Telco sheds alarm business

SOUTHFIELD, Mich.—At a time when many telcos are jumping into home security, Cincinnati Bell has decided to shed its home security business, though it will continue to have a cooperative marketing agreement with the buyer, Guardian Alarm Company, a super-regional security company based here.

Guardian paid $11.5 million for Cincinnati Bell's alarm business, which included 15,000 accounts and 15 employees, Guardian president David Goldstein told Security Systems News.

“We're now in Cincinnati as a player instead of as a spectator,” Goldstein said. “It gives us stability and a solid footprint in south/central Ohio. We were already in Cleveland and Toledo,” he added. Guardian previously had a small presence in Cincinnati, with about 700 accounts. It also had 500 existing accounts in Columbus, Ohio and the company does “quite a bit of medical monitoring in the area,” Goldstein said.

The 15 employees that come with the buy include a general manager, two sales reps, a service supervisor and an 11-person installation team. Cincinnati Bell is closing its Five Diamond-certified central station and all accounts will be moved to Guardian's central station by Aug. 1.

The Cincinnati Bell team has generated 300 accounts per month on average and Goldstein expects the team to continue at that pace. The new Guardian Cincinnati group will operate out of a new office, located in the same building as Cincinnati Bell. Goldstein wanted the group to be in close proximity with its former owners because of the cooperative marketing agreement between Guardian and Cincinnati Bell.

Under the agreement, the Cincinnati Bell telemarketing team will continue to sell home security over the phone to its customers to whom it sells telephone, Internet and TV services for one year. Goldstein hopes to extend the agreement after the first year. “We're not changing anything they do or we do,” Goldstein said. “We don't want to break what works. The telemarketing team typically sells 150 systems per month.

“Down the road” Goldstein anticipates partnering with the telemarketing team to sell Guardian's medical monitoring services.

In addition, Cincinnati Bell has doorknockers who sell their services, and who historically sell 50 security systems per month year round. They will continue to sell security for Guardian.

Peter H. Wright, managing director of Charlotte, N.C.-based investment bank Anderson LeNeave & Co. brokered the sale. Wright said Cincinnati Bell ranked as the “80th largest provider of home security in the country.” Shareholders were given the opportunity to divest the security operation in February. “There were seven interested buyers and Guardian made the most sense financially and strategically.”

With the acquisition, Guardian has 115,000 accounts. Its account balance is mostly residential. Beside its headquarters here, Guardian has offices in Ohio (Cleveland, Toledo, Akron, and now Cincinnati), in Lansing, Mich., in Boca Raton, Fla.; and, in Windsor, Ontario.

In a prepared statement, Cincinnati Bell CFO Gary Wojtaszek called the transaction a “shareholder-friendly initiative that demonstrates the company's ability to sell a non-core asset at a significant premium to current stock price multiples.”