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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 - ..... %
Source: Ministry of Interior, Rosstat, Russian government data
analysis centre, Rustelecom Ltd.
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
Source: Ministry of Interior, Rosstat, Russian government data
analysis centre, Rustelecom Ltd.
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
Source: Ministry of Interior, Rosstat, Russian government data
analysis centre, Rustelecom Ltd.
St. Petersburg Security services market
Source: Ministry of Interior, Rosstat, Russian government data
analysis centre, Rustelecom Ltd.
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,%
Source: Ministry of Interior, Rosstat, Russian government data
analysis centre, Rustelecom Ltd.
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
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
ESD on the market share of security services of
NWFD,%
2011 2010
Central Security Console market’s structure
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
Central Security Console market volume in NWFD,
mln rub.
2011 2010
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
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.
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
CSC services market dynamics for corporate
clients, mln rub.
2011 2010
NWFD CORPORATE CLIENTS SEGMENT
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
Corporate clients’ objects under protection
2011 2010
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
ESD’s share in corporate clients’ segment, %
2011 2010
NWFD CORPORATE CLIENTS SEGMENT
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
Number of objects guarded by means of CSC
2011 2010
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
ESD’s CSC corporate clients market’s share, %
2011 2010
NWFD: PRIVATE CLIENTS
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
Number of apartments and SPEC under protection
2011 2010
Республика Карелия
Республика Коми
Архангельская область
Вологодская область
Калининградская область
Ленинградская область
Мурманская область
Новгородская область
Псковская область
г.Санкт-Петербург
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 .....