UPDATE What analysts call an “activist investor,” Elliott Investment Management LP, issued a statement yesterday calling for a shake-up in the leadership of Crown Castle Inc. (NYSE: CCI). This same investor had put out a similar warning three years ago but said Crown did not heed its directives and said it was prepared to put up its own slate of alternative board candidates at Crown Castle’s annual shareholder meeting in May.
Crown Castle CFO Dan Schlanger issued a statement yesterday in response to the charges. “We value the views of all our shareholders as we seek to better understand their perspectives on our strategy, performance and business objectives,” Schlanger said. “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.”
Elliott claims it has a $2 billion stake in the firm, and said CCI “suffers from a profound lack of oversight by the board, which has contributed to irresponsible stewardship and flawed financial policy.” The investor said it would like to see a review of Crown’s fiber business, an optimized incentive plan for executives, and improved corporate governance.
Eric Luebchow of Wells Fargo sided with the investor saying they agree with Elliott’s assertions that the CCI strategy is in need of a refresh. “We have been somewhat critical of CCI’s fiber business for some time,” Luebchow said yesterday. “The capital-intensive nature of this segment—without the corresponding EBITDA growth—has worsened the cash burn from fiber/small cells and raised the risk on its dividend—recurring cash flow is now not covering its dividend, which will push leverage higher in the coming years. CCI is starting to see demand growth improve in small cells, but the balance sheet concerns have still weighed heavy on the stock.”
Luebchow said Elliott is proposing a plan based on return on invested capital to provide better incentives on capital allocation while asking for a board refresh and amendments to its bylaws which have made it more challenging to nominate alternative directors.
“A JV partner or potential sale of parts of its fiber business would free up capital accretively to where the market currently implies its value,” Luebchow said. “We don’t believe a high-dividend REIT is the optimal structure for investing in long-duration fiber/small cell infrastructure, particularly with a wave of densification demand potentially coming in the next few years.”
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