Interim financial information for the quarter ended September 30, 2017 and independent auditor s review report on the interim financial information

Transcription

1 OI S.A. (Under judicial reorganization) Interim financial information for the quarter ended September 30, 2017 and independent auditor s review report on the interim financial information EO/LGPS/DL/FS/CJ/LCSM 5102i/17

2 OI S.A. (Under judicial reorganization) Interim financial information for the quarter ended September 30, 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 September 30, 2017, which comprise the statement of financial position as at September 30, 2017 and the respective statements of operations, comprehensive income (loss) for the three- and nine-month periods then ended, and of changes in equity and cash flows for the nine-month period 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 opinion on the interim financial information. 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 court-ordered reorganization approved by the judge in charge on June 29,

4 The Judicial Reorganization Plan ( the Plan ) was object of the following approvals: On September 5, 2016, the Company s Board of Directors approved the Plan; (ii) on March 22, 2017, the Board of Directors approved the adjustment of certain basic financial conditions, as an addendum to the Plan previously approved; (iii) on October 11, 2017, the Company s Board of Director approved a new version of the Plan, with substantial changes on the Plan previously approved, as well as the new version of the Plan was submitted to the judge in charge of the judicial reorganization on October 11, Until the conclusion of our work of review of the interim financial information for the quarter ended September 30, 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, as well as due to the fact that the date of AGC, regarding the determination of the judge in charge of the judicial reorganization published on November 9, 2017, is scheduled for the subsequent period of approval of this individual and consolidated interim financial information. 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 September 30, 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 September 30, 2017, as well as to the items of the statements of operations, comprehensive income (loss), changes in equity, and cash flows for the quarter and nine-month period 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 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 statements of value added (DVA) for the quarter and ninemonth period ended September 30, 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, presented for comparison purposes, were audited by other independent auditors, whose report thereon, dated March 22, 2017, had a disclaimer of opinion due to the same matter mentioned in the section Basis for disclaimer of conclusion on the individual and consolidated interim financial information. The amounts corresponding to the interim financial information for the quarter ended September 30, 2016, also presented for comparison purposes and now restated as a result of the matters described in Note 2(b), were reviewed by other independent auditors, whose report thereon, dated November 13, 2017, had a disclaimer of conclusion, due to the same matter mentioned in the section Basis for disclaimer of conclusion on the individual and consolidated interim financial information. Rio de Janeiro, November 13, BDO RCS Auditores Independentes SS CRC 2 SP /O-1 Esmir de Oliveira Contador CRC 1 SP /O-0 5

6 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization 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 9/30/ Statement of Changes in Equity - 1/1/2016 to 9/30/ 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 9/30/ Statement of Changes in Equity - 1/1/2016 to 9/30/ Statements of Value Added 22

7 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Company Data / Capital Breakdown Number of Shares (thousand) Current Quarter 9/30/2017 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 - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Balance Sheet as at September 30, 2017 Assets (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 9/30/2017 Prior Year 12/31/ Total assets 55,723,755 56,797, Current assets 13,291,222 13,620, Cash and cash equivalents 4,226,282 4,190, Cash investments 13,915 20, Cash investments measured at fair vale 13,915 20, Trading securities 13,915 20, Accounts receivable 2,137,120 1,897, Trade receivables 2,137,120 1,897, Inventories 45,258 10, Recoverable taxes 191, , Current recoverable taxes 191, , Prepaid expenses 137,382 55, Other current assets 6,540,242 6,888, Other 6,540,242 6,888, Due from subsidiaries 825, , Other taxes 322, , Judicial deposits 179, , Dividends and interest on capital 882, , Pension plan assets 2,398 5, Held-for-sale assets 3,294,482 3,667, Other assets 1,034, , Non-current assets 42,432,533 43,177, Long-term receivables 15,638,543 14,360, Cash investments measured at fair vale 4,921 4, Restricted cash 4,921 4, Deferred taxes 2,950,648 2,079, Deferred income tax and social contribution 2,950,648 2,079, Prepaid expenses 15,579 5, Due from related parties 3,079,959 2,857, Due from subsidiaries 3,079,959 2,857, Other non-current assets 9,587,436 9,413, Judicial deposits 9,237,108 8,793, Other taxes 203, , Pension plan assets 115, , Other assets 30, , Investments 13,490,130 14,974, Equity interests 13,490,130 14,974, Investments in subsidiaries 13,464,440 14,948, Other equity interests 25,690 25, Property, plant and equipment 6,126,320 5,973, Property, plant and equipment in service 5,451,357 5,586, Property, plant and equipment in progress 674, , Intangible assets 7,177,540 7,868,872 PAGE: 2 of 22

9 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Balance Sheet as at September 30, 2017 Assets (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 9/30/2017 Prior Year 12/31/ Intangible assets 7,177,540 7,868, Software 63,091 21, Intangibles in progress 12, , Regulatory licenses 7,024,315 7,664, Other 77,550 77,660 PAGE: 3 of 22

10 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Balance Sheet as at September 30, 2017 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 9/30/2017 Prior Year 12/31/ Total liabilities and equity 55,723,755 56,797, Current liabilities 23,361,560 21,066, Payroll and related taxes 134, , Mandatory benefits 134, , Trade payables 1,983,472 2,032, Domestic suppliers 1,983,472 2,032, Taxes payable 5,562 63, Federal taxes payable 5,562 63, Income tax and social contribution payable 5,562 63, Borrowings and financing 17,183,445 16,182, Borrowings and financing 17,183,445 16,182, In local currency 7,515,654 6,945, In foreign currency 9,667,791 9,236, Other payables 3,480,509 2,054, Due to related parties 2,241, , Payables to subsidiaries 2,241, , Other 1,238,758 1,386, Dividends and interest on capital payable 5,142 5, Other taxes 671, , Tax refinancing program 129,952 56, Derivative financial instruments 104, , Licenses and concessions payable 0 29, Other payables 327, , Provisions 574, , Tax, social security, labor, and civil provisions 574, , Tax provisions Social security and labor provisions 69,983 46, Accrued employee benefits 184, , Civil provisions 319, , Non-current liabilities 24,028,495 24,066, Other payables 21,509,521 21,689, Due to related parties 18,935,774 18,898, Payables to subsidiaries 18,935,774 18,898, Other 2,573,747 2,790, Tax refinancing program 383, , Other taxes 38, , Other payables 2,151,274 2,225, Provisions 2,518,974 2,377, Tax, social security, labor, and civil provisions 2,518,974 2,377, Tax provisions 124,766 48, Social security and labor provisions 458, , Accrued employee benefits 436, , Civil provisions 1,499,194 1,431, Equity 8,333,700 11,664, Realized capital 21,438,374 21,438,374 PAGE: 4 of 22

11 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Balance Sheet as at September 30, 2017 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 9/30/2017 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) -20,313,942-16,849, Valuation adjustments to equity -519, , Other comprehensive income 17, ,117 PAGE: 5 of 22

12 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Statements of Profit or Loss for the Quarters and Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 7/1/2017 to 9/30/2017 Current YTD 1/1/2017 to 9/30/2017 Same Quarter Prior Year 7/1/2016 to 9/30/2016 Prior YTD 1/1/2016 to 9/30/ Net operating revenue 1,207,085 3,691,074 1,318,759 4,274, Cost of sales and/or services -870,112-2,624, ,013-2,802, Gross profit or loss 336,973 1,066, ,746 1,472, Operating expenses/income -599,571-3,051,064-1,009,175-3,575, Selling expenses -253, , , , General and administrative expenses -231, , , , Other operating income 339, , , , Other operating expenses -130, , , , Share of profits of investees -323,664-2,059, ,386-1,717, Profit (loss) before financial income (expenses) and taxes -262,598-1,984, ,429-2,103, Financial income (expenses) 307,265-2,581,528-1,111,300-1,538, Financial income 703,348 1,809,984-4,160 3,323, Financial expenses -396,083-4,391,512-1,107,140-4,861, Profit before taxes on income 44,667-4,565,638-1,671,729-3,641, Income tax and social contribution -36,998 1,101, ,289-71, Current 16, ,548-6,709-18, Deferred -53,104 1,213, ,998-52, Profit/loss for the period from continuing operations 7,669-3,464,525-1,214,440-3,712, Profit/loss for the period 7,669-3,464,525-1,214,440-3,712, Earnings per share - (R$ 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, , , ,49000 PAGE: 6 of 22

13 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Statements of Comprehensive Income for the Quarters and Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 7/1/2017 to 9/30/2017 Current YTD 1/1/2017 to 9/30/2017 Same Quarter Prior Year 7/1/2016 to 9/30/2016 Prior YTD 1/1/2016 to 9/30/ Profit for the period 7,669-3,464,525-1,214,440-3,712, Other comprehensive income -115, , , , Hedge accounting gains (losses) , , Subsidiaries hedge accounting gains (losses) 0 0 2,042 57, Actuarial gains (losses) 5,789 51,052 3,295-6, Exchange losses on investment abroad -118, ,709 72, , Effect of taxes on other comprehensive income -1,967-17,358-25, , Comprehensive income for the period -107,447-3,185,122-1,089,151-4,209,259 PAGE: 7 of 22

14 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Statements of Cash Flows - Indirect Method for the Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2017 to 9/30/2017 Prior YTD 1/1/2016 to 9/30/ Net cash from operating activities 444,244 26, Cash generated by operations 1,453,075 1,468, Loss before income tax and social contribution -4,565,638-3,641, Charges, interest income, inflation adjustment, and exchange differences 2,142,572-2,461, Financial instrument transactions 0 3,794, Depreciation and amortization 1,393,409 1,538, Losses on receivables 87,816 61, Provisions 163, , Provision for pension plans 324 7, Equity in investees 2,059,612 1,717, Loss on disposal of capital assets 17,704 17, Concession Agreement Extension Fee - ANATEL 21,704 22, Employee and management profit sharing 14,810 14, Inflation adjustment to intragroup receivables and private debentures -246, , Inflation adjustment to provisions 226,235 80, Inflation adjustment to tax refinancing program 6,949 9, Expired dividends 0-35, Other 131, , Changes in assets and liabilities -1,054, , Accounts receivable -302, , Inventories -24,864 7, Taxes 248, , Held-for-trading cash investments -20, , Redemption of held-for-trading cash investments 27, , Trade payables -342, , Payroll, related taxes and benefits 7,169-44, Provisions -60, , Provision for pension plans 0-50, Other assets and liabilities -587, , Other 45, , Financial charges paid , Income tax and social contribution paid - Company -19,923-16, Income tax and social contribution paid - third parties 0-21, Dividends received 65,742 35, Net cash from investing activities -290,659-3,026, Purchases of tangibles and intangibles -584, , Due from related parties and debentures - disbursements 0-2,155, Due from related parties and debentures - receipts 15,400 2,039, Proceeds from the sale of investments, tangibles and intangibles 4,845 42,249 PAGE: 8 of 22

15 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Statements of Cash Flows - Indirect Method for the Quarters and Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2017 to 9/30/2017 Prior YTD 1/1/2016 to 9/30/ Cash received due to capital reduction in subsidiary 150, Judicial deposits -106, , Redemption of judicial deposits 230, , Capital increase in subsidiaries 0-2,174, Increase/(decrease) in permanent investments Net cash from financing activities -119,880 5,546, Repayment of principal of borrowings, financing, and derivatives 0-3,244, Due to related parties and debentures - Borrowings 16 9,926, Due to related parties and debentures - Repayments 0-1,083, Licenses and concessions -36, Tax refinancing program -83,789-48, Payment of dividends and interest on capital -64-2, Exchange differences on cash and cash equivalents 2, , Increase (decrease) in cash and cash equivalents 36,255 2,166, Cash and cash equivalents at the beginning of the period 4,190,027 1,518, Cash and cash equivalents at the end of the period 4,226,282 3,685,169 PAGE: 9 of 22

16 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Statement of Changes in Equity for the Nine-month Period Ended September 30, 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 ,464, ,616-3,330, Profit for the period ,464, ,464, Other comprehensive income , , Actuarial gain ,694 33, Exchange losses on investment abroad , , Decrease in stake in subsidiary , , Closing balances 21,438,374 7,711, ,313, ,014 8,333,700 Equity PAGE: 10 of 22

17 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Statement of Changes in Equity for the Nine-month Period Ended September 30, 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 1,484, ,672,334-35,287 13,215, Adjusted opening balances 21,438,374 1,484, ,672,334-35,287 13,215, Total comprehensive income ,212, ,635-3,708, Profit for the period ,212, ,212, Other comprehensive income , , Hedge accounting gain , , Subsidiaries hedge accounting gain ,336 57, Actuarial loss ,481-4, Exchange losses on investment abroad , , Closing balances 21,438,374 1,484, ,884, ,922 9,506,935 PAGE: 11 of 22

18 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Individual Statements of Value Added for the Quarters and Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2017 to 9/30/2017 Prior YTD 1/1/2016 to 9/30/ Revenue 5,656,195 6,024, Sales of goods and services 5,001,006 5,626, Other income 743, , Allowance for/reversal of doubtful accounts -87,816-61, Inputs purchased from third parties -1,960,457-2,282, Cost of sales and services -190, , Supplies, power, outside services, and other inputs -1,721,164-1,797, Other -48,422-46, Gross value added 3,695,738 3,742, Retentions -1,858,911-2,140, Depreciation, amortization and depletion -1,393,409-1,538, Other -465, , Provisions (including inflation adjustment) -389, , Other expenses -76, , Wealth created 1,836,827 1,601, Value added received as transfer -249,628 1,606, Share of profits of investees -2,059,612-1,717, Financial income 1,809,984 3,323, Wealth for distribution 1,587,199 3,208, Wealth distributed 1,587,199 3,208, Personnel 280, , Salaries and wages 202, , Benefits 55,879 56, Severance pay fund (FGTS) 16,605 18, Other 5,815 6, Taxes and fees 123,558 1,261, Federal -1,016, , State 1,106,628 1,074, Municipal 33,460 11, Lenders and lessors 4,647,393 5,360, Interest 4,195,900 4,865, Rentals 451, , Shareholders -3,464,525-3,712, Retained earnings/accumulated losses for the period -3,464,525-3,712,624 PAGE: 12 of 22

19 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Balance Sheet as at September 30, 2017 Assets (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 9/30/2017 Prior Year 12/31/ Total assets 82,455,611 82,171, Current assets 25,885,015 26,706, Cash and cash equivalents 7,608,293 7,563, Cash investments 21, , Cash investments measured at fair vale 21, , Trading securities 21, , Accounts receivable 8,450,495 8,347, Trade receivables 8,450,495 8,347, Inventories 540, , Recoverable taxes 677,872 1,320, Current recoverable taxes 677,872 1,320, Prepaid expenses 545, , Other current assets 8,040,197 8,709, Other 8,040,197 8,709, Judicial deposits 364, , Other taxes 1,343,838 1,222, Pension plan assets 2,677 6, Held-for-sale assets 4,721,006 5,403, Other assets 1,608,482 1,098, Non-current assets 56,570,596 55,464, Long-term receivables 19,197,708 17,887, Cash investments measured at fair vale 87, , Restricted cash 87, , Deferred taxes 3,401,666 2,515, Deferred income tax and social contribution 3,401,666 2,515, Prepaid expenses 27,257 11, Other non-current assets 15,681,278 15,191, Judicial deposits 14,634,295 14,122, Other taxes 706, , Pension plan assets 119, , Other assets 220, , Investments 139, , Equity interests 139, , Investments in associates 44,322 38, Other equity interests 95,204 97, Property, plant and equipment 26,545,026 26,268, Property, plant and equipment in service 23,363,234 23,854, Property, plant and equipment in progress 3,181,792 2,413, Intangible assets 10,688,336 11,173, Intangible assets 10,688,336 11,173, Software 1,130,153 1,152, Intangibles in progress 17, , Regulatory licenses 8,107,655 8,877, Goodwill 1,183, , Other 248, ,599 PAGE: 13 of 22

20 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Balance Sheet as at September 30, 2017 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 9/30/2017 Prior Year 12/31/ Total liabilities and equity 82,455,611 82,171, Current liabilities 65,043,144 60,749, Payroll and related taxes 815, , Mandatory benefits 815, , Trade payables 7,096,612 6,360, Domestic suppliers 7,096,612 6,360, Taxes payable 510, , Federal taxes payable 510, , Income tax and social contribution payable 510, , Borrowings and financing 51,721,877 48,086, Borrowings and financing 51,721,877 48,086, In local currency 14,530,587 13,447, In foreign currency 37,191,290 34,638, Other payables 4,076,468 4,250, Other 4,076,468 4,250, Dividends and interest on capital payable 6,237 6, Derivative financial instruments 104, , Other taxes 1,453,062 1,814, Tax refinancing program 250, , Licenses and concessions payable 16, , Liabilities associated to held-for-sale assets 680, , Other payables 1,564,742 1,568, Provisions 822, , Tax, social security, labor, and civil provisions 822, , Tax provisions 21,839 10, Social security and labor provisions 83, , Accrued employee benefits 184, , Civil provisions 531, , Non-current liabilities 8,775,674 8,966, Other payables 3,856,818 4,412, Other 3,856,818 4,412, Other taxes 858,738 1,073, Licenses and concessions payable 4,170 4, Tax refinancing program 688, , Other payables 2,305,883 2,680, Provisions 4,918,856 4,553, Tax, social security, labor, and civil provisions 4,918,856 4,553, Tax provisions 571, , Social security and labor provisions 1,277, , Accrued employee benefits 436, , Civil provisions 2,633,484 2,539, Consolidated equity 8,636,793 12,455, Realized capital 21,438,374 21,438,374 PAGE: 14 of 22

21 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Balance Sheet as at September 30, 2017 Liabilities and Equity (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 9/30/2017 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) -20,313,942-16,849, Valuation adjustments to equity -519, , Other comprehensive income 17, , Non-controlling interests 303, ,997 PAGE: 15 of 22

22 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Statements of Profit or Loss for the Quarters and Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 7/1/2017 to 9/30/2017 Current YTD 1/1/2017 to 9/30/2017 Same Quarter Prior Year 7/1/2016 to 9/30/2016 Prior YTD 1/1/2016 to 9/30/ Net operating revenue 5,963,554 17,961,943 6,394,382 19,673, Cost of sales and/or services -3,951,685-11,868,865-3,994,512-12,765, Gross profit or loss 2,011,869 6,093,078 2,399,870 6,908, Operating expenses/income -1,856,907-5,529,998-2,303,409-6,830, Selling expenses -1,131,024-3,272,542-1,048,669-3,263, General and administrative expenses -743,841-2,355,178-1,020,083-2,870, Other operating income 640,151 1,792, ,299 1,198, Other operating expenses -623,176-1,696, ,074-1,892, Share of profits of investees 983 1, , Profit (loss) before financial income (expenses) and taxes 154, ,080 96,461 77, Financial income (expenses) 45,131-5,050,894-1,701,389-2,981, Financial income 416,224 1,786, ,735 1,110, Financial expenses -371,093-6,837,158-2,098,124-4,091, Profit before taxes on income 200,093-4,487,814-1,604,928-2,904, Income tax and social contribution -225, , , , Current -123, , , , Deferred -102,198 1,713, , , Loss for the period from continuing operations -25,805-3,529,523-1,178,463-3,815, Consolidated profit/loss for the period -25,805-3,529,523-1,178,463-3,815, Attributable to owners of the Company 7,669-3,464,525-1,214,440-3,712, Attributable to non-controlling interests -33,474-64,998 35, , Earnings per share - (R$ 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, , , ,49000 PAGE: 16 of 22

23 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Statements of Comprehensive Income for the Quarters and Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item Current Quarter 7/1/2017 to 9/30/2017 Current YTD 1/1/2017 to 9/30/2017 Same Quarter Prior Year 7/1/2016 to 9/30/2016 Prior YTD 1/1/2016 to 9/30/ Consolidated profit for the period -25,805-3,529,523-1,178,463-3,815, Other comprehensive income -121,560 84, , , Hedge accounting gains (losses) , , Actuarial gains (losses) 5,789 51,052 3,295-6, Exchange losses on investment abroad -125,382 51, ,221-1,075, Effect of taxes on other comprehensive income -1,967-17,358-27, , Consolidated comprehensive income for the period -147,365-3,444,683-1,003,749-4,491, Attributable to owners of the Company -107,447-3,185,122-1,089,151-4,209, Attributable to non-controlling interests -39, ,561 85, ,456 PAGE: 17 of 22

24 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Statements of Cash Flows - Indirect Method for the Quarters and Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2017 to 9/30/2017 Prior YTD 1/1/2016 to 9/30/ Net cash from operating activities 3,874,512 1,481, Cash generated by operations 4,672,652 4,993, Loss before income tax and social contribution -4,487,814-2,904, Charges, interest income, inflation adjustment, and exchange differences 2,990,449-3,546, Financial instrument transactions 0 5,147, Depreciation and amortization 4,382,210 4,768, Losses on receivables 519, , Provisions 323, , Provision for pension plans 420 8, Equity in investees -1,587 1, Loss on disposal of capital assets 141,041 30, Concession Agreement Extension Fee - ANATEL 65,147 69, Employee and management profit sharing 90,748 74, Inflation adjustment to provisions 389, , Inflation adjustment to tax refinancing program 13,846 17, Expired dividends 0-37, Other 245,829-74, Changes in assets and liabilities -461,463-1,010, Accounts receivable -621,475-1,719, Inventories -124,851-12, Taxes 337, , Held-for-trading cash investments -459,059-1,505, Redemption of held-for-trading cash investments 656,164 3,280, Trade payables 191,798 1,030, Payroll, related taxes and benefits 51,460-70, Provisions -347, , Provisions for pension funds 0-50, Changes in assets and liabilities held for sale 548, , Dividends and interest on capital 0 7, Other assets and liabilities -694, , Other -336,677-2,501, Financial charges paid -1,658-2,230, Income tax and social contribution paid - Company -204, , Income tax and social contribution paid - third parties -130, , Net cash from investing activities -3,227,222-3,045, Purchases of tangibles and intangibles -3,338,457-2,381, Proceeds from the sale of investments, tangibles and intangibles 5,144 2, Judicial deposits -132,245-1,484, Redemption of judicial deposits 238, , Net cash from financing activities -609,349-6,127, Repayment of principal of borrowings, financing, and derivatives ,806, Licenses and concessions -103, ,449 PAGE: 18 of 22

25 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Statements of Cash Flows - Indirect Method for the Quarters and Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais R$) Code Line Item YTD 1/1/2017 to 9/30/2017 Prior YTD 1/1/2016 to 9/30/ Tax refinancing program -145,695-79, Payment of dividends and interest on capital -59,447-37, Share buyback -300, Exchange differences on cash and cash equivalents 7, , Increase (decrease) in cash and cash equivalents 45,042-7,945, Cash and cash equivalents at the beginning of the period 7,563,251 14,898, Cash and cash equivalents at the end of the period 7,608,293 6,952,398 PAGE: 19 of 22

26 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Statement of Changes in Equity for the Nine-month Period Ended September 30, 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 ,464, ,616-3,330, ,904-3,818, Profit for the period ,464, ,464,525-64,998-3,529, Other comprehensive income , , , , Actuarial gain ,694 33, , Exchange losses on investment abroad , , ,563 51, Decrease in stake in subsidiary , , , , Closing balances 21,438,374 7,711, ,313, ,014 8,333, ,093 8,636,793 PAGE: 20 of 22

27 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Statement of Changes in Equity for the Nine-month Period Ended September 30, 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 Other comprehensive accumulated losses income Equity Non-controlling interests Consolidated equity 5.01 Opening balances 21,438,374 1,484, ,672,334-35,287 13,215,664 1,190,547 14,406, Adjusted opening balances 21,438,374 1,484, ,672,334-35,287 13,215,664 1,190,547 14,406, Total comprehensive income ,212, ,635-3,708, ,456-3,991, Profit for the period ,212, ,212, ,469-3,314, Other comprehensive income , , , , Hedge accounting gain , , , Subsidiaries hedge accounting gain ,336 57, , Actuarial loss ,481-4, , Exchange losses on investment abroad , , ,987-1,075, Closing balances 21,438,374 1,484, ,884, ,922 9,506, ,091 10,415,026 PAGE: 21 of 22

28 Interim Financial Information - ITR - 09/30/ OI S.A. - under Judicial Reorganization Version: 1 Consolidated Statements of Value Added for the Quarters and Nine-month Periods Ended September 30, 2017 and 2016 (In thousands of Brazilian reais - R$) Code Line Item YTD 1/1/2017 to 9/30/2017 Prior YTD 1/1/2016 to 9/30/ Revenue 25,001,492 26,249, Sales of goods and services 23,814,455 25,555, Other income 1,706,261 1,153, Allowance for/reversal of doubtful accounts -519, , Inputs purchased from third parties -8,396,002-9,144, Cost of sales and services -766,384-1,104, Supplies, power, outside services, and other inputs -7,050,658-7,408, Other -578, , Gross value added 16,605,490 17,104, Retentions -5,310,803-6,116, Depreciation, amortization and depletion -4,382,210-4,768, Other -928,593-1,347, Provisions (including inflation adjustment) -713, , Other expenses -215, , Wealth created 11,294,687 10,988, Value added received as transfer 1,787,851 1,108, Share of profits of investees 1,587-1, Financial income 1,786,264 1,110, Wealth for distribution 13,082,538 12,097, Wealth distributed 13,082,538 12,097, Personnel 1,763,679 1,959, Salaries and wages 1,264,226 1,409, Benefits 347, , Severance pay fund (FGTS) 106, , Other 45,466 51, Taxes and fees 5,045,436 6,707, Federal -74,768 1,901, State 4,779,293 4,661, Municipal 340, , Lenders and lessors 9,802,946 7,245, Interest 6,595,592 4,022, Rentals 3,207,354 3,222, Shareholders -3,529,523-3,815, Retained earnings/accumulated losses for the period -3,464,525-3,712, Non-controlling interests in retained earnings -64, ,469 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 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 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 30, 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 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. 29

30 In Asia, the Company provides fixed and mobile telecommunications services basically through its subsidiary Timor Telecom. 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 November 13, 2017, 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 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 ), 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. 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 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. 30