XRX - Crown Castle Inc. Founder Ted B. Miller Leads Slate of Four Highly Qualified Directors for Board of Crown Castle Inc. | Benzinga
Miller and Nominees Are Committed To Restoring Urgency, Operational Excellence and Shareholder Confidence in Crown Castle
Miller and Nominees Bring a Detailed Plan for Optimizing Crown Castle's Fiber Assets, and Materially Improving Operations, Go-To-Market Strategy and Customer Innovation
Strategic Plan Financial Targets:
AFFO After Discretionary Capex of $2.2 Billion by 2025
Drive EBITDA Margin Per Tower From 70% Toward 75-80%, In Line With Crown Castle's Peers American Tower and SBA
A Highly Sustainable Dividend Policy To Build Long-Term Value
Annual Interest Cost Savings of $330 Million – In Excess of Expected Churn Costs from Expiring Sprint Contract
A Target Share Price of $150-$160 Based on 2026 Ebitda Projections
Miller and Co-Investors Have Economic Position of $100 Million in Crown Castle
Miller and Nominees Also Urge Crown Castle to Put the Company's Coercive and Disenfranchising Agreement With Elliott Management to a Shareholder Vote
HOUSTON, Feb. 20, 2024 /PRNewswire/ -- Ted B. Miller, the founder of Crown Castle Inc. (NYSE:CCI) ("Crown Castle" or the "Company") has nominated a slate of four director nominees to the Crown Castle board of directors (the "Board"). Their full biographical information is available at the end of this release. Below is the text of a letter sent by Mr. Miller, on behalf of his investment vehicle Boots Capital Management, to the Crown Castle Chairman, P. Robert Bartolo.
Dear Rob:
This is a pivotal moment for the future of the company I founded, Crown Castle Inc. Like you, I believe that Crown Castle must be rebooted after the shameful adventure into fiber, which has cost investors tens of billions and turned the global industry-leader into a ridiculed laggard.
But raising questions is not the same as answering them. While Elliott Investment Management L.P. ("Elliott") and the Board have brought on new directors and hopeful concepts about the future, my six months of discussions with the largest fundamental shareholders, customers and employees surfaced the same plea: Crown Castle lacks leadership, expertise, vision and urgency. It needs a plan.
The CEO has resigned, the current CFO has resigned and un-resigned, there is a revolving door of fiber leadership, the EVP/COO of Towers has left, a major employee location has been shuttered and reopened, the company still trades at a 15-20% enterprise-value discount to peers, and the share price reflects skepticism about a potential fiber sale and what comes after.
Well, we've got a plan.
A plan that brings leadership, expertise, vision and urgency. We have readied world-class tower know-how – across every aspect of the business – to execute that plan and act as the single best insurance policy for Crown Castle's long-suffering shareholders.
I would serve as Executive Chairman, and Chuck, Tripp and David as directors. We would help the Board and collaborate with both the interim and new CEO to accomplish the following objectives for all stakeholders:
- Get fiber sold. My fellow nominees and I have spent the last six months and $5 million in direct, personal cost, dissecting every dimension of the fiber transaction including leading a due diligence process with 25 prospective buyers and financing sources to increase speed and certainty of a transaction for Crown Castle's benefit. We have analyzed the status and financing capacity of each potential buyer, the optimal buyer structure, carveout economics, and go-forward financials for Crown Castle. In our discussions with the Board, not one Board member ever asked to see this extensive work.
The fiber and small-cell assets are of high quality, and our model anticipates Crown Castle retaining a minority interest, but it's clear they belong in the hands of operators who are most comfortable in that business. Our models showed that Crown Castle could go all the way to 2050 and never earn back its own cost of capital. Sadly, the facts show that Crown Castle would be worth tens of billions more today if it had simply held on to its international towers and never ventured into fiber. - Capture tax benefits. We have detailed to you and the broader Board the need for the completion of the fiber transaction in 2024. There are significant tax benefits, estimated by our accounting advisers at $1 billion-plus, that expire at the end of 2024.
- Relentlessly focus as a pure-play US TowerCo. Freed from fiber, Crown Castle becomes a pure-play US tower company, with what should be a substantially attractive trading multiple that we estimate at 25 times Ebitda. This will finally close the decade-long valuation gap between Crown Castle and SBA Communications Corp. and American Tower Corp.
- Buyback shares. Add in $1.9 billion of buybacks from the proceeds of the fiber sale and enhance near-term and future shareholder returns.
- Run the company much more efficiently. In 2013, Crown Castle owned 40,000 towers and employed 1,400. Today it still owns 40,000 towers and employs 2,200 people across that business line, even after a 750-person reduction. How can the Company have gotten less efficient over time given so many advances in technology? Elliott has rightly had similar observations.
We will drive change to improve this. I founded this company and this industry. And I have devoted the last two decades of my life to advancing the technology that serves this industry. With this direct, functional knowledge we intend to use digital-twin and AI technology to reduce customer rebalance and rollout times, while reducing service costs by an estimated 40% during the tower lifecycle. Currently Crown Castle has 18 towers for each employee, the worst among the major three providers. We target taking that number to 23 for each employee by 2026 which is in line with AMT's US tower operations. We believe additional gains can be achieved because Crown Castle operated in 2013 with 29 towers per employee. - Repair a broken company culture. I founded this company with the hard work and shared values of dedicated employees. I have been horrified by the stories employees have conveyed to me over the last six months. In my opinion, their public comments show a company rotting from the top, managed by financial engineers and not actual operators. With interest rates having changed so drastically, this financial-engineering chapter of Crown Castle's life is over. It is time to get back to operational basics. And I am ready to be the principled leader – supporting both the interim and new CEO – to help fill this vacuum. Restoring a positive and productive company culture is essential to driving shareholder value.
- Build a better go-to-market relationship with carriers. We are also focused on creating value over a longer 24 to 36 month period. Once we spend the next two years fixing Crown Castle, we have a longer-term detailed approach to help customers access new communications infrastructure that captures immense opportunities in edge compute, Internet of Things, satellite connectivity, private networks, public services and autonomous transportation.
- Delivering materially improved financials. Clearing a fiber transaction, running a tighter organization, and paying down debt has material financial benefits for all shareholders. That includes our projections to:
Take AFFO after discretionary CapEx to over $5 per share by 2025, up from its current $3 per share.
Take AFFO after Discretionary Capex and Dividend from a $1.3 billion DEFICIT to a positive $200 million.
Drive EBITDA Margin per tower from 70% toward 75-80% in line with Crown Castle's peers AMT and SBA.
The current dividend is funded with debt and, in my view, is unsustainable. Our plan is to payout 90%, translating to a dividend of $4.62/share in 2025 with annual growth of 6-7%. This is accomplished with 5.4x leverage to maintain the Company's investment grade status.
Reduce total debt to approximately $17 billion, freeing up capacity for future initiatives once we get the house in order over the next two-plus years.
Pay off all floating rate debt eliminating interest rate exposure for the Company.
Paydown/buyout $4 billion of fixed rate debt and reduce fixed rate maturities between now and 2026 by 15%.
The bottom line for shareholders: We estimate that this detailed plan supports 2026 Ebitda that takes Crown Castle shares to $150 to $160.
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It is my direct experience – in the lab and field, responding directly to customers – which made me see both the failings of Crown Castle's management and the virtues of a business that Elliott rightly describes as one of the best businesses in the world.
Knowing the potential locked inside Crown Castle, I have never been more excited about an investment opportunity for all stakeholders. It's why I've got real skin in the game -- $100 million of capital from myself and select investors – to aid this transformation. This is a sum greater than the entire 12-person Board's company-granted holdings in Crown Castle, and it is a far greater amount than their personal purchases.
And unlike common hedge fund practice, our position is not hedged in a way that minimizes or fully eliminates true economic exposure. We deeply believe in what this company can and should be.
We shared our 39-page plan (a redacted version of which we are releasing today) with you on a 90-minute Board call on January 30. Perhaps most revealing was that during my Board interview, one director questioned whether we were "too in the weeds."
It was a poignant remark from a Board that only met four times a year in both 2021 and 2022, ...