Crown Castle cuts jobs and scales back build plans

The US towers operator this week revealed it will shed 10% of its workforce and close certain, unspecified offices, thereby creating cost-savings as well as lowering projected investment levels. It is putting a positive spin on the whole thing, dubbing it an enhancement of its operational performance, but it's not difficult to see through the rhetoric: the market is not panning out as Crown Castle had hoped.

Crown Castle has always been bullish on small cells and just over two years ago it was starting to look like the promised mobile operator network densification that would make smalls the market to be in was starting to happen. But it now looks like it was something of a false dawn.

It is reducing its build target for small cells by 3,000-5,000 in 2024, both by scaling back its expansion plans and by delaying or modifying some ongoing small cells projects.

Specifically, it wants to increase colocation in small cells and focus any build on sites close to its existing infrastructure, pulling back on fully greenfield deployments. Similarly, in fibre it will narrow its focus to what it terms "the magnitude of market opportunities near its existing assets." Or to put it another way, it is reducing build to save a few bucks.

We're actually talking about more than a handful of dollars, of course. The new strategy will see Crown Castle reduce gross capex at its Fiber segment – which houses small cells and fibre solutions, and accounts for around a third of group revenues – by $275 million-$325 million this year.

Further, the headcount reduction, which will mainly affect the Fiber segment and corporate departments, should generate around $100 million in annualised run-rate cost savings, $60 million of which will come alongside the firm's 2024 results.

"As we have continued to progress the strategic and operating review of Crown Castle's fibre business, we are implementing changes designed to drive operational efficiencies and to enhance returns in fibre solutions and small cells. These changes are being implemented, regardless of the outcome of the strategic review, which remains active and ongoing," said Crown Castle's new CEO Steven Moskowitz, in a statement.

"With these changes, we are pursuing a more focused sales effort to target on-net and near-net demand and, critically, increasing return thresholds on all new growth opportunities to drive a more efficient use of capital," Moskowitz said, adding that the firm is sticking by its outlook on revenue growth its towers, small cells and fibre solutions businesses over the coming few years.

The outcome of that strategic review cannot come soon enough for Crown Castle's disgruntled investors, some of whom have been making their feelings very clear on what they perceive to be its failings in recent months.

Elliott Investment Management and Boots Capital Management both claim tens of billions of dollars in potential shareholder returns have been lost as a result of poor management at the towers company and both have called for the sale of its fibre business, something that is under consideration as a part of the review.

Boots Capital, under the guidance of Crown Castle co-founder and one-time CEO Ted Miller, was the latest to launch a scathing attack on the company, accusing it of having "no credible plan to reverse years of underperformance," amongst other things, but failed to secure the backing of shareholders for its alternate slate of board directors last month.

Crown Castle's operational changes could well be designed to make the Fiber arm more attractive to potential buyers; the investors will certainly hope so. But until it announces the results of its strategic review, we are left guessing. One thing is certain though; the towers firm's activist shareholders will not give in without a fight if the review does not go their way.