Security service in russia 2012 - NEW, english version

RUSSIAN MARKET OF

SECURITY SERVICES IN 2008-2012

Rustelecom Ltd. 2012

RESEARCH

� The purpose of this research is to carry out a comprehensive analysis oftrends on St. Petersburg market of central security, its key players, theirservices and pricing for private and commercial clients, evaluation of theadvantages and disadvantages of private security companies and theExtradepartmental Security Directorate (ESD), as well as theircapabilities.

� Research method - desk study to gather data. Additional component -expert interviews. Geography of research - Russia, St.-Petersburg.

� The period under review - an expert survey conducted in July 2012, a deskstudy covers the period from 2008 to 2012.

� Selection of respondents - managers of ESD from police of St. Petersburgand Leningrad region, private security companies, integrators of fire andsecurity alarm systems.

SECURITY SERVICES MARKET IN RUSSIA� The Russian market of security systems

and security services in 2011 amountedto almost ...bln rub.

� Market grew by ...% compared to theprevious year.

� The largest share of the market is thesecurity and fire alarm systems segment(...%), followed by CCTV (...%).

� The largest share of the market ofsecurity systems is located in Moscowand St. Petersburg. About ...% ofconsumers live in Moscow ...% live in St. Petersburg.

� In the upcoming years Russian securityservices market will grow by an averageof ....% per year.

� The main drivers of growth will be…

Source: Ministry of Interior, Rosstat, Russian government data

analysis centre, Rustelecom Ltd.

2008 2009 2010 2011 2012

Security services market dynamics in Russia, bln

rub.

STRUCTURE of the RUSSIAN MARKET

� The main source of income for ESD are security services offered to corporate clients (....% of total revenues), and

security services for private home-owners as well as storage of personal effects of citizens (SPEC).

� ESD units have provided security services of the total amount of ... million objects, of which …% are non-state,

the objects included in the list of objects subject to state

protection - ...%, apartments - .... %, SPEC - .... %.

� In other words .... % of protected objects (apartments and

SPEC) bring ESD less than ... % of revenues.

� However, the trend is outflowing of the clients from ESD segment to private security firms which are in a better

position to attract customers.

� Analysis of the structure of expenditures by ESD units show that they are socially oriented, from ....% of the

funds are spent on wages and social benefits. For the

purchase of fixed assets and inventories - ....% of the funds

are spent, to pay for work and services - ..... %



2008 2009 2010 2011 2012

Structure of the market of security services of Russia,

bln rub

ГУВО МВД РФ ФГУП Охрана ЧОО

The number of objects under protection

2007 2008 2009 2010 2011 2012

Apartments and SPEC, ths.

ГУВО МВД РФ ЧОО ФГУП Охрана

2007 2008 2009 2010 2011 2012

Corporate clients facilities, ths.

ГУВО МВД РФ ЧОО ФГУП Охрана

Source: Ministry of Interior Source: Ministry of Interior

SECURITY SERVICES MARKET SHARES� ESD and FSUE Ohrana are gradually

retreating from the market giving it to private security organizations.

� Tendency of clients’ outflow from ESD gets stronger every year and is likely to remain in the medium term outlook.

� It is highly likely that in 2014 the marketshare of private security will pass threshold of ...%.

� Private security organizations still do notuse all marketing opportunities to attractcustomers.

� In total, the private security businessemploys more than one million Russiancitizens.

2008 2009 2010 2011 2012

Shares of major Russia security services market

participants,%

ГУВО МВД РФ ФГУП Охрана ЧОО

Source: Ministry of Interior, Rosstat, Rustelecom Ltd.

ASSORTMENT POLICY

� Basic services offered by Private Security Companies (PSC):

� 1) Panel protection when the object isequipped with alarm and in the case ofan emergency alarm message makes patrol unit to show up;

� 2) physical security, when an object isguarded on the perimeter by trainedpersonnel;

� 3) escorting of cars and cargo vehicles;

� 4) protection of public events;� 5) bodyguarding;� 6) design, installation and maintenance

of security-fire alarm systems;� 7) advice and recommendations for

clients on legal protection againstunlawful encroachments.

THE MAIN SECURITY SERVICES’ CONSUMERS

Among the

major

consumers

of PSC

services -

retail, banks,

industry,

construction-

tion sector,

educational

institutions

and hospitals.

Source: Ministry of Interior

2010 2011

Consumer market structure in the PSC segment, ths.

спортивные объекты

имущество граждан и ИП

(собственность чл)

жизнь и здоровье граждан

объекты здравоохранения

КБ и предприятия кредитно-

финансовой сферы

промышленные предприятия

образовательные учреждения

торговые комплексы и объекты

розничной торговли

объекты культуры

прочее (в основном -

незавершенное стр-во)

MARKET TRENDS

In Russia,

an increased

demand for

security

services is

due to a

negative

criminal

situation and

ineffective

functioning

of state-run police.

� The main trends of the Russian market of security services and security are:

� expansion of the customer base through small and medium enterprises;

� increasing segment of individuals as consumers of services in the field of safetyand security;

� appearance on the market of integrated security and insurance products(insurance companies are encouraging by the pricing policy property owners toaddress to security companies);

� involvement of private security organizations in the city and municipal programs;

� development of means of protection (Panel protection, video surveillance, accesscontrol etc.);

� creation and brand development for the safety and security companies;

� preparation for accession to the WTO and the search for foreign partners, possible purchasing of security companies; building of strategicalpartnerships

� consolidation of security companies.

MARKET’S STRUCTURE BY FEDERAL DISTRICTS

The largest

market by

federal

districts is

the Central

Federal

District. It

accounts for

....% of the

market of

security

services of Russia.

2008

2009

2010

2011

2012

Structure of the market of security services by the Federal Districts, bln rub.

ЦФО СЗФО ЮФО СКФО ПФО УФО СФО ДФО



NWFD MARKET’S STRUCTURE

By the end

of 2011 the

largest

regional

security

services

market was

the Vologda

Region. The

smallest

volume

market in

North-West

is the Pskov region.

2008

2009

2010

2011

2012

Dynamics and structure of the security services market of NWFD, mln rub.

Республика Карелия Республика Коми Архангельская область

Вологодская область Калининградская область Ленинградская область

Мурманская область Новгородская область Псковская область



St. Petersburg Security services market



2008 2009 2010 2011 2012

Dynamics of St. Petersburg market of security services,

bln rub.

2010 2011 2012

Structure of the market of security services St.

Petersburg,%



ESD ON THE SECURITY SERVICES MARKET

Республика Карелия

Республика Коми

Архангельская область

Вологодская область

Калининградская область

Ленинградская область

Мурманская область

Новгородская область

Псковская область

г.Санкт-Петербург

ESD net income in NWFD, mln

6м 2012 2011 2010











ESD on the market share of security services of

NWFD,%

2011 2010

Central Security Console market’s structure











Central Security Console market volume in NWFD,

mln rub.

2011 2010











ESD share in NWFD Central Security Console market, %

2011 2010

Central Security Console market’s structure

� The main income generator for theregional market of CSC are corporate clients.

� In St. Petersburg, according to the IAA Rustelecom, corporate clients provide ...% of the total segment revenue.

� In St. Petersburg, in addition to industrialfacilities and monetary system, by ESDs are protected.... hospitalcomplexes .... medical facilities ..... Gasstations ..... Railway facilities ..... Children's educational institutions ..... Shopping malls, .... sports’ facilities..... hotels.

� In the Pskov region corporate clients account for...% of all revenues fromCSC.

� However, the potential of this segment is limited, market grows mainly thanks to newly built objects.











CSC services market dynamics for corporate

clients, mln rub.

2011 2010

NWFD CORPORATE CLIENTS SEGMENT











Corporate clients’ objects under protection

2011 2010











ESD’s share in corporate clients’ segment, %

2011 2010

NWFD CORPORATE CLIENTS SEGMENT











Number of objects guarded by means of CSC

2011 2010











ESD’s CSC corporate clients market’s share, %

2011 2010

NWFD: PRIVATE CLIENTS











Number of apartments and SPEC under protection

2011 2010











ESD’s share in the private segment, %

2011 2010

St. Petersburg: market’s structure

2007 2008 2009 2010 2011 2012

St. Petersburg CSC services for apartments

and SPEC market’s structure,…

УВО ФГУП Охрана ЧОП

Source: Ministry of Interior, Rustelecom Ltd. Source: Ministry of Interior, FSUE Ohrana, Rustelecom Ltd.

2007 2008 2009 2010 2011 2012

St. Petersburg CSC services for corporate

clients market’s structure,…

УВО ФГУП Охрана ЧОП

LARGEST MARKET’S PLAYERS

Net revenue

of largest

PSC in St.

Petersburg

market by

Russian

Accounting Standards

St. Petersburg Security Services Market

The local

market of

security

services is

still highly

segmented .

Leaders are

increasing

their market

share at the

expense of

smaller players.

Source: Rustelecom Ltd.;

* ESD and FSUE Ohrana excluded

7% 8% 8% 9%

8% 8% 9% 10%

8% 8% 9%10%

1%

4% 4%4%

5%14%16%

17%

18%4%5%

5%

5%

11%10%

10%

11%

4%4%

5%

5%

7%8%

9%

9%

4%4%

4%

4%29%25%

20%13%

2009 2010 2011 2012

The structure of St. Petersburg market of private

security companies in net income, % *

Telecommunications operators on CSC services market

55%38%

3% 3% 1%

Technological structure of St. Petersburg CSC

services market in 2011,%

Source: Ministry of Interior, Rustelecom Ltd.

CENTRAL SECURITY

Source: FSUE Ohrana, St. Petersburg and Lenoblast Police Departmnet, Rustelecom Ltd. estimates and calculations

2010 2011 2012

Volume and structure of CSC market in St.

Petersburg, mln rub.

УВО ЧОО

CENTRAL SECURITY

Источник: данные компаний, оценки и расчеты ИАА Рустелеком

Прим.: МП – медная пара, GSM – GSM-канал или радиоканал.

CSC MARKET POTENTIAL

� At the end of 2Q 2012, thepenetration rate of the CSC systems in St. Petersburg was .....

� In developed markets, this index isat ....%. In the medium term, growthis expected to .....%.

� The local CSC services market thuscan be considered as weaklysaturated.

� So these services have significantpotential for development.

� In the future, the market could take as many as ...... thousandconsumers.

Source: FSUE Ohrana, St. Petersburg and Lenoblast Police Departmnet, Rustelecom Ltd. estimates and calculations,

companies’ data

2007 2008 2009 2010 2011 2012

Dynamics of CSC services

penetration level in St.

Petersburg,%

SECURITY EFFICIENCY

� Burglary is the most massive anddifficult to solve crime. In 2011, according to the Interior Ministry, one inseven theft (12.5%) was associated withan illegal entry into an apartment, premises or other storage facility, everyseventeenth (5.8%) reported crime was burglary.

� Most effective apartments security provides burglar alarm. According toInterior Ministry, in 2011, a reliability ofstate-run security of property andfacilities was 99.93%.

� According to statistics from the Ministry, 90% of robbers waive criminal plans ifthey discover that the apartment isequiped with burglar alarm.

� According to the Interior Ministry, nearly97% of thefts from apartments with CSC end up with eventual detentionof criminals

40%

18%

14%

10%

13%5%

Ways of unlawful intrusion to apartments

взлом и выбивание замка

проникновение через окна, балконы и форточки

выбивание и взлом двери

свободный доступ (гости, знакомые и т.д.)

подбор ключа

не установлено

Source: Interior Ministry, 2011

Telecommunications operators and CSC segment� Security services market makes an object of

interest from telecommunications operators. So far their attempts to enter that sector can not beconsidered successful.

� The only exception is "MegaFon“ which has connected to its service "Video surveillance" about 4.5 thousand clients.

� However, in foreign markets operators quitesuccessfully implement their customers securityservices.

� AT & T, for example, provides a comprehensive serviceof monitoring and management of the facilities.

� AT & T set of services is based on the protocol IPand includes windows and doors, security cameras, smoke detectors, carbon monoxide, motion and glassbreak, remote access to temperature and humiditysensors, access to the remote control of homeappliances.

� In the U.S., these services are also provided byVerizon, Time Warner Cable and Comcast.

� According to U.S. experts, the share of servicesrendered by Internet Service Providers, in totalsecurity services will grow from 2.5% in 2011 to 13.4% in 2013.

SALES CHANNELS

Sales

channels,

suitable for

selling CSC

services contracts

CSC SALES DEVELOPMENT PROJECT

CSC

services

sales project

is based on

the targeted offer

CSC SALES DEVELOPMENT PROJECT

ALGORITHM OF SALES IMPLEMENTATION

In the short

term outlook

for security

organization

s strategic

sales

channels in

the private

sector, most

likely will be .....

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