Activist Investor Elliott Calls For A Management Reboot At Crown Castle

Elliott Investment Management is taking a close interest in US wireless cell tower provider Crown Castle, disclosing a $2 billion stake in the company and pushing for a change of leadership to counter a "value-destructive strategy."

Crown Castle is one of the largest operators of shared communications infrastructure in America, operating more than over 40,000 cell towers and 85,000 miles of fiber.

Yet while the company is said to have a market capitalization of about $45 billion, revenue for the third quarter 2023 came in below analyst expectations at $1.577 billion, and net income of $265 million, was down 37 percent on the same period last year.

It is also forecasting lower revenue for 2024, which is being blamed on a slowdown in spending by telco customers over the past few quarters.

Enter a certain bolshy investor who's been known to twist tech firms' arms...

Elliott, known as an activist investmentor with a track record of forcing changes on tech companies, has now written to Crown Castle asking for new leadership and a review of the company's strategy. Elliott said it had previously pushed for changes at Crown Castle following its initial investment in 2020.

The letter is highly critical, claiming that Crown Castle's stock price is near a six-year low and the company has "underperformed its direct peers in every time period over the last 15 years despite owning similar, high-quality tower assets."

Due to operational underperformance and "flawed capital allocation," Elliott claims the investment community "has been forced to question the stability of Crown Castle's dividend" and whether the company "may need to raise equity at a historically cheap valuation."

According to Elliott, Crown Castle suffers from "a profound lack of oversight by the board," which has contributed to "irresponsible stewardship and flawed financial policy."

It picked out CEO Jay Brown in particular, saying the company's strategy has been a failure, with underperformance translating into "nearly $26 billion of unfulfilled shareholder value ... We believe shareholders deserve better."

For these reasons, Elliott claims that an executive revamp is necessary, and calls for new executive and board leadership as part of the path forward.

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It also wants a comprehensive review of the company's fiber business, including whether Crown Castle should divest itself of this entirely, as well as improved corporate governance, and the implementation of a management incentive program based on return on invested capital.

Crown Castle issued a response to Elliott's letter, saying it was open to discussions with the investment company.

"We value the views of all our shareholders as we seek to better understand their perspectives on our strategy, performance, and business objectives. We look forward to reviewing Elliott's materials and are open to commencing a constructive engagement with Elliott. The Company's Board of Directors remains confident in Crown Castle's executive leadership as the Company continues to act in the best interests of all shareholders."

However, Elliott made plain in its letter that while it prefers to pursue a constructive course of action, it is prepared to make its case directly to shareholders at the company's 2024 annual meeting.

Last month, storage company Western Digital announced plans to split into separate flash memory and hard drive businesses, a course of action put forward by Elliott in 2022.

Earlier this year Elliott also took a multibillion-dollar stake in cloud CRM provider Salesforce, and was said to be pressuring the company to take steps to boost its profit margins up closer to 40 percent.

According to MarketWatch, shares in Crown Castle were up 5.7 percent following news of the intervention by Elliott. ®