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Stock Strategist

ADT's Moat Less Secure

The home security company faces an onslaught of new competition.

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 ADT (ADT) has long dominated the $13 billion North American residential and small-business security market. The firm owns a 25% share of the $11 billion residential portion of the market, which it enhanced with the 2010 acquisition of Broadview Security (which owned the Brink's brand) for $2 billion. ADT's market share is approximately 6 times those of its next-largest competitors, Vivint (owned by Blackstone Group (BX)) and Monitronics (owned by Ascent Capital Group (ASCMA)). Other traditional providers include Protection 1, Slomins, and Guardian. The majority of the market has been served by regional and local security dealers that outsource alarm monitoring to wholesale alarm monitoring service companies such as COPS. Over time, the industry structure is likely to shift toward large cable and telecom companies that have introduced competing offerings in recent years.

The most aggressive new entrant to date has been AT&T (T). AT&T first launched its Digital Life security offering in 15 U.S. markets in April 2013, reaching more than 50 markets at year-end and 63 at present. Unlike other cable and telecom offerings that require customers to subscribe to existing cellular, Internet, or cable services, AT&T is available to any household in its markets that doesn't reside in an apartment or condo. Meanwhile, Comcast (CMCSA), which is the cable provider for approximately 50 million homes, introduced its XFINITY Home solution to Comcast customers in Houston in October 2010 and completed its nationwide rollout in October 2012.

James Krapfel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.