Earlier this month, satellite television firm DirecTV (NASDAQ:DTV) entered the residential security market with its acquisition of LifeShield, which provides wireless home security solutions and monitoring services to more than 20,000 customers across the U.S. Cable operators such as Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) have also made moves into the home security sector. While the home security services is a high margin business, it can well be tricky as people prefer professional and experienced operators to ensure the safety of their homes. It would be interesting to see how DirecTV moves forward in this new segment given that the business is largely under-penetrated in the U.S.
What Is Lifeshield?
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LifeShield is the maker of wireless home security systems with burglary and fire monitoring for homes, apartments and small businesses in the U.S. Each of its users can customize the wireless system to fit their homes. All LifeShield systems include a patented LifeShield Siren Detector, which is used with any existing smoke and fire detectors. The siren detector can “hear” when a smoke alarm sounds and alerts the central monitoring station, which will then contact the user’s local fire department and the homeowner.  Lifeshield offers good cellular based alarm systems with a simple setup and smart fire safety sensors. However, LifeShield’s major weakness is the home automation service. Unlike some of the leading home security systems, LifeShield does not provide remote lighting control so a user can’t turn lights on or off, and control the temperature or access appliances when away from the house. 
What Is In It For DirecTV?
A home security system could offer multiple benefits for pay-TV and broadband operators. Brad Bentley of DirecTV stated that the home security by itself is a high margin and low-churn business, which offers a natural extension to DirecTV due to its national footprint of technicians, consultants and dealers who visit these homes regularly.  While Lifeshield seems to be a perfect fit for DirecTV as they offer a completely digital, wireless and easy to install solution, DirecTV has a long way to catch up in the home security systems as Comcast, Verizon (NYSE:VZ), Time Warner Cable and AT&T (NYSE:T) have been in the market for some time now.
The home security business itself is not just about operating with a handful of technicians and a call center. For a customer, life safety services should be provided and monitored by a professional group and fortunately for DirecTV, Lifeshield appears to be building such reputation in the market. Lifeshield is ranked third best wireless security system in the U.S. after FrontPoint and ProtectAmerica.  Approximately 14% of the broadband users in the U.S. want to utilize home security services and only 16% of the U.S. homes currently have professional home security systems. ((A fifth of US broadband homes “highly interested” in ISP-delivered security, Telecoms, Sep 25, 2012)) It is evident that the home security business is largely under-penetrated and the industry can offer significant growth in the future. While the financials of the deal are not disclosed, it appears that DirecTV has made a move in the right direction, as it can extend these services to some of its existing pay-TV subscribers.
Our price estimate for DirecTV stands at $58, implying a discount of over 5% to the market price.Notes:
- Lifeshield’s Webpage [↩]
- LifeShield Security Review, Reviews [↩]
- DirecTV’s acquisition of LifeShield a sign of things to come?, Security Info Watch, Jun 6, 2013 [↩]
- Home Security System Experts Announce Rankings for Best Wireless Security Systems, Watch List News, May 24, 2013 [↩]