AT&T (T) - Get Report shares surged Monday after activist investors Elliott Management wrote a letter to the company's board of directors urging a broader business review that it says would unlock investor value after taking a $3.2 billion stake in the telecoms and media company.

Elliott said AT&T had "yet to articulate" the benefits of its TimeWarner deal, and said the group needed to look at divesting some of its non-core assets. The fund also said AT&T's focus on mergers was a "distraction for the group" that has lead to "operational underperformance". Elliott also requested a meeting with the company's board in order to discuss specific changes. 

"The purpose of today's letter is to share our thoughts on how AT&T can improve its business and realize a historic increase in value for its shareholders," Elliott wrote. "Elliott believes that through readily achievable initiatives - increased strategic focus, improved operational efficiency, a formal capital allocation framework, and enhanced leadership and oversight - AT&T can achieve $60+ per share of value by the end of 2021."

"This represents 65%+ upside to today's share price - a rare opportunity for any company, let alone one of the world's largest," the letter added.

AT&T shares were marked 4.4% higher at the start of trading Monday following release of the Elliott Management letter to change hands at $37.86 each, the highest in more than two years and a move that would give the group a market value of $275 billion.

AT&T said many of the actions Elliott outlined in its letter were already being addressed by the company, but noted it looked forward to "engaging" with the fund nonetheless.

"AT&T's Board and management team firmly believe that the focused and successful execution of our strategy is the best path forward to create long-term value for shareholders," the company said in a statement. "This strategy is driven by the unique portfolio of valuable businesses we've assembled across communications networks and media and entertainment, and as Elliott points out, is the foundation for significant value creation."

"We believe growing and investing in these businesses is the best path forward for our company and our shareholders," the statement added.

Elliott said AT&T's total shareholder returns (TSR) have lagged the broader S& 500 benchmark by "well over 100 percentage points", and noted its crash out from the Dow Jones Industrial Average in 2015.

"Unfortunately for shareholders and the millions of current and former employees who own shares in AT&T as part of their remuneration or pension, this underperformance has been both profound and persistent," Elliott said. "AT&T's TSR has underperformed across all relevant benchmarks and timeframes for more than 10 years, with the exception of a small catch-up over the last year following the Company's 27% share price decline in 2018 and coinciding with Elliott's large purchases of stock."

AT&T's debt load has remained a significant concern since its June 2018 acquisition of Time Warner, which added $40 billion to the already-troubling $140 billion in obligations in its balance sheet.

That concern was somewhat offset by a modestly higher 2019 free cash flow guidance from AT&T following its second quarter earnings in late July, with the group now expecting $28 billion thanks to the addition of secutitization receivables from Time Warner worth around $2.6 billion.