BCE takeover of AlarmForce a small deal serving ‘big purposes’

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 about 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 Montrealbased 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 and lock doors.

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.