Megacable Holdings, S. A. B. de C. V. (MEGACPO) Earnings Call Transcript & Summary

Good morning, and welcome to Megacable's First Quarter 2021 Earnings Conference Call. With us this morning from Megacable, we have Mr. Enrique Yamuni, CEO; Mr. Raymundo Fernandez, Deputy CEO; and Mr. Luis Zetter, CFO. Let me remind you that the information discussed in today's earnings call may include forward-looking statements on the company's future financial performance and prospects, which are subject to risks and uncertainties. Megacable undertakes no obligation to update or revise any forward-looking statement. I will now turn the call over to Mr. Enrique Yamuni. Sir, you may now begin.

Thank you very much, and good morning, everyone. Thank you for joining us today. Despite the persisting effects of the health contingency, Megacable kept posting a solid performance, supported by both the resilience that has characterized the telecom sector during the pandemic and a very competitive offer, attractive rates and a dedicated customer service. At the end of March, unique subscribers achieved its highest annual growth rate of the last 4 years, almost reaching the 4 million mark as the effort deployed to improve the quality of service and affordable tariffs drove a higher number of subscribers across all services. We're proud of the growth of unique subscribers is accompanied with growth in the 3 services of the mass market with broadband at the forefront. One of the reasons for this growth is our share rates remained below their annual comparatives in a similar levels of the previous quarter. As the progress in proximation will allow people to return to a regular mode, thus improving the economy and creating a recovery opportunity for some businesses, we believe that the need of connectivity is here to stay and the services we provide will remain essential for our subscribers. As a result of the previous mentioned, total revenue and EBITDA reached a record high figure for a single quarter. Similarly, quarterly EBITDA margins stood at the highest levels of the last 3 years also. On the corporate side, we continue to strive to return to levels before the pandemic. The good news is that we have recorded growth on the annual comparison. So we are positive about recovering in the coming periods. The future for MetroCarrier looks promissory given the need for connectivity together with higher bandwidth requirements. Regarding our cutting edge XView Plus and XView platforms, we have already surpassed 1.4 million subscribers, meaning we have already almost 40% of our total subscribers base with this service capable of putting together the content of the most recognized on-demand streaming services in a single application to a universal search engine. As of this point, we record approximately 30 million viewed assets per month each month. Further pursuant to our goal of consolidation, consolidating our position as a leading provider of Internet services, during the quarter, we continued transferring our subscribers to the FTTH network thus making more visible the benefits of this newer technology despite the related challenges. The project continues. As of today, we have already migrated close to 280,000 subscribers to the new network. We are proud of the progress that we have reached on this task that is a company priority. The MVNO platform maintained its upward trend in terms of subscribers. That should continue in the following periods. Meanwhile, in the HFC network, we continue planning its rare locations to other regions over upcoming quarters. Also, it is important to mention that despite the investments that we are doing, including the strategic project of network evolution, interactive video and expansion to new territories in the corporate segment, the company continues with its strong cash generation, which has resulted in the lowest net debt levels in the last 2 years. Wrapping up, I would like to emphasize that while we will remain cautious and vigilant to the performance of our key operating metrics, we are also confident that the further progress of the GPON migration, coupled with a gradual expansion of XView Plus, will provide us the required momentum to achieve our growth prospects. Finally, I am pleased to announce that at the general ordinary shareholders' meeting, shareholders approved yesterday a dividend payment of MXN 2.2 billion representing 20% of 2020 consolidated EBITDA, in line with our dividend policy and a little bit over that. The payment will be carried out in our installment in May 20. With this, I conclude my remarks and pass it along to Raymundo. Please, Raymundo, go on.

Thank you, Enrique. Good morning, everyone. We entered this new year with the growth trend achieved on the mass market over 2020. These great results were based on the 25% bandwidth speed increase that we provided to our customers. The attractive bundles with the most accessible rates of the market. The launch and consolidation of our advanced video solution. Our customer service operation and of course the essential nature of our services. The company has taken a serious commitment to keep up with the consumption trends, both in terms of increasing bandwidth capacity and providing reliable broadband services. And regarding the TV service, increasing the content available for our subscribers to enjoy whenever and wherever they want. We believe the subscribers growth reflects that we have been successful at meeting such target, and we're certain that our GPON migration and divorce will allow us to continue with the same trend in the future. With these strong fundamentals, we were able to reach the largest annual increase of the last 4 years in unique subscribers that posted an annual growth rate of 8.9% fueled by 327,000 net additions of subscribers, thus allowing us to close the first quarter of 2021 with about 4 million unique subscribers. Churn rate once again remained stable on a sequential basis, recording 1.7% for broadband, 1.9% in video and 2% in telephony. These rates remain at very healthy levels despite the economic situation and nefarious competition. However, our higher speeds and low rates proved the preference of our subscribers. Breaking down by service, the incremental bandwidth capacity of our network has strengthened the quality of the Internet service, attracting more customers, as reflected in the 80,444 sequential and annual net additions recorded during the first quarter. Therefore, as of the end of March, Internet secured its place as the service with the largest number of subscribers totaling 3.6 million. It is important to mention that seeking to capture the demand of home broadband for entertainment, education and e-commerce trend, Megacable is diligently advancing in the required infrastructure to migrate subscriber to FTTH as well as enhancing the capabilities of its remaining HFC network through DOCSIS 3.1. Our GPON project continues as planned during 2021. As of March 2021, approximately 50% of our subscriber base is demanding broadband speeds of 30 megabits or more compared to only 35% a year ago. Going to the video side. 203,000 and 24,000 net additions were gained, growing from 3.23 million subscribers in the first quarter of 2020 and 3.41 million over the last quarter to 3.44 million during this quarter, proof that despite the maturity of this market, our unique platform continues to provide satisfactory results. As a consequence, the subscriber of our next generation platforms, XView and XView Plus reached more than 1.4 million, representing more than 500,000 net additions on an annual basis, out of which 247,000 were recorded during this quarter, representing the best quarterly growth for digital. These results reaffirmed the investment thesis behind the XView Plus launching, which is oriented to reach a better absorption of the OTT demand as well as the demand for interactive services from the existing pay TV subscribers. Content integration is the key for consumer loyalty and absorption. Meanwhile, telephony arose as the service with the highest net additions on a sequential basis, with 101,000, totaling 2.7 million subscribers as of quarter-end. The MVNO platform, which complements our fixed offer, report quarterly net additions of 35,000 and annual net additions of 191,000, thus reaching 209,000 subscribers as of the end of March. Turning to RGUs, following our triple play packages commercialization strategy, RGUs grew at a faster rate at unique subscribers, amounting to 9.8 million at the end of the quarter, 13.9% above its annual comparative, becoming the record high of the last 2 years. Consequently, RGUs per unique subscriber were up from 2.34 in the first quarter of 2020 to 2.45 during this period. On a sequential basis, ARPU per unique subscriber continued to increase to reach MXN 411.4. This was due to the increase of RGUs per unique subscriber, the absorption of interactive video and higher speeds in the broadband services. Across the 3 segment units, broadband and telephony also posted higher sequential levels, while video remained flat. Going to the corporate telecom segment, MetroCarrier continued its recovery, increasing 8% in an annual basis, a trend that we expect to gain traction during the following quarters to reach a double-digit growth rate, not only because of the organic operation, but also due to the expansion to new territories. On the other hand, both MCM and Ho1a recorded an annual decrease of 5%, trend that we expect to shift for next quarters through our better alignment of the operation to current market conditions. Finally, during this quarter, the expansion of our network continues, reaching more than 9 million homes passed and having built more than 450 kilometers of additional networks over the period. The company expects to increase the trend of construction according to MetroCarrier and Megacable's expansion plans. With this, I conclude my remarks. Now I would like to hand the call over to Luis, who will provide a deeper analysis on financial results.

Thank you, Raymundo. Good morning, and welcome, everyone. Megacable's consolidated revenues reached MXN 5.9 billion mark, increasing 8% on an annual basis driven mainly by a larger subscriber base and price increases we were able to carry out during the second half of last year. In this regard, the mass segment registered 9% annual growth, favored by the growth recorded at broadband, video and telephony, which went up by 14%, 1% and 25% respectively. Following the uphill in the B2B segment, Corporate Telecom increased 2% year-over-year given the decline of 5% reported by MCM and Ho1a, which was offset by the increase of 8% in MetroCarrier. In this context, 85% of consolidated revenue came from the mass segment and the remaining 15% in the corporate segment. On the cost and expenses side, the cost of services was up 8% on an annual basis due to a larger subscriber base. On the other hand, operating expenses increased only 7% below the revenue growth. As a result of the above, the quarterly consolidated EBITDA recorded an annual growth of 9%, reaching the MXN 3 billion mark, a record high figure for the company. Following the same dynamics, EBITDA margin was 50.5%, increasing sequentially and when compared to the first quarter of 2020 and becoming the highest registered in this item for the last 3 years. EBITDA for cable operations grew 10% year-over-year, reaching MXN 2.8 billion with a 52% margin. Net income was MXN 1.1 billion, 16.5% lower than the one of the same period in 2020, given the negative comparison effect due to the FX gain of nearly MXN 200 million recorded in the first quarter of 2020, and also on the increase in our tax rate that we expect to be around 26% to 27% levels for this year. On a sequential basis, net income have a positive trend. In line with the growth recorded in the cash and cash equivalents balance, which in turn was driven by a higher generation of cash that was partially offset by the debt amortizations made during the period, the company net debt decreased 27% or MXN 1 billion on an annual basis totaling MXN 2.7 billion. Consequently, net debt-to-EBITDA ratio was 0.24x and interest coverage ratio was 12.58x, which reflects the continued strength of the balance sheet. On the investment front, the development phase of the GPON project continues to be reflected on CapEx as over the quarters the resources allocated to capital expenditures totaled close to MXN 1.9 billion, representing a 31.5% of quarterly revenues. We expect CapEx to accelerate during rest of the year. Before concluding, I would like to note despite the upcoming dividend payment of MXN 2 billion recently approved by the General ordinary Shareholders' Meeting, our liquidity will continue in executable and healthy level for a stable operation in coming periods. With this, I [indiscernible]. Now let me turn back the call to the operator to open the line for Q&A.

[Operator Instructions] Our first question is from the line of Marcelo Santos with JPMorgan.

I have 2 questions. The first one is regarding the outlook for 2021. Perhaps now I don't know if you already have more visibility so that you could provide a little bit more detailed outlook on the revenue and the EBITDA for the year, if that could be done would be great. And the second question is the sequential improvement in ARPU. So there was a improvement versus the fourth quarter. Could you please comment a bit more on this and how ARPU should behave going forward?

Sure, Marcelo. Regarding looking going into the future, we believe that we have a strong base to continue providing growth through an increase in unique subscribers. We don't see why we shouldn't continue having that trend with the essential nature of ourselves, we have a terrific growth during the year during these quarters. The health crisis strengthen the essential part of our service. But I think we're doing a good job in terms of product rate relation. So the market is absorbing that and continue to provide growth. So you can expect growth to be driven in revenues coming from unique subscribers. Regarding the EBITDA, we believe our margin -- there's always pressure on margins. We discussed that internally, and we see that. But we continue our policy of being a very efficient company related to our OpEx and cost. And we believe EBITDA margin should remain at the levels that you see right now. So that's what we can tell you, going into the near future on that part. Going to the sequential of the ARPU, we have an increase in the unique ARPU and that's going to be coming for what I say for the number of RGUs that we have on that part, there's going to be some pressure because of competition on that part. And the other one because some people want to absorb not a triple play package, but the double-play package in that terms. All around, combined, we expect ARPU to remain going forward in that part, but don't decrease, it should go slightly above to what we have right now. So I don't know, Luis, if you want to add something, but that's our view in terms of increasing revenue coming from unique subscriber, keeping the margin of the company the way we have been. And ARPU is pretty much constant, you can say it's slightly above what we have because of the combination of the XView platform, the personal video and increasing of speed. That will be...

Yes. No, I think you mentioned -- perfectly you describe the situation.

I don't know, Marcelo, if that's okay. I mean I answer this question.

No, that's great.

Thanks, Marc.

Our next question is from the line of Andres Coello with Scotiabank.

Yes. And I have a couple of questions. The first one, if you can give us some update on the progress of your GPON project, how that is going? Perhaps what percentage of your network is already under FTTH? And also, if you could help us understand the difference in ARPU, churn and perhaps maintenance CapEx between a subscriber, for example, in Guanajuato, where you already have FTTH and a subscriber, for example, in Guadalajara, perhaps you can give us some idea of the different operating metrics of a subscriber on the fiber versus the subscriber on [ HST ]? And that's my first question.

Sure, Andres. This is Raymundo. Okay. We can tell you the GPON project is going as expected. There are major challenges regarding that. We believe we will finish the project as expected during this year. It will take us the 3 remaining quarters to finish, but is going, as we said, some part of that was at the end of 2020, but the majority will be during 2021. You can count that 1/3 of our project has already been finished. And as we said, and Enrique mentioned in his remarks, over that we have already almost 300,000 subscribers already migrated to GPON. So we're very happy of that -- on that part because even though the subscriber sees only a change that -- to the new platform, really it releases all to continue to grow in terms of the next systems to be operated and also to provide better services for the whole company, not only to the GPON project. So that project, which is very important for us, is at 35% pretty much what we have and going according to a system. Regarding the ARPUs and the churn that we have, pretty much what we're doing is so far we don't have an increase in the ARPU because of the GPON because we just migrated subscriber. What we're planning to do is to increase the number of additional services to that coming from the [ OTTRs ] that you can have and the premium services and higher speeds as soon as we continue to migrate. Comparing Guanajuato to Guadalajara, always a larger city has a larger ARPU than a lower city, not really related to the GPON or the HFC. HFC, when we have the DOCSIS 3.1 platform, which we haven't, we have that technology, it's proving to be a great technology. So we don't need to change that to keep low ARPUs in one system and higher in the other one. It's more related to competition, to the acquisition power of the system and the subscriber itself and the products that they absorb. In terms of churn, we can tell you that we have shown across all Megacable in that part whether it's HFC or GPON and we keep it that we report in this part in a very, very good levels. So we expect to have higher [ ARPU ], we can provide mostly on the video part. We can provide more of the new applications that we have as we can continue to migrate. But not only because it's GPON, but because we are aiming GPON with the XView plus platform. As Enrique and myself said, we reached 1.4 million subscribers with the XView platform. That is the one that is going to bring us a new use of the video, and we can charge that more to that subscriber. So summary, we expect to continue to increase ARPU slightly because of everything we say, we continue to have this shown, maybe some pressure on this shown because of the economy, not because of the product on that part. But also, we have competition, that part what we've proven to be successful in all the areas. So I wouldn't make that much different between Guanajuato and Guadalajara because of the technology. It will always be because of the product we offer, and we offer those products in the -- in all the systems. And the difference is between the size of the system, Andres.

Okay. And my second question is a little bit on the competitive environment on opportunity and issues. First on Totalplay, as you know, they reported yesterday a very strong subscriber growth [indiscernible] and you're talking 1,000 RGUs, and I was wondering if you believe that competition is the same all over Mexico? Or we -- or is the competition you face in your territories is different from other territories? Because, for example, you grew more RGUs than Izzi during the first quarter. So I was wondering if your stronger growth is probably due to different competitive dynamics. So just if you could give us an update on Totalplay? And second, on Red Compartida, we are reading in the press that Red Compartida project is taking some financial problems. That's what we are reading on the press. I understand Megacable has a 4% stake in ALTAN. I was wondering if you could give us an update on your stake in ALTAN and whether you are thinking in investing capital or perhaps lending money to ALTAN, or perhaps increasing your equity participation in that project?

Sure, Andres. Let me address the first one that you asked regarding the competitive environment that we face. As you are aware, pretty much you can say that we are 4 fixed telco companies in Mexico, Telmex, Totalplay, Izzi and ourselves, we're facing strong competition in all the markets. There's also small cable operators or telco operators. So every market we have, we have faced competition over the past year. So it can get more furious or not, but we are -- we are used to face that competition. Regarding Totalplay, they compete to us in about 20 districts. So we have competition from them. And you can say the majority of the systems. It's nothing new. It's been there for the past competition at Totalplay is in over 60% of our total footprint. So we have that for the past 5 years to 6 years, some system is more -- is newer. The other one is been there for longer time. Over this time that we face competition from them, we can tell you that out of the report that they have and the number of subscribers, you can count that pretty much between 15% to 20% of the subscribers, mostly regarding to 15%, are in our territories, are in our systems. So in every place that we compete, we keep over 50% of the market share that we have above that, and they are way below our results. We don't like to brag about that, but we keep a very good margin despite competition. And that's been for a long time with Telmex, Totalplay and Izzi. We do the same with Izzi in Queretaro, Zacatecas and other markets, and we have the majority of the market share. And we've been competing with them for the past 40 years in those cities, if I can recall. So it's nothing new for us to have that competition. Of course, they continue to bring new products, new service. Remember that we have the XView platform. Our HFC network was already at a very good level to provide the bandwidth when we have the COVID crisis in that part. We were able to provide 25% to 30% more bandwidth with no additional effort for our subscribers, even in HFC. The GPON will strengthen that future bandwidth to come, but it is aimed with the XView platform that can depend on the Android TV platform for all our subscribers. So altogether, we've been proving to be so far a very successful operational systems and efficient one. Regarding ALTAN that you asked, yes, we have a participation of ALTAN on the part. ALTAN is our provider of the MVNO. We have a very good relation with them in all the different parts, but going to the future, the best offer that we can do to our subscribers is Red Compartida, and we will continue to that. But that doesn't mean that we don't have and we don't plan to have deals for those subscribers with only mobile systems to provide -- to have a second vendor in terms of what we're doing. Regarding our participation of them, that's something that -- well, we are discussing internally, and we will let you know in the near future regarding that.

Our next question is from the line of Carlos Legarreta with UBM (sic) [ GBM ].

I have 2 actually. I guess they're related. Raymundo, you were just talking about competition. I understand that you guys have been competing for -- with a lot of companies in the past. But Televisa was very explicit last week about the strategy to go into the territories of mega, particularly we're starting in Guadalajara. So I would like to know what is the company's reaction and if possible strategic response to this move? And I guess the second question that I think is closely related is on the CapEx front, I mean you obviously are undergoing a major project with the GPON. But how would that play out for CapEx for Mega both for this year and beyond? I think those are for me the key questions right now that I'm thinking of.

Sure, Carlos. Yes, I talk about competition, and we're aware of what Izzi disclaims on that part. As I said before, we compete with them in Queretaro, Zacatecas and the north part of Mexico City, where we have operations on that area. They start massive operation in Guadalajara, aimed by an infrastructure that they build a corporate contract that they want, a government contract. We are prepared for that one too in that area. We will continue to do our plans that has been successful in the past. We are building 6 new cities as we mentioned. We disclaim that. I don't remember if it was the last conference call or 2 conference ago in our plans, we are taking MetroCarrier to 6 new systems. We have always grown like we did in the past with Cancun, Merida, so you have Juarez, Mexico City and Monterrey on the hand of our corporate segment. That is pretty much what Izzi is doing. That doesn't mean we are not open to areas where it makes economic sense for us to provide massive services. We will, and we do that. As I said, we're in the north part of Mexico City, and we have operations in so far of Zapopan, Queretaro and Zacatecas. And we will continue to that. We will follow our plans to do and invest where it makes economic sense, both for our masses and for our corporate segment. So right now, we can tell you that the cities that we are talking about for MetroCarrier, they are on plan too. They will be open this year. Pretty much, you can expect that for end of -- pretty much at the mid of third quarter, some pressure to be end of that quarter. But you will have it this year, so we will expand MetroCarrier to those systems. What we do there is bring the best of what we know how to do and increase corporate to those areas. And if we found areas that make sense, we will build those areas as we [ speak ]. We are ready for that. And that's part of our plans. And that will be done according to the best competitive and economic sense of those areas.

You have to remember, Carlos, this is Enrique, if you are -- well, you are smart of all the people that is here in this conference is smart people. It doesn't really make a lot of sense to increase competitions or the competition at that level. But it's been done. And you have to realize that Megacable is the lowest ARPU company with the highest margin in the industry. And the markets that Izzi has are way higher family income than the areas where we operate. Mexico City and Monterrey are the highest family income in the country. So the opportunity for us to go in those markets is humongous if that what we decided and even more in selected areas. We have the balance sheet to do it. We will do it. And that it's going to be great -- those are going to be great markets for us with -- among -- with other cities like maybe Cancun, maybe San Luis Potosi. I mean they have great markets. We also have great markets. But we are ready. We're prepared. We've been successful with competition -- against competition. And we will continue to be successful, and we will continue to have the best margins in the industry despite whatever the market does.

No, that's very clear. I appreciate your -- both of your answers. And I guess I mean a follow-up, if I may. Just on margins, I think you mentioned that you expect margin to remain sort of around the same level that we saw this quarter. I guess I'm a little confused as to why -- how you could achieve that even -- I mean, I assume there is a certain expectation of recovery on the enterprise side, there's a lower margin. And I mean perhaps there are significant savings that we're not, like, seeing perhaps at the consolidated level that you can talk about, that would be also helpful.

Sure, easy. I mean the highest margin product is broadband. Now we have way more subscribers in broadband and video. Video is still a reasonable margin business for us. We make money there. But we make more money in broadband and the capital expenditure to acquire subscribers in broadband is less -- is lower than for a video subscriber. The good thing for the broadband subscribers that we -- I mean, we can install a voice line or telephone line for them with almost no cost. So it's very inexpensive to do that. So that's why we have been able to keep our margins. And we will keep it that way. I think that we will keep pushing for video because we still make money there. And it's a service that the subscriber looks for after. And once you are with XView, with the XView service, it's almost impossible to go back. We're much better than any satellite service. And it really complements whatever you have in the streaming platform that you have, or the other way around. The platforms complement, but will have in XView, and now you can find all platforms for XView. So it's a very complete service and a very, very, very attractive service for the subscriber. And it's very inexpensive also. Once you have broadband, the bundle is very inexpensive. So it's -- I think we're doing a smart bundling strategy and very efficient pricing for the subscriber.

And also, Carlos, if I may, as we foresee the results for the year or the following quarters, we think that it is going to be driven by the massive market. So the growth mainly this year is going to be driven again by the subscriber growth. We think what that is -- will be in a healthy level. And also, MetroCarrier, we expect that to regain growth. And as you know, the margins coming from those 2 businesses are the ones that keep our margins at the levels that we mention. Of course, we will get some pressure on other effects, but basically, this is what will be driven the growth for the year. So that's why we think that margins will be more or less stable.

Our next question is from the line of Alejandro Gallostra with BBVA.

I have 2 questions. First, I would like to understand how you price your bundles? Or more importantly, how you allocate the bundled revenues among each business segment? Since it's been widely perceived that you've been giving the telephony services mostly for free as part of the bundled goods strategy. However, the telephony segment has been growing at double-digits for the past 5 quarters, and even growing faster than the other business segments. And it is also accelerating. So why telephony revenues have been growing that much, and how should we think about the revenue growth performance in the telephony segment going forward? And the second question is regarding your Corporate Segment. How fast do you expect to return to a double-digit growth rate in this business segment? Should it happen in the second quarter or in the second half of the year or more probably next year? Having additional color on this will be greatly appreciated.

Thanks, Alejandro, and thanks for your question. And well, as you know, the revenue allocation, we changed the method of revenue allocation for telephony -- for fixed telephony at the beginning of 2020. And that was the result of reassessing the value that -- perceived by the subscribers. We have not done any new adjustment on that. And maybe that's something that we have to do. But for now, that's what the numbers have been showing. And yet it's -- we think that it still has some value perceived by the subscribers. So we are not ready to say that it has 0 value for the service. And which is small right now, MXN 68 for the service, it's really small. But it's really among the range that we think is perceived by the market. On the revenue growth, we will see MCM on the enterprise business. We will see MCM on these levels going forward. So this could be considered the new levels for MCM going forward with small growth maybe on a sequential basis. For Ho1a, we expect also an increase. And we have to think that on a comparable basis, the first quarter of 2020 still was before pandemic impact. And thus the real impact to Ho1a started on the second quarter. So the comparison basis will be really soft for Ho1a on the following quarters. And we think that we'll show some recovery. But again, on a sequential basis, we expect the numbers to improve. And again -- go ahead, go ahead.

Sorry, Luis, I jump into. And Alejandro, for all of you, we're very happy with the results of the corporate, even though with those decline in MCM and Ho1a, we're happy with increase of MetroCarrier. And let me tell you why we're happy of that. Pandemic has opportunities and has some risk and some backdrop to our operation. In terms of MetroCarrier and MCM, when you see some of the operations that we had before, like the Mexico Conectado project and some projects that were aimed to bring Internet to public schools that were canceled by the actual government or you see the impact in some of the contact centers where we used to -- and we sell a lot in terms of MCM on that part. And the other segment that hit us in that area, hit everybody that goes from corporate of course is hospitality, hotels. So saying all those 3 that we have what is still posting positive results, 2% over last year in terms of connectivity, mostly coming from connectivity and contact center, mostly coming from MetroCarrier and MCM. Ho1a, when I say on my remarks, we're going through a transformation too, and we are very happy, why? Because when you have a home office mood or way to work for enterprises, you don't invest more in that part in terms of networking equipment and higher capacity. You can have some broadband when you need it, but you send everybody on. So the majority of the government did not invest in the projects of networking and contact center that we used to have in Ho1a as an infrastructure part. So we transform the company into a much more infrastructure as a service or software as a service, cloud services, data center. So at the end, the level that you see, it looks good into individual because we're getting the trend of what's going to happen for people to work in the new way of doing things. We're doing a lot of collaboration, we're using a lot of video conferencing, we're using a lot of teams with Cisco Webex, Microsoft. We have all the partners. So we shift the way we used to do things in Ho1a and with great results, if you call it because we suffer the change of the trend of the market. So it looks good coming. If we can continue to adapt our sales force to the new reality, and as soon as everybody will go back to work in the offices, we can have the best of tools. So we expect corporate to increase, and if you should, of course, it's going to take us still some months to get the full split of what we have. But we are confident that we're doing a good job and good results. If you consider all the challenges that we have, having said all the -- all what we face in the past. So that's what we -- I wanted to add, Alejandro. And thank you for the questions.

Okay. Great. So it seems that the business has been well, but it's fair to assume that you may take a few more months, even some quarters before the business returns to double-digit growth rates, is that correct to assume?

Yes. Yes. Definitely it would take a couple of quarters to recover and regain those lifts.

I'll now turn the floor back to management for additional questions.

Thank you. We have some questions coming from the web. The first one is could you give us a little bit more color about the decrease of Ho1a and MCM? I believe we just discussed that.

We have discussed that. Regarding that the trend of the market impact those 2 segments, we've got contact centers for MCM pretty much, that MCM [ was under, was more of a ] [indiscernible] and telephony on that part. So it was hit. It's doing and working on the chip to higher connectivity in IP services. Ho1a went through a transformation, so it's doing a good job on that part. But the market is tough, it's constrained. So we would expect that to maintain the levels and increase in the near future as we discussed before.

Okay. And the second one is, once the GPON project is completed at the end of this year, how should we think about CapEx as a percentage of revenue next year and beyond?

Well, as we have mentioned, we still expect the CapEx to remain at certain levels because we would be using CapEx to accommodate all the collected equipment from the HFC network that we will be replacing, and that will happen during 2022. So we expect softer levels of course, but still above 25% or around 25%. And then for 2023 and 2024, we expect a decline from those.

Okay. That's all the questions that we have from the webcast. I'll turn it over to the conference.

There are no additional questions on the phone at this time.

Okay. As always, it's a pleasure to discuss our results with you. Please contact our Investor Relations department if you have any questions or concerns regarding the company. And also, feel free to contact Raymundo, Luis or me, whatever you -- as you wish. We are very pleased with the results of the company, and we will continue delivering good results in the future. Thank you all for your interest in the company and for your questions and for your friendship. Thank you. Thank you very much. Have a nice weekend.

Thank you.

Thank you, everyone. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.