Elliott Management, an activist fund run by its billionaire founder Paul Singer, won the vote securing two-thirds of seats on Telecom Italia's board.
Elliott had accused Vivendi of failing shareholder interest in Italy's biggest phone company and subsequently forced Friday's vote over the company's stewardship.
Telecom Italia shares rose sharply on the news on Friday afternoon.
Shareholders were asked to pick between Elliott's preferred board of 10 independent Italian business figures and Vivendi's list which included a majority of Vivendi employees, including its own CEO as executive chairman.
After losing the vote, Vivendi said in a press release that it would maintain its long-term commitment to Telecom Italia and would "take all measures necessary to preserve its value and avoid its dismantling."
Vivendi owns nearly 24 percent of Telecom Italia shares while on the other side Elliott Management owns just under 9 percent.
Friday's vote was called after the majority of Telecom Italia's directors resigned in March.