschland, which operates Germany'sbiggest cable network, closed down 0.6 percent on Monday at85.22 euros.
Vodafone agreed the 84.5 euro a share, plus a 2.5 eurodividend, offer for Kabel Deutschland in June, a near 40 percentpremium to Kabel's share price before the British company'sinterest first emerged.
Another one of Kabel Deutschland's 30 largest shareholderssaid on Monday he expected the deal to go through.
"Shareholders are unlikely to get a better deal for theirshares in the next three to four years. Vodafone and Kabel D.can unlock high synergies from the joint utilisation of networksand a counter-bid is unlikely," he said.
Espirito Santo analyst Andrew Hogley said there was a riskthat the Kabel Deutschland deal would fail, although on balancehe expected it would succeed.
"Kabel Deutschland on a standalone basis on our numbers isworth about 84 (euros), so it's a fair price that Vodafone isoffering but given the synergies they are claiming from thedeal, it is not compelling," he said.
Vodafone said on Monday that Germany's Federal CartelOffice had confirmed it would not request a referral from Europeon the deal.
It also said the European Commission was expected tocomplete an initial review of the offer by Sept. 20.
Vodafone said that by Friday evening it had secured thesupport of holders of 11.86 percent of Kabel Deutschland,including 4.27 percent of the cable operator's shares Vodafoneand a person that acts jointly with the group already owned.
In acquisitions, shareholders generally wait until thedeadline to tender their shares in case a last-minute rival bidemerges.
