The investor's recommendations include streamlining its fiber business, adjusting its compensation plan and changing the board.
“Crown Castle's return on investment in fiber is well below industry benchmarks,” Elliott Management, run by Paul Singer, wrote in a letter to Crown Castle’s board.
“The company should refocus on its highest return opportunities and target a fiber [capital-expenditure revenue return on investment] of at least 40%.”
As for compensation, “Crown Castle's current incentive program is not aligned with the capital-intensity of its fiber strategy,” Elliott said.
“Crown Castle should incorporate return-on-invested-capital to appropriately align capital allocation decisions with compensation.”
The investor says its plan will increase free cash flow by 35%, while still allowing for $600 million a year of discretionary fiber capital spending, enabling the company to increase the dividend by 46% to $7 a share in 2021.
When it comes to the board, “Crown Castle should address its extraordinarily 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 said.
“Additionally, Crown Castle's board would meaningfully benefit from greater diversity to improve its performance, culture and value for all stakeholders.”
Elliott said it’s not an adversary. “We want to emphasize our continuing desire to work together.” The company said in the letter that it holds "an economic interest of $1 billion" in Crown Castle.
Crown Castle shares recently traded at $174.73, up 2.1%. The stock has climbed 20% over the apst three months, compared with a 28% rise for the S&P 500.