Elliott Sends Letter to the Board of Crown Castle Inc. Summarizing Feedback Supportive of Change

Responses From Investment Community, Current and Former Employees and Industry Experts Overwhelmingly Support the Need for Change

Highlights Widespread Lack of Confidence in Company's Strategy, Current Management and Board

Reiterates Need for a Robust Review of Fiber Business, CEO Change and a Reconstitution of the Company's Board

Full Letter Available at RestoringTheCastle.com 

WEST PALM BEACH, Fla., Dec. 7, 2023 /PRNewswire/ -- Elliott Investment Management L.P. ("Elliott"), which manages funds that collectively have an investment of approximately $2 billion in Crown Castle Inc. ("Crown Castle" or the "Company"), today sent a letter to Crown Castle's Board (the "Board") summarizing the feedback received since publicly sharing its views on the Company last week. The feedback, which was overwhelmingly supportive of change at Crown Castle, came from investors, analysts, current and former employees, and industry experts, among others.

As Elliott wrote in the letter, "the commentary has been consistent and highly critical of the Company and its strategy and leadership, including the apparent lack of oversight by the Board."

Elliott went on to note that in the week following the release of its materials, Crown Castle's stock price appreciated by 14.5% and the Company outperformed its direct peers by 8.4% – the largest week of outperformance for Crown Castle in the last decade. "In effect," the letter noted, "Jay Brown's severe underperformance as a CEO has made the prospect of his departure his greatest moment of outperformance."

In the letter, Elliott also took aim at the Board's continued lack of oversight and wrote, "The Board's refusal to act in the face of such overwhelming data and robust support for change would be a failure of its most basic duty of oversight and stewardship on behalf of shareholders."

Elliott added that while it "remain[s] hopeful that we can align with the Board on a constructive path forward, it is even clearer to us today based on the feedback we have received that Crown Castle requires CEO change and a robust review of the Fiber business."

Elliott concluded the letter by stating that if the Crown Castle Board is unwilling to make necessary leadership changes, Elliott will nominate a new Board that will. Based on the shareholder feedback it has received, Elliott, the letter said, is "confident that shareholders will choose a Board with a greater commitment to shareholder stewardship and best-in-class governance."

The letter can be accessed at RestoringTheCastle.com.

The full text of the letter follows:

December 7, 2023

Board of Directors
Crown Castle Inc.
8020 Katy Freeway
Houston, TX 77024

Dear Members of the Board:

We are writing to you again on behalf of Elliott Associates, L.P. and Elliott International, L.P. (together, "Elliott" or "we"). Since publicly sharing our views last week on Crown Castle Inc. (the "Company" or "Crown Castle"), we have had the opportunity to hear from numerous investors, analysts and industry leaders on the merits of our perspectives and recommendations. The feedback has been overwhelmingly supportive of significant change at Crown Castle, including unsolicited feedback from many current and former employees and executives of the Company. CEO Jay Brown's Fiber strategy has been universally panned by investors, industry insiders (including competitors, peers and advisors) and even the Company's own employees to such an extent that the Board's failure of oversight deserves intense scrutiny. In today's letter, we summarize this feedback and question what level of underperformance this Board will tolerate before taking action.

To begin, we think it is important to highlight the extraordinary support for the mere prospect of CEO and strategy change manifested in Crown Castle's stock price. In the week following the release of our materials, Crown Castle's stock appreciated by 14.5%¹. More importantly, Crown Castle outperformed its direct peers – American Tower and SBA Communications – by 8.4%², which stands as the largest week of outperformance for Crown Castle in the last decade.

See "Crown Castle's Top 10 Weeks of Outperformance Over Last Decade²" image.

The magnitude of Crown Castle's outperformance was so great, it exceeded that of any one-week relative move over the entirety of Jay Brown's tenure as CEO, underscoring that the degree of sentiment shift was truly unique. In effect, Jay Brown's severe underperformance as a CEO has made the prospect of his departure his greatest moment of outperformance. Unquestionably, the investment community has signaled with its capital that change is both necessary and urgent at Crown Castle.

In terms of the direct feedback that we have received, the commentary has been consistent and highly critical of the Company and its strategy and leadership, including the apparent lack of oversight by the Board. We encourage you as directors to have the same conversations, in a format that allows for candor, and not rely on management's portrayal of sentiment. Such discussions are critical to understanding the situation today across constituents: shareholders, equity research analysts, current and former employees and industry insiders. Since the release of our materials, we have been inundated with feedback, which can be summarized as follows:

• Industry insiders and advisors broadly acknowledge that Crown Castle paid richly for its Fiber assets and had minimal understanding of how to operate a Fiber business. (E.g., one highly regarded industry leader told us bluntly, "Jay overpaid for their Fiber assets and then didn't know how to run them. Everyone in the industry knows this.")
  
  
• Current and former employees and executives do not have faith in the leadership of the CEO and the small number of executives on his team who remain committed to the Fiber strategy. (E.g., see the "CEO Approval" metric on Glassdoor, which, at 51%, lags the CEO approval ratings of Crown Castle's peers by a staggering amount.)³
  
  
• The CEO and Board have adopted a head-in-the-sand approach to the Company's deep and persistent underperformance. (E.g., one former Crown Castle senior executive told us, "I've watched the Executive Management Team and Board try to conceal and ignore massive problems for so long that it's been both shocking and disappointing.")
  
  
• Most important, based on our conversations with our fellow Crown Castle shareholders, the CEO has thoroughly lost the confidence of the Company's shareholder base. Across many discussions with a diverse range of holders, we have not yet identified a single shareholder who believes Crown Castle's status-quo strategy is working. (In fact, many have commented that they have conveyed similar criticisms of the Fiber strategy to Crown Castle's leadership team for years and that their concerns have largely been ignored.) Not a single shareholder has suggested to us that Crown Castle should continue investing more than $1 billion per year in low-yielding Fiber capex. And not a single shareholder with whom we spoke has praised Jay Brown as a successful CEO or defended his track record. (E.g., as one large Crown Castle shareholder told us in a representative comment, "If Jay is gone, the stock goes up. The math tells you they are a destroyer of value.")

In addition to these conversations, we have had the opportunity to speak with most of the 24 equity research analysts who cover the Company, and we have yet to identify a single analyst who disagrees with our core thesis. These analysts have followed Crown Castle and its industry closely for years – in some cases more than a decade – and they speak regularly to the largest investors in the Company and its peers. Their perspectives reflect not only their own independent analysis, but also the perspectives they have consistently heard from investors and industry insiders, and they are therefore a good reflection of broader sentiment toward Crown Castle.

While opinions differ on the best solution (ranging from a Fiber divestiture to a curtailment of Fiber capex), we believe there is widespread support for a top-to-bottom review of the Fiber strategy. Thus far, 10 equity research analysts have published reports in response to Elliott's renewed call for change, which we believe are uniformly supportive of our perspectives:

• BMO: "We find ourselves largely agreeing with Elliott's views. As outlined in our recent initiation, we believe CCI's fiber/small cell strategy has been a key driver of its relative underperformance and valuation discount to peers."
  
  
• Citi: "Taking a step back, we believe Crown has an opportunity to further improve Fiber segment performance, re-balance capital allocation to improve the annual funding mechanism for its fiber segment, and retain the previously established long-term objective of increasing ownership (not just control) of land underneath its strategic towers."
  
  
• Deutsche Bank: "[W]e have increased our price target (and target valuation multiples) to better reflect the recent change in interest rates, alongside the prospect for potential changes in CCI's approach to its fiber business in upcoming years."
  
  
• Green Street: "To say the fiber/small-cell business has been a thorn in the side for Crown Castle would be an understatement. The investment community has nagged the company for years about its decision not to follow peers into international macro tower investments and rather invest heavily in an unproven technology."
  
  
• Jefferies: "[A] quick sale of the fiber business should drive immediate upside to the stock as we believe the market ascribes little value to the fiber business."
  
  
• MoffettNathanson: "From where things stand today, it's far clearer that the performance of the fiber segment has underwhelmed. The argument that investments into small cells and fiber solutions merit greater scrutiny strikes us as much stronger today than it did three years ago, especially considering the higher cost of capital."
  
  
• Raymond James: "CCI's Total Shareholder Return (TSR) has significantly lagged that of AMT and SBAC on 1-year, 3-year, 5-year, and 10-year time horizons, and has been 72% and 98% lower than AMT and SBAC respectively since current CEO Jay Brown was promoted from the CFO role. This suggests the poor performance goes beyond just the impact of rates and into the fundamentals and capital allocation decisions of the company. And it seems that Elliott has a stronger case and a more receptive investor audience this time."
  
  
• RBC: "Our impromptu discussions with investors about this matter suggest roughly two thirds of investors favor a divestiture of the fiber/small cell business, at which point they believe it would trade roughly at parity with towerco peers on a trading multiple basis."
  
  
• TD Cowen: "Three years have passed, and we've seen both lackluster fiber results from Crown as well as lackluster fiber/small cell results across the industry…A sale of the fiber/small cell business would result in the best/fastest way toward stock appreciation given (1) it would provide Crown a solution out of its 'capital box', and (2) Crown's multiple would climb to reflect the U.S. Towers business."
  
  
• Wells Fargo: "Jay Brown is the primary architect behind CCI's fiber / small cell strategy, which has underwhelmed since its inception…We agree with Elliott's assertion that the CCI strategy is in need of a refresh."^4,5

Across all of these many conversations, the most frequent reaction we have heard can be summarized as follows: "We agree with you. But why should this time be different than 2020, and why do you believe that Elliott can facilitate leadership and strategy change?"

This is a very good question and one that we would turn back to the Board. So far, investors have heard little from the Company in response to Elliott's published views. However, several actions since the release of our materials reinforce the perception that the Board's oversight failures are ongoing.

For example, one day after the release of our materials (in which we detailed our analysis of the value-destructive Fiber business), Crown Castle announced that the COO of the underperforming Fiber business would be made COO of the Tower business as well, after a "monthslong external and internal search." Many observers shared with us that "tone deaf" was their immediate reaction to this news, and we agree. Additionally, on November 29^th, TMT Finance reported that Crown Castle is soliciting bids for a portfolio of land leases under its towers. We, and many others, believe that this is yet another example of the CEO's irresponsible financial management – i.e., that Crown Castle is essentially mortgaging its best assets to fund yet more value-destructive Fiber capex.

Proceeding in this way, in defiance of both sound decision-making and a clearly growing consensus for fundamental change, would be a profound mistake. While we remain hopeful that we can align with the Board on a constructive path forward, it is even clearer to us today based on the feedback we have received that Crown Castle requires CEO change and a robust review of the Fiber business. The Board's refusal to act in the face of such overwhelming data and robust support for change would be a failure of its most basic duty of oversight and stewardship on behalf of shareholders (in addition to the egregious governance lapses highlighted in our prior letters).

The underperformance of CEO Jay Brown and his Fiber strategy is unambiguous: When we launched our 2020 campaign, Crown Castle had underperformed its direct peers by an average of 70% during the tenure of this leadership team. That underperformance has now expanded to 85%, translating into $26 billion of unfulfilled value.⁶ Yet this Board has remained unwilling to make the right decision and change course, leaving us and other investors wondering:

Having been warned three years ago that the Fiber strategy was the road to value destruction, and having watched that destruction take place and done nothing, how much more value destruction will this Board permit before finally taking action and changing the leadership of Crown Castle?

If the current Board is unwilling to take this necessary step, we will nominate a new Board that will. And based on the feedback we have received, we are confident that shareholders will choose a Board with a greater commitment to shareholder stewardship and best-in-class governance. We look forward to your response and meeting in the near future.

Best regards,

Jesse Cohn
Managing Partner

Jason Genrich
Senior Portfolio Manager

About Elliott

Elliott Investment Management L.P. (together with its affiliates, "Elliott") manages approximately $59.2 billion of assets as of June 30, 2023. Founded in 1977, it is one of the oldest funds under continuous management. The Elliott funds' investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm. 

_____________________

¹ Calculated from closing price on November 24^th through December 1^st, 2023.
² Relative performance versus equal weighted basket of AMT and SBAC over all Friday to Friday periods.
³ As of this writing, the CEO approval ratings of AMT and SBAC on Glassdoor are 93% and 94%, respectively.
⁴ It is worth noting that Wells Fargo subsequently upgraded Crown Castle, noting, "The potential for Elliott to enact change at CCI should be supportive of the stock, including a possible management change and strategic reassessment of fiber solutions" (emphasis in the original).
⁵ Emphasis added to quotes.
⁶ Calculated from June 1^st, 2016 through close of trading on day prior to public launch (July 2^nd, 2020 for 2020 campaign and November 24^th, 2023 for current campaign).

Media Contact:
Stephen Spruiell
Elliott Investment Management L.P. 
(212) 478-2017
[email protected]

SOURCE Elliott Investment Management L.P.

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