BCE UPS ANTE IN RACE TO ‘ OWN THE HOME’
TELECOMMUNICATIONS
A “connected home” used to mean a landline and a cable package. But as these traditional services decline, telecommunications companies are looking to products such as home security, automation and the Internet of Things to keep residential customers as linked as possible.
That’s exactly what BCE Inc., Canada’s largest telecom, had in mind with the $ 166- million deal to buy AlarmForce Industries Inc., the second largest home security company in Canada.
“We look forward to growing our nascent position in security and automation services to ensure Bell residential customers are at the leading edge of connected home innovation,” CEO George Cope said in a Monday statement announcing the acquisition.
The transaction isn’t material to Bell’s bottom line — it adds approximately 102,000 customers with average revenue per user of $ 35 per month, barely a rounding error considering Bell already serves millions of homes.
But analysts say it’s a big strategic move for the Mont- real-based telecom.
“Strategically, we believe the acquisition highlights the growing battle among telecom operators to own the home as well as the desire to tactically and actively participate in over-the-top services ( such as home security and home automation),” RBC Capital Markets analyst Drew McReynolds wrote in a note to clients.
Bell already offers home security products in Atlantic Canada and Manitoba, but the deal allows it to expand to Ontario and Quebec. Its top cable competitor, Rogers Communications Inc., already offers smart home monitoring packages that do things like control thermostats, switch off lights, lock doors and turn on coffee makers.
AlarmForce gives Bell the ability to compete against this and future offerings through Comcast’s X1 platform, which is expected to provide more capabilities through Xfinity Home when Rogers and Quebecor Inc. eventually sell it across Bell’s footprint, McReynolds noted.
Barclays analyst Phillip Huang called the deal, which represents less than 0.2 per cent of BCE’s market capitalization, “a small acquisition that serves big purposes.”
Home security services have shown to reduce churn among customers, he wrote in a note to clients. It’s an- other product that can be bundled with internet, TV and telephone, with bundled customers being less likely to change providers due to the hassle.
It also provides Bell and AlarmForce cross-selling op- portunities between standalone customers, he said, and it further differentiates Bell’s broadband offerings from smaller internet players.
Big telecoms aren’t the only players vying for the cash flow expected from increasingly wired homes. Tech giants also want to be in the space with voice assistants such as Alphabet Inc.’ s Google Home and Amazon. com Inc.’s Amazon Echo, both of which can control home security or automated products.
BCE’s stock remained stable on the news of the deal, while AlarmForce’s price skyrocketed more than 71 per cent to $16.04 by noon on Tuesday.
BCE agreed to purchase all of AlarmForce’s issued and outstanding shares for $ 16 per share in an all- cash offer. The deal does not require regulatory approval. It is expected to close in January.