OI S.A. - UNDER JUDICIAL REORGANIZATION

Transcription

1 OI S.A. - UNDER JUDICIAL REORGANIZATION Interim financial statements for the quarter ended March 31, 2017 and independent auditor s review report on the interim financial information EO/DVL/LGPS/TVM/TMS 2287i/17

2 OI S.A. - UNDER JUDICIAL REORGANIZATION Interim financial information for the quarter ended March 31, 2017 and independent auditor s review report on the interim financial information Contents Independent auditor s report on the interim financial information Interim financial information Management report Notes to the interim financial information 2

3 Tel.: Rua Buenos Aires, 48 Fax: º andar - Centro Rio de Janeiro/RJ INDEPENDENT AUDITOR S REPORT ON THE INTERIM FINANCIAL INFORMATION To the Shareholders and Management of Oi S.A. - under Judicial Reorganization Rio de Janeiro - RJ Introduction We were engaged to review 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, 2017, which comprise the statement of financial position as at March 31, 2017 and the respective statements of operations, comprehensive income (loss), changes in equity and cash flows for the quarter then ended, as well as the corresponding notes to the quarterly information, 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 financial statements and with International Accounting Standard (IAS) 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), and for the presentation of this interim financial 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 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. However, due to the relevance of the matters described in the Basis for disclaimer of conclusion on the individual and consolidated interim financial information section of this report, we were unable to obtain proper and sufficient evidence to support our conclusion on the interim financial information. BDO RCS Auditores Independentes, uma empresa brasileira da sociedade simples, é membro da BDO Internacional Limited, uma companhia limitada por garantia do Reino Unido, e faz parte da rede internacional BDO de firmas-membro independentes. BDO é nome comercial para a rede BDO e cada uma das firmas da BDO. 3

4 Basis for disclaimer of conclusion on the individual and consolidated interim financial information According to Note 1 to the individual and consolidated interim financial information, on June 20, 2016, Oi S.A. with some direct and indirect controlled companies filed a request for judicial reorganization approved by the judge in charge on June 29, On September 5, 2016, the Company s Board of Directors approved the Judicial Reorganization Plan (the Plan) and later, on March 22, 2017, the Board of Directors approved the adjustment of certain basic financial conditions, as an addendum to the Plan previously approved. As a result, until the conclusion of our work of review of the interim financial information for the quarter ended March 31, 2017, the Plan had not been approved by the General Meeting of Creditors (AGC) as certain relevant conditions of the Plan were still being discussed and questioned. Accordingly, we were unable to currently determine the effects, if any, on the current Plan or to conclude on whether the going-concern basis, used for the preparation of this individual and consolidated interim financial information for the quarter ended March 31, 2017, is adequate, including the possible effects on the balances of assets, liabilities and on the items of the statements of operations, comprehensive income (loss), changes in equity, and cash flows, if this individual and consolidated interim financial information had not been prepared on the going-concern basis. In view of this scenario of material uncertainty, that may affect the Company s capacity for investment in future operations and result in possible impairment of assets, the Company's management, until the date of conclusion of our review, had not yet conducted the impairment test of assets that should have been conducted up to March 22, 2017, date of approval of the individual and consolidated financial statements for the year ended December 31, 2016, as required by NBC TG 01 (R1) (IAS 36) Impairment. Consequently, we were unable to determine if it would be necessary to make adjustments to the balances of non-financial assets of the Company as at March 31, 2017, as well as to the items of the statements of operations, comprehensive income (loss), changes in equity, and cash flows for the quarter then ended. Disclaimer of conclusion on the individual and consolidated interim financial information Due to the relevance of the matters described in the Basis for disclaimer of conclusion on the individual and consolidated interim financial information section, we were unable to obtain proper and sufficient audit evidence to support our audit conclusion on the individual and consolidated interim financial information referred to above, according to Technical Pronouncement NBC TG 21 (R1) and IAS 34, applicable to the preparation of Quarterly Information and presented according to the standards issued by CVM. Therefore, we do not express a conclusion on this individual and consolidated interim financial information. Other matters Statement of value added We were also engaged to review the individual and consolidated statements of value added for the quarter ended March 31, 2017, prepared by the Company s Management, whose disclosure in the interim financial statements is required in accordance with the standards issued by CVM applicable to the preparation of the Quarterly Information and considered as supplemental information by the IFRS, which do not require the disclosure of the statement of value added. However, due to the relevance of the matters described in the Basis for disclaimer of conclusion on the individual and consolidated interim financial information section of this report, we were also unable to obtain proper and sufficient evidence to support our conclusion on this statement in relation to the individual and consolidated interim financial information as a whole. Consequently, we do not express a conclusion on the Statement of value added referred to above. 4

5 Financial statements and interim financial information of the previous year and quarter, for comparison purposes, examined and reviewed by other independent auditor The financial statements for the year ended December 31, 2016, as well as the interim financial information for the quarter ended March 31, 2016, presented for comparison purposes, were subject to audit and review procedures, respectively, adopted by other independent auditor, whose reports thereon, dated March 22, 2017 and May 10, 2017, had a disclaimer of opinion and a disclaimer of conclusion, respectively, due to the same matters mentioned in the section Basis for disclaimer of conclusion on the individual and consolidated interim financial information. Rio de Janeiro, May 10, BDO RCS Auditores Independentes SS CRC 2 SP /F Esmir de Oliveira Accountant CRC 1 SP /O-0 S RJ 5

6 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Contents Company Data Capital Breakdown 1 Individual Financial Statements Balance Sheets, Assets 2 Balance Sheets, Liabilities and Equity 4 Statements of Profit or Loss 6 Statements of Comprehensive Income 7 Statements of Cash Flows 8 Statements of Changes in Equity Statement of Changes in Equity - 1/1/2017 to 3/31/ Statement of Changes in Equity - 1/1/2016 to 3/31/ Statements of Value Added 12 Consolidated Financial Statements Balance Sheets, Assets 13 Balance Sheets, Liabilities and Equity 14 Statements of Profit or Loss 16 Statements of Comprehensive Income 17 Statements of Cash Flows 18 Statements of Changes in Equity Statement of Changes in Equity - 1/1/2017 to 3/31/ Statement of Changes in Equity - 1/1/2016 to 3/31/ Statements of Value Added 22

7 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Company Data / Capital Breakdown Number of Shares (thousand) Current Quarter 03/31/2017 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: 1 of 22

8 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Balance Sheets as at March 31, 2017 and 2016 Assets (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2017 Prior Year 12/31/ Total assets 56,626,168 56,797, Current assets 13,133,281 13,620, Cash and cash equivalents 4,066,641 4,190, Cash investments 10,204 20, Cash investments measured at fair vale 10,204 20, Trading securities 10,204 20, Accounts receivable 2,035,226 1,897, Trade receivables 2,035,226 1,897, Inventories 22,833 10, Recoverable taxes 104, , Current recoverable taxes 104, , Prepaid expenses 122,778 55, Other current assets 6,771,056 6,888, Other 6,771,056 6,888, Due from subsidiaries 774, , Other taxes 338, , Judicial deposits 668, , Dividends and interest on capital 872, , Pension plan assets 4,677 5, Held-for-sale assets 3,452,787 3,667, Other assets 659, , Non-current assets 43,492,887 43,177, Longo-term receivables 14,926,822 14,360, Cash investments measured at fair vale 4,368 4, Restricted cash 4,368 4, Deferred taxes 2,448,247 2,079, Deferred income tax and social contribution 2,448,247 2,079, Prepaid expenses 8,150 5, Due from related parties 2,930,322 2,857, Due from subsidiaries 2,930,322 2,857, Other non-current assets 9,535,735 9,413, Judicial deposits 8,910,891 8,793, Other taxes 194, , Pension plan assets 109, , Other assets 321, , Investments 14,925,016 14,974, Equity interests 14,925,016 14,974, Investments in subsidiaries 14,899,326 14,948, Other equity interests 25,690 25, Property, plant and equipment 6,003,583 5,973, Property, plant and equipment in service 5,437,922 5,586, Property, plant and equipment in progress 565, , Intangible assets 7,637,466 7,868, Intangible assets 7,637,466 7,868,872 PAGE: 2 of 22

9 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Balance Sheets as at March 31, 2017 and 2016 Assets (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2017 Prior Year 12/31/ Software 3,499 21, Intangibles in progress 104, , Regulatory licenses Other PAGE: 3 of 22

10 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Balance Sheets as at March 31, 2017 and 2016 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2017 Prior Year 12/31/ Total liabilities and equity 56,626,168 56,797, Current liabilities 21,209,939 21,066, Payroll and related taxes 101, , Mandatory benefits 101, , Trade payables 1,890,901 2,032, Domestic suppliers 1,890,901 2,032, Taxes payable 62,008 63, Federal taxes payable 62,008 63, Income tax and social contribution payable 62,008 63, Borrowings and financing 16,306,788 16,182, Borrowings and financing 16,306,788 16,182, In local currency 7,157,333 6,945, In foreign currency 9,149,455 9,236, Other payables 2,270,992 2,054, Due to related parties 831, , Payables to subsidiaries 831, , Other 1,439,231 1,386, Dividends and interest on capital payable 5,183 5, Other taxes 922, , Tax refinancing program 56,824 56, Derivative financial instruments 104, , Licenses and concessions payable 36,043 29, Other payables 313, , Provisions 577, , Tax, social security, labor and civil provisions 577, , Tax provisions Social security and labor provisions 46,356 46, Provisions for employee benefits 159, , Civil provisions 371, , Non-current liabilities 24,099,203 24,066, Other payables 21,605,581 21,689, Due to related parties 18,780,230 18,898, Payables to subsidiaries 18,780,230 18,898, Other 2,825,351 2,790, Tax refinancing program 374, , Other taxes 189, , Other payables 2,261,960 2,225, Provisions 2,493,622 2,377, Tax, social security, labor and civil provisions 2,493,622 2,377, Tax provisions 71,267 48, Social security and labor provisions 460, , Provisions for employee benefits 441, , Civil provisions 1,519,708 1,431, Equity 11,317,026 11,664, Realized capital 21,438,374 21,438,374 PAGE: 4 of 22

11 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Balance Sheets as at March 31, 2017 and 2016 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2017 Prior Year 12/31/ Capital reserves 7,711,282 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 goodwill reserve net assets 8,658,079 8,658, Interest on construction in progress 745, , Law 8200/91 inflation adjustment 31,287 31, Retained earnings (accumulated losses) -17,049,578-6,849, Valuation adjustments to equity -519, , Other comprehensive income -263, ,117 PAGE: 5 of 22

12 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Statements of Profit or Loss for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2017 to 3/31/2017 Prior YTD 1/1/2016 to 3/31/ Net operating revenue 1,256,827 1,481, Cost of sales and/or services -895,746-1,029, Gross profit or loss 361, , Operating expenses/income -557, , Selling expenses -207, , General and administrative expenses -220, , Other operating income 115, , Other operating expenses -120, , Share of profits of investees -124, , Profit (loss) before financial income (expenses) and taxes -196, , Financial income (expenses) 3,099-1,683, Financial income 687,848 1,279, Financial expenses -684,749-2,962, Profit before taxes on income -193,031-2,040, Income tax and social contribution -7, , Current -7,128-4, Deferred , Loss for the period from continuing operations -200,161-1,839, Profit/loss for the period -200,161-1,839, Earnings per share - (R$ per share) Basic earnings per share Common shares (ON) -0, , Preferred shares (PN) -0, , Diluted earnings per share Common shares (ON) -0, , Preferred shares (PN) -0, ,72000 PAGE: 6 of 22

13 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Statements of Comprehensive Income for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2017 to 3/31/2017 Prior YTD 1/1/2016 to 3/31/ Profit for the period -200,161-1,839, Other comprehensive income -1,635-29, Hedge accounting gain 0 358, Subsidiaries hedge accounting gain (loss) 0 20, Actuarial gain 44, Exchange losses on investment abroad -79, , Exchange gains (losses) on subsidiaries investment abroad 48,515-53, Effect of taxes on other comprehensive income -15, , Comprehensive income for the period -201,796-1,868,747 PAGE: 7 of 22

14 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Statements of Cash Flows - Indirect Method for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2017 to 3/31/2017 Prior YTD 1/1/2016 to 3/31/ Net cash from operating activities 52, , Cash generated by operations 478, , Loss before income tax and social contribution -193,031-2,040, Charges, interest income, inflation adjustment, and exchange differences -3,131-1,479, Financial instrument transactions 0 2,831, Depreciation and amortization 477, , Losses on receivables 14,847 12, Provisions 54,032 77, Provision for pension plans 115 2, Equity in investees 124, , Loss on disposal of capital assets 3,074 4, Concession Agreement Extension Fee - ANATEL 6,787 7, Employee and management profit sharing 0-39, Inflation adjustment to intragroup receivables and private debentures -67,827-18, Inflation adjustment to provisions 69,415 62, Inflation adjustment to tax refinancing program 1, Other -8,606-75, Changes in assets and liabilities -417,949 84, Accounts receivable -152, , Inventories -2,851 5, Taxes 146,135-21, Held-for-trading cash investments -4,810-18, Redemption of held-for-trading cash investments 15,794 19, Trade payables -225,837-62, Payroll, related taxes and benefits -10,721-13, Provisions -15,255-83, Other assets and liabilities -168, , Other -8, , Financial charges paid , Income tax and social contribution paid - Company -8,129-5, Income tax and social contribution paid - third parties 0-17, Net cash from investing activities -158,318-1,007, Purchases of tangibles and intangibles -192, , Due from related parties and debentures - disbursements 0-551, Due from related parties and debentures - receipts 15,400 2,001, Proceeds from the sale of investments, tangibles and intangibles 0 40, Judicial deposits -10, , Redemption of judicial deposits 30,028 67, Capital increase in subsidiaries 0-2,174, Net cash from financing activities -16,865 6,509,267 PAGE: 8 of 22

15 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Statements of Cash Flows - Indirect Method for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2017 to 3/31/ Repayment of principal of borrowings, financing, and derivatives Prior YTD 1/1/2016 to 3/31/ ,289, Due to related parties and debentures - Borrowings 0 20,698, Due to related parties and debentures - Repayments 0-10,881, Tax refinancing program -16,842-16, Payment of dividends and interest on capital -23-1, Exchange differences on cash and cash equivalents Increase (decrease) in cash and cash equivalents -123,386 5,280, Cash and cash equivalents at the beginning of the year 4,190,027 1,518, Cash and cash equivalents at the end of the year 4,066,641 6,798,876 PAGE: 9 of 22

16 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 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, ,849, ,630 11,664, Adjusted opening balances 21,438,374 7,711, ,849, ,630 11,664, Total comprehensive income , , , Profit for the period , , Other comprehensive income , , Actuarial gain ,443 29, Exchange losses on investment abroad ,593-79, Exchange gains on subsidiaries investment abroad ,515 48, Decrease in stake in subsidiary , , Closing balances 21,438,374 7,711, ,049, ,052 11,317,026 Equity PAGE: 10 of 22

17 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Statement of Changes in Equity for the Quarter Ended March 31, 2016 (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 5.01 Opening balances 21,438,374 7,711, ,905,911-35,287 19,208, Adjusted opening balances 21,438,374 7,711, ,905,911-35,287 19,208, Total comprehensive income ,839,340-29,407-1,868, Profit for the period ,839, ,839, Other comprehensive income ,407-29, Hedge accounting gain , , Subsidiaries hedge accounting gain ,790 20, Exchange losses on investment abroad , , Exchange losses on subsidiaries investment abroad ,545-53, Closing balances 21,438,374 7,711, ,745,251-64,694 17,339,711 PAGE: 11 of 22

18 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Individual Statements of Value Added for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2017 to 3/31/2017 Prior YTD 1/1/2016 to 3/31/ Revenue 1,800,615 2,095, Sales of goods and services 1,703,291 1,946, Other income 112, , Allowance for/reversal of doubtful accounts -14,847-12, Inputs purchased from third parties -644, , Cost of sales and services -84, , Supplies, power, outside services, and other inputs -544, , Other -15,735-14, Gross value added 1,155,832 1,258, Retentions -632, , Depreciation, amortization and depletion -477, , Other -155, , Provisions/reversals -123, , Other expenses -32,021-62, Wealth created 523, , Value added received as transfer 563,563 1,009, Share of profits of investees -124, , Financial income 687,848 1,279, Wealth for distribution 1,086,629 1,527, Wealth distributed 1,086,629 1,527, Personnel 87,955 59, Salaries and wages 61,534 31, Benefits 18,930 19, Severance pay fund (FGTS) 5,447 6, Other 2,044 2, Taxes and fees 421, , Federal 47, , State 370, , Municipal 3,440 3, Lenders and lessors 777,763 3,118, Interest 627,636 2,947, Rentals 150, , Shareholders -200,161-1,839, Retained earnings/accumulated losses for the period -200,161-1,839,340 PAGE: 12 of 22

19 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Consolidated Balance Sheets as at March 31, 2017 and 2016 Assets (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2017 Prior Year 12/31/ Total assets 81,546,725 82,171, Current assets 25,846,489 26,706, Cash and cash equivalents 7,504,084 7,563, Cash investments 17, , Cash investments measured at fair vale 17, , Trading securities 17, , Accounts receivable 8,733,995 8,347, Trade receivables 8,733,995 8,347, Inventories 464, , Recoverable taxes 356,409 1,320, Current recoverable taxes 356,409 1,320, Prepaid expenses 875, , Other current assets 7,894,094 8,709, Other 7,894,094 8,709, Judicial deposits 950, , Other taxes 1,252,221 1,222, Pension plan assets 5,242 6, Held-for-sale assets 4,590,187 5,403, Other assets 1,095,941 1,098, Non-current assets 55,700,236 55,464, Longo-term receivables 18,445,547 17,887, Cash investments measured at fair vale 177, , Restricted cash 177, , Deferred taxes 2,896,073 2,515, Deferred income tax and social contribution 2,896,073 2,515, Prepaid expenses 13,475 11, Other non-current assets 15,358,343 15,191, Judicial deposits 14,317,395 14,122, Other taxes 706, , Pension plan assets 113, , Other assets 220, , Investments 137, , Equity interests 137, , Investments in associates 39,979 38, Other equity interests 97,073 97, Property, plant and equipment 26,249,875 26,268, Property, plant and equipment in service 23,329,591 23,854, Property, plant and equipment in progress 2,920,284 2,413, Intangible assets 10,867,762 11,173, Intangible assets 10,867,762 11,173, Software 1,124,953 1,152, Intangibles in progress 88, , Regulatory licenses 8,622,250 8,877, Goodwill 788, , Other 243, ,599 PAGE: 13 of 22

20 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Consolidated Balance Sheets as at March 31, 2017 and 2016 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2017 Prior Year 12/31/ Total liabilities and equity 81,546,725 82,171, Current liabilities 60,731,142 60,749, Payroll and related taxes 659, , Mandatory benefits 659, , Trade payables 6,645,922 6,360, Domestic suppliers 6,645,922 6,360, Taxes payable 288, , Federal taxes payable 288, , Income tax and social contribution payable 288, , Borrowings and financing 48,203,025 48,086, Borrowings and financing 48,203,025 48,086, In local currency 13,846,916 13,447, In foreign currency 34,356,109 34,638, Other payables 4,370,672 4,250, Other 4,370,672 4,250, Dividends and interest on capital payable 6,437 6, Derivative financial instruments 104, , Other taxes 1,804,193 1,814, Tax refinancing program 112, , Licenses and concessions payable 129, , Liabilities associated to held-for-sale assets 364, , Other payables 1,562,179 1,568, Provisions 851, , Tax, social security, labor and civil provisions 851, , Tax provisions 17,227 10, Social security and labor provisions 91, , Provisions for employee benefits 159, , Civil provisions 583, , Non-current liabilities 9,123,147 8,966, Other payables 4,413,586 4,412, Other 4,413,586 4,412, Other taxes 1,120,681 1,073, Licenses and concessions payable 4,194 4, Tax refinancing program 623, , Other payables 2,664,949 2,680, Provisions 4,709,561 4,553, Tax, social security, labor and civil provisions 4,709,561 4,553, Tax provisions 559, , Social security and labor provisions 1,052, , Provisions for employee benefits 441, , Civil provisions 2,656,449 2,539, Consolidated equity 11,692,436 12,455, Realized capital 21,438,374 21,438, Capital reserves 7,711,282 7,711,282 PAGE: 14 of 22

21 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Consolidated Balance Sheets as at March 31, 2017 and 2016 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 03/31/2017 Prior Year 12/31/ 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 goodwill reserve net assets 8,658,079 8,658, Interest on construction in progress 745, , Law 8200/91 inflation adjustment 31,287 31, Retained earnings (accumulated losses) -17,049,578-16,849, Valuation adjustments to equity -519, , Other comprehensive income -263, , Non-controlling interests 375, ,997 PAGE: 15 of 22

22 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Consolidated Statements of Profit or Loss for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2017 to 3/31/2017 Prior YTD 1/1/2016 to 3/31/ Net operating revenue 6,159,556 6,755, Cost of sales and/or services -3,997,592-4,387, Gross profit or loss 2,161,964 2,367, Operating expenses/income -1,958,370-2,233, Selling expenses -1,050,006-1,058, General and administrative expenses -832, , Other operating income 393, , Other operating expenses -465, , Share of profits of investees -3, Profit (loss) before financial income (expenses) and taxes 203, , Financial income (expenses) -115,263-1,902, Financial income 598, , Financial expenses -713,277-2,180, Profit before taxes on income 88,331-1,768, Income tax and social contribution -288,727-45, Current -229, , Deferred -59, , Loss for the year from continuing operations -200,396-1,814, Consolidated profit/loss for the period -200,396-1,814, Attributable to owners of the Company -200,161-1,839, Attributable to non-controlling interests , Earnings per share - (R$ per share) Basic earnings per share Common shares (ON) -0, , Preferred shares (PN) -0, , Diluted earnings per share Common shares (ON) -0, , Preferred shares (PN) -0, ,72000 PAGE: 16 of 22

23 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Consolidated Statements of Comprehensive Income for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2017 to 3/31/2017 Prior YTD 1/1/2016 to 3/31/ Consolidated profit for the period -200,396-1,814, Other comprehensive income -188,644-29, Hedge accounting gain 0 390, Actuarial gain 44, Exchange losses on investment abroad -218, , Effect of taxes on other comprehensive income -15, , Consolidated comprehensive income for the period -389,040-1,925, Attributable to owners of the Company -201,796-1,868, Attributable to non-controlling interests -187,244-57,075 PAGE: 17 of 22

24 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Consolidated Statements of Cash Flows - Indirect Method for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2017 to 3/31/2017 Prior YTD 1/1/2016 to 3/31/ Net cash from operating activities 916, , Cash generated by operations 1,893,555 1,804, Profit (loss) before income tax and social contribution 88,331-1,768, Charges, interest income, inflation adjustment, and exchange differences -152,378-1,710, Financial instrument transactions 0 3,183, Depreciation and amortization 1,519,330 1,631, Losses on receivables 160, , Provisions 109, , Provision for pension plans 140 2, Equity in investees 3, Loss on disposal of capital assets 69,460 5, Concession agreement extension fee - ANATEL 22,235 23, Employee and management profit sharing 8, Inflation adjustment to provisions 111, , Inflation adjustment to tax refinancing program 2,245 3, Other -48,792-36, Changes in assets and liabilities -825, , Accounts receivable -545, , Inventories -60,758-11, Taxes 277, , Held-for-trading cash investments -117, , Redemption of held-for-trading cash investments 220,037 2,356, Trade payables 54,980-34, Payroll, related taxes and benefits -17,972-15, Provisions -72, , Changes in assets and liabilities held for sale 10,100-96, Other assets and liabilities -572,950-1,108, Other -151, , Financial charges paid -1, , Income tax and social contribution paid - Company -109,847-39, Income tax and social contribution paid - third parties -39,422-70, Net cash from investing activities -948,941-1,243, Purchases of tangibles and intangibles -1,001, , Proceeds from the sale of investments, tangibles and intangibles 43, Judicial deposits -55, , Redemption of judicial deposits 65, , Increase/(decrease) in permanent investments Net cash from financing activities -26,505-5,960,680 PAGE: 18 of 22

25 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Consolidated Statements of Cash Flows - Indirect Method for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2017 to 3/31/ Repayment of principal of borrowings, financing, and derivatives Prior YTD 1/1/2016 to 3/31/2016-5,934, Tax refinancing program -26,500-24, Payment of dividends and interest on capital -5-2, Exchange differences on cash and cash equivalents , Increase (decrease) in cash and cash equivalents -59,167-6,609, Cash and cash equivalents at the beginning of the year 7,563,251 14,898, Cash and cash equivalents at the end of the year 7,504,084 8,288,499 PAGE: 19 of 22

26 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 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 Non-controlling interests Consolidated equity 5.01 Opening balances 21,438,374 7,711, ,849, ,630 11,664, ,997 12,455, Adjusted opening balances 21,438,374 7,711, ,849, ,630 11,664, ,997 12,455, Total comprehensive income , , , , , Profit for the period , , , Other comprehensive income , , , , Actuarial gain ,443 29, , Exchange losses on investment abroad ,593-79, , , Exchange gains on subsidiaries investment abroad ,515 48, , Decrease in stake in subsidiary , , , , Closing balances 21,438,374 7,711, ,049, ,052 11,317, ,410 11,692,436 PAGE: 20 of 22

27 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Version: 1 Consolidated Statement of Changes in Equity for the Quarter Ended March 31, 2016 (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 Non-controlling interests Consolidated equity 5.01 Opening balances 21,438,374 7,711, ,905,911-35,287 19,208,458 1,190,547 20,399, Adjusted opening balances 21,438,374 7,711, ,905,911-35,287 19,208,458 1,190,547 20,399, Total comprehensive income ,839,340-29,407-1,868,747-57,075-1,925, Profit for the period ,839, ,839,340 24,454-1,814, Other comprehensive income ,407-29,407-81, , Hedge accounting gain , , , Subsidiaries hedge accounting gain ,790 20, , Exchange losses on investment abroad , ,460-81, , Exchange gains on subsidiaries investment abroad ,545-53, , Closing balances 21,438,374 7,711, ,745,251-64,694 17,339,711 1,133,472 18,473,183 PAGE: 21 of 22

28 Interim Financial Information - ITR for the Quarter Ended March 31, 2017 Consolidated Statements of Value Added for the Quarters Ended March 31, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2017 to 3/31/2017 Prior YTD 1/1/2016 to 3/31/ Revenue 8,345,452 8,978, Sales of goods and services 8,137,558 8,749, Other income 367, , Allowance for/reversal of doubtful accounts -160, , Inputs purchased from third parties -2,768,377-3,122, Cost of sales and services -320, , Supplies, power, outside services, and other inputs -2,253,404-2,461, Other -194, , Gross value added 5,577,075 5,856, Retentions -1,780,302-2,135, Depreciation, amortization and depletion -1,519,330-1,631, Other -260, , Provisions/reversals -221, , Other expenses -39, , Wealth created 3,796,773 3,720, Value added received as transfer 594, , Share of profits of investees -3, Financial income 598, , Wealth for distribution 4,391,578 3,997, Wealth distributed 4,391,578 3,997, Personnel 583, , Salaries and wages 416, , Benefits 116, , Severance pay fund (FGTS) 33,645 40, Other 15,971 17, Taxes and fees 2,292,452 1,991, Federal 645, , State 1,585,612 1,594, Municipal 61,551 40, Lenders and lessors 1,716,494 3,215, Interest 651,272 2,119, Rentals 1,065,222 1,096, Shareholders -200,396-1,814, Retained earnings/accumulated losses for the period -200,161-1,839, Non-controlling interests in retained earnings ,454 PAGE: 22 of 22

29 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. 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 the 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, the ANATEL announced that the review to be implemented by the end of 2015 had been postponed to April 30, Subsequently, On April 29, 2016, the 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 concession agreements up to June 30, 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.

30 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 the São Paulo Mercantile and Stock Exchange ( BM&FBOVESPA ) 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 10, 2017, after being reviewed at the Board of Directors meeting held on the same daily. On May 10, 2017, the Company restated its interim financial information for the quarter ended March 31, 2016, presented for comparative purposes in this interim financial information for the quarter ended March 31, 2017, to take into account the effects of the merged net assets related to the added value of the assets of the Group s former parent company, Telemar Participações S.A. Judicial reorganization On June 20, 2016, Oi, together with its direct or 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 ), 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 authorized governing bodies of the Oi Companies. 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. The filing of the judicial reorganization was another step towards the Company s financial restructuring, and that the Company would continue 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 will also continue to be performed on a timely basis by the Oi Companies and its subsidiaries. All Oi s workforce will continue to work as usual, including the sales, operating and administrative activities. Oi keeps focusing in its investments in structuring projects aimed promoting the improvement of service

31 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 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 Debtors or their property located within the territorial jurisdiction of the United States and parties from terminating their existing U.S. contracts with the Debtors. On July 21, 2016, the U.S. Bankruptcy Court held a hearing to judge the Debtors request and no objection to the recognition was submitted and the U.S. Bankruptcy Court recognized the judicial reorganization as a main foreign proceeding with regard to each of the Debtors. As a result of this recognition, a stay was automatically applied, preventing the filing, in the United States, of any actions against the Debtors or their properties located within the territorial jurisdiction of the United States and parties from terminating their existing U.S. contracts with the 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 11,101/2005, 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 determining, among other measures, in particular: a) to request that ANATEL present, within five days, up to 5 names of legal entities with competence and expertise on the subject to be evaluated for appointment as trustee; b) the ratification of the decision to grant an emergency measure to exempt the Oi Companies from the requirement to present clearance certificates for the exercise of their activities; c) the re-ratification of the decision to grant an emergency measure in regards to the suspension of all lawsuit and execution actions for 180 business days;