Elliott Pushes Crown Castle To Bolster Fiber Business
July 06 2020 - 11:57AM
Dow Jones News
By Micah Maidenberg
Elliott Management Corp. is pressuring Crown Castle
International Corp. to overhaul its approach to its fiber-cable
business, which the hedge fund says has weighed on the company's
market value despite billions in investment in recent years.
Elliott on Monday publicly released a letter it sent to the
Crown board that criticized what it called disappointing returns
tied to the $16 billion it has invested to build up the company's
fiber-cable business, including a $7.1 billion acquisition three
years ago.
Crown's fiber strategy "has not been effective and has
significantly detracted from shareholder returns," Elliott said in
the letter. The investment firm said it controls an economic
interest of $1 billion in the company and has been speaking with
Crown executives privately for more than a month.
Crown defended its strategy in a statement Monday and said that
it has beaten the S&P 500 index on a total-return basis for
one-, three- and five-year periods through July 2.
"While we firmly believe our strategy best positions Crown
Castle to deliver near- and long-term value creation, we remain
open to having continuing dialogue with Elliott, as we do with all
shareholders," Crown said.
Shares of Crown rose 2% in morning trading.
The company, based in Houston, owned, operated or leased about
40,000 wireless towers and 80,000 route miles of fiber as of the
end of last year, according to its latest annual report. It rents
out wireless capacity on its towers under long-term deals to major
wireless carriers, the report says. The fiber business supports
so-called smart cells that bolster its towers with added capacity
and by helping customers with high-bandwidth data needs.
Elliott, run by Paul Singer, said it doesn't believe that Crown
should own the fiber assets, and cited stronger return performance
by competitor tower-owners American Tower Corp. and SBA
Communications Corp.
"Relative to its close industry peers, Crown Castle has
underperformed on a consistent basis for more than a decade," the
hedge fund said in the letter.
But the investor said selling the fiber business or spinning it
off into a new company would likely be disruptive and cost more
than the value created from any such transaction.
Elliott wants Crown to change how it manages the fiber business
by focusing on its highest-return opportunities and by
incorporating incentives for the unit tied to returns on invested
capital.
In addition, Elliott said in the letter that it wants Crown to
address its "long-tenured board to improve oversight of its capital
allocation approach and ensure Crown Castle's underperforming fiber
business has the appropriate management skill set to deliver
improved results."
Elliott is well-known for pushing for changes at companies it
invests in, including Marathon Petroleum Corp. and Twitter Inc,
among others.
Write to Micah Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
July 06, 2020 11:42 ET (15:42 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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