Oi S.A. - UNDER JUDICIAL REORGANIZATION

Transcription

1 (Convenience translation into English from the original previously issued in Portuguese) Oi S.A. - UNDER JUDICIAL REORGANIZATION Interim financial information for the quarter ended March 31, 2018 and independent auditor s review report on the interim financial information EO/GP/DL/MK/TMS/LFFMM 2898i/18

2 OI S.A. - UNDER JUDICIAL REORGANIZATION Interim financial information for the quarter ended March 31, 2018 and independent auditor s review report on the interim financial information Contents Independent auditor s review report on the interim financial information Individual and consolidated statements of financial position Individual and consolidated statements of operations Individual and consolidated statements of comprehensive income (loss) Individual and consolidated statements of changes in equity Individual and consolidated statements of cash flows Individual and consolidated statements of value added supplementary information Notes to the individual and consolidated interim financial information 2

3 Tel.: Rua Buenos Aires, 48, 4 andar Fax: Centro Rio de Janeiro, RJ - Brasil INDEPENDENT AUDITOR S REVIEW REPORT ON THE INTERIM FINANCIAL INFORMATION To the Shareholders and Management of Oi S.A. - Under Judicial Reorganization Rio de Janeiro - RJ Introduction We have reviewed the individual and consolidated interim financial information of Oi S.A. Under judicial reorganization (the Company), included in the Quarterly Information, for the quarter ended March 31, 2018, which comprise the statement of financial position as at March 31, 2018 and the respective statements of operations, comprehensive income (loss), changes in equity and cash flows for the three-month period then ended, as well as the corresponding notes to the financial statements, including a summary of significant accounting policies. The Company s management is responsible for the preparation of the individual and consolidated interim financial information in accordance with Technical Pronouncement NBC TG 21 (R1) Interim statements and of the consolidated interim financial information in accordance with Technical Pronouncement CPC 21 (R1) and with international accounting standard (IAS) 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), and for the presentation of this information in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the Quarterly Information. Our responsibility is to express a conclusion on this individual and consolidated interim financial information based on our review. Scope of the review We conducted our review in accordance with Brazilian and international standards for reviewing interim information (NBC TR 2410 and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity. An interim review consists principally of applying analytical and other review procedures, and making enquiries of and having discussions with persons responsible for financial and accounting matters. An interim review is substantially less in scope than an audit conducted in accordance with auditing standards. An interim review does not provide assurance that we would become aware of any or all significant matters that might be identified in an audit. Accordingly, we do not express such an audit opinion. Conclusion on the individual and consolidated interim financial information Based on our review, we are not aware of any fact that leads us to believe that the individual and consolidated interim financial information included in the Quarterly Information referred to above has not been prepared, in all material respects, in accordance with NBC TG 21 (R1) and IAS 34, applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM). 3

4 Emphasis Going concern We draw attention to Note 1 to the individual and consolidated interim financial information, on the section about going concern, which informs that the individual and consolidated interim financial information has been prepared assuming the continuity of the Company as a going concern, which consider the success of the implementation of the approved Judicial Reorganization Plan ( PRJ ) including, among other matters, the satisfaction of the Condition Precedents informed in attachment (c) of the PRJ related to: (i) conversion of credits of qualified bondholders into capital increase and into New Notes to be issued by the Company, which shall occur until July 31, 2018; and (ii) capital increase with new funds in the amount of R$ 4,000,000 thousand, which shall occur up to February 28, These events or conditions indicate that there are significant uncertainties that may cast doubt on the Company's going concern. Our conclusion is not qualified in respect of this matter. Restatement of amounts for the quarter ended March 31, 2017 The amounts corresponding to the quarter ended March 31, 2017, related to the interim financial information, individual and consolidated, presented for comparison purposes, were previously submitted to review procedures, and the respective review report issued, dated May 10, 2017, had a disclaimer of conclusion, because at the time the Company had not concluded the impairment test of assets, as required by NBC TG 01 (R1)/IAS 36 - Impairment, and not obtained the approval of the Judicial Reorganization Plan at the Creditors' General Meeting. As mentioned in Note 2(b), the Company made adjustments and reclassifications, which corrected, among others, the matters that were the Basis for disclaimer of conclusion in our review report originally presented, to adjust the interim financial information, individual and consolidated, for the quarter ended March 31, 2017, originally presented, and it is restating in this individual and consolidated interim financial information, for the quarter ended March 31, 2018, the comparative balances of the interim financial information, individual and consolidated, for the quarter ended March 31, As part of our review of the individual and consolidated financial statements for the quarter ended March 31, 2018, we have also reviewed the adjustments and reclassifications described in the mentioned Note 2(b), which were made to amend the interim financial information, individual and consolidated, for the quarter ended March 31, We have concluded that such adjustments and reclassifications are adequate and were properly made. We were not engaged to review or to apply any other procedures on the interim financial information, individual and consolidated, for the quarter ended March 31, 2017 and, accordingly, we do not issue a conclusion or provide any form of assurance, on this date, on the interim financial information, individual and consolidated, for the quarter ended March 31, 2017 taken as a whole. Other matters Interim statements of the value added We have also reviewed the interim statements of value added, individual and consolidated, for the quarter ended March 31, 2018, prepared by the Company s management, whose disclosure in the interim financial information is required in accordance with the standards issued by CVM applicable to the preparation of the Quarterly Information and considered supplemental information by the IFRS, which do not require the disclosure of the Statement of Value Added. This statement was submitted to the same review procedures previously described and based on our review, we are not aware of any fact that would lead us to believe that they have not been fairly stated, in all material respects, in relation to the interim financial statements, individual and consolidated, taken as a whole. 4

5 Amounts for the year ended December 31, 2017 The amounts corresponding to the year ended December 31, 2017, presented for comparison purposes, were previously audited by us and our report thereon, dated April 12, 2018, had a specific section on Material uncertainty as to going concern referring to the same matter of Going concern included in the section Emphasis above. The accompanying financial statements have been translated into English for the convenience of readers outside Brazil. Rio de Janeiro, May 28, BDO RCS Auditores Independentes SS CRC 2 SP /F Esmir de Oliveira Accountant CRC 1SP /O-0 S - RJ 5

6 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Contents Company Data Capital Breakdown 6 Individual Financial Statements Balance Sheets, Assets 7 Balance Sheets, Liabilities and Equity 8 Statements of Profit or Loss 10 Statements of Comprehensive Income 11 Statements of Cash Flows 12 Statements of Changes in Equity Statement of Changes in Equity - 1/1/2018 to 3/31/ Statement of Changes in Equity - 1/1/2017 to 3/31/ Statements of Value Added 16 Consolidated Financial Statements Balance Sheets, Assets 17 Balance Sheets, Liabilities and Equity 18 Statements of Profit or Loss 20 Statements of Comprehensive Income 21 Statements of Cash Flows 22 Statements of Changes in Equity Statement of Changes in Equity - 1/1/2018 to 3/31/ Statement of Changes in Equity - 1/1/2017 to 3/31/ Statements of Value Added 26

7 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Company Data / Capital Breakdown Number of Shares (thousand) Current Quarter 03/31/2018 Paid-in Capital Common shares 668,034 Preferred shares 157,727 Total 825,761 In Treasury Common shares 148,282 Preferred shares 1,812 Total 150,094 PAGE: 6

8 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Balance Sheets as at March 31, 2018 and December 31, 2017 Assets (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2018 Prior Year 12/31/ Total assets 62,183,936 39,542, Current assets 12,205,484 13,877, Cash and cash equivalents 3,712,084 3,875, Cash investments 17,834 14, Cash investments measured at fair vale 17,834 14, Trading securities 17,834 14, Accounts receivable 1,372,831 2,076, Trade receivables 1,372,831 2,076, Inventories 55,352 48, Recoverable taxes 345, , Current recoverable taxes 345, , Prepaid expenses 327,640 95, Other current assets 6,374,614 7,304, Other 6,374,614 7,304, Due from subsidiaries 898, , Other taxes 306, , Judicial deposits 710, , Dividends and interest on capital 36, , Pension plan assets 3, Held-for-sale assets 3,538,213 3,553, Other assets 880,760 1,027, Non-current assets 49,978,452 25,664, Long-term receivables 18,512,823 7,837, Cash investments measured at fair vale 28,330 30, Restricted cash 28,330 30, Prepaid expenses 9,506 11, Due from related parties 11,423,422 3,139, Due from subsidiaries 11,423,422 3,139, Other non-current assets 7,051,565 4,656, Judicial deposits 4,251,329 4,353, Other taxes 182, , Pension plan assets 95,688 96, Other assets 2,521,763 21, Investments 19,366,477 5,706, Equity interests 19,366,477 5,706, Investments in subsidiaries 19,340,787 5,681, Other equity interests 25,690 25, Property, plant and equipment 6,000,802 5,981, Property, plant and equipment in service 5,422,273 5,333, Property, plant and equipment in progress 578, , Intangible assets 6,098,350 6,138, Intangible assets 6,098,350 6,138, Software 43,329 52, Intangible assets in progress 12,867 12, Regulatory licenses 5,971,916 6,003, Other 70,238 70,224 PAGE: 7

9 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Balance Sheets as at March 31, 2018 and December 31, 2017 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2018 Prior Year 12/31/ Total liabilities and shareholders equity 62,183,936 39,542, Current liabilities 5,362,002 24,664, Payroll and related taxes 154, , Mandatory benefits 154, , Trade payables 1,103,896 2,027, Domestic suppliers 1,103,896 2,027, Trade payables 1,002,658 1,459, Trade payables not subject to the Judicial Reorganization 101, , Taxes payable Federal taxes payable Income tax and social contribution payable Borrowings and financing 97,029 17,967, Borrowings and financing 97,029 17,967, In local currency 293 7,670, In foreign currency 96,736 10,297, Other payables 3,354,610 3,818, Due to related parties 2,096,021 2,536, Payables to subsidiaries 2,096,021 2,536, Other 1,258,589 1,282, Dividends and interest on capital payable 5,112 5, Other taxes 654, , Tax refinancing program 145, , Derivative financial instruments 0 104, Licenses and concessions payable 6, Other payables 447, , Provisions 651, , Tax, social security, labor, and civil provisions 651, , Tax provisions 6, Social security and labor provisions 72, , Accrued employee benefits 77,334 61, Civil provisions 495, , Non-current liabilities 28,188,660 28,683, Borrowings and financing 7,928, Borrowings and financing 7,928, In local currency 2,815, In foreign currency 5,113, Other payables 14,767,475 22,593, Due to related parties 936,371 19,769, Payables to subsidiaries 936,371 19,769, Other 13,831,104 2,823, Trade payables subject to the Judicial Reorganization 260, Tax refinancing program 312, , Other taxes 39,987 39, Provision for negative shareholders equity 11,636,175 1,365, Other payables 1,582,171 1,068, Deferred taxes 2,476,485 2,576,813 PAGE: 8

10 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Balance Sheets as at March 31, 2018 and December 31, 2017 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2018 Prior Year 12/31/ Deferred income tax and social contribution 2,476,485 2,576, Provisions 3,015,830 3,513, Tax, social security, labor, and civil provisions 3,015,830 3,513, Tax provisions 71, , Social security and labor provisions 478, , Accrued employee benefits 570, , Civil provisions 1,895,881 2,394, Shareholders equity 28,633,274-13,805, Realized capital 21,438,374 21,438, Capital reserves 19,335,310 7,711, Special merger goodwill reserve 1,750,494 1,750, Treasury shares -5,531,092-5,531, Donations and investment grants 123, , Other capital reserves 1,933,200 1,933, Special merger reserve Net assets 8,658,079 8,658, Interest on construction in progress 745, , Law 8200/91 inflation adjustment 31,287 31, Restructured Senior Notes 11,624, Retained earnings/accumulated losses -11,509,223-42,335, Valuation adjustments to equity -519, , Other comprehensive income -111, ,411 PAGE: 9

11 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Statements of Profit or Loss for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Net operating revenue 1,175,674 1,256, Cost of sales and/or services -662, , Gross profit 513, , Operating expenses/income 2,629, , Selling expenses -202, , General and administrative expenses -222, , Other operating income 132, , Other operating expenses -81, , Share of profits of investees 3,003, , Profit (loss) before financial income (expenses) and taxes 3,142, , Financial income (expenses) 27,315,020-9, Financial income 27,017, , Financial expenses 297, , Profit before taxes on income 30,457, , Income tax and social contribution 85,449-31, Current -19,304-7, Deferred 104,753-24, Profit/loss for the period from continuing operations 30,543, , Profit/loss for the period 30,543, , Earnings per share - (R$ per share) Basic earnings per share Common shares (ON) Preferred shares (PN) Diluted earnings per share Common shares (ON) Preferred shares (PN) PAGE: 10

12 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Statements of Comprehensive Income for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Profit for the period 30,543, , Other comprehensive income -11,476-1, Actuarial gain 0 44, Exchange losses on investment abroad -11,476-31, Effect of taxes on other comprehensive income 0-15, Comprehensive income for the period 30,531, ,274 PAGE: 11

13 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Statements of Cash Flows - Indirect Method for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Net cash from operating activities 16,220 52, Cash generated by operations 1,002, , Profit (loss) before income tax and social contribution 30,457, , Charges, interest income, inflation adjustment, and exchange differences -6,606,441 9, Adjustment to present value -20,379, Depreciation and amortization 261, , Estimated loss on doubtful debts 33,911 14, Provisions 34, , Provision for pension plans Equity in investees -3,003, , Loss on disposal of capital assets 111,718 3, Concession Agreement Extension Fee - ANATEL 6,103 6, Inflation adjustment to intragroup receivables and private debentures -111,408-67, Inflation adjustment to provisions 29,094 69, Inflation adjustment to tax refinancing program 4,940 1, Other 163,284-8, Changes in assets and liabilities -985, , Accounts receivable -338, , Inventories -6,636-2, Taxes 28, , Held-for-trading cash investments -19,251-4, Redemption of held-for-trading cash investments 18,748 15, Trade payables -800, , Payroll, related taxes and benefits -23,699-10, Provisions -519,017-15, Other assets and liabilities 675, , Other , Financial charges paid Income tax and social contribution paid - Company 0-8, Net cash from investing activities -162, , Purchases of tangibles and intangibles -213, , Due from related parties and debentures - receipts 0 15, Proceeds from the sale of investments, tangibles and intangibles -3, Judicial deposits -174,372-10, Redemption of judicial deposits 228,699 30, Net cash from financing activities -17,369-16, Borrowings net of costs 21, Tax refinancing program -39,050-16, Payment of dividends and interest on capital Exchange differences on cash and cash equivalents 1, PAGE: 12

14 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Statements of Cash Flows - Indirect Method for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Increase (decrease) in cash and cash equivalents -163, , Cash and cash equivalents at the beginning of the period 3,875,141 4,190, Cash and cash equivalents at the end of the period 3,712,084 4,066,641 PAGE: 13

15 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Statement of Changes in Equity for the Quarter Ended March 31, 2018 (In thousands of Brazilian reais - R$) Code Line Item Paid-in capital Capital reserves, stock options granted and treasury shares Profit reserves Retained earnings or accumulated losses Other comprehensive income 5.01 Opening balances 21,438,374 7,711, ,335, ,711-13,805, Adjusted opening balances 21,438,374 7,711, ,335, ,711-13,805, Capital transactions with shareholders , , Merger of subsidiary , , Total comprehensive income ,543,355-11,476 30,531, Profit for the period ,543, ,543, Other comprehensive income ,476-11, Exchange losses on investment abroad ,476-11, Internal change in shareholders equity 0 11,624, , ,906, Effects of the first-time adoption of IFRS 9 and , , Restructured Senior Notes 0 11,624, ,624, Closing balances 21,438,374 19,335, ,509, ,187 28,633,274 Equity PAGE: 14

16 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Statement of Changes in Equity for the Quarter Ended March 31, 2017 (In thousands of Brazilian reais - R$) Code Line Item Paid-in capital Capital reserves, stock options granted and treasury shares Profit reserves Retained earnings or accumulated losses Other comprehensive income 5.01 Opening balances 21,438,374 7,711, ,970, ,630-7,456, Adjusted opening balances 21,438,374 7,711, ,970, ,630-7,456, Total comprehensive income , , , Profit for the period , , Other comprehensive income , , Actuarial gain ,443 29, Exchange losses on investment abroad ,593-79, Exchange losses on subsidiaries investment abroad ,515 48, Decrease in stake in subsidiary , , Closing balances 21,438,374 7,711, ,159, ,052-7,792,941 Equity PAGE: 15

17 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Individual Statements of Value Added for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Revenue 1,676,160 1,800, Sales of goods and services 1,579,129 1,703, Other income 130, , Allowance for/reversal of doubtful accounts -33,911-14, Inputs purchased from third parties -604, , Cost of sales and services -45,909-84, Supplies, power, outside services, and other inputs -547, , Other -10,523-15, Gross value added 1,071,869 1,155, Retentions -336, , Depreciation, amortization and depletion -261, , Other -75, , Provisions/reversals -64, , Other expenses -11,313-32, Wealth created 735, , Value added received as transfer 30,020, , Share of profit (loss) of investees 3,003, , Financial income 27,017, , Wealth for distribution 30,756,228 1,122, Wealth distributed 30,756,228 1,122, Personnel 83,689 87, Salaries and wages 58,519 61, Benefits 18,117 18, Severance pay fund (FGTS) 5,163 5, Other 1,890 2, Taxes and fees 140, , Federal -210,054 71, State 346, , Municipal 4,108 3, Lenders and lessors -11, , Interest -168, , Rentals 157, , Shareholders 30,543, , Retained earnings/accumulated losses for the period 30,543, ,639 PAGE: 16

18 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Consolidated Balance Sheets as at March 31, 2018 and December 31, 2017 Assets (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2018 Prior Year 12/31/ Total assets 68,683,226 68,639, Current assets 24,207,041 23,747, Cash and cash equivalents 6,073,249 6,862, Cash investments 37,580 21, Cash investments measured at fair vale 37,580 21, Trading securities 37,580 21, Accounts receivable 7,485,300 7,367, Trade receivables 7,485,300 7,367, Inventories 262, , Recoverable taxes 1,026,642 1,123, Current recoverable taxes 1,026,642 1,123, Prepaid expenses 1,594, , Other current assets 7,727,378 7,811, Other 7,727,378 7,811, Judicial deposits 1,096,868 1,023, Other taxes 1,112,868 1,081, Pension plan assets 3,891 1, Held-for-sale assets 4,609,903 4,675, Other assets 903,848 1,030, Non-current assets 44,476,185 44,891, Long-term receivables 9,160,100 9,415, Cash investments measured at fair vale 114, , Restricted cash 114, , Prepaid expenses 23,772 28, Other non-current assets 9,022,106 9,272, Judicial deposits 8,035,662 8,289, Other taxes 632, , Pension plan assets 99, , Other assets 254, , Investments 125, , Equity interests 125, , Investments in associates 42,016 42, Other equity interests 83,718 94, Property, plant and equipment 26,932,432 26,988, Property, plant and equipment in service 23,727,468 23,554, Property, plant and equipment in progress 3,204,964 3,434, Intangible assets 8,257,919 8,350, Intangible assets 8,257,919 8,350, Software 1,037,956 1,069, Intangible assets in progress 25,307 17, Regulatory licenses 6,972,417 7,043, Other 222, ,793 PAGE: 17

19 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Consolidated Balance Sheets as at March 31, 2018 and December 31, 2017 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2018 Prior Year 12/31/ Total liabilities and shareholders equity 68,683,226 68,639, Current liabilities 10,590,585 67,891, Payroll and related taxes 855, , Mandatory benefits 855, , Trade payables 4,919,726 7,627, Domestic suppliers 4,919,726 7,627, Trade payables 4,063,885 5,491, Trade payables subject to the Judicial Reorganization 855,841 2,135, Taxes payable 203, , Federal taxes payable 203, , Income tax and social contribution payable 203, , Borrowings and financing 98,103 54,515, Borrowings and financing 98,103 54,515, In local currency 1,200 14,834, In foreign currency 96,903 39,680, Other payables 3,605,655 3,232, Other 3,605,655 3,232, Dividends and interest on capital payable 6,222 6, Derivative financial instruments 0 104, Other taxes 1,652,294 1,443, Tax refinancing program 275, , Licenses and concessions payable 39,528 20, Liabilities associated to held-for-sale assets 306, , Other payables 1,325,416 1,024, Provisions 907,857 1,025, Tax, social security, labor, and civil provisions 907,857 1,025, Tax provisions 15,434 13, Social security and labor provisions 92, , Accrued employee benefits 77,403 61, Civil provisions 722, , Non-current liabilities 29,184,615 14,259, Borrowings and financing 13,436, Borrowings and financing 13,436, In local currency 6,852, In foreign currency 6,583, Other payables 6,959,826 3,792, Other 6,959,826 3,792, Trade payables subject to the Judicial Reorganization 1,170, Other taxes 876, , Licenses and concessions payable Tax refinancing program 545, , Other payables 4,366,749 2,313, Deferred taxes 3,184,668 3,076, Deferred income tax and social contribution 3,184,668 3,076, Provisions 5,604,104 7,390, Tax, social security, labor, and civil provisions 5,604,104 7,390,644 PAGE: 18

20 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Consolidated Balance Sheets as at March 31, 2018 and December 31, 2017 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2018 Prior Year 12/31/ Tax provisions 631, , Social security and labor provisions 1,543,297 1,479, Accrued employee benefits 571, , Civil provisions 2,858,446 4,693, Consolidated equity 28,908,026-13,512, Realized capital 21,438,374 21,438, Capital reserves 19,335,310 7,711, Special merger goodwill reserve 1,750,494 1,750, Treasury shares -5,531,092-5,531, Donations and investment grants 123, , Other capital reserves 1,933,200 1,933, Special merger reserve Net assets 8,658,079 8,658, Interest on construction in progress 745, , Law 8200/91 inflation adjustment 31,287 31, Restructured Senior Notes 11,624, Retained earnings/accumulated losses -11,509,223-42,335, Valuation adjustments to equity -519, , Other comprehensive income -111, , Non-controlling interests 274, ,457 PAGE: 19

21 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Consolidated Statements of Profit or Loss for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Net operating revenue 5,668,290 6,159, Cost of sales and/or services -3,738,385-3,798, Gross profit 1,929,905 2,360, Operating expenses/income -1,626,446-2,026, Selling expenses -948,141-1,050, General and administrative expenses -671, , Other operating income 401, , Other operating expenses -404, , Share of profits of investees -4,171-3, Profit (loss) before financial income (expenses) and taxes 303, , Financial income (expenses) 30,179, , Financial income 28,676, , Financial expenses 1,502, , Profit (loss) before taxes on income 30,482, , Income tax and social contribution 43, , Current 143, , Deferred -99, , Profit (loss) for the period from continuing operations 30,526, , Consolidated profit/loss for the period 30,526, , Attributable to the Company owner 30,543, , Attributable to non-controlling interests -16, Earnings per share - (R$ per share) Basic earnings per share Common shares (ON) Preferred shares (PN) Diluted earnings per share Common shares (ON) Preferred shares (PN) PAGE: 20

22 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Consolidated Statements of Comprehensive Income for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Consolidated profit for the period 30,526, , Other comprehensive income -13, , Actuarial gain 0 44, Exchange losses on investment abroad -13, , Effect of taxes on other comprehensive income 0-15, Consolidated comprehensive income for the period 30,513, , Attributable to the Company owner 30,531, , Attributable to non-controlling interests -18, ,244 PAGE: 21

23 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Consolidated Statements of Cash Flows - Indirect Method for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Net cash from operating activities 814, , Cash generated by operations 2,875,111 1,893, Profit before income tax and social contribution 30,482, , Charges, interest income, inflation adjustment, and exchange differences -16,528, , Adjustment to present value -13,304, Depreciation and amortization 1,268,458 1,320, Estimated loss on doubtful debts 202, , Provisions 91, , Provision for pension plans Equity in investees 4,171 3, Loss on disposal of capital assets 392,226 69, Concession Agreement Extension Fee - ANATEL 19,058 22, Employee and management profit sharing 12,824 8, Inflation adjustment to provisions 118, , Inflation adjustment to tax refinancing program 7,025 2, Other 108,208-48, Changes in assets and liabilities -1,630, , Accounts receivable -693, , Inventories 38,563-60, Taxes 627, , Held-for-trading cash investments -444, , Redemption of held-for-trading cash investments 433, , Trade payables -1,511,601 54, Payroll, related taxes and benefits -81,836-17, Provisions -1,992,408-72, Changes in assets and liabilities held for sale 83,746 10, Other assets and liabilities 1,908, , Other -429, , Financial charges paid -2,220-1, Income tax and social contribution paid - Company -365, , Income tax and social contribution paid - third parties -61,960-39, Net cash from investing activities -1,431, , Purchases of tangibles and intangibles -1,514,701-1,001, Proceeds from the sale of investments, tangibles and intangibles 15,423 43, Judicial deposits -288,023-55, Redemption of judicial deposits 355,905 65, Increase/(decrease) in permanent investments Net cash from financing activities -175,551-26, Borrowings net of costs 53, Repayment of principal of borrowings, financing, and derivatives -161, Tax refinancing program -66,753-26, Payment of dividends and interest on capital 0-5 PAGE: 22

24 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Consolidated Statements of Cash Flows - Indirect Method for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Exchange differences on cash and cash equivalents 3, Increase (decrease) in cash and cash equivalents -789,436-59, Cash and cash equivalents at the beginning of the period 6,862,684 7,563, Cash and cash equivalents at the end of the period 6,073,248 7,504,084 PAGE: 23

25 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Consolidated Statement of Changes in Equity for the Quarter Ended March 31, 2018 (In thousands of Brazilian reais - R$) Code Line Item Paid-in capital Capital reserves, stock options granted and treasury shares Profit reserves Retained earnings or accumulated losses Other comprehensive income Equity Noncontrolling interests Consolidated equity 5.01 Opening balances 21,438,374 7,711, ,335, ,711-13,805, ,457-13,512, Adjusted opening balances 21,438,374 7,711, ,335, ,711-13,805, ,457-13,512, Capital transactions with shareholders , , , Merger of subsidiary , , , Total comprehensive income ,543,355-11,476 30,531,879-18,705 30,513, Profit for the period ,543, ,543,355-16,949 30,526, Other comprehensive income ,476-11,476-1,756-13, Exchange losses on investment abroad ,476-11,476-1,756-13, Internal change in shareholder 0 11,624, , ,906, ,906, Effects of the first-time adoption of IFRS 9 and , , , Restructured Senior Notes 0 11,624, ,624, ,624, Closing balances 21,438,374 19,335, ,509, ,187 28,633, ,752 28,908,026 PAGE: 24

26 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Version: 1 Consolidated Statement of Changes in Equity for the Quarter Ended March 31, 2017 (In thousands of Brazilian reais - R$) Code Line Item Paid-in capital Capital reserves, stock options granted and treasury shares Profit reserves Retained earnings or accumulated losses Other comprehensive income Equity Noncontrolling interests Consolidated equity 5.01 Opening balances 21,438,374 7,711, ,970, ,630-7,456, ,997-6,665, Adjusted opening balances 21,438,374 7,711, ,970, ,630-7,456, ,997-6,665, Total comprehensive income , , , , , Profit for the period , , , Other comprehensive income , , , , Actuarial gain ,443 29, , Exchange losses on investment abroad ,593-79, , , Exchange losses on subsidiaries investment abroad ,515 48, , Decrease in stake in subsidiary , , , , Closing balances 21,438,374 7,711, ,159, ,052-7,792, , ,417,531 PAGE: 25

27 Interim Financial Information (ITR) - March 31, OI S.A. UNDER JUDICIAL REORGANIZATION Consolidated Statements of Value Added for the Quarters Ended March 31, 2018 and 2017 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2018 to 3/31/2018 Prior YTD 1/1/2017 to 3/31/ Revenue 7,659,096 8,345, Sales of goods and services 7,461,317 8,137, Other income 400, , Allowance for/reversal of doubtful accounts -202, , Inputs purchased from third parties -2,524,266-2,768, Cost of sales and services -238, , Supplies, power, outside services, and other inputs -2,113,555-2,253, Other -172, , Gross value added 5,134,830 5,577, Retentions -1,518,027-1,666, Depreciation, amortization and depletion -1,268,458-1,320, Other -249, , Provisions/reversals -210, , Other expenses -38,873-39, Wealth created 3,616,803 3,910, Value added received as transfer 28,672, , Share of profit (loss) of investees -4,171-3, Financial income 28,676, , Wealth for distribution 32,289,394 4,505, Wealth distributed 32,289,394 4,505, Personnel 539, , Salaries and wages 384, , Benefits 105, , Severance pay fund (FGTS) 33,415 33, Other 15,572 15, Taxes and fees 1,615,350 2,394, Federal 81, , State 1,469,202 1,585, Municipal 64,483 61, Lenders and lessors -391,647 1,716, Interest -1,420, , Rentals 1,029,332 1,065, Shareholders 30,526, , Retained earnings/accumulated losses for the period 30,543, , Non-controlling interests in retained earnings -16, PAGE: 26

28 1. GENERAL INFORMATION Oi S.A. under judicial reorganization ( Company or Oi ), is a Switched Fixed-line Telephony Services ( STFC ) concessionaire, operating since July 1998 in Region II of the General Concession Plan ( PGO ), which covers the Brazilian states of Acre, Rondônia, Mato Grosso, Mato Grosso do Sul, Tocantins, Goiás, Paraná, Santa Catarina and Rio Grande do Sul, and the Federal District, in the provision of STFC as a local and intraregional long-distance carrier. Since January 2004, the Company also provides domestic and international long-distance services in all Regions and local services outside Region II started to be provided in January These services are provided under concessions granted by Agência Nacional de Telecomunicações - ANATEL (National Telecommunications Agency), the regulator of the Brazilian telecommunications industry ( ANATEL or Agency ). The Company is headquartered in Brazil, in the city of Rio de Janeiro, at Rua do Lavradio, 71 2º andar. The Company also holds: (i) through its wholly-owned subsidiary Telemar Norte Leste S.A. under judicial reorganization ( Telemar ) a concession to provide fixed telephone services in Region I and nationwide International Long-distance services; and (ii) through its indirect subsidiary Oi Móvel S.A. under judicial reorganization ( Oi Móvel ) a license to provide mobile telephony services in Region I, II and III. The local and nationwide STFC long-distance concession agreements entered into by the Company and its subsidiary Telemar with ANATEL are effective until December 31, These concession agreements provide for reviews on a five-year basis and in general have a higher degree of intervention in the management of the business than the licenses to provide private services, and also include several consumer protection provisions, as perceived by the regulator. On December 30, 2015, ANATEL announced that the review to be implemented by the end of 2015 had been postponed to April 30, Subsequently, On April 29, 2016, ANATEL decided, under a Resolution Circular Letter, postpone again the execution of the revised agreements, this time to December 31, Once again, on December 30, 2016 and again under a Resolution Circular Letter, ANATEL postponed the execution of the new concession agreements up to June 30, On June 29, 2017, ANATEL informed, in an official letter, that it would no longer make any further amendments to the concession agreements at this instance. Note that through the end of the concession agreement on December 31, 2025 there would still be a window for revision, on December 31, It is worth noting that Congress Bill 79/2016 provides for a special amendment of concession agreements to adjust them to the possibility of migrating from a public utility regime to an STFC service provision under a private law regime. Thus, if this bill is passed into law, a concession agreement could be amendment in any date other than December 31, Throughout the years, ANATEL initiated some procedures aiming at monitoring the Company s financial situation, as well as to assess the Company s ability to discharge its obligations arising from the terms of the concession agreements. In light of the approval of the Judicial Reorganization Plan by the creditors and its subsequent ratification by the competent judge, ANATEL started to monitor the Oi Group Companies operating and financial positions based on the effectiveness of said JRP. 27

29 In Africa, the Company provides fixed and mobile telecommunications services indirectly through Africatel Holding BV ( Africatel ). The Company provides services in Mozambique, and São Tomé, among other countries, notably through its subsidiaries Listas Telefónicas de Moçambique ( LTM ) and CST Companhia Santomense de Telecomunicações, SARL ( CST ). Additionally, Africatel holds an indirect 25% stake in Unitel S.A. ( Unitel ) and a 40% stake in Cabo Verde Telecom, S.A. ( CVT ), which provide telecommunications services in Angola and Cape Verde. In Asia, the Company provides fixed and mobile telecommunications services basically through its subsidiary Timor Telecom. The international operations referred to above are in the process of being sold, as described in Note 25. The Company is registered with the Brazilian Securities and Exchange Commission ( CVM ) and the U.S. Securities and Exchange Commission ( SEC ). Its shares are traded on B3 S.A. Brasil, Stock Exchange, OTC, and its American Depositary Receipts ( ADRs ) representing Oi common shares and preferred shares traded on the New York Stock Exchange ( NYSE ). The Executive Committee authorized the completion of this quarterly information at the meeting held on May 28, 2018, after being reviewed at the Board of Directors meeting held on the same daily. Judicial reorganization On June 20, 2016, Oi, together with its direct and indirect wholly owned subsidiaries Oi Móvel, Telemar, Copart 4 Participações S.A. - under Judicial Reorganization ( Copart 4 ), Copart 5 Participações S.A. - under Judicial Reorganization ( Copart 5 ), Portugal Telecom International Finance B.V. - under Judicial Reorganization ( PTIF ), and Oi Brasil Holdings Cooperatief U.A. - under Judicial Reorganization ( Oi Holanda ) (collectively with the Company, the "Oi Companies") filed, as a matter of urgency, a request for judicial reorganization with the Court of the State of Rio de Janeiro, as approved by the Company s Board of Directors and the competent governing bodies. As broadly disclosed to the market, the Company had been taking actions and conducting studies, together with its financial and legal advisors to optimize its liquidity and debt profile. The Company, after considering the challenges arising from its economical and financial situation and in light of the maturity schedule of its financial debts, threats to cash flows represented for imminent block or pledge of amounts in lawsuits, and in light of the urgency to adopt protection measures of the Oi Companies, concluded that the request for judicial reorganization was the most appropriate course of action at that time to (i) preserve the continuity of its offering of quality services to its customers, within the rules and commitments undertaken with the Brazilian National Telecommunications Agency (ANATEL), (ii) preserve the value of the Oi Companies, (iii) maintain the continuity of operations and corporate activities in an organized manner, thus protecting the interests of the Oi Companies, its customers, shareholders and other stakeholders, and (iv) protect the Oi Companies cash and cash equivalents. 28

30 The filing of the judicial reorganization was another step towards the Company s financial restructuring, and that the Company continues working to secure new customers while maintaining its service and product sales to all market segments, in all of its distribution and customer service channels. The installation, maintenance and repair activities also continue to be performed on a timely basis by the Oi Companies and their subsidiaries. All Oi s workforce has been maintaining the work as usual, including the sales, operating and administrative activities. Oi keeps focusing on its investments in structuring projects aimed promoting the improvement of service quality to continue to bringing technologic advances, high service standards, and innovation to its customers. On June 22, 2016, the United States Bankruptcy Court for the Southern District of New York ( U.S. Bankruptcy Court ) entered an order granting the provisional relief requested by the Company, Telemar, Oi Coop and Oi Móvel (all four collectively referred to as Chapter 15 Debtors ) in their United States bankruptcy code Chapter 15 cases that were filed on June 21, The Provisional Relief prevents creditors from initiating actions against the Chapter 15 Debtors or their property located within the territorial jurisdiction of the United States and parties from terminating their existing U.S. contracts with the Chapter 15 Debtors. On June 23, 2016, the High Court of Justice of England and Wales issued orders recognizing the judicial reorganization request in respect of the Company, Telemar and Oi Móvel filed in Brazil pursuant to Law 11101/2005, as a foreign main proceeding in accordance with the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency, as set out in Schedule 1 to the Cross-Border Insolvency Regulations 2006 (S.I No. 1030) ("Recognition Orders"). The Recognition Orders establish that the commencement or continuation of proceedings (including enforcement actions) in England and Wales relating to the Company s, Telemar s and Oi Móvel s assets, rights, obligations or liabilities are stayed from June 23, On June 29, 2016, the Judge of the 7 th Corporate Court of the Judicial District of the State Capital of Rio de Janeiro ( Judicial Reorganization Court ) granted the processing of the judicial reorganization of the Oi Companies. The decision granting the processing of the judicial reorganization of the Oi Companies determined that all the procedural time limits are counted in business days. To this regard, even though the decision has determined that the Judicial Reorganization Plan ( JRP or Plan ) be filed within 60 business days, the Public Prosecution Service filed an interlocutory appeal requesting that this time limit be counted in calendar days. In light of the interlocutory appeal filed by the Public Prosecution Service, the Judicial Reorganization Court revised their decision, establishing that the JRP was filed within 60 calendar days, counted from the issue of the decision granting the processing of the judicial reorganization. 29